USD
On Wednesday, the U.S. dollar index, representing the dollar, fell to its lowest level since June 18th, around 105.20, following the release of strong ADP labor market data. Moreover, the minutes from the Federal Open Market Committee (FOMC) meeting in June indicated that members recognized that price pressures and overall economic pressures were easing. Against the backdrop of weak foreign exchange price trends, the dollar was slightly defensive. Meanwhile, the dollar index maintained a bearish stance for the fourth consecutive trading day but oscillated within a narrow range, always encountering resistance at the 106.00 level. The dollar index remained steady above 105.50 this week, slightly below last Friday's 105.87. The euro, a major component of the dollar index, initially surged to 1.0776 (the 50-day moving average) but faced resistance due to the far-right National Rally party's failure to secure an absolute majority in the first round of the French elections on Sunday. The EUR/USD pair closed at 1.0740 on Monday, returning to the June second-half range of 1.0650-1.0750. Similarly, the dollar index has been consolidating in the 103.99 - 106.13 range since the beginning of June. The euro is concerned that the second round of the French elections on July 7 might lead to a far-right government or a hung parliament, while the dollar is wary that weak U.S. employment data on July 5 might open the door to market bets on a Federal Reserve rate cut in September.
The daily chart shows that although the contraction is mild, the technical indicators — the 14-day Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) — depict a robust pattern. The RSI remains above 55, slightly flattening, while the MACD continues to display green bars, suggesting an increase in bullish momentum. The dollar index is firmly above the 20, 100, and 200-day Simple Moving Averages (SMA), holding steady at highs since May, with upward targets looking towards 106.00 (a psychological market threshold), and 106.50 (forming a double top in April and May). On the downside, focus on 105.00 (a whole number threshold), and 104.74 (the 100-day moving average).
Today, consider shorting the dollar index around 105.50, with a stop loss at 105.65 and targets at 105.05 and 105.00.
WTI Spot Crude Oil
The American Petroleum Institute (API) reported a significant decrease in oil inventories for the week ending June 28th, as investors await U.S. nonfarm payroll data for new guidance on Federal Reserve interest rates. Midweek, U.S. WTI crude briefly touched a nine-week high near $84.10 per barrel, before pulling back to $83.50 during the U.S. session due to market capital flows. The oil market continues to be supported by ongoing tensions in the Middle East. The conflict between Israel and Hamas in Palestine continues to disrupt the energy market, as investors remain concerned about the potential for the conflict to spill over borders and directly involve Iran, which supports Hamas, potentially threatening the stability of oil supply and logistics in the Middle East. The API revealed that U.S. weekly crude oil inventories saw the largest single-week drop in nearly two years; data showed a weekly decrease of 9.163 million barrels, far below the forecasted reduction of 150,000 barrels and following a decrease of 1 million barrels on top of the previous week’s reduction of 3 million barrels.
WTI has broken through the recent consolidation range near $80.50 - $82.56 (23.6% Fibonacci retracement from $67.94 to $87.08), but the intraday bullish momentum failed to surpass the high of $84.14 per barrel on April 26th. WTI oil prices are expected to first pull back to $82.56 (23.6% Fibonacci retracement from $67.94 to $87.08) and stabilize at $81.62 (Monday’s low) before rising further. The 14-day Relative Strength Index (RSI) has risen above 63, indicating a strong short-term trend, hence the upward targets should focus on $84.14 (the high of April 26th), and around $85.48 (the high of April 19th).
Today, consider going long on crude oil near $83.50, with a stop loss at $83.20, and targets at $84.50 and $84.70.
XAUUSD
Gold has accumulated bullish momentum, trading at its highest level in recent weeks, around $2,365. Following disappointing U.S. ADP employment change and ISM services PMI data, there was a significant drop in U.S. 10-year Treasury yields, which helped boost the daily rise in gold prices. During Wednesday’s Asian session, trading fluctuated above the 50-day simple moving average. As traders prefer to wait for more clues about the Federal Reserve’s policy path before placing new directional bets, commodities remain within the familiar range of the past week or so. Friday’s non-farm payroll report could influence market expectations regarding future Fed policy decisions, which would drive recent dollar demand and provide new momentum for the zero-yield asset gold prices. Meanwhile, Fed Chair Jerome Powell’s somewhat dovish remarks on Tuesday reaffirmed the prospect of the central bank potentially starting a rate-cutting cycle later this year. This led to a modest pullback in U.S. bond yields and put dollar bulls on the defensive, which is seen as boosting gold prices. Ongoing geopolitical tensions and the uncertain political outlook in the U.S. and Europe also help limit downside space for the safe-haven precious metal.
