US Dollar Index
On Wednesday, the Dollar Index remained relatively unchanged around the 105.20 mark as investors parsed remarks from key Federal Reserve officials in a quiet market. Following a 0.50% rise last week, the index has declined for three consecutive days. With bets on a Fed rate cut in September, the dollar struggled to attract buyers. The Dollar Index, which tracks the dollar against a basket of currencies, hovered near a one-week low hit the previous day, as markets anticipated the Fed would soon cut rates. This reaction followed recent comments from Fed officials and weaker-than-expected May retail sales data. Tuesday’s weak U.S. retail sales data indicated signs of exhaustion among American consumers, boosting such expectations. This comes against a backdrop of weak consumer and producer prices in the U.S. last week, supporting the prospect of the Fed starting a rate cut cycle in September. Additionally, a bullish tone in global stock markets also undermined the safe-haven status of the dollar.
The daily chart shows that technical indicators display a flat momentum but remain in a positive stance. The Relative Strength Index (RSI) remains above the 50 level, while the Moving Average Convergence Divergence (MACD) continues to show green bars. With bullish activity paused, last week's slowdown in momentum may suggest that the recent uptrend in the Dollar Index could be slowing. If the Dollar Index breaks below 105.00 (a key psychological level), it may continue to test 104.92 (the 38.2% Fibonacci retracement level from 102.35 to 106.51). A break below this level would target 104.47 (the 200-day moving average) and 104.43 (the 50.0% Fibonacci retracement level) support areas. On the upside, if the index holds above 105.00 (a psychological level) and 105.25 (Tuesday’s low), the next target to watch is 105.80 (last Friday’s high).
Today, consider shorting the Dollar Index around 105.38, with a stop loss at 105.55, and targets at 104.95 and 105.00.
Spot WTI Crude Oil:
WTI crude oil surged to near a six-week high of $81.50 on Wednesday. The price strength is driven by improved expectations of a Fed rate cut starting from the September meeting and escalating tensions in the Middle East and Europe. U.S. WTI crude clearly broke above $80.00 per barrel on Tuesday as traders shrugged off the impact of another weekly crude inventory build reported by the American Petroleum Institute (API). Despite OPEC+ preparing to roll back voluntary production cuts aimed at supporting crude prices and curbing global supply, the energy market is betting that increased fossil fuel demand entering the summer will absorb further supply in the global crude market. Geopolitical unrest continues to add a risk premium to the crude market, following successful drone strikes on Russian oil facilities by Ukraine this week and escalating tensions between Israel and Palestine. Coupled with the uncertain outlook for increased summer crude demand, the energy market is brushing off bearish factors like excess U.S. crude production and disappointing demand data from China last week.
From a technical perspective, U.S. crude is accelerating into bullish territory as WTI prices rise from a significant swing low of $72.62 on June 4. On Tuesday, WTI prices broke through the short-term key resistance zone of $80.00 - $80.35, testing a one-and-a-half-month high of $81.52 as traders pushed prices higher. This week’s bullish trend in WTI prices has led U.S. crude to break above the 200-day simple moving average of $79.17. Additionally, WTI prices surpassed the upper boundary of the downward channel from the 2024 high near $87.08, which stood at $77.20. Short-term upside resistance can be observed at $82.56 (the 23.6% Fibonacci retracement level from $67.94 to $87.08) and $84.15 (the April 26 high). If WTI prices face a setback, they might retreat to $80.00 (a psychological level), with the next support level at $79.17 (the 200-day simple moving average).
Today, consider going long on crude oil around $80.75, with a stop loss at $80.50 and targets at $81.85 and $82.00.
Spot Gold
Gold struggled to capitalize on the previous day's rebound from near the $2,300 mark, trading narrowly around $2,330. The U.S. bond market remained closed due to the Juneteenth holiday, limiting volatility. Earlier on Wednesday, gold prices were consolidating their previous gains, lacking new fundamental or technical catalysts for further upside. The Juneteenth holiday in the U.S. might keep liquidity around the dollar scarce, potentially impacting gold prices. However, light trading could also exacerbate price movements. On Tuesday, gold reversed its early losses and staged a strong rebound following the U.S. retail sales data release, driven by a slight decline in U.S. Treasury yields. Meanwhile, the Federal Reserve indicated that more signs of cooling were needed before shifting towards a policy easing trajectory. Looking ahead, with a lack of major macro events and Fed speeches due to the U.S. market holiday, gold prices will take cues from broader market sentiment and expectations surrounding Fed rate changes.
