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Market Overview

Yesterday, the Canadian CPI was released, showing cooler-than-expected data and indicating that inflationary pressures are easing. Both the Median and Trimmed CPI came in slower than expected at 2.4% and 2.7%, respectively—both ten basis points lower than anticipated. This has led traders and analysts to price in a rate cut for the coming month.

Today, the market is relatively quiet, with a lack of momentum and growth expected as traders await data releases tomorrow and on Friday.

Another key point is the rising conflict in the Middle East after ceasefire-hostage negotiations failed. Why is this significant？ Previous engagements between Israel and Iran were held off due to the prospects of peace. Now that U.S. efforts have failed, attacks and skirmishes are resuming—as already seen with Hamas claiming responsibility for the explosion in Tel Aviv.

This development increases expectations of a higher demand for safe-haven assets, particularly gold and silver. We may see a temporary dip as markets attempt to buy at a more favorable price. This also raises concerns for oil prices and supply. 

GOLD - As initially identified, GOLD has indeed risen beyond previous highs. The market is factoring in the expectation of a rate cut this September. However, at this moment, the price increase is largely due to the uncertainty in the Middle East and the Asian Waters—both of which could escalate into a wider conflict. While some may discount the talks of war, the underlying narratives should not be disregarded. Consequently, we continue to see a rise in demand for metals, with GOLD expected to rise further.

From a technical perspective, the price is supported by both the demand zone at 2487.076 and the newfound support at 2510.304.

SILVER - As we expected, the price of silver has indeed risen toward 29.900 in light of positive prospects for a bullish run. Similar to gold, our outlook for this market is based not only on technical and data analysis but also on the narratives. Therefore, we anticipate the market to move beyond this level.

DXY - Our expectations for the dollar should not be disregarded. While we see it weakening, there is a chance that the anticipated rate cut could turn into a rate hike—a sudden price surge dependent on developments in the Middle East. This would be an attempt to curb inflationary fears brought on by war and disruptions in global supply chains. Until such an event occurs, we expect monetary policy to remain dovish, and therefore, we continue to factor in discounts for the dollar.

GBPUSD -The story of the pound may soon change as the BOE prices in possible rate cuts in the coming months. The recent increase in the pound's value is driven by the declining demand for the dollar. With that in mind, we may expect further growth in this market in the near term. However, there could be a sudden turnaround in price if the conflicts in West Asia escalate further.

AUDUSD -The Aussie dollar has gained significantly against the U.S. dollar, with trades steadily moving toward 0.67531. We expect this market to continue rising, as we still see prospects of rate cuts being delayed. However, there may be instances where the Aussie dollar drops in value alongside the Kiwi as traders flock to safe-haven assets. Further developments in tensions, whether in Asia or the Middle East, may impact demand.

NZDUSD - Despite factoring in further rate cuts before 2025, markets are becoming more confident that the economy will be stronger in the coming year, as they began their cycle earlier. Now, prospects of a better-performing economy are in sight, reflected in the currency's appreciation.

EURUSD - The euro has gained considerably as the dollar continues to fall. There hasn't been much change in our readings over the past few days—we still foresee a near-term price expansion against the euro as new highs are reached this quarter. We might find the peak soon, but not until the Fed cuts are implemented. In other words, we may see continued growth until the end of this quarter and into the next. However, conflicts in the Middle East—similar to the pound—will negatively impact this market as they will be forced to take sides.

USDJPY -The yen has performed as expected, rising above the dollar and pushing prices below the 146.512 level. There is a possibility for prices to drop further beyond previous lows. We suggest using your system to secure better trade positions. We also want to highlight discussions of a potential 'Big One,' which is causing concern in the markets and among the people of Japan. This possible crisis could shatter the country's economy and population. Depending on developments, and if such an event occurs, prices may struggle to withstand the rising tensions in Asia and the Middle East.

USDCHF -The franc has shown the best prospects, as reflected in its price—better than the yen, despite both being safe-haven assets during times of uncertainty. This suggests that the markets are influenced by the narratives surrounding the 'Big One.' Thus, we continue to expect the franc to gain more strength. Additionally, Switzerland began its economic cycle earlier than others, boosting its economy. Analysts and investors no longer have to worry about a weakening economy, but instead, see potential growth.

USDCAD -Despite the possibility of a rate cut for the loonie next month, the price has stagnated and hasn't progressed significantly upward. This is despite the falling prices of oil—Crude at 73.02 and Brent at 77.08 at the time of writing. So, where does the loonie's strength come from？ Is it because its economy is stronger now than the U.S. dollar's, or is it purely due to USD weakness？ It might be so, but we also attribute this to concerns over rising oil prices. The only question is, when will this happen？ Such news could trigger a sudden shift in economies, potentially reshaping the markets in a different manner.

COT Report Analysis

CAD - WEAK (3/5)

CHF - WEAK (3/5)

GBP - WEAK (3/5)

JPY - STRONG (5/5)

EUR - WEAK (3/5)

AUD - WEAK (3/5)

NZD - WEAK (3/5)

USD - STRONG (4/5)

SILVER - STRONG (3/5)

GOLD - STRONG (5/5)