USD Index
On Tuesday, the USD index rose to 105.78 after a weak start to the week. The recovery in U.S. Treasury yields appeared to overlook the slight decline in the consumer confidence data reported during the day. On Monday, the USD index fell to around 105.40 after a series of gains since early May, as investors seemed to take profits ahead of a turbulent week. Regarding the U.S. economic outlook, the situation is mixed, with some signs of deflation. However, Federal Reserve officials have adopted a cautious stance, refraining from fully entering an easing cycle. This cautious attitude by the Fed continues to create suspense in market expectations. The USD index has strengthened for three consecutive weeks. Better-than-expected preliminary PMI readings and still hawkish Fed comments are the main drivers supporting the USD’s strength. The USD index was last reported at 105.46, with a moderately bullish momentum intact on the daily chart. It is also noted that end-of-month and end-of-quarter fund flows might distort price movements later this week. The U.S. presidential debate on Friday (9 AM Beijing time) might also attract interest from the forex and rates markets.
From a technical perspective, the environment remains positive, with technical indicators in favorable zones. The 14-day Relative Strength Index (RSI) remains above 50 at 54.75 but is trending downward. The Moving Average Convergence Divergence (MACD) continues to build green bars, indicating that the bulls seem to be firmly in control. The USD index consistently stays above the 20-day, 100-day, and 200-day simple moving averages. Combining these conditions with rising indicators, the USD seems likely to rise further, mainly if it holds above the 20-day moving average of 105.00, 104.80 (61.8% Fibonacci retracement from the October high to the 2024 low), and 104.47 (200-day moving average).
Today, consider shorting the USD index around 105.70, with a stop loss at 105.80 and targets at 105.30 and 105.25.
WTI Spot Crude Oil:
After rising on Monday, oil prices fell back due to profit-taking. Traders observed increased supply from the Republic of Congo entering the market. The USD index traded above 105.50, while European stock markets triggered a risk-off sentiment. On Tuesday, WTI crude oil prices traded around $81.00. In the context of ongoing geopolitical tensions in the Middle East, strong summer driving season demand expectations pushed WTI prices higher due to concerns over oil supply. The summer driving season demand might further elevate WTI prices. Geopolitical risks in the Middle East and Ukraine could threaten crude oil transport in the region, supporting WTI prices. Conversely, a strong dollar and the Federal Reserve officials maintaining a hawkish stance could pressure WTI prices. San Francisco Fed President Mary Daly stated on Monday that she doesn't see the Fed cutting rates until policymakers are confident inflation is headed towards 2%. Rate hikes typically weigh on WTI prices as they increase borrowing costs, thereby dampening economic activity and oil demand.
From a daily chart perspective, the intraday bullish momentum places U.S. crude in a supply growth area above the $81.00 mark, with prices slowly increasing at $81.50 and potentially depleting, leading to a pullback to familiar levels. The daily chart is anchored in the recent bullish zone above the 200-day moving average of $79.04 and the psychological level of $80.00. A short-term upward breakout of $82.12 (last Friday's high) would target $83.50 and $84.14 (April 26 high). Downside support is estimated at $80.00 (psychological level) and the 200-day average of $79.04, with the next level of reference at $78.33 (38.2% Fibonacci retracement from $72.62 to $81.86).
Today, consider going long on crude oil around $80.70, with a stop loss at $80.50 and targets at $81.85 and $82.00.
Spot Gold
After a narrow range fluctuation around $2,330 yesterday, gold prices dipped slightly to $2,320 during the U.S. session. The benchmark 10-year U.S. Treasury yield stabilized above 4.2%, and the dollar rebounded due to hawkish comments from the Federal Reserve, leading to a decline in gold prices. Gold prices are erasing part of Monday's gains, as bears made a comeback on Tuesday morning amid a risk-on market sentiment. Influenced by dovish remarks from Fed policymakers, both the dollar and U.S. Treasury yields fell together. Broad portfolio rebalancing helped improve overall market sentiment, aiding gold in recovering some losses, but the dollar remained under pressure. EUR/USD rebounded from a six-day low near 0.6670. Consequently, gold prices recovered to around $2,335 despite the bearish pressure, but sellers continued to lurk at this level, causing a renewed decline so far on Tuesday. Despite the dollar's ongoing weakness and falling U.S. Treasury yields, gold prices moved oppositely as traders eagerly await Friday's U.S. inflation data for new clues on when the Fed might cut rates. Additionally, end-of-quarter fund flows may continue to play a significant role, impacting gold price movements.
Gold prices continue to maintain the symmetrical triangle pattern confirmed last week, rebounding from the "symmetrical triangle" support level (then at $2,320) on Monday. However, with the 14-day Relative Strength Index (RSI) below the 50 level at 48.95, bears have returned to retest this level. Furthermore, the death cross formed by the 21-day and 50-day simple moving averages continues to exert bearish pressure on gold prices. If gold prices close below the symmetrical triangle support line (currently at $2,320) on a daily basis, it will confirm the breakdown of the symmetrical triangle pattern, enhancing bearish sentiment towards the $2,310 round figure. The next relevant support is the key level of $2,300. If it breaks below this level, the low of May 3 at $2,277 will become the next notable support. On the other hand, gold prices need to reclaim the confluence level around $2,335, where the 21-day and 50-day moving averages converge, to turn bullish. Further upward movement will then test the symmetrical triangle upper boundary resistance at $2,358, which might become a strong hurdle before Friday’s potential volatility peak around the $2,368-$2,369 area.
