#EURUSD & #GBPUSD Forecast: July 2022

GBP/USD Forecast: July 2022

It more likely than not will continue to be a “sell the rallies” type of market for the month of July.

The British pound initially tried to overcome the 1.26 level during the month of June but has since fallen rather significantly. At the end of the month, it looks as if the market is trying to break down below the 1.22 handle, and it’s very likely that we will continue to see downward pressure in this market to make a go looking to the 1.20 level underneath. We had bounced from there previously, so it would simply be revisiting a recent low.

If we were to break down below the 1.20 level, it’s likely that the market could go down to the 1.15 level. This is where the market had bottomed a couple of years ago, so it should be a very interesting target going forward, especially as the area had been defended so vigorously in the past.

The Federal Reserve will be tightening interest rates yet again during the month of July, and the Bank of England might become a bit more hawkish, but they are going to be far behind the curve of the Federal Reserve. That’s going to be the story for the rest of the summer, US dollar strength, so I don’t think that the British pound is going to be any different.

From a technical analysis standpoint, I believe that your ceiling for the month of July under the best of circumstances will be the 1.26 handle, assuming that the British pound can recover a bit. That being said, I would be a bit surprised if we reached that level again, but if we did then I will be shorting this market. If we break above that area, then it’s possible that the British pound could go looking to reach the 1.30 level, but we would need to see something fundamentally change between now and then to make that happen. Perhaps if the Bank of England were to become aggressive in its tightening cycle, that might be a reason, or if the Federal Reserve changes its tone. I don’t see that happening, so at this point, it more likely than not will continue to be a “sell the rallies” type of market for the month of July. Ultimately, this is a market that is trying to chip away at a significant support level, so it may be more sideways during the month of July, perhaps with a bit of a downward tilt.

EUR/USD Forecast: July 2022

Fed fund futures are starting to suggest that we may even see a 75 basis point rate hike in July, so this will still favor the greenback.

The euro continues to look very lackluster as the month of June continues to see sellers jump in every time the market tries to break above the 1.06 level. Beyond that, the 1.08 level also offers resistance, so to think that the month of July is going to be easy for the common currency is probably a bit of a stretch. In fact, it’s not until we break above the 1.08 level that the buyers have any real strength, and even then, I think that there are plenty of opportunities for short-sellers to jump into this market.

When you look at the central bank divergence, meaning that the Federal Reserve is looking to tighten monetary policy rather aggressively, while the European Central Bank is probably going to be a bit more casual about it. The pair should continue to draw from here, perhaps reaching down to the 1.04 level again, and then the 1.02 level. Sometime this summer, I would not be surprised at all to see the euro reach the parity level against the United States dollar, but I don’t know if it happens in the month of July. Typically, July tends to be a rather quiet month, so I think it is more likely than not that we will be in more of a consolidation type of situation.

The Federal Reserve is anticipating raising interest rates at least 50 basis points this month, and then again at the next meeting. In contrast, the ECB is likely to raise interest rates by 25 basis points, followed by another 25 basis points. The situation in the European Union is much different than the United States, as there is a major energy problem in the EU, as it now find itselfs scrambling to provide power to its citizens. Because of this, the tightening cycle of the EU is more likely than not going to be very short.

It has become apparent that in the United States the number one problem is inflation, so the tightening cycle will not only continue, but it may become rather aggressive. In fact, Fed fund futures are starting to suggest that we may even see a 75 basis point rate hike in July, so this will still favor the greenback. As a general rule, the greenback is bought in times of uncertainty, which is where we find ourselves now.

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