Tin tức thì trường

• AUD/USD holds lower grounds at weekly low, stays pressured during three-day downtrend.
• Sour sentiment weigh on the risk barometer pair, updates concerning China put a floor under the prices.
• Australia Retail Sales for May, central bankers’ panel discussion at the ECB Forum will be important for fresh impulse.

AUD/USD remains depressed around 0.6900, after a two-day downtrend, as traders await key Aussie data during Wednesday’s Asian session. That said, the risk barometer pair refreshed its weekly high before closing in the red for the second consecutive day on Tuesday.

Headlines surrounding China’s easing of quarantine rules for travelers joined mixed concerns to favor the AUD/USD pair in refreshing the weekly top around 0.6965 the previous day. However, fresh fears of recession joined the market’s anxiety ahead of the key data/events to weigh on the quote afterward.

That said, “China will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home, health authorities said on Tuesday,” per Reuters.

On the other hand, the US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5%, which in turn renewed hawkish hopes from the Fed and propelled the USD. It should be noted that the US trade deficit dropped to the lowest in a year, to $104.3 billion, per the latest release for May.

While portraying the mood, the US 10-year Treasury yields snapped a two-day uptrend whereas Wall Street closed in the red. The S&P 500 Futures, however, print mild gains and it seems to probe the AUD/USD bears of late.

Moving on, the flash readings for Australia’s Retail Sales for May, expected 0.4% versus 0.9%, could direct immediate AUD/USD moves amid fears of receding hawkish bets on the Reserve Bank of Australia (RBA) rate hikes. Following that, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will precede the central bankers’ discussions at the ECB Forum to offer important insights.

Technical analysis

The 10-DMA restricts immediate AUD/USD upside to around 0.6945. However, a two-week-old support line precedes the ascending trend line from May 12, respectively around 0.6875 and 0.6860, to challenge the pair’s short-term downside.

"Monetary policy’s transmission channel may change in a rapidly changing world with uncertainties," said Bank of Japan (BOJ) Governor Haruhiko Kuroda.

More to come

• USD/JPY is aiming to recapture its two-decade high at 136.71 on firmer DXY.
• The DXY is scaling higher on expectations of stable US PCE figures.
• Japan’s Retail Trade may outperform on an annual basis but will underperform on a monthly basis.

The USD/JPY pair displayed a vertical upside move after violating the three-day high of 135.50. The major has turned into a consolidation phase and may turn into imbalance after giving an upside break of the balance formed in a range of 136.06-136.38. An upside break of the consolidation will unleash the greenback bulls to recapture its two-decade high at 136.71.

The major is performing well in the FX domain as the US dollar index (DXY) has been captured by the bulls on expectations of a stable US Personal Consumption Expenditure (PCE). A preliminary estimate for the US PCE for the first quarter of CY22 is 7%, similar to its prior release. The US economy is facing the headwinds of a higher inflation rate. For that, the Federal Reserve (Fed) has already elevated its interest rates to 1.50-1.75%. However, not even a minute impact has been reflected on the inflation mess. Therefore, an unchanged PCE figure will also dampen the sentiment of the households in the US.

Considering the stable forecast for the US PCE figures, Fed chair Jerome Powell is expected to dictate a hawkish stance on July monetary policy. The speech from Fed Powell on Wednesday will provide insights about the likely monetary policy action by the Fed in July.

On the Tokyo front, investors are awaiting the release of Japan’s Retail Trade. The economic data may improve to 3.3% vs. 2.9% recorded earlier on an annual basis. While the monthly figure may decline to -0.1% from the former release of 0.8%.

• WTI seesaws around an eight-day high as bulls seek more clues.
• API Weekly Crude Oil Stock dropped 3.799M for the week ended on June 24.
• G7 agreed to cap Russian oil prices but the capacity limits of major producers favor oil buyers.
• Delayed release of EIA stockpile data, risk catalysts will be important for fresh impulse.

WTI remains on the front foot, grinding higher around $110.50-60 during the initial Asian session on Wednesday. The black gold rose during the last three consecutive days as supply-crunch fears battle the Group of Seven (G7) announcements to cap the Russian oil prices.

That said, the energy benchmark’s latest uptick could be linked to the surprise draw in weekly inventory data from the industry source. The weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data for the period ended on June 24 flashed a reduction of 3.799 million barrels versus the previous addition of 5.607M, not to forget expectations of -0.106M.

It’s worth noting that the G7 pressure on Russia failed to tame the WTI crude oil prices amid chatters that major oil producers are already operating at the peak of their capacities and hence further output increase is less likely.

“G7 leaders have agreed to explore imposing a ban on transporting Russian oil that has been sold above a certain price, aiming to deplete Moscow's war chest,” said Reuters. The news also mentioned, “Saudi Arabia and the UAE have been seen as the only two members of the Organization of the Petroleum Exporting Countries with spare capacity to make up for lost Russian supply and weak output from other member nations.”

It should, however, be noted that the fears of economic slowdown challenge the upside momentum but the latest easing of travel restrictions in China appears to have helped the black gold buyers.

Moving on, the already-delayed release of the official weekly oil inventory data from the Energy Information Administration (EIA) for the week ended on June 17 and 24 will be important for oil traders to watch. Additionally, the OPEC meeting on Thursday and risk catalysts, as well as the central bankers’ speeches at the ECB Forum are some extra catalysts to take note of for clear directions.

Technical analysis

The 21-day EMA level surrounding $110.75 challenges WTI buyers even if the quote managed to cross the 50-day EMA hurdle, near $109.20, the previous day. That said, the receding bearish bias of the MACD and recently firmer RSI favor the upside momentum.

“A clear US response on China tariffs is coming soon,” said US Deputy Commerce Secretary Don Graves in a Bloomberg TV interview.

The diplomat also mentioned that the US will take a balanced approach on China tariffs, per the news.

Additional comments

Market reactions

The news fails to gain any major reaction from the traders even if the S&P 500 Futures pare recent losses around 3,830, up 0.10% intraday, during the initial hour of Wednesday’s trading.

Also read: Forex Today: Inflation and recession fears continue to drive financial markets

• USD/CAD is juggling in a narrow range of 1.2867-1.2880 as investors await Fed Powell.
• An unchanged US PCE will also escalate recession fears in the US economy.
• Oil prices are balancing above $110.00 as focus shifts to supply worries.

The USD/CAD pair is hovering around 1.2870 after a mild correction from the critical hurdle of 1.2880 in the early Tokyo session. Earlier, the asset rebounded firmly after hitting a low of 1.2820 on Tuesday. The major picked bids amid a firmer rebound in the US dollar index (DXY).

The DXY is attempting to overstep the current hurdle of 104.50 backed by higher expectations of extreme hawkish comments from Federal Reserve (Fed) chair Jerome Powell in his speech. The Fed has already elevated its interest rates to 1.50-1.75% along with the balance sheet reduction program, however, their impact has not been reflected yet on the inflation rate. Therefore, a consecutive rate hike by 75 basis points (bps) is expected to be discussed in his speech.

In addition to Fed Powell’s speech, investors’ focus will also remain on the release of the US Personal Consumption Expenditure (PCE), which is expected to remain stable at 7% for the first quarter. Also, the core PCE is seen unchanged at 5.1%. It is worth noting that as per the ongoing situation a stable of higher side PCE figures are vulnerable for the US economy as it will escalate recession fears.

On the oil front, oil prices have established themselves comfortably above the psychological resistance of $110.00. The market participants are worried about the supply constraints as it won’t be a cakewalk to substitute Russian oil with any other exporter. It is worth noting that Canada is the largest producer of oil to the US, therefore higher oil prices fetch higher funds for the Canadian economy.

• USD/CHF grinds higher after taking a U-turn from the key EMA, horizontal support.
• 50% Fibonacci retracement of January-May upside guards recovery moves.
• Descending RSI line, bearish MACD signals challenge buyers, eight-day-old resistance line adds to the upside filters.

USD/CHF holds onto the previous day’s bounce off the 100-day EMA around 0.9575 during Wednesday’s initial Asian session. In doing so, the Swiss currency (CHF) pair jostles with the 50% Fibonacci retracement (Fibo.) of its January-May upside.

Although monthly horizontal support near 0.9520-45 adds strength to the downside filters, descending RSI (14) line, not oversold, joins the bearish MACD signals to hint at the USD/CHF pair buyer's hardships.

That said, a weekly resistance line near 0.9620 also challenges the short-term USD/CHF recovery, apart from the 50% Fibo. level of 0.9578.

Even if the quote rises past 0.9620, the 0.9700 round figure and multiple hurdles surrounding 0.9715 may test the bulls before giving them control.

On the contrary, a downside break of the 0.9520 support could direct the USD/CHF sellers towards the 61.8% Fibonacci retracement level near 0.9465.

Following that, the 200-day EMA level of 0.9430 will challenge the pair’s further downside, a break of which won’t hesitate to direct the quote towards January’s high near 0.9345.

USD/CHF: Daily chart

Trend: Limited upside expected

• EUR/USD bulls move in as the US dollar struggled to keep up the bid. 
• Markets are choppy with no clear sense of direction. 

EUR/USD is trading around 1.0520 in early Asia following a choppy Tuesday on the back of a firmer US dollar, China relaxing its rigid COVID protocols coupled with disappointing US consumer sentiment data and central bank rhetoric. 

'' As quarter-end fast approaches, markets are becoming desensitised to Fed speak in the very short term. The FOMC has laid out its broad strategy for tackling inflation,'' analysts at ANZ Bank argued. ''The debate over whether the Federal Reserve will raise by 50 or 75bps at the 26-27 July meeting and the eventual peak in the fed funds rate will very much depend on the path of the data and how quickly the economy decelerates.''

''New data is needed; more words add limited value at this point. Markets are therefore consolidating within established price ranges but primary trends remain intact.''

Federal Reserve officials downplayed the risk of the US economy entering a recession, despite raising rates by 75 basis points this month and another 75 basis points next month. Both New York Fed President John Williams and San Francisco Fed President Mary Daly acknowledged the need to reduce inflation but insisted that a soft landing was still possible.

A key set of rates that the Fed is focusing on to help judge financial conditions is still a long way from reaching levels that would prompt officials to abandon their tightening plans. Adjusted for inflation rates at the short end of the curve remain below zero, despite real rates on longer-term securities reaching levels not seen since 2019.

On Tuesday, the US dollar shot higher from below 104, making gold more expensive for international buyers. US dollar bulls moved in on euro weakness as European Central Bank (ECB) President Christine Lagarde offered no fresh insight into the central bank's policy outlook. Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations. The US dollar index (DXY), which had made a two-decade high of 105.79 this month, was last up 0.46% at 104.42. The DXY had been as low as 103.77 and as high as 104.60. 

Meanwhile, favourable to risk sentiment is the fact that China made the greatest change yet to a pandemic policy that has isolated the nation and spurred economic worries by halving the amount of time new immigrants must spend in isolation. However, data in the US nipped the cheer in the bid and this was followed by a sell-off in big tech that weighed heavily on stocks.  A measure of expectations, which reflects a six-month outlook, has fallen to a nearly decade low. ''The data comes at a time when analysts are still optimistic about corporate earnings, with net-margin estimates for S&P 500 companies at an all-time high,'' Reuters reported. 

• The AUD/JPY stays in positive territory, bolstered by a dovish Bank of Japan stance.
• Risk aversion dominates the headlines as worries about recession and inflation increase.
• The AUD/JPY’s inability to reclaim 95.30 leaves the pair vulnerable to selling pressure.
• A break below 91.96 to send the AUD/JPY tumbling towards 90.10s.

The AUD/JPY advanced on Tuesday for the first day in the week though it remains below the 20-day EMA, which lies around 94.20, amidst a dampened market mood, courtesy of renewed fears of stagflation, meaning recession and inflation at the same time. At 93.98, the AUD/JPY begins the Asian session with minimal losses of 0.01% at the time of writing.

US equities finished with substantial losses due to portfolio rebalancing, as half/quarter/month-end flows dominated the markets. However, the AUD/JPY printed gains due to the dovish monetary policy stance by the Bank of Japan (BoJ), which is trying to anchor inflation above the 2% threshold.

On Tuesday, the AUD/JPY registered a daily low in the Asian session around 93.00 and rallied towards a June 22 swing low around 94.68. Nevertheless, buyers’ lack of strength to lift the cross-currency above 95.00 opened the door for selling pressure, as sellers entered around that area and dragged the pair towards the 94.00 mark.

AUD/JPY Daily chart

This time frame portrays the AUD/JPY trading within a rising wedge. Additional to that factor, which favors AUD sellers, it’s worth noting that the last two higher highs were lower than the YTD one, at around 96.88, suggesting that selling pressure is piling on the pair. Furthermore, the pair’s breaking below the 20-day EMA and the Relative Strength Index (RSI) is almost horizontal, but below the RSI’s 7-day SMA might pave the way for further losses.

If that scenario plays out, the AUD/JPY first support would be the June 23 daily low at 92.64. Once cleared, the next support would be the 50-day EMA at 92.42. A breach of the latter would expose the June 16 daily low at 91.96, which, once cleared, will send the pair tumbling towards the 100-day EMA at 90.18.

AUD/JPY Key Technical Levels

• GBP/USD stays pressured around weekly low after falling the most in eight days.
• Brexit woes join, inflation/recession fears to recall bears ahead of the key events.
• US Core PCE, Final reading of Q1 GDP may entertain traders ahead of key discussions at the ECB Forum.

GBP/USD dribbles around the weekly low of 1.2180, after declining the most in over a week, as sellers take a breather ahead of the key data/events. However, pessimism surrounding Brexit, economic slowdown and inflation woes keep the downside bias intact.

Although the Northern Ireland Protocol (NIP) passed the first hurdle to becoming the law in the UK’s House of Commons, the Brexit protests gain momentum in Britain of late. The same exert more pressure on Prime Minister Boris Johnson as Brexit is considered the core of Conservatives’ winning recipe.

On the other hand, fears of economic slowdown and inflation renewed the US dollar demand after the greenback gauge slumped to the lowest in two weeks on Tuesday. Additionally helping the USD buyers were cautious mood ahead of today’s key penal discussion by the US Federal Reserve (Fed) Chairman Jerome Powell, Bank of England (BOE) Governor Andrew Bailey and the European Central Bank (ECB) President Christine Lagarde at the ECB Forum.

That said, the US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5%.

Amid these plays, the US 10-year Treasury yields snapped a two-day uptrend whereas Wall Street closed in the red.

Moving on, updates from the ECB Forum will be crucial for the GBP/USD pair. Ahead of that the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will be important. On the same line will be the final readings of the US Q1 GDP, which is likely to confirm 1.5% Annualized contraction.

Technical analysis

A clear downside break of the two-week-old support, now resistance around 1.2305, directs GBP/USD prices towards the yearly bottom surrounding 1.1935, which is also the monthly low. During the fall, the 1.2000 psychological magnet may offer an intermediate halt.

• Gold price is eyeing downside to near weekly lows at $1,816.98.
• The DXY has advanced firmly on expectations of hawkish Fed Powell and stable PCE.
• The precious metal is displaying signs of volatility contraction amid Descending Triangle formation.

Gold price (XAU/USD) is auctioning around a two-day low at $1,818.64 and is expected to slip further to near the weekly low at $1,816.98. The precious metal has failed to capitalize on the event of banning the imports of gold from Russia, which generates the second-highest revenue for Moscow after oil and gas. The gold prices have remained vulnerable for the past few trading weeks i.e. declining gradually and are expected to slip swiftly now.

Meanwhile, the US dollar index (DXY) is attempting to surpass 104.50. The asset has scaled firmly above the critical hurdle of 104.00 as investors are bracing for a hawkish commentary from Federal Reserve (Fed) chair Jerome Powell. The speech from Fed Powell will provide hints about the likely monetary policy action in July. For sure, a rate hike will be announced in July monetary policy meeting but what needs to gauge is the extent of a rate hike.

Apart from that, the release of the quarterly US Personal Consumption Expenditure (PCE) will remain in focus. As per the market consensus, the PCE is seen stabled at 7%.

Gold technical analysis

The gold prices are trading in a Descending Triangle pattern that signals a volatility contraction. The downward sloping trendline is plotted from June 16 high at $1,857.58 while the horizontal support is placed from June 16 low at $1,815.73. The precious metal is balanced below the 200-period Exponential Moving Average (EMA) at $1,831.25. Meanwhile, the Relative Strength Index (RSI) (14) has shifted into a bearish range of 20.00-40.00, which adds to the downside filters.

Gold hourly chart

• AUD/USD bears are in control, for now, and target a break of 0.6900.
• The bulls could be lurking not far below.

As per the prior series of analyses this week so far, AUD/USD Price Analysis: A break from 0.6950 is on the cards, AUD/USD bulls seek a break of 0.6925 for 0.6950 target area, AUD/USD Price Analysis: The break into 0.6930s has summoned the bulls to target the 0.6950s, the pair continues to play the ranges but the bias stays with the upside longer-term. 

AUD/USD daily chart scenarios

The M-formation's neckline failed to fend off the bulls and the high lows may have invalidated the bearish prospects of a move towards 0.67 and 0.66 in the meantime.

Instead, as illustrated below, the volume profile and price imbalances to the upside could make for a path of least resistance as follows:

AUD/USD H1 chart sell-buy scenario

From a shorter-term outlook, there is the possibility of a liquidity grab from below high volume areas into buyer's protective stops and fresh sell orders in anticipation of a longer-term bear trend, encouraged by the moves lower from 0.6950.

If this were to play out, then 0.6870/80 could be an area of renewed demand as per the mod point of the bullish order block. A short squeeze could eventuate in a surge higher and a bullish trend into higher liquidity and price imbalance mitigations on the daily chart. 

• The USD/JPY extends its weekly gains to 0.74% on Tuesday.
• Falling US Treasury yields capped any U¨SD/JPY’s attempts towards the YTD highs near 136.70s.
• A rising wedge in the USD/JPY daily chart looms; if it plays out, it will send the pair tumbling towards 132.00.

The USD/JPY extends its string of days, advancing to three straight, and registers a new weekly high near the 136.30s after bouncing from daily lows at around 135.10s earlier in the Asian session, gaining close to 80 pips in the day. At the time of writing, the USD/JPY is trading at 136.10.

Wall Street’s Tuesday session ended with substantial losses, between 1.56% and 3.09%. A risk-off mood impulse, usually a headwind for the major, backfired on the Japanese yen, which remains heavy on the Bank of Japan’s (BoJ) pledging for an ultra-loose monetary policy stance, despite dealing with a weaker JPY, which makes inflation less tolerable.

In the meantime, US Treasury yields receded from weekly highs. The US 10-year benchmark note rate edges down one basis point and sits at 3.183%, putting a lid on higher USD/JPY prices.

