ECB decision today

The ECB’s interest rate decision is set to occur later on today. The majority of participants are anticipating the bank to remain on hold, with EUR OIS currently implying a 95.33% probability for such a scenario to materialize. As such, our attention turns to ECB President Lagarde’s press conference which is set to occur after the decision. Should ECB President Lagarde imply that the bank may proceed with further rate cuts this year, as is expected by market participants, it could be perceived as dovish in nature, which in turn could weigh on the common currency. On the flip side, any form of hesitation to continue cutting rates this year, could instead be perceived as hawkish in nature, which in turn may aid the EUR. On a political level, we note that elections for the position of Commission President are set to occur during today’s European session. In the event that the incumbent President Ursula von der Leyen fails to secure at least 361 out of 720 votes in favor of a second five year term, it could potentially spark a political crisis within the EU, which in turn could weigh on the EUR. Over in the US the Philly Fed Business index figure for July is expected to come in at 2.7 which would be higher than the previous figure of 1.3. Therefore, should the figure come in as expected or higher it may aid the greenback, whereas any figure lower could have negative implications for the dollar. Over in Asia, Japan’s CPI rates for June are set to be released in tomorrow’s Asian session. The current market expectations are for the Core CPI rate for June to come in at 2.7% which would be higher than the prior rate of 2.5%. As such, should it come in as expected or higher, thus implying an acceleration of inflationary pressures, it may aid the JPY.

EUR/USD appears to be moving in an upwards fashion. We maintain our bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure above 60, implying a bullish market sentiment, in addition to the upwards-moving trendline which was incepted on the 2nd of July. For our bullish outlook, to continue we would require a break above the 1.0980 (R1) resistance line with the next possible target for the bulls being the 1.1047 (R2) resistance level. On the flip side, for a sideways bias we would require the pair to remain confined between the 1.0920 (S1) support level and the 1.0980 (R1) resistance line. Lastly, for a bearish outlook, we would require a clear break below the 1.0920 (S1) support level, with the next possible target for the bears being the 1.0865 (S2) support level.

XAU/USD appears to be moving in an upwards fashion, after bouncing off near our 2450 (S1) support level. We opt for a bullish outlook for the commodity and supporting our case is the RSI indicator below our chart which currently registers a figure above 60 implying a bullish market sentiment, in addition to the upwards moving trendline which was incepted on the 11th of July. For our bullish outlook to continue, we would require a break above the 2480 (R1) resistance level, with the next possible target for the bulls being the 2510 (R2) resistance line. On the flip side for a bearish outlook, we would require a clear break below the 2450 (S1) support level, with the next possible target for the bears being the 2417 (S2) support level. Lastly, for a sideways bias, we would require the precious metal to remain between the 2450 (S1) support level and the 2480 (R1) resistance line.

Other highlights for the day

Today in the European session, we note the UK’s employment data for May, followed by the US weekly initial jobless claims figure and the US Philly Fed business index figure for July. In tomorrow’s Asian session, we note Japan’s CPI rates for June. On a monetary level, we highlight and stress the importance of the ECB’s interest rate decision, followed by ECB President Lagarde’s press conference and the speech by Dallas Fed President Logan. In tomorrow’s Asian session, we note the speeches by San Francisco Fed President Daly and Fed board Governor Bowman.