The daily chart shows a neutral to bearish bias for gold due to a bearish head-and-shoulders pattern still in play. Despite short-term gains, momentum favors sellers, as indicated by the 14-day Relative Strength Index (RSI), which is below the negative threshold of 49, suggesting increasing downside momentum. If gold prices fall below $2,306.60 (Tuesday’s low) and $2,305 (an upward trend line extending from the February 14 low of $1,984), the next support level will be $2,300 (a psychological level). A break below this level would target $2,286.70 (June 7 low) and $2,277 (May 3 low) to maintain the bearish signal. Conversely, if gold prices extend gains beyond $2,350, key resistance levels will appear at the May 29 cycle high of $2,361.40 and the June 7 cycle high of $2,387, followed by a challenge at $2,400.
Today, consider going long on gold at around $2,324.00, with a stop loss at $2,320.00, and targets at $2,340.00 and $2,345.00.
AUDUSD
During Wednesday's trading session, the AUD/USD pair gained traction around 0.6660. The pair moved higher after weaker-than-expected U.S. retail sales data and the Reserve Bank of Australia (RBA) maintaining a hawkish stance during its June meeting on Tuesday. The recent U.S. retail sales report indicated signs of weak consumer activity in the U.S., prompting expectations for a Federal Reserve rate cut later this year, which broadly pressured the dollar. On the Australian side, the RBA kept its key rate unchanged at 4.35% for the fifth consecutive meeting in June, in line with market participants' expectations. The RBA decided to maintain the policy due to the need for various factors to align to bring inflation back within the target range. The monetary policy statement indicated that inflation remains above target and continues to persist, and the RBA needs to be confident that inflation is moving sustainably towards the target range. The RBA's hawkish stance provided some support for the AUD and boosted the AUD/USD pair.
The AUD/USD pair continued its upward momentum from Tuesday, recovering above 0.6600 amid a steady dollar, while investors continued to assess the latest hawkish stance from the RBA. The daily chart shows the 14-day Relative Strength Index (RSI) has risen to the 50-55.56 level, indicating a shift in momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) shows shrinking red bars, suggesting decreasing selling pressure and potential reversal. However, the short-term outlook remains negative unless buyers consolidate above the 20-day Simple Moving Average (SMA) currently set at 0.6636. Investors should keep an eye on 0.6600 (a psychological level), and subsequently the 0.6565-0.6546 region, where the 100-day and 200-day SMAs converge. AUD bulls need to hold a daily close above 0.6600 and near 0.6630 (the 23.6% Fibonacci retracement level from 0.6362 to 0.6714) to attempt a rebound to 0.6700 (a round number) and 0.6714 (the May 16 high).
Today, consider going long on AUD around 0.6655, with a stop loss at 0.6640, and targets at 0.6700 and 0.6705.
GBP/USD
On Wednesday, GBP/USD saw a slight increase, maintaining above the 1.2700 level. UK data showed that the annual inflation rate, as measured by the Consumer Price Index (CPI), decreased from 2.3% in April to 2% in May. The Bank of England (BoE) is set to announce its policy decision on Thursday. GBP/USD struggled to gain any meaningful traction on Wednesday, oscillating within a narrow trading range around the 1.2700 mark during the Asian session. Meanwhile, spot prices remained above the one-month low of 1.2656 touched last Friday, as traders eagerly awaited the release of the UK's latest consumer inflation data to prepare for the next directional move. Market attention will then shift to the BoE's monetary policy meeting on Thursday, which will help determine the near-term trajectory of the pair. Regarding key data/central bank event risks, the weaker dollar price action has been a key factor driving the GBP/USD pair. Tuesday's U.S. retail sales report fell short of expectations, indicating signs of consumer exhaustion and reinforcing bets on a potential Fed rate cut in September. This led to an overnight decline in U.S. Treasury yields, which was seen as weakening the dollar.
