GBP/USD: the UK economy is the best among the G7 countries

Trading idea for EUR/GBP on July 3, 2024On Wednesday, the most popular forex cross EUR/GBP shows a moderate recovery, trading near 0.8470. Euro buyers became more active after yesterday's sell-off, when the pair retreated from the local high of 0.8500.Earlier, the European currency was under pressure due to inflation data in the Eurozone. The preliminary Harmonized Consumer Price Index (HICP) of the Eurozone in June amounted to 2.5% in annual terms against 2.6% in the previous month. The base indicator remained at 2.9% in annual terms with a forecast of 2.8%, and changed from 0.4% to 0.3% on a monthly basis. In response, officials of the European Central Bank (ECB) are being cautious when talking about the prospects of the regulator's monetary policy. ECB President Christine Lagarde noted that the Central Bank will need more time to ensure a steady decline in inflation to the target level of 2%, and therefore monetary policy easing will take place gradually and slowly. Lagarde also stressed that the risks of recession have not disappeared anywhere, and the prospects for economic growth remain uncertain. ECB chief Economist Philip Lane said that the data for June was in line with ECB expectations, which means there is a high probability of further rate cuts.Although the prospect of easing European monetary policy is a negative factor for the euro, its impact can only be assessed over time. This week, traders should focus on the parliamentary elections in England, which will be held tomorrow. British Prime Minister Rishi Sunak admitted the possibility of the defeat of the Conservative Party led by him in the elections, after which the winning party will form a new government. Political uncertainty in the UK may put pressure on the pound in the coming days, which creates the potential for the EUR/GBP pair to rise above 0.8500.Trade recommendation: Buy Stop 0.8500, target 0.8650, stop loss 0.8450.

FOREX Fundamental analysis for EUR/USD on July 3, 2024At a forum in Portuguese Sintra, Jerome Powell did not surprise the markets by saying that the strong US economy gives the Fed time to think. However, the rhetoric of the head of the Fed was perceived by investors as "dovish". This led to a decrease in Treasury bond yields, which rose markedly after the Joe Biden and Donald Trump debates, which allowed EURUSD buyers to go on the offensive. Isn't it time for investors to reconsider forex trading strategies after the words of the chairman of the Federal Reserve?It was probably his reasoning that recent statistics indicate the return of the US economy to a disinflationary path. Powell stressed that the Fed wants to make sure of this before starting to adjust rates. Perhaps the frequent mention of the word "progress" in the fight against inflation impressed investors. But, most likely, the essence lies deeper.Jerome Powell also took the liberty of criticizing the Joe Biden administration for taking excessive risks associated with a huge budget deficit in full employment. He stated that it is impossible to manage such deficit levels for a long time in good economic times, calling on the president to eliminate the financial imbalance. It is clear that his words are directed not only at the Democrats.But if Joe Biden plans to extend the tax relief program, which has been in effect since 2017 only for those whose income does not exceed $400 thousand per year, then everyone is equal for Donald Trump. His victory in the presidential election will further expand the budget deficit, which, according to forecasts by the Congressional Budget Office, will reach $1.9 trillion in 2024, which is 7% of GDP.Trump's policy of raising tariffs on imports will help to accelerate inflation, forcing the Fed to keep rates at 5.5% for a long time, which significantly increases the risks of recession. However, this also contributes to the growth of the yield of treasuries and supports the US dollar.Investors, and the Fed itself, are afraid of Trump's return to the White House. Unlike Biden, Trump has a habit of interfering in the affairs of the Central Bank. There are rumors that the Fed may cut rates in September not only because of the cooling of the economy, but also to support the current government. Powell, speaking about the budget deficit, added arguments in favor of an early start of monetary expansion.The euro supports the reluctance of core inflation and service prices to decline from their May levels of 2.9% and 4.1%. In addition, Christine Lagarde has unequivocally stated that the ECB's actions are incomplete.I think investors are overestimating the situation. The Fed will remain neutral, and the federal funds rate cut in September will occur against the backdrop of a cooling US economy. Employment data for June will certainly confirm this, providing an opportunity to strengthen long positions on EURUSD from the area of 1,071-1,072.EUR/USD Technical analysisYesterday, EUR/USD reached the sellers' first target, declining from the resistance area (A) 1.0758 - 1.0750. It was the 1.0712 level. Then the pair tested the resistance area (A) again. Today, buyers are likely to try to break through it and continue strengthening towards the resistance area (B) 1.0804 - 1.0792. After the resistance test (B), we suggest considering new sales of the instrument with the first target at 1.0735.To change the trend and make purchases, the bulls need to fix the quote above the 1.0804 level. In this case, it will be possible to consider long positions with a target in the range of 1.0943 - 1.0918.

