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USD/MXN stays defensive around 17.20 amid the early hours of Wednesday’s Asian session, after posting the biggest daily jump in a month to extend the previous week’s rebound from the lowest level since 2016.

In doing so, the Mexican Peso (MXN) pair justifies the options market signals to pare recent gains as traders brace for Fed Chair Jerome Powell’s bi-annual Testimony, up for publishing on Wednesday, as well as Thursday’s Banxico Interest Rate Decision.

That said, the one-month Risk Reversal (RR) of the USD/MXN pair, a measure of the spread between call and put prices, prints the biggest daily jump in a monthly by flashing a 0.112 figure, up for the second consecutive day, per the latest options market data from Reuters.  With this, the USD/MXN pair’s weekly RR snaps the four-week downtrend with the 0.150 mark.

The Mexican Peso pair’s consolidation might have also taken clues from the pre-event consolidation, as well as the market’s latest risk-off mood that underpinned the US Dollar’s haven demand.

Also read: USD/MXN: MXN surrenders to USD amidst crucial week for Banxico decision, Fed’s Powell speech eyed

• GBP/USD pauses corrective bounce off one-week low after two-day losing streak as UK inflation data looms.
• Overbought RSI suggests further grinding of Cable prices toward the south but 10-DMA, May’s peak can prod bears.
• Pound Sterling needs clear break of 1.2850 and upbeat UK CPI to aim for the 1.3000 psychological magnet.

GBP/USD fades corrective bounce off weekly low as it retreats to 1.2760 amid the early hours of Wednesday’s Asian session, sidelined of late. In doing so, the Cable pair inability to defend the previous week’s upside break of a five-month-old resistance line amid the overbought RSI conditions. It’s worth noting that the Pound Sterling’s latest inaction could be linked to the market’s cautious mood ahead of the UK’s top-tier inflation clues including the Consumer Price Index (CPI) for May.

Also read: GBP/USD retraces below 1.2800 on a strong USD, ahead of Powell testimony, BoE’s decision

Given the overbought RSI (14) line and the Cable pair’s inability to stay beyond the key resistance line, the GBP/USD bears are well-set to extend the previous two-day downtrend. However, the previous monthly high join the 10-DMA to highlight the 1.2685-80 region as the short-term key support zone for them to conquer to tighten the grip.

Also acting as a short-term downside filter is an upward-sloping trend line from June 05, close to 1.2645 by the press time.

In a case where the GBP/USD pair breaks the 1.2645 support, the early June swing high of near 1.2545 will precede a 3.5-month-old ascending support line, close to 1.2475, to please the bears before directing them to the January 2023 peak of near 1.2450.

On the contrary, GBP/USD recovery needs to cross the latest monthly peak of around 1.2850 to aim for the early April 2022 low of near 1.2975-80.

Following that, the 1.3000 psychological magnet may act as an extra check for the Pound Sterling bulls before giving them control.

GBP/USD: Daily chart

Trend: Further downside expected

“Business morale at big Japanese manufacturers edged up in June, staying in positive territory for a second straight month and reflecting a post-COVID economic recovery though uncertainty remains high amid slowing global growth,” showed the latest Reuters Tankan poll, for June.

The sentiment poll also said that there would be a steady recovery in business sentiment in the Bank of Japan's (BOJ) closely watched Tankan quarterly survey due next on July 3.

“In the Reuters poll of 493 large companies, of which 232 responded on condition of anonymity, many firms cited the post-COVID rebound in demand as a positive factor, while risks stemmed from overseas economies,” adds the update.

Key findings

USD/JPY extends pullback from yearly low

Following the release, USD/JPY stretches the previous day’s retreat from the highest level in seven months to 141.30 heading into Wednesday’s Tokyo open.

Also read: USD/JPY Price Analysis: Bears eye a run to test 141 the figure

• EUR/JPY faces a neutral downward trend in the short term.
• Key support at Tenkan-Sen, Senkou Span B lines, though the EUR/JPY trades inside the Ichimouku cloud.
• Resistance awaits at 154.61 daily pivots, ahead of breaching the 155.00 figure.

The EUR/JPY drops as the Asian session commences, following a bearish session on Tuesday that witnessed a fall of 0.40%. However, expectations for further tightening by the European Central Bank (ECB) capped the cross’s fall. At the time of writing, the EUR/JPY exchanges hand at 154.37, down 0.02%.

EUR/JPY Price Analysis: Technical outlook

The daily chart portrays the pair in a strong uptrend, though price action is overextended, as the Relative Strength Index (RSI) exists from overbought conditions. That triggered the EUR/JPY downward correction toward the current week’s low of 154.04, but the pair recovered some traction since then.

In the short term, the EUR/JPY 1-hour chart portrays the pair as neutral downwards. Traders must be aware the EUR/JPY is trading inside the Ichimoku cloud; therefore, price action would remain capped withint the Span A and B lines, each at 154.94/154.20.

If EUR/JPY breaks below the Tenkan-Sen line and the Senkou Span B line at around 154.32/20, the EUR/JPY would accelerate its downtrend. The next support would be the 154.00 figure, followed by the S1 daily pivot at 153.84. A decisive break will expose the 153.50, followed by the S2 pivot point at 153.27.

Conversely, the EUR/JPY first resistance would be the daily pivot at 154.61. Once cleared, the Kijun-Sen line is up for grabs at 154.71, followed by the Senkou Span A at 154.94, before cracking the 155.00 figure.

EUR/JPY Price Action – Hourly chart

New Zealand (NZ) Minister of Finance (FinMin) Grant Robertson crossed wires, via Reuters, early Wednesday in Asia while confirming that the economic environment in the Pacific nation remains challenging.

“Projections for budget spending are ‘responsible’,” added the policymaker while also saying that he is not prepared to deliver an austerity budget.

NZ FinMin Robertson previously criticized higher rates by saying that tere have been long standing concerns that the market is not working well for New Zealanders.

Also read: NZ FinMin Robertson, Treasury criticize higher interest rates

NZD/USD pauses corrective bounce

Following the news, NZD/USD pauses the late Tuesday's corrective bounce off the lowest level in a week by grinding near the intraday high of around 0.6170. It's worth noting that the hawkish Fed talks and fears surrounding China previously weighed down the Kiwi pair.

Also read: NZD/USD defended the 200-day SMA, still vulnerable

• XAU/USD lost more than 0.70% and challenges the $1,925 monthly low.
• Sour market mood amid PBoC rate cuts to limit Gold’s losses.
• Eyes on Chair Powell’s testimony before Congress on Wednesday.

The yellow metal traded with losses on Tuesday’s session, heading towards the $1,935 area despite a sour market mood following the People’s Bank’s of China (PBoC) rate cuts which fueled global economic downturn fears. In that sense, the US bond yields weakened across the board, but the US Dollar managed to hold its ground and hence weakened the XAU/USD pair.

Gold prices couldn’t capitalize on the sour market mood following PBoC's decision

During the Asian trading session, the People's Bank of China took a significant step by announcing a reduction in the benchmark Loan Prime Rates (LPRs) by ten basis points (bps). Moreover, the one-year LPR was cut from 3.65% to 3.55%, while the five-year LPR was lowered from 4.30% to 4.20%. These rate cuts served as a reminder to investors about the sluggishness observed in Chinese economic activity and fueled global economic downturn fears..

As a result, the US bond yields, which could be seen as the opportunity cost of holding Gold, lost ground. The 10-year bond yield retraced to 3.72%, the 2-year yield closed at 4.69% while the 5-year at 3.95%, all three with more than 1% declines.

Elsewhere, the US stock market weakened on Tuesday, as all three major indices closed in negative territory. The S&P 500 index (SPX) saw a 0.47% loss, the Dow Jones Industrial Average (DJI) a 0.72% loss, and the Nasdaq Composite (NDX) a 0.09% decline.

Investors are now shifting their focus to Jerome Powell's testimony before Congress during Wednesday's session, as they seek any hints or indications regarding the Federal Reserve's monetary policy next steps.

XAU/USD Levels to watch

Technically speaking, the XAU/USD maintains a bearish outlook for the short term, as per indicators on the daily chart. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both showing weakness, standing in negative territory. In addition, the price now trades below the 20- and 100-day Simple Moving Average (SMA) with both of them about to perform a bearish cross.

The monthly low at $1,925 level stands as a key support level. If broken, the $1,915 area and psychological mark at $1,900 could come into play. Furthermore, a move above the 100-day SMA at $1,942 would suggest a continuation of the bullish trend for the yellow metal, with next resistances at the 20-day SMA at $1,953 and the $1,975 zone.

XAU/USD Daily chart

• EUR/USD hesitates justifying US Dollar strength, grind higher after three-day downtrend.
• ECB policymakers keep suggesting higher rates even as inflation clues, growth numbers ease.
• Fed talks reiterate hawkish bias ahead of Powell’s bi-annual Testimony, US housing numbers came in strong.
• Risk-off mood, upbeat US data and hawkish Fedspeak allow Euro bears to stay hopeful.

EUR/USD edges higher past 1.0900 amid early hours of Wednesday’s Asian session, defending the late Tuesday’s rebound from the lowest levels in three days around 1.0920, as markets prepare for the week’s key events. In doing so, the Euro pair stays defensive despite broad US Dollar strength as the European Central Bank (ECB) Officials remain hawkish about future policy moves.

European Central Bank (ECB) policymaker Boris Vujčić said on Tuesday that they have to consider the risk of doing too much vs too little, adding that a soft landing might not be possible. On the other hand, ECB Governing Council member, Olli Rehn said that the underlying inflation is easing ‘only gradually’.

It should be noted that Germany’s Producer Price Index (PPI) rises by 1.0% for May versus 1.7% YoY expected and 4.1% prior whereas the monthly figures spread disappointment with -1.4% mark compared to -0.7% market forecasts and 0.3% previous readings. Previously, downbeat German and Eurozone statistics raised recession woes in the bloc.

On the other hand, Federal Reserve Governor Lisa Cook said "I am committed to promoting sustained economic growth in a context of low and stable inflation," in her statement to be given before the Senate on Wednesday. Further, Federal Reserve Governor Philip Jefferson said, “I remain focused on returning it to our 2% target.”

That said, US Housing Starts jumped to the highest level since April 2022 by rising 21.7% MoM in May versus -2.9% (revised from +2.2%) recorded in April and -0.8% market forecasts. On the same line, Building Permits were also upbeat for the said month, up 5.2% MoM versus -5.0% expected and -1.4% previous readings (revised from -1.5%).

Apart from the Fed versus ECB play and the data counters, the market’s risk-off mood also allowed the US Dollar to remain firmer and weigh on the EUR/USD price. That said, the sentiment soured after the People's Bank of China (PBoC) cut two key lending rates (Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate for the first time in almost a year. Additionally weighing on the risk appetite was the US-China tension about Taiwan.

Amid these plays, the Wall Street benchmark began the week on the negative side while the US Treasury bond yields also snapped a two-day winning streak.

Moving on, EUR/USD traders should pay attention to the speeches from second-tier ECB officials ahead of Fed Chair Jerome Powell’s bi-annual Testimony. Should Powell defends the hawkish moves, the Euro pair may witness further downside.

Technical analysis

Unless providing a daily close beyond the 1.0945-50 immediate resistance zone, the EUR/USD pair remains vulnerable to testing convergence of the 21-day and 50-day Exponential Moving Average (EMA), around 1.0835-30 by the press time.

• USD/JPY bears eye a run towards trendline support.
• The 38.2% Fibo is exposed on the daily chart. 

The US Dollar index moved up on Tuesday and sank the Yen as investors weighed the US interest rate outlook ahead of Federal Reserve Chair Jerome Powell's congressional testimony. US Treasury yields also eased but USD/JPY fell to 141.21 from a high of 142.25 nonetheless. The following illustrates that there is further downside potential in the correction as anticipated in prior analysis, USD/JPY Price Analysis: Bulls throwing in the towel, 38.2% Fibo eyed?,

USD/JPY prior analysis

The bears were anticipated to move in which left the Fibonacci scale open for mitigation to the downside and move to test near-term trendline support. 

USD/JPY update

Bulls are yet to be seen which leaves scope for further downside with the 38.2% Fibonacci still in tact and vulnerable to a test, exposing 141 the figure for the day ahead.

• AUD/JPY sees a bearish trend below 96.00, with sellers eyeing the 95.00 figure.
• The AUD/JPY could potentially slide to the Tenkan-Sen line at 95.41.
• Upside resistance lies around 97.00 after the AUD/JPY surpasses key resistance levels.

As the Asian session began, the AUD/JPY exchanged hands at around 95.96, following Tuesday’s price action. The AUD/JPY formed a three-candle evening star chart pattern, which suggests further downside action is expected.  

AUD/JPY Price Analysis: Technical outlook

From the daily chart perspective, the AUD/JPY remains upward biased in the medium term, but a back-to-back bearish session suggests downside action is warranted. If the AUD/JPY slides past the June 20 daily low of 95.57, that could drive the price toward the Tenkan-Sen line at 95.41. A breach of the latter could tumble the AUD/JPY below the 95.00 handle, exposing the 94.00 figure immediately followed by the Kijun-Sen line at 93.96.

Dropping to the 1-hour chart, the AUD/JPY is set to extend its losses, but support lies at the Tenkan-Sen line at 95.80. Once cleared, the cross would test the 95.57 June 20 low before challenging the S1 daily pivot at 95.20, followed by the S2 pivot at 94.46.

Conversely, if AUD/JPY cracks the 96.00 figure, it would exacerbate a rally toward the bottom of the Ichimoku cloud. The next resistance would be the daily pivot at 96.30, followed by the Kijun-Sen line at 96.49, before testing the bottom of the cloud at around 97.00.

AUD/JPY Price Action – Hourly chart

• The GBP/JPY traded in the 179.93 - 182.09 range, setting a second consecutive day of losses.
• BoJ intervention prospects help the Yen gain traction.
• Eyes on inflation data from the UK on Wednesday, ahead of BoE's decision.

On Tuesday, the GBP/JPY pair suffered losses as the Yen gained traction on the back of Bank of Japan rumours to intervene in the market to bolster the domestic currency. On the other hand, investors await UK’s inflation data at the early London trading hour’s ahead of the Bank of England’s (BoE) decision on Thursday.

Japanese government to intervene in the markets to stop the Yen’s decline

According to a Reuters poll, most economists anticipate that Japan's government and the BoJ will intervene if the Japanese Yen weakens and reaches 145 per U.S. Dollar. Market participants will closely watch for any hints of intervention in the June BoJ meeting minutes, scheduled for release early on Wednesday in the Asian session.

On the other hand, The UK National Statistics Office is set to release the May CPI figures on Wednesday. Expectations suggest a slight deceleration, with the headline figure anticipated at 8.5% compared to the previous 8.7%. Additionally, a 0.4% monthly increase is expected for May. The Core figure is projected to remain unchanged at a year-on-year rate of 6.8%.

For Thursday’s BoE’s decision, a 25 basis point (bps) rate hike is already priced in, so inflation data may strengthen or weaken the case for a larger increase of 50 bps. In addition, eyes will be on Governer Andrew Bailey’s presser, where market participants will look for clues regarding the next monetary policy decision. As for now, investors anticipate 25 bps hikes in August, September, November, and December. These hikes would potentially bring the policy rate to a peak of around 5.75%.

GBP/JPY Levels to watch

The GBP/JPY currently exhibits a neutral to bearish bias in the short term. Although the bulls have lost some momentum, technical indicators continue to show positive signals, implying the potential for further upward movement in the market.

If GBP/JPY manages to regain momentum, the next resistances to watch are at the 181.00 area, followed by the 181.50 zone and the cycle high at 182.12. On the other hand, in case the cross loses more ground, support levels line up at the nearest round levels at the 180.50 area and below the psychological mark at 180.00 and the 179.50 zone.

GBP/JPY Daily chart

Federal Reserve Governor Lisa Cook said "I am committed to promoting sustained economic growth in a context of low and stable inflation," in her statement to be given before the Senate on Wednesday. "As I stated to this committee last year, elevated inflation is a grave threat to sustaining the expansion of the American economy," Cook said, adding "If confirmed, I will stay focused on inflation until our job is done."

Key notes

• Elevated inflation is a `grave threat' to US economy.
• Focused on inflation ‘until the job is done’.
• American economy at ‘critical juncture’.

Fed’s Jefferson also made remarks:

• Remain focused on returning inflation to 2%.
• Fed must remain attentive to inflation, banking-sector stress.
• Geopolitical uncertainty - us banking system is sound & resilient.

• US Dollar update

The US Dollar index DXY on Tuesday rose from 102.32 to a high of 102.785 and recovered from early losses posting modest gains. Tuesday’s better-than-expected US housing news was bullish for the US Dollar.

• AUD/USD bulls are in the process of a minor correction.
• The bias remains bearish towards the daily 61.8% Fibo area.

As per the prior analysis, AUD/USD Price Analysis: Bears grind towards key 4-hour support, the bears made their moves and squeeze longs out all the way to a 50% mean reversion of the prior daily bullish impulses range. The following is an analysis of the moves and offers possibilities for the forthcoming sessions and days. 

AUD/USD prior analysis

The pair were meeting resistance and the support structures were then put into focus.

Dropping down to the 4-hour chart, the bears were in anticipation of a move into both horizontal and trendline supports.

AUD/USD updates

The price has continued lower in a 50% mean reversion of the daily bullish impulse at 0.6770 reaching a low of 0.6753 and towards a weekly 38.2% Fibonacci level near 0.6730. 

The 4-hour chart shows the price correction from the 0.6750 area. This leaves prospects of a move-in on the 38.2% Fibonacci a 50% mean reversion to test the 0.68 figure again and even a 61.8% ratio higher up prior to the next downside impulse getting underway. 