From a technical perspective, the recent range-bound price action indicates traders’ hesitation about the near-term trajectory of gold prices. Furthermore, the neutral oscillators on the daily chart further indicate that caution must be exercised before placing aggressive directional bets. Meanwhile, the current resistance near $2,360 will be tested next, followed by the late June swing highs (around $2,365-$2,370). If some follow-through buying occurs, it could allow the bulls to reclaim the $2,400 whole number threshold and challenge the historic highs of $2,450 reached in May. On the other hand, the $2,319-$2,318 region now appears to be the immediate strong support before the $2,300 major threshold and the $2,285 level. A clear break below the latter would become a new trigger point for bearish traders and make it easier for gold prices to further accelerate towards the 100-day moving average, currently near $2,258.
Today, consider going long on gold near $2,352.00, with a stop loss at $2,348.00, and targets at $2,368.00 and $2,372.00.
AUDUSD
After a significant domestic sell-off of the dollar driven by data, the EUR/USD rose on Tuesday and surged significantly to 0.6733 in a risk-favorable environment, while the positive calendar results also provided support for the dollar. In the early part of the week, EUR/USD fluctuated again near 0.6650, with dollar pricing also showing indecisiveness. The uncertain movement of the AUD/USD reflects the overall sentiment of the forex market, with this week being eventful, primarily due to the U.S. non-farm employment data on July 5th. A slight rebound in copper prices and a minor rise in iron ore prices once again benefited the Australian dollar. In terms of monetary policy, similar to the Federal Reserve, the Reserve Bank of Australia is expected to be among the last G10 central banks to start cutting rates. At its recent meeting, the RBA took a hawkish stance, maintaining the official cash rate at 4.35% and stating that future decisions will be flexible. Moreover, the RBA released the minutes of its latest hawkish meeting, showing that members kept the policy rate unchanged. The Fed’s possible easing policy contrasts sharply with the RBA’s potentially prolonged restrictive stance, which may support AUD/USD in the coming months.
From a recent trend perspective, if bulls gain control, AUD/USD could reach the May high of 0.6714 (May 16) before touching the critical level of 0.7000, followed by 0.6760 (the high of January 4). On the other hand, bearish attempts could push AUD/USD lower, with the first fall to the 50-day simple moving average at 0.6622 as a strong support level, further support lies at the psychological market threshold of 0.6600. The June low of 0.6574 (June 10) follows, then down to the crucial 200-day moving average at 0.6556.
Today, consider going long on the AUD/USD near 0.6695, with a stop loss at 0.6680, and targets at 0.6730 and 0.6740.
GBPUSD
The GBP/USD pair continues to rise, reaching 1.2775, the highest level since mid-June on Wednesday. Disappointing ISM services PMI data from the U.S. significantly pressured the dollar, aiming the currency pair at new multi-week highs. During early Asian trading on Wednesday, GBP/USD traded near 1.2700 for the fifth consecutive day in a positive tone. The U.S. dollar index broke below the 106.00 level, which had supported major currency pairs. On Tuesday, Federal Reserve Chairman Jerome Powell stated that inflation in the U.S., which had risen earlier this year, has cooled down again. However, he expressed a desire to see more evidence before feeling confident to begin cutting rates. Powell added that the U.S. economy and job market remain strong, which means the central bank can take its time to decide when it is appropriate to cut rates. Meanwhile, the Chicago Mercantile Exchange FedWatch Tool shows that traders have increased their bets on the Fed starting an easing cycle this year, with the probability of a 25 basis points cut in September nearing 63%, up from 58% on Monday, thus exerting further selling pressure on the dollar. On the other hand, despite expectations that the Bank of England might cut rates earlier, GBP/USD still trends higher.
