Market Analysis Review

BOC second cut as expected, The USD gains against the CAD, U.S. grim Eurozone PMIs, Stocks plunged, Bitcoin retreats from the highs

| 25 July, 2024 at 15:10 GMT

Previous Trading Day’s Events (24.07.2024)

“We are increasingly confident that the ingredients to bring inflation back to target are in place,” Bank of Canada Governor Tiff Macklem told reporters. The BoC reiterated that inflation should return sustainably to its 2% target in the second half of 2025.

“The dovish language in the releases paints a picture of officials who are growing more worried about the likelihood of recession,” Royce Mendes, head of macro strategy at Desjardins Group, wrote in a report.

Economists expressed concerns about the prospect of weaker economic growth in the coming months, reiterating that a slowdown could trigger more rate cuts.

Source: https://www.reuters.com/markets/rates-bonds/bank-canada-cuts-rates-again-frets-about-low-growth-2024-07-24/

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Winners vs Losers

USDCAD reached the top of the week’s gainers with 0.76% gains. GBPUSD leads for the month with 1.90% gains. The BOC decided to cut yesterday and the CAD depreciated heavily. Stocks dropped as well significantly with no correction so far.

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News Reports Monitor – Previous Trading Day (24.07.2024)

Server Time / Timezone EEST (UTC+03:00)

1. Midnight – Night Session (Asian)

No significant news announcements, no special scheduled releases. 

2. Morning – Day Session (European and N. American Session)

PMI releases:

Increasing divergence between manufacturing and services sectors in the U.S. according to the S&P Global PMIs. U.S. business activity experiences fast growth.

PMIs for the Eurozone show a grim picture, thus the initial market reaction with EUR depreciation at the time of the release. 

U.K. is in a better spot with PMIs reported to have improved and in the expansion area. A jump in business growth in the U.K. private sector was recorded.

Eurozone PMIs

The manufacturing sector PMI worsened in France, down to 44.1 in contraction. The Services sector PMI though was reported in expansion but close to the 50 level. The private sector came close to stabilising in July and the combined level of output across both sectors decreased marginally at the start of the third quarter.

Germany’s PMIs were also reported worse with manufacturing falling further in contraction. The private sector economy slipped back into contraction at the start of the third quarter. Labour market weakening was recorded. The latest inflation data showed a softening of the rate of increase in service sector output prices to the weakest since April 2021.

In the Eurozone the PMIs worsened but the services PMI stayed in expansion. New orders fell for the second month running and business confidence dropped to a six-month low. The rate of input cost inflation quickened. EUR depreciated after the release of the Eurozone PMIs but the effect was only intraday.

U.K. PMIs

PMIs for both sectors of the U.K. economy were reported to have improved and in expansion. Business growth jumped to a 15-month high with a strengthening of business confidence after a dip in June. Services activity growth accelerated slightly while manufacturing output rose to the strongest degree since February 2022.

U.S. PMIs

The U.S. manufacturing sector PMI was reported at 49.5, worse than the previous figure. A turn to contraction. The services PMI though was reported to have improved and in expansion, a 56 figure which is considered relatively high. Business activity growth edged up to its fastest for 27 months in July, with the service sector leading the upturn. Manufacturing output slipped into decline for the first time in six months. Business confidence in the outlook fell for a second month, fueled in part by rising political uncertainty ahead of the Presidential Election.

The Bank of Canada (BoC) decided to cut rates by 25 basis points meeting expectations. The move was widely expected by economists as inflation continues to cool and the Canadian economy shows signs of weakness. At the time of the release, at 16:45, the CAD started to depreciate. USDCAD jumped 30 pips.

General Verdict:

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FOREX MARKETS MONITOR

EURUSD (24.07.2024) 15m Chart Summary

Server Time / Timezone EEST (UTC+03:00)

Price Movement

The EUR was greatly affected by the worse-than-expected PMI figures reported during the European session. At the time of the release, the EUR depreciated heavily causing a 20 pips drop of the EURUSD pair. After finding support at near 1.0825 it reversed to the upside since the USD started to depreciate heavily. It crossed the 30-period MA on its way up and found resistance at near 1.08645 before it finally experienced retracement to the MA that resulted in another reversal to the downside due to USD appreciation, after the positive PMI releases.

