In July, the Thai baht weakened against the US dollar in terms of London closing rates from 35.341 to 36.364. Despite potential positives in domestic fundamentals, the THB looks to be adversely affected by global risks, in the view of economists at MUFG Bank.

“We highlighted last Monday (01 Aug, spot at 36.27) that USD/THB ‘could dip below the rising trend-line support at 35.92’. We added, ‘the next major support at 33.58 (55-day exponential moving average) is not expected to come into the picture’.”

“The anticipated weakness exceeded our expectations as USD/THB dropped to 35.54 on Friday before rebounding quickly. While further USD/THB weakness is not ruled out this week, oversold conditions suggest a sustained decline below 35.50 is unlikely (next support is at 35.20). Resistance is at 36.05 but only a break of 36.36 would indicate that the current downward pressure has eased.”

“Owing to near-term dollar strength possibly persisting in the coming months, we move our USD/IDR forecast profile higher.” 

“We forecast USD/IDR to move lower from 15,100 in Q3 and 15,200 in Q4 to 15,000 in Q1-2023 and 14,750 in Q2-2023.”

 

“Political uncertainty has had limited impact on GBP so far. Liz Truss's victory could trigger a more volatile GBP reaction. Looser fiscal and tighter monetary policy combination is normally supportive for a currency.”

“The risks for cable in Q3 remain to the downside given GBP tends to perform poorly as global financial conditions tighten. Beyond then, we expect cable to recover as the USD weakens more broadly.”

 

“The NFP report surprisingly revealed that employment growth surged higher by 528K in July. Leading indicators continue to signal that employment growth is likely to slow sharply later this year, but for now, the robust pace of employment growth combined with more evidence of stronger average hourly earnings growth (+0.5% MoM) in July keeps pressure on the Fed to keep raising rates further into restrictive territory above 3.00%.”

“Renewed upward pressure on short-term US yields should encourage an even a stronger US dollar. We believe there is room for the US dollar to rebound further in the near-term.”

 

In the view of economists at CIBC Capital Markets,  the Canadian dollar is set to see modest weakening as slower global growth hits commodities, and the Federal Reserve slightly outguns the Bank of Canada (BoC).

EUR/USD could test December 2002 lows as costly nat-gas prices and ongoing supply threats leave the eurozone facing elevated recession risks, which will weigh on the euro ahead, economists at CIBC Capital Markets report.

GBP/USD has failed to reclaim 1.2100 following the earlier recovery attempt. The pair could face further bearish pressure if 1.2050 support fails. The positive shift witnessed in risk sentiment helps the pound limit its losses.

Gold price nurses losses after impressive US NFP-inspired sell-off. US dollar eases in tandem with the Treasury yields amid a better mood. XAU/USD looks south towards $1,750, as 75 bps Sept Fed rate hike bets rise.

“In case the market environment remains risk-positive in the second half of the day, GBP/USD's downside could remain limited. Nevertheless, market participants are unlikely to bet on a steady rebound in the pair ahead of the highly-anticipated US inflation report on Wednesday.”

“The Fibonacci 50% retracement level of the latest uptrend forms significant support at 1.2050. In case sellers drag the pair below that level, additional losses toward 1.2000 (psychological level, Fibonacci 50% retracement) and 1.1920 (static level) could be witnessed.”

On the other hand, 1.2100 (psychological level, Fibonacci 38.2% retracement) aligns as significant resistance. If the pair starts using that level as support, technical recovery could stretch higher toward 1.2150 (50-period SMA) and 1.2175 (Fibonacci 23.6% retracement).”

 

EUR/GBP attracts some dip-buying on Monday, though the uptick lacks follow-through. The BoE’s gloomy economic outlook is behind the GBP’s relative underperformance. Recession fears acted as a headwind for the euro and kept a lid on any meaningful gains.

The index exchanges gains with losses in the mid-106.00s and keeps the daily lack of direction well in place in the European midday, as market participants appear to have already digested Friday’s solid print from Nonfarm Payrolls (+528K jobs).

The inconclusive price action in the greenback so far comes amidst the mild drop in US yields across the curve after the post-NFP upside recorded at the end of last week.

