USD Index
At the beginning of this week, based on the recent ISM Manufacturing PMI data, the USD based on the USD Index has erased daily losses and is currently near 105.80. The continued high yield on US Treasury bonds continues to support the strength of the USD Index. The USD's performance shows that last week, the USD Index finally broke through the key threshold of 106.00 for the first time since early May. In fact, due to the widening monetary policy divergence between the Federal Reserve and most other G10 central banks, the USD Index has risen for four consecutive weeks. The Consumer Price Index (CPI) also reflects a decline in the US inflation rate. The Federal Reserve may start cutting interest rates by the end of this year. It is worth noting that the Federal Open Market Committee has indicated only one rate cut this year, likely at the December 18 meeting. However, recent weeks' CPI and Friday's Personal Consumption Expenditures (PCE) report show deflationary pressures re-emerging, coupled with a slowdown in key areas such as the US labor market, prompting market participants to start expecting the central bank to cut rates twice this year, in September and December.
The USD Index has maintained strong momentum since bottoming near 104.00 in early June, eventually breaking through the key threshold of 106.00. If the USD Index breaks above the June peak of 106.13 (June 26), it may face a double top formed in April and May at the 106.50 - 106.51 level. Once this area is broken, the USD Index may test 107.11 (the highest level since November 2023). On the other hand, the 55-day moving average at 105.24 guards the 105.00 integer threshold. The 100-day and 200-day moving averages are located below at around 104.72 and 104.50, forming a dual layer of support for any downturn. If the pullback is significant, the June low of 103.99 (June 4) and 104.00 (integer threshold) will become short-term key support levels.
Today, consider shorting the USD Index near 105.95, with a stop loss at 106.10, and targets at 105.60 and 105.50.
WTI Spot Crude Oil
U.S. WTI crude oil saw a significant rise on Monday, climbing nearly $2 per barrel. This surge was driven by new bidding pressure in the energy market amidst ongoing geopolitical tensions in the Middle East and hopes that abnormal high temperatures across the U.S. would stimulate enough demand to consume the supply. WTI crude oil prices attracted some dip buyers at Monday’s opening, staying close to the two-month high reached last Friday. However, WTI oil prices seem to be maintaining within the trading range of the past two weeks, currently trading around $84.00. Persistent conflicts in the Middle East and Ukraine's attacks on Russian refineries continue to heighten geopolitical risks, further fueling concerns over disruptions to crude supply from major oil-producing countries. Additionally, the peak summer fuel consumption and expectations of OPEC+ production cuts in the third quarter may lead to a global oil market supply shortfall, which is viewed as a key factor supporting oil prices. Nevertheless, the economic difficulties in China warrant caution from bulls before positioning for further rises in WTI oil prices, potentially limiting the upward space for oil prices.
From the daily chart, WTI crude oil prices refreshed an eight-week high at $83.80 early in the week, struggling around the $82.00 mark at the end of last week. Despite intraday price volatility, the "piercing pattern" and the bearish "death cross" of the 50-day and 100-day moving averages from the end of last week suggest the possibility of a test down to $80.00 (a psychological level). A break below this level points to the critical support area from the two main simple moving averages: 50-day ($79.10) and 200-day ($78.82), with a specific support level at $79.00. This may pose a substantial obstacle to further price declines and could mark a key turning point for oil prices. Bulls now need to break above $82.56 (the 23.6% Fibonacci retracement from $67.94 to $87.08) and $82.95 (last week's high), with the next targets challenging $84.14 (April 26 high) and the $85.00 level.
Today, consider going long on crude oil near $83.30, with a stop loss at $83.00, and targets at $84.50 and $84.70.