USD/JPY Daily chart

The USD/JPY is still upward biased, albeit closing to YTD highs and “verbal” intervention by Japanese authorities. However, price action begins to show the possible formation of a rising wedge, which would pave the way for a pullback. If that scenario plays out, the USD/JPY first target would be the 20-EMA at 133.92, followed by the June 16 swing low at 131.49. USD/JPY traders should be aware that once the latter’s cleared, the 50-EMA at around 130.80 would be in play.

USD/JPY Hourly chart

The USD/JPY consolidates around the 135.00-136.20 area, clinging to Tuesday’s R2 daily pivot at 136.21. Traders should notice that the Relative Strength Index (RSI), albeit at 63.26, is aiming lower and trending below RSI’s 7-period SMA, a bearish signal suggesting downward pressure lying ahead.

USD/JPY buyers’ failure to break above 136.21 might open the door for further losses. That said, the major’s first support would be 136.00. Break below would expose the 20-EMA at 135.88, followed by the confluence of the 50 and 100-EMA around 135.45-34, respectively, and then the 200-EMA at 135.16.

Conversely, a USD/JPY’s upward break above 136.21 might open the door for a YTD test at 136.71.

USD/JPY Key Technical Levels

• The New Zealand dollar tumbles courtesy of a negative market mood and a bid US dollar.
• US June’s CB Consumer Confidence dipped to a 10-year low on US citizens’ concerns about high inflation and slower growth.
• The US Dollar Index is back above the 104.000 thresholds, courtesy of quarter and month-end flows.

The NZD/USD ticks down and extends its losses to 1% in the week, amidst a negative market sentiment, spurred by weaker than expected US consumer confidence slid to a decade low, as pessimism grows in North Americans about the US economic outlook. At 0.6242, the NZD/USD is also trading at new two-week lows at the time of writing.

NZD/USD falls due to a negative mood amidst a buoyant US dollar

US equities remained under heavy pressure as the portfolio rebalancing continued. In the FX space, sentiment bolstered the safe-haven peers, in this case, the greenback and the CHF. That said, the NZD/USD proceeded to dive after reaching a daily high in the mid-European session around 0.6313, sliding afterward below the June 27 daily low at 0.6281, followed by a fall to the 0.6240s area.

In the meantime, the US Dollar Index, a measure of the greenback’s value against its peers, edges up 0.54% at 104.504, boosted by quarter and month-end flows. Contrarily, the US 10-year benchmark note rate is at 3.192%, almost flat.

During the North American session, Fed Regional indices were released. The Richmond Fed’s Manufacturing Index dipped below the expectations, contracting from -19.0 vs. -12.0 foreseen, while the Dallas Fed Services Index shrank.

Additionally to that, Fed officials were crossing newswires. Mary Daly, the San Francisco Fed President, said that the Fed could address inflation while adding that, according to her, demand is “half of the cause of inflation” and said that the US would have slower growth.

Before Wall Street opened, the New York Fed President John Williams said that officials would discuss whether to hike 50 or 75 bps the Federal funds rate in the next month on Tuesday. Williams added that policymakers would be data-dependent and do not foresee a recession in his baseline, though he acknowledged that the US economy might slow down.

NZD/USD Key Technical Levels

What you need to take care of on Wednesday, June 29:

The American dollar resumed its advance on Tuesday and finished the day with gains against most major rivals amid renewed inflation and recession-related fears. The CB Consumer Confidence Index fell in June to 98.7,t its lowest level since February 2021. More relevantly, the survey showed that consumer expectations were sharply down, falling to their lowest in almost a decade, amid increased concerns about inflation, expected to keep climbing.

Earlier in the day, the European Central Bank President Christine Lagarde spoke at the Central Banking Forum organized by the ECB in Portugal. She reaffirmed the central bank intends to raise rates by 25 bps in July but added that her team is ready to hike at a faster pace if needed. She also downplayed recession risks, noting that policymakers are still expecting positive growth rates. Also, ECB Pierre Wunsch said he would be comfortable with a 50 bps hike in September, as 200 bps of hikes are needed relatively fast.

The EUR/USD pair flirted with the 1.0500 level and settled at 1.0520. The GBP/USD pair is below 1.2200. Commodity-linked currencies edged lower, undermined by the sour tone of Wall Street. US indexes are once again flirting with bearish territory.

The AUD/USD pair is now around 0.6900, while USD/CAD advanced to 1.2875. The USD/JPY pair is back above 136.00 and nearing multi-decade highs.

Gold shed some ground and settled around $1,820 a troy ounce, but crude oil prices kept rising amid supply concerns. G7 leaders discussed an agreement to impose a price cap on Russian oil, as sanctions on the crypto sent crude prices skyrocketing. WTI is now at around $111.60 a barrel.

Focus shifts to inflation, as the US will publish the Q1 core PCE Price Index on Wednesday, the Federal Reserve's favorite inflation figure, while Germany will unveil the preliminary estimate of June CPI data.

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• Gold is on the verge of a move to test $1,812 as the greenback remains firm.
• The US dollar has risen on Tuesday and is firmly back above 104.00, DXY.  

The gold price is slightly lower in afternoon trade on Wall Street, losing some 0.13% to the greenback at $1,820.32. The price fell from a high of $1,829.50 to a low of $1,818.48 and is being pressured out of a bullish scenario on the charts.

''It's a snoozefest in gold markets,'' analysts at TD Securities note.

The price of the metal has been mostly rangebound for the month of June which has made for shorter-term two-way business between the final weeks of the month between $1,848 and $1,820 in the main. However, rather than rebounding from down here, the price is starting to eat into liquidity below with bulls checked by gains in the US dollar and inflationary pressures that are running at a 40-year high. Higher US yields, as a consequence, are detrimental for the yellow metal since gold does not offer investors yield.

''The yellow metal is being pulled in two directions as a hawkish Fed regime clashes with recession fears,'' analysts at TD Securities explained.

''After all, a Fed hiking cycle tends to be associated with rising recession risks, with the US5-30s curve already pointing to an elevated probability of a recession in the next twelve months. Gold has benefited from this narrative, as highlighted by substantial safe-haven inflows recorded in past weeks. Notwithstanding, this hiking cycle differs from recent historical analogs as the Fed's ability to control inflation is limited, given that the supply-side is disrupted.''

On Tuesday, the US dollar shot higher from below 104, making gold more expensive for international buyers. US dollar bulls moved in on euro weakness as European Central Bank (ECB) President Christine Lagarde offered no fresh insight into the central bank's policy outlook. Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations. The US dollar index (DXY), which had made a two-decade high of 105.79 this month, was last up 0.46% at 104.420. The DXY had been as low as 103.77 and as high as 104.606. 

Inflation fears have advanced again and choppy trading persists, sinking US stocks midday at the same time that a consumer confidence gauge sank amid rising inflation expectations, undermining the improvement in investor sentiment after China relaxed certain COVID-19 restrictions. The Conference Board's measure of consumer confidence fell to 98.7 in June from 103.2 in May while the Board's inflation expectations index rose to 8% from 7.5%, the highest since the series began in 1987.  The Dow Jones Industrial Average slid over 1.48% with the S&P 500 down 1.92% and the Nasdaq Composite 2.94% lower by Tuesday afternoon. All three indexes traded higher earlier in the session.

''Gold trading will likely remain a snoozefest while bears wait for a catalyst to shake-out this complacent length. In the meantime, continued whipsaws from CTA trend followers reflect the range-bound price action.

Gold technical analysis

There is an imbalance of price below which could be mitigated in the coming sessions for a test of $1,812.

• The British pound is losing 0.63% in the week.
• Soft US Consumer Confidence dropping to 20-year lows, augmented appetite for the buck.
• The GBP/USD falls due to a stronger buck, and weak US economic data.

The British pound extends its losses to two consecutive days, trading below the 1.2200 figure, after printing a daily high shy of the 1.2300 mark and stumbling towards the 1.2190s area in the North American session. At the time of writing, the GBP/USD is trading at 1.2189.

The GBP/USD fell due to a stronger buck, and weak US data

Sentiment shifted sour after a disappointing US Consumer Confidence reading dropped to a decade low, to 98.7 from a 103.2 downward revision in May. US equities tumbled on the headline, which sparked a counter-cyclical move in the greenback, rising instead of falling, and advanced back above the 104.000 mark, as shown by the US Dollar Index.

At the same time, further US economic data was unveiled led by the Richmond Fed’s Manufacturing Index fell below the expectations, shrinking from -19.0 vs. -12.0 foreseen, while the Dallas Fed Services Index contracted.

The GBP/USD reacted negatively and had the same fate as US equities, tumbling below June’s 27 low at 1.2238, exacerbating the downward move later, through the 1.2200 figure, registering a fresh weekly low at 1.2180.

Elsewhere, more Fed policymakers hit the media. The San Francisco Fed President Mary Daly commented that the Fed could address inflation, which according to her, is “half of the cause of inflation,” and said that the US would have slower growth.

Earlier, the New York Fed President John Williams said that officials would discuss whether to hike 50 or 75 bps the Federal funds rate in the next month on Tuesday. Williams added that policymakers would be data-dependent and does not foresee a recession in his baseline, though he acknowledged the US economy might slow down.

Regarding growth, the Fed’s Atlanta GDPNow, a forecast of the US GDP, rose from 0% to 0.3% on its last update, June 27.

Concerning the UK economic docket, the house of commons approved the North Ireland Protocol bill, which would allow the UK to scrap the Brexit deal, which would trigger a trading war with the EU, and weighed on the GBP/USD.

The US Dollar Index, a gauge of the buck’s value against six currencies, underpinned by the rise in the US 10-year yield up by four bps at 3.234%, advances firmly above the 104.000 thresholds, at around 104.560, gaining 0.62%.

The US economic docket will feature the Fed Chair Jerome Powell on Wednesday at an event organized by the European Central Bank.

GBP/USD Key Technical Levels

• USD/CAD slides from the dollar rally tops and consolidates awaiting the next catalyst. 
• Oil prices are elevated and support the Canadian dollar. 

At 1.2853, the Canadian dollar is down by some 0.15% at the time of writing after sliding from a high of 1.2894 to a low of 1.2819 following a rise in the price of oil on Tuesday. The Canadian dollar is ultimately holding on to its gains from Friday, as the recent pullback in bond yields bolstered investor sentiment at the start of the week.

However, the inflation fears have advanced again and choppy trading persists, sinking US stocks midday at the same time that a consumer confidence gauge sank amid rising inflation expectations, undermining the improvement in investor sentiment after China relaxed certain COVID-19 restrictions. The Dow Jones Industrial Average slid over 1% with the S&P 500 down 1.5% and the Nasdaq Composite 2.44% lower by Tuesday afternoon. All three indexes traded higher earlier in the session.

The Conference Board's measure of consumer confidence fell to 98.7 in June from 103.2 in May while the Board's inflation expectations index rose to 8% from 7.5%, the highest since the series began in 1987.

Perky oil

Nevertheless, a booster for the commodity currency that is strongly linked to the energy sector, oil prices rose early on Tuesday after the G7 countries agreed to explore capping the price of Russian oil sold on the world market.

Additionally, French President Emmanuel Macron, citing a United Arab Emirates dignitary, reportedly said the UAE was producing crude at maximum capacity and that Saudi Arabia could only scale up its oil output by 150,000 barrels per day. At its annual summit in Germany, G7 leaders agreed to explore the possibility of capping the price of Russian oil to cut the country's take from exports as its invasion of Ukraine continues. West Texas Intermediate crude oil futures advanced 2.1% to $111.78 per barrel.

As for the greenback, bulls moved in on euro weakness as European Central Bank (ECB) President Christine Lagarde offered no fresh insight into the central bank's policy outlook. Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

The US dollar index (DXY), which had made a two-decade high of 105.79 this month, was last up 0.46% at 104.420. The DXY had been as low as 103.77 and as high as 104.606. 

For the Canadian economy, the Canadian Finance Minister Chrystia Freeland on Sunday said the economy still has a path to a "soft landing," where it could stabilize economically after the blow by the COVID-19 pandemic, without facing a severe recession that many fear.

In this regard, traders are in anticipation of Industry Level Gross Domestic product month on month for April this week, 30 June. Analysts at TD Securities expect industry-level GDP to rise by 0.3% in April, slightly above the flash estimate for a 0.2% rise. ''Look for increases in activity in both the goods and services sectors, but with goods leading the way. The flash estimate for May will be of particular interest, particularly given recent deterioration in consumer confidence.''

Nevertheless, speculators have cut their bullish bets on the Canadian dollar, data from the US Commodity Futures Trading Commission showed on Friday. As of June 21, net long positions had fallen to 4,105 contracts from 23,202 in the prior week.

Reuters has reported that San Francisco Federal Reserve Bank President Mary Daly on Tuesday said she believes the US economy will slow to below 2% annual growth as the Fed raises interest rates, but there's enough momentum that it won't stop growing.

"I do expect the unemployment rate to rise slightly, but nothing (like).... what people would think of as a recession," Daly said in an interview on LinkedIn.

Key comments

The fed can address inflation, at least partly.

Supply is still very short, made shorter by war in Ukraine.

Fed can reduce demand, which is about half of the cause of inflation.

Inflation bridles the economy.

getting price stability is a fundamental factor in achieving full employment.

The labor market is really strong right now.

The economy has a lot of momentum, that puts us in a better position of achieving a softer landing.

We will have slower growth, perhaps below 2%, but it won't be negative.

Expect unemployment rate to rise slightly, but not like in a recession.

We are tapping on the brakes to get to a more sustainable pace.

Global economy won't grow as fast because of Ukraine, and that will be a headwind for the u.s. economy.

Consumer and small business sentiment show pervasive effect of inflation.

I'm worried that left unbridled inflation would continue to threaten u.s. economy.

It is tough right now, but it will get better in part because of fed rate hikes, and signs of life in supply chains.

Mass layoffs in tech are not only related to slowing in the economy; tech is always repositioning itself.

Labor market is strong right now, despite layoffs; if you are in tech, you'll be able to continue to get jobs.

US dollar update

The US dollar bulls moved in on euro weakness as European Central Bank (ECB) President Christine Lagarde offered no fresh insight into the central bank's policy outlook.

Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

The US dollar index (DXY), which had made a two-decade high of 105.79 this month, was last up 0.462% at 104.517. The DXY had been as low as 103.77 and as high as 104.606. 

• US: CB Consumer sentiment falls to a 16-month low.
• Stocks turned lower, main indexes fall by 1% on average.
• AUD/USD falls from six-day highs toward 0.6900.

US stocks turned to the downside on Tuesday and boosted the US dollar. The AUD/USD dropped to 0.6909, hitting a fresh daily low. It remains under 0.6930 with a bearish intraday bias. Earlier it climbed to a six-day high of 0.6964.

Since last Friday, AUD/USD is moving sideways between 0.6910 and 0.6960 with a modest bullish bias. Still unable to move significantly away from the 2-year low at 0.6823 it reached during May.

Risk-off weighs on AUD

The AUD/USD found support so far on Tuesday above the support area of 0.6905/10. A break lower could trigger more losses; the next strong support stands at 0.6870, around last week’s low. On the upside the immediate resistance could be seen at the 20-hour Simple Moving Average at 0.6930.

Stocks erased earlier gains. The S&P 500 is falling by 1.07%. The decline in Consumer Sentiment weighed on sentiment. Conference Board’s index dropped to the lowest level in 16 months in June amid rising inflation and a negative growth outlook. 

On Wednesday, retail sales data is due in Australia at 01:30 GMT (market consensus: 0.4%). Analysts at TD Securities see a 0.5% increase. “A strong retail beat will strengthen the case for another aggressive move by the RBA (Reserve Bank of Australia) in July after their outsized 50bps hike this month.”

Technical levels

• USD/CHF bounces off near-daily lows and stays above the 50% Fibonacci retracement in the H1 chart.
• Disappointing US economic data sparks a counter-cyclical move with the US dollar rising instead of falling.
• The USD/CHF daily chart formed a double top that is in play, but USD/CHF sellers’ failures to breach 0.9520, might open the door for a rally towards 0.9600.

The USD/CHF is trying to stage a recovery after falling for six straight days, though it failed to break below the June 24 daily low of around 0.9561 and remains trapped within that day’s price action amidst the lack of a fresh impulse above/below the 0.9520-9630 range. At 0.9563, the USD/CHF advances barely by 0.07% in the North American session.

US equities are beginning to tumble as market sentiment shifted sour. During the Asian session, positive news from China that cut quarantine for travelers was overshadowed by a dismal read in US consumer confidence, triggering a counter-cyclical move in the greenback, with the US Dollar Index advancing sharply near last Friday’s high around 104.377, up by 0.42%.

USD/CHF traders should notice that negative US data from the growth perspective can sometimes boost the greenback, as is happening today.

USD/CHF Daily chart

A double top in the USD/CHF daily chart is still in play. However, since last Friday, CHF buyers could not achieve a fresh swing low, below the 0.9520-0.9630 range, keeping the major trapped. In the meantime, the Relative Strength Index (RSI) at 39.72 begins to show some signs of aiming slightly up, but unless it breaks the 50-midline, the bias remains negative, and the USD/CHF might probe the 100-day moving average (DMA) at 0.9508 in the near term.

USD/CHF 1-Hour chart

The USD/CHF is seesawing around the daily pivot near 0.9573, with the 50, 100, and 200-simple moving averages (SMAs) above the exchange rate. Nevertheless, the pullback from daily highs at around 0.9586 might be short-lived, as the price jumped from around the 50% Fibonacci retracement at 0.9560 after the London fix.

If the USD/CHF breaks above the 50-SMA at 0.9568, a re-test of the daily highs is on the cards. That said, the major next resistance would be the daily pivot at 0.9573, followed by the confluence of the 100-SMA, and the daily high near 0.9586-88, followed by the R1 daily pivot at 0.9600.

USD/CHF Key Technical Levels

The US dollar should remain strong against more currencies; however, the peak may be approaching earlier than initially expected, according to analysts at Wells Fargo. They believe medium-term dollar strength will be most pronounced against emerging market currencies.

Key Quotes: 

“Our short to medium term view on the U.S. dollar is unchanged, and we continue to forecast a stronger greenback against most foreign currencies through early 2023. With the U.S. economy now likely to fall into recession and the Fed to start cutting policy rates, we now believe the dollar will peak in mid-2023 and start to gradually weaken in the second half of next year.”

“Dollar strength should persist through early 2023; however, peak dollar strength may be approaching earlier than we initially expected. As the Fed eases monetary policy in late 2023, we believe the dollar's rise should slow by the middle of next year and the greenback should eventually start to weaken against most foreign currencies. We continue to believe Latin American currencies will be the outlier. Political risks and mature tightening cycles should keep Latin American currencies from strengthening during our forecast horizon.

