The Greenback Falls as the Market Prepares for a Double or Even Triple Fed Rate Cut This Hour

The greenback weakened massively in the following weeks, as market expectations on the Fed’s coverage trail changed dramatically. The June US CPI document continued the narrative painted through previously dated non-farm payrolls data, suggesting additional cooling in each financial job and easing price pressures. Those characteristics have firmly placed the September Federal Secured Charges look like a walk in the park in the minds of buyers, with additional expectations for any further relief in December. Some competitive market members are also betting on additional relief in November. This change in sentiment sent US stocks to unprecedented record highs and led to a decline in Treasury yields.

On the other hand, despite his significant action, the Greenback was only the second worst performer, with the unused Zeeland Greenback occupying the base position. The kiwi declined after unusually dovish remarks from the RBNZ, which were consistent with their determination to keep interest rates unchanged. Markets are betting on lower rates from the RBNZ as early as November following a day of financial easing. Meanwhile, the Canadian greenback was the third-worst performer.

In contrast, the eastern yen emerged as the date’s megastar performer thanks to a strategically timed market intervention via Japan. The upcoming journey for the yen depends on whether market members join in to push its value further, a mechanism that will depend on the BOJ meeting on this date.

Meanwhile, the British pound regained its place as the second-strongest performer, with a management that bolstered expectations for upcoming August payments through the BOE dashed by comments from the BOE and Britain’s stronger than expected Financial figures have been revealed. , The euro finished third in performance, with futures aussie and Swiss franc finishing in the middle.

Chances of 3 Fed price cuts in 2024 now a toss-up

Following previous surges in the S&P 500 and NASDAQ, US stock markets have been on top, with even the lagging DOW achieving unbeaten intraday records. The sense of euphoria among investors was largely driven by optimism that the Fed is on target for tapering, and this expectation was further strengthened by US June CPI data.

The CPI document confirmed additional deceleration in both headline and core inflation rates, suggesting that the “last mile” of the disinflation process in the United States may be less difficult than previously feared. This definitive building should strengthen Fed policymakers’ confidence in cutting interest rates sharply.

In light of these features, Fed investment futures now show a 94% probability of a 25bps rate cut in September, worsening the federal budget rate to 5.00-5.25%. There is also a 94% chance of 2 overall fee cuts by the end of the year, bringing the pace down to 4.75-5.00%.

More importantly, there is about a 60% chance of an Optic Two payment cut by the November meeting, which would take momentum down to 4.75-5.00%. Additionally, 54% expect 3 cuts by the end of the year, bringing the pace down to 4.50-4.75%.

This means that some marketplace members are aggressively betting on back-to-back fee cuts in September, November, and December. This hypothesis has the clock dialed back to March, with between two and three tariff cuts this year equally likely.

Technically, the S&P 500 reached an untested record top at 5655.56. However it seems to be having minor trouble dealing with the 61.8% projection from 4103.78 to 5263.95 at 4953.56 to 5670.55.

For now, further rally is predicted as 5523.64 tall resistance becomes support hold. The company split of 5670.66 would pave the way for a 100% projection at 6113.73. This is where the actual test is near 3491.58 with a 100% projection from 2191.86 to 4818.62.

Meanwhile, the company split of 5523.64 will bring consolidation before growth resumes.

The subsequent breakout of the DOW means that long-term growth is resuming. As long as the 39146.60 support holds, additional leverage is predicted on one’s feet. Sustained buying and selling above 40000 will pave the way for a 61.8% projection from 3237.20 to 39889.05 at 38000.96 to 42674.18.

Additionally, it should be emphasized that 40k is important to keep in mind as it is equivalent to a 61.8% projection from 18213.65 to 36952.65 at 28660.94 to 40241.64. Decisive split could lead to medium term upside against 100% projection at 47399.94.

However, breakdown of 39146.60 support will add to the bullish case.

Yields fall and greenback weakens amid change in Fed expectations

The US 10-year cap yield declined significantly at a later date as Fed expectations progressed. Technically, the outlook remains unchanged in that the fall from 4.737 is the third leg of the trend from 4.997 and it is still on the move. Additional downside is predicted as long as the 55D EMA (now at 4.352) holds.

55W EMA A sustained split of the 55W EMA (now at 4.189) could increase problem acceleration in TNX, and extend the decline from 4.737 to 3.785, and also to the 100% projection of 4.997 to 3.785. 4.737 in the medium term.

Again, there is an important counterpoint to this bearish outlook, linked to the rising indifference curve. The rally reflects market concerns that Donald Trump’s re-election could impose policies that could create a risk appetite on long-term maturity Treasuries. In this case, the decline of TNX may be reduced to a certain extent.

