US Dollar Index
On Monday, the US Dollar Index dropped to 105.48 after a series of gains since early May, as investors appeared to take profits ahead of a turbulent week. The index showed a marked improvement last week, nearing the 106.00 mark, a level last seen in early May. The index has risen for three consecutive weeks, primarily due to the widening monetary policy gap between the Federal Reserve and almost all other G10 central banks. A review of the recent performance of the dollar reveals that it rebounded against risk-sensitive currencies after a significant decline following lower-than-expected inflation data from the US Consumer Price Index for May. Investor adjustments for the June 12 FOMC meeting aligned with a renewed interest in buying dollars when the Federal Reserve maintained the federal funds target range (FFTR) at 5.25%-5.50%, in line with broad consensus. Additionally, the committee indicated only one rate cut this year, likely to occur in December.
The dollar index regained strong momentum after touching a recent low of around 103.99 on June 7 and set a multi-week high of 105.93 near the 106.00 mark. If the dollar index breaks the June high of 105.93 (June 21), it could test 106.00 (a psychological barrier) and the resistance area of the 2024 high at 106.51 (April 16). Once it surpasses the latter, the index may begin testing the November high of 107.11 (November 1). On the downside, the dollar index is expected to find support at the crucial 9-week moving average of 105.18, directly pointing to the 105.00 level.
Today, consider shorting the US Dollar Index around 105.60, with a stop loss at 105.75 and targets at 105.20 and 105.15.
WTI Spot Crude Oil
WTI crude oil showed strength on Monday, rebounding to the $82.00 region after breaking the $80.00 barrier. The energy market remains volatile as investors anticipate a potential increase in future demand, driving the broader market higher while attempting to mitigate the impact of current supply concerns due to pressing demand. On Monday, WTI crude was trading around $81.00. Prices edged higher against the backdrop of ongoing geopolitical tensions in the Middle East and the prospect of increased summer oil demand. Investors are concerned about a wider conflict in the Middle East, which could disrupt oil transportation in the region and boost WTI prices. Additionally, the expected rise in fuel demand for food and travel during the summer will further support WTI in the near term. The US dollar strengthened following the release of the June S&P Purchasing Managers' Index data, and the possibility of the Federal Reserve maintaining a hawkish stance could also bolster WTI. Federal Reserve policymakers indicated that more progress in inflation would be necessary before considering rate cuts. The notion of "higher rates for longer" in the US continues to pressure WTI, as it increases leverage costs, thereby dampening economic activity and oil demand.
The daily chart shows that WTI crude oil retreated from a high of $82.12 to around $81.00 last Friday. Technical indicators, such as the 14-day Relative Strength Index (RSI) and the stochastic oscillator, have also turned downward from overbought territory, suggesting short-term downside potential for oil prices. The estimated support levels are at $80.00 (a psychological barrier) and the 200-day moving average at $79.08, with the next level at $78.33 (the 38.2% Fibonacci retracement level from $72.62 to $81.86). Current resistance is expected at $82.12 (last Friday's high), with significant resistance around $82.50 and $83.00, and further pointing to $84.14 (the April 26 high).
Today, consider going long on crude oil around $81.70, with a stop loss at $81.50 and targets at $82.85 and $83.00.
Spot Gold
After a calm European session, gold prices edged higher to $2,334. Following a sharp decline on Friday, gold managed to hold its ground as the benchmark 10-year US Treasury yields struggled to rise, while the dollar weakened due to optimistic market sentiment. Early Monday in the Asian session, gold prices dipped to $2,325 after retreating from a two-week high near $2,368.80. Last Friday's stronger-than-expected US Purchasing Managers' Index (PMI) data put pressure on gold. This week's focus will be on the final readings of the US Gross Domestic Product (GDP) and Core Personal Consumption Expenditures (PCE) Price Index. June's mixed US economic data signals continue. Meanwhile, Minneapolis Federal Reserve Bank President Neel Kashkari indicated that inflation might take one to two years to return to 2%. Stronger US economic data and the Federal Reserve's continued hawkish stance support the dollar, dragging gold prices lower. Notably, rising interest rates typically weigh on gold prices as they increase the opportunity cost of holding non-yielding assets. On the other hand, safe-haven flows due to geopolitical and economic uncertainties could boost gold in the short term.