“We believe the Fed will act more aggressively than the European Central Bank as well as the Bank of England, which should keep the dollar on sound footing against the euro and the pound for at least the next few quarters. In addition, with the Bank of Japan unlikely to adjust monetary policy settings for the foreseeable future or intervene meaningfully to halt depreciation, we believe the yen can continue to reach new lows against the greenback. We do, however, believe the Canadian dollar could be more resilient to broad U.S. dollar strength. As mentioned, BoC policymakers have turned more hawkish, and we look for Canadian policymakers to broadly match Fed rate hikes in the short term.”

The pound may not receive a lasting support from the Bank of England, even if it accelerates rate hikes, as investors override concerns about UK investment and growth, explain analysts at Rabobank. 

Key Quotes: 

“The BoE was quicker out of the blocks on policy tightening than many other G10 central banks this cycle. However, the five interest rate hikes announced by the BoE already have not prevented the pound from being one of the poorest performing G10 currencies in the year to date. A step up in the pace of BoE rate hikes, may not provide the pound with much lasting support given investors overriding concerns about UK investment and growth. We see scope for EUR/GBP to end the year around 0.88.”

“A current account deficit in a country where fundamentals are perceived to be poor is likely to trigger a downward adjustment in its currency. Higher interest rates could bring a short-term boost, but ultimately may only serve to weaken the environment for investment and growth in the medium-term which could thicken the clouds over the outlook for the pound.”

“By the end of the year, it is possible that the BoE’s window of opportunity for rate hikes could have closed completely as the cost of living crisis grows. This could leave the pound further disadvantaged.”

• The yellow metal is near the day’s lows and aiming lower, extending Monday’s losses.
• Risk-on mood, spurred by China’s news, decreased appetite for safe-haven assets.
• US consumer confidence fell the most since February 2021.
• Gold Price Forecast (XAUUSD): To remain downward pressured below the 200-DMA

Gold spot (XAUUSD) prolonged its losses for the second straight day, struggling to stay above the $1820 mark amidst a positive market mood that witnessed a jump in riskier assets, weighing on safe-haven assets, particularly in the precious metal segment. At the time of writing, XAUUSD is trading at $1820.72, recording minimal losses of 0.10%.

XAUUSD’s Tuesday’s price action illustrates that the yellow metal entered a consolidation phase before resuming Monday’s downtrend, seesawing around its low at $1820.61. Nevertheless, it should be noted that XAUUSD will face solid support around the June 24 low at $1816.64.

Sentiment and a strong US dollar weighed on the gold price

Global equities rallied on positive news from China. Beijing cut the Covid-19 quarantine for travelers, which was greatly cheered by investors, shifting from the negative sentiment of Monday’s Wall Street session. In the meantime, US consumer confidence fell in June to its lowest level in 12 months, as inflation dampened US citizens’ economic conditions.

Elsewhere, Fed speakers will continue to cross newswires. On Tuesday, the NY Fed President John Williams said that officials would discuss whether to hike 50 or 75 bps the Federal funds rate in the next month. Williams added that policymakers would be data-dependent and that he does not foresee a recession in his baseline, though he acknowledged the US economy might slow down.

The US Dollar Index, a gauge of the buck’s value against six currencies, underpinned by the rise in the US 10-year yield up by four bps at 3.234%, advances firmly above the 104.000 thresholds, at around 104.560, gaining 0.62%.

Also, the US 10-year TIPS (Treasury Inflation-Protected Securities), a proxy for Real yields,  climbs six basis points, up to 0.707%, a headwind for gold prices.

In the meantime, outflows from gold ETFs could add some pressure on gold. Commerzbank analysts wrote, “holdings in the gold ETFs tracked by Bloomberg were reduced by 6 tons yesterday. The momentum of outflows has picked up pace again of late.”

Meanwhile, the Richmond Fed Manufacturing Index added to the ongoing Fed regional indices displaying negative readings and could be a prelude to July’s ISM Manufacturing PMI.

The US economic docket will feature later the San Francisco’s Fed Mary Daly, and by Wednesday, Cleveland’s Fed President Loretta Mester and Fed Chair Jerome Powell will cross wires.

Gold Price Forecast (XAUUSD): Technical outlook

XAUUSD is still downward biased, consolidating in the $1820-50 range. However, a daily close below $1820 would open the door for further losses. Besides, the daily moving averages (DMAs) above the spot price and the RSI at bearish territory bolstered the seller’s hopes for lower prices.

Therefore, the XAUUSD’s first support would be June 16 low at 1814.68. Break below will expose the June 14 low at $1804.95, followed by $1800.

• US dollar gains momentum during American session.
• Euro prints fresh lows versus USD, CHF and GBP.
• Stocks erase gains in Wall Street, US yields move off highs.

The EUR/USD dropped further and bottomed at 1.0501, the lowest level since Thursday. It then trimmed losses, rising to 1.0530. The move lower took place amid a stronger US dollar across the board.

The greenback gained ground as Wall Street indexes turned negative. The Dow Jones is falling by 0.51% and the Nasdaq by 1.74%. US yields pulled with the US 10-year at 3.20% and the 30-year at 3.31%.

US economic data came in below expectations. The Conference Board’s Consumer Confidence Index dropped to 98.7 in June, the lowest level in 16 months. The Richmond Fed Manufacturing Index tumbled to -19 in June from -9, against market consensus of -11. The S&P/Case Shiller Price Index rose 1.6% in April. The numbers did not affect the dollar.

The euro is among the worst performers of the American session. EUR/CHF dropped to test last week's lows near 1.0050 and EUR/GBP pulled back to 0.8620. The common currency did not benefit from hawkish comments by European Central Bank officials.

The annual ECB forum in Portugal will have its last day on Wednesday. A discussion panel will include Lagarde (ECB), Powell (Fed) and Baily (BoE).

Short-term outlook

The EUR/USD moved off lows and is back above 1.0530. The pair will likely continue to move sideways between 1.0500 and 1.0600. Earlier on Tuesday the euro traded above 1.0600 but again it was rejected from those levels; it needs to consolidate above those levels to open the doors to more gains.

The immediate resistance is seen at 1.0550 (20-SMA in four hour chart); while below EUR/USD could test 1.0500 again. The next level to watch is last week’s low at 1.0467.

Technical levels

The United States will prohibit Russian gold imports in the latest round of sanctions, the Treasury Department announced on its website on Tuesday, as reported by Reuters.

Additional takeaways

"US imposes Russia-related sanctions on dozens of entities and individuals."

"Latest sanctions target Russia's state-owned defense conglomerate Rostec and affiliated entities."

"Latest sanctions target multiple banks including Bank of Moscow."

"US imposes sanctions on United Aircraft Corp."

Market reaction

This headline doesn't seem to be having a significant impact on gold's valuation. As of writing, XAU/USD was down 0.15% on the day at $1,820.

• Consumer confidence in the US continued to weaken in June.
• US Dollar Index clings to strong daily gains near mid-104.00s.

The data published by the Conference Board showed on Tuesday that the Consumer Confidence Index dropped to 98.7 in June from 103.2 in May. This print came in weaker than Reuters' estimate of 100.00.

Further details of the press release revealed that the Present Situation Index fell to 147.1 from 147.4 and the Expectations Index plunged to its lowest level since March 2013 at 66.4 from 73.7.

Additionally, the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5%. 

Market reaction

The greenback continues to outperform its major rivals after this report and the US Dollar Index was last seen rising 0.5% on the day at 104.45.

• A combination of supporting factors pushed USD/JPY higher for the second successive day.
• The risk-on impulse, the Fed-BoJ policy divergence, rising US bond yields extended support.
• Resurgent USD demand provided an additional lift, taking along stops near the 136.00 mark.

The USD/JPY pair built on its steady intraday ascent through the early North American session and shot to a fresh three-day high, around the 136.30 region in the last hour.

The markets turned optimistic amid hopes that inflation is nearing its peak, bolstered by the recent decline in commodity prices. Furthermore, China announced to relax COVID-19 quarantine requirements for international travellers and raised expectations for a revival in global growth. This, in turn, boosted investors' confidence and undermined the safe-haven Japanese yen.

The risk-on flow pushed the US Treasury bond yields higher, widening the gap between the US-Japanese bond yields. This, along with the divergent monetary policy stance adopted by the Bank of Japan and the Federal Reserve, weighed heavily on the JPY. Apart from this, a strong pickup in the US dollar demand also contributed to the strong bid tone surrounding the USD/JPY pair.

The intraday bullish momentum, also marking the third successive day of a positive move, could further be attributed to some technical buying above the 136.00 round-figure mark. This, in turn, might have already set the stage for an extension of the upward trajectory, back towards retesting a 24-year high, around the 136.70 region touched last week.

Moving ahead, the market focus now shifts to Fed Chair Jerome Powell's appearance on Wednesday. Market participants will look for clues about the US central bank's policy tightening path. This will play a key role in influencing the near-term USD price dynamics and help investors to determine the next leg of a directional move for the USD/JPY pair.

Technical levels to watch

Julia Goh, Senior Economist at UOB Group and Economist Loke Siew Ting comment on the June BSP event.

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP), as expected, raised its overnight reverse repurchase (RRP) rate for the second straight meeting by 25bps to 2.50% today (23 Jun). Accordingly, both the overnight deposit and lending rates were also hiked to 2.00% and 3.00% respectively.”

“The latest move came after the national inflation hit above BSP’s 2.0%-4.0% medium-term target range in May (at 5.4%) and the government approved PHP1 provisional fare hike for jeepneys in mid-Jun that will likely intensify second-round effects on headline inflation. In view of inflation risks still tilting to the upside, BSP revised its inflation forecasts higher to 5.0% for 2022 (from 4.6% previously, UOB est: 5.0%) and 4.2% for 2023 (from 3.9% previously, UOB est: 4.0%), and introduced a 3.3% inflation outlook for 2024.”

“The accompanying statement revealed BSP’s top priority now is to bring inflation back to its 2.0%4.0% target range over the medium term, which is in line with our expectations. Hence, we continue to expect BSP to raise rates by a measured 25bps at every remaining meeting of this year in Aug, Sep, Nov, and Dec. This will bring the RRP rate to 3.50% by the end of 2022.”

• EUR/USD reverses the positive start of Tuesday’s session.
• Further gains look initially limited by the 55-day SMA near 1.0615.

EUR/USD fades part of the recent 2-day advance and quickly retreats to the low-1.0500s on Tuesday.

In the very near term, occasional bullish attempts need to surpass the 55-day SMA near 1.0615, which also coincides with the weekly highs. If surpassed, then the next hurdle of note emerges at the 4-month line near 1.0660. The pair is expected to see its downside pressure alleviated on a close above the latter, with the next target at the June top at 1.0773 and the May peak at 1.0786.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.1125.

EUR/USD daily chart

It is a snoozefest in gold markets. Strategists at TD Securities expect this regime to continue for the time being.

Hawkish Fed regime clashes with recession fears 

“The yellow metal is being pulled in two directions as a hawkish Fed regime clashes with recession fears. After all, a Fed hiking cycle tends to be associated with rising recession risks.”

“This hiking cycle differs from recent historical analogs as the Fed's ability to control inflation is limited, given that the supply-side is disrupted. In turn, gold bugs sniffing out a potential stagflationary outcome associated with lower growth but lingering inflation should consider that central banks, facing a credibility crisis, could also continue to raise rates for longer than they otherwise would.”

“Gold trading will likely remain a snoozefest while bears wait for a catalyst to shake-out this complacent length.”

• The emergence of aggressive USD dip-buying assisted USD/CAD to pare its intraday losses.
• Bullish crude oil prices continued underpinning the loonie and caped any meaningful upside.
• Investors now look forward to the US economic data for some short-term trading impetus.

The USD/CAD pair recovered a few pips from over a two-week low touched earlier this Tuesday and was last seen trading just below mid-1.2800s, still down over 0.25% for the day.

Bullish crude oil prices underpinned the commodity-linked loonie and dragged the USD/CAD pair lower for the third successive day. G7 leaders agreed to explore price caps on imports of Russian oil and gas, fueling supply concerns. Apart from this, the easing of COVID-19 curbs in China lifted hopes for demand recovery and lifted crude oil prices to a one-week high.

On the other hand, the US dollar made a solid comeback and snapped a two-day losing streak to over a one-week low amid a goodish pickup in the US Treasury bond yields. This, in turn, assisted the USD/CAD pair to find decent support near the 1.2820-1.2815 region and stall its intraday bearish trajectory, though any meaningful upside still seems elusive.

Investors turned optimistic amid hopes that inflation is nearing its peak, which was evident from the prevalent risk-on mood around the equity markets. The softening inflation expectations also seem to have forced investors to scale back their expectations for a more aggressive policy tightening by the Fed, which might keep a lid on any further gains for the buck.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent pullback from the YTD peak has run its course and placing fresh bullish bets around the USD/CAD pair. Market participants now look forward to the US economic docket - featuring the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index.

The data, along with the US bond yields and the broader market risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from oil price dynamics to grab short-term opportunities around the major. The focus, however, would remain on the OPEC+ meeting and Fed Chair Jerome Powell's appearance on Wednesday.

Technical levels to watch

GBP/USD awaits the Bank of England’s Governor Andrew Bailey's speech at the ECB forum in Sintra, Portugal on Wednesday. Hawkish remarks are needed to lift the pound, economists at Scotiabank report.

Markets set a high bar for the BoE with 165 bps expected by year-end

“There are no domestic drivers for GBP price action until tomorrow’s address by BoE Gov Bailey where we’re looking for confirmation that the bank will tighten by 50 bps in Aug. With weak UK growth and global recession fears, the GBP will need the support of a hawkish central bank.” 

“Markets have set a high bar for the BoE with 165 bps in hikes expected by year-end, so further downside on the crosses for the GBP looks more likely.”

Enrico Tanuwidjaja, Economist at UOB Group, assesses the recent BI interest rate decision.

Key Takeaways

“Bank Indonesia (BI) kept its benchmark rate (7-Day Reverse Repo) unchanged at 3.50% at its June MPC meeting. Consequently, BI maintained the Deposit Facility rate at 2.75% as well as the Lending Facility rate at 4.25%.”

“The policy of liquidity normalisation has been accelerated through a gradual increase in Reserve Requirement (RR) for Conventional Bank from the current 5% to 6% starting this month, and further to 7.5% starting next month and to reach 9.0% starting on 1 September 2022.”

“We keep our view for BI to start hiking in 2H22, with two 25bps hikes in 3Q 2022 to 4.00%, followed by another two 25bps hikes in 4Q, taking its benchmark rate to 4.5% by the end of 2022.”

Japanese Prime Minister Fumio Kishida said on Tuesday that they will extend an additional $100 million in humanitarian aid to Ukraine, as reported by Reuters.

Additional takeaways

"G7 agreed Russia is to blame for global price increases."

"Japan will extend support to expand Ukraine's grain storage capacity as harvest season nears."

"Will do utmost to secure enough power supply in Japan."

"Will work hard to realise continued wage hikes."

"G7 agreed that unilateral attempt to change status quo by force is unacceptable."

Market reaction

USD/JPY preserves its bullish momentum after these comments and was last seen rising 0.57% on a daily basis at 136.20.

• DXY leaves behind two daily pullbacks in a row.
• Further up comes the weekly peak near 105.00.

DXY regains the smile and manages to stage quite a moderate bounce to the area well north of the 104.00 mark on Tuesday.

Ideally, the index should surpass the weekly high near 105.00 (June 22) in the near term to allow for the recovery to gather momentum and attempt a visit to the nearly 20-year peak in the 105.80 zone (June 15). On the flip side, a breach of the lower bound of the range carries the potential to force the index to challenge the weekly low at 103.42 (June 16).

As long as the 4-month line near 102.20 holds the downside, the near-term outlook for the index should remain constructive.

Looking at the longer run, the outlook for the dollar is seen bullish while above the 200-day SMA at 97.95.

DXY daily chart

The USD/CAD finally cracked retracement support at 1.2865 to edge back to the low 1.28s. Economists at Scotiabank expect the pair to extend its decline towards the 1.2730 mark.

USD/CAD can push on to the low/mid 1.27s

“Short-term trends suggest building bearish momentum behind the USD’s decline and price patterns point to USD losses extending to the 1.2730/35 zone after spot rejected the 1.3075 area again earlier this month.”

“We spot interim support at 1.2795/00 ahead of 1.2730 (61.8% retracement of the June rally in the USD).”

“Look to fade minor USD gains to the upper 1.28s.”

• House prices in the US rose by 1.6% on a monthly basis in April.
• US Dollar Index clings to daily gains near 104.30.

The monthly data published by the US Federal Housing Finance Agency showed on Tuesday that the Housing Price Index rose by 1.6% on a monthly basis in April. This print matched March's reading and came in slightly higher than the market expectation for an increase of 1.5%.

On a yearly basis, home prices in the US increased by 18.8%.

Additionally, the S&P/Case-Shiller Home Price Index edged higher to 21.2% annually in April from 21.1%.

Market reaction

There was no immediate market reaction to these figures and the US Dollar Index was last seen rising 0.37% on a daily basis at 104.33.

New York Fed President John Williams told CNBC on Tuesday that recession was not his base case, as reported by Reuters.

Additional takeaways

"Economy is strong, financial conditions have tightened."

"GDP expected to grow 1% 1.5% for the year."

"We have a path forward to bring inflation down."

"Some downside risks are from abroad."

"Watching effects of tightening financial conditions."

"Seeing slowing in interest-rate sensitive sectors."

"Unemployment rate will move up in next few years."

"Unemployment will rise to a little over 4% over the next couple of years."

"Longer-run neutral rate has not changed, still quite low."

"Nominal neutral rate is higher, that's one reason we need to raise rates quite a bit this year, next year."

"We need to get real rates above zero."

"We need to get to somewhat restrictive territory next year."

"The data may tell us something different."

"Reasonable to get to 3.5% - 4% fed funds rate."

"75 bps rate move was exactly right."

"Next meeting 50 bps or 75 bps will be the debate."

"Not seeing signs of the taper tantrum, markets are functioning well."

Market reaction

The greenback holds its ground after these comments with the US Dollar Index rising 0.35% on the day at 104.30.

• US' international trade deficit narrowed modestly in May.
• US Dollar Index holds in positive territory above 104.00.

The data published by the US Census Bureau revealed on Tuesday that the United States' international trade deficit narrowed by $2.4 billion to $104.3 billion in May from $106.7 billion in April.

"Exports of goods for May were $176.6 billion, $2.0 billion more than April exports," the publication further read. "Imports of goods for May were $280.9 billion, $0.4 billion less than April imports."

Market reaction

The US Dollar Index continues to edge higher after this report and was last seen rising 0.3% on a daily basis at 104.25.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest inflation figures in Malaysia.

Key Takeaways

“Headline inflation accelerated to 2.8% y/y in May (from 2.3% in Apr), surpassing our estimate (2.6%) and Bloomberg consensus (2.7%). Approximately 67% of 12 consumer price index (CPI) components recorded a larger annual gain in prices as compared to the preceding month, led by food & non-alcoholic beverages, transport, recreation services & culture, restaurants & hotels, as well as housing, utilities & other fuels segments. This suggests broader second-round effects on consumer prices from higher energy prices, raw material and labour shortages.”

