This outlook contains information correct as at 1500hr on 04 Aug 2026
At its July FOMC meeting last week, the Fed voted 9-3 to maintain the Federal Funds target range at 3.50%-3.75%. This resulted in the 30-year Treasury yield surging to 5.20%, its highest level in 19 years. However, the USD Index (DXY) ended the week at 99.91, logging its worst weekly performance since early April.
The USD enters the second half of 2026 much stronger than it was a year ago (1 Aug 25: DXY 98.68). Its strength reflects persistent US inflation, changing expectations of Fed policy, geopolitical tensions, and renewed demand for defensive assets — i.e., those denominated in USD. The unwinding of speculative USD forward sales is also contributing to the current USD strength.
The major figures to watch this week are the US July Labour Market Report on 7 Aug — Bloomberg estimates Non-Farm Payrolls at 88,000, up from 57,000 in June, with the unemployment rate expected to hold at 4.2%, the same as in June. Bloomberg also estimates Consumer Credit increased by USD12.1 bln, following a decrease of USD0.182 bln previously.
The conventional wisdom is that ongoing geopolitical risk around the Middle East — resulting in higher energy prices, higher inflation, and strained supply chains — should dampen business activity and, in turn, stock markets. However, according to FactSet, a global financial data, analytics, and technology company, a record number of S&P 500 technology companies have issued positive EPS guidance for Q2, and S&P 500 earnings growth could approach 30% YoY. In Europe, led primarily by the energy, materials, and technology sectors, consensus forecasts point to EPS growth of 15%-17%.
Looking back over the last thirty or so years, a pattern starts to emerge: crises in 1997/1998 (the Asian Financial Crisis and its contagion), 2008/2009 (the Sub-Prime Crisis), and 2020/2021 (Covid lockdowns) — roughly every 10 years or so. The next round might hit markets sometime between 2029 and 2030. What might trigger such an event is anyone's guess — there have been rumblings about Private Credit and talk of an artificial intelligence bubble that could take down the global economy. The four largest companies in the data centre race have committed nearly USD2.4 trillion over the coming years, pointing to a massive bet on AI infrastructure. What could happen if there's no payback?
Economically, things are still not looking good for China: its CFLP composite PMI slumped 1.3 points to 49.3 in July, its lowest reading since Dec 2022. The manufacturing and non-manufacturing PMIs both fell into contraction territory (a reading below 50), signalling a broad-based weakening in economic activity. The softening in industrial activity is particularly concerning, as policymakers have been relying on external demand and export growth to offset the prolonged weakness in domestic demand.
Oil prices spiked to as high as USD92 a barrel amid renewed hostilities in the Middle East. At their 2 Aug meeting, major OPEC+ nations agreed to a token increase in production quotas for September, adding a further 188,000 barrels a day. WTI is currently trading around USD79 per barrel (vs USD70 in July).
Sources: Bloomberg, MSNBC, Reuters, Morningstar, Business Times, 04 Aug 2026
June CPI slowed to 3.8% YoY from 4.0% YoY in May while the monthly CPI fell 0.1% MoM, due to lower fuel and transport costs. Though underlying inflation remains sticky, the figures were below expectations and softer than the RBA’s May projections. Softer inflation, together with moderating growth and gradually easing labour market conditions, may give the RBA room to pause. Analysts expect the OCR to remain unchanged at 4.35% into 2027. This should weigh on AUDUSD.
AUDUSD is still consolidating within the Support zone at 0.6900 – 0.7000. After this, the chart pattern supports a down move to test the 50% Fibonacci Support at 0.6750.
EURUSD
As widely expected, the ECB left all three policy rates unchanged at its 23 Jul meeting, keeping the deposit rate at 2.25%. Policymakers needed time to assess the inflationary implications of the recent energy shock and its effects on the Eurozone. The next ECB meeting will be on 10 Sep, where a 0.25% rate hike is expected, bringing the deposit rate to 2.5%. Economic weakness in the Eurozone should put the EURUSD under continuing pressure.
EURUSD is consolidating within the minor support at 1.1350 and the 50% Fibonacci Resistance at 1.1490. After this consolidation, we can expect a fall to the 1.1000 – 1.1150 Support Zone.
Image Source: Bloomberg 05 Aug 2026
GBPUSD
In a more hawkish vote split of 6 - 3 against June’s 7 – 2 at its MPC meeting last week, the BoE left its Bank Rate unchanged at 3.75%. The three dissenters favour a 0.25% rate hike. However, the overall policy message was more balanced than markets had expected. Markets are pricing a 1-in-3 chance of a rate hike in September.
GBPUSD dropped as we expected in July but received support below 1.3300 and managed a bounce to penetrate Resistance at 1.3400. We maintain our view for GBPUSD to move down for a test of the 1.3200 – 1.3400 Support Zone again and eventually break through 1.3200 Support in the coming weeks.
Image Source: Bloomberg 05 Aug 2026
USDJPY
At its July meeting, the BOJ kept its policy rate unchanged at 1.00%, following June’s 0.25% hike. The decision was not unanimous, and markets are expecting further hikes later this year. However, the dominant Forex market story of recent days was the joint intervention by the BoJ and the US Federal Reserve. The New York Fed was reported to have sold Euros and bought Yen while the BoJ sold USDJPY. Over three days, the USDJPY was driven down by more than 5%. The last US / Japan joint intervention occurred in March 2011. The Central Banks' actions showed the red line in the sand for USDJPY is likely 165.00
USDJPY is trading around 157.50 and has broken down from the Uptrend Channel. The market should find its footing in the next few weeks but will not rule out a move back to above 160.00
Image Source: Bloomberg 05 Aug 2026
USDSGD
The Monetary Authority of Singapore (MAS) tightened monetary policy on Monday (Jul 27), in a surprise move, for the second consecutive time since April. It was interpreted as a 0.25% slope steepening to 1.25% of the SGDNEER, reflecting a more calibrated approach to policy tightening. The SGD is expected to continue strengthening against regional currencies, including the JPY, into 2027.
The USDSGD is heading back down to the 1.2600 – 1.2800 range. USDSGD should trade within this range for an extended period with a bearish bias.
Image Source: Bloomberg 05 Aug 2026
AUDSGD
AUDSGD is still trading above 0.8930. We are maintaining our view that AUDSGD is likely to stay around this level with a downwards bias to 0.8800.
Image Source: Bloomberg 05 Aug 2026
XAUUSD
Back in the simpler “good old days”, Gold was bid as a safe haven asset in the face of geopolitical tensions and higher energy prices driving expectations for higher inflation. But today, higher inflation, higher interest rates and therefore higher yields drove Gold prices down. One could conclude that Gold has perhaps become just another speculative asset under the mask of a safe haven.
Gold’s poorer cousin Silver may be a better long-term investment. It has a dual role as both a precious metal and an industrial commodity influenced by industrial consumption across sectors such as electronics, electric vehicles, renewable energy and AI infrastructure. According to the latest World Silver Survey, the global silver market is expected to record its sixth consecutive annual supply deficit in 2026, reinforcing longer-term support for the metal.
Gold has remained below the 50-Day Moving Average since mid-March, and XAUUSD has formed a Death Cross by cutting through the 200-Day Moving Average. XAUUSD seem to have strong support at USD4,000, but we expect this to break for a likely test of the USD3,500 level.
Image Source: Bloomberg 05 Aug 2026
Note: In the Candlesticks Chart, Green bars mean the Close is higher than the Open price, and Brown bars mean the Close is lower than the Open price