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  • Market Insights  >  Daily Market Analysis

4 July 2023,06:39

Daily Market Analysis

Aussie Dollar Gains Ahead Of RBA Rate Decision

4 July 2023, 06:39

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The disappointed PMI reading indicates a lack of optimism in the manufacturing sector

Investors await the RBA’s interest rate decision, expecting a 25 bps rate hike. Despite Australia’s CPI dropping to 5.6%, it remains distant from the 2% target. Meanwhile, the Purchasing Managers’ Index (PMI) readings in both the United States and the Eurozone indicate a lack of optimism in the manufacturing sector. This sentiment has hindered the ability of equity markets to trade higher. Furthermore, oil prices are also impacted by lower-than-expected PMI figures in both regions, leading to a pessimistic outlook for demand. Compounding this, Saudi Arabia and Russia have postponed their oil production cut plans to August, resulting in an increase in oil supplies entering the market.


Current rate hike bets on 26th July Fed interest rate decision

Source: CME Fedwatch Tool

0 bps (11%) VS 25 bps (89%)   


Market Overview

Economic Calendar

economic calendar 4 july 2023

Market Movements

dollar index price chart 4 july 2023

DOLLAR_INDX, H4

Despite the release of downbeat manufacturing data from the US region, the US Dollar edged slightly higher in the market. Investors closely monitored the upcoming release of the Federal Open Market Committee (FOMC) meeting minutes, scheduled for Wednesday. Speculation among futures traders suggests an 86% probability of a Fed rate hike during the July meeting, as the central bank remains committed to pushing inflation towards its 2% target.

The dollar index is trading lower following the prior retracement from the resistance level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 50, suggesting the index might consolidate within a range between support and resistance since the RSI stays near the midline. 

Resistance level: 103.35, 103.80

Support level: 102.50, 101.95

xau/usd gold price chart 4 july 2023

XAU/USD, H1

Gold staged a modest rebound in response to a series of disappointing economic data releases. Both the manufacturing data from the European Union (EU) and the United States fell short of market expectations, leading to a shift in sentiment towards the safe-haven appeal of gold. Markit Economics reported that Germany’s Manufacturing Purchasing Managers Index (PMI) registered a discouraging 40.6, missing the market forecast of 41.0. Similarly, the Institute for Supply Management revealed that the US ISM Manufacturing PMI came in at 46.0, well below the market expectation of 47.2. These lacklustre figures underscored concerns about the health of the global economy, prompting investors to seek refuge in the precious metal.

Gold prices are trading higher following the prior rebound from the support level. However, MACD has illustrated increasing bearish momentum, while RSI is at 54, suggesting the commodity might extend its losses toward support level since the RSI retraced sharply from overbought territory. 

Resistance level: 1930.00, 1950.00

Support level: 1910.00, 1895.00

eur/usd price chart 4 july 2023

EUR/USD,H4

The dollar’s strength has eased for the past 2 days providing support for the euro from dropping further. The U.S. PMI released with a lower-than-expected reading showed that the manufacturing sector in the U.S. is not doing well, which hindered the dollar from continuing with its bullish run. However, the Eurozone PMI, especially the German PMI, also gave a pessimistic reading, which may lead the euro to trade sluggishly in the long run. 

EUR/USD has gained support at above 1.0890 after it rebound from its recent low at 1.0836. The RSI constantly flows below 50-level suggesting that the buying power is lacking while the MACD has crossed below the zero line which gives a trend reversal signal for the pair. 

Resistance level: 1.0951, 1.1027

Support level: 1.0892, 1.0848

usd/jpy price chart 4 july 2023

USD/JPY,Daily

The Japanese yen extended its bearish momentum as market analysts anticipated a slower-than-expected rise in consumer prices, adding to the downward pressure on the currency. Considering the latest quarterly Tankan survey conducted by the Bank of Japan (BoJ), which revealed a projected average increase of 2.6% in consumer prices, falling short of the previously estimated 2.80% three months ago, it is evident that inflation expectations have weakened. This downward revision in inflation outlook is likely to reinforce the Bank of Japan’s commitment to maintaining its quantitative monetary easing policy, further intensifying the bearish sentiment surrounding the Japanese yen.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum. However, RSI is at 50, suggesting the pair might consolidate within the resistance level since the RSI stays near the midline. 

Resistance level: 144.80, 145.95

Support level: 143.20, 141.90

aud/usd price chart 4 july 2023

AUD/USD, H4

The Aussie dollar had rebounded after it plummeted when Australia’s CPI showed the country’s inflation rate had shown signs of cooling down last week. The RBA will announce its interest rate decision today (04th July), and the market is widely expecting another 25 bps hike from the Australian central bank. In addition, the U.S. dollar is dragged by its pessimistic PMI reading and may support the Aussie dollar to surge further. 

AUD/USD has rebounded to its previous psychological support level of 0.6600. The RSI is constantly moving up, suggesting the buying power has overshadowed the selling power while the MACD is breaking the zero line after it has crossed below. 

Resistance level: 0.6716, 0.6747

Support level: 0.6643, 0.6606

dow jones price chart 4 july 2023

Dow Jones, H4

In a holiday-shortened session on Monday, the US equity index experienced a slight uptick, largely propelled by the remarkable surge in Tesla shares. The electric vehicle giant reported a record number of vehicle deliveries in the second quarter, leading to a substantial 6.90% jump in its stock price. Tesla’s impressive performance served as a significant contributor to the positive momentum in the market. Besides, the strength exhibited by the banking sector further bolstered investor sentiment in the US equity market. Major financial institutions such as JP Morgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley made headlines by increasing their third-quarter dividend

The Dow is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 66, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 34550.00, 35250.00

Support level: 33265.00, 32450.00

crude oil price chart 4 july 2023

CL OIL, H4

Amid mounting concerns about a decelerating global economy and the possibility of US interest rate hikes, the oil market retraced slightly. Despite the recent supply cuts announced for August by key exporters Saudi Arabia and Russia, the negative sentiment surrounding economic growth overshadowed the positive news. Market participants remained cautious as business surveys revealed a significant decline in global factory activity during June, primarily driven by sluggish demand in China and Europe.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 51, suggesting the commodity might extend its losses since the RSI retraced sharply from the overbought territory. 

Resistance level: 72.60, 74.90

Support level: 67.65, 64.50

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