GBP/USD appears to have bottomed near last week’s low at 1.2612, as sellers were unable to push the rate below the 1.2612 – 1.2600 range, which could intensify the challenge of a price rebound. If GBP/USD buyers push the spot price above the July 1 high of 1.2709, there is potential for further gains past this level. The next supply area would be the psychological threshold of 1.2800. The next level would be 1.2860 (the high of June 12). Conversely, if sellers control the price movement in the short term, 1.2700 (a psychological market threshold) would be the next target. If the pound weakens, the pair might fall to the 50-day moving average at 1.2666, which would attract further attention.
Today, it is advisable to go long on GBP at 1.2725, with a stop loss at 1.2710, and targets at 1.2780 and 1.2790.
USDJPY
The USD/JPY exchange rate has reached a 38-year high of 161.95. Japan’s Services PMI for June was revised down to 49.4 from 53.8 in May, marking a reversal to contraction in business activity. This downturn is attributed to the final value of June’s business activity turning contractionary. Market participants are focusing on the possibility of foreign exchange intervention by the Bank of Japan, which could support the yen and limit the upward potential of USD/JPY. The yield on Japan’s 10-year government bonds rose to a near 13-year high of 1.11%. As the yen continues to depreciate sharply, traders are assessing the monetary policy outlook of the Bank of Japan. The depreciation of the yen has increased import costs, exacerbating inflationary pressures. Moreover, the Bank of Japan has announced plans to unveil a strategy in July for gradually ending its bond purchase program. The U.S. dollar has halted a four-day decline as two-year treasury yields rebounded.
On Wednesday, USD/JPY traded near 161.65. Daily chart analysis shows a bullish inclination, with the pair stabilizing slightly below the upper trendline of the rising channel formation at 162.15. However, caution is advised as the 14-day Relative Strength Index (RSI) is elevated, ranging between 70 to 75.50, indicating an overbought market and suggesting a potential short-term correction. USD/JPY may test the upper trendline of the rising channel near 162.15 and the 162.17 area (123.6% Fibonacci retracement from 160.20 to 151.85). A breakout above this level could enhance bullish sentiment, potentially pushing the pair towards psychological resistance at 163.00 and the 164.37 level (150.0% Fibonacci retracement). On the downside, short-term support is found near the midline of the rising channel at 160.75, and the 9-day moving average at 160.65. A break below this level could weaken bullish tendencies, potentially driving USD/JPY towards the psychological threshold of 160.00. Further breakdown of this channel support might test 159.40 (a support line extending right from the low of 153.08 on May 2).
Today, it is advisable to go long on USD/JPY near 161.40, with a stop loss at 161.20, and targets at 162.00 and 162.20.
EURUSD
Amid a continued pullback of the dollar and stable expectations ahead of the second round of the French elections on July 7th, the EUR/USD has sustained a recovery above the 1.0800 level for several trading days. As investors continue to digest the results of the French elections from June 30th, and speeches by European Central Bank President Christine Lagarde and Chairman Jerome Powell at the ECB Forum in Sintra, Portugal, a slight uptick in the dollar also contributed to EUR/USD fluctuating around the 1.0750 range during the early part of this week. ECB President Lagarde asserted that although the economic growth outlook remains uncertain, significant progress has been made in the Eurozone on the path to eliminating inflation. Meanwhile, Powell stated that the Federal Reserve needs to observe more data before considering rate cuts, to confirm if the recent downturn in inflation truly reflects sustained price pressures. On a broader scale, the macroeconomic situation in both Europe and America remains stable. The European Central Bank is considering further rate cuts after the summer, with market expectations for the ECB to cut rates two more times later this year. Supporting further rate cuts, preliminary inflation data for the Eurozone showed that the annual inflation rate grew by 2.5% in June, while core inflation was stronger than expected, increasing by 2.9% annually.
From a recent trend perspective, since the 14-day Relative Strength Index (RSI) is around 54.50, it indicates that the market appears to be strengthening, suggesting a potential short-term correction. If the bears regain control, EUR/USD might retest the June low of 1.0666 (June 26th), followed by the May low of 1.0649 (May 1st), and ultimately the 2024 low of 1.0601 (April 16th). Meanwhile, a stronger EUR/USD could reposition above the 200-day moving average at 1.0792, and the psychological market threshold of 1.0800, followed by the weekly high of 1.0852 (June 12th).
Today, it is advisable to go long on EUR/USD near 1.0765, with a stop loss at 1.0750, and targets at 1.0840 and 1.0850.
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