USDCAD (24.07.2024) 15m Chart Summary

Server Time / Timezone EEST (UTC+03:00)

Price Movement

The USD was basically depreciating against the other currencies but since the CAD was weakening greatly and early yesterday, the pair was moving steadily to the upside. After the start of the European session it moved sideways within a small range and as the time of the BOC rate decision was getting closer the pair moved to the downside, deviating from the 30-period MA by nearly 12 pips. At the time of the rate decision release, the rate cut caused a jump of the USDCAD pair by nearly 30 pips before retracement took place, back to the MA. It later continued with an upward path as the USD started to appreciate heavily. 

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CRYPTO  MARKETS MONITOR

BTCUSD (Bitcoin) Chart Summary 1H

Server Time / Timezone EEST (UTC+03:00)

Price Movement

This week, Bitcoin is moving mainly sideways and consolidating after the high performance that took place since mid-July. The resistance area remained near 68K USD and the support area was near the level 66K USD, but on the 23rd however, that support was broken with the price just moving downwards at near 65.5K USD. On the 25th a huge breakout occurred of that support with the price reaching the 63,800 USD support level. Retracement could follow now.

Crypto sorted by Highest Market Cap:

Cryptos have experienced a significant correction since mid-July. A strong reversal to the upside. The market experienced a recent slowdown after the performance since then and most prices retrace significantly.

https://www.investing.com/crypto/currencies

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EQUITY MARKETS MONITOR

S&P500 (SPX500) 4-Day Chart Summary

Server Time / Timezone EEST (UTC+03:00)

Price Movement

From the 22nd to the 23rd the index moved on an uptrend but on the 24th the index opened with a gap downwards. All indices have experienced a huge drop since the 24th and for the S&P500 it seems that the 5,425 USD currently acts as a strong support. Today, the 25th the index tries to break that support several times unsuccessfully. If the index moves to the upside, the breakout of level 5,460 could trigger a rapid upward movement and initiation of the retracement to the 5,490 USD/oz level. 

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COMMODITIES MARKETS MONITOR

USOIL (WTI) 4-Day Chart Summary

Server Time / Timezone EEST (UTC+03:00)

Price Movement

Crude’s price has fallen significantly since the 18th. For several days, mid-day it experiences a drop. On the 23rd the drop resulted in the price of Crude oil reaching the support at near 76.2 USD/b before it retraced to the 61.8 Fibo level and remained close to the 30-period MA. On the 24th Crude oil was not affected much but the U.S. Crude oil inventories only raised the volatility levels for a while before the price closed slightly higher. It looks like the price slowed down after the huge drop and moves sideways. The 76 USD/b level could be the strong support and serve as the turning point to the upside.

XAUUSD (Gold) 4-Day Chart Summary

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Price Movement

The 2,400 USD/oz was an important level as mentioned in our previous analysis and its breakout could cause a jump. The breakout of that on the 23rd  led to the price reaching the 2,420 USD/oz level and completing the retracement of the previous large drop, with the price reaching 61.8 Fibo at near the 2,425 USD/oz. On the 24th though Gold experienced a sharp drop that continued all the way down to 2,365 USD/oz, marking a nearly 24 USD drop. Currently is showing signs that the support area near that level is strong and a retracement could take place soon with a target level of 2,390 USD/oz. 

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News Reports Monitor – Today Trading Day (25.07.2024)

Server Time / Timezone EEST (UTC+03:00)

1. Midnight – Night Session (Asian)

No significant news announcements, no special scheduled releases. 

2. Morning – Day Session (European and N. American Session)

News and figure releases at 15:30 are going to shake the markets and USD pairs. GDP, Unemployment claims and durable goods orders. Expectations for durable goods orders are optimistic and could be exaggerated considering the recent economic indicators that show deterioration in business.

General Verdict:

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