Another Week of Central Banks and Critical Macro Data

Last week the Fed delivered another rate hike of 75 basis points (bps). A separate report showed an unexpected decline in the second-quarter gross domestic product (GDP), sending the US economy into a recession.

This week is looking like this:

Monday will bring us the US manufacturing ISM for July, expected to decrease again from 53.0 to 52.0.

On Tuesday, investors will be paying attention to the RBA monetary policy meeting. The Australian central bank will deliver a 50bps rate hike, bringing the primary rate to 1.85%. However, the RBA might be nearing its neutral rate. Therefore, further rate hikes will likely be lower, possibly undermining the Australian dollar.

Looking at how the Fed’s interest rate rises are affecting jobs might be provided by the Labor Department data expected during the following week. With 11 million job vacancies anticipated following 11.3 million the month prior, the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday will reveal whether or not the labor market remained tight in June.

On Wednesday, the EU PPI inflation is likely staying above 35% year-on-year, a rather unbelievable number as inflation is rapidly destroying EU economies. Moreover, EU retail sales are projected to decline from 0.2% to -1.6% yearly.

Later that day, the US services ISM for July will likely fall from 55.3 to 53.5, confirming the overall weakness in the US economy.

The most important thing on Thursday will be the Bank of England’s monetary policy decision. There, investors are anticipating another 25 basis points rate hike. Still, inflation is showing no signs of stopping, and the BoE is far beyond inflation (as are other central banks).

The nonfarm payroll data on Friday will also reveal whether businesses continued to hire in July after adding 372,000 positions in June or whether economic uncertainty has caused them to cut down. The official consensus is at 250,000 new jobs in July, while the unemployment rate is expected to stay at 3.6%.

At the same time, the Canadian labor market data will be released, expected to improve slightly, likely causing some volatility in the USDCAD pair.

Setups for This Week:

USDJPY

The USDJPY pair has formed a rising wedge pattern, usually a bearish reversal formation, this time reinforced by the bearish divergence between the RSI indicator and the price. The pair is about to test the critical support at previous highs and lows near 131.20. If the price drops below that support, we could see another leg lower, possibly below the 130 level, and the long-term uptrend would likely be over. On the other hand, if bulls reappear at that support, a short-term bullish momentum could drive the price back to 134.

Nasdaq

The US stock market posted a massive monthly return in July as the Nasdaq 100 index canceled its medium-term downtrend. The price is currently trying to get above the key resistance of previous highs and lows, near 12.950 USD. If that is achieved, the index might accelerate toward the 200-day moving average (the purple line) near 14,100 USD. Alternatively, if bears return, we might see a decline, targeting 12,500 USD in the initial wave.

Silver

The metal had a colossal week, rising more than 10% in a week as the US economy has entered a recession, and the Fed might not be so hawkish anymore. The price has now jumped to the previous lows at 20.60 USD, and if bulls manage to push silver above it, the medium-term uptrend could change to bullish, targeting 21.80 USD in the initial reaction. On the other hand, if bulls start taking profits, the metal could decline below the psychological level of 20 USD.