USD
Amid signs of deflation in the U.S. economy, the U.S. dollar continues to struggle, reinforcing market participants' confidence that the Federal Reserve may cut interest rates in September. This week, statements from the Federal Reserve Chair and other governors could potentially save the dollar and limit losses, provided they maintain a cautious stance. The law of market prices is that what goes up must eventually come down, and vice versa. Consequently, over the past week, after reaching a multi-week high above the 106.00 level, the U.S. Dollar Index faced strong selling pressure. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six major currencies (euro, yen, Swiss franc, Canadian dollar, British pound, and Swedish krona). Against this backdrop, the index fell for the first time last week after rising for four consecutive weeks. In recent days, there has been a noticeable retracement in the U.S. Dollar Index, primarily due to investors repricing the likelihood of the Federal Reserve cutting interest rates sooner. Last week's disappointing fundamental results in the U.S. also contributed to this situation, with a primary focus initially on the labor market and subsequently on the services sector. An exception was the U.S. non-farm payroll data, which showed robust performance again, but the unemployment rate rose for the third consecutive month to 4.1%.
Looking at the fluctuations of the U.S. Dollar Index, the dollar closed last week at a mid-session low, down about 1.0%, ending its four-week rising streak. While the monthly chart shows a long-term upward trend, the short-term shows limited support or resistance. Therefore, an immediate priority is to break above the 50-day simple moving average at 105.10 and the psychological market level of 105.00. Importantly, if buying pressure is suppressed from this area, the technical pendulum could swing bearish, targeting the 200-day simple moving average at 104.49 and the 104.43 support level (50% Fibonacci retracement from 102.35 to 106.51). After the non-farm payroll released worse than market expectations, traders seem to be reducing their long positions, and the U.S. Dollar Index could plummet to last month's low at 103.99. On a positive note, after a firm rejection in early tests last week, the 50-day simple moving average at 105.10 and 105.00 (psychological market level) have now become resistance, while the 10-day moving average at 105.51 and 105.52 (23.6% Fibonacci retracement from 102.35 to 106.51) have become key obstacles for a rebound of the U.S. Dollar Index.
Today, consider shorting the U.S. Dollar Index around 105.00, with a stop loss at 105.10 and targets at 104.65 and 104.60.
WTI Spot Crude Oil
Due to ongoing discussions about a ceasefire plan to end the conflict in Gaza, WTI crude oil prices have fallen to around $82.00. The drop in WTI prices is attributed to discussions about a U.S.-brokered ceasefire plan to end the Gaza war. Oil prices may rise as Tropical Storm Beryl could disrupt U.S. energy supplies. Increased bets on a Fed rate cut might support oil demand. After reaching a two-and-a-half-month high near $84.65 last week, WTI continued to pull back to around $83.00 in Monday's Asian session. Oil prices are under pressure due to investor concerns that Tropical Storm Beryl could disrupt U.S. energy supplies. Although the crude oil market was affected by multiple factors last week, overall volatility was limited. Despite short-term uncertainties due to geopolitics and natural disasters, long-term expectations of steady global economic growth and loose monetary policy will continue to support crude oil demand and prices. With continued growth in summer demand and gradual recovery of global economic activities, the crude oil market is expected to maintain a stable development trend.
Technically, with the 14-day Relative Strength Index (RSI) and stochastic indicators trending upwards, oil prices are expected to test higher levels. Current resistance is projected near the April 26 high of $84.50 and last Friday's high of $84.65, forming a "double top." The next level to watch is $85.80 (a trend line extending right from the April 5 high of $87.08). If oil prices continue to rise, they are aimed at the $87.08 level from April 5. As for downward pressures, support is estimated at $81.81 (23.6% Fibonacci retracement from $72.62 to $82.65). If it breaks below this support zone, the next level expected is $80.00 (psychological market threshold).
Today, consider going long on crude oil around $82.20, with a stop loss at $82.00 and targets at $83.30 and $83.50.
XAUUSD
After reporting impressive gains on Friday, gold remains under bearish pressure, falling to below $2350 on Monday. Reports that the People's Bank of China has paused its gold purchases for the second consecutive month in June have pressured gold prices. In early Asian trading on Monday, gold attracted some selling around $2385, ending a three-day rise. The drop in gold prices was due to a modest rebound in the dollar, along with the People's Bank of China pausing gold purchases for the second consecutive month. However, safe-haven flows driven by political uncertainty could boost precious metals. The Federal Reserve's meeting minutes indicated that policymakers acknowledge that price pressures are receding, sparking expectations for a Fed rate cut this year, which could drag the dollar lower and boost gold priced in dollars. Additionally, unclear political prospects in Europe (especially France) and tense geopolitical situations in the Middle East could drive safe-haven flows, benefiting precious metals. At this stage, gold prices are still somewhat elevated, and the People's Bank of China is waiting for further price declines before resuming its gold purchasing plans. Notably, as China is the world’s largest gold consumer, its pause in purchases could exert pressure on gold prices.