USD/CAD analysis on July 2, 2024On Tuesday, USD/CAD rose moderately, updating local highs from June 18 and testing the level of 1.3750 for an upward breakout. Activity on the instrument remains high despite the fact that the macroeconomic background from the United States does not contribute to an upward movement.Statistics on the personal consumption expenditure price index were in line with analysts' forecasts, so the market reaction was restrained. In May, the base index decreased from 2.8% to 2.6% in annual terms and from 0.3% to 0.1% on a monthly basis, while the broader index adjusted from 2.7% to 2.6% and from 0.3% to 0.0%. These data did not affect expectations of an interest rate cut by the US Federal Reserve. It is likely that the local driver for the regulator's decision will be the June labor market report, which will be released on Friday. Traders expect that the number of new jobs outside the agricultural sector will decrease from 272.0 thousand to 195.0 thousand, the average hourly wage will slow down from 4.1% to 3.9% in annual terms and from 0.4% to 0.3% monthly, and the unemployment rate will remain at 4.0%. Tomorrow, the minutes of the Fed's June meeting will be published, which will clarify the sentiments of FOMC members regarding the prospects for rate cuts. Analysts expect the first rate cut of 25 basis points in September.A report on the Canadian labor market will also be released on Friday. Forecasts suggest a moderate slowdown in employment growth in June from 26.7 thousand to 22.5 thousand, the unemployment rate may rise from 6.2% to 6.3%, and the average hourly wage will be 5.0-5.2%.On the daily chart, the Bollinger band indicator is trying to turn into a horizontal plane. The MACD indicator is growing, maintaining an uncertain buy signal. Stochastic is approaching its maximum values.It is recommended to open long positions only after a confident breakout of the 1.3762 level with a target of 1.3845. We set the stop loss at 1.3720.If the price bounces off the 1.3762 level and breaks down to 1.3733, we get a signal to form sales with a target of 1.3675. In this case, we will set the stop loss at 1.3762.

USD/JPY is steadily strengthening, updating record highs. On Tuesday, the pair is trading near the 161.65 mark, but without much activity, as traders are waiting for new market triggers.Yesterday, the main attention of market participants was focused on Japanese business activity data. The Tankan business activity index in the service sector for the second quarter decreased from 34.0 to 33.0 points, the Bank of Japan's Tankan index of large manufacturers increased from 11.0 to 13.0 points, although analysts expected to see the same value, and the manufacturing sector index in June decreased from 50.1 to 50.0 points, testing a critical level of stagnation. The study showed that production volumes are growing due to the fulfillment of orders already received, while the number of new orders remains low due to limited external demand for Japanese products, especially automobiles and semiconductors. A slowdown in the industrial sector could exacerbate the economic downturn, and the government has already revised its forecasts.At the same time, business activity in the US manufacturing sector from S&P Global decreased from 51.7 to 51.6 points, but remained above the key level of 50.0. The business activity index from the Institute of Supply Management (ISM) decreased from 48.7 to 48.5 points, despite forecasts of 49.1 points. The main attention is now focused on Friday's report on the US labor market. It is expected that the number of new jobs created outside the agricultural sector will decrease from 272.0 thousand. to 195.0 thousand, the average hourly wage will slow down from 4.1% to 3.9% in annual terms and from 0.4% to 0.3% on a monthly basis, and the unemployment rate will remain at 4.0%. These data will help clarify the prospects for a reduction in the US Federal Reserve interest rate by the end of the year. The main scenario assumes a rate cut in September, and a total of one or a maximum of two cuts of 25 basis points are expected.On the daily chart, the Bollinger Bands indicator shows steady growth, as does the MACD, which has formed a buy signal. Stochastic is near the maximum values.It is recommended to open long positions after a confident breakdown up to the level of 162.00. The target is 163.00. We set the stop loss at the level of 161.30.If the pair breaks through the 161.30 mark down, we will get a sales signal with a target at 159.92. We will place a stop loss at 162.00.