The daily chart shows that GBP/USD remains below the lower boundary of the ascending channel at 1.2750, with the 14-day Relative Strength Index (RSI) near 50.56, reflecting a balance between bulls and bears around the 1.2700 level. On the downside, key support levels are at 1.2645 (38.2% Fibonacci retracement from 1.2299 to 1.2860) and 1.2639 (100-day moving average) before the psychological level of 1.2600 and 1.2579 (50.0% Fibonacci retracement). Resistance levels are at 1.2742 (20-day simple moving average) and 1.2750 (lower boundary of the ascending channel). Further upside could see a rebound to 1.2800 (a psychological resistance level).
Today, consider going long on GBP around 1.2700, with a stop loss at 1.2680 and targets at 1.2750 and 1.2760.
USDJPY
As investors look for new clues on the Fed's rate cut timeline, USD/JPY is consolidating around 158.00. U.S. retail sales for May grew only 0.2%, missing expectations. The minutes from the Bank of Japan's (BoJ) June meeting revealed that policymakers discussed the possibility of an earlier rate hike. During the Asian session on Wednesday, the USD/JPY pair traded in a narrow range, currently hovering just below the 158.00 level. Meanwhile, the spot price saw little change following the release of the BoJ's April meeting minutes, remaining far from the late-April highs retested the previous day. According to the minutes, BoJ board members shared their views on the monetary policy outlook. They discussed the risks related to the impact of a weak yen on inflation. The impact of a weak yen on inflation and wages might not be temporary. A weak yen could push the core inflation rate beyond the target. The BoJ needs to carefully study how the recent yen depreciation will affect core inflation. If core inflation continues to exceed the target partly due to a weak yen, the pace of policy normalization could likely accelerate.
Despite the discussion among BoJ board members about the risks related to the weak yen's impact on underlying inflation, this did not impress yen bulls or provide any meaningful traction to the USD/JPY pair, even though the weak dollar price action continued to act as a drag on spot prices. The USD/JPY rate surged above 158.00 during the European session on Tuesday. With the dollar slightly retreating to around 157.50, a sustained drop towards 157.00 could see bears challenge key support levels, starting with 156.87 (the 20-day moving average) and 156.10 (an upward trend line from the March 11 low of 146.48). Given that Fed policymakers continue to forecast only one rate cut this year, the strong dollar performance is notable. Therefore, if USD/JPY breaks above 158.00 (a psychological resistance) and 158.25 (last Friday's high), the next resistance level would be the April 26 high of 158.44. If USD/JPY surpasses these resistance levels, the next target would be the early-year high of 160.20.
Today, consider shorting USD around 158.20, with a stop loss at 158.40, and targets at 157.30 and 157.10.
EURUSD
The EUR/USD pair saw a slight increase, successfully returning to the 1.0750 area amid marginal fluctuations in the forex galaxy, continuing the outlook from the first half of the week. The dollar opened the week weakly and saw a modest rise on Tuesday, providing some minor support to risk assets and pushing the EUR/USD up to the 1.0760 area, which seems to face some initial resistance. The pair's modest rise was also supported by the easing of French political concerns, while weak U.S. economic data weighed on the dollar and reignited speculation of two Fed rate cuts this year. On the Fed front, cautious sentiment among Fed policymakers on Tuesday seemed to limit the dollar's downside. In the near term, the recent ECB rate cut contrasted with the Fed's decision to keep rates unchanged, widening the policy divergence between the two central banks, which could further weaken the EUR/USD. However, looking ahead, the recovery of emerging economies in the Eurozone and a noticeable slowdown in the U.S. economy are expected to help mitigate this divergence, providing some support for the EUR/USD.
The daily chart shows that EUR/USD faces continued bearish risks. If the downtrend persists, EUR/USD may retest the June low of 1.0667 (June 14) and the 1.0668 area (78.6% Fibonacci retracement from 1.0601 to 1.0916), followed by the 2024 low of 1.0601 (April 16) and the psychological level of 1.0600. On the upside, if the pair reverses and rises, the 200-day moving average at 1.0786 - 1.0790 will be tested. A break above this area would challenge the 250-day moving average at 1.0818 and the June 12 high of 1.0852. Further resistance lies at 1.0859 (June 4 high).
Today, consider going long on EUR around 1.0725, with a stop loss at 1.0710 and targets at 1.0770 and 1.0780.
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