“Going into 2H22, we expect CPI growth to trend higher as low-base effects kick in and the government has begun to gradually adjust prices of administered item amid elevated global commodity prices, currency weakness, and recovering domestic demand. Headline CPI growth may breach 5.0% at some point in 3Q22 should headwinds persist and the government further adjust subsidies for other price-administered items, posing upside risks to our 2022 full-year headline inflation outlook which is at 3.0% currently (BNM est: 2.2%-3.2%, 2021: 2.5%).”

“Given signs of broader second-round effects on consumer prices, ongoing domestic recovery, and latest developments in global financial markets, we think there is room for Bank Negara Malaysia (BNM) to follow-through with another 25bps rate hike at both the 6 Jul and 8 Sep monetary policy meetings. Hence, our updated OPR projection is 2.50% by end-2022.”

• Silver gained some positive traction on Tuesday, though lacked follow-through buying.
• The technical set-up favours bearish traders and supports prospects for further losses.
• Sustained strength beyond the $22.00 mark is needed to negate the negative outlook.

Silver attracted some dip-buying near the $21.10 area on Tuesday, albeit lacked bullish conviction and remained below a three-day high touched the previous day.

Given the recent repeated failures to find acceptance above the 200-period SMA on the 4-hour chart, the near-term bias remains tilted in favour of bearish traders. The negative outlook is reinforced by the fact that technical indicators on short-term charts are holding deep in the bearish territory and are still far from being in the oversold zone.

Some follow-through selling below the $21.00 round-figure mark will reaffirm the bearish bias and drag the XAG/USD back towards the monthly swing low, around the $20.60 area touched last week. The downward trajectory could further get extended towards the YTD low, around the $20.45 region en-route the next relevant support near the $20.00 psychological mark.

On the flip side, the overnight swing high, around the $21.55 region now seems to act as an immediate resistance ahead of the 200-period SMA on the 4-hour chart, currently near the $21.65 area. Sustained strength beyond could trigger a short-covering move, though the momentum runs the risk of fizzling out rather quickly and remain capped near the $22.00 mark.

The latter should act as a pivotal point, which if cleared decisively might negate the bearish outlook and pave the way for a further near-term appreciating move. The XAG/USD might then accelerate the move towards an intermediate resistance near the $22.30 area en-route the $22.50-$22.60 hurdle, above which bulls might aim to reclaim the $23.00 round-figure mark.

Silver 4-hour chart

Key levels to watch

The yen has been significantly under pressure. Nonetheless, if it becomes foreseeable that the Federal Reserve will lower its key rate again in 2023, Japan's currency has recovery potential, according to economists at Commerzbank.

When will the yen depreciation end?

“We expect the interest rate outlook for other G10 central banks to stay elevated in the near term, keeping the yen under depreciation pressure.”

“Quite quickly, however, the USD/JPY trend is likely to reverse again. As the probability of a US recession increases, the realization that the Fed will have to cut its key rate again in the foreseeable future should increasingly mature.

”We expect the USD/JPY exchange rate to stabilize even without MOF intervention and the yen to recover moderately once a US recession and falling US interest rates are going to be more widely expected.”

• EUR/JPY clinches new 2022 peak near 144.30 on Tuesday.
• Further up appears the 2015 top near 145.30.

EUR/JPY prints gains for the third session in a row and records new cycle highs near 144.30 on Tuesday.

The bullish bias in the cross remains well and sound and the continuation of the recovery now targets the round level at 145.00 prior to the 2015 high at 145.32 (January 2). Further up is the 2014 top at 149.78 (December 8).

In the meantime, while above the 3-month support line around 138.40, the short-term outlook for the cross should remain bullish. This area appears reinforced by the proximity of the 55-day SMA.

EUR/JPY daily chart

• GBP/USD witnessed some intraday selling on Tuesday and dropped to a three-day low.
• Brexit woes, less hawkish BoE expectations continued acting as a headwind for sterling.
• Rising US bond yields revived the USD demand and contributed to the intraday selling.

The GBP/USD pair retreated nearly 60 pips from the daily swing high touched during the early European session and dropped to a three-day low, around the 1.2235-1.2230 region in the last hour.

The latest Brexit-related development over the Northern Ireland Protocol has raised the risk of fresh tension between Britain and the European Union. In fact, the UK House of Commons on Monday voted 295 to 221 in favour of a controversial bill that would unilaterally overturn part of Britain's divorce deal from the EU agreed in 2020.

Apart from this, speculations that the Bank of England (BoE) will adopt a more gradual approach towards raising interest rates amid fears of a UK recession acted as a headwind for the British pound. This, along with the emergence of some US dollar buying dragged the GBP/USD pair away from over a one-week high touched the previous day.

The risk-on flow pushed the US Treasury bond yields higher, which, in turn, assisted the USD to reverse its modest intraday losses. That said, reduced bets for a more aggressive policy tightening by the Fed might hold back the USD bulls from placing aggressive bets and help limit deeper losses for the GBP/USD pair, at least for the time being.

The recent decline in commodity prices now seems to have eased concerns about the persistent rise in inflation. This, along with the worsening economic outlook, forced investors to reassess expectations for a faster policy tightening by the Fed. Hence, the market focus will remain glued to Fed Chair Jerome Powell's appearance on Wednesday.

The BoE Governor Andrew Bailey is also due to speak at the ECB forum in Sintra, Portugal on Wednesday, which would help investors determine the next leg of a directional move for the GBP/USD pair. In the meantime, traders on Tuesday will take cues from the US macro data - the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index.

Technical levels to watch

USD/IDR could likely face extra consolidation in the short-term horizon, noted Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“We highlighted last Monday (20 Jun, spot at 14,830) that USD/IDR ‘is likely to strengthen further but the major resistance at 14,950 is likely out of reach’. We added, ‘there is another resistance at 14,900’”.

“USD/IDR rose to a high of 14,872 on Wednesday before pulling back. Shorter-term upward pressure has eased and USD/IDR is likely to trade sideways for this week, expected to be within a range of 14,720/14,870.”

• Gold Price rebound lacks follow-through bias, as Treasury yields firm up.
• USD stays sluggish amid a better mood, ahead of NATO, ECB Forum.
• Oil price surge keeps the demand for XAUUSD underpinned.

Optimism prevails, pointing to a turnaround Tuesday for the financial markets, as the previous week’s upbeat global momentum returns and caps the broad US dollar recovery. Investors, however, remain wary ahead of the key NATO Summit and a policy panel of the heads of the Fed, BOE and ECB due later this week. The sluggish price action in the dollar is helping Gold Price recoup a part of Monday’s sharp decline. The upside in the yellow metal lacks traction, as the US Treasury yields resume their gradual recovery mode amid lingering recession fears and an aggressive Fed rate-hike track. Buyers also remain cautious, as a slew of key US economic data are due for release later this week, which may prompt markets to re-price the hawkish Fed expectations, in turn impacting gold valuations.

Also read: Gold Price Forecast: Can XAUUSD bulls defend the critical $1,820 support?

Gold Price: Key levels to watch

The Technical Confluence Detector shows that Gold Price is approaching the strong support around $1,820, where the previous day’s low and the Bollinger Band four-hour Lower merge.

Selling interest may pick up steam below the latter, exposing the convergence of the previous week’s low, Fibonacci 23.6% one-month and pivot point one-day S1 at $1,816.

The line in the sand for gold optimists is seen at the pivot point one-week S1 at $1,813.

On the flip side, bulls need to find a strong foothold above the $1,829 barrier, which is the confluence of the SMA5 one-day, Fibonacci 38.2% one-day and one-week.

The next stop for bulls is aligned at the SMA10 one-day at $1,832, above which the Fibonacci 61.8% one-day at $1,835 will come to sellers’ rescue.

Further up, the intersection of the Fibonacci 61.8% one-week and pivot point one-day R1 at $1,837 will offer stiff resistance.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• A combination of supporting factors assisted AUD/USD to regain positive traction.
• The risk-on mood benefitted the risk-sensitive aussie amid subdued USD demand.
• The recent fall in commodity prices could cap gains for the resources-linked aussie.

The AUD/USD pair attracted fresh buying on Tuesday and climbed to a four-day high, around the 0.6965 region during the first half of the European session.

Hopes that inflation might be nearing its peak boosted investors' confidence, which was evident from a generally positive tone around the equity markets. This, in turn, offered some support to the risk-sensitive amid subdued US dollar price action. The softening inflation expectations forced investors to scale back their expectations for a more aggressive policy tightening by the Fed. The repricing of the future Fed rate hikes kept the USD bulls on the defensive and provided a modest lift to the AUD/USD pair.

That said, a goodish pickup in the US Treasury bond yields helped limit any deeper losses for the buck, which, so far, has managed to hold above a one-week low touched the previous day. Apart from this, the recent decline in commodity prices might hold back traders from placing aggressive bullish bets around the resources-linked Australian dollar. This makes it prudent to wait for strong follow-through buying before confirming that the AUD/USD pair has bottomed out and positioning for any meaningful upside.

Market participants now look forward to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities ahead of Fed Chair Jerome Powell's appearance on Wednesday.

Technical levels to watch

• A combination of supporting factors pushed USD/JPY higher for the third successive day.
• The risk-on impulse undermined the safe-haven JPY and remained supportive of the move.
• Rising US bond yields further impressed bulls, though subdued USD demand might cap gains.

The USD/JPY pair attracted fresh buying in the vicinity of the 135.00 psychological mark on Tuesday and turned positive for the third successive day. The momentum pushed spot prices to a three-day high during the early part of the European session, with bulls now looking to reclaim the 136.00 round figure.

A generally positive tone around the equity markets undermined the Japanese yen and turned out to be a key factor that acted as a tailwind for the USD/JPY pair. The risk-on impulse pushed the US Treasury bond yields higher, which resulted in the widening of the gap between the US-Japanese bond yields. This, along with a big divergence in the monetary policy stance adopted by the Fed (hawkish) and the Bank of Japan (dovish), continued lending support to the major.

On the other hand, the US dollar languished near a one-week low touched on Monday amid reduced bets for aggressive Fed rate hike moves. The recent slump in commodity prices raised hopes that inflation might be nearing its peak and forced investors to reassess expectations that Fed would tighten its monetary policy at a faster pace. This continued weighing on the USD, which might hold back bulls from placing aggressive bets around the USD/JPY pair and cap gains, at least for now.

Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and supports prospects for the resumption of the recent strong upward trajectory witnessed since early March. Sustained strength back above the 136.00 mark will reaffirm the constructive outlook and allow the USD/JPY pair to aim back to test a 24-year high, around the 136.70 region touched last week. Market participants now look forward to the US macro data for a fresh trading impetus.

Tuesday's US economic docket features the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index later during the early North American session. This, along with the US bond yields, will influence the USD and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities ahead of Fed Chair Jerome Powell's appearance on Wednesday.

Technical levels to watch

The Group of Seven (G7) leaders reached a deal to explore a price cap on Russian oil, Reuters reports, having read the G7 communique.

“G7 leaders have agreed to study placing global price caps on imports of Russian energy to curb Moscow's ability to fund its invasion of Ukraine and to contribute up to $5 billion to address global food insecurity,” per Reuters.

developing story ....

USD/MYR remains side-lined and is seen trading within the 4.3900-4.4100 range for the time being, according to Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“We highlighted last Monday (20 Jun, spot at 4.4000) that ‘momentum is weakening and a break of 4.3870 could lead to a deeper pullback to 4.3800’. Our expectations did not materialize as USD/MYR traded sideways for the whole week and within a narrow range of 4.3950/4.4055.”

“Shorter-term momentum indicators are neutral and USD/MYR could continue to trade sideways this week, likely between 4.3900 and 4.4100.”

The White House said in a press release on Tuesday that at the NATO summit in Madrid, leaders will discuss the consequences of Russia’s invasion of Ukraine.

At the NATO summit, the “alliance will take historic decisions to strengthen the alliance's collective defense and security,” the White House said.

Related reads

• G7: Sanctions will not target food, agricultural products from Russia
• US Dollar Index: Bears appear in control below 104.00

European Central Bank (ECB) policymaker Pierre Wunsch said on Tuesday that the central bank’s new “anti-fragmentation tool should have no limits if market moves are unwarranted.”

Also read: Lagarde speech: There is optionality to raise by more in September

Additional quotes

Market reaction

Amidst a bevy of ECB policymakers speaking on inflation and policy lately, EUR/USD is digesting the comments, currently trading flat at 1.0585.

The Group of Seven (G7) leaders released a joint statement on Tuesday, calling on all partners to avoid unjustified restrictive trade measures that risk food insecurity.

Additional takeaways

Market reaction

Risk sentiment remains in a better spot so far during this Tuesday’s European session, not allowing the US dollar extend its previous recovery.

The US dollar index is trading muted at around 104.00.

During the course of yesterday, gold shed all of the gains it had initially accrued and dropped to $1,820. Meanwhile, silver trades at $21 as compared with around $25 at the beginning of the quarter. ETF outflows play their part in the poor performance of precious metals, according to strategists at Commerzbank.

Gold/silver ratio is at a very high level at around 86

“Another sizeable outflow from ETFs presumably put pressure on gold: holdings in the gold ETFs tracked by Bloomberg were reduced by a good 6 tons yesterday. The momentum of outflows has picked up pace again of late.” 

“The silver ETFs tracked by Bloomberg have seen considerable outflows in recent weeks and months. Their holdings have been slashed by 1,100 tons since the beginning of the month. Outflows since the start of the quarter have so far totalled more than 1,300 tons.”

“The weakness of silver is also evident in the gold/silver ratio, which is at a very high level at around 86. As an investment metal, silver is under pressure not only from gold – as an industrial metal, it has also been facing headwinds generated by the sharp falls in metals prices.”

Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/THB faces further consolidation in the near term.

Key Quotes

“We highlighted last Monday (20 Jun, spot at 35.25) that USD/THB ‘could rise above 35.40 but the next resistance at 35.70 is unlikely to come under threat’. Our view was not wrong as USD rose to a high of 35.58 on Friday.”

“Shorter-term upward momentum has waned somewhat and this coupled with overbought conditions suggests that USD/THB is unlikely to strengthen much further. For this week, USD/THB is more likely to trade between 35.27 and 35.60.”

FX option expiries for June 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0200 539m
• 1.0300 519m
• 1.0450 498m
• 1.0595 735m
• 1.0750 390m

- GBP/USD: GBP amounts        

• 1.2000 664m

- USD/JPY: USD amounts                     

• 135.00 350m

- USD/CHF: USD amounts        

• 0.9425 480m
• 0.9550 471m

- AUD/USD: AUD amounts  

• 0.7000 252m
• 0.7040 324m

• EUR/USD adds to Monday’s advance and flirts with 1.0600.
• Germany GfK Consumer Confidence dropped to -27.4 in July.
• ECB-speak, US Consumer Confidence next of note later on Tuesday.

Investors keep the optimism around the European currency well in place and encourage EUR/USD to approach once again to the 1.0600 neighbourhood on turnaround Tuesday.

EUR/USD focuses on ECB, data

EUR/USD prints gains for the third consecutive session on Tuesday and remains en route to challenge the 1.0600 mark and beyond in the very near term, always on the back of the intense offered stance in the US dollar.

Daily gains in the pair are so far bolstered by the equally positive performance of the German 10y bund yields, which extend the bounce to new 3-day highs near the 1.65% level.

The upbeat mood in the pair remains underpinned by the persistent bid bias in the broader risk complex amidst dollar weakness and higher US yields across the curve. In addition, hawkish comments from Board member Kazaks advocating for a 50 bps rate hike at the September meeting seem to have also lent legs to the pair so far.

Later in the session, ECB Lagarde and other rate-setters (Lane, Panetta) are also due to speak at the ECB Forum in Sintra. Earlier in the euro docket, Germany’s Consumer Confidence tracked by GfK worsened a tad to -27.4 for the month of July (from -26.2).

Across the pond, the Conference Board’s Consumer Confidence will be the salient event seconded by flash trade balance figures and house prices measured by the FHFA’s index.

What to look for around EUR

EUR/USD regained composure and pierced the 1.0600 mark amidst further improvement in the risk appetite trend so far this week. A close above this level, however, remains elusive for the time being.

In the meantime, the single currency continues to closely follow any developments surrounding the ECB and its plans to design a de-fragmentation tool in light of the upcoming start of the hiking cycle.

However, EUR/USD is still far away from exiting the woods and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, while higher German yields, persistent elevated inflation in the euro area and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: ECB Forum on Central Banking, Germany G7 Summit, ECB Lagarde, Germany GfK Consumer Confidence (Tuesday) - ECB Forum on Central Banking, EMU Final Consumer Confidence, EMU Economic Sentiment, Germany Flash Inflation Rate, ECB Lagarde (Wednesday) – Germany Retail Sales, Unemployment Change, Unemployment Rate. EMU Unemployment Rate, ECB Lagarde (Thursday) – EMU, Germany Final Manufacturing PMI, EMU Flash Inflation Rate (Friday).

Eminent issues on the back boiler: Fragmentation risks. Kickstart of the ECB hiking cycle in July? Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is gaining 0.07% at 1.0588 and a breakout of 1.0615 (weekly high June 27) would target 1.0773 (monthly high June 9) en route to 1.0786 (monthly high May 30). On the other hand, the next support emerges at 1.0358 (monthly low June 15) followed by 1.0348 (2022 low May 13) and finally 1.0300 (psychological level).

European Central Bank (ECB) President Christine Lagarde delivers the Introductory speech on Day 2 of the ECB Forum on Central Banking in Sintra, Portugal. Her speech is titled ‘Price stability and policy transmission in the euro area.’

Further comments

European Central Bank (ECB) President Christine Lagarde delivers the Introductory speech on Day 2 of the ECB Forum on Central Banking in Sintra, Portugal. Her speech is titled ‘Price stability and policy transmission in the euro area.’

Also read: Lagarde speech: We need to act in a determined and sustained manner

Additional quotes

Market reaction

EUR/USD was last seen trading at 1.0581, almost unchanged on the day.

European Central Bank (ECB) President Christine Lagarde delivers the Introductory speech on Day 2 of the ECB Forum on Central Banking in Sintra, Portugal. Her speech is titled ‘Price stability and policy transmission in the euro area.’

Key quotes

Market reaction

The shared currency fails to capitalize on Lagarde’s comments on the new anti-fragmentations took likely to be introduced by the ECB in the July meeting.

EUR/USD is off the session highs of 1.0606 to now trade at 1.0575, down 0.07% on the day.

The New Zealand dollar is facing depreciation pressure. Economists at CIBC Capital Markets expect the NZD/USD pair to slump under the 0.62 level.

Losing ground on a softer economic outlook

“We see pressures continuing to build in coming weeks, and anticipate a retest of recent NZD/USD lows below 0.62.” 