Today, consider going long on gold around $2,316.00, with a stop loss at $2,313.00 and targets at $2,335.00 and $2,340.00.
GBPUSD
In line with other parts of the risk complex, GBP/USD managed to accelerate and retarget the key 1.2700 level after some corrective decline in the USD. Following the market's solid risk-on sentiment at the start of the week, GBP/USD showed a slightly bullish pattern, climbing from recent oscillation lows to 1.2650. With key economic data limited for most of the week, GBP/USD traders will look forward to the significant economic data releases later. The latest GDP figures for the U.S. and the UK will be published in the latter half of the week, with the U.S. Personal Consumption Expenditures (PCE) Price Index inflation data coming on Friday. Overall, the 2024 inflation data has not provided much market confidence, although recent inflation figures have shown some promise. Before comments from Fed policymaker Mary Daly, Chicago Fed President Austan Goolsbee also commented that the Fed's policy stance remains appropriately restrictive.
The bullish run on Monday pushed GBP/USD up from Friday’s low of 1.2621 by 0.6% to a high of 1.2667. The hourly chart shows it has hit technical resistance at the 200-hour Exponential Moving Average (EMA) of 1.2695, which might impede the bullish momentum. The daily chart indicates that GBP/USD is oscillating in a neutral zone above the 100-day Moving Average (1.2640), with intraday buying stalling at the 20-day EMA (1.2727) and 1.2760 (last Monday's high). GBP/USD could potentially move further down. On the downside, first consider 1.2645 (38.2% Fibonacci retracement from 1.2299 to 1.2860), followed by 1.2619 (55-day Simple Moving Average), and 1.2600 (psychological level) as key support levels.
Today, consider going long on GBP around 1.2670, with a stop loss at 1.2655 and targets at 1.2730 and 1.2740.
USDJPY
As concerns about Japanese intervention deepen, USD/JPY faces pressure to revisit the 160.00 level. The Bank of Japan (BoJ) is expected to raise interest rates further as the yen's weakness continues to exacerbate inflation pressures. The USD will be guided by the U.S. core PCE inflation data for May. The yen extended its rally for the second consecutive day on Tuesday. According to Reuters, USD/JPY remains near the 160.00 level, which recently prompted Japanese authorities to spend billions on yen-buying interventions. Japan's Corporate Service Price Index (CSPI) for May rose 2.5% year-on-year, slightly lower than the 2.7% increase in April. Investors now await more domestic economic reports this week, including retail sales, May unemployment data, and Tokyo’s June inflation data. Japanese Chief Cabinet Secretary Hirokazu Matsuno stated that excessive exchange rate volatility is undesirable and added that he will closely monitor forex movements and take necessary measures if required. The BoJ noted that any change in policy rates would only be considered after confirming economic indicators. On the USD side, the revised U.S. Q1 GDP will be released on Thursday, followed by the Personal Consumption Expenditures (PCE) Price Index on Friday.
On Tuesday, USD/JPY traded around 159.50. The daily chart shows a bullish bias, with the pair hovering near the upper limit of an ascending channel pattern. The 14-day Relative Strength Index (RSI) is above the 50 level, indicating upward momentum. A breakout above the upper limit of the ascending channel pattern around 159.70 would reinforce bullish sentiment, potentially pushing USD/JPY up to 160.20, the highest level since April and a major resistance point. The next target would be 162.17 (123.6% Fibonacci retracement from 160.20 to 151.85). On the downside, immediate support is at the 9-day moving average at 158.40 and at 158.66 (last Friday’s low). Breaking below this level could intensify downward pressure on USD/JPY, potentially driving it towards 157.50 (midline of the ascending channel), and possibly testing 156.60 (an upward trendline from the March 11 low of 146.48).
Today, consider shorting USD around 159.88, with a stop loss at 160.15 and targets at 159.00 and 158.90.
EURUSD
As investors continue to focus on the U.S. Personal Consumption Expenditures (PCE) data to be released on June 28, buying bias around the USD has resurfaced, causing EUR/USD to partially retreat from its optimistic outlook at the start of the week. EUR/USD moderately rebounded after falling to 1.0667 last Friday. The market opened on Monday with a strong risk-on sentiment, the USD weakened, and the EUR strengthened, leading to a relatively calm Tuesday. Key economic data will be released later this week, with investors' focus on important data in the latter half of the week before policymakers' statements. The latest U.S. GDP data will be released on Thursday, followed by Germany's retail sales and the U.S. PCE Price Index inflation data on Friday. Confidence surveys released early Monday from Germany were generally below expectations, but the EUR market ignored the EU data's downside, following the broader market higher as risk sentiment continued to hope for at least a 25 basis point rate cut by the Fed at its September 18 meeting.
EUR/USD rose after retesting the 1.0667 level last Friday but faced intraday buying resistance at the 200-hour Exponential Moving Average (EMA) of 1.0789 and the psychological level of 1.0800, limiting the bullish momentum. From the daily candlestick chart, EUR/USD remains weak, trading below the 50-day EMA at 1.0772. Additionally, the 14-day Relative Strength Index (RSI) at 45.20 indicates downward momentum, suggesting EUR/USD is unlikely to move higher. EUR/USD remains below all moving averages, with increasing downside risks, maintaining a bearish inclination. On the downside, watch for the psychological level of 1.0700 and 1.0668 (78.6% Fibonacci retracement from 1.0601 to 1.0916) as key support areas, with 1.0675 (an upward support trendline from the April 16 low of 1.0601) being critical support this week.
Today, consider going long on EUR around 1.0700, with a stop loss at 1.0685 and targets at 1.0750 and 1.0760.
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