From a technical perspective, last week's decline can be classified as a failure to break the 50-day Simple Moving Average (SMA) resistance at $2,342.25. However, the subsequent drop stalled before the support of the lower boundary of the "symmetrical triangle" on the daily chart, currently fixed at $2,320 and the $2,308.70 (75-day SMA) region, which should now act as crucial pivotal points. Given that the oscillators on the daily chart have just started drifting into negative territory, a convincing break below the aforementioned support could make gold prices vulnerable to falling below the $2,300 mark and retesting the monthly fluctuation lows near the $2,285 region. Conversely, the 50-day SMA currently fixed around the $2,342 - $2,343 region and the $2,358 (upper boundary resistance of the symmetrical triangle) might pose immediate strong barriers before the volatile highs on Friday (near the $2,368 - $2,369 region). Some follow-through buying could potentially push gold prices towards the intermediate hurdle of $2,387 - $2,388 and eventually to the $2,400 psychological mark.
Today, consider going long on gold around $2,330.00, with a stop loss at $2,325.00 and targets at $2,345.00 and $2,350.00.
AUDUSD
The AUD/USD pair rose during the US afternoon session, hovering around 0.6625 after early losses. The Australian dollar's decline might be limited due to the Reserve Bank of Australia's (RBA) hawkish stance. According to ABC News, RBA Governor Michele Bullock recently stated that the board discussed potential rate hikes and ruled out a near-term rate cut. The US dollar remained stable as Federal Reserve officials delayed this year's first rate cut. The fall in commodity prices, particularly copper, also pressured the Australian dollar. However, the interest rate differential continues to support the AUD, especially as the AUD/JPY cross rose to a 16.5-year high, helping limit the AUD's decline against the USD in direct trading.
The daily chart shows the AUD trading near 0.6640 on Monday. The current trend appears neutral, consolidating within a horizontal channel. The 14-day Relative Strength Index (RSI) at 51.50 suggests that further movement might provide a clearer directional trend. The AUD/USD pair may find support near the 45-day Exponential Moving Average at 0.6615 and 0.6620 (the middle line of the horizontal channel). Additional support is seen around the lower boundary of the channel at approximately 0.6590 and 0.6581 (the 38.2% Fibonacci retracement level from 0.6362 to 0.6714). The next support level is at 0.6540 (the 50.0% Fibonacci retracement level). On the upside, resistance may be encountered around 0.6680 (last week's high) and near 0.6700. Further potential resistance includes the January high of 0.6714.
Today, consider going long on the AUD around 0.6640, with a stop loss at 0.6625 and targets at 0.6685 and 0.6690.
GBPUSD
On Monday, GBP/USD rose above 1.2650. After outperforming its counterparts on optimistic PMI data on Friday, the dollar continued to face adverse conditions amid a positive shift in risk sentiment, allowing the pair to recover partially. GBP/USD opened sluggishly, remaining near the lowest level since mid-May at 1.2621, touched last Friday. The pair is currently trading around 1.2675, with bears looking to sustain a break below the 50-day Simple Moving Average (SMA) at 1.2573 and confirm it. The Bank of England's dovish stance last week continued to weigh on the pound, increasing bets on a rate cut at the BoE's August monetary policy meeting. Additionally, some follow-through buying of the dollar is another factor influencing GBP/USD movements. Cautious market sentiment lifted the safe-haven dollar to its highest level since May 9, further bolstering the downward bias for GBP/USD, though the lack of follow-through selling requires bears to act cautiously. With signs of easing US inflationary pressures, market participants still price in two Fed rate cuts in 2024. This may curb further dollar appreciation and help limit GBP/USD downside potential.