“A key area of resistance in NZD/USD is between 0.6530 (January low) and 0.6576 (June high). While spot is held below this band, risk is for another test of the downside.”

“Higher rates are a negative that will be exacerbated by weak activity in China – New Zealand’s largest trading partner, and by the outrun of higher rates and softer outlooks globally. In this environment, higher policy rates in New Zealand will not support the currency beyond present levels.”

AUD/USD is trading above the 0.69 level. Nonetheless, economists at CIBC Capital Markets expect the pair to test its May low of 0.6830.

Reserve Bank of Australia improbable to support the aussie

“Due to the impact on activity from RBA tightening, we do not view hikes already delivered or subsequent moves as priced by the market, as being supportive for the AUD.”

“On growth, downgrading of Australian forecasts will see the current positive differentials, and AUD support from those, eroded.”

“We favour AUD/USD trading back toward its May low of 0.6830, with risk of deeper losses on indications of softer economic activity.”

With the Fed's terminal rate surpassing the Bank of Canada's, economists at CIBC Capital Markets have weakened their forecast for the loonie into 2023. They expect the USD/CAD pair to reach 1.33 in early 2023.

CAD profile softer as Fed races to higher terminal rate

“A likely 75 bps hike by the Bank of Canada in July, and the potential for another move of that magnitude in September if we don't see enough of an inflation deceleration by then, should be aggressive enough to allow USD/CAD to remain around current levels over the next three months.”

“Markets appear to be overpricing both BoC and Fed tightening this year, but comparatively more for the BoC, and that recalibration will lead the CAD to end the year weaker, with USD/CAD expected to reach 1.31 by then.”

“In 2023, the loonie could weaken further on a global slowdown in growth as interest rate hikes take a toll on activity, which will weigh on commodity prices and dent nominal exports for Canadian natural resource producers. Look for USD/CAD to reach 1.33 in early 2023, before recouping some of that ground further into the year as the USD loses favour globally.”

The S&P 500 rallied 6.5% last week, including a 3.1% gain on Friday. Economists at UBS expect the index to trade around 3,900 in a soft landing scenario by year-end.

S&P 500 to trade around 3,300 if earnings forecasts were revised down to around -15%

“In a soft-landing scenario, in which earnings growth expectations for 2023 are close to flat year-on-year, we would expect the S&P 500 to end the year close to current levels at 3,900.”

“If worsening economic data leads earnings forecasts to be revised down to around -15%, in line with average declines during recessions, we would expect the S&P 500 to trade around 3,300.”

GBP/USD is moving below 1.23. The Bank of England (BoE) prioritizing growth over containing inflation suggests GBP downside, compounded by political risks, including a potential trade spat with the EU, economists at CIBC Capital Markets report.

BoE still hiking but risks undershooting expectations

“Sliding consumer sentiment and spending, as real earnings head lower, will help squeeze demand-side inflationary pressures out of the system. Building macro headwinds suggest that the BoE will not be as aggressive as the market discounts. We expect a protracted policy pause post once rates reach 1.75% in September.”

“As the growth versus inflation trade-off remains challenging, expect the bank to prioritize growth. This favours GBP downside, especially as ongoing political risks, including a potential trade spat with the EU, remains real.”

The Bank of Japan (BoJ) maintained policy stability once again. Economists at CIBC Capital Markets expect the USD/JPY to stay on a strong footing.

BoJ Maintains yield curve control

“The bank continues to underline that it expects short and long-term policy rates to remain at ‘present or lower levels.’ That commitment is notable when combined with BoJ Governor Kuroda maintaining that he anticipates no obvious change in the strategy of limiting 10-year JGB yields, under the YCC regime, to 0.25%.”

“Although the monetary authorities are paying attention to the JPY, they are not necessarily signaling a lack of tolerance for JPY weakness, rather they are looking to avoid disorderly moves.”

“As the BoJ signaled that 10-year JGB yields will continue to be capped, UST-JGB spreads point towards USD/JPY remaining elevated.”

Inflation concerns and a lack of future scheduled meetings point to a 50 bps hike from the Riksbank. However, any benefits for SEK may only show up at a later stage due to the current unstable risk environment, in the view of economists at ING.

Krona should struggle to stage a sustained rebound in the near term

“A weaker krona, above-expectation inflation readings, and a lack of scheduled meetings later this year, mean a 50 bps rate hike from the Riksbank this Thursday looks highly likely.”

“The environment for global equities is likely to remain challenging due to the combination of global slowdown fears and tighter monetary conditions, and the relatively illiquid (to other G10 FX) and high-beta krona should in our view struggle to stage a sustained rebound in the near term.”

“We'll need to wait for a considerable stabilisation in global risk sentiment (that may only happen in 4Q) to see EUR/SEK re-connect with its rates differential, which unmistakenly argues for a weakening of the exchange rate.”

“We still don't exclude a return to 10.10-10.20 by the end of this year, with the Riksbank's policy being a major driver of SEK restrengthening.”  

European Central Bank (ECB) policymaker Martins Kazaks told Bloomberg TV on Tuesday that he expected a 25 bps rate hike in July while a 50 bps increase is the base case scenario in September.

Additional quotes

US monetary policy tightening still has a way to go and slower US growth will likely affect the rest of the world. Economists at HSBC expect the US dollar to enjoy further gains.

The peak has yet to come

“As US policy tightening slowly takes hold, it might represent a further downside risk to global growth dynamics. In our view, the greater the downside risks to global growth, the greater the upside risks to the broad USD. The opposite should also hold true.”

“Our USD framework has rested on two forces coming together causing it to strengthen, namely a hawkish Fed and slower global growth. These have underpinned and will continue to support our strong USD view for the months ahead.”

The pound continues to be rather unreactive to Brexit-related news. Bank of England’s Governor Andrew Bailey will speak on Wednesday and a hawkish message could drag the EUR/GBP pair under 0.86, economists at ING report.

Still no impact from Brexit headlines

“The UK Government proposed bill to unilaterally scrap part of the Norther Ireland protocol yesterday, which will now need to be voted by the House. There are surely many indications that the pound is largely pricing in this scenario, and markets remain mostly focused on other drivers of UK economic underperformance as well as assuming Brexit is not a major input in the BoE’s policy decision-making process at the moment.”

“Tomorrow’s speech by BoE’s Governor Andrew Bailey in Sintra will be the main event of the week. A broadly hawkish message could further help the pound stabilise and possibly drag EUR/GBP back below 0.86.”

The European Central Bank's Sintra forum today sees the introductory speech and press conference by Christine Lagarde. With markets pricing in 150 bps of ECB tightening by year-end, the EUR/USD pair is unlikely to break higher, economists at ING report.

A high bar for hawkish surprises in Sintra

“Lagarde is expected to provide some colour on how seriously the ECB is considering a 50 bps rate hike in September in light of recent activity survey pointing at a rapidly deteriorating picture for the eurozone. Also, more details of the anti-fragmentation tools discussed earlier this month will likely be addressed.”

“A look at rate expectations embedded in the swaps market – 150 bps of tightening fully in the price by year-end – suggests that the bar for a hawkish surprise is likely set quite high, and we doubt that Sintra will be the catalyst for a significant break higher in EUR/USD.”

“A softer dollar environment could help a move and stabilisation in the 1.0600-1.0650 range this week, even if we see a return to 1.0500 in the remainder of 3Q as more likely.”

USD strength extended as Federal Reserve races ahead with tightening, but that will fade into 2023 as other major central banks press on with normalizing policy, economists at CIBC Capital Markets report.

Near term risks tilted towards the USD building further on its gains

“While Chair Powell was less committal on the possibility of another 75 bps hike in July, we still see the risks tilted in that direction.”

“We ultimately see slowing growth and a turn in inflation as convincing the Fed to back away from what its most hawkish members are now advocating, paving the way towards a softer greenback in 2023. But that's not going to be apparent in the next few months, leaving the near term risks still tilted towards the USD retaining or even building further on its recent gains.”

USD/CNH is expected to keep the trade between 6.6600 and 6.7400 in the next few weeks, commented FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘the bias for USD is on the downside towards 6.6700’. Our view did not materialize as USD traded sideways between 6.773 and 6.6940. Momentum indicators are mostly neutral and USD could continue to trade sideways. Expected range for today, 6.6780/6.7050.”

Next 1-3 weeks: “We have expected USD to trade sideways between 6.6600 and 6.7400 since last Monday (20 Jun, spot at 6.7080). While shorter-term downward momentum has improved somewhat, there is no change in our view for now.”

• DXY remains under pressure and breaches 104.00.
• US yields trade within a mixed fashion on Tuesday.
• Trade Balance, House Price Index, Consumer Confidence next on tap.

The greenback, in terms of the US Dollar Index (DXY), extends the downside and probes the sub-104.00 region once again on turnaround Tuesday.

US Dollar Index near multi-day lows

The index sheds ground for the third consecutive session on Tuesday and returns to the area below the 104.00 mark on the back of the continuation of the risk-on sentiment and amidst the mixed performance in the US cash markets.

In the meantime, dollar dynamics continue to look to the Fed’s planned normalization of its monetary conditions, always with the unconditional pledge to bring down inflation to the Fed’s target. On this, and according to CME Group’s FedWatch Tool, the probability of a 75 bps rate hike at the July 27 gathering is now around 92% from 0% just a month ago.

In the US data space, advanced Goods Trade Balance figures are due seconded by the FHFA’s House Price Index and the Consumer Confidence gauged by the Conference Boar.

What to look for around USD

The index succumbs to further selling pressure amidst further improvement in the appetite for the risk complex in the first half of the week so far.

The dollar, in the meantime, remains well supported by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence, higher US yields and a potential “hard landing” of the US economy, all factors suggesting a stronger dollar in the next months.

Key events in the US this week: Advanced Goods Trade Balance, House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, Final Q1 GDP Growth Rate (Wednesday) – PCE, Core PCE, Personal Income, Personal Spending, Initial Claims (Thursday) – ISM Manufacturing, Final Manufacturing PMI (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is losing 0.10% at 103.83 and faces the next contention at 103.41 (weekly low June 16) seconded by 102.91 (55-day SMA) and finally 101.29 (monthly low May 30). On the other hand, a break above 104.94 (weekly high June 22) would expose 105.78 (2022 high June 15) and then 107.31 (monthly high December 2002).

The June European Central Bank (ECB) underlined a move away from unconventional policy. But ECB policy gradualism suggests that euro bulls will have to wait until 2023 for an appreciation, economists at CIBC Capital Markets report.

ECB tightening is imminent

“The bank has clearly committed to policy gradualism, as they look to hike the deposit rate for the first time since 2014, by 25 bps.”

“Absent a material correction in inflation and inflation expectations, we should expect 50 bps in September. Such a move will result in a positive deposit rate for the first time in eight years. This would favour long-term FX diversification appetite and residual EUR support. However, as the ECB looks to tighten policy, fragmentation risk, namely yields in peripheral markets blowing out, risking debt sustainability, remain a concern.” 

“Avoidance of another round of debt concerns, allied to avoidance of fragmentation risks, will help limit near-term EUR downside against a USD which currently remains risk and rate supported.”

“Over the medium run, expect diversification interest to sustain support EUR valuations.”

• USD/CAD continued losing ground for the third straight day and dropped to over a two-week low.
• Bullish crude oil prices underpinned the loonie and exerted pressure amid subdued USD demand.
• Reduced bets for aggressive Fed rate hikes, a positive risk tone weighed on the safe-haven buck.

The USD/CAD pair witnessed follow-through selling for the third successive day on Tuesday and broke through the 1.2865-1.2860 horizontal support during the early European session. The downward trajectory dragged spot prices to over a two-week low, around the 1.2830 region and was sponsored by a combination of factors.

Concerns about tight global supplies amid expectations for fresh sanctions against Russian oil and gas exports that might come out of the G7 meeting pushed crude oil prices to a one-week high. This, along with rising bets for a 75 bps rate hike move by the Bank of Canada in July, continued underpinning the commodity-linked loonie. Apart from this, subdued US dollar demand exerted some downward pressure on the USD/CAD pair.

The recent decline in commodity prices raised hopes that inflation might be nearing its peak and forced investors to scale back expectations for more aggressive policy tightening by the Fed. Apart from this, a goodish recovery in the global risk sentiment boosted investors' confidence, which was evident from a generally positive tone around the equity markets. This was seen as another factor that dented demand for the safe-haven buck.

The risk-on flow offered some support to the US Treasury bond yields, which, along with recession fears could help limit deeper losses for the greenback and help limit losses for the USD/CAD pair. Investors remain concerned that rapidly rising interest rates and tighter financial conditions would pose challenges to global economic growth. This might keep a lid on any optimistic move in the markets and lend support to the USD.

That said, sustained weakness below the 1.2865-1.2860 congestion zone favours bearish traders and supports prospects for a further near-term depreciating move for the USD/CAD pair. Traders now look forward to the US economic docket - featuring the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index. Apart from this, the US bond yields and the broader risk sentiment will drive the USD demand.

Market participants will further take cues from oil price dynamics to grab short-term trading opportunities around the USD/CAD pair. That said, traders might refrain from placing aggressive directional bets ahead of the OPEC+ meeting and Fed Chair Jerome Powell's remarks in a panel discussion during the latter part of the week.

Technical levels to watch

• USD/CNH plummets almost 200 pips on upbeat headlines from China.
• China reduces quarantine time for international travelers, vows timely policy measures to cope with economic risks.
• Sellers remain cautious as G7 updates challenge risk-on mood.
• US CB Consumer Confidence, Fedspeak eyed for fresh impulse.

USD/CNH takes offers to renew intraday low around 6.6685 as sellers cheer upbeat headlines from China during early Tuesday morning in Europe.

“China will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home, health authorities said on Tuesday,” per Reuters.

Earlier in the day, Ou Hong, Deputy Secretary-General at the National Development and Reform Commission (NDRC) told a news conference, per Reuters, “The government will implement its existing support measures while improving its policy toolbox.”

The news also mentioned, “China will roll out tools in its policy reserve in a timely way to cope with more economic challenges, as COVID-19 outbreaks and risks from the Ukraine crisis pose a threat to employment and price stability.”

On a different page, the Group of Seven (G7) officials signaled potential price caps for Russian oil and gas, which in turn challenges the latest risk-on mood. The news, however, is already known and failed to renew the US dollar strength.

That said, the greenback gauge drops for the third consecutive day, down 0.11% around 103.84 at the latest, as market players await US CB Consumer Confidence for June, prior 106.4.

It’s worth noting that the mixed US data published on Monday challenge the Fed’s hawkish path and exert downside pressure on the greenback. On Monday, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

Moving on, US sentiment data and Fedspeak may entertain traders ahead of Wednesday’s ECB Forum as the key central bankers are scheduled to debate the monetary policies.

Technical analysis

USD/CNH bears attack a two-week-old support line near 6.6720, a daily closing below the same will direct the quote towards the monthly low near 6.6170.

USD/CAD has pulled higher to fetch a recent 1.3079 high, before cooling off. A 1.3077-1.3079 double top contains USD for now, Benjamin Wong, Strategists at DBS Bank reports.

Support is pegged into the 1.2767-1.2732 zone

“We have a 1.3077-1.3079 double top that has seen a swift response of USD backtracking. There is as well the repeat of a bearish head-and-shoulders pattern – albeit of a much smaller dose, and this should limit a USD decline on its own.”

“A move under the 50-day moving average at 1.2812 needed to grease the lower towards the 1.2767-1.2732 support patch.”

The relentless underperformance of the Hungarian forint in recent days will put additional pressure on Hungary’s National Bank (MNB) when it holds its monetary policy meeting today. Economists at Commerzbank expect the HUF to weaken if MNB hikes by only 50 basis points (bps).

Pressure on MNB

“HUF weakness has triggered some revision of expectations amongst market observers recently. A sizeable minority has switched to expecting a 100 bps hike instead. This means that, if MNB were to simply ignore such expectations and hike by 50 bps, there could be immediate further pressure on HUF.”

“It will be interesting to watch today whether or not MNB sees more urgency in the situation, in view of no natural peaking in inflation yet. The HUF’s near-term trajectory will depend very much on the answer.”

USD/CNY continues to hold around the 6.70 level. Economists at Commerzbank expect the pair to stabilize at this zone.

People’s Bank of China pledges continued policy support

“PBoC will ensure sufficient loans to key industries. Overall, the subtle message is one of a continued targeted and measured approach, and ongoing policy support via loans rather than interest rate cuts.”

“On the currency front, the message was once again one of ‘a flexible and market-determined exchange rate’. We see stability as the key objective near term.”

• USD/TRY struggles for clear directions after bouncing off three-week low.
• Turkish President Erdogan signals to review minimum wage to battle inflation.
• US dollar weakenss, risk-on mood could entertain traders ahead of key data/events.

USD/TRY seesaws around 16.50 as traders seek more clues to extend the latest recovery of the Turkish lira (TRY). In doing so, the pair remains sidelined during early Tuesday morning in Europe, after falling the most during 2022 in the last two days.

The TRY pair refreshed its three-week low the previous day in an initial reaction to the Reuters news suggesting more restrictions over lira lending. “The Turkish lira rallied as much as 6% against the dollar on Monday after Turkiye moved to restrict lira lending to many companies with more than $1 million in foreign currency cash in the latest step to reverse a slide in the currency,” said Reuters.

Also contributing to the pair’s weakness were comments from Turkish President Recep Tayyip Erdoğan suggesting more wage hikes to battle inflation. “President Tayyip Erdogan said he has asked the Labour Ministry to review the minimum wage in Turkey due to persistently high inflation, after hiking it by 50% at the end of last year,” said the news shared via Reuters.

On the other hand, the US Dollar Index (DXY) remains pressured for the third consecutive day, at 103.83, down 0.12% intraday by the press time.

It should be noted that the market sentiment improves as China cuts quarantine time for international travelers while also vowing to cope with economic risks.

While portraying the mood, the US Treasury yields and stock futures pare the early-day losses to print mild gains.

Moving on, updates from Turkey, mainly from the North Atlantic Treaty Organization (NATO) nations’ meeting, will be important for the USD/TRY pair as Turkiye pushes allies to stop Sweden and Finland from joining NATO. Further, US CB Consumer Confidence for June, prior 106.4, will precede Wednesday’s ECB Forum as an important catalyst to determine short-term market moves.

Technical analysis

USD/TRY stays on the way to 50-DMA, around 16.00 by the press time, until keeping the downside break of an ascending trend line from May, previous support near 16.95.

In a benign environment, the EUR was able to further appreciate against USD. However, the risk in EUR/USD remains at the lower end, in the view of economists at Commerzbank.

EUR/USD recovery remains fragile

“It might begin to get more difficult for EUR to appreciate as concerns that the global economy might weaken are likely to put pressure on market sentiment.”

“The risk of an energy crisis in connection with the war in Ukraine remains in place so that it is questionable whether investors will be willing to bank on further EUR gains.”