Spot Gold
On Monday, gold prices struggled to gain bullish momentum, trading near $2,330 during the U.S. session. The benchmark 10-year U.S. Treasury yield rose over 1% for the day, exceeding 4.4%, putting pressure on gold prices. In the early Asian session on Monday, gold prices fluctuated lower to around $2,323. Gold prices fell due to the Federal Reserve maintaining a cautious stance. Investors will closely monitor the U.S. June ISM Purchasing Managers' Index (PMI). San Francisco Federal Reserve Bank President Mary Daly stated last Friday that monetary policy is taking effect, but it is still too early to judge when it will be appropriate to cut rates. Daly further noted that "if inflation remains stubborn or slow to decrease, rates will need to stay higher for longer." It is noteworthy that higher rates typically drag on gold prices, as this increases the opportunity cost of holding non-yielding assets. However, according to CNN, ongoing geopolitical tensions and uncertainty following France's first round of parliamentary elections might drive safe-haven flows, supporting gold prices.
The daily chart shows that gold remains defensive after the "head and shoulders" chart pattern, suggesting a potential slight decline in gold prices. Momentum indicates that neither buyers nor sellers can control the situation in the short term, but the 14-day Relative Strength Index (RSI) remains bearish at 49.80. If gold prices break below $2,319.20 (last Friday's low) and $2,300 (psychological level), the next stop will be the support area at $2,284.20 (38.2% Fibonacci retracement from 2016 to 2450) and $2,288.50 (near the 89-day moving average). Conversely, on the upside, attention is focused on $2,337.60 (50-day simple moving average). If gold/USD breaks above this level and confirms it as support, technical buying may come into play and continue towards the two-week high of $2,368.70 and the June 7 high of $2,387.80.
Today, consider going long on gold near $2,326.00, with a stop loss at $2,322.00, and targets at $2,345.00 and $2,348.00.
GBPUSD
On Monday, GBP/USD rose above 1.2700 but struggled to maintain its position, falling back below 1.2650. Despite weaker-than-expected U.S. Purchasing Managers' Index data, a negative shift in risk sentiment helped the dollar recover, leading the pair lower. During the early Asian session on Monday, GBP/USD strengthened to around 1.2655. The dollar fluctuated lower as the Federal Reserve's preferred inflation indicator, the core PCE price index for May, continued to decline, fueling speculation of a Fed rate cut this year. The core PCE price index for May climbed to 2.6% from April's 2.8%, in line with expectations. Fed officials have emphasized in recent weeks that rate cuts will occur only when they are confident inflation has fallen close to the 2% target. If inflation data remains stubborn, the central bank is unlikely to advocate further rate cuts. The UK election on Thursday is likely to trigger volatility in GBP/USD. According to the latest exit polls, the opposition Labour Party is expected to defeat Prime Minister Rishi Sunak's Conservative Party.
Following the bearish momentum after breaking the ascending trendline support two weeks ago, the pound continued its downward trend. The 14-day Relative Strength Index (RSI) has fallen below 50, currently near 45.50, adding credibility to further declines. Additionally, GBP/USD broke the critical support level at 1.2645, the confluence of the 50-day (1.2651) and 100-day (1.2641) simple moving averages, signaling another bearish sign. However, before the weekend, the 50-day moving average crossed above the 100-day moving average, representing a new bullish golden cross, urging caution for sellers. GBP/USD needs to decisively break below last Thursday's low of 1.2612 to regain bearish momentum. The 200-day moving average at 1.2560 will be the next line of defense for GBP buyers; a break below this level will target 1.2500 (psychological level). Conversely, the weekly close must be above the aforementioned key confluence point at 1.2641 - 1.2651, which has turned from support to resistance, to attract buyers. The next upside target is at 1.2700 (psychological level) and 1.2727 (23.6% Fibonacci retracement). If the latter is breached, it will open the door to test the static resistance at 1.2800.
Today, consider going long on GBP near 1.2635, with a stop loss at 1.2620, and targets at 1.2690 and 1.2700.