Dropping down to the hourly chart, we see that the 50% mean reversion area guards an inefficiency between thereabouts, 0.6812 highs and 0.6850. The bottom of the inefficiency areas tend to act as a resistance.

• USD/CHF sees a 0.30% rise late in the North American session, fueled by expectations of a US rate hike in June.
• Despite a neutral to downward bias, the recent correction has investors optimistic about breaching several resistance levels, including the crucial 0.9000 mark.
• Mixed signals from oscillators suggest caution is warranted for USD/CHF buyers.

USD/CHF advances late in the North American session, as the greenback remains bolstered by expectations the US central bank would raise rates in June. Furthermore, the market mood was dampened amidst uncertainty about the US Federal Reserve (Fed) Chair Jerome Powell's testimony in the US Congress. At the time of writing, the USD/CHF is trading at 0.8980, a gain of 0.30%.

USD/CHF Price Analysis: Technical outlook

From a technical perspective, the USD/CHF is neutral to downward biased. However, the recent correction keeps buyers hopeful of shifting the pair bias to neutral if several resistance levels are breached. Firstly, the USD/CHF must reclaim the 0.9000 figure, followed by conquering the 20-day Exponential Moving Average (EMA) at 0.9007. In that outcome, the next supply zone would be the June 15 daily high at 0.9056, followed by the confluence of the

Conversely, and the path of least resistance, the USD/CHF first support would be the June 16 low at 0.8940. Once cleared, the pair could dive towards the 0.8900 figure, ahead of challenging the year-to-date (YTD) low of 0.8819.

Oscillators offer mixed signals, with the Relative Strenght Index (RSI), although at bearish territory, aiming north; while the three-day Rate of Change (RoC) portrays the pair

USD/CHF Price Action – Daily chart

• NZD/USD fell below the 100-day SMA to a low of 0.6133 but recovered and stabilized at 0.6160.
• The USD gained ground on upbeat Housing Data, all eyes on Jerome Powell’s testimony.
• Market mood turned cautious amid PBoC rate cut.

On Tuesday, while US traders returned from their three-day weekend, the NZD/USD dropped to its lowest level in over a week, towards the 0.6130 area. The announcement by the People’s Bank of China (PBoC) to cut rates and a strong USD are the main reasons why the Kiwi weakened.

PBoC cut rates, while the US released upbeat housing data

During the Asian session, the People's Bank of China announced a reduction of the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps). Moreover,  the one-year LPR was cut from 3.65% to 3.55%, while the five-year LPR from 4.30% to 4.20%. In that sense, the rate cuts reminded investors about the weakness seen in the Chinese economic activity, and as China is a huge trading partner of New Zealand, the Kiwi lost traction.

On the other hand, Housing Starts data released by the US Census Bureau for May exceeded expectations, demonstrating a notable increase of 21.7% vs the anticipated decline of 0.8%. In addition, Building Permits from the same month increased 5.2%, while the consensus was a 5% decline. As a reaction, the Greenback, as per the DXY index, held its ground at 102.60, seeing gains on the day despite a decline in US bond yields seen across the board, which signal a cautious market mood amid higher demand for safe-haven bonds. In that sense, the 10-year rate led the fall, seeing a 2.35% decline on the day to 3.73%.

Attention now turns to Jerome Powell's testimony before Congress during Wednesday's session, where investors will look for any clues regarding the Federal Reserve monetary policy. In addition, the release of Jobless Claims data on Thursday and S&P PMI data on Friday can also have an impact on the USD price dynamics.

NZD/USD Levels to watch

According to the daily chart, the technical outlook for the NZD/USD turned bearish as the bears cleared in the last two sessions, a great deal of last week’s gains. In addition, technicals have fallen into negative territory while the pair now trades below the 100 and 200-day Simple Moving Averages (SMAs).

On the downside, support levels line up at the daily low at the 0.6130 area, followed by the 20-day SMA at 0.6108, and the psychological mark of 0.6100. On the upside, the 100 and 200-day SMA at 0.6150 and 0.6212 are the next resistance to retake in order to reignite bullish momentum.

What you need to know on Wednesday, June 21:

The US Dollar kept grinding higher on Tuesday as the market mood soured on fears that Chinese economic growth has lost momentum. The focus now shifts to Federal Reserve Chairman Jerome Powell's testimony before Congress.

The People's Bank of China (PBoC) cut two key lending rates for the first time in almost a year amid concerns about slowing growth. The central bank cut the one-year loan prime rate by 10 basis points from 3.65% to 3.55% and the five-year loan prime rate by 10 basis points from 4.3% to 4.2%.

The Reserve Bank of Australia (RBA) published the Minutes of its latest meeting. The document showed that Broad discussed two options, either increasing the cash rate by 25 basis points (bps) or holding it unchanged. Arguments were "finely balanced," but policymakers ended up opting for a hike amid increased risk inflation would take longer to return to target than had been expected. AUD/USD plunged, ending the day at around 0.6780.

Japanese authorities came out with some verbal intervention after USD/JPY hit 142.24, a fresh 2023 yearly high. Finance Minister Shun'ichi Suzuki said that FX stability is important, adding they are watching FX moves closely on a daily basis. USD/JPY shed roughly 100 pips on Tuesday.

Upbeat United States data gave the US Dollar another push early in the American session, as Building Permits were up by 5.2% MoM in May, while Housing Starts surged 21.7%, well above the market's expectations.

EUR/USD finished the day little changed, just above the 1.0900 mark after briefly piercing the level. European Central Bank (ECB) Governing Council member Olli Rehn hit the wires. Rehn noted that underlying inflation is easing only gradually "but not to the extend desired." His hawkish words reaffirmed the message delivered by the central bank last week and came as a no-surprise to financial markets.

GBP/USD hovers around 1.2750 as investors await UK inflation data and the Bank of England Monetary policy decision.

XAU/USD shed roughly $20 at the beginning of the American session, briefly piercing the $1,930 level, to end the day closer to $1,940, down for a third consecutive day. 

• USD/MXN pair surges over 0.80%, with market focus on impending Banxico and US Fed monetary verdicts.
• Despite hawkish Banxico tones, no rate hikes are projected; Fed maintains rate-hike caution.
• Key focus: Powell’s forthcoming testimonies and Banxico’s policy decision; US Housing Starts soar 21.4% MoM.

The Mexican Peso (MXN) surrenders against the US Dollar (USD) as the USD/MXN trades with gains of more than 0.80% after hitting a daily low of 17.0499 in a week that would feature the Bank of Mexico (Banxico) monetary policy decision. That, alongside Federal Reserve (Fed) Chair testimony at the US Congress, would likely drive the USD/MXN pair direction. At the time of writing, the USD/MXN trades at 17.2119.

USD/MXN surges as investors await clarity from Banxico and Federal Reserve; US Housing Starts hit a 13-month high

The USD/MXN is bolstered by a risk-off impulse, as shown by US equities trading with losses. In the June monetary policy decision, Banxico is expected to keep rates unchanged, as demonstrated by a Reuters poll on Tuesday. Twenty analysts surveyed see the central bank holding rates unchanged at 11.25% for back-to-back meetings. It should be said that the latest Mexico inflation report showed annual CPI coming below the 5.90% foreseen by analysts at 5.84%

Also, comments made by Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath suggest Banxico will keep rates higher for longer. However, no more hikes are expected, with market participants, expecting a rate cut “at least” until the fourth quarter, according to Goldman Sachs Alberto Ramos.

Aside from this, the Fed skipped raising rates during the last week, though its policymakers upwards revised peak rates above the 5.50% threshold, as shown by the dot-plot. The Summary of Economic Projections (SEP) revealed that 12 of 18 Fed board members tweaked their monetary policy expectations, which bolstered the greenback.

Nevertheless, Fed Chair Powell’s press conference downplayed the dot plots, hurting the prospects of the greenback, which gave back most of its earned gains.

Over the weekend, comments by Fed Governor Christopher Waller and Richmond’s Fed Thomas Barkin leaned hawkish, with both favoring additional tightening if needed. The Fed Watch tools portray investors seeing a 72% odds of a 25 bps hike in July, but the swaps markets are not buying the 50 bps increases towards the year-end.

Earlier, the US economic agenda featured Housing Starts jumping to a 13-month high, as shown by May’s data displayed by the US Commerce Department. Housing Starts rose by 21.4% MoM, crushing the prior month’s plunge of -2.9%, while Building Permits expanded by 5.2%, above -1.4% contraction in April.

Upcoming events.

The Fed Chair Jerome Powell’s testimony at the US Congress on Wednesday and Thursday is expected to keep the press conference tone. USD/MXN traders must be aware of the language used by Powell, particularly on Wednesday. The Bank of Mexico will reveal its monetary policy decision on Thursday at around 19:00 GMT.

USD/MXN Price Analysis: Technical outlook

The USD/MXN recovery failed to test the 20-day Exponential Moving Average (EMA) at 17.3599 but erased two days of consecutive losses. If USD/MXN achieves a daily close above the June 15 high of  17.2533, that could exacerbate a rally toward the 20-day EMA. A subsequent break of the latter will expose the May 16 swing low support turned resistance at 17.4038, ahead of testing July 2017 lows of 17.4498. Failure to conquer 17.25 on a daily close could pave the way to re-test YTD lows of 17.0219.

• EUR/USD bears are taking over and eye the trendline support. 
• Bulls will need to stay committed above the daily 78.6% Fibo. 

As per the prior analysis, EUR/USD Price Analysis: Bulls run into resistance, bears eye trendline support, EUR/USD is turning lower as the following will illustrate:

EUR/USD prior analysis

It was noted that the market had run into the weekly neckline of the M-formation. 

On the daily chart, it was noted that we had possible stops above the swing highs that had been left intact, so far. Before a move higher into them, it was argued that a drive to the downside could be in order first. This brought the 38.2% Fibonacci of the bullish impulse on the daily chart into focus as well as the trendline support. 

EUR/USD update

The price is moving lower toward the daily trendline support and from the neckline of the weekly M-formation. 

From an hourly perspective, the price has broken structure, (BoS) and formed a fresh swing higher. therefore, we can anticipate another bearish impulse towards the trendline support in a 50% mean reversion or a 61.8% Fibonacci retracement of the prior hourly bullish impulse as follows: 

A break of the trendline will dilute the bullish thesis but so long as the 78.6% Fibo holds on the daily chart, near 1.0780, a bullish case can still be argued. 

• USD/CAD jumped to a high of 1.3270 before stabilizing at 1.3235.
• PBoC rate cuts fueled global economic downturn worries.
• Falling Oil prices and strong USD weight on the Canadian Dollar.

On Tuesday, the Loonie lost traction amid a cautious market mood following the decision by the People’s Bank of China to cut its main key rates by 10 basis points. Spurred by the cut, Oil prices plunged due to fears of a global economic downturn. On the other hand, the USD held its ground thanks to upbeat US Housing market data. 

PBoC cut rates while the US reported strong Housing data

During the Asian session, the People's Bank of China made an announcement to decrease the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps). This decision resulted in the one-year LPR declining from 3.65% to 3.55%, while the five-year LPR was reduced from 4.30% to 4.20%. These rate cuts served as a reminder to investors of the sluggishness of Chinese economic activity, and as Oil prices tend to be positively correlated with the health of the main world economies, they plunged more than 1.50%. In that sense, as Canada is a large Oil producer, the CAD weakened.

On the other hand, the US Census Bureau's May Housing Starts data surpassed expectations with a significant increase of 21.7%, outperforming the anticipated 0.8% decline. Similarly, Building Permits for the same month exceeded consensus by rising 5.2% instead of the expected 5% fall, helping the USD hold its ground as the DXY index trades with gains at the 102.55 area.

Reacting to the PBoC decision and US data, the US bond yields weakened across the curve, signaling a cautious market mood. The 10-year bond yield fell to 3.73%, while the 2-year yield sits at 4.69% and the 5-year at 3.96% – all three with more than 1% declines that limits the USD’s upside.

USD/CAD Levels to watch

The technical analysis of the daily chart indicates a neutral to bullish stance for the USD/CAD in the short term. While buyers have shown some strength, they have yet to overcome the negative territory. The Relative Strength Index (RSI) currently sits below its midpoint, but shows a positive slope while the Moving Average Convergence Divergence (MACD) depicts decreasing red bars, suggesting a waning selling momentum.

Upcoming resistance for USD/CAD is seen at the 1.3270 (daily high) zone, followed by the psychological mark at 1.3300 and the 1.3350 area. On the other hand, on the downside, the next support levels to watch are the 1.3200 level, followed by the cycle low at 1.3180 and the 1.3150 area.

USC/CAD Daily chart

• Strong US Dollar, driven by expectations of further tightening by the US Federal Reserve and an overbought US equity market, has influenced the movement.
• Fed Chair Jerome Powell’s upcoming testimony at the US Congress could further influence the USD, with potential bullish or bearish implications.
• Markets expect the BoE to raise rates by 25 bps on Thursday, which can potentially underpin the GBP/USD toward 1.30, especially if inflation data comes hot.

GBP/USD retraces after hitting a new year-to-date (YTD) high of 1.2848 in the last week, down 0.34% back at the 1.2700 handle, amidst a strong US Dollar (USD). Expectations for additional tightening by the US Federal Reserve (Fed) and an “overbought” US equity market dampened investors’ mood. At the time of writing, the GBP/USD is trading at 1.2755 after hitting a high of 1.2806.

Potential for further tightening by US Federal Reserve and overbought US equity market affecting GBP/USD

In the last week, the Fed held rates unchanged at their June monetary policy but upward revised peak rates at 5.6%, according to the dot plots. That strengthened the US Dollar, which was hurt by Fed Chair Jerome Powell, who struck a neutral tone, disappointing USD bulls, so the GBP/USD continued towards its YTD high. But last Friday, hawkish comments by Fed Governor Christopher Waller and Thomas Barkin weighed on traders after Monday’s holiday in the US.

Notably, the CME FedWatch Tool shows traders seeing a 74% chance of a 25 bps increase to the Federal Funds Rate (FFR) in June, but toward the end of the year, money markets do not believe the Fed would raise rates any further the 5.25%-5.50% area.

Meanwhile, Fed Chair Jerome Powell’s testimony at the US Congress on Wednesday and Thursday is expected to keep the press conference tone. Any hawkish surprises could bolster the greenback, while dovish hints could damage the already battered US Dollar.

Aside from this, the Bank of England (BoE) is expected to raise rates on Thursday, with markets pricing in a 25 bps hike. A day earlier, inflation data in the UK would be revealed, with expectations leaning toward a slowdown in headline and core Consumer Price Index (CPI) in yearly and monthly readings. Upward surprises could further cement market participants’ expectations that the BoE would raise rates by 100 bps toward the end of 2023. That should be positive for the GBP/USD, with traders looking for a reason to challenge the 1.30 figure.

Data-wise, the US economic docket revealed that Housing Starts jumped to a 13-month high, as shown by May’s data revealed by the US Commerce Department. Housing Starts rose by 21.4% MoM, crushing the prior month’s plunge of -2.9%, while Building Permits expanded by 5.2%, above -1.4% contraction in April.

GBP/USD Price Analysis: Technical outlook

The GBP/USD remains bullish-biased, though the pullback from YTD highs fell shy of testing the May 10 high at 1.2679. GBP/USD’s retracement was sponsored by the Relative Strength Index (RSI) getting out of overbought conditions, while the three-day Rate of Change (RoC) turned negative after eight days of positive readings. The GBP/USD reached the 38.2% Fibonacci Retracement at 1.2711 before settling around current levels. Therefore, the GBP/USD first resistance would be the 1.2800 mark, followed by the YTD high at 1.2848. A breach of the latter will expose 1.2900. Conversely, a drop below 1.2713, and the pair could fall to the 1.26 handle.

• WTI fell to a five-day low of $69.82, seeing more than 1.50% losses.
• PBoC rate cuts fueled energy demand concerns amongst Oil traders.
• World indexes declined following the decision signalling a negative market sentiment.

On Tuesday, the West Texas Intermediate (WTI) barrel fell to a five-day low and then stabilized at $70.30 as rate cuts announced by the People’s Bank of China (PBoC) fueled concerns regarding the economic health of the largest Oil importer in the world. In addition, American, German, British and Japanese stocks are falling, indicating a negative market sentiment amid fears of a global economic downturn.

PBoC rate cuts fuel global economic downturn fears

During the Asian trading session, the People's Bank of China made an announcement to lower the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps). This led to a decrease in the one-year LPR from 3.65% to 3.55% and the five-year LPR from 4.30% to 4.20%. This decision served as a reminder to investors about the sluggishness observed in Chinese economic activity. In that sense, as Oil prices are positively correlated with strong economic activity, it implied higher demand for black gold, which since China is the largest Oil importer in the world, led Crude Oil prices to weaken.

As a reaction, US, German and Japanese stocks are in retreat, reinforcing the negative market mood. The Wall St major indexes from the US saw more than 0.50% declines while the German DAX and the Japanese Nikkei index retreated from all-time highs seeing 0.40% and 0.80% losses on the day, respectively.

WTI Levels to watch

According to the daily chart, the WTI holds a neutral to a bearish outlook for the short term as bears have lost some steam, but technical indicators remain negative, suggesting that the market may still have some downward potential. In addition, the price trades below the 20,100 and 200-day Simple Moving Average (SMA) indicating that in the bigger picture, bears are in command.

On the upside, a move above the 20-day SMA at $70.80 would reignite the bullish momentum for WTI, with next resistances at the $71.30 zone and $72.30 area (daily high). On the other hand, on the downside, the next support levels to watch are the daily low at $69.80, followed by the $69.50 area and the psychological mark at $69.00.