“It is questionable whether the speech by ECB President Christine Lagarde at the ECB forum in Sintra is going to provide any new momentum for EUR today.”

Here is what you need to know on Tuesday, June 28:

The US Dollar Index is consolidating the overnight rebound around 104.00 in early European trading this Tuesday, as Asian stocks struggled for traction amid a mixed market mood. The US stock futures also reflected the same cautious trait, fluctuating between gains and losses so far. The narrative that the Fed rate hike bets have cooled off amid growing worries of a sharp economic slowdown remained in play. Stronger than expected US Durable Goods and Pending Home Sales data, however, hinted at a healthy American economy, which could withstand big rate increases by the Fed.

Meanwhile, markets weighed on China’s commitment to continue with monetary policy support, as Beijing and Shanghai reported zero new covid cases after four months. The latest tech sell-off, led by the negative news for Tencent Holdings, kept investors on the edge. Amid a damp mood, the safe-haven demand for the US bonds is back, which is prompting a pullback in the US Treasury yields. The benchmark 10-year US yields are down 0.50% on the day at 3.18%, having hit a day high of 3.22% on Monday.

Traders also remain cautious ahead of a slew of speeches from the ECB policymakers and US Consumer Confidence data due for release later on Tuesday. The main event risk of this week, however, remains Wednesday’s policy panel between the Fed, BOE and ECB Chiefs at the annual ECB Forum in Sintra, Portugal.

EUR/USD is stuck in a tight range below 1.0600, unable to find any impetus from the latest Reuters report, citing that the ECB may unveil a new bond-buying scheme to cap yields/spreads at its July policy meeting. ECB President Christine Lagarde is due to speak at the ECB Forum on Central Banking at 0800 GMT.

GBP/USD is moving back and forth in a 25-pips range below 1.2300, as GBP traders remain wary amid looming Brexit risks. UK Foreign Minister Liz Truss said on Monday that they don't rule out using Article 16 further down the line. Meanwhile, “as expected the Northern Ireland protocol bill passed its first hurdle, with MPs voting 295 to 221 in favor despite heavy criticism from some Conservative backbenchers, including former Prime Minister Theresa May, who said the move is illegal and unnecessary,” The Guardian reported.

USD/JPY keeps its volatile trading intact while within a defined range above 135.00, tracking the sentiment around yields and the dollar.

Gold is staging a decent comeback above $1,825 ahead of the anticipated G7’s decision to ban imports of Russian gold to tighten the sanctions squeeze on Moscow. 

Bitcoin is defending the $20,000 threshold, madly bid on the day. Ethereum is up 0.50% on a daily basis, battling $1,200.

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, USD/JPY seems to have now moved to a consolidative phase within the 134.00-136.50 range in the next weeks.

Key Quotes

24-hour view: “Our view for a weaker USD yesterday was incorrect as it rebounded to a high of 135.54. The rebound has scope to extend but any advance is unlikely to break the strong resistance at 136.00. On the downside, a breach of 134.90 (minor support is at 135.20) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “Our latest narrative was from last Friday (24 Jun, spot at 134.85) where the recent pullback in USD has scope to extend to 133.50. USD has not been able to make much headway on the downside and downward pressure has more or less dissipated. In other words, USD is not expected to move to 133.50. Overall, USD is likely to trade within a range of 134.00/136.50 for now.”

Open interest in natural gas futures markets extended the downtrend by around 13.5K contracts at the beginning of the week, noted advanced prints from CME Group. On the other hand, volume remained erratic and increased by around 43.5K contracts.

Natural Gas looks supported around $6.00

Monday’s decent gains in prices of natural gas was accompanied by the persistent decline in open interest, which keeps curtailing prospects of a sustainable rebound at least in the very near term. In the meantime, the commodity seems to have met a tough support around the $6.00 mark per MMBtu.

• Gold regained positive traction on Tuesday and recovered a part of the overnight losses.
• Reduced bets for more aggressive Fed rate hikes, recession fears extended some support.
• Modest USD uptick acted as a headwind and kept a lid on any further gains for the metal.

Gold attracted some dip-buying on Tuesday and reversed a part of the overnight sharp retracement slide from the very important 200-day SMA. The XAUUSD held on to its modest gains through the early European session and was last seen trading just above the $1,825 level, up less than 0.15% for the day.

The recent sharp decline in commodity prices seems to have eased concerns about the persistent rise in inflationary pressures. This, in turn, forced investors to reassess the prospects for more aggressive rate hikes by the Fed, which was reinforced by the recent fall in the US Treasury bond yields. Apart from this, growing recession fears assisted the non-yielding gold to regain some positive traction.

Despite softening inflation expectations, investors remain worried that rapidly rising interest rates and tighter financial conditions would pose challenges to global economic growth. This was evident from the prevalent cautious mood around the equity markets, which offered additional support to the safe-haven gold amid expectations that some G7 countries plan to ban bullion imports from Russia.

As a way to tighten sanctions on Russia over its invasion of Ukraine, the US, UK, Japan, and Canada could announce a ban on new gold imports from Russia during the G7 summit this week. This was seen as another factor that contributed to the bid tone surrounding gold prices. The upside, however, remains capped amid a modest US dollar uptick, which tends to undermine the dollar-denominated commodity.

Even from a technical perspective, the recent repeated failures near a technically significant moving average favours bearish traders. It, however, would be prudent to wait for strong follow-through selling before positioning for any further near-term depreciating move. Traders now look forward to the US economic docket - featuring the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index, for some impetus later during the early North American session.

Technical levels to watch

• The Symmetrical Triangle formation is advocating a squeeze in volatility going further.
• Aussie bulls have faced barricades around the 200-EMA at 0.6950.
• The RSI (14) is oscillating in a 40.00-60.00 range which signals a consolidation ahead.

The AUD/USD pair is displaying an inventory distribution structure in a narrow range of 0.6918-0.6936 in the Asian session. The major has auctioned sideways in the entire Asian session and is expected to continue its sideways streak further till the occurrence of any potential trigger that will bring a decisive move in the asset.

On an hourly scale, the asset is forming a Symmetrical Triangle that signals for a volatility contraction followed by a breakout in the same. The upward sloping trendline is placed from Thursday’s low at 0.6868 while the downward sloping trendline is plotted from June 21 high at 0.6994.

The 200-period Exponential Moving Average (EMA) at 0.6950 has acted as a major hurdle for the aussie bulls.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which indicates a rangebound move ahead.

A decisive move below Thursday’s low at 0.6868 will activate the downside break of the above-mentioned chart pattern, which will drag the asset towards May 12 low and the round-level support at 0.6829 and 0.6800 respectively.

Alternatively, the aussie bulls could dictate the asset price if the major overstep Wednesday’s high at 0.6962. This will drive the asset towards the psychological resistance at 0.7000, followed by June 13 high at 0.7035.

AUD/USD hourly chart

• Platinum prices fail to extend corrective pullback from six-month low.
• Previous support line from December 2021, three-week-old resistance line limit recovery moves.
• November 2020 lows could lure bears below $898.00, RSI may test further downside.

Platinum Price (XPT/USD) retreats to $910.00, after bouncing off the yearly low the previous day. In doing so, the precious metal portrays failure to cross the support-turned-resistance line from late 2021.

Adding strength to the bearish bias is the downbeat RSI (14) line, not oversold, as well as a downward sloping trend line from June 06.

That said, the metal prices are likely to drop towards the latest trough surrounding $898.00. However, the RSI may challenge any further downside of the XPT/USD prices.

Should the quote remains bearish past $898.00, the odds of witnessing a south-run towards the latest 2020 lows surrounding $840.00 can’t be ruled out.

On the contrary, the previous support line and a three-week-long descending trend line, respectively around $914.00 and $922.00, guard the short-term recovery of the platinum prices.

In a case where the XPT/USD manage to cross the $922.00 hurdle, the 200-SMA level near $992 may probe the bulls before directing them to the monthly high surrounding $1,036.

To sum up, the platinum price stays depressed but further downside needs validation from the yearly low of $898.00.

Platinum: Daily chart

Trend: Limited downside expected

Gold shaved off the early gains and fell nearly $20 from the highest point of the day to settle Monday in the red at $1,823. Can XAUUSD bulls defend the critical $1,820 support? FXStreet’s Dhwani Mehta reports.

The path of least resistance remains to the downside in the near term

“Gold bulls are testing the bearish commitments at the critical rising trendline support at $1,820. If the latter is cracked on a daily closing basis, then it would confirm a downside break from a two-week-old pennant formation. A fresh downtrend will kick in, with sellers targeting the $1,800 mark. Ahead of that Friday’s low of $1,1817 and the June 15 low of $1,808 could help limit the decline.”

“Bulls need a sustained move above the $1,840 supply zone, which is the intersection of the short-tern critical 21-Daily Moving Average (DMA) and the falling trendline (triangle) resistance. The next hurdle for buyers is seen at the mildly bullish 200 DMA at $1,845.”

• NZD/USD struggled to gain any meaningful traction and oscillated in a familiar trading range.
• The cautious mood acted as a headwind for the risk-sensitive kiwi amid a modest USD uptick.
• Reduced bets for more aggressive Fed rate hikes might cap the USD and lend some support.

The NZD/USD pair extended its sideways price moves for the second straight day on Tuesday and remained confined in a range around the 0.6300 mark heading into the European session.

Despite hopes that inflation might be nearing its peak, investors remain concerned that rapidly rising interest rates and tighter financial conditions would pose challenges to global economic growth. This was evident from the prevalent cautious mood around the equity markets, which, in turn, acted as a headwind for the risk-sensitive kiwi.

The downside, however, remains cushioned, at least for the time being, amid subdued US dollar demand. The recent decline in commodity prices has eased concerns about the persistent rise in inflationary pressures. Apart from this, recession fears forced investors to trim their bets for more aggressive Fed rate hikes and undermined the USD.

The mixed fundamental backdrop, so far, has failed to assist the NZD/USD pair to gain any meaningful traction. Even from a technical perspective, spot prices have been oscillating in a familiar trading range over the past two weeks or so, which further makes it prudent to wait for a sustained move in either direction before placing fresh bets.

Market participants now look forward to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD and provide some impetus to the NZD/USD pair.

The focus, however, will remain glued to Fed Chair Jerome Powell's appearance on Thursday. Investors will look for fresh clues about the US central bank's policy tightening path. This will play a key role in driving the near-term USD demand and help determine the next leg of a directional move for the NZD/USD pair.

Technical levels to watch

• EUR/GBP remains pressured around intraday low, snaps two-day uptrend.
• UK’s NIP Bill crosses the first hurdle to become a law despite EU’s warnings.
• ECB Forum appears the key event of the week, risk catalysts, Lagarde’s speech are important too.

EUR/GBP holds lower ground near the intraday low around 0.8620 heading into Tuesday’s European session. In doing so, the cross-currency pair ignores downbeat sentiment, as well as the risk-negative headlines concerning Brexit, as the US dollar rebound weighs on the regional currency.

British policymakers in the House of Commons voted in favor of the Northern Ireland Protocol (NIP) Bill late Monday. Even if the NIP has multiple hurdles to cross before becoming legislation, the European Union’s (EU) trade warnings make the latest passage a grim event for the GBP/USD traders. “Despite some fierce criticism, lawmakers voted 295 to 221 in favor of the Northern Ireland Protocol Bill, which would unilaterally overturn part of Britain's divorce deal from the EU agreed in 2020. The bill now proceeds to line-by-line scrutiny,” said Reuters.

The Brexit move appears a political play to defend UK Prime Minister (PM) Boris Johnson’s position after criticism of the patygate scandal, as well as the Conservatives’ defeat in the recently held two parliamentary by-elections.

On the other hand, the US Dollar Index (DXY) rebounds from a one-week low to 104.00 amid the market’s sour sentiment, as well as amid firmer US Treasury yields.

That said, the US 10-year Treasury yields dropped 1.9 basis points (bps) to 3.17% by the press time. The benchmark US bond coupons rose during the last two consecutive days.

Moving on, speeches from the Bank of England’s (BOE) Deputy Governor for Financial Stability Sir Jon Cunliffe and the European Central Bank (ECB) Governor Christine Lagarde will be important to watch for clear intraday directions, not to forget updates concerning the UK politics and Brexit. However, Wednesday’s ECB Forum is the key as major central bankers from the BOE and the Fed are scheduled to debate the monetary policies.

Technical analysis

Successful trading above an upward sloping support line from mid-April, near 0.8580 by the press time, keeps EUR/GBP buyers hopeful.

• USD/CHF is oscillating in a 0.9551-0.9567 range, following the footprints of the DXY.
• Investors are shifting their focus toward Fed Powell’s speech and the US GDP.
• A decline is expected in the ZEW survey- Expectations to -70.7 vs. -52.6 releaser earlier.

The USD/CHF pair is trading in a minor range of 0.9551-0.9567 since the early Asian session as the unavailability of any potential trigger has shifted the FX domain in a consolidation phase. Earlier, the asset remained in the grip of bears after failing to sustain above the round-level resistance of 0.9600. It looks like the asset is following the footprints of the US dollar index (DXY).

The DXY is struggling to cross the critical hurdle of 104.00 as investors are on the sidelines ahead of the speech from Federal Reserve (Fed) Jerome Powell. The speech from Fed Powell may dictate the likely monetary policy action for the July meeting.

Investors should brace for the continuation of the jumbo rate hike from the Fed as the prior rate hike announcements have failed to make any significant impact on the inflation rate. The US economy is operating at an inflation rate of 8.6%, which is more than four times of the desired inflation rate.

Apart from that, the US Gross Domestic Product (GDP) numbers will also remain in focus. A preliminary estimate for the US GDP is -1.5% on an annual basis for the first quarter, similar to its previous release. No wonder, the US agency may reveal an upside surprise considering the upbeat US Durable Goods Orders, which were more than expectations.

On the Swiss franc front, investors are focusing on the ZEW Survey- Expectations, which is due on Wednesday. As per the market consensus, the economic data could decline to -70.7 vs. -52.6 recorded earlier. A higher-than-expected figure will strengthen the Swiss franc bulls against the greenback.

NZD/USD is predicted to navigate the 0.6240-0.6360 range in the next weeks, suggested FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday ‘the price actions still appear to be part of a consolidation’ and we expected NZD to ‘trade between 0.6270 and 0.6330’. Our view for consolidation was not wrong even though NZD traded within a narrower range than expected (0.6283/0.6326). NZD could continue to consolidate for now, likely between 0.6270 and 0.6325.”

Next 1-3 weeks: “Our update from yesterday (27 Jun, spot at 0.6310) still stands. As highlighted, it appears that NZD is still in a consolidation phase and it is likely to trade between 0.6240 and 0.6360 for now.”

The European Central Bank (ECB) is said to bring back 'sterilization' in the fight against fragmentation, as a new scheme at its July policy meeting, Reuters reports, citing two sources familiar with the matter.

Key takeaways

The ECB will likely drain cash from the banking system to offset any bond purchases made to cap borrowing costs for indebted euro zone states.

The ECB could hold auctions so banks can park cash at the central bank for a more favorable interest rate, which may up to the refinancing operation rate. 

Market reaction

EUR/USD is unfazed by the above report, currently trading at 1.0574, down 0.09% so far.

• GBP/USD stays defensive after reversing from 21-day EMA.
• Impending bull cross on MACD, hesitance in breaking the support line tease buyers.
• Bears need validation from 1.2160 before targeting the yearly low.

GBP/USD struggles for clear directions as it seesaws around two-week-long support surrounding 1.2260 heading into Tuesday’s London open.

The cable pair portrayed a Doji candlestick the previous day while reversing from the 21-day EMA, which in turn suggested a reversal of the last week’s rebound.

However, a looming bullish signal on the MACD joins a fortnight-old support line to challenge the pair bears.

Even if the quote drops below 1.2260 immediate support, multiple levels surrounding 1.2180-60 marked since June 16 could challenge the pair’s further weakness.

In a case where the GBP/USD bears manage to conquer the 1.2160 support, they can rush towards the yearly bottom near 1.1930-35, also the lowest levels since March 2020.

Meanwhile, recovery remains elusive until the Cable pair remains below the 21-day EMA level surrounding 1.2330.

Should the quote rises past 1.2330, the 61.8% Fibonacci retracement of the May-June fall and a downward sloping trend line from late May, respectively around 1.2390 and 1.2470, will gain the market’s attention.

Overall, GBP/USD remains on the bear’s radar but short-term corrections can’t be ruled out.

GBP/USD: Daily chart

Trend: Corrective pullback expected

CME Group’s flash data for crude oil futures markets noted traders added around 2.4K contracts to their open interest positions on Monday, partially fading the previous daily pullback. Volume, instead, shrank for the third consecutive session on Monday, now by around 172K contracts.

WTI faces minor resistance near $119.00

Monday’s improvement in prices of the WTI was in tandem with rising open interest. That said, the continuation of the recovery appears favoured in the very near term and with the immediate hurdle at $118.94 (June 17 high).

Ahead of a meeting of NATO leaders, Australian Prime Minister Anthony Albanese warned the Chinese government, in an interview with the Australian Financial Review (AFR).

Key quotes

The Ukraine invasion had brought democratic nations together, "whether they be members of NATO, or non-members such as Australia".

“The war "had shown attempts to impose change by force on a sovereign country meet resistance".

“The Chinese government to learn the lessons of Russia's "strategic failure" in Ukraine.”

Related reads

• China extends anti-dumping tariffs on EU, UK steel fasteners imports
• PBOC Governor Yi: Policy support aims to boost credit than lowering interest rates

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, GBP/USD is still seen within the 1.2165-1.2380 range in the short term.

Key Quotes

24-hour view: “We highlighted that GBP ‘could continue to range trade, the slightly firmed underlying tone suggests a higher range of 1.2245/1.2335’. GBP subsequently traded between 1.2239 and 1.2331 before closing largely unchanged at 1.2265 (-0.07%). Further range-trading would not be surprising, likely within a range of 1.2235/1.2330.”

Next 1-3 weeks: “We have held the same view since early last week where the outlook for GBP is mixed and we expect GBP to range-trade. There is no change in our view for now even though a 1.2165/1.2380 range (vs 1.2130/1.2380 previously) is likely enough to contain the price actions in GBP, at least within these few days.”

• Asian equities have witnessed a corrector after a firmer recovery as oil advances.
• The unavailability of any potential trigger has turned the DXY sideways.
• A speech from Fed Powell will provide hints of likely monetary policy action in July.

Markets in the Asian session are trading mixed as the US indices traded subdued on Monday. The unavailability of any potential trigger has paused the global assets. The US dollar index (DXY) is trading lackluster in the Asian session as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell, which is due on Wednesday. Also, the US Gross Domestic Product (GDP) numbers will release along with Fed Powell’s speech.

At the press time, Japan’s Nikkei225 added 0.25% while China A50 eased 0.17%, Hang Seng surrendered 0.80%, and Nifty50 eased 0.62%.

