From ECB Moves to Currency Shifts: An In-depth Look at Friday’s Financial Landscape

By Tomasz Wisniewski|

Published: July 28 2023, 05:59 GMT+0

From ECB Moves to Currency Shifts: An In-depth Look at Friday’s Financial Landscape

The financial world often finds itself at the mercy of data releases and central bank decisions, and this week was no exception. While the week was brimming with action, Friday’s outlook, heavily influenced by Thursday’s data and market moves, deserves an in-depth analysis.

Thursday, the European Central Bank (ECB) grabbed headlines by raising its rates by 25 basis points, adjusting the main refinancing rate to 4.25%. This pivotal move was reflective of similar actions across major economies, with central banks reacting to global inflationary pressures and robust economic recoveries.

Further, the US gave market participants much to chew on. GDP figures turned heads by charting a robust 2.4%, considerably overshadowing the 1.8% expectations. This underlines a vigorous US economy, seemingly undeterred by global economic challenges. Moreover, the country’s durable goods orders didn’t just meet but significantly exceeded expectations, coming in at an impressive 4.7%, as opposed to the 1.3% anticipated.

As for Friday, the macro calendar is replete with significant data points. Early in the day, the Bank of Japan announced its interest rate decision, accompanied by its outlook report and monetary policy statement. Traders are currently keeping a close eye on the impending inflation data from Germany. The day also promises GDP figures from Canada, the Core PC Price Index, and the Employment Cost Index from the US. Capping off the day (and the week) is the revised University of Michigan Consumer Sentiment Number from the US, which is bound to influence the markets.

The currency market on Friday seems to be continuing its trend from Thursday. The Japanese Yen and the US Dollar are displaying signs of strength, a phenomenon likely influenced by central bank decisions and economic data. The underperformers of the pack, however, are the Australian Dollar and the New Zealand Dollar, which are experiencing a continuation of their downward trajectory.

EURUSD has been a pair of particular interest. After breaking the crucial 1.105 support on Thursday, the pair has been giving technical analysts ample fodder for discussion. This downward momentum has rendered a mid-term sell signal on EURUSD, causing traders to reassess their positions.

USDCHF, on the other hand, seems to be painting a brighter picture. With its potential double bottom formation, it’s hinting at a bullish turn, positioning itself for a buy signal. Similarly, the USDCAD remains above its long-term uptrend line, fostering a positive sentiment.

Over in the world of commodities, the strength of the dollar continues to exert pressure. Gold’s pullback from its local highs is of note, but it’s the slide in silver, breaking a key horizontal support, that has raised eyebrows. The sentiment on silver has turned bearish, especially with its dip below the 24.4 USD/oz mark. In contrast, oil seems to be defying the dollar’s strength, staying resilient and hovering near monthly highs.

Lastly, when it comes to indices, Thursday saw American indices taking a bearish turn from their long-term highs. Particularly, the S&P 500, with its shooting star candlestick pattern, suggests the potential for a deeper correction. The NASDAQ is also on the radar as it tests a long-term uptrend line. A break below could signal a shift to bearish sentiment. European indices, for now, are holding their ground, faring relatively better.