• XAG/USD has moved downward after breaking support levels, remaining above the 200-day EMA at $22.96, which is now under pressure.
• Oscillators such as the Relative Strength Index (RSI) and three-day Rate of Change (RoC) indicate a negative scenario for Silver.
• If the price surpasses the May 26 low, Silver could potentially drop to the $21.00 level.
• If buyers can push XAG/USD back above the 100-day EMA at $23.54, a challenge to $24.00 could be expected.

Silver price plunges more than 3%, and sellers are eyeing a challenge of the 200-day Exponential Moving Average (EMA), as overall US Dollar (USD) strength drives the financial markets on Tuesday. Fed speakers will cross newswires, while the Fed Chair Jerome Powell’s testimony at the US Congress dampened the market mood. At the time of writing, XAG/USD exchanges hands at $23.14 after hitting a daily high of $24.02.

XAG/USD Price Analysis: Technical outlook

The XAG/USD has shifted downward biased after cracking support levels. Yet stills above the 200-day EMA ) at $22.96, which is up for grabs, as Silver’s spot price continues to nosedive during the North American session. Oscillators like the Relative Strength Index (RSI) indicator portray a negative scenario for XAG’s buyers, with the RSI turning negative, while the three-day Rate of Change (RoC) is at its lowest level since May 25.

That said, the XAG/USD first support would be the $23.00 figure. A breach of the latter will expose the 200-day EMA, followed by the May 26 low at $22.68. if XAG/USD surpasses the latter, Silver could plummet to the $21.00 handle. Conversely, if XAG/USD buyers reclaim the 100-day EMA at $23.54, they could challenge $24.00.

XAG/USD Price Action – Daily chart

• USD/JPY dipped below the 141.50 zone, hitting a daily low of 141.28. 
• Stealth intervention by the BoJ gives the JPY traction.
• Cautious market mood amid PBoC rate cut to limit the Yen upside potential.

The USD/JPY fell to negative territory losing over 40 pips below the 141.50 area as the Yen gained interest as markets anticipated a Bank of Japan’s (BoJ) stealth intervention. However, the Japanese currency remains vulnerable amid the rate cuts announced by the People Bank of China (PBoC), which fueled global economic downturn worries.

Economists and investors anticipate a BoJ intervention to bolster the Yen

A Reuters poll revealed that a majority of economists believe Japan's government and the BoJ are likely to take action if the Japanese Yen experiences a decline and reaches the 145 per U.S. Dollar level. In that sense, markets will look for any clues regarding the potential intervention on the release of the June BoJ’s meeting minutes, set to be released in the early Asian session on Wednesday.

On the other hand, during the Asian session, the People's Bank of China announced a decrease in the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps). This decision resulted in the one-year LPR declining from 3.65% to 3.55%, while the five-year LPR was reduced from 4.30% to 4.20%. These rate cuts served as a reminder to investors of the sluggishness observed in Chinese economic activity, and as China is a big trading partner from Japan, the JPY is set to remain vulnerable.

On the US Dollar side, the Greenback gained traction on the back of upbeat housing market data. The US Census Bureau's May Housing Starts data surpassed expectations with a significant increase of 21.7%, outperforming the anticipated 0.8% decline. Similarly, Building Permits for the same month exceeded consensus by rising 5.2% instead of the expected 5% and helped the USD hold its ground as the DXY index trades with gains at the 102.75 area.

Focus now shifts to Chair Powell’s testimony before the US Congress on Wednesday’s session, where market participants will look for clues regarding the next steps of the Federal Reserve (Fed) monetary policy.

USD/JPY Levels to watch

In terms of technical analysis, the Ninja indicates a neutral to bullish outlook for the short term. Despite bulls taking a breather, the positive readings of both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest that the market could be gearing up for another upward movement.

On the downside, the daily low at 141.30 stands as immediate support for the pair. If breached, the price could see a steeper decline towards the 20-day Simple Moving Average (SMA) at 140.05 and 139.20 zone. Furthermore, if the pair manages to move higher, the next resistances to watch are at the 142.00 zone, followed by the 142.50 area and the 143.00 level.

Economists at Commerzbank have now adjusted their Gold forecast following last week’s Fed meeting.

Gold to achieve a new all-time high of around $2,100 next year

• XAU/USD trades at $1932.42 after a sharp fall due to a stronger USD, with traders watching for Fed Chair Powell’s testimony.
• Despite Fed officials’ predictions of a 50 bps increase to FFR, market participants anticipate only a 25 bps hike.
• Depending on his tone, Fed Chair Powell’s testimony could impact USD and Gold prices.

Gold price tumbled sharply in the North American session as trading resumed after a holiday in the United States (US). A stronger US Dollar (USD) is the main reason behind XAU/USD’s fall, as the US Treasury bond yield slid, with traders eyeing Federal Reserve (Fed) Chair Jerome Powell’s testimony at the US Congress. At the time of writing, XAU/USD is trading at $1932.42 after hitting a daily high of $1956.74.

Expectations for a rate hike put pressure on XAU/USD prices, with markets keenly awaiting Powell’s upcoming Congress appearance

US equities continue to trade negatively. The US 10-year benchmark note dropped more than ten basis points at 3.707%, a tailwind for Gold prices, which remained downward pressured. Even though the CME FedWatch Tool shows, traders expect a 25 bps increase at the July Federal Reserve Open Market Committee (FOMC) meeting. It should be said that despite Federal Reserve officials forecasting 50 bps increases to the Federal Funds Rate (FFR), market participants are not, as shown by CME data.

In the meantime, US State Secretary Anthony Blinken reunited with Chinese President Xi Jinping to improve ties between but countries. Still, they failed to get an agreement on better military communication. Expectations for growth in China have been revised downward as the People’s Bank of China (PboC) has cut rates three times in the last ten days, aiming to stimulate the economy.

Aside from this, Fed Chair Jerome Powell will appear at the US Congress on Wednesday and Thursday. Traders expect the Chair to keep his press conference tone, but any hawkish surprises can bolster the US Dollar, and weaken Gold, as it would underpin US Treasury bond yields higher. However, any dovish signals and the greenback would be punished by market participants.

On the data front, US housing starts soaring to a 13-month high, up 21.7% MoM in May, crushing April’s -2.9% contraction, while Building Permits rose by 5.2%, exceeding last month’s -1.4% plunge.

Upcoming events

The US economic docket would be busy with Fed officials crossing the wires, led by Fed Chair Powell. Initial Jobless Claims and Existing Home Sales will be featured on Thursday.

XAU/USD Price Analysis: Technical outlook

XAU/USD resumed its downward path after breaking a descending symmetrical triangle, breaking dynamic support at the 100-day Exponential Moving Average (EMA) at $1939.56. Immediate support lies at $1925.06, June 15 swing low, ahead of nosediving toward $1900. Of note, oscillators warrant further downside, as the Relative Strength Index (RSI) indicator portrays sellers in charge, while the three-day Rate of Change (RoC) shifted gears to the downside after back-to-back positive sessions. Conversely, if XAU/USD reclaims $1950, that could cap XAU/USD’s losses, but a break above the 20-day EMA, at  $1957.13, could offer additional support to the yellow metal.

The Reserve Bank of New Zealand defied hawkish expectations at the May meeting. Economists at ING discuss RBNZ's policy outlook and share their forecasts for the NZD.

RBNZ might not be done after all

The USD declined last week, adding to a string of losses seen over the month of June. Economists at TD Securities analyze the greenback outlook.

USD will drop later in H2

A pulsating week lies ahead for the Pound. Economists at Société Générale analyze GBP outlook.

Sterling technically stretched

Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes USD outlook.

Are markets going to distinguish between good and bad rate increases? 

Economists at ING discuss RBA policy outlook and share their AUD/USD forecast.

The unpredictable RBA may be done with hikes

The Mexican Peso rallied for fourth straight week. Economists at Société Générale analyze USD/MXN outlook.

Dovish pivot by Banxico?

• EUR/USD loses further momentum near the 1.0900 support.
• The pair still targets the 1.1000 barrier in the near term.

EUR/USD’s initial bull run falters around the 1.0950 region on Tuesday.

Despite the current downtick, further gains remain well on the table for the time being. Against that, the pair is expected to challenge the psychological barrier at 1.1000 once the June peak at 1.0970 (June 16) is surpassed.

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0549.

EUR/USD daily chart

Inflation data from South Africa is due tomorrow. Economists at Société Générale analyze Rand outlook ahead of the report.

USD/ZAR faces psychological support at 18.00

UOB Group's Economist Enrico Tanuwidjaja and Junior Economist Agus Santoso assess the latest trade balance figures in Indonesia.

Key Takeaways

• AUD/USD has slipped sharply to near 0.6770 due to further recovery in the USD Index.
• The risk profile is demonstrating caution ahead of Fed Powell’s testimony.
• The RBA might increase rates further in July considering the outcome of May’s very strong labor market data.

The AUD/USD pair has stretched its downside to near 0.6770 in the early New York session. The downside pressure in the Aussie asset is built-up by less-hawkish Reserve Bank of Australia (RBA) minutes and a recovery in the US Dollar Index (DXY).

S&P500 has opened on a negative note after an extended weekend due to the holiday on Monday on account of Juneteenth. The risk profile is demonstrating caution ahead of the Federal Reserve (Fed) chair Jerome Powell’s testimony.

The USD Index has printed a fresh day high at 102.62. The appeal for the USD Index has improved due to the risk-aversion theme. However, the US Treasury yields have extended their losses. The return offered on 10-year US Treasury bonds has dropped to near 3.76%.

Considering price action in the USD Index, it seems that investors are getting clarity ahead of Fed Powell’s testimony. Fed Powell is expected to deliver hawkish guidance as current inflation is double the desired rate and demand for durables is still solid despite higher interest obligations.

Meanwhile, less-hawkish RBA minutes have impacted the Australian Dollar. Analysts at ANZ Bank conveyed that minutes of the RBA described the rate rise decision was again described as “finely balanced”. Unlike previous minutes, there was no talk of whether further increases were needed. Ultimately the minutes had something for everyone – with talk of upside risks to inflation since May, but also optimism on productivity and unit labor costs from here. They further added increase in July is the most likely outcome given May’s very strong labor market data, which came out after the meeting.

Later this week, Australian Trade Balance data will be keenly watched.

• DXY keeps the recovery well in place and approaches 102.70.
• Extra gains now target the 103.00 zone in the near term

DXY manages well to reverse the initial pessimism and regain the smile in the vicinitry of the 102.70 region on Tuesday.                                                                  

Immediately to the upside, the index faces the next hurdle at the 103.00 round level, which appears reinforced by the proximity of the transitory 100-day SMA. The index could see its downside pressure mitigated once this area is cleared on a convincing fashion.

Looking at the broader picture, while below the 200-day SMA at 105.21 the outlook for the index is expected to remain negative.

DXY daily chart

Copper's stimulus-relief rally is overdone, in the opinion of Daniel Ghali, Senior Commodity Strategist at TD Securities.

The set-up is ripe for consolidation in Copper markets

Economist at UOB Group Lee Sue Ann reviews the latest ECB monetary policy meeting (June 15).

Key Takeaways

EUR is supported on dips as ECB keeps focus on policy tightening risk, economists at Scotiabank report.

EUR risks remain tilted to the topside

• EUR/GBP has climbed above 0.8570 as ECB Lagarde has confirmed a rate hike in July.
• Higher-than-anticipated UK inflation might propel chances of a 50 bps interest rate hike by the BoE.
• ECB Vujčić noted that the central bank has to consider the risk of doing too much vs. too little.

The EUR/GBP pair has displayed a solid upside move to 0.8570 despite the street is confident that the Bank of England (BoE) will hike interest rates further to keep weighing on the stubborn United Kingdom inflation.

The interest rate decision by BoE Governor Andrew Bailey will be announced after the release of the UK’s May Consumer Price Index (CPI) data, which is scheduled for Wednesday. As per the preliminary report, UK’s monthly headline inflation (May) is expected to show a pace of 0.4%, slower than the pace of 1.2% registered in April. Annualized headline CPI is seen softening to 8.5% vs. the prior release of 8.7% while core inflation that excludes oil and food prices is seen steady at 6.8%.

A mild softening in the UK inflation will not provide the luxury of keeping monetary policy to the BoE. Reuters reported that the BoE looks set to raise interest rates by a quarter point to a 15-year high of 4.75% on June 22. While economists at Commerzbank expect that a surprise upside in inflationary pressures in the Pound Sterling area might intensify chances of a 50 bp interest rate hike from the BoE.

On the Eurozone front, European Central Bank (ECB) President Christine Lagarde has confirmed that a rate hike is widely anticipated in July as core inflation is showing immense persistence. The central bank is ready to threaten economic prospects in the fight against stubborn inflation.

Meanwhile, ECB policymaker Boris Vujčić has cited that regarding future policy actions, Vujčić noted that the central bank has to consider the risk of doing too much vs. too little, adding that a soft landing might not be possible.

The CAD has drifted a little lower in quiet trade. Economists at Scotiabank analyze USD/CAD technical outlook.

Softer trading remains the more likely direction in the coming days

• Housing Starts in the US rose sharply in May.
• US Dollar Index gained traction and rose above 102.50.

The monthly data published by the US Census Bureau revealed on Wednesday that Housing Starts rose 21.7% on a monthly basis in May following the 2.9% decline (revised from +2.2%) recorded in April. This reading surpassed the market expectation for a decline of 0.8% by a wide margin.

In the same period, Building Permits rose 5.2%, compared to analysts' estimate for a 5% contraction.

Market reaction

The US Dollar Index gained traction with the immediate reaction to these data and was last seen posting small daily gains at 102.55.

USD/CNH is now likely no trade within the 7.0900-7.1800 range in the next few weeks, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

Last week’s Fed meeting did not really weigh on the Gold price in any lasting manner. Economists at Commerzbank analyze XAU/USD outlook.

Interest rate expectations of the market will now remain at their higher levels

• USD/CAD is showing lackluster action following the footprints of the sideways USD Index and oil prices.
• Interest rate guidance and a detailed explanation behind a skip in the policy-tightening regime by Fed Powell will be keenly watched.  
• The upside in the oil price seems restricted above $72.00 despite the rate cut by the PBoC.

The USD/CAD pair is demonstrating topsy-turvy moves above the round-level support of 1.3200 in the London session. The Loonie asset is showing lackluster action following the footprints of the sideways US Dollar Index (DXY) and oil prices.

S&P500 futures have recovered some of the losses but caution prevails as the US opening session is expected to remain volatile. Investors are expected to wind up their positions after an extended weekend, which might create sheer volatility.

The US Dollar Index (DXY) is hovering around 102.48 as investors are keeping an eye over the Federal Reserve (Fed) chair Jerome Powell’s testimony. Interest rate guidance and a detailed explanation behind a skip in the policy-tightening regime will be keenly watched.  

Meanwhile, the Canadian Dollar will dance to the tunes of the Retail Sales data (April). Monthly Retail Sales data is seen expanding by 0.2% against a contraction of 1.4% witnessed earlier. Economic data excluding automobile numbers is seen expanding by 0.4%. This indicates that demand for automobiles have remained weak as higher inflationary pressures are biting the income of households. Also, individuals are postponing demand for automobiles to avoid higher installment obligations due to elevated interest rates by the Bank of Canada (BoC).

On the oil front, the upside in the oil price seems restricted above $72.00 despite a rate cut by the People’s Bank of China (PBoC). China’s central bank cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps) due to which the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR was trimmed to 4.20%. The higher monetary stimulus might accelerate oil demand ahead.

It is worth noting that China is the largest importer of oil in the world and expansionary PBoC monetary policy would support the oil price ahead.

Sterling is a moderate underperformer on the session as markets move to reduce exposure ahead of this week’s key UK event risk. Economists at Scotiabank analyze GBP outlook.

Resistance aligns at 1.2800/10

The USD is trading mixed against the majors. Economists at Scotiabank discuss the greenback outlook.

DXY needs to break 102.60/65 short-term resistance to extend its recovery

• Gold price has stabilized above $1,950.00 amid subdued performance by the USD Index.
• Investors are going light into the American session as US markets will open after an extended weekend.
• Gold price is auctioning in a Descending Triangle chart pattern that indicates a volatility contraction.

Gold price (XAU/USD) is holding itself above the crucial support of $1,950.00 as the US Dollar Index (DXY) is demonstrating a subdued performance in the European session. The precious metal is broadly showing a non-directional performance as investors lack clarity about further action ahead of testimony from Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures have trimmed some losses posted in Europe. Investors are going light into the American session as US markets will open after an extended weekend. The US Dollar Index (DXY) is inside the woods around 102.44 as the testimony of Fed Powell will provide clear guidance about interest rates. The US Treasury yields have come under pressure as investors are expecting that only one interest rate hike is left in the basket of the Fed.

In the monetary policy statement, Fed Powell confirmed that the central bank will hike interest rates two times by the year-end. Also, rate cuts are not appropriate as US Employment situation has not softened yet. The US economy is operating at full employment levels and firms are facing higher payouts to retain talent. Apart from the tight labor market conditions, Fed policymakers believe that tight credit conditions by the US regional banks would keep a lid on inflationary pressures.

Gold technical analysis

Gold price is auctioning in a Descending Triangle chart pattern on a two-hour scale that indicates a volatility contraction. Downward-sloping trendline of the aforementioned chart pattern is plotted from June 02 high at $1,983.00 while its horizontal support is placed from May 30 low at $1,932.12.

The 200-period Exponential Moving Average (EMA) at $1,958.84 is acting as a barricade for the Gold bulls. Horizontal resistance is plotted from May 05 low around $2,000.00.

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which indicates a non-directional performance.