The odds of a 75 basis point (bps) rate hike by the Federal Reserve (Fed) have advanced as the upbeat Durable Goods Orders have indicated that the demand prospects in the US economy are rock solid. Considering the forecasts for the US economic data at 0.1%, investors believed earlier that rate hikes by the Fed have impacted significantly on the growth forecasts. However, the release of the economic data at 0.7%, much higher than the estimates, and the prior print of 0.5% have empowered the Fed to announce policy tightening measures without much hesitation.

On the oil front, a firmer rebound in the oil prices has brought a correction in the Asian equities after a strong recovery. Investors have returned to the betting counter of supply constraints rather than taking chances on global recession fears. The oil prices have climbed above $110.00 and are holding above the same effortlessly.

According to preliminary readings from CME Group for gold futures markets, open interest remained choppy and went up by around 1.1K contracts on Monday. Volume followed suit and rose by around 6.3K contracts.

Gold under pressure below the 200-day SMA

Prices of the ounce troy of gold started the week on the defensive amidst rising open interest and volume, which is suggestive that further decline is favoured in the very near term. That said, the yellow metal is expected to face further weakness while below the key 200-day SMA, today at $1,844.

• Steel Price remains firmer for the third consecutive day, keeping the bounce off yearly low.
• Over 6.0% fall in the global steel output joins sluggish USD to underpin bullish bias.
• Fears of recession, headlines concerning China adds filter to the north.

Steel Price extends the previous week’s recovery towards 4,300 Chinese yuan (CNH), around 4,280 CNH heading into Tuesday’s European session.

The metal’s latest gains could be linked to the market’s cautious optimism, as well as the softer US dollar. However, receding fears of oversupply appear the top reason for the Steel Price to portray the quarter-end positioning.

That said, the Scrap Monster quotes the World Steel Association (worldsteel) figures to mention the reduction in the global steel output during the January-May period. That said, the news states that the steel output by the 64 reporting countries dropped to 791.8 million tonnes during the initial five months of 2022.

On the other hand, the US Dollar Index (DXY) struggles to extend the previous two-day downtrend as it flirts with the 104.00 threshold. In doing so, the greenback seems to follow the US Treasury yields amid a risk-off mood. That said, the US 10-year Treasury yields dropped 1.9 basis points (bps) to 3.17% by the press time.

Elsewhere, China’s rejection of the speculations suggesting a flood-like stimulus joins anti-dumping tariffs on the US, the UK and the European Union to weigh on the metal prices. “China's commerce ministry said on Tuesday it would extend anti-dumping tariffs on certain steel fasteners imported from the European Union and the United Kingdom for five years,” said Reuters.

Moving on, US CB Consumer Confidence for June, prior 106.4, will precede Wednesday’s ECB Forum as an important catalyst to determine short-term market moves.

China will extend anti-dumping tariffs on certain steel fasteners imported from the European Union (EU) and the UK for five years, Reuters reported, citing the country’s Commerce Ministry on Tuesday.  

The anti-dumping tariffs will come into effect from June 29, the Ministry said.

more to come ...

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang noted EUR/USD still faces some consolidation but could break above the 1.0630 level in the next few weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the bias for EUR is tilted to the upside but any advance is expected to encounter strong resistance at 1.0605’. As expected, EUR strengthened even though it cracked 1.0605 and rose to 1.0614 before pulling back quickly. Upward momentum has not improved by much and EUR is unlikely to advance further. For today, EUR is likely to trade between 1.0540 and 1.0615.”

Next 1-3 weeks: “We have expected EUR to consolidate for more than a week now. While shorter-term upward momentum is beginning to build, there is no change in our view for now. That said, the risk of EUR breaking above 1.0630 has increased. Meanwhile, EUR could consolidate within a range of 1.0460/1.0630 (narrowed from 1.0430/1.0630 previously).”

• EUR/USD is holding above 1.0570 ahead of ECB Lagarde’s speech.
• A significant rate hike by the ECB looks likely as the inflation rate has climbed above 8%.
• The speech from Fed Powell will fade some clouds of uncertainty over the extent of July’s rate hike.

The EUR/USD pair is seeking some bids around 1.0580 and is expected to advance towards the round-level resistance of 1.0600. The asset is juggling in a narrow range of 1.0570-1.0586 from the early Tokyo session as investors are shifting their focus on speeches from European Central Bank (ECB) President Christine Lagarde and Federal Reserve (Fed) chair Jerome Powell on Tuesday and Wednesday respectively.

At the ECB Forum in Sintra, Portugal, ECB Lagarde is expected to provide insights on how aggressive the ECB can go to fix the eurozone inflation mess. It won’t be wrong to dictate that the ECB has taken the inflation monster lightly by not elevating its interest rates yet. This is the reason that the inflation rate in the eurozone has climbed above 8%. And, this Friday an escalation is expected from the prior release. Also, the market participants will focus on the roadmap to be dictated by ECB Lagarde for further monetary policy meetings.

Meanwhile, the US dollar index (DXY) has defined its range for auctioning till the availability of an effective trigger. The asset is oscillating in a range of 103.89-104.02 in the early European session. Going forward, the speech from Fed Powell will be of key importance as it will fade some clouds of uncertainty from the extent of the interest rate hike to be announced in July. It is worth noting that the upbeat US Durable Goods Orders will strengthen the Fed to feature policy tightening decisions fearlessly.

• USD/CAD drops for the third consecutive day, extends pullback from six-week-old horizontal resistance.
• Downbeat RSI favors bears targeting 200-SMA, double tops challenge the advances.

USD/CAD prints a three-day downtrend as sellers flirt with the lowest levels in two weeks around 1.2860 during early Thursday morning in Europe.

The Loonie pair’s latest losses could be linked to the early week failure to cross a six-week-old horizontal resistance, as well as downbeat RSI (14).

With this, the USD/CAD sellers aim for the 100-SMA level surrounding 1.2840. However, the nearly oversold RSI conditions and the 200-SMA level, around 1.2805 by the press time, could restrict the quote’s further weakness.

In a case where the pair drops below 1.2805, the 50% and 61.8% Fibonacci retracement of April-June upside, respectively around 1.2770 and 1.2700, will be on the bear’s radar.

Meanwhile, USD/CAD bulls need a clear upside break of the 1.2900 mark, comprising the aforementioned horizontal area, to retake control.

Even so, the 1.3000 psychological magnet and the double tops marked around 1.3080 will be tough nuts to crack for the pair buyers.

Should the quote remains firmer past 1.3080, the odds of witnessing a rally towards the late 2020 peaks above 1.3400 can’t be ruled out.

USD/CAD: Four-hour chart

Trend: Further downside expected

• USD/INR prints three-day uptrend to refresh all-time high.
• USD/INR NDFs hint at further upside momentum towards 79.00.
• Oil prices renew one-week top above $110.00, up for the third consecutive day.
• RBI intervention, US data should be watched carefully for clear directions.

USD/INR stays on the front foot while refreshing an all-time high of around 78.56 during the initial Indian trading session on Tuesday.

The Indian rupee (INR) pair’s latest run-up could be linked to the strong oil prices, as well as bullish bets on the Non-Deliverable Forwards (NDF). Recently downbeat sentiment has also propelled the USD/INR prices of late.

WTI crude oil prices print a three-day uptrend near $109.50 by the press time. Growing fears of a supply crunch appear to underpin the black gold’s latest run-up. Comments suggesting no excess capacity to increase oil output from the United Arab Emirates Energy Minister join the G7 nations’ commitment to unveil new sanctions on Russian oil to favor the supply crunch fears.

It’s worth noting that India imports around 85% of its oil consumption and hence is susceptible to oil price moves.

On the other hand, Reuters conveys the latest USD/INR NDFs around 78.67-72, which in turn suggests the further advances of the Indian rupee pair.

Elsewhere, the market’s cautious mood ahead of the key data/events joins a light calendar in Asia to weigh on sentiment amid impending fears of recession. While portraying the mood, the S&P 500 Futures retreat from a two-week high flashed the previous day, down 0.15% intraday around 3,897 at the latest. In doing so, the key gauge of the US equity futures prints the first daily loss in four. On the same line, the US 10-year Treasury yields dropped 1.9 basis points (bps) to 3.17% by the press time. The benchmark US bond coupons rose during the last two consecutive days.

Moving on, USD/INR bulls should wait for the US CB Consumer Confidence for June, prior 106.4, for clear directions. Following that, Wednesday’s ECB Forum will be crucial as the central bank leaders from the US, the UK and Europe will debate monetary policies then.

Technical analysis

USD/INR approaches an upward sloping resistance line from March, around 78.60 by the press time. However, overbought RSI conditions seem to challenge the bulls of late. It’s worth noting that a three-week-old rising support line, near 78.15 at the latest, restricts the short-term downside moves of the pair.

• AUD/USD extends the previous day’s pullback from weekly top, stays pressured around intraday low.
• Market sentiment dwindles amid fears of recession, lack of major catalysts challenge momentum traders.
• Australia’s business sentiment gauge dropped for the second month, China rejects expectations of heavy stimulus.
• RBA rate hike expectations ease ahead of Wednesday’s Aussie Retail Sales, US CB Consumer Confidence could direct intraday moves.

AUD/USD remains on the back foot for the second consecutive day, down 0.25% around 0.6920 during the mid-Asian session on Tuesday. In doing so, the Aussie pair justifies downbeat data at home, disappointment from China and receding hopes of the Reserve Bank of Australia’s (RBA) aggression ahead of the key US and Australia statistics.

Australia’s Roy Morgan Business Confidence index fell to 97.3 for June. In doing so, the sentiment gauge drops to the lowest levels since September 2020 while also posting the second monthly fall.

Moving on, China’s National Development and Reform Commission (NDRC) Vice Head mentioned that China will not resort to flood-like stimulus. The policymaker also said, “China faces new challenges in stabilizing jobs, prices due to covid, Ukraine crisis.”

Elsewhere, global rating agency S&P cuts Australia’s 2022 GDP forecast to to 3.6% (from 4% previously), 2023 projection is 2.8% (2.7% prior forecast). The rating giant also expects further interest rate hikes to 1.75% this year, 2.5% in 2023, 2.75% in 2024 while a cut to 2.5% in 2025.

On a different page, the market’s cautious mood ahead of the key data/events joins a light calendar in Asia to weigh on sentiment amid impending fears of recession. While portraying the mood, the S&P 500 Futures retreat from a two-week high flashed the previous day, down 0.15% intraday around 3,897 at the latest. In doing so, the key gauge of the US equity futures prints the first daily loss in four. On the same line, the US 10-year Treasury yields dropped 1.9 basis points (bps) to 3.17% by the press time. The benchmark US bond coupons rose during the last two consecutive days.

Looking forward, US CB Consumer Confidence for June, prior 106.4, will precede Wednesday’s ECB Forum as an important catalyst to determine short-term market moves.

At home, Australia’s Retail Sales for May, up for publishing on Wednesday, is expected to ease to 0.4% versus 0.9% previous growth. It’s worth noting that the futures market hints at the slower pace of the RBA’s rate hike of late. That said, the benchmark rates are seen at 3.25% by the end of the year, compared with almost 4.0% a couple of weeks ago.

Technical analysis

Unless successfully crossing the weekly resistance line near 0.6945, AUD/USD remains vulnerable to challenge the six-week-old support line near 0.6885.

In an exclusive interview conducted by China Global Television Network on Monday, People’s Bank of China (PBOC) Governor Yi Gang said that the central bank’s monetary policy support prioritizes boosting credit over cutting interest rates lower, per Bloomberg.

Key quotes

“Will continue to be accommodative to support economic recovery in an aggregate sense.”

 China’s “real interest rate is pretty low” after taking inflation into account, suggesting that there’s limited room for large-scale rate cuts.

 The central bank’s “high priorities” are to maintain stable prices and maximize employment.

Market reaction

Yields on the benchmark Chinese government bond steadied Tuesday after slipping 1 basis point to 2.82% following Yi’s comments. Meanwhile, USD/CNY was last seen trading up 0.09% on the day at 6.6965. AUD/USD is attempting a minor bounce near 0.6925, almost unchanged on the day, as of writing.

• Gold price has turned sideways following the footprints of the DXY.
• The upbeat US Durable Goods Orders have bolstered the odds of one more 75 bps rate hike by the Fed.
• A symmetrical triangle formation by the gold prices is hinting for a continuation of a consolidation phase.

Gold price (XAU/USD) is displaying back and forth moves in a narrow range of $1,821.76-1,825.55 in the Tokyo session. The precious metal is trading lackluster right from the first tick on Tuesday. Earlier, the gold prices witnessed a steep fall after failing to surpass the critical hurdle of $1,840.00. Considering the ongoing inventory distribution, a downside move below Monday’s low at $1,820.85 will drag the bright metal significantly.

Also, the US dollar index (DXY) is displaying a lackluster performance in the Asian session. The DXY is struggling to contain the round-level resistance of 104.00 after a firmer rebound from Monday’s low at 103.69.

The upbeat US Durable Goods Orders released on Monday have raised the odds of a consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed). Investors were worried over the fact that growth prospects might not remain supportive of more policy tightening. However, the release of the above-mentioned economic data at 0.7% vs. 0.1% forecasted has strengthened the Fed to elevate interest rates without much hesitation.

Gold technical analysis

On an hourly scale, the gold prices are auctioning in a Symmetrical Triangle that signals a volatility contraction followed by a breakout in the same. The upward sloping trendline is placed from June 14 low at $1,805.11 while the downward sloping trendline is plotted from June 16 high at $1,857.88. The Relative Strength Index (RSI) (14) is attempting to find a cushion around 40.00.

Gold hourly chart

• The H&S formation has strengthened the odds of a bearish reversal in the asset
• Greenback bulls are failing to defend the 50-EMA.
• The RSI (14) is attempting to violate 60.00 but is facing significant hurdles.

The USD/JPY pair has witnessed a regular fall after multiple failed attempts of overstepping the critical resistance of 135.60 for the past three trading sessions. The asset is auctioning inside Thursday’s range since Friday, which is marked in the 134.27-136.22 area.

The formation of a Head and Shoulder (H&S) chart pattern on an hourly scale has bolstered the odds of a bearish reversal in the counter after remaining bullish for a few months. The neckline of the aforementioned chart pattern is marked from June 17 low at 134.27.

The greenback bulls seem unable to defend the 50-period Exponential Moving Average (EMA) at 135.24, which indicates a short-term downtrend.

Also, the Relative Strength Index (RSI) (14) has sensed barricades around 60.00, which signals that the yen bulls are barricading the asset to turn bullish.

A firmer drop below the H&S neckline marked from June 17 low at 134.27 will drag the asset towards June 15 low at 135.50, followed by June 17 low at 132.36.

Alternatively, the greenback bulls could regain their mojo back after violating Thursday’s high at 136.30. This will expose the asset to register fresh two-decade highs at 136.89, recorded in October 1998, followed by September 1998 highs at 139.91.

USD/JPY hourly chart

In its latest economic assessment for the Asia-Pacific region, S&P Global offers a dire growth outlook. The global rating agency has cut Australia’s 2022 GDP forecast while revising the RBA’s policy expectations.

Key quotes

“Growth is easing in the region as export demand softens in line with an expected slowdown among major global economies.”

"However, the recovery in domestic demand from COVID is largely intact, so overall growth has softened only modestly."

"This is especially so in Australia, India, Japan, Indonesia and the Philippines where growth is more domestic demand-oriented."

“Inflation has risen across the region, largely driven by higher energy and commodity prices but not by as much as in the US and Europe.”

“S&P has cut its Australia 2022 growth forecast to 3.6% (from 4% previously), 2023 projection is 2.8% (2.7% prior forecast).”

“Expect inflation to average 5% in Australia this year, back to 3% in 2023 and 2.5% in 2024.”

Expect further OCR “hikes to 1.75% this year, 2.5% in 2023, 2.75% in 2024 while a cut to 2.5% in 2025.”

Market reaction

AUD/USD remains vulnerable near 0.6920 on the above headlines, modestly flat on the day.

Japan’s Finance Minister Shunichi Suzuki said on Tuesday that it was "a little difficult" at present to confirm the definite impact of Russia's debt default on the economy.

Key quotes

"The ratio of investments in Russia as part of Japan's overall foreign bond investments is limited.”

"Moves in Russian government bonds are likely to result in limited direct losses for Japanese investors, including financial institutions."

Separately, Japan Chief Cabinet Secretary Matsuno announced that they will start incentive programme for power-saving households from August.

Market reaction

A renewed risk-aversion wave has hit markets, as they reassess the implications of tighter monetary policies and the new sanctions against Russia. USD/JPY is falling in sync with the Treasury yields, now trading at 135.19, down 0.16% so far.

“China faces new challenges in stabilizing jobs, prices due to covid and risks from Ukraine crisis,” the country’s National Development and Reform Commission (NDRC) Vice Head said on Tuesday.

Additional takeaways

Market reaction

AUD/USD remains weighed down by the cautious remarks from the Chinese official, now trading at 0.6918, down 0.07% on the day. Meanwhile, USD/CNY is up 0.09% on the day at 6.6965, at the time of writing.

• Market sentiment remains sluggish as traders await fresh clues for clear directions.
• Light calendar, mixed headlines add to the traders’ confusion.
• S&P500 Futures snap three-day uptrend, US 10-year Treasury yields consolidate two-day gains.
• US CB Consumer Confidence, central bankers’ speeches will be important for fresh impulse.

Global traders fade the week-start optimism while searching for fresh directions during Tuesday’s Asian session. The sluggish sentiment could also be linked to the cautious mood ahead of the key data/events.

While portraying the mood, the S&P 500 Futures retreat from a two-week high flashed the previous day, down 0.15% intraday around 3,897 at the latest. In doing so, the key gauge of the US equity futures prints the first daily loss in four.

On the same line, the US 10-year Treasury yields dropped 1.1 basis points (bps) to 3.18% by the press time. The benchmark US bond coupons rose during the last two consecutive days.

A light calendar in Asia joins traders’ indecision amid the inflation and recession chatters to challenge the market moves. That said, the anxiety ahead of the US CB Consumer Confidence for June, prior 106.4, as well as the European Central Bank (ECB) Forum, also weighs on the risk appetite.

It should be observed that the US dollar began the week on a softer footing before consolidating the losses amid a risk-off mood. That said, mixed US data, as well as the quarter-end positioning, could be linked to the latest performance of the greenback.

On Monday, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

Elsewhere, headlines surrounding Russia and China appear as the major challenge to the market sentiment. On the same line are updates concerning the major central banks’ next moves, as well as fears of recession.

Moving on, the US CB Consumer Confidence for June, prior 106.4, will precede Wednesday’s ECB Forum as an important catalyst to determine short-term market moves.