Trading idea for GBP/USD on July 2, 2024After yesterday's growth, when the pound peaked at 1.2709, the maximum level on June 20, on Tuesday, GBP/USD is declining, trading at 1.2640. Despite a promising start to the week, buyers were unable to hold their positions, and sterling fell by 60 pp, ending yesterday's session at 1.2649.Weak data on UK business activity did not allow sterling buyers to develop an offensive. In June, the British manufacturing activity index fell from 51.2 to 50.9 points, indicating a possible stagnation of the economy. The latest study by the Confederation of British Industrialists showed an expansion in order volumes and delivery times, as well as an increase in production costs since the beginning of 2023. According to Nationwide Building Society, the real estate price index decreased from 0.4% to 0.2% (mom). Analysts point out that British household incomes are still insufficient to compensate for high mortgage rates. Political risks also remain a negative factor for the pound. Parliamentary elections in the UK will be held on July 4, and according to polls, the Labour Party is leading by a margin of 20 percentage points. Prime Minister Rishi Sunak acknowledged the possibility of a defeat for the Conservative Party, which would allow the winning party to form a new government.In addition to the above, the growth of GBP/USD is holding back the strengthening of the dollar. Mary Daley, President of the Federal Reserve Bank of San Francisco, said in an interview with CNBC that the Fed's monetary policy is generally effective, but the regulator will need more time to fully control inflation. Markets are expecting today's speech by Fed Chairman Jerome Powell at 13:30 GMT. If Powell confirms his intention not to rush into monetary policy easing, the dollar will continue to strengthen, which will create additional pressure on the pound.In accordance with fundamental analysis, readings of technical indicators and graphical patterns, we consider the sale of GBP/USDSell stop 1.2610Target 1.2400Stop loss 1.2680.

FOREX Fundamental analysis for EUR/USD on July 2, 2024Forex currency trading does not tolerate uncertainty, but political events have added chaos to trading. The victory of Claudia Sheinbaum and her Morena party in Mexico led to the fall of the peso. At the same time, the decrease in the probability of victory with an absolute advantage of the National Rally in France reduced the difference in yields of French and German bonds and had a positive impact on the EUR/USD exchange rate. Investors fear that the concentration of power in one hand may lead to reforms unfavorable for the market. In the United States, the situation is different - the Republican sweep is perceived by investors as an incentive for the growth of the dollar index.The convincing victory of Donald Trump and the decision of the Supreme Court to protect him from criminal prosecution for his actions as president increased the yield of US Treasury bonds and caused a decrease in EUR/USD.Under Joe Biden's presidency, the dollar index was the leader among other forex currency indices, thanks to loose fiscal policy and the Fed's tight exchange rate. However, the situation has been changing since 2024. Households have spent their savings, the Fed is preparing to cut rates, and Democrats will face difficulties in passing new fiscal stimulus through Congress.If Donald Trump returns to the White House, Republicans can continue tax cuts and widen the budget deficit. This will require more issuance of Treasury bonds, which will lead to lower prices and higher yields, creating favorable conditions for a bearish EUR/USD trend.Even disappointing data on business activity in the US manufacturing sector from ISM, indicating a slowdown in the economy, did not help buyers of the main currency risk.If Donald Trump raises tariffs on imports, this could accelerate inflation and force the Fed to keep rates at 5.5%, which will support the downward trend of EUR/USD, especially if we add here the slowdown in inflation in Germany, which increases the likelihood of two acts of ECB monetary expansion in 2024. Political uncertainty in France is also not going away.The composition of the National Assembly will be known only after the second round of elections. The right can get an absolute majority, which will have a negative impact on the euro. However, the most likely scenario is a minority government, which will reduce the difference in French and German bond yields and allow EUR/USD to recover.Investors should take into account the upcoming important releases on European inflation and the US labor market. A drop in EUR/USD below 1.07 may restore the downtrend and become a sales signal. While the euro is trading above this level, the focus should remain on purchases.EUR/USD Technical AnalysisOn Monday, EUR/USD tested the resistance area 1.0758 - 1.0750, working out a correction of the short-term downward trend. Sellers were able to hold the designated area, which triggered a decline in the pair. If the downtrend continues today, it will be possible to wait for testing the sellers' first target at 1.0712. A breakdown of the 1.0712 level is likely to lead to a further drop in EUR/USD to the second target of the bears at 1.0666.At the same time, an alternative scenario should not be discarded. If the pair continues to grow and breaks through the resistance up, then we are waiting for testing the trend boundary 1.0804 - 1.0792. From here, sales will be considered again.