Gold two-hour chart

The past month, EUR/GBP has continued its move lower, now trading around mid-0.85. Economists at Danske Bank analyze the pair’s outlook.

GBP rebound to prove temporary

• EUR/JPY climbs to new highs near 155.40 on Tuesday.
• Still overbought conditions prop up extra pullbacks.

EUR/JPY clinches a new 2023 peak near 155.40 just to slip back to the sub-155.00 region afterwards.

The cross remains overbought and against this backdrop, further retracement should not be ruled out in the short-term horizon.

In the longer run, the resumption of the uptrend should clear the YTD high to then refocus on the weekly top recorded in late September 2008 at 156.83, which precedes the key round level at 157.00.

So far, further upside looks favoured while the cross trades above the 200-day SMA, today at 144.56.

EUR/JPY daily chart

Economists at Société Générale analyze USD/MXN technical outlook and see the pair moving to 16.95/16.60.

Steady downtrend

See: Brazilian Real and Mexican Peso will remain well supported – Commerzbank

European Central Bank (ECB) policymaker Boris Vujčić said on Tuesday that core inflation pressures remain high in the Eurozone, as reported by Reuters.

Regarding future policy actions, Vujčić noted that they have to consider the risk of doing too much vs too little, adding that a soft landing might not be possible.

Market reaction

These comments don't seem to be having a noticeable impact on the Euro's performance against its rivals. As of writing, EUR/USD was trading at 1.0930, where it was up 0.08% on a daily basis.

Further upside is likely in USD/JPY once the 142.25 level is cleared, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

On Thursday, the Bank of England (BoE) will decide on its key rate. Economists at Commerzbank analyze how inflation data due out tomorrow could impact the BoE decision and, therefore, the Pound.

Short-term rate speculation might support Sterling

• USD/CHF is eyeing a break towards 0.9000 as US extended weekend ahs triggered caution.
• The SNB is expected to raise interest rates by 25 basis points (bps) to 1.75% to avoid further increase in inflation.
• USD/CHF rebounded firmly after dropping below the 61.8% Fibonacci retracement at 0.8945.

The USD/CHF pair is demonstrating back-and-forth action around 0.8980 in the European session. The Swiss Franc asset is looking to recapture the psychological resistance of 0.9000 ahead of the Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures are holding significant losses ahead of the United States opening session after an extended weekend due to Juneteenth. The US Dollar Index (DXY) is showing a volatile action as investors are eager to know whether Fed Powell would stand to the interest rate guidance delivered in his monetary policy statement.

Meanwhile, the interest rate decision by the Swiss National Bank (SNB) is in focus. SNB Chairman Thomas J. Jordan is expected to raise interest rates by 25 basis points (bps) to 1.75% to avoid further increase in inflation.

USD/CHF rebounded firmly after dropping below the 61.8% Fibonacci retracement (plotted from May 04 low at 0.8820 to May 31 high at 0.9148) at 0.8945. The upside move in the Swiss Franc has found barricades near the 50% Fibo retracement at 0.8985.

The pair is trading below the 200-period Exponential Moving Average (EMA) at 0.912, which indicates that the long-term trend is still bearish.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 from the bearish range of 20.00-40.00. This indicates an attempt of a bullish reversal but will be confirmed only after placement in the bullish range of 60.00-80.00.

Should the asset break above the intraday high at 0.8986, US Dollar bulls will drive the asset towards a 38.2% Fibo retracement at 0.9023 followed by May 18 high at 0.9063.

In an alternate scenario, a downside move below the round-level support of 0.8900 will expose the asset to May 10 low at 0.8868. A slippage below the latter would drag the asset toward May 04 low at 0.8820.

USD/CHF two-hour chart

Economists at ING see the US Dollar trapped between two stories. 

US Dollar is trapped between inverted curves and rallying equities

Economists at Danske Bank share their USD/CAD forecast.

Relative growth outlook between the US and Canada favours a higher cross

The CBRT’s latest policy update is due on Thursday. Economists at MUFG Bank analyze TRY outlook.

CBRT is expected to deliver a significant rate hike

GBP/USD has embarked on an extended up move after defending the multi-month ascending support line near the 1.2300 level. Economists at Société Générale analyze the pair’s technical outlook.

Next objective seen at 1.3000

See: GBP/USD set to move closer to the 1.30 level this year – MUFG

• The US Dollar is back to normal trading conditions after the US holiday on Monday.
• Traders will get a first batch of US housing data and the US Treasury is holding another auction. 
• The US Dollar Index trades above 102.50 but sees selling pressure after its subdued performance in Asia.

The US Dollar (USD) sees its gains from Monday against several Asian currencies coming under pressure a bit as markets digest the People’s Bank of China (PBOC) rate cut this Tuesday. Traders and investors  expected more from the PBoC, sending equities lower and pushing Crude Oil down to $71.

On the data front, this week will be mainly on US housing, ranging from permits to construction numbers and house prices. For today, Housing Starts and Building Permits numbers for May are expected to come in at 12:30 GMT . A few Federal Reserve (Fed) members are taking the stage as well. St. Louis Fed President Jim Bullard will talk  at the Barcelona School of Economics at 10:30 GMT, while Federal Reserve Bank of New York President John Williams and Fed’s vice chairman for supervision Michael Barr will speak on leadership at a NY Fed event. 

Daily digest: US Dollar faces a packed and eventful week

• Datapoints of interest for today: At 12:30 GMT a big batch of housing data is set to hit the markets with Housing Starts numbers for May expected to come in at 1,400K against 1,401K last month. Building Permits are expected at 1,423K from 1,417K. On a monthly basis, Building Permits are expected to decline 5% after decreasing 1.4% a month earlier, while Housing Starts are seen dropping 0.8% after a 2.2% increase in April.  Outlier data point between all this housing data will be the Philadelphia Fed non-manufacturing index for June, which came in at  -16 the prior month.  
• Fed’s Bullard will give a speech at the Barcelona School of Economics at 10:30 GMT, and both Fed’s Williams and Barr will speak  on leadership at the NY Fed event at 15:45 GMT. 
• The US Treasury is heading back to the markets for funding as it auctions a 3-month bond and a 6-month bond, both around 15:30 GMT. 
• AUD/USD moved substantially in favor of the US Dollar by over 0.5% after the Royal Bank of Australia (RBA) mentioned in its latest central bank meeting minutes that the surprise interest-rate hike in June is finely balanced, pointing to a possible end of the hiking cycle in Australia. 
• China has cut both its 5-year and 1-year Loan Prime Rate from 4.3% to 4.2% and from 3.65% to 3.55%, respectively. The move was received with disappointment by markets.  
• Japanese Finance Minister Shunichi Suzuki  said that Japan wants foreign exchange rates to move in a stable manner. Suzuki said that they are watching FX on a daily basis and that appropriate action might be necessary. Last intervention dates from the fall of 2022, and any move in this direction could trigger a big-figure move intraday between the Japanese Yen and the US Dollar. 
• The disappointing tone on China impacts commodities, with WTI Crude Oil down nearly 1% to $71.22 and gold up $5 to $1,955. Iron Ore and all other precious metals are on the back foot in the assumption demand will not pick up anytime soon out of China. Even the Baltic Dry Index, a good measure on global trade, is down over 1% for the price per shipping container. All these elements should help global inflation and price pressures abate further. 
• Equities are also in the red,  with China tech stocks leading the losses and the overall Hang Seng Index down 1.60%, which in turn drags other major Asian indices to the downside. European markets are taking over the negative sentiment from Asia and are trading in the red.US equity futures are on the downside as well. 
• The CME Group FedWatch Tool shows that markets are pricing in a 74.4% chance of a 25 basis points (bps) hike on July 26th.   Markets seem to be pricing in just one more hike and done as all other futures for 2023 are pointing to an unchanged rate level. The market is challenging the view of the Fed’s Dot-Plot curve, which showed most Fed members see two more hikes this year. 
• The benchmark 10-year US Treasury bond yield trades at 3.80% and gapped open against the close on Friday as there was no bond trading on Monday due to the public holiday. US bonds are receiving some bids as investors rebalance their exposure against China after a disappointing step in their monetary easing. 

US Dollar Index technical analysis: Blurred picture gives a mixed result

The US Dollar is seeing some selling pressure as it is giving up some gains from Monday against most Asian pairs, while the US Dollar Index (DXY) has been able to jump above 102.50. The European session is picking up speed and sees European currencies like the Euro, Swedish Krona and Norwegian Krone all advancing against the Greenback. In Asia, the South Korean Won and the Japanese Yen are paring back some of their losses against the USD, making the DXY to slide below 102.50. 

On the upside, the 55-day Simple Moving Average (SMA) at 102.57 has turned from support into resistance. Should the DXY recover further today or this week, look for the 103.00 psychological level as the next big challenge to the upside. The 100-day SMA at 103.05 will be key to reach, should the DXY want to advance further.  

On the downside, the psychological level near 102.00 is the only element upholding DXY. Once price action starts to reside below it, expect to see another nosedive move toward 100.82. That means a challenge for the low of this year and would imply a substantial devaluation for the Greenback to come. 

How does Fed’s policy impact US Dollar?

The US Federal Reserve (Fed) has two mandates: maximum employment and price stability. The Fed uses interest rates as the primary tool to reach its goals but has to find the right balance. If the Fed is concerned about inflation, it tightens its policy by raising the interest rate to increase the cost of borrowing and encourage saving. In that scenario, the US Dollar (USD) is likely to gain value due to decreasing money supply. On the other hand, the Fed could decide to loosen its policy via rate cuts if it’s concerned about a rising unemployment rate due to a slowdown in economic activity. Lower interest rates are likely to lead to a growth in investment and allow companies to hire more people. In that case, the USD is expected to lose value.

The Fed also uses quantitative tightening (QT) or quantitative easing (QE) to adjust the size of its balance sheet and steer the economy in the desired direction. QE refers to the Fed buying assets, such as government bonds, in the open market to spur growth and QT is exactly the opposite. QE is widely seen as a USD-negative central bank policy action and vice versa.

The trade in EUR/USD was very quiet yesterday. Economists at Commerzbank analyze ECB policy outlook and its implications for the Euro.

ECB doves try to dampen expectations

Economists at TD Securities discuss IDR outlook ahead of the Bank of Indonesia Policy Decision.

BI may extend its pause

It seems the upside bias is beginning to stutter around NZD/USD according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• GBP/USD has faced barricades around 1.2800 amid an indecisive market mood.
• The US Dollar Index (DXY) has found intermediate support around 102.40 ahead of Fed Powell’s testimony.
• More interest rate hikes are expected from the BoE as UK’s Employment conditions are extremely tight.

The GBP/USD pair has sensed selling pressure near the round-level resistance of 1.2800 in the London session. The Cable is facing the heat as the market mood has turned indecisive due to the extended weekend in the United States.

S&P500 futures have generated significant losses as fears of a recession in the US economy have not faded despite the Federal Reserve (Fed) skipped the policy-tightening spell. The street is worried as the Fed has cleared that no rate cuts are appropriate this year s labor market conditions have not eased as expected.

Meanwhile, economists at HSBC cited that investors should prepare for some consolidation in US equities as valuations have risen, and the potential of further Fed tightening may cut into future earnings estimates and valuations in the short term. However, we feel the Fed is closer to the end of its monetary policy tightening cycle, and this should bode well for US equities.

The US Dollar Index (DXY) has found intermediate support around 102.40 after a sell-off move. Going forward, the testimony from Fed chair Jerome Powell will be keenly watched.

On the Pound Sterling front, investors are awaiting the release of the United Kingdom inflation data. Scrutiny of the UK inflation expectations shows that inflationary pressures would soften further but will be insufficient to force the Bank of England (BoE) to pause the rate-hiking spree. More interest rate hikes are expected from the BoE as UK’s Employment conditions are extremely tight and food inflation is not showing signs of peaking yet.

EUR/USD is becalmed above 1.09 and waiting for the next significant input. Economists at ING analyze the pair’s outlook.

Little follow-through buying as yet

• USD/CAD struggles to capitalize on its modest intraday positive move on Tuesday.
• An uptick in Oil prices underpins the Loonie and caps gains amid fresh USD selling.
• Rising US bond yields, a softer risk tone helps limit losses for the buck and the major.

The USD/CAD pair attracts some intraday sellers following an early uptick to the 1.3235-1.3240 area on Tuesday and retreats to the lower end of its daily range during the early European session. The pair currently trades just above the 1.3200 mark and remains well within the striking distance of its lowest level since September 2022 touched on Friday.

The US Dollar (USD) struggles to capitalize on its modest intraday gains and for now, seems to have stalled its recent recovery from over a one-month low witnessed over the past two days. Adding to this, a modest uptick in Crude Oil prices underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair. Despite the Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps by the end of this year, investors seem convinced that the US central bank is nearing the end of its year-ling rate-hiking cycle. This, in turn, keeps a lid on any meaningful upside for the Greenback.

The markets, however, are still pricing in another 25 bps lift-off at the July FOMC meeting, which triggers a fresh leg up in the US Treasury bond yields. This, along with a generally weaker tone around the equity markets, could lend some support to the safe-haven Greenback and help limit the downside for the USD/CAD pair, at least for the time being. The market sentiment remains fragile on the back of growing worries about a global economic slowdown, particularly in China. This, to a larger extent, overshadows an interest rate cut by the People’s Bank of China (PBoC), which tempers investors' appetite for riskier assets and could benefit the buck.

Traders might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of Fed Chair Jerome Powell's two-day congressional testimony, starting this Wednesday. Powell's comments will be closely scrutinized for fresh clues about the Fed's future rate-hike path, which, along with speeches by a slew of influential FOMC members, will play a key role in driving the USD demand this week. Traders this week will also confront the release of the flash PMI prints from the US. Apart from this, Oil price dynamics should contribute to producing some meaningful trading opportunities around the USD/CAD pair.

Technical levels to watch

European Central Bank (ECB) Governing Council member, Olli Rehn, made some comments on the Eurozone inflation outlook during his appearance on Tuesday.

Rehn said that the underlying inflation is easing ‘only gradually’.

Market reaction

At the time of writing, EUR/USD is holding its latest upside near 1.0940, up 0.16% on the day.

Officials are likely to step up verbal intervention closer to 145 in USD/JPY, in the opinion of economists at Société Générale.

Widening of 10y JGB yield range in July

• USD/JPY is expected to show losses if fails to sustain above 141.50.
• A moderate upside move in the USD Index has concluded now as investors are expecting only one rate hike from the Fed.
• BoJ might do a stealth intervention if USD/JPY climbs to 145.00.

The USD/JPY pair has faced stiff barricades around 142.15 in the European session. The asset is expected to deliver more weakness below 141.50 as the US Dollar Index (DXY) has shown a volatile action after facing stiff resistance around 102.60.

S&P500 futures have displayed significant losses amid caution in the market participants ahead of the US opening after an extended weekend. The risk appetite theme has been dented again as the street is mixed about the interest rate guidance from the Federal Reserve (Fed).

A moderate upside move in the USD Index has concluded now as investors are expecting that the Federal Reserve (Fed) will hike interest rates only one time despite Fed chair Jerome Powell has confirmed two rate hikes by year-end. Also, the US Treasury yields have softened following the footprints of the USD Index. The yields offered on 10-year US government bonds have dropped to near 3.79%.

Later, Fed Powell’s testimony will remain in the spotlight. Fed Powell is expected to deliver detailed guidance behind keeping interest rates steady in June’s monetary policy. Also, further guidance and the current condition of the banking crisis will be in focus.

On the Japanese Yen front, more than half of economists polled by Reuters favored that Japan's government and the Bank of Japan (BoJ) will act to stop the yen's decline if it depreciates to the 145 per U.S. dollar level. This could be done by a stealth intervention from the BoJ.

In the Asian session, Japan’s ministry reported mixed Industrial Production data (April). Monthly economic data surprisingly expanded by 0.7% while the street was anticipating a contraction of 0.4%. Annualized Industrial Production was contracted by 0.7%, higher than expectations of a 0.3% contraction.

The EUR is likely to appreciate somewhat further against the USD with a view to the end of the year, if interest rate cuts become tangible in the US, in the opinion of economists at Commerzbank.

Is the ECB the more hawkish central bank?

• USD/MXN continues with its struggle to gain any traction and languishes near a multi-year low.
• The formation of a descending channel points to a well-established short-term bearish trend.
• The RSI on the daily chart is still flashing oversold conditions and holding back bearish traders.

The USD/MXN pair struggles to capitalize on the previous day's modest rebound from the 17.0245 area, or its lowest level since December 2015 and oscillates in a narrow range through the early part of the European session on Tuesday. The pair currently trades just below the 17.1000 round figure, nearly unchanged for the day, and seems vulnerable to sliding further.

From a technical perspective, the recent downfall from the vicinity of the 18.00 round-figure mark, or the May swing high, has been along a downward-sloping channel. This points to a well-established short-term bearish trend and suggests that the path of least resistance for the USD/MXN pair is to the downside. That said, the Relative Strength Index (RSI) on the daily chart is still flashing oversold conditions and holding back traders from placing fresh bearish bets around the pair.

Nevertheless, the lack of any meaningful buying suggests that the downtrend is still far from being over. Hence, any recovery attempt could attract fresh sellers near the 17.20-17.25 area, which coincides with the 50-period Simple Moving Average (SMA) on the 4-hour chart. This is closely followed by the top end of the aforementioned channel and should act as a pivotal point. A convincing breakout will suggest that the USD/MXN pair has formed a bottom and pave the way for additional gains.

On the flip side, the multi-year low, around the 17.0245-17.0240 zone could protect the immediate downside ahead of the trend-channel support, currently pegged just below the 17.0000 psychological mark. Some follow-through selling will be seen as a fresh trigger for bearish traders and make the USD/MXN pair vulnerable to accelerate the fall towards the 16.60-16.55 region en route to the November 2015 swing low, around the 16.35 region.

