Forex Today: Risk mood improves ahead of US consumer sentiment data

Eren Sengezer FXStreet

Here is what you need to know on Tuesday, July 25:

Risk flows dominated the financial markets during the Asian trading on hopes of Chinese economy picking up steam on additional stimulus measures. Investors seem to have turned slightly cautious in the European morning, with US stock index futures trading mixed. In the second half of the day, Conference Board's Consumer Confidence Index data will be featured in the US economic docket alongside May Housing Price Index.

Chinese news agency Xinhua reported earlier in the day that the Politburo - the top decision-making body of the ruling Communist Party - announced that they will step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence. The Shanghai Composite Index gained more than 2% on Tuesday and Hong Kong's Hang Seng Index rose nearly 4%.

The US Dollar Index (DXY) closed the fifth straight day in positive territory on Monday. In the European session, the DXY stays in a consolidation phase below 101.50. The benchmark 10-year US Treasury bond yield continues to edge higher toward 3.9% ahead of the Federal Reserve's critical monetary policy announcements on Wednesday.

Earlier in the day, the data from Germany revealed that the headline IFO Business Climate Index declined to 87.3 in July from 88.6 in June. This reading came in weaker than the market expectation of 88.0. The IFO Expectations Index – indicating firms’ projections for the next six months, fell to 83.5 in July from the previous month’s 83.8 reading. Following a recovery attempt toward 1.1100, EUR/USD lost its traction and declined to the 1.1050 area.

The upbeat market mood in the Asian session provided a boost to AUD/USD. The pair was last seen rising 0.5% on a daily basis slightly above 0.6770.

GBP/USD dropped below 1.2800 for the first time in two weeks on Monday. Early Tuesday, the pair stages a technical correction and trades in positive territory above 1.2850.

USD/JPY snapped a four-day winning streak and closed in the red on Monday. The pair continues to inch lower toward 141.00 in the European session. In a recently published report, the Japanese government said that inflation is seen staying around 0.7% in the longer term. “Wages are projected to increase by 2.5% in FY24, following a 2.6% jump in FY23,” the statement further read.

Pressured by rising US Treasury bond yields, gold price closed below $1,960 on Monday. XAU/USD clings to modest daily gains early Tuesday and trades at around $1,960.

Bitcoin broke below its 10-day-old trading range and touched its lowest level in a month at $28,850 on Monday. BTC/USD struggles to stage a rebound and trades slightly above $29,000. Ethereum lost 2% on the first trading day of the week before going into a consolidation phase at around $1,850.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD looks sidelined around 1.1850

EUR/USD remains on the back foot, extending its bearish tone and sliding towards the 1.1850 area to print fresh daily lows on Monday. The move lower comes as the US Dollar gathers modest traction, with thin liquidity and subdued volatility amplifying price swings amid the US market holiday.

GBP/USD flirts with daily lows near 1.3630

GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.

Gold loses momentum, eases below $5,000

Gold is giving back part of Friday’s sharp rebound, deflating below the key $5,000 mark per troy ounce as the new week gets underway. Modest gains in the US Dollar are keeping the metal in check, while thin trading conditions, due to the Presidents Day holiday in the US, are adding to the choppy and hesitant tone across markets.

Bitcoin consolidates as on-chain data show mixed signals

Bitcoin price has consolidated between $65,700 and $72,000 over the past nine days, with no clear directional bias. US-listed spot ETFs recorded a $359.91 million weekly outflow, marking the fourth consecutive week of withdrawals.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

XRP steadies in narrow range as fund inflows, futures interest rise

Ripple is trading in a narrow range between $1.45 (immediate support) and $1.50 (resistance) at the time of writing on Monday. The remittance token extended its recovery last week, peaking at $1.67 on Sunday from the weekly open at $1.43.