USDJPY
The yen remains near a 38-year low at 161.72. The downside potential for the yen might be limited due to the Tankan Large Manufacturers Index rising to 13 in the second quarter, hitting a two-year high. The dollar is struggling due to recent inflation data raising expectations of Fed rate cuts in 2024. After Monday's opening, USD/JPY showed a lackluster performance, consolidating its recent strong gains, reaching the highest level since December 1986 last Friday. USD/JPY is currently trading near the 161.00 level, showing moderate bullish tendencies, but the upside seems limited due to market speculation that Japanese authorities might intervene to support their currency soon. Japanese Finance Minister Shunichi Suzuki reiterated the same message from Thursday, stating that the Japanese cabinet is "monitoring foreign exchange movements with a high sense of urgency," but this message has now lost its impact, as the market seems to act despite the department's requests. Meanwhile, the USD Index, which measures the value of the dollar against a basket of six major currencies, is in positive territory. Even though last week's US data failed to make the dollar outperform, durable goods prices were flat, and pending home sales shrank for the second consecutive month. Personal consumption expenditure figures were in line with their deflationary trajectory and did not cause any significant fluctuations.
USD/JPY continues to challenge the 161.00 level at the beginning of the week, the highest since 1986. Investors expect that Japanese authorities might intervene soon. While the level of the yen is a factor to consider, officials are indeed concerned about the pace of depreciation, as the purpose of intervention is to curb excessive volatility. Therefore, the path of least resistance for USD/JPY may currently remain upward. USD/JPY was last reported slightly above 161.00. On the daily chart, the bullish momentum remains intact, with the 14-day Relative Strength Index (RSI) maintaining above 75 and the Moving Average Convergence Divergence (MACD) showing new green bars. The key to the pair's future momentum will be holding above the April 29 high of 160.20 and 160.00 (psychological level). As long as buyers can maintain above this key level, the next resistance is at 161.72 (upper line of the ascending channel), with a break pointing to 162.17 (123.6% Fibonacci extension of 160.20 to 151.85). Support is at 160.00 - 160.20, followed by 159.40 (a support line extending from the May 2 low of 153.08) and then 158.41 (78.6% Fibonacci retracement).
Today, consider going long on USD near 161.30, with a stop loss at 161.00, and targets at 162.20 and 162.40.
EURUSD
EUR/USD extended its upward trend, hitting a three-week high near the critical 200-day moving average, but then failed due to a late rebound in the dollar. According to CNN, preliminary forecasts show that Marine Le Pen's far-right party, the National Rally, won 34% of the vote in the first round of France's parliamentary elections held last Sunday. Meanwhile, French President Emmanuel Macron's centrist alliance suffered significant losses, coming in third with 20.3% of the vote. EUR/USD opened higher in the Asian session at the start of the week, last reported at 1.0755. Overall, financial markets remain in a risk-averse mood, keeping major currency pairs within familiar levels due to the lack of tier-one macroeconomic data. Speculative interest seeks safety amid political turmoil in the euro area, particularly focusing on France and the upcoming elections. Meanwhile, the imbalance among central banks continues to favor the dollar, as the Federal Reserve firmly maintains a hawkish stance while its major counterparts lean towards dovishness.
EUR/USD ended June with a bearish trend, barely holding above the monthly low of 1.0665. On the daily chart, the bearish extension for EUR/USD appears more evident as the pair develops below all its moving averages. The 20-day simple moving average (1.0754) has accelerated downward, crossing below the flat 100-day (1.0792) and 200-day (1.0790) simple moving averages, maintaining its downward slope and providing dynamic resistance near 1.0760. Meanwhile, momentum indicators slightly rise below their 100 line, while the Relative Strength Index (RSI) moves slightly lower near 50, suggesting that EUR/USD may breach the 1.0660 support area. A break below this area could see EUR/USD continue its decline towards the yearly low of 1.0600. Resistance above the 1.0790-92 area is at 1.0800, while stronger selling interest may emerge if EUR/USD approaches the 1.0850 price area.
Today, consider going long on EUR near 1.0720, with a stop loss at 1.0705, and targets at 1.0770 and 1.0780.
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