USD/MXN 4-hour chart

Key levels to watch

FX markets are relatively quiet following yesterday's public holiday in the US. Economists at ING analyze USD outlook.

USD/JPY to continue nudging higher

• AUD/USD has shown a recovery move from 0.6800 supported by a sell-off in the USD Index.
• S&P500 futures have recovered some losses, portraying an increment in the risk appetite of the market participants.
• Dovish PBoC interest rate policy has provided strength to the Australian Dollar.

The AUD/USD pair has found decent strength near the round-level support of 0.6800 in the London session. The Aussie asset has gained attention as the US Dollar Index (DXY) has witnessed an intense sell-off after facing barricades around 102.60.

S&P500 futures have recovered some losses, portraying an increment in the risk appetite of the market participants. On a broader note, the risk profile will remain precautionary as the US markets will open after an extended weekend.

The USD Index has faced immense selling pressure as investors are hoping that interest rates by the Federal Reserve (Fed) won’t move beyond 5.25-5.50%. As per the CME Fedwatch tool, more than 49% chances are in favor of only one small interest rate hike by the year-end. The context of only one interest rate hike this year is being supported by easing labor market conditions, and lower gasoline prices that have softened consumer and producer price index.

Going forward, the testimony from Fed chair Jerome Powell will be keenly watched.

Meanwhile, the Australian Dollar has gained traction as the People’s Bank of China (PBoC) has announced rate cuts. China’s central bank cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps) due to which the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR was trimmed to 4.20%.

It is worth noting that Australia is the leading trading partner of China and more monetary stimulus by the PBoC has strengthened the Australian Dollar.

Apart from that, the release of the Reserve Bank of Australia (RBA) minutes also propelled action in the Australian Dollar. Analysts at ANZ Bank cited the minutes of the RBA describes the rate rise decision was again described as “finely balanced”. Unlike previous minutes, there was no talk of whether further increases were needed. Ultimately the minutes had something for everyone – with talk of upside risks to inflation since May, but also optimism on productivity and unit labor costs from here. The further added increase in July is the most likely outcome given May’s very strong labor market data, which came out after the meeting.

• Euro reverses two consecutive daily declines and regains traction.
• Stocks markets in Europe opens slightly offered on Tuesday.
• The improvement in the risk complex helps the pair so far.
• US traders returns to their desks following Monday’s holiday.
• Investors’ attention remains on the Fed, ECB future moves.
• Cautiousness is expected to pick up ahead of Powell’s testimonies.

The European currency (EUR) has gained some upward momentum, prompting EUR/USD to ignore two consecutive daily declines and resume its recent upward trend on turnaround Tuesday.

This improved sentiment towards riskier assets can be attributed in part to the People's Bank of China's (PBoC) recent decision to cut its 1-year medium-term lending facility (MLF) by 10 bps, aimed at bolstering the Chinese economy as it emerges from the pandemic.

Investors are closely monitoring the potential interest rate decisions by the Federal Reserve and the European Central Bank (ECB), with both expected to resume their hiking campaigns in July.

In Germany, Producer Prices declined by 1.4% MoM in May but rose by 1.0% YoY, while Current Account and Construction Output data will be released in the broader Euroland before speeches by ECB's Board members E. McCaul and L. De Guindos.

In the US, the housing sector will be the primary focus, with speeches by St. Louis Fed member J. Bullard (a hawkish 2025 voter) and NY Fed member J. Williams (a centrist permanent voter) also on the agenda.

Daily digest market movers: Euro bulls regain control of the sentiment

• The renewal of market optimism puts pressure on the US dollar.
• The PBoC lowers the 1-year medium-term lending facility (MLF) to support the ongoing slow economic rebound.
• The testimonies of the Federal Reserve's Chair, J. Powell, will be the significant events to watch later this week.
• Currently, the primary factor influencing the price movement of the currency pair is the divergence in policies between the ECB and the Fed.

Technical Analysis: Focus re-shifts to 1.1000

EUR/USD has pulled back slightly from its recent monthly high of 1.0970, which was reached on June 16. In order to continue its upward momentum, the EUR must quickly surpass this level, potentially allowing it to reach the psychological barrier of 1.1000. Further resistance levels include the 2023 high of 1.1095 (April 26), the round level of 1.1100, and the weekly high of 1.1184 (March 31, 2022), which is supported by the 200-week SMA, currently at 1.1181.

In the event that the bears take control, there is an interim contention at the 55-day SMA at 1.0881. Should this level be breached, there are no significant support levels until the May low of 1.0635 (May 31), followed by the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

The minutes of the Reserve Bank of Australia’s last meeting have been published. Economists at Commerzbank analyze AUD outlook.

RBA meeting minutes not hawkish enough

Here is what you need to know on Tuesday, June 20:

Following a three-day weekend in the US, trading conditions normalize on Tuesday and markets seem to have adopted a cautious stance. Housing Starts and Building Permits data for May will be featured in the US economic docket. Several Federal Reserve (Fed) policymakers, including St. Louis Fed President James Bullard and NY Fed President John Williams, will be delivering speeches later in the day.

During the Asian trading hours, the People's Bank of China (PBoC) announced that it lowered the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps) as expected. With this decision, the one-year LPR declined from 3.65% to 3.55%, while the five-year LPR got cut down to 4.20% from 4.30%. This development reminded markets of the loss of momentum in China's economic growth and caused investors to move away from risk-sensitive assets. At the time of press, US stock index futures were down around 0.3% on a daily basis.

Meanwhile, the Minutes of the Reserve Bank of Australia's (RBA) June monetary policy meeting revealed that the board considered a rate rise of 25 basis points or holding the policy rate steady and reconsidering an increase at later meeting. Arguments were "finely balanced" but the board decided the case for an immediate hike was stronger, the RBA noted in its publication. AUD/USD came under heavy bearish pressure early Tuesday and was last seen trading deep in negative territory at around 0.6800.

EUR/USD registered small losses on Monday but didn't have a difficult time regaining its traction. In the European morning, the pair continues to edge higher toward 1.0950. Eurostat will release Construction Output data for April later in the session.

Following Monday's downward correction, GBP/USD staged a rebound to the 1.2800 area early Tuesday. On Wednesday, the UK's Office for National Statistics will publish the Consumer Price Index (CPI) data for May.

USD/JPY climbed above 142.00 for the first time since November in the Asian session on Tuesday but reversed its direction with the Japanese Yen benefitting from safe-haven flows. As of writing, the pair was stretching lower toward 141.50.

Gold price recovered back above $1,950 after having closed modestly lower on Monday. The benchmark 10-year US Treasury bond yield is down nearly 1% early Tuesday, helping XAU/USD find a foothold.

Bitcoin rose nearly 2% on Monday but lost its bullish momentum near $27,000. Ethereum continues to fluctuate in a narrow range slightly above $1,700.

Economists at ING discuss GBP outlook. 

UK 2-10 year Gilt curve is now the most inverted since 2000

• EUR/JPY is seen consolidating its recent strong gains to the highest level since September 2008.
• Overbought RSI on the daily chart holds back bulls from placing fresh bets and caps the upside.
• Weakness below the daily swing low could pave the way for some meaningful corrective decline.

The EUR/JPY cross extends its consolidative price move for the second straight day and seesaws between tepid gains/minor losses through the early part of the European session. Spot price currently trades around the 155.00 mark, just below the highest level since September 2008 touched this Tuesday.

A big divergence in the monetary policy stance adopted by the Bank of Japan (BoJ) and the European Central Bank (ECB) is seen as a key factor acting as a tailwind for the EUR/JPY cross. Even from a technical perspective, last week's sustained breakout through the 151.00 strong horizontal resistance was seen as a fresh trigger for bullish traders. This, in turn, supports prospects for a further near-term appreciating move.

That said, a generally weaker tone around the equity markets lends some support to the safe-haven Japanese Yen (JPY) and caps the upside for the EUR/JPY cross. Moreover, the Relative Strength Index (RSI) on the daily chart is holding well above the 70 mark, flashing overbought conditions and holding back traders from placing fresh bullish bets, though any meaningful corrective pullback still seems elusive.

Hence, a slide back towards the daily swing low, around the 154.60-154.55 area could be seen as a buying opportunity and remain limited. That said, a sustained break below might prompt some technical selling and accelerate the slide towards the 154.00 round-figure mark. The EUR/JPY cross could eventually drop to the 153.65-153.55 region, which should act as a strong base and a pivotal point for short-term traders.

On the flip side, bulls might now wait for a move beyond the 155.35-155.40 zone, or the multi-year peak, before positioning for any further gains. The EUR/JPY cross might then accelerate the momentum towards the 156.00 round figure en route to the next relevant hurdle near the 156.30-156.40 region. Spot prices might then aim to reclaim the 157.00 mark, though overbought RSI warrants some caution for aggressive bullish traders.

EUR/JPY daily chart

Key levels to watch

FX option expiries for June 20 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0980 401m
• 1.1000 934m

- GBP/USD: GBP amounts     

• 1.2200 2.2b
• 1.2435 330m
• 1.2575 2.1b

- USD/JPY: USD amounts                     

• 140.75 760m
• 141.00 1.8b
• 141.50 991m
• 142.00 2b

- USD/CHF: USD amounts        

• 0.8950 942m
• 0.9100 526m

- AUD/USD: AUD amounts

• 0.6630 451m
• 0.6650 571m
• 0.6775 675m
• 0.6900 365m

- USD/CAD: USD amounts       

• 1.3275 421m
• 1.3350 340m

• Gold price has jumped above the $1,950.00 resistance as the USD Index is struggling in extending its recovery.
• Investors’ risk-taking ability has dropped and the appeal for risk-perceived assets has softened.
• Gold price is marching towards the upper portion of the Falling Wedge pattern.

Gold price (XAU/USD) witnessed decent buying interest around $1,947.50 in the London session. The precious metal has climbed above the crucial resistance of $1,950.00 as investors are anticipating only one more interest rate hike from the Federal Reserve (Fed) this year.

S&P500 futures have extended their downside journey as investors have the excuse of an extended weekend in the United States due to Juneteenth. Investors’ risk-taking ability has dropped and the appeal for risk-perceived assets has softened.

Economists at HSBC believe that investors should prepare for some consolidation as valuations have risen, and the potential of further Fed tightening may cut into future earnings estimates and valuations in the short term. However, we feel the Fed is closer to the end of its monetary policy tightening cycle, and this should bode well for US equities.

The US Dollar Index (DXY) has turned sideways as the upside is restricted around 102.60 despite Fed chair Jerome Powell having confirmed that no rate cuts are appropriate this year. In spite of rising weekly jobless claims three times in a row, a jump in the Unemployment Rate to 3.8%, and softening of consumer and producer inflationary pressures due to lower gasoline prices, the Fed believes that core inflation is still persistent and labor market conditions have not softened enough to announce victory over the sticky Consumer Price Index (CPI).

Gold technical analysis

Gold price is marching toward the upper portion of the Falling Wedge chart pattern, which indicates a consistent downside move followed by an upside breakout. The 200-period Exponential Moving Average (EMA) at $1,958.84 is acting as a barricade for the Gold bulls. Horizontal resistance is plotted from May 05 low around $2,000.00.

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which indicates a non-directional performance.

Gold two-hour chart

Since EUR/CHF tested the parity threshold at the end of Q1, we have witnessed progressive CHF gains. Economists at CIBC Capital Markets analyze the pair’s outlook.

CHF to lag in the coming quarters

• USD/CHF struggles to extend Friday’s recovery, clings to mild gains during three-day uptrend.
• Steady RSI, clear break of 61.8% Fibonacci retracement suggests further advances.
• Weekly resistance line, 200-SMA guards recovery moves before welcoming bulls.

USD/CHF reverses intraday gains as it fades bounce off an ascending support line from Friday heading into Tuesday’s European session, downbeat around 0.8960 by the press time. In doing so, the Swiss Franc (CHF) pair fails to defend the three-day recovery from the lowest level in five weeks.

The pullback moves, however, lack acceptance from the RSI and MACD oscillators as the former remains steady near the 50.0 level whereas the latter prints bullish signals.

Hence, the USD/CHF is likely to remain firmer past the immediate support line, close to 0.8955 at the latest.

Even if the quote breaks the nearby support line, the 61.8% Fibonacci retracement level of its May 04-31 upside, near 0.8945, will act as an extra filter toward the south.

It’s worth noting, however, that the USD/CHF pair’s weakness past 0.8945 won’t hesitate in refreshing the monthly low, currently around the 0.8900 round figure.

In that case, the previous monthly low of 0.8820, also the lowest level since early 2021, will be in the spotlight.

On the contrary, a one-week-old falling resistance line, around 0.8990 and the 0.9000 psychological magnet guard the immediate recovery of the USD/CHF pair.

Following that, the 200-SMA level of around 0.8975 acts as the final defense of the bears, a break of which will quickly cross the 0.9000 round figure ahead of directing the pair buyers toward the June 12 swing high of near 0.9110.

USD/CHF: Four-hour chart

Trend: Further upside expected

• EUR/USD has delivered an upside break of the 20-pips range formed above 1.0900.
• The ECB has confirmed that more interest rates are in the pipeline due to persistence in core inflation.
• EUR/USD has shown a mild correction after confidently climbing above the 61.8% Fibonacci retracement at 1.0920.

The EUR/USD pair is coming out of the woods as the US Dollar Index (DXY) has faced stiff barricades around 102.60 in the London session. The major currency pair has delivered a breakout of the consolidation formed in a narrow range of 20 pips.

S&P500 futures have extended losses in the European session amid caution due to an extended weekend in the United States. Meanwhile, investors are looking for a potential trigger that will bring an action in the FX domain.

On the Eurozone front, more interest rate hikes are anticipated from the European Central Bank (ECB) despite a threat to economic prospects. ECB President Christine Lagarde has confirmed that more interest rates are in the pipeline due to persistence in core inflation.

EUR/USD has shown a mild correction after confidently climbing above the 61.8% Fibonacci retracement (plotted from April 26 high at 1.1095 to May 31 low at 1.0635) at 1.0920. The 20-period Exponential Moving Average (EMA) at 1.0910 is providing a cushion to the Euro bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, which indicates that the bullish momentum is already active.

More gains will be added by the major currency pair on a break above May 02 low at 1.0942, which will drive the asset toward the psychological resistance at 1.1000 and May 08 high at 1.1054.

In an alternate scenario, a breakdown below 50% Fibo retracement at 1.0865 will drag the shared currency pair toward 38.2% Fibo at 1.0813 followed by June 14 low at 1.0775.

EUR/USD four-hour chart

• USD/JPY seesaws between tepid gains/minor losses through the early European session.
• The Fed-BoJ policy divergence continues to act as a tailwind amid a modest USD strength.
• A softer risk tone benefits the safe-haven JPY and caps any further gains, for the time being.

The USD/JPY pair reverses an intraday dip and trades around the 142.00 mark during the early European session, just below its highest level since November 2022 touched earlier this Tuesday.

The Japanese (JPY) continues with its relative underperformance in the wake of a big divergence in the monetary policy stance adopted by the Bank of Japan (BoJ) and other major central banks, including the US Federal Reserve (Fed). It is worth recalling that the BoJ on Friday kept intact its view that inflation will slow later this year, underscoring its focus on supporting a fragile economic recovery on the back of global uncertainty. This, in turn, assists the USD/JPY pair to attract fresh buyers near the 141.60-141.55 region and edge higher for the fourth straight day. This also marks the seventh day of an uptick in the previous eight and is further supported by a modest US Dollar (USD) strength.

The Federal Reserve (Fed) last week signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year. The markets were quick to react and are now pricing in another 25 bps lift-off at the July FOMC meeting. This, in turn, triggers a fresh leg up in the US Treasury bond yields, which allows the USD to capitalize on its recent recovery from over a one-month low touched last Friday and further acts as a tailwind for the USD/JPY pair. That said, a generally weaker tone around the equity markets lends some support to the safe-haven JPY. Apart from this, slightly overstretched technical indicators on the daily chart hold back bulls from placing fresh bets around the major.

Investors also prefer to move to the sidelined and await Fed Chair Jerome Powell's two-day congressional testimony starting this Wednesday, which will be looked for fresh clues about the future rate-hike path. This, along with scheduled speeches by a slew of influential FOMC members, will play a key role in driving the USD demand and provide a fresh impetus to the USD/JPY pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside and any meaningful corrective fall might still be seen as a buying opportunity.

Technical levels to watch

• EUR/GBP picks up bids to refresh intraday high, stretches recovery from 10-month low.
• ECB policymakers suggest higher rates despite softer German PPI.
• UK’s two-year borrowing costs jump to 15-year high, suggesting more power for BoE hawks.
• Risk catalysts eyed ahead of Wednesday’s British inflation.

EUR/GBP renews intraday high near 0.8550 as it picks up bids to stretch the previous day’s rebound from the lowest levels since August 2022 heading into Tuesday’s London open. In doing so, the cross-currency pair justifies hawkish concerns from the European Central Bank (ECB) while ignoring German inflation clues and the expectations of the Bank of England (BoE) rate hikes.

Germany’s Producer Price Index (PPI) rises by 1.0% for May versus 1.7% YoY expected and 4.1% prior whereas the monthly figures spread disappointment with -1.4% mark compared to -0.7% market forecasts and 0.3% previous readings. It’s worth noting that statistics from Germany and the Eurozone have recently flagged concerns of the economic slowdown in the old continent and challenged the Euro bulls.

