Short-Term Technical Picture for Dollar Turned More Neutral

The short-term technical picture for the dollar also turned more neutral. Still we see room for some bottoming. The EUR/USD 1.08 area probably won’t be that easy to regain in a sustainable way.

AUD/USD Hits One-month High, RBA Decision Next

The Australian dollar has started the week with modest gains. AUD/USD is up 0.25%, trading at 0.6624 in the European session at the time of writing. The Aussie is coming off a strong week, having gained 1.19%.

Euro Edges Higher as Eurozone Data Improves

The eurozone Sentix Investor Confidence index took a small step forward in May, rising to -3.6, up from -5.9 in April and was higher than expected. This was the seventh straight acceleration and the highest level since February 2022. The index, which has been in negative territory since February 2022, is creeping up to the zero level, which separates optimism from pessimism.

Sunset Market Commentary

With Japanese and US markets closed, Europe stood on its own to look for direction after Friday’s yield decline in the wake of weaker than expected US payrolls and services ISM. US markets again considering two potential Fed rate cuts (Sept +/- 90% discounted, 2nd in December +/- 80% discounted) gives European investors some additional comfort on an early ECB rate cut (June almost fully discounted).

Yen Rally Fizzles as US Dollar Climbs

The Japanese yen is sharply lower on Monday after stringing together a three-day rally.  USD/JPY is trading at 153.92, up 0.62% at the time of writing.

We Now Expect Two Rate Cuts from Fed This Year

We revise our Fed call to 2 rate cuts of 25bp this year in September and December. It will be a close call between July and September but with macro indicators showing no signs of sudden weakening, we lean towards September as our base case.

RBA Stays Pat, AUD Falls

Reserve Bank of Australia (RBA) left its policy rate unchanged today and warned that inflation is declining more slowly than expected, that persistence of services inflation is a key uncertainty, that it will be some time yet before inflation is sustainably in the target range and that they will remain vigilant to upside risks. Surprisingly, the kneejerk reaction to the decision has been a decline in the AUDUSD to the 66 cents level

Dollar Basically Didn't Go Anywhere

The dollar basically didn’t go anywhere. The DXY index closed unchanged (105.05). EUR/USD gained marginally (close 1.0769). USD/JPY was the exception to the rule, rebounding to 153.9. The US-Japan interest rate differential clearly remains too big to prevent yen selling.

Pound Shrugs as Construction PMI Jumps

The British pound is slightly lower on Tuesday. GBP/USD is down 0.21%, trading at 1.2535 in the European session at the time of writing.

Bitcoin Can't Accelerate But Won't Give Up Trying

On Monday, Bitcoin failed for the second time in a fortnight to break above the 50-day moving average. The price very easily went from $64.5K to $65.5K, where it met with impressive selling volume that pushed the price back to $62.6K by the end of the day. The positive performance of Asian and European stock exchanges fuels the appetite for Bitcoin. It cannot be ruled out that we will see further attempts to climb above the 50-day.