The daily chart shows GBP/USD breaking below the lower boundary of the ascending channel at 1.2700 and 1.2645 (the 38.2% Fibonacci retracement level from 1.2299 to 1.2860). The 14-day Relative Strength Index (RSI) indicator fell to 42.70, reflecting a short-term bearish outlook. On the downside, 1.2618 (55-day SMA) and 1.2600 (psychological level) are key support levels. If GBP/USD breaks this level and begins to use it as resistance, it could further decline to 1.2579 (50.0% Fibonacci retracement level), with the next level pointing to 1.2500 (psychological level, static level). On the upside, 1.2700 and 1.2727 (23.6% Fibonacci retracement level) form strong resistance; a break above could aim for 1.2760 (last Monday's high).
Today, consider going long on GBP around 1.2665, with a stop loss at 1.2650 and targets at 1.2720 and 1.2730.
USDJPY
The yen showed strength, possibly due to verbal intervention by Japanese authorities. Masato Kanda from Japan stated that he would intervene around the clock if necessary. The US dollar edged higher as Federal Reserve officials continued to delay the timing of the first rate cut in 2024. On Monday, after a warning from Japanese Finance Minister Shunichi Suzuki, the yen rebounded, causing USD/JPY to fall to around 159.63, its intraday low. The yen maintained its position, likely due to intervention in the forex market by Japanese authorities. Japan's chief currency diplomat, Masato Kanda, stated on Monday that he would take appropriate measures if the forex market experiences excessive volatility. He warned about the negative economic impacts of such movements and emphasized his willingness to intervene around the clock if necessary. Meanwhile, the US dollar index, which measures the dollar's value against six major currencies, edged higher as Fed officials delayed the first rate cut this year. According to the CME FedWatch tool, investors now see a 65.9% chance of a Fed rate cut in September, down from 70.2% a week ago.
Technically, USD/JPY is now back at the edge of the "intervention zone," where Japanese authorities directly purchased yen in the open market in late April and early May to counter its depreciation. As a result, USD/JPY sharply retreated from 160 to around 152. On Monday, USD/JPY traded near 159.70. The daily chart shows a bullish bias, with the pair testing the upper limit of an ascending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) at 69.11 indicates upward momentum. Breaking above the ascending channel's upper limit of 159.35 last week has reinforced bullish sentiment, potentially pushing the pair towards the 160.20 level, a major resistance point and the highest level in 34 years, set in April. A break above 160.20 would target 162.17 (the 123.6% Fibonacci extension of the 160.20 to 151.85 move). Conversely, a break below 158.66 (last Friday's low) and 157.50 (the channel's middle line) could prompt a downward test of 156.60 (a trendline extending from the March 11 low of 146.48).
Today, consider shorting the dollar around 159.85, with a stop loss at 160.10 and targets at 159.00 and 158.80.
EURUSD
Due to a lack of new directional clues, EUR/USD remained within a limited range on Monday. The release of the UC PCE inflation data and FOMC meeting minutes later this week may provide some impetus. On Monday, EUR/USD stayed subdued for the third consecutive day, trading around the 1.0690-1.0685 region during the Asian session, just above its lowest level since early May. The unclear results of the French election continued to weigh on EUR/USD, exacerbating market concerns about the new government's potential to worsen the fiscal situation of the Eurozone's second-largest economy. Additionally, the preliminary Purchasing Managers' Index (PMI) data released last Friday showed a significant slowdown in Eurozone business activity growth in June. This, coupled with some follow-through buying of the dollar, has been a key factor putting downward pressure on EUR/USD. Traders might also prefer to wait for the US Personal Consumption Expenditure (PCE) price index data scheduled for release this Friday to gain insights into the Federal Reserve's rate cut path. This will play a crucial role in influencing near-term dollar price dynamics and provide some clear direction for EUR/USD.
From the daily chart, the latest uptrend support at 1.0668 (78.6% Fibonacci retracement level from 1.0601 to 1.0916) and 1.0675 (a support trendline extending from the April 16 low of 1.0601) is crucial this week. If EUR/USD breaks below this level and starts using it as resistance, technical sellers might remain interested. In this case, the next bearish targets could be set at 1.0601 (April 16 low) and 1.0600 (psychological level). On the upside, the first resistance is at 1.0758 (50.0% Fibonacci retracement level), with a break above potentially aiming for 1.0800 (psychological level).
Today, consider going long on EUR around 1.0710, with a stop loss at 1.0700 and targets at 1.0760 and 1.0770.
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