Nothing scheduled data wise in the US docket other than a short-term bill auction. It is worth recalling that the release of inflation figures measured by the CPI (Wednesday) will be the salient event this week.

“EUR/USD faces interim resistance at 1.0230 (Fibonacci 38.2% retracement of the latest downtrend) ahead of 1.0250 (200-period SMA on the four-hour chart). With a four-hour close above the latter, buyers could show interest and open the door toward the next bullish target at 1.0300 (psychological level, Fibonacci 50% retracement).”

“On the downside, additional losses toward 1.0150 (Fibonacci 23.6% retracement) and 1.0100 (psychological level, static level) could be witnessed in case 1.0200 (100-period SMA, 50-period SMA) is confirmed as resistance.”

 

Given the war in Ukraine, does it make sense to talk of a war economy in the European Union? In the opinion of analysts at Natixis, the economic tensions caused by the war in Ukraine are quite similar to what would have been caused, without the war in Ukraine, by the normalisation of Europe’s defence effort and by the energy transition.

A combination of factors assists NZD/USD to catch fresh bids on the first day of a new week. Retreating US bond yields undermines the USD and offers support amid a positive risk tone. Recession fears, larger Fed rate hike bets could limit the USD losses and cap gains for the pair.

The Eurozone Sentix Investor Confidence index came in at -25.2 in August from -26.4 in May vs. -24.7 expected. The index resumed its recovery, suggesting fading recession fears.

developing story ...

EUR/USD has recovered toward 1.0200 following Friday's selloff. Hawkish Fed bets help the dollar stay resilient against its rivals. The pair could struggle to extend its recovery unless it clears 1.0250.

24-hour view: “USD traded between 6.7468 and 6.7686 last Friday, close to our expected sideway-trading range of 6.7470/6.7700. Further sideway trading seems likely even though the slightly firmed underlying tone suggests a higher range of 6.7540/6.7750.”

Next 1-3 weeks: “We continue to hold the same view as last Wednesday (03 Aug, spot at 6.7750) where is USD is likely to trade between 6.7350 and 6.8000 for now.”

Silver regains traction on Monday and reverses a major part of Friday’s fall to over a one-week low. Bulls still need to wait for a move beyond the $20.30-35 confluence before placing aggressive bets. A convincing break below the $19.20 support zone would negate any near-term positive outlook.

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for the second session in a row on Friday, now by nearly 5K contracts. Volume, instead, reversed the previous daily pullback and went up by around 50.4K contracts.

24-hour view: “USD traded sideways last Friday until NY session when it rocketed to 135.49. Impulsive momentum suggests further USD strength is likely but in view of the overbought conditions, a break of 136.00 is unlikely for now (next resistance is at 136.50). Support is at 134.90 followed by 134.40.”

Next 1-3 weeks: “In our latest narrative from last Wednesday (03 Aug, spot at 133.50), we highlighted that USD is likely to trade between 131.30 and 135.60. USD soared to 135.49 on Friday before closing higher by +1.60% (NY close of 134.97), its largest 1-day gain in 7 weeks. Shorter-term upward momentum has improved and USD could advance to 136.00, with lower chance for extension to 136.50. The USD strength is intact as long as USD does not move below 134.00 (‘strong support’ level) within these few days.”

“Rating agency Moodys shifted its rating outlook on Italy's sovereign debt from stable to negative. That has raised some eyebrows and no doubt will call the European Central Bank into further supportive action, be it through the more aggressive re-investment of the Pandemic Emergency Purchase Programme or potentially even using its new support instrument – the Transmission Protection Instrument (TPI). None of this will help the beleaguered euro. Indeed, if quiet summer markets prompt renewed interest in the carry trade, the euro will probably be one of the preferred funding currencies.”

“EUR/USD was understandably hit by Friday's strong US jobs release data and looks like it can stay offered in a 1.01-1.03 trading range.”

“EUR/CHF will be monitoring the performance of Italian bonds today and can probably edge back towards the lower end of a 0.97-0.98 range – a move that will not be unwelcome to the newly hawkish Swiss National Bank.”

The dollar starts the new week on the firm side after some impressive US July jobs figures on Friday. Firm US July CPI data this week can see the dollar continue to trade near its highs, economists at ING report.