The bearish case in the Greenback Index has an opening to form with a similar under the 55W EMA (now at 103.40). As long as 105.20 support holds, a 100% projection from 106.13 to 103.61 with a deeper drop from 106.51 to 103.99 is predicted. The target for the fracture would be the upcoming 138.2% projection at 102.64.

More importantly, continued buying and selling under the 55W EMA will make the case that the entire gain on a leg up from 100.61 has already been wiped out at 106.51. This would clear a deeper fall through 102.35 to retest the 100.61 support upcoming.

Yen jumps on suspected intervention; Markets await BOJ’s subsequent moves

The yen also dominated the financial headlines with its biggest daily rally since the end of 2022, reportedly driven by Japan’s unconfirmed market intervention. The timing of this intervention was quite strategic, with the incoming US CPI running on the loose, which had already exerted significant downward pressure on the buck. A study of the BoJ accounts suggests that roughly JPY 3.5T could have been deployed in efforts to boost the yen.

Despite this bounce, the yen’s rally was limited as market participants looked to be forced to exert upward pressure on the currency. The focus now turns to the BOJ meeting at the end of July. The monetary population is divided over the BOJ’s upcoming visit: while some economists argue that market intervention makes a rate hike likely, it is seen as an important follow-up to government movements. Others believe that easing the yen makes tariff increases much less likely.

Technically, further downside in USD/JPY is predicted as long as the 160.25 support resistance holds. Making allowance for the bearish divergence situation in the MACD, a fall from 161.94 could correct the already entire five-wave rally from 140.25.

Sustained trading below the 55D EMA (now at 157.34) will extend this bearish stance and provide additional downside for USD/JPY at 163.65 at 161.94 on the 38.2% retracement of 140.25. However, strong support for a rebound should emerge there, setting the tone for a medium-term consolidation.

On the other hand, Nikkei suffered a strong bounce from the yen. The Eastern index had its biggest daily decline this year, setting an untested record above 42k in the coming period. As long as the 40746.89 support holds, there is still a chance of extending the record rally from 37950.19 to 44469.76 with a 61.8% projection of 35038.28 to 41087.75. On the other hand, corporate split of 40746.89 will again lead to deeper decline at 55D EMA (now at 39407.32). The intensity of Nikkei’s authority in this bearish case will also depend on USD/JPY.

Sterling remains on strong footing as expectations for BOE rate cut in August fade

At a later date Stirling once again emerged as the standout performer. There was often a feeling among traders that the BOE could reduce rates in August, especially with the upcoming general election. Then, those hopes were dashed following comments from the BoE’s chief economist, Huw Tablet. The tablet indicated the option of maintaining the interest rate at 5.25%, bringing down power wage expansion and inflation across the service and product sector as key considerations. Their cautious stance was further strengthened by stronger than expected UK GDP data for May. Due to this, the probability of the August BOE rate being lower, which was earlier around 60% in the market, has fallen to around 50%.

EUR/GBP’s breach of the 0.8396 support means medium-term ailing growth is able to resume. Additional downside cannot be hidden from 0.8498 to 0.8360 with a 61.8% projection from 0.8619 to 0.8396. The defect acceleration from the company’s split could reach the 100% projection at 0.8275.

GBP/CHF’s strong bounce from 1.1216 continued towards the 1.1675 resistance until later in the day. Splitting of the company will ensure restoration of entire profit from 1.0634 at one’s feet. The target for the same time period later is 1.1216 to 1.1859 with a 61.8% projection from 1.0634 to at least 1.1675.

EUR/USD Weekly Outlook

EUR/USD’s rally continued till late date and the collision with the key level at 1.0910 continued. The initial bias remains at the upper level till this date. The company split of one.0915 from 1.0601 to 100% projection from one.0601 to at least one.0915 will resume the howl at the feet of one from 1.0665 to 1.0979. On the downside, minor support under 1.0859 will neutralize intraday bias first.

In the bigger picture, price movements from 1.1274 are seen as a corrective trend, possibly a triangle, which is still in the journey. A fracture of the 1.1138 resistance will be the first sign that the move is capable of resuming a leg up from 0.9534 (2022 minimum) through 1.1274 (2023 prime). This may remain a popular case at times as long as the 1.0601 support holds.

In the long-term picture, the long-term base is in the playing field at 0.9534 (2022 low). A sustained breakdown of the 55M EMA (now at 1.1046) will increase the chances of a long-term reversal. However even in this case, the company must ensure a breakdown of the .2348 structural resistance. Rejection through 55M EMA will protect the bearish side from 1.6039 (2008 prime) to the next level extending the ill-fated growth to 0.9534.