Even so, European Central Bank (ECB) policymaker Peter Kazimir said on Monday, “We need to raise rates again in July.” On the same line, ECB Chief Economist Philip Lane said that another rate hike in July seemed appropriate but noted that the decision in September will depend on incoming data, per Reuters. Furthermore, ECB Governing Council member Isabelle Schnabel also said, “Risks to the inflation outlook are tilted to the upside.” ECB’s Schnabel also cited the need to keep raising interest rates until seeing convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to 2%.

On the other hand, The Times came out with the news suggesting that the UK government’s two-year borrowing costs have risen above 5% for the first time in 15 years amid mounting expectations that the Bank of England (BoE) will lift interest rates again this week as it battles to contain inflation. The news also added that the Gilt yields, which move inversely to the British Pound prices, have soared in recent days as traders bet that Threadneedle Street will need to raise rates further and will keep them higher for longer than had been anticipated.

Elsewhere, the fears of slower economic recovery in the UK join the US-China tension to weigh on the sentiment and allow the Euro pair to remain on the front foot versus the Pound Sterling. While portraying the mood, S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days.

Moving on, a light calendar in Eurozone and the UK may restrict immediate EUR/GBP moves ahead of Wednesday’s UK inflation data and Thursday’s Bank of England (BoE) Monetary Policy Meeting.

Technical analysis

Oversold RSI conditions triggered the EUR/GBP pair’s rebound from a 13-day-old falling support line, close to 0.8510 by the press time. However, the quote’s recovery remains elusive unless it crosses the two-month-old resistance line, near 0.8580 at the latest.

• Silver price is consolidating below $24.00 as the USD Index remains elevated.
• A cautious market mood has been observed in the FX domain as the US markets will open after an extended weekend.
• Distinct responses to Fed interest rate guidance have kept the USD Index quiet.

Silver price (XAU/USD) has shifted its auction below the crucial support of $24.00 in the early European session. The white metal has shown a steady downside move amid an absence of potential economic indicators this week.

S&P500 futures have carry-forwarded losses added in Asia to the European session. A cautious market mood has been observed in the FX domain as the US markets will open after an extended weekend. The US Dollar Index (DXY) has faced nominal barriers around 102.60, however, the upside move has not faded yet. The US Treasury yields are also showing resilience. The 10-year US Treasury yields have climbed strongly above 3.8%.

Distinct responses to Federal Reserve’s (Fed) interest rate guidance have kept the USD Index quiet. The street is hoping that the bleak US economic outlook might force the Fed to shift its stance to only one rate hike this year. US labor market conditions have released some heat as weekly jobless claims are consistently increasing and the Unemployment Rate has climbed to 3.8%.

Chicago Fed Bank President Austan Goolsebee commented that there is conflicting data on whether we are too hot or whether we have done enough. He further added labor market is too hot but working hours are declining.

Silver technical analysis

Silver price has faced selling pressure while attempting to climb into the Rising Channel chart pattern around $24.24 on a four-hour scale. The white metal is hovering near the 200-period Exponential Moving Average (EMA) around $23.90, indicating a sheer decline in volatility.

Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, portraying a lackluster performance.

Silver four-hour chart

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, GBP/USD could still set sail to the 1.2900 region in the next few weeks.

Key Quotes

• GBP/USD drifts lower for the second successive day, though the downside seems limited.
• Rising US bond yields, along with a softer risk tone, benefit the USD and exert pressure.
• Traders, however, seem reluctant ahead of this week’s key data/central bank event risks.

The GBP/USD pair attracts some sellers for the second successive day on Tuesday and remains on the defensive heading into the European session. The pair currently trades around the 1.2775-1.2770 region, or a three-day low, still not far away from its highest level since April 2022 touched last Friday.

The US Dollar (USD) builds on its recent recovery from over a one-month low and is seen as a key factor exerting downward pressure on the GBP/USD pair. The Federal Reserve (Fed) last week paused its year-long policy tightening cycle, but signalled that borrowing costs may still need to rise as much as 50 bps and forecasted a higher peak interest rate this year. The hawkish outlook triggers a fresh leg up in the US Treasury bond yields, which along with a softer risk tone, pushes the safe-haven buck higher for the third straight day.

Worries about a global economic slowdown, particularly in China, overshadow an interest rate cut by the People’s Bank of China (PBoC). This is evident from a weaker sentiment surrounding the equity markets and drives some haven flows towards the Greenback. The USD bulls, however, seem reluctant to place aggressive bets and prefer to wait for fresh cues about the Fed's future rate hike path. It is worth recalling that the incoming softer US macro data raised questions over how much headroom the US central bank has to keep raising rates.

Hence, the focus will remain glued to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday. Apart from this, speeches by a slew of influential FOMC members will play a key role in driving the USD demand. In the meantime, expectations that the Bank of England (BoE) will be far more aggressive in policy tightening to combat high inflation should limit losses for the GBP/USD pair. This might hold back traders from placing fresh bets ahead of the UK consumer inflation figures on Wednesday and the BoE meeting on Thursday.

Technical levels to watch

• USD/TRY remains indecisive, grinding near the record high marked the last week.
• Turkish Lira buyers brace for strong hawkish CBRT move, markets expect heavy rate increase to the tune of near 20%.
• Fed stays on course to announce July rate hike, Powell’s speech will be crucial to watch.
• Full markets’ return may entertain intraday traders but lack of volatility is expected ahead of the key Thursday.

USD/TRY fade bullish bias as it seesaws around 23.60 heading into Tuesday’s European session. In doing so, the Turkish Lira (TRY) pair fails to refresh the all-time high mark in the last week as traders fear a bearish surprise for the pair.

That said, the fresh appointment of Hafize Gaye Erkan as the new Governor of the CBRT and former economy chief M. Simsek as the new Finance Minister, as well as Turkish President Recep Tayyip Erdogan’s readiness to relinquish rate controls, allow CBRT hawks to remain hopeful.

It’s worth noting that chatters of witnessing a CBRT rate hike to 20%, from the current 8.5%, gain major attention and prod the USD/TRY traders. That said, Reuters quotes JP Morgan’s report suggesting the Turkish central bank’s rate lift to 25%.

Apart from the CBRT moves, Fed Chair Jerome Powell’s bi-annual Testimony will also be important to watch for the USD/TRY moves.

While the CBRT is likely to offer a wild move on Thursday, Fed Chair Powell’s Testimony and second-tier US/Turkish data will entertain the traders ahead of that. That said, a strong rate hike from the Central Bank of the Republic of Türkiye (CBRT) could trigger a downside break of the 23.00 key support, which in turn will challenge the previous all-time high of around 21.00.

Additionally, the inflation pressure is much high in Turkiye than in the US and hence the odds of witnessing a heavy rate hike from the CBRT, as well as the USD/TRY’s slump, can’t be ruled out.

Technical analysis

USD/TRY bulls fade upside momentum amid easing bullish MACD signals and overbought RSI conditions. The Turkish Lira pair sellers, however, need validation from 23.10 and CBRT to convince bears.

• NZD/USD is going through a rough phase as higher interest rates by the RBNZ are denting domestic demand.
• US markets were closed on Monday therefore a volatile action is expected due to the extended weekend.
• Investors should note that RBNZ has raised interest rates to 5.50%, higher than interest rates in the US economy.

The NZD/USD pair is declining towards the crucial support of 0.6150 as investors are expecting that the Federal Reserve (Fed) will not cut interest rates this year. The Kiwi asset is falling like a house of cards as the New Zealand administration is worried about the domino effects of higher interest rates by the Reserve Bank of New Zealand (RBNZ).

S&P500 futures have generated significant losses in Asia. US markets were closed on Monday therefore a volatile action is expected due to the extended weekend. The overall market mood is cautious that has trimmed appeal for risk-sensitive assets.

The US Dollar Index (DXY) is moderately climbed to near 102.60. A monetary policy statement delivered by Federal Reserve (Fed) chair Jerome Powell indicated that two interest rate hikes are in the pipeline and rate cuts are not appropriate this year. The street is convinced that the Fed will keep interest rates higher this year as inflationary pressures are twice the desired rate of 2% but will announce only one more interest rate hike as the economic outlook of the United Kingdom economy seems dismal.

Meanwhile, the NZ economy has already slipped into a technical recession. Q1 Gross Domestic Product (GDP) contracted by 0.1% followed by a 0.7% contraction registered in the prior quarter.

NZ Treasury has criticized higher interest rates from the RBNZ as the extremely restrictive monetary policy has dampened domestic demand.

Investors should note that RBNZ Governor Adrian Orr has raised interest rates to 5.50%, higher than interest rates in the US economy.

• The index climbs to 3-day peaks near 102.60.
• US markets return to normal activity following Monday’s holiday.
• Housing data, Fedspeak next on tap in the US docket.

The greenback advances further and reaches new 3-day peaks around 102.60 when tracked by the USD Index (DXY) on turnaround Tuesday.

USD Index looks at data, Fed speakers

The index remains optimistic during the first half of the week, maintaining its upward trend for the third consecutive session. This persistent strength is attributed to the ongoing fluctuations in the risk market.

Despite the People's Bank of China (PBoC) reducing the 1-year medium-term lending facility (MLF) by 10 bps during Asian trading hours, the risk-associated market shows little response. Investors, instead, are closely monitoring the Federal Reserve's future actions and eagerly awaiting Chair J. Powell's semiannual testimonies on Wednesday and Thursday.

In terms of US data, the focus will be on Housing Starts and Building Permits, accompanied by speeches from St. Louis Fed member J. Bullard, who holds voting rights in 2025 and leans hawkish, and NY Fed member J. Williams, a permanent voter with centrist tendencies.

What to look for around USD

The greenback maintains alive the rebound from last week’s lows around the 102.00 neighbourhood for yet another session on Tuesday.

Meanwhile, the likelihood of another 25 bps hike at the Fed's upcoming meeting in July remains high, supported by the continued strength of key US fundamentals such as employment and prices.

This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.

Key events in the US this week: Building Permits, Housing Starts (Tuesday) – MBA Mortgage Applications. Fed’s Powell Testimony (Wednesday) – Chicago Fed National Activity Index, Initial Jobless Claims, Fed’s Powell Testimony, Existing Home Sales (Thursday) – Advanced Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023/early 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.12% at 102.60 and the breakout of 103.05 (100-day SMA) would open the door to 104.69 (monthly high May 31) and then 105.21 (200-day SMA). On the downside, the next support emerges at 102.00 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).

• USD/CAD extends week-start rebound from yearly low, renews intraday top of late.
• Convergence of 100-HMA, previous support line guards immediate recovery.
• Loonie pair sellers need validation from resistance-turned-support line.
• Triangle breakout, bullish MACD signals favor intraday buyers of USD/CAD.

USD/CAD refreshes intraday high near 1.3235 as it extends the previous day’s rebound from the nine-month low heading into Tuesday’s European session.

In doing so, the Loonie pair justifies the triangle breakout, as well as the bullish MACD signals.

However, a joint of the 100-Hour Moving Average (HMA) and previous support line stretched from June 07, around 1.3250, appears a short-term key hurdle for the Loonie pair buyers.

Should the quote manage to cross the 1.3250 resistance confluence, the 200-HMA level of around 1.3300 will act as the final defense of the USD/CAD bears before giving control to the bulls.

In that case, the mid-June swing high of around 1.3385 and the monthly peak of 1.3585 will be in the spotlight.

On the contrary, the top line of the immediate triangle puts a floor under the USD/CAD price near 1.3215.

Following that, the stated triangle’s bottom low and the latest trough, respectively near 1.3200 and 1.3175, will challenge the USD/CAD sellers ahead of directing them to the September 2022 bottom of around 1.2955.

USD/CAD: Hourly chart

Trend: Limited upside expected

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group suggest there is still scope for EUR/USD to advance further in the near term.

Key Quotes

24-hour view: We indicated yesterday that “the current price movements appear to be part of a consolidation phase” and we expected EUR to trade in a range of 1.0910/1.0970. EUR then traded between 1.0905 and 1.0946. The price actions still appear to be consolidative, but the slightly weakened underlying tone suggests EUR is likely to trade in a lower range of 1.0890/1.0950. 

Next 1-3 weeks: We have held a positive EUR view for more than a week now. In our most recent narrative from last Friday (16 Jun, spot at 1.0940), we highlighted that EUR “is likely to rise further, albeit at a slower pace.” We added, “the next level to watch is 1.1000.” We continue to hold the same view even though overbought conditions could lead to 1-2 days of consolidation first. Overall, only a breach of 1.0845 (no change in ‘strong support’ level) would indicate 1.1000 is out of reach this time around. 

• GBP/JPY has gauged a cushion around 181.00 as the focus has shifted to UK inflation.
• Price pressures in the UK region have remained extremely stubborn in comparison with other developed economies.
• The consistent decline in the Japanese Yen has propelled expectations of a stealth intervention by the BoJ.

The GBP/JPY pair is well-supported around 181.00 in the Asian session. The cross is getting the attention of buyers ahead of the United Kingdom Consumer Price Index (CPI) data (May), which will release on Wednesday.

Price pressures in the UK region have remained extremely stubborn in comparison with other developed economies after the pandemic. Major factors that have been fueling inflationary pressures in the Pound Sterling area are labor shortages and 45-year high food inflation.

The event of Brexit and early retirements taken by individuals have been crucial contributors to labor shortages, which forced firms to offer significantly higher payouts to offset the extreme demand for fresh talent.

As per the preliminary report, UK’s monthly headline inflation (May) is expected to show a pace of 0.4%, slower than the pace of 1.2% registered in April. Annualized headline CPI is seen softening to 8.5% vs. the prior release of 8.7% while core inflation that excludes oil and food prices is seen steady at 6.8%.

The UK inflation data will be followed by the interest rate decision from the Bank of England (BoE). Taking into account, tight Employment and stubborn inflation, BoE Governor Andrew Bailey is expected to hike interest rates further by 25 basis points (bps) to 4.75%.

On the Tokyo front, the consistent decline in the Japanese Yen has propelled expectations of a stealth intervention by the Bank of Japan (BoJ) in the FX domain. The BoJ has a history of intervening in FX operations to avoid further damage to their domestic currency.

• AUD/USD prints the biggest daily loss in a month, down for the third consecutive day as it prods intraday low.
• RBA Minutes defend the latest hawkish rate surprise but fails to provide clues for further increase rate increase.
• RBA’s Bullock cites short-term negatives for Aussie employment, economy.
• PBoC’s rate cut, hawkish Fed bets and dicey markets also weigh on the risk-barometer pair.

AUD/USD bears occupy the driver’s seat around the 0.6800 round figure amid early Tuesday morning in Europe. With this, the Aussie pair not only bears the burden of the Reserve Bank of Australia’s (RBA) unimpressive Minutes but also the downbeat updates from the People’s Bank of China (PBoC), as well as hawkish concerns about the US Federal Reserve. It should be noted that the market’s cautious mood and a light calendar also favor the risk-barometer pair to print the biggest daily loss in a month, so far.

RBA Minutes defend the consecutive second hawkish surprise by terming it a trick to boost confidence that inflation will return to normal sooner. Even so, failure to provide hints for further rate hikes weighs on the AUD/USD price.

On the same line, RBA Deputy Governor Michele Bullock also said that the higher rates are the only tool the RBA has to curb inflation. The policymaker, however, also said that the employment and economy need to grow below trend for a while.

Earlier in the day, the People's Bank of China (PBoC) cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps), matching market expectations. That said, the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR currently stands at 4.20% from 4.30% previous readings.

With the rate cuts, the PBoC backs the market’s fears of China’s slower economic recovery and the downward growth forecasts from the top-tier banks, including Goldman Sachs and JP Morgan.

As a result, the AUD/USD had extra reasons to fall the most in a month while printing a three-day losing streak.

It should be noted that the monetary policy officials from the European Central Bank (ECB) and the US Federal Reserve (Fed) have been hawkish so far and hence flag fears of the global economic slowdown, which in turn weigh on the sentiment and the AUD/USD price.

While portraying the mood, S&P500 Futures print mild losses whereas the yields grind higher.

Moving on, the return of the full markets will keep entertaining the AUD/USD bears amid hawkish Fed hopes and the risk-off mood. However, major attention will be given to Wednesday’s Fed Chair Jerome Powell’s bi-annual Testimony for clear directions.

Technical analysis

A clear downside break of an ascending support line from May 31, now immediate resistance near 0.6885, directs the AUD/USD bears toward the 200-day Exponential Moving Average (EMA) support of around 0.6760.

• Gold Price struggles for clear directions amid full markets, mixed catalysts.
• PBoC rate cut justifies fears surrounding China economic woes, weigh on XAU/USD price.
• Retreat in yields put a floor under the Gold Price ahead of Fed Chair Jerome Powell’s Testimony, PMI.

Gold Price (XAU/USD) fades two-day-old bearish bias as it recovers from the intraday low amid the full market’s return. Even so, the yellow metal appears indecisive as a whole amid the mixed catalysts surrounding the US Federal Reserve (Fed) and China, as well as the market’s inaction.

That said, fears of China’s economic slowdown gain momentum after the People's Bank of China (PBoC) cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps), matching market expectations. On the previous day, multiple top-tier banks, including Goldman Sachs and JP Morgan, downwardly revised China growth forecasts and raised fears of easy energy demand, considering China’s status as one of the world’s biggest gold consumers.

On the other hand, monetary policy officials from the European Central Bank (ECB) and the Fed have been hawkish so far and hence flag fears of the global economic slowdown, which in turn weighs on the Gold Price.

Moving on, major attention will be given to Fed Chair Jerome Powell’s Testimony and preliminary readings of June’s PMIs for a clear short-term view.

Also read: Gold Price Forecast: For how long will 100 DMA guard the XAU/USD downside?