From the daily chart, the 14-day Relative Strength Index (RSI) is heading towards 60, and gold has closed above the 50-day ($2341.10) and 20-day ($2334.80) simple moving averages for three consecutive days, indicating that bullish momentum is building. On the upside, before the psychological price level of $2400, $2393 (last week's high) is an intermediate resistance level. Once gold climbs above this and confirms it as support, it might target the all-time high of $2450. The key support zone seems to have formed around $2340-$2330, where the 20-day moving average ($2334), the 50-day moving average ($2341), and the 23.6% Fibonacci retracement from the mid-February low of $1984 to the June high of $2450 converge. If gold/USD returns below this level and begins to treat it as resistance, the next support level could be $2300 (psychological level).
Today, consider going long on gold around $2354.00, with a stop loss at $2350.00 and targets at $2370.00 and $2375.00.
AUDUSD
The AUD/USD managed to climb to a six-month high near 0.6760, although bullish attempts seem to have lost momentum due to a later rebound in the U.S. dollar. In early Asian trading on Monday, the AUD/USD fluctuated lower to 0.6740, breaking a four-day winning streak. Under the influence of cautious market sentiment, demand for the U.S. dollar resurfaced, putting pressure on the AUD/USD. Since there are no significant data releases from Australia and the U.S. on Monday, fluctuations in the U.S. dollar will be the primary driver for the AUD/USD. The latest U.S. employment data increased the probability of a Fed rate cut in September, with market pricing of a September rate cut rising from 70% before the non-farm payroll release to 77%. Expectations of a Fed rate cut may put some selling pressure on the U.S. dollar in the short term. On the Australian side, rising inflation rates and stronger retail sales and services PMI have prompted the Reserve Bank of Australia (RBA) to maintain a hawkish stance, which could continue to support the AUD/USD.
At the start of the week, the AUD/USD exchange rate is around 0.6740. Daily chart analysis indicates that the AUD/USD is still operating above an upward wedge, suggesting potential bullish continuation. Additionally, the 14-day Relative Strength Index (RSI) is just below the 70 level. A downward movement in the RSI suggests that the asset may undergo an adjustment. On the downside, the AUD/USD pair might find initial support at the 0.6700 (psychological threshold) and 0.6695 (the upper line of the horizontal channel on the daily chart). If broken, it could challenge further down to 0.6676 (61.8% Fibonacci retracement from 0.6871 to 0.6362), and 0.6666 (lower support line of the upward wedge), followed by targeting the 0.6600 (psychological level). On the upside, the first area of interest is the key resistance zone at 0.6762 (78.6% Fibonacci retracement). Further looking towards the psychological level near 0.6800, followed by 0.6820 (upper resistance line of the daily upward wedge).
Today, consider going long on the AUD/USD around 0.6720, with a stop loss at 0.6705 and targets at 0.6765 and 0.6770.
GBPUSD
The GBP/USD has recovered ground, climbing to its highest level since mid-June, surpassing 1.2800. As the market's focus shifts to Federal Reserve Chair Jerome Powell's congressional testimony, the U.S. dollar struggles to find demand, further driving up the GBP/USD rate. On Monday, the GBP/USD continued its rise from last week's rebound, pushing the pair back to 1.2800, the highest level in nearly three weeks. The strong rebound from a six-week low to multi-week highs for GBP/USD was primarily due to a significant pullback in the U.S. dollar against its major counterparts. Dovish remarks by Fed Chair Jerome Powell at the ECB's Sintra Central Banking Forum spelled doom for the dollar. On Tuesday, Powell acknowledged progress on disinflation. On the UK side, the pound has remained robust since the beginning of the month, as the market has already priced in an overwhelming victory for the Labour Party. The pound is not highly sensitive to exit polls and the results of the UK 2024 general election, as the market needs some time to assess the impact of the Labour victory on the prospects for Bank of England rate cuts and domestic currency performance.
The GBP/USD rebounded from a strong support near 1.2612 and broke through all major daily simple moving average resistance levels. The 14-day Relative Strength Index (RSI) has reclaimed 50 and is now approaching 60, indicating that the risk is shifting upward. These bullish technical indicators suggest that the path of least resistance for the GBP/USD pair appears to be upward. The main resistance is now located near the intermittent highs of 1.2860 (June 21 high) and 1.2893 (March 8 high). If it continues to break through the key upward barrier of 1.2893, it could push GBP/USD towards the psychological level of 1.2950. Conversely, if it fails to find a foothold above the supply zone of 1.2800-1.2815, it will enhance selling interest, and GBP sellers will again target the 1.2706 level, the 20-day moving average. If the decline persists, the 50-day moving average at 1.2678 could be the next support level. Further down, the 200-day moving average at 1.2575 will inevitably be tested.