Also read: Forex Today: Uncertainty keeps majors ranging ahead of central bankers’ words

• Copper is bid and eyes a break of the 38.2% Fibonacci level near $3.8070.
• Bears are moving in on the US dollar as DXY edges below 104 the figure. 

 The price of copper has been attempting to correct as the US dollar is faded on rallies above 104 the figure as measured by the DXY index. The bulls are accumulating copper following a drop from the $4.50s earlier in June and have their eyes set on a move back to test higher. The following illustrates a bearish bias on the US chart and a bullish bias for copper:

DXY H1 chart

Copper daily chart

According to early indicator data from Bloomberg, economic activity picked up in June after financial hub Shanghai lifted its lockdown and this too is supporting the bullish outlook for the metals sector. A break of the 38.2% Fibonacci level near 3.8070 opens the risk to a deeper correction in order to mitigate the price imbalances as illustrated in the chart above. This will reveal the pathway towards the 78.6% Fibo. 

USD/CHF remains depressed around the intraday low, taking rounds to 0.9555 during the three-day downtrend to Tuesday’s Asian session. In doing so, the Swiss currency (CHF) pair traces options market signals while favoring bears.

That said, the one-month risk reversal (RR) of the USD/CHF, a spread between the calls and the puts, fails to extend the previously weekly rebound with the latest RR being -0.030.

In addition to the RR, the softer US dollar and the CHF’s safe-haven status also appear to weigh on the USD/CHF prices.

It’s worth noting that the US Dollar Index (DXY) stays pressured at around 103.95 after declining for the last two consecutive days.

The risk appetite, however, remains cautiously optimistic as the S&P 500 Futures print mild gains while the US 10-year Treasury yields probe a two-day rebound around 3.19% by the press time.

Looking forward, the US CB Consumer Confidence for June, prior 106.4, will be important for immediate direction.

Also read: USD/CHF Price Analysis: Falling Channel advocates bears, 0.9550 a critical support

• GBP/USD regains upside momentum after Monday’s lackluster performance.
• UK lawmakers back Northern Ireland Protocol Bill in first of many parliamentary tests.
• US dollar struggles to regain market confidence amid lack of major data/events.
• BOE’s Cunliffe, US CB Consumer Confidence to direct intraday moves, Wednesday’s ECB Forum is the key.

GBP/USD grinds higher around the intraday top near 1.2285, following a sluggish start to the week, as buyers cheer the US dollar weakness during Tuesday’s Asian session. In doing so, the Cable pair ignores recent negative news surrounding Brexit, as well as the UK’s political jitters.

That said, the UK policymakers in the House of Commons voted in favor of the Northern Ireland Protocol (NIP) Bill late Monday. Even if the NIP has multiple hurdles to cross before becoming legislation, the European Union’s (EU) trade warnings make the latest passage a grim event for the GBP/USD traders. “Despite some fierce criticism, lawmakers voted 295 to 221 in favor of the Northern Ireland Protocol Bill, which would unilaterally overturn part of Britain's divorce deal from the EU agreed in 2020. The bill now proceeds to line-by-line scrutiny,” said Reuters.

The Brexit move appears a political play to defend UK Prime Minister (PM) Boris Johnson’s position after criticism of the patygate scandal, as well as the Conservatives’ defeat in the recently held two parliamentary by-elections.

Alternatively, the US Dollar Index (DXY) stays pressured at around 103.95 after declining for the last two consecutive days. It’s worth noting that mixed US data, as well as the quarter-end positioning, could be linked to the latest weakness of the greenback.

On Monday, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

Meanwhile, risks emanating from Russia and China appear to weigh on the market’s mood and test the GBP/USD buyers of late. Among them, the chatters surrounding the North Atlantic Treaty Organization (NATO) nations to take a tough stand on China and Russia are the major challenges. On the same line is Moscow’s first default since 1918.

While portraying the mood, the S&P 500 Futures print mild gains while the US 10-year Treasury yields probe a two-day rebound around 3.19% by the press time.

Looking forward, more updates on Brexit and global recession fears are likely to direct GBP/USD moves ahead of a speech from the Bank of England’s (BOE) Deputy Governor for Financial Stability Sir Jon Cunliffe. Also important to watch is the US CB Consumer Confidence for June, prior to 106.4. Above all, Wednesday’s ECB Forum is the key as major central bankers from the BOE and the Fed are scheduled to debate the monetary policies.

Technical analysis

GBP/USD remains firmer beyond convergence of the 50-SMA and a fortnight-long support line, near 1.2255 by the press time. However, the 100-SMA hurdle on the four-hour chart, near 1.2310 by the press time, limits the short-term advances of the pair buyers.

Strategists at Goldman Sachs believe that the single currency could likely remain supported over the coming weeks amid hawkish ECB expectations.

Key quotes

"Our economists have a below-consensus growth outlook for the second half of the year and we think there are still significant downside risks from further gas disruptions, helping push near-term recession odds to around 40%.”

"But, at the same time we find it hard to be outright bearish on the Euro when the ECB is on the brink of such a momentous policy change: exiting negative rates after eight years. This week's Sintra meeting will likely help firm expectations for an imminent exit of negative rates and a broad anti-fragmentation "backstop."

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.6930 vs. the last close of 6.6940.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• EUR/USD keeps late Monday’s pullback from a 12-day top despite recent recovery.
• Firmer RSI, three-day-old support defend buyers inside a bearish chart formation.
• 50-SMA adds to the downside filters before directing bears to the monthly low, 200-SMA guards short-term rebound.

EUR/USD picks up bids to rebound from the intraday lows surrounding 1.0570 to pare daily losses, the first in three days, during Tuesday’s Asian session. That said, the quote rises to 1.585 by the press time.

Although a three-day-old support line triggered the EUR/USD pair’s rebound, it stays inside a two-week-long ascending triangle bearish chart pattern.

It’s worth noting that the recently firmer RSI line and the rebound from a short-term support line direct EUR/USD towards battling with the 200-SMA resistance of 1.0590.

However, the aforementioned triangle’s resistance line, neat 1.0610, could challenge the EUR/USD pair’s further upside.

In a case where the quote rises past 1.0610, it becomes capable of challenging the monthly high near 1.0775.

On the flip side, a break of the immediate support line, near 1.0570 at the latest, won’t convince the EUR/USD bears as the triangle’s lower line and the 50-SMA act as additional downside filters to challenge the downside momentum around 1.0540 and 1.0530 respectively.

Should the quote drop below 1.530, the monthly low of near 1.0360 will gain the seller’s attention.

EUR/USD: Four-hour chart

Trend: Pullback expected

• The bulls are moving in and eye the 0.6950s and prior highs.
• 0.69536 is a mid point from where the downside commenced in Monday's Tokyo open.

In a variation of a Wyckoff style schematic, AUD/USD, as per the prior analysis, AUD/USD bulls seek a break of 0.6925 for 0.6950 target area, the bulls have accumulated the Aussie at a discount.

The price has broken out from within the 'consolidation' following the break of 0.6925 resistance, in a ''sign of strength'' which has encouraged the bulls. The market is making fresh highs above the resistance and the following illustrates this from prior analysis down to the recent price action on a 5-min time frame.

AUD/USD prior analysis

AUD/USD live 5-min charts

In the above schematic, the W-formation was identified and the last point of support, LPS, gave a perfect entry for the bulls seeking a discount. Below, a secondary W-formation was formed from which the price has rallied from a test of the first leg of the pattern and its resistance: 

The price is taking off but there are risks of further mitigation of price imbalances until 0.6924. Should the bulls manage to stay in control from between here and there, then the upside is compelling for a test of the 0.6950s and prior highs. 0.69536 is a mid point of a prior order block from where the downside commenced in Monday's Tokyo open.

• USD/CAD has slipped below 1.2870 as oil prices have rebounded firmly.
• The DXY is struggling to surpass 104.00 on advancing recession fears.
• Fed’s quick rate hike announcements are raising hopes of a tight liquidity environment.

The USD/CAD pair has witnessed a marginal fall to near 1.2860 after slipping below the critical support of 1.2870. The asset is expected to extend its losses establishing below 1.2860 as the oil prices have extended their recovery and are auctioning above the psychological resistance of $110.00.

It is worth noting that Canada is a leading exporter of oil to the US. Therefore, higher oil prices result in higher fund inflows for Canada.  The oil prices have rebounded strongly as investors have started underpinning the current supply constraints rather than focusing on forwarding recession fears.

After the prohibition of oil imports from Russia by the Western leaders, the OPEC cartel is working on fixing the supply issues. Majorly, only two OPEC countries: Saudi Arabia and United Arab Emirates (UAE) carry the ability to add significant oil to the global supply. Both nations are enjoying high prices and high supplied quantity levels.

Meanwhile, the US dollar index (DXY) is struggling to violate the round-level resistance of 104.00 decisively. As quick as the Federal Reserve (Fed) is stepping up interest rates, the expectations of recession fears are scaling higher. No doubt, that the Fed will elevate its borrowing rates to at least 2% in its July monetary policy.  An interest rate of 2% in the US economy is sufficient to squeeze liquidity from the market. This will force the corporate sector to stick to some ultra-filtered investment projects and eventually less demand for labor in the economy for some time.

Contrary to the popular perception, JP Morgan rejects recession fears while expecting an economic rebound in the second half of the year (H2 2022).

“It is not that we think that the world and economies are in great shape,” mentioned JP Morgan.

The US bank not only expects a 3.1% growth rate during the H2 2022 but also expects the inflation to ease to 4.2%.

The same, “Would allow central banks to pivot and avoid producing an economic downturn,” said JP Morgan in its latest report.

The note also mentioned that but just that an average investor expects an economic disaster, and if that does not materialize risky asset classes could recover most of their losses from the first half.

Also read: How on earth the stock market can have sentiment so far divorced from reality?

• GBP/JPY picks up bids to portray three-day uptrend.
• Sustained break of weekly resistance line directs buyers towards a fortnight-old hurdle.
• Convergence of the key SMAs, resistance-turned-support and an immediate upward sloping trend line highlight 165.40 as the key support.

GBP/JPY refreshes intraday high near 166.40 during the third positive daily performance amid Tuesday’s Asian session.

In doing so, the cross-currency pair justifies the previous day’s upside break of a one-week-old resistance line amid sluggish MACD signals.

With this, the quote aims for a downward sloping trend line resistance from June 09, around 167.50.

However, the GBP/JPY pair’s upside past 167.50 will be challenged by the previous weekly top and the monthly high, respectively surrounding 167.90 and 168.75, before directing the advances toward the 170.00 psychological magnet.

Alternatively, pullback moves remain elusive until stay beyond the 165.40 support confluence, including the 50-SMA, 100-SMA and an ascending support line from June 23, not to forget the one-week-old previous resistance line.

In a case where the GBP/JPY prices decline below 165.40, the odds of witnessing a slump towards the 200-SMA level near 162.90 can’t be ruled out.

Overall, GBP/JPY has limited upside room but the bears will have a tough time until breaking 165.40.

GBP/JPY: Four-hour chart

Trend: Further upside expected

• NZD/USD is attempting to sustain above 0.6300 after performing lackluster in the past few trading sessions.
• Fed Powell’s speech may bring a decisive move in the asset.
• The RBNZ is expected to elevate its interest rates further and achieve a neutral rate sooner.

The NZD/USD pair has witnessed some bids around 0.6292 and has moved above the round-level resistance of 0.6300 in the Asian session. On a broader note, the asset is displaying topsy-turvy moves in a range of 0.6285-0.6327 since Friday.

Investors have shifted their focus on the speech from Federal Reserve (Fed) chair Jerome Powell, which is due on Wednesday. The speech will provide some insights into the likely monetary policy action by the Fed in July.

Taking into account the soaring price pressures and the upbeat growth prospects, the Fed is expected to dictate one more 75 basis points (bps) interest rate hike. Effective employment generation capacity, strong growth outlook, and of course the inflationary pressures are sufficient to support the verdict.

The households in the US economy are the real victim of the higher inflation rate as the roaring price rise is reducing their real income, eventually leaving less money to them for disposal. The release of the upbeat US Durable Goods Orders on Monday indicated that the aggregate demand is resilient in the US economy but recession fears still loom if inflation doesn’t get under control.

On the kiwi front, the Reserve Bank of New Zealand (RBNZ) will be the first Western central bank, which will shift its interest rates to a neutral state. Officially, the Official Cash Rate (OCR) stands at 2% after a 50 bps rate hike announcement by RBNZ Governor Adrian Orr on May 25. No doubt, the RBNZ will face the consequences of elevating its interest rates vigorously as a quick enrolment of policy tightening measures will reduce the overall demand.

• Gold picks up bids to refresh intraday high, pares week-start losses.
• Cautious optimism, US dollar’s failures to extend the bounce off two-week low favor gold buyers.
• US CB Consumer Confidence, Fedspeak can entertain traders ahead of Wednesday’s ECB Forum.

Gold Price (XAU/USD) consolidates recent losses at around $1,825.00 during Tuesday’s Asian session. In doing so, the yellow metal takes clues from the market’s cautious optimism ahead of the key US consumer sentiment numbers and the much-awaited central bankers’ debate at the European Central Bank (ECB) forum.

That said, an absence of major data/events allowed the US dollar bears to keep reins despite late Monday’s rebound from an eight-day low. That said, the US Dollar Index (DXY) stays pressured around 103.93 after declining for the last two consecutive days.

It’s worth noting that mixed US data, as well as the quarter-end positioning, could be linked to the latest performance of the greenback and gold.

On Monday, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

However, challenges to risk appetite, mainly emanating from Russia and China, appear to weigh on the market’s mood and test the XAU/USD buyers of late. While chatters surrounding the North Atlantic Treaty Organization (NATO) nations to take a tough stand on China and Russia are major challenges for the gold buyers, Moscow’s first default since 1918 should exert additional downside pressure on the bullion prices. Though, the metal’s traditional risk-safety status seems to have been defending bulls of late.

Amid these plays, Wall Street closed in the red, after an upbeat start, whereas the US 10-year Treasury yields gained nearly seven basis points (bps) to end Monday at around 3.20%. That said, the S&P 500 Futures rise 0.16% intraday gains by the press time.

US CB Consumer Confidence for June, prior to 106.4, will be crucial for the intraday gold traders. Also important will be multiple Fed speakers who are up for public appearances. However, major attention will be given to Wednesday’s ECB Forum as the key central bankers are scheduled to debate the monetary policies.

Technical analysis

A two-week-old symmetrical triangle restricts short-term XAU/USD moves between $1,819 and $1,840. Adding strength to the upside filter is the 200-SMA level surrounding $1,840.

It’s worth noting that the bearish RSI divergence, a condition when prices make lower-high but RSI marks higher-high, keeps gold sellers hopeful.

That said, a downside break of the $1,819 appears necessary for the gold bears to retake control.

Following that, the monthly low of $1,805 and the $1,800 threshold will be on the bear’s radar.

Meanwhile, the metal’s recovery beyond $1,840 will have multiple hurdles around $1,858 and $1,870 before the gold buyers can aim for the monthly peak surrounding $1,880.

Gold: Four-hour chart

Trend: Further downside expected

• EUR/JPY is inching towards its seven-year high at 144.25 as investors await ECB Lagarde.
• The speech from ECB Lagarde is expected to remain hawkish on interest rates amid soaring inflation.
• The continuation of an ultra-loose monetary policy will keep the yen bulls on the tenterhooks.

The EUR/JPY pair is oscillating in a minor range of 143.17-143.36 in early Tokyo. Broadly, the asset is modestly advancing after sensing a rebound near Thursday’s low at 141.58. The cross is aiming to recapture its seven-year high at 144.25 as investors are awaiting the speech from European Central Bank (ECB) President Christine Lagarde, which is due on Tuesday.

ECB Lagarde is expected to dictate the roadmap of elevating the interest rates to combat the inflation monster. It is worth noting that the ECB has not followed the footprints of its Western mates and has not elevated its policy rates yet. The inflation rate has climbed above 8% in the eurozone and the only measure that has been taken by the ECB to contain inflation is the ending of the Asset Purchase Program (APP).

This time a rate hike announcement by the ECB looks likely as the inflation situation has turned into a mess and the households are facing the headwinds of the same.  

On the Tokyo front, a continuation of an ultra-loose monetary policy by the Bank of Japan (BOJ) will keep the Japanese yen on the tenterhooks. Despite the achievement of the desired inflation rate, the BOJ is unable to elevate its interest rates as the price pressures are majorly contributed by costly fossil fuels and food prices. For further guidance, investors will keep an eye on the Retail Trade data, which is due on Wednesday.

 As per the market estimates, Japan’s Retail Trade is seen at 3.3%, higher than the former print of 2.9% on an annual basis. While the monthly Retail Trade may drop to -0.1% vs. 0.8% recorded earlier.

• US Dollar Index fades bounce off eight-day low amid market’s indecision.
• Lack of catalysts challenge the previous rebound backed by firmer US statistics, risk-off mood.
• US CB Consumer Confidence for June, qualitative factors to determine moves ahead of Wednesday’s ECB Forum.

US Dollar Index (DXY) pokes the 104.00 hurdle as buyers struggle to extend the previous day’s rebound from over a week’s low during a sluggish Asian session on Tuesday. In doing so, the greenback’s gauge versus the six major currencies remains indecisive after a two-day downtrend, keeping the fortnight-old downward trajectory after refreshing the yearly top.

The DXY began the week on a back foot as market sentiment improved after Friday’s downbeat US data joined economic fears and softer inflation expectations to favor hopes of no major hawkish surprise from the Fed. However, mixed US data and risk-aversion recalled the greenback buyers during the late North American session on Monday.

US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

On a different page, Russia rejects default on paying external debt by saying Euroclear not accepting Russia’s euro bond transaction 'is not our problem'. “Russian gold and forex reserves are blocked unlawfully. Russia made a payment on euro bond coupons in May,” adds Kremlin in a statement.

Recently, global rating agency Moody’s mentioned that Russia's failure to make its coupon payment resulted in a default. Additionally, former Russian President Dmitry Medvedev also crossed wires, via Reuters, while saying, “Any attempt by a NATO nation to encroach upon Crimea constitutes a declaration of war against Russia and may trigger the outbreak of world war III.”

Against this backdrop, Wall Street closed in the red, after an upbeat start, whereas the US 10-year Treasury yields gained nearly seven basis points (bps) to end Monday at around 3.20%. That said, the S&P 500 Futures rise 0.16% intraday gains by the press time.

Looking forward, risk catalysts are likely to direct the immediate DXY moves ahead of the US CB Consumer Confidence for June, prior to 106.4. Also important will be multiple Fed speakers who are up for public appearances. However, major attention will be given to Wednesday’s ECB Forum as the key central bankers are scheduled to debate the monetary policies.

Read: Conference Board Consumer Confidence June Preview: Watch what we do, not what we say

Technical Analysis

Unless crossing a fortnight-old resistance line, around 104.30 by the press time, DXY remains pressured towards the 50-DMA level surrounding 103.15