Gold Price: Key levels to watch

Our Technical Confluence Indicator suggests that the Gold Price remains sidelined near the $1,950 key level, recently piercing from below. That said, the hurdle comprises 5-DMA, Fibonacci 23.6% on the daily chart and middle band of the Bollinger on the four-hour chart

Apart from the $1,950 hurdle, the $1,955-56 zone can also act as an immediate resistance as it encompasses the Fibonacci 61.8% on the daily and the weekly chart, as well as the 10-DMA.

Following that, the Gold Price will have an open space to ride towards the north unless hitting the $1,968 hurdle and the previous weekly high of around $1,972.

Meanwhile, the Gold sellers need validation from the 100-DMA support of around $1,942, which also includes the Fibonacci 38.2% on the weekly chart.

In a case where the Gold Price drops below $1,942, the previous monthly low of around $1,933 can act as the final defense of the XAU/USD buyers.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• EUR/USD lacks any firm intraday direction and oscillates in a range through the Asian session.
• A goodish pickup in the US bond yields underpins the USD and acts as a headwind for the pair.
• The ECB’s hawkish outlook lends some support to the Euro and helps limit any meaningful slide.

The EUR/USD pair struggles to gain any meaningful traction on Tuesday and oscillates in a narrow trading band, just above the 1.0900 round-figure mark through the Asian session.

The US Dollar (USD) builds on its recent bounce from over a one-month low touched last Friday and edges higher for the third successive day, which, in turn, is seen as a key factor acting as a headwind for the EUR/USD pair. The Federal Reserve (Fed), though skipped a rate hike last week, signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year. The markets were quick to react and are now pricing in another 25-bps lift-off at the July FOMC meeting, which, in turn, triggers a fresh leg up in the US bond yields and lends some support to the buck.

Apart from this, a generally weaker tone around the equity markets further benefits the Greenback's relative safe-haven status and contributes to capping the upside for the EUR/USD pair. Concerns about a global economic downturn, particularly in China, overshadow reports that China is considering a broad stimulus package to bolster economic support and continues to weigh on investors' sentiment. Even a move by the People's Bank of China, to cuts one-year and five-year Loan Prime Rates (LPRs) this Tuesday, does little to ease concerns or provide any meaningful impetus to the major.

The downside for the EUR/USD pair, however, seems cushioned, at least for the time being, in the wake of the European Central Bank's (ECB) hawkish outlook. It is worth recalling that the ECB hiked interest rates for the eighth straight time last Wednesday, to the highest in 22 years and indicated that additional rate hikes will be needed to bring Eurozone inflation to its medium-term target of 2%. The inflation projection for this year was raised to 5.1% from 4.6%, suggesting that the central bank is still not done with its policy tightening. This, in turn, could offer support to the shared currency.

Traders also seem reluctant to place aggressive bets and might prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's two-day congressional testimony starting this Wednesday. Apart from this, comments by a slew of influential FOMC members will be looked upon for fresh cues about the Fed's future rate-hike path, which will play a key role in driving the USD demand and help determine the near-term trajectory for the EUR/USD pair. Investors this week will also confront the release of the flash PMI prints from the Eurozone and the US, due on Friday.

• USD/INR picks up bids to extend bounce of seven-month-old ascending support line.
• RSI rebound from oversold territory favor corrective move in Indian Rupee.
• 100-DMA acts as extra upside filter before welcoming USD/INR bulls.
• Multi-month-old symmetrical triangle restricts the pair’s broad moves, suggest further recovery.

USD/INR renews its intraday high near 82.10 as it prints a three-day uptrend while bouncing off the key support line amid early Tuesday in Europe.

The Indian Rupee (INR) pair’s recovery also takes clues from the RSI (14) line as it improves toward the 50.0 level of late.

However, the bearish MACD signals require the USD/INR pair buyers to wait for a daily closing beyond the 200-DMA hurdle of around 82.10 to retake control. Even so, the 100-DMA resistance of near 82.30 will act as an extra filter toward the north.

Above all, a symmetrical triangle formation established since October 2022 restricts USD/INR moves between 82.00 and 82.80 of late.

That said, the pair’s latest rebound from the support line will please short-term buyers before making them jostle with the 82.80 key hurdle, a break of which could quickly propel the USD/INR price beyond the 83.00 round figure.

On the flip side, a daily closing below the 82.00 support will make the pair vulnerable to refreshing the yearly low, currently around 80.90.  In doing so, April’s bottom of around 81.50 may act as a buffer.

USD/INR: Daily chart

Trend: Further recovery expected

• WTI fades bounce off intraday low, defends previous day’s U-turn from one-week high.
• Fears about tropical storm Bret turning into hurricane outside US Gulf renew supply crunch woes.
• PBoC rate cut, concerns about China’s economic recovery and the Sin-American tussle prod demand out.
• Risk catalysts eyed amid full markets’ return, light calendar.

WTI crude oil price retreats toward the intraday low of around $71.00 as downbeat sentiment joins demand woes amid early Tuesday in Europe. In doing so, the black gold also pays little heed to the supply crunch emanating from tropical storm Bret.

Late on Monday, the US National Hurricane Centre flagged concerns that tropical storm Bret is likely to strengthen and can turn itself into a hurricane on Thursday and Friday. It’s worth noting that tropical storm Bret is heading towards the US Gulf and may land just outside the oil-rich area, which in turn raises supply-crunch fears.

It should be noted that the OPEC+ supply cuts and comments from Saudi Arabia suggesting more tightening in the output also defend the Oil buyers.

On the other hand, fears of China’s economic slowdown gain momentum after the People's Bank of China (PBoC) cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps), matching market expectations. On the previous day, multiple top-tier banks, including Goldman Sachs and JP Morgan, downwardly revised China growth forecasts and raised fears of easy energy demand, considering China’s status as one of the world’s biggest energy consumers.

Elsewhere, hawkish concerns about the US Federal Reserve (Fed) and the European Central Bank (ECB) also weigh on the WTI demand outlook and prod the energy benchmark’s price of late.

Against this backdrop, S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days. That said, the US Dollar Index (DXY) struggles to defend the latest gains near 102.50.

Moving on, concerns about the major central banks and risk catalysts will be key to watching for clear directions.

Technical analysis

Steady RSI (14) and bullish MACD signals join a one-week-old rising support line, near $70.35 at the latest, to restrict short-term WTI crude oil downside.

Following a speech, Reserve Bank of Australia (RBA) Deputy Governor Bullock is now taking audience questions at the AI Group conference, in Newcastle, on Tuesday.

Key quotes

Market reaction

AUD/USD was last seen trading at 0.6806, down 0.63% on the day.

• Natural Gas price drifts lower on Tuesday and snaps a six-day winning streak to a one-month top.
• The recent breakout through key hurdles favours bulls and supports prospects for further gains.
• A convincing break back below the $2.50 area is needed to negate the near-term positive outlook.

Natural Gas price edges lower during the Asian session on Tuesday and reverses a part of the previous day's positive move to the $2.765 area, or a one-month top. The XNG/USD currently trades around the $2.725 region, down nearly 0.75% for the day and for now, seems to have snapped a six-day winning streak, though any meaningful corrective decline still seems elusive.

The Relative Strength Index (RSI) on the daily chart is hovering around the 70 mark and turning out to be a key factor that prompts some profit-taking around the XNG/USD. That said, last week's sustained move beyond the $2.50 congestion zone and the overnight breakout through a descending trend line extending from March swing high favours bullish traders. This, in turn, suggests that the path of least resistance for Natural Gas price is to the upside and supports prospects for the emergence of some dip-buying at lower levels.

The aforementioned descending trend-line resistance breakpoint, currently around the $2.70 area, now seems to protect the immediate downside ahead of the $2.65 zone, or the overnight swing low. Any further decline might still be seen as a buying opportunity, which should help limit the downside for the XNG/USD near the $2.50 horizontal resistance breakpoint. The latter should act as a pivotal point, which if broken decisively might shift the near-term bias in favour of bearish traders and prompt aggressive technical selling.

On the flip side, the overnight swing high, around the $2.765 area, closely followed by the $2.815 region, or the May monthly top, now seem to act as immediate hurdles. Some follow-through buying will reaffirm the positive outlook and lift the XNG/USD beyond an intermediate barrier near $2.915, towards reclaiming the $3.000 round figure. The momentum could get extended further and eventually lift Natural Gas price to the March swing high, around the $3.075-$3.080 zone.

Natural Gas: Daily chart

Reserve Bank of Australia (RBA) Deputy Governor Bullock is speaking at the AI Group conference, in Newcastle, on Tuesday.

Key quotes

Market reaction

AUD/USD is paying little heed to the above comments, losing 0.70% on the day to trade at 0.6802, as of writing.

• USD/CHF scales higher for the third straight day, albeit lacks follow-through buying.
• A goodish pickup in the US bond yields boosts the USD and lends support to the pair.
• A softer risk tone benefits the CHF and caps gains amid the Fed rate hike uncertainty.

The USD/CHF pair gains some positive traction for the third straight day on Tuesday and trades just above mid-0.8900s through the Asian session. The uptick, however, lacks bullish conviction, warranting some caution before positioning for an extension of the recent bounce from the 0.8900 mark, or over a one-month low touched last Friday.

The US Dollar (USD) attracts some follow-through buying and recovers further from its lowest level since May 11, which is seen as a key factor acting as a tailwind for the USD/CHF pair. The Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps by the end of this year, triggers a fresh leg up in the US Treasury bond yields and lends some support to the Greenback. That said, the incoming softer US economic data raised questions over how much headroom the US central bank has to keep raising rates. This, in turn, holds back the USD bulls from placing aggressive bets.

Apart from this, a generally softer tone around the equity markets lends some support to the safe-haven Swiss Franc (CHF) and contributes to capping the upside for the USD/CHF pair, at least for the time being. The market sentiment remains fragile in the wake of growing worries about a global economic slowdown, particularly in China. In fact, the recent Chinese macro data showed that the world's second-largest economy is struggling to sustain the momentum seen earlier this year and that the post-COVID recovery is faltering. Even reports that China is considering a broad stimulus package to bolster economic support fails to ease concerns.

Traders also seem reluctant and prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday. Investors will look for clues about the Fed's future rate hike path, which will play a key role in influencing the USD price dynamics and help determine the near-term trajectory for the USD/CHF pair. This makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move. Traders now look forward to the US housing market data - Building Permits and Housing Starts - for some impetus ahead of a speech by New York Fed President John Williams.

Technical levels to watch

• GBP/USD remains sidelined after reversing from 14-month high.
• Jump in UK government’s two-year borrowing cost propel hawkish BoE concerns.
• Fed talks, mixed US data lures Pound Sterling bears as full markets return.
• UK CPI, second-tier US data may entertain Cable traders ahead of BoE, Fed Chair Powell’s Testimony.

GBP/USD remains defensive near 1.2780 as it struggles to justify the hawkish concerns about the Bank of England (BoE) ahead of the UK’s inflation data. That said, the recently mixed concerns about the Federal Reserve (Fed) also prod the Pound Sterling traders as it struggles to extend the previous day’s U-turn from the highest levels since April 2022.

Earlier in the day, The Times came out with the news suggesting that the UK government’s two-year borrowing costs have risen above 5% for the first time in 15 years amid mounting expectations that the Bank of England (BoE) will lift interest rates again this week as it battles to contain inflation. The news also added that the Gilt yields, which move inversely to the British Pound prices, have soared in recent days as traders bet that Threadneedle Street will need to raise rates further and will keep them higher for longer than had been anticipated.

On the other hand, the Fed monetary policy report, presented late Friday to the US Congress, joins the recent comments from the Fed officials to favor the US Dollar bulls. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller were the important ones who appeared a bit hawkish of late.

It’s worth noting that the fears of slower economic recovery in the UK join the US-China tension to weigh on the sentiment and put a floor under the US Dollar. While portraying the mood, S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days.

Looking ahead, the economic calendar appears mostly empty for the UK on Tuesday but the return of the full markets and the US housing numbers may entertain the GBP/USD pair traders. Above all, Wednesday’s UK inflation and Fed Chair Jerome Powell’s bi-annual Testimony will be the key to determining near-term Cable pair moves.

Technical analysis

Although the overbought RSI (14) line restricts immediate GBP/USD upside, the Cable pair bears need validation from the six-month-old resistance-turned-support line of around 1.2770-65.

• USD/CAD gains traction for the second straight day and recovers further from the YTD low.
• Weaker Oil prices undermine the Loonie and lend support amid a modest USD strength.
• A goodish pickup in the US bond yields and a softer risk tone benefit the safe-haven buck.

The USD/CAD pair builds on the previous day's modest recovery from its lowest level since September 2022 and gains positive traction for the second successive day on Tuesday. Spot prices maintain the bid tone through the Asian session and currently trade around the 1.3225-1.3230 region, up 0.15% for the day.

Crude Oil prices remain depressed in the wake of worries that a global economic slowdown, particularly in China, will dent fuel demand. This, in turn, undermines the commodity-linked Loonie, which, along with a modest US Dollar (USD) strength, acts as a tailwind for the USD/CAD pair. It is worth recalling that the recent Chinese macro data showed that the world's second-largest economy is struggling to sustain the momentum seen earlier this year.

Even reports that China is considering a broad stimulus package to bolster economic support and the expected move by the People's Bank of China (PBoC), to cut one-year and five-year Loan Prime Rates (LPRs), fail to ease market concerns. This is evident from a weaker risk tone, which, along with a goodish pickup in the US Treasury bond yields, pushes the safe-haven USD higher for the third straight day and lends support to the USD/CAD pair.

The Federal Reserve (Fed), though skipped a rate hike last week, signalled that borrowing costs may still need to rise by as much as 50 bps by the end of this year. The markets were quick to react and are now pricing in another 25 bps lift-off at the July FOMC meeting, which, in turn, triggers a fresh leg up in the US bond yields. That said, the incoming softer US economic data raised questions over how much headroom the Fed has to keep raising rates.

Hence, the market focus now shifts to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday, which will be scrutinized for fresh clues about the future rate-hike path.  This, in turn, will play a key role in determining the near-term trajectory for the USD and provide some meaningful impetus to the USD/CAD pair. In the meantime, Oil price dynamics should allow traders to grab short-term opportunities around the major.

Technical levels to watch

• USD/JPY retreats from the highest level since November 2022, print four-day uptrend despite grinding at multi-day top of late.
• Yields struggle to defend initial run-up amid mixed concerns about US-China, Fed.
• Japan FinMin Suzuki hints at stable fundamental, refrains from comments on FX.
• Japan Industrial Production, US housing data may entertain Yen traders but Fed concerns are the key.

USD/JPY pares intraday gains at the seven-month high amid early Tuesday, falling from a multi-day peak of 142.25 to 142.00 by the press time. That said, the Yen pair previously cheered the US Dollar run-up and an upbeat start of the week by the Treasury bond yields to refresh the yearly top before retreating on the mixed catalysts.

That said, the US Dollar Index (DXY) prints a three-day uptrend near 102.60 by the press time even as the US Treasury bond yields struggle to defend the latest run-up. That said, the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days.

It’s worth noting that the yield began the trading week on a firmer footing amid hawkish hopes from the Fed and fears of more US-China jitters. However, the People’s Bank of China’s (PBoC) rate cut and Japan Finance Minister (FinMin) Shunichi Suzuki’s comments appear to prod the market sentiment, US Treasury bond yields and the USD/JPY prices of late.

That said, the PBoC matches market expectations of announcing 10 basis points (bps) rate cut to propel the growth amid concerns that the world’s biggest industrial player is losing recovery.

On the other hand, Japan FinMin Suzuki said earlier in the day that FX should move stably reflecting the fundamentals. The policymaker refrained from commenting on the FX levels but highlighted the importance of stability in the market. It’s worth noting that Japan’s Industry Minister Nishimura also advocates for stability in the FX markets.

Elsewhere, the Fed monetary policy reports to the US Congress and the latest comments from the Fed officials have been hawkish and favor the US Dollar bulls. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller were the important ones who appeared a bit hawkish of late.

It should be noted that the US Secretary of State Antony Blinken met China President Xi Jinping and Beijing’s top diplomat Wang Yi and raised hopes of an easing in the US-China ties. However, concerns about Taiwan keep challenging the route for cordial relations.

Amid these plays, S&P500 Futures print mild losses whereas the yields grind higher.

Moving on, USD/JPY is likely to remain firmer but the second-tier US housing data, Japan Industrial Production for April and Fed versus BoJ updates will be the key to watch for the clear directions.

Technical analysis

A seven-week-old rising trend channel keeps USD/JPY pair buyers hopeful until it trades between 140.20 and 143.70.

• AUD/USD remains under some selling pressure for the third straight day and drops to a multi-day low.
• A goodish pickup in the US bond yields acts as a tailwind for the USD and is seen weighing on the pair.
• The hawkish  RBA meeting minutes and rate cuts by PBoC do little to impress bulls to lend any support.

The AUD/USD pair drifts lower for the third successive day on Tuesday and drops to a multi-day low, closer to the 0.6800 round-figure mark during the Asian session.

The Australian Dollar (AUD) weakens a bit following the release of the Reserve Bank of Australia (RBA) meeting minutes, which showed that argument between a rate hike and a pause was finely balanced. The board, however, decided the case for an immediate hike was stronger as the balance of risks to inflation had shifted to the upside since the May meeting. The RBA reaffirmed its willingness to do what was necessary to bring inflation to target over a "reasonable" timeframe. This, however, does little to impress bullish traders or lend any support to the AUD/USD pair.

