In this article, we have covered the highlights of global market news about the NZD/USD price analysis, Dollar Declines, BTC/USD Struggles, and the EUR/GBP.
Bears have the upper hand and may attempt to challenge the YTD low, according to the NZD/USD price analysis.
Early in the European session, there was some selling in the NZD/USD pair, extending the overnight retracement decline from the 0.6250-0.6255 supply zone. Spot prices fell back below the round number of 0.6200 in the previous hour and are still in danger of falling lower.
A somewhat larger picture reveals that the NZD/USD pair has been drifting downward along a descending channel that has been present since mid-June, indicating a well-established short-term negative trend. The oscillators on the daily chart are holding strongly in the bearish region, and they have been unable to make any significant progress on hourly charts, which adds to the bias in favour of the downside.
The possibilities for an extension of the most recent depreciating move are supported by the technical set-up, which seems to be strongly biassed in favour of negative traders. As a result, a continuing decline towards the YTD low, within the range of 0.6150–0.6145 reached last Friday, is still a real possibility. Bears may ultimately try to attack the bottom of the declining channel, close to the 0.6120 region.
A strong break of the channel support, followed by some follow-through weakness below the round-figure level, would be seen as a new trigger for bearish traders. The NZD/USD pair would thus be exposed to continuing its downward trend approaching the psychological level of 0.6000, which would pave the way for more losses.
Dollar Declines; RBA Increases Interest Rate
While the Australian dollar fell despite the country’s Reserve Bank announcing a half-point rate rise, the U.S. dollar slipped down in early European trading on Tuesday.
At 3 AM ET (0700 GMT), the Dollar Index, which measures the value of the dollar against a basket of six other currencies, was down 0.1 percent at 104.892 after reaching a high of 105.64 on Friday, which was not far off the top of 105.79 hit in mid-June 2000 and two decades ago.
The safe-haven dollar has suffered as risk sentiment has increased on Tuesday as a result of generally rising stock markets. However, given the 10-year Treasury yield’s impressive recovery, which last traded at 2.937 percent after falling to its lowest level since May at 2.791 percent on Friday, losses are being kept to a minimum.
Due to U.S. markets being closed on Monday for the Fourth of July vacation, there was little activity in the foreign currency markets as well as no trading in Treasurys.
After the Reserve Bank of Australia increased its benchmark interest rate by 50 basis points, the AUD/USD exchange rate dropped 0.1 percent to 0.6858. Although this action was generally anticipated, the 75 basis point hike by the U.S. Federal Reserve last month had led to rumours that Australia’s central bank may be more aggressive in its tightening.
The Aussie currency is still predominantly influenced by USD movements and the global risk environment, analysts at ING said in a report. “Despite this, the Aussie dollar has been substantially de-linked from monetary policy and short-term rate dynamics.”
BTC/USD Struggles to Find Support Before FOMC
With prices continuing to stabilise around the $20,000 level, Bitcoin has entered Q3 after a turbulent Q2.
Since the start of the year, increased geopolitical concerns and a change in attitude (induced by rate increases, conflict, and a bleak economic outlook) have put pressure on digital assets, pushing Bitcoin down toward values last seen in December 2020.
Since there is a negative connection between BTC/USD and interest rates, rising price pressures and a surge in stimulus (due to the Covid-19 outbreak) have driven the Federal Reserve to hike rates more quickly than anticipated, which has diminished the attraction of speculative assets.
Bitcoin prices have enjoyed the US holiday in the black, carefully stepping slightly beyond $19,000, as the expected economic growth prognosis remains somewhat gloomy. Fundamentals may help prices move out of the $18,000–$22,000 area this week, as the FOMC Minutes and NFP data are both important economic releases.
Market pricing and interest rate differentials for long EUR/GBP
Bears of the EUR/GBP have changed their fortunes in 2022 after a solid finish to 2021 for the pound. Part of this may be attributed to the market’s exaggerated expectations for rate increases from the Bank of England (BoE) in late 2021, which have now been revealed in EUR/GBP price movement. The present interest rate difference between the European Central Bank (ECB) and the BoE is what influences my preference for an increase in the value of the euro relative to the British Pound. The steadily increasing EUR/GBP rate can be seen in the graph below against a background of a rather hawkish BoE and a dovish ECB.
After Q2, the ECB’s cautious stance seems to be giving way to one that is more receptive to drastic tightening measures. This should (in principle) strengthen the euro, which has remained strong versus the pound despite a number of challenges facing the eurozone, such as the crisis in Russia and Ukraine and its worries about the rates on EU peripheral bonds. Since the ECB is falling behind, larger rate increases would be required—at a severe economic cost.