EUR/USD holds 1.10 ahead of CPI and GDP: European open – 31st July 2023

Asian Indices:

• Australia's ASX 200 index fell by -21.9 points (-0.3%) and currently trades at 7,381.70
• Japan's Nikkei 225 index has risen by 319.02 points (0.97%) and currently trades at 33,078.25
• Hong Kong's Hang Seng index has risen by 292.22 points (1.47%) and currently trades at 20,208.78
• China's A50 Index has risen by 65.91 points (0.5%) and currently trades at 13,332.90

UK and Europe:

• UK's FTSE 100 futures are currently down -39.5 points (-0.51%), the cash market is currently estimated to open at 7,654.77
• Euro STOXX 50 futures are currently down -20 points (-0.44%), the cash market is currently estimated to open at 4,446.50
• Germany's DAX futures are currently down -48 points (-0.29%), the cash market is currently estimated to open at 16,421.75

US Futures:

• DJI futures are currently down -66 points (-0.19%)
• S&P 500 futures are currently down -9 points (-0.2%)
• Nasdaq 100 futures are currently down -42.25 points (-0.27%)

China’s manufacturing sector contracted for a fourth month, but at its slowest rate in five. The services PMI also expanded at its slowest pace in seven which dragged the composite PMI down to its lowest level this year. It remains debatable as to how much news this really is, given China has vowed to provide yet more stimulus to the economy. Still, it gave a nice little bump for NZD/USD and AUD/USD which are the strongest forex majors so far today.

Flash GDP and inflation data is released for the eurozone at 10:00 BST. Growth is expected to slow to 0.5% y/y from 1% previously, although grow at 0.2% q/q – up from -0.1% previously. CPI is forecast to slow to 5.3% y/y from 5.5%, and core CPI to 5.4% y/y from 5.5%. As incoming data is really about whether the ECB will feel the need to hike by another 15bp in September, a softer-than-expected set of figures could weigh on the euro and further support the DAX which reached a record high on Friday. Conversely, if data is not to slow enough today then it keeps the pressure on the ECB to tighten policy and could send EUR/SUD higher and the DAX to retrace from its record-high perch.

• EUR/GBP is on track for a second consecutive Doji on the monthly chart, after handing back all of the prior week’s gains last week and closing near July’s open prices. It is another market which underscores a lack of direction and suggest shorter holding times may be preferable for traders until sustainable trends return.
• Gold has produced a deeper retracement overnight than expected, as per Asian Open report. Prices need to hold above 1950 for it to stand any hope of reverting higher in line with our near-term bullish bias, bac towards Friday’s high
• GBP/USD is coiling up within a similar intraday consolidation to EUR/USD. If it can hold above 1.280 then perhaps it can provide a bull flag breakout and head for 1.2900
• USD/JPY has risen to a 6-day high and appears set on testing (and perhaps breaking above) 142. Whilst the intraday trend structure remains bullish, traders should also keep an ear out for more BOJ or MOF jawboning the closer it gets to 145.
• There has been little in the way of notable volatility from forex majors overnight apart from USD/JPY, which has moved ~80% of its 20-day average. 1-day implied volatility also points to a quiet start with most pairs suggesting between half or two thirds of their usual potential.

EUR/USD 1-hour chart:

EUR/USD has retraced for a second consecutive week, and if it were to close around current levels today would print a bearish hammer candle on the monthly chart. It managed to hold above trend support projected from the June 7 low on Friday after a minor intraday break beneath it, and the day closed with a small bullish candle.

As it is the last day of the month, traders may want to factor in a few spikes here and there along the way as end of month flows can prove tricky on occasion. But if EUR/USD can build a support level above the 1.10 area, perhaps it can muster up the energy for a quick rebound towards Friday high or the daily R1 pivot near 1.1060.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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