Weekly Market Analysis for 5th August 2024

Asian stock markets plunged today with the Nikkei selling off heavily (down 13% at the lowest point), while US index futures also traded lower. The markets were under pressure as investors feared an escalation of the conflict in the Middle East and a possible recession in the US.

The yen surged to its highest level against the US dollar since January 2024, influenced by weak US labour data and anticipated rate cuts by the Federal reserve. Last week’s poor US jobs report, as well as weak earnings from major tech firms and concerns over China's economy triggered a global sell-off.

This week could be quite volatile, so be prepared to trade the opportunities ahead.

US Purchasing managers index

Monday's main risk event is the ISM Services PMI report for the US Dollar (USD). The previous reading was 48.8, and the forecast is 51.4. An actual figure higher than expected could boost the USD.

Interest rates statements for AUD

Tuesday will be a busy day for the Australian Dollar (AUD) with the releases of the Cash Rate and the RBA Monetary Policy Statement in the Asian session. The Cash Rate is expected to remain at 4.35%. Traders should watch for any changes in the RBA’s stance, as this could influence AUD movements.

Employment data from New Zealand

Wednesday will see significant releases from New Zealand (NZD) with the Employment Change and the Unemployment Rate data. Employment Change is forecasted to be -0.3%, a slight decrease from the previous -0.2%. The Unemployment Rate is expected to rise to 4.7% from 4.3%. These figures could impact NZD significantly, especially if the actual data deviates from expectations.

Employment data from the US, Inflation for NZD, RBA monetary policy statement.

Thursday will again spotlight Australia with RBA Governor Bullock's speech. Any hints about future monetary policy could influence the AUD. Additionally, New Zealand's Inflation Expectations q/q will be closely monitored, alongside US Unemployment Claims forecasted at 245K, which is down slightly from the previous 249K. The actual figures can impact market sentiment towards the USD.

Employment data from Canada

Friday will wrap up the week with significant data from Canada (CAD), including Employment Change and the Unemployment Rate. The previous Employment Change was -1.4K, and any improvement could bolster the CAD. The Unemployment Rate is expected to hold steady at 6.4%.

Three markets to watch this week

EURUSD

After missing our second downside target of 1.0775 by 2.5 pips (target one at 1.0805 was hit), EURUSD rallied strongly today. The market is now trading near a weekly resistance level at 1.0981. This level roughly coincides with the top of a bull channel (1.0972), creating a technical confluence area that makes the 1.0981 region significant. If the market weakens and starts to roll over near this level, we might see a mean reversion move possibly down to 1.0875. Alternatively, if EURUSD can rally beyond the 1.0981 level and hold above it, we could see it moving to 1.1050.

AUDUSD

The AUDUSD market has traded lower for four consecutive weeks. Today's bearish reaction pushed AUDUSD down to a major support level (0.6362) before it recovered. As the pair is quite oversold, some traders are bottom-fishing the market. However, China's sputtering growth and the potential for a US recession are significant risk factors for this commodity-driven currency. Additionally, fears of wider conflict in the Middle East contribute to investor nervousness, suggesting that AUDUSD will likely remain volatile.

Technically, the market remains bearish (despite being oversold) below 0.6514, with the nearest key support level at 0.6362. A decisive break above 0.6514 could see AUDUSD trade in the 0.6560 - 0.6570 range, potentially extending to 0.6611. Below 0.6514, the market remains bearish, with traders possibly targeting 0.6340.

NZDUSD

Today's volatility in NZDUSD has reached levels typically seen over an entire week. NZDUSD fell to 0.5875 before recovering to its current level of 0.5935. The market is oversold on the weekly chart after reaching a major weekly swing low at 0.5852, which has limited further downside today. If this support holds, the market could push above the nearest key resistance level on the daily chart at 0.5985, potentially moving towards 0.6050. Alternatively, if the 0.5985 resistance holds, a retest of today's low is likely. The market's reaction to employment numbers on Wednesday and inflation expectations on Thursday could provide further clues on which scenario is more likely.

This weeks high impact market events

The following economic events and data releases have the potential to cause considerable price movements, thereby offering you both opportunities and risks. Stay informed and leverage our economic calendar to access real-time data and analysis as these key events unfold.

Time (GMT +3)

Monday 5th August

Tuesday 6th August

Wednesday 7th August

Thursday 8th August

Friday 9th August

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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