Even reports that China is considering a broad stimulus package to bolster economic support and a move by the People's Bank of China (PBoC), to cut one-year and five year Loan Prime Rates (LPRs) this Tuesday, fails to lend any support to the Aussie. The US Dollar (USD), on the other hand, gains some positive traction for the third successive day and builds on its recent bounce from over a one-month low amid a goodish pickup in the US Treasury bond yields. Apart from this, a softer risk tone benefits the safe-haven buck and exerts pressure on the AUD/USD pair.

With the latest leg down, spot prices have now retreated nearly 100 pips from the 0.6900 neighbourhood, or the highest level since February 2023 touched last Friday. However, it will still be prudent to wait for strong follow-through selling before confirming that the recent upward trajectory witnessed since the beginning of this month has run out of steam. Traders might also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday, which might provide fresh clues about the future rate-hike path.

Technical levels to watch

• USD/CNH picks up bids to refresh intraday high, up for the third consecutive day.
• PBoC cuts one-year, five-year LPRs by 10 basis points.
• Hawkish Fed bets gain momentum after Juneteenth holiday.
• Mixed clues about US-China ties, fears of China’s slower economic recovery also propel offshore Yuan price.

USD/CNH justifies the People’s Bank of China’s (PBoC) rate cut as it marches towards the 7.1800 round figure during a three-day winning streak amid early Tuesday. That said, the offshore Chinese Yuan (CNH) renews its intraday high near 7.1770 by the press time.

People's Bank of China (PBoC) cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps), matching market expectations. That said, the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR currently stands at 4.20% from 4.30% previous readings.

Apart from the PBoC rate cuts fears of China’s slower economic recovery and the downward growth forecasts from the top-tier banks, including Goldman Sachs and JP Morgan, seem to also propel the USD/CNH price of late.

Elsewhere, US Secretary of State Antony Blinken recently met China President Xi Jinping and Beijing’s top diplomat Wang Yi and raised hopes of an easing in the US-China ties. After the meeting, China President Xi Jinping said that he hopes through the visit, Blinken will make more positive contributions to stabilizing US-Sino relations. However, China’s top diplomat Wang Yi said on Monday, “China has no room for compromise and concessions on the Taiwan issue,” Ahead of that, the diplomats held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going.

On the other hand, the Fed monetary policy reports to the US Congress and the latest comments from the Fed officials have been hawkish and favor the US Dollar bulls. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller were the important ones who appeared a bit hawkish of late and helped propel the USD/CNH bulls.

Looking ahead, a return of the full markets may entertain the DXY traders with the US housing numbers on the calendar to watch. Though, major attention will be given to Fed Chair Jerome Powell’s Testimony and preliminary readings of June’s PMIs for a clear short-term view.

Technical analysis

A clear bounce off the 21-DMA support of 7.1220 directs the USD/CNH bulls toward the late November 2022 high of near 7.2600. However, the latest peak of near 7.1925 and the 7.2000 psychological magnet may test the pair buyers.

• EUR/USD takes offers to refresh intraday low, down for the third consecutive day.
• ECB policymakers keep suggesting further rate hikes and so do Fed clues.
• RSI conditions suggest bottom-picking, multiple supports challenge Euro bears.
• Bulls remain cautious below 1.1100 while 1.0970 guards immediate recovery.

EUR/USD drops for the third consecutive day amid early Tuesday morning in Europe, refreshing intraday low near 1.0920 by the press time. In doing so, the Euro pair justifies the failure to cross the 1.0970-60 area in the last week, as well as a three-day-old falling resistance line.

That said, the Euro pair fails to justify hawkish signals from the European Central Bank (ECB) Officials amid the Federal Reserve (Fed) updates which have been suggesting higher rates of late.

Also read: EUR/USD prods bears above 1.0900 as ECB hawks gain more acceptance than the Fed ones

It’s worth noting that the multiple tops marked around 1.1100 in April and May also highlight the Euro pair’s inability to defend the bullish bias. However, the below 50 conditions of the RSI (14) line challenge the EUR/USD bears.

The same highlights descending support line from Friday, around 1.0900 as an immediate key level to watch for the Euro bears.

Following that, a convergence of the 100-Hour Moving Average (HMA) and a one-week-old ascending trend line, near 1.0890, will challenge the EUR/USD bears.

It’s worth noting that, an upward-sloping support line from June 07, close to 1.0850 at the latest, acts as the last defense of the EUR/USD buyers, a break of which will confirm the short-term bearish trend of the major currency pair.

On the contrary, a downward-sloping resistance line from Friday, near 1.0920 precedes the latest peak of 1.0970 to restrict the immediate EUR/USD upside.

However, a clear break of the 1.0970 won’t hesitate to challenge the 1.1000 psychological magnet and then aim for the yearly highs marked near the 1.1100 zone.

EUR/USD: Hourly chart

Trend: Limited downside expected

The Reserve Bank of Australia (RBA) published the Minutes of its June monetary policy meeting, citing that “board considered rate rise of 25bp or holding steady and reconsidering at later meeting.”

Additional takeaways

Market reaction

On the Minutes release, AUD/USD is dropping toward 0.6800, currently trading at 0.6830, down 0.22% on the day.

• NZD/USD struggles to gain any meaningful traction on Tuesday amid a modest USD uptick.
• A fresh leg up in the US Treasury bond yields and a softer risk tone underpin the Greenback.
• The fundamental backdrop favours bearish traders and supports prospects for deeper losses.

The NZD/USD pair lacks any firm direction and seesaws between tepid gains/minor losses, around the 0.6200 mark through the first half of the Asian session on Tuesday.

The US Dollar (USD) builds on its bounce from over a one-month high touched last Friday and edges higher for the third straight day, which, in turn, is seen as a key factor acting as a headwind for the NZD/USD pair. The USD uptick could be attributed to a goodish pickup in the US Treasury bond yields, bolstered by rising bets for another 25 bps lift-off at the July FOMC meeting. This comes on the back of the Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise by as much as 50 bps by the end of this year, and continues to lend some support to the buck.

Apart from this, a generally weaker tone around the equity markets further benefits the Greenback's relative safe-haven status and contributes to capping the upside for the risk-sensitive Kiwi. Concerns about a global economic downturn, particularly in China, overshadow reports that China is considering a broad stimulus package to bolster economic support and continues to weigh on investors' sentiment. Furthermore, the People's Bank of China cuts one-year and five-year Loan Prime Rates (LPRs) this Tuesday, though does little to inspire bulls or provide any impetus to the NZD/USD pair.

This, along with the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999, could further undermine the New Zealand Dollar (NZD). Furthermore, New Zealand's Minister of Finance Grant Robertson and the Treasury criticized higher interest rates. However, expectations that the Fed is nearing the end of its policy tightening cycle might cap the USD and help limit losses for the NZD/USD pair, at least for now. Traders might also refrain from placing aggressive bets ahead of Fed Chair Jerome Powell's congressional testimony.

Powell's comments will be closely scrutinized for clues about the Fed's future rate-hike path, which, in turn, will influence the USD price dynamics and help determine the near-term trajectory for the NZD/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bearish traders and suggests that the recent strong move-up witnessed over the past two weeks or so has run its course. That said, it will still be prudent to wait for some follow-through selling before positioning for any meaningful corrective decline from the monthly peak touched last Friday.

Technical levels to watch

People’s Bank of China (PBoC) set the USD/CNY central rate at 7.1596 on Tuesday, versus previous fix of 7.1201 and market expectations of 7.1630. It's worth noting that the USD/CNY closed near 7.1620 the previous day.

It should be noted that the PBoC also cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps).

Also read: PBOC cuts one-year, five-year LPR by 10 basis points to 3.55%, 4.20% respectively

About PBOC fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

Early Tuesday in Asia, the People's Bank of China (PBoC) cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps), matching market expectations. That said, the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR currently stands at 4.20% from 4.30% previous readings.

The news exerts downside pressure on the AUD/USD as it renews intraday low near 0.6843, down 0.10% on a day by the press time.

Also read: AUD/USD bears take a breather around mid-0.6800s with eyes on RBA Minutes, PBoC

About PBoC Interest Rate Decision

The PBoC Interest Rate Decision is announced by the People´s Bank of China. If the PBoC is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the CNY. Likewise, if the PBoC has a dovish view on the Chinese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

• US Dollar Index prints three-day winning streak by extending last week’s recovery from monthly low.
• Fed report to Congress, comments from officials and upbeat US housing data favor DXY bulls.
• Challenges to sentiment add strength to US Dollar recovery as markets await more clues after Monday’s Juneteenth holiday.
• Fed Chair Powell’s Testimony is the key event of the week, PMIs are important too.

US Dollar Index (DXY) stays on the front foot as it refreshes intraday high near 102.55 during early Tuesday.

In doing so, the greenback’s gauge versus the six major currencies copies the moves of the US Treasury bond yields while printing the third consecutive daily run-up, so far, while extending the previous week’s rebound from the monthly low.

That said, the US 10-year and two-year Treasury bond yields grind higher to 3.82% and 4.75%, up for the third consecutive day by the press time.

The US bond coupons justify the market’s bets on the Federal Reserve’s (Fed) July rate hike, nearly 70% of late, as well as the trader’s rush towards risk safety amid indecision about China.

The Fed monetary policy reports to the US Congress and the latest comments from the Fed officials have been hawkish. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters, which in turn put a floor under the US Dollar Index (DXY). Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller also appeared a bit hawkish and helped the DXY to reverse from a multi-day low.

On the other hand, the US-China tension about Taiwan escalated and the concerns about China’s inability to propel the growth trajectory also roiled the sentiment and the Juneteenth holiday in the US. It’s worth observing that the US National Association of Home Builders (NAHB) survey jumped to 55.0 in June from 50.0 prior, marking the highest level in 11 months and favored the DXY to grind higher, before the latest retreat.

It’s worth noting that the upbeat yields in the Eurozone and the UK also favored the US bond coupons and the DXY despite the Juneteenth holiday the previous day.

Moving on, a return of the full markets may entertain the DXY traders with the US housing numbers on the calendar to watch. Though, major attention will be given to Fed Chair Jerome Powell’s Testimony and preliminary readings of June’s PMIs for a clear short-term view.

Technical analysis

While upbeat oscillators favor the latest recovery of the US Dollar Index (DXY), the 50-DMA and a two-week-old falling resistance line, respectively near 102.65 and 103.00, can challenge the upside momentum.

“There have been long standing concerns that the market is not working well for New Zealanders,” said New Zealand (NZ) Minister of Finance (FinMin) Grant Robertson said in a statement per Reuters.

The policymaker also said that banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries.

“There has not been an in-depth look into competition issues in New Zealand's banking for some time, and New Zealand lags other countries such as Australia and the UK into doing a detailed analysis into banking services,” added NZ FinMin Robertson.

The same calls for examining the profitability of the country's banks and investigating whether competition in the sector was working well for consumers.

Earlier in the day, NZ Treasury stated that the domestic demand is being dampened by high interest rates.

NZD/USD remains indecisive

The news fails to move a needle on the NZD/USD as the quote remains sidelined near 0.6200 by the press time of early Tuesday in Asia.

• Gold price oscillates in a narrow trading band through the Asian session on Tuesday.
• A hawkish outlook by major central banks continues to act as a headwind for the metal.
• Rising US bond yields underpin the US Dollar and contribute to capping the XAU/USD.

Gold price struggles to capitalize on its modest intraday uptick and oscillates in a narrow trading band through the first half of the Asian session on Tuesday. The XAU/USD currently trades around the $1,950 level, nearly unchanged for the day, and remains well within a familiar trading range held over the past month or so.

Federal Reserve’s uncertain rate-hike path leads to range-bound price action

The uncertainty over the Federal Reserve's (Fed) rate-hike path is holding back traders from placing aggressive directional bets around the Gold price. It is worth recalling that the Fed signalled last week that borrowing costs may still need to rise by as much as 50 basis points (bps) by the end of this year. That said, the incoming softer macro data from the United States (US) raised questions over how much headroom the Fed has to keep raising rates. Hence, the focus will remain glued to Fed Chair Jerome Powell's two-day congressional testimony, which will be scrutinized for fresh clues about the US central bank's policy outlook and help determine the near-term trajectory for the XAU/USD.

Hawkish major central banks continue to weigh on Gold price

In the meantime, the markets have been pricing in the possibility of another 25 bps lift-off in July as inflation in the US is still trending well above the central bank’s 2% annual target. This, along with a more hawkish outlook by other major central banks, caps the upside for the non-yielding Gold price. In fact, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 bps rate hike earlier this month. Moreover, the European Central Bank (ECB) last week lifted rates to the highest level in 22 years and projected further tightening to bring down inflation. The Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates by 25 bps later this week.

Modest US Dollar uptick contributes to capping the XAU/USD

Apart from this, a modest US Dollar (USD) uptick, bolstered by a goodish pickup in the US Treasury bond yields, suggests that the path of least resistance for Gold price is to the downside. That said, worries about a global economic downturn continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and could lend some support to the safe-haven XAU/USD. This, in turn, makes it prudent to wait for strong follow-through selling before traders start positioning for the resumption of the recent sharp retracement slide from the all-time high, around the $2,075-$2,080 region touched in May.

Gold price technical outlook

From a technical perspective, the 100-day Simple Moving Average (SMA), currently around the $1,942 area, is likely to protect the immediate downside ahead of the $1,932 region and the $1,925-$1,924 zone or the monthly swing low. Some follow-through selling will be seen as a fresh trigger for bearish traders and make the Gold price vulnerable to accelerate the fall towards the $1,900 round figure. The downward trajectory could get extended further towards the $1,876-$1,875 horizontal support before the XAU/USD eventually drops to the very important 200-day SMA, currently around the $1,839 region.

On the flip side, the $1,962-$1,964 region is likely to act as an immediate hurdle ahead of the $1,970-$1,972 supply zone. This is followed by the $1,983-$1,985 barrier, above which a bout of a short-covering should allow the Gold price to reclaim the $2,000 psychological mark and climb further towards the next relevant barrier near the $2,010-$2,012 region.

Key levels to watch

• USD/MXN picks up bids to extend the previous day’s recovery from December 2015 lows.
• Convergence of weekly falling trend line, 100-HMA restricts immediate upside of Mexican Peso pair.
• Near 50.0 RSI line, sluggish MACD signals keep Mexican Peso buyers to keep the reins.

USD/MXN remains on the front foot, clings to mild gains of late, as it pierces the 17.00 round figure during early Tuesday in Asia, up 0.07% on a day near 17.10 by the press time.

In doing so, the Mexican Peso (MXN) pair extends the previous day’s recovery from the lowest levels since December 2015 amid steady RSI (14) and sluggish MACD signals.

Although the oscillators suggest a continuation of the corrective bounce, the USD/MXN pair’s downside break of an upward-sloping support line from Friday, now immediate resistance near 17.12, prods the bulls.

Even if the Mexican Peso (MXN) pair rises past 17.12, a convergence of the 100-Hour Moving Average (HMA) and descending resistance line from June 08, close to 17.14, appears a tough nut to crack for the short-term USD/MXN buyers.

Following that, the quote may approach the previous monthly low of around 17.42 which holds the key for the USD/MXN bull run.

Meanwhile, the 17.00 psychological magnet puts a floor under the USD/MXN price, a break of which could direct the MXN buyers toward the mid-December 2015 low of around 16.89.

It’s worth noting that the multiple levels marked in 2015 together highlight 16.40-38 zone as the key support to watch for the USD/MXN bears past 16.89.

Overall, the USD/MXN pair is likely to remain bearish but a short-term recovery can’t be ruled out in a case where it manages to cross the 17.14 resistance confluence.

USD/MXN Price: Hourly chart

Trend: Limited recovery expected

Early Tuesday morning in Asia, at 01:30 GMT, the Reserve Bank of Australia (RBA) will release its minutes of the latest monetary policy meeting held in June.

The Australian central bank surprised markets for the second consecutive time by announcing a 0.25% rate hike earlier in the month, after pausing its 10-time rate hike trajectory in April. The policymakers also tried to convince markets that they can defend the hawkish rate lift cycle but the traders fear proximity to the policy pivot, which in turn makes today’s RBA Minutes more important for the AUD/USD pair traders.

Apart from looking at the catalysts that helped RBA to surprise markets in the last monetary policy meetings, the prospects of the policy pivot and benefits from China stimulus will also be important for the AUD/USD pair traders to watch in today’s RBA Monetary Policy Meeting Minutes.

How could the minutes affect AUD/USD?

AUD/USD picks up bids to 0.6855 while licking the wounds at the highest levels in four months, pausing the two-day downtrend, during early Tuesday morning in Asia. In doing so, the Aussie pair portrays the market’s hopes of witnessing hawkish signals from the Reserve Bank of Australia (RBA), as well as upbeat moves of the People’s Bank of China.

That said, the RBA has already surprised the markets with its second back-to-back rate hike. As a result, the Aussie bulls seek more hawkish clues to aim for a July rate lift. It should be noted that the absence of major geopolitical disappointment from the latest round of the US-China talks also underpins the AUD/USD pair’s corrective bounce ahead of the key event. On the same line are the hopes of China’s more stimulus to propel economic recovery.

Given the recent divergence between the RBA and the Fed’s actions, today’s RBA Minutes will be closely watched for linkages on future moves of the Aussie central bank. Should the RBA manages to defend its recent hawkish play, as well as suggest some more in the pipeline, the AUD/USD prices may have further upside to trace.

Technically, the AUD/USD pair’s rejection of the three-week-old bullish channel, by a downside break of the channel’s support line of near 0.6885 at the latest, keeps the Aussie pair bears hopeful.

Key Notes

AUD/USD bears take a breather around mid-0.6800s with eyes on RBA Minutes, PBoC 

AUD/USD Price Analysis: Bears grind towards key 4-hour support

About the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

• Silver Price remains sidelined between 21-DMA and 50-DMA, prints mild gains