AUD/USD has noticeably sagged, rolling back from local highs on June 26 and at the beginning of the week it is testing the support of 0.6665 for a breakdown downwards. Traders analyze macroeconomic data from Australia and China. In Australia, the manufacturing PMI for June fell from 47.5 to 47.2 points, and the ANZ jobs index fell 2.2% after a 1.9% decline in the previous month. In addition, in May, the weighted average consumer price index rose from 3.6% to 4.0%, which raised concerns about a possible interest rate hike in August. Although these data supported the Australian dollar, the comments of the deputy head of the Reserve Bank of Australia, Andrew Hauser, who said that it was impossible to make decisions based on a single inflation report, restrained further growth of the pair.The data from China was mixed: the Caixin business activity index in manufacturing rose from 51.7 to 51.8 points in June, exceeding analysts' expectations, but the index in the services sector fell from 51.1 to 50.5 points. The index in the manufacturing sector from the National Bureau of Statistics remained at 49.5 points.Expectations of further actions by the RBA provide some support to the Australian dollar. Unexpectedly strong inflation growth in Australia may lead to new interest rate hikes. In May, the consumer price index accelerated from 3.6% to 4.0%. Business activity data from the Australian Industry Group (AiG) and the Commonwealth Bank, inflation statistics from TD Securities, as well as retail sales data for May are expected to be published on Wednesday. On Friday, the US is expected to release June labor market data, where the number of new jobs is projected to decrease from 272 thousand to 180 thousand.The main forex indicators on the daily chart give mixed signals: the Bollinger bands move to a horizontal position, the MACD is growing, maintaining a weak buy signal, and the Stochastic Oscillator is approaching maximum levels.It is recommended to open short positions with a confident breakdown down to the level of 0.6667. The target is 0.6622. We will set the stop loss at 0.6690.For purchases, we are waiting for a rebound from 0.6667 and an upward breakdown of the resistance of 0.6679. The target mark is 0.6725. We place the stop loss at 0.6655.

FOREX Fundamental analysis for EUR/USD on July 1, 2024The circumstances turned out well. The slowdown in inflation in the United States and expectations that Marine Le Pen's party is unlikely to achieve an absolute majority in Parliament allowed the EURUSD to break above the resistance of 1.0725. Political tension will continue to put pressure on the euro until the second round of elections, but its influence has already weakened, which creates prerequisites for the growth of the main currency pair.According to Elabe, in the first round, the National Rally won 33% of the vote, the New Popular Front – 29%, and the Revival of Emmanuel Macron – 22%. This is projected at 255-295 seats in the National Assembly for the right, 120-140 for the left and 90-125 for Macron's party and his allies. Marine Le Pen's opponents must join forces to prevent her party from gaining an absolute majority of 289 seats. If her party succeeds, Jordan Bardella will become the new prime minister.The most negative scenario for the markets would be the success of the New Popular Front. The victory of the National Rally increases the likelihood of a repeat of the Italian scenario, when the right-wingers, who criticized the EU before the elections, then began to cooperate with Brussels. In any case, the results of the first round reduced the difference in French and German bond yields and contributed to the growth of EURUSD.The hammer of political instability is gradually moving away from the euro, while the anvil in the form of a slowdown in the US economy continues to limit the dollar. In May, the growth rate of the American index of personal consumption expenditures decreased from 2.7% to 2.6% in annual terms and from 0.3% to 0.1% on a monthly basis. The core PCE index remained unchanged from the previous month and slowed from 2.8% to 2.6% year-on-year. Markets have almost stopped expecting inflation to accelerate again, as at the beginning of the year, and estimate the probability of two Fed rate cuts in 2024 at 95%. The chances of a rate cut in September are 63%.Observing the cooling of the US economy, sooner or later you will want to prevent its complete freezing. The Fed is on the verge of declaring victory over inflation, and, according to Oxford Economics, the labor market report is becoming a more important indicator than CPI and PCE statistics. Weak employment data for April lifted the EURUSD rate, while strong data for May caused the pair to fall.I believe that the June NFP report will help you choose forex trading strategies for dollar pairs for the coming month. Before its release, the EURUSD will move in versatile fluctuations. The elections in France have not yet been completed, and on July 4 there will be a vote in Britain. In addition, a slowdown in inflation in the Eurozone may put pressure on the euro. We maintain long positions open from 1.0725, counting on further weakening of the US labor market.EUR/USD Technical analysisEUR/USD corrects the short-term downtrend. At the moment, the pair is breaking through the resistance area (A) 1.0758 - 1.0750. If the correction continues, it will be possible to wait for the test of the resistance area (B) 1.0804 - 1.0792. Zone (B) is the boundary of the trend, and from here we will consider selling the instrument with a target at the minimum of June 26.If EUR/USD returns to the 1.0750 level during trading, a sell pattern will form. In this case, it will be possible to consider short positions with the first target at the 1.0712 level and with the second target at the June 26 minimum.