Today, it is suggested to go long on GBP at around 1.2790, with a stop loss at 1.2770 and targets at 1.2840 and 1.2850.
USDJPY
The USD/JPY pair has retraced after touching the top of its rising channel. It found support at key levels and has stabilized. In the short term, the outlook remains bearish, but the risks of a recovery have increased. The yen rose for the third consecutive trading day on Monday. The dollar fell against the yen following the release of weaker-than-expected U.S. employment growth data on Friday. Japan's current account surplus extended its growth momentum into the 15th month in May. The Japanese Ministry of Finance reported on Monday that the current account surplus increased from 205.5 billion yen in the previous month to 2,849.9 billion yen ($17.78 billion), surpassing the market expectation of 2,450 billion yen. U.S. non-farm payrolls in June exceeded market expectations, and the unemployment rate also rose. These developments have sparked trader speculation that the Federal Reserve might start cutting interest rates sooner than expected. With a significant U.S.-Japan interest rate differential and no intervention from Japanese authorities, the USD/JPY continues to hover near a 38-year low. Looking ahead, the market is focused on the Bank of Japan's interest rate decision on July 31st. However, if Japanese authorities' rate hikes or reductions in bond purchases are less aggressive than expected, USD/JPY may continue to climb.
On Monday, USD/JPY traded slightly above 160.00, and the daily analysis shows a bullish inclination. The pair remains within an upward channel mode. However, caution is warranted as the 14-day Relative Strength Index (RSI) has dropped below 62, suggesting that the ongoing upward trend may weaken. In the short term, initial resistance for USD/JPY is at 161.40 (the midpoint of the upward channel), with a second resistance level at the pivot line 161.95 (last week's high), followed by 162.20 (1.236% Fibonacci retracement from 160.23 to 151.85). Breaking above this level could strengthen bullish sentiment and potentially drive the pair to form a psychological resistance at 163.00. On the downside, 160.00 (psychological threshold) and 159.80 (first support of the midpoint of the upward channel) are already key levels. If this level is breached, USD/JPY will inevitably plunge to 158.43 (78.6% Fibonacci retracement from 160.23 to 151.85) and 158.00 (whole number threshold).
Today, it is advised to go short on USD at around 161.05, with a stop loss at 161.20 and targets at 160.00 and 159.90.
EURUSD
The EUR/USD halted its multi-day rise on Monday, hovering around 1.0850 and facing some new downward pressures as buying interest in the greenback revived. The EUR/USD oscillated weaker near 1.0820. Following the second round of French parliamentary elections on Sunday, the uncertain political landscape in France exerted selling pressure on the euro. President Emmanuel Macron's centrist alliance party won 146 seats, while Marine Le Pen's party was pushed to third place, securing about 142 seats. Some selling interest in the euro was triggered by exit polls indicating a hung parliament in the final round of the French parliamentary elections. On the U.S. side, following slow growth in U.S. employment data, the probability of a Fed rate hike increased, which could drag the dollar lower and limit the downside for EUR/USD. Traders will get more clues from the U.S. Consumer Price Index (CPI) inflation data set to be released on Wednesday, seeking new trading momentum, with June's inflation rate expected to drop to 3.1% from May's 3.3%.
Technical indicators on the weekly chart raise doubts about whether EUR/USD can rebound more strongly. The EUR/USD is contesting near the flat 20-week simple moving average (SMA) at 1.0785, while the flat 100-week SMA provides dynamic support near 1.0675. Meanwhile, technical indicators have enhanced upward momentum but remain at neutral levels. On the other hand, the EUR/USD continues to look bullish on the daily chart, as the pair trades comfortably above all moving averages. The flat 100-day (1.0794) and 200-day SMAs (1.0797) converge around 1.0795, and the 20-day SMA also levels off but in the 1.0743 area. At the same time, although technical indicators have lost some bullish strength, they remain at a positive level.
The 1.0870 area (50.0% Fibonacci retracement from 1.0601 to 1.1139) serves as a resistance level, but if this resistance is broken, the EUR/USD will face levels at 1.0933 (61.8% Fibonacci retracement) and 1.0943 (March 21 high), continuing its advance towards 1.0960.
Today, it is advised to go long on EUR at around 1.0808, with a stop loss at 1.0800 and targets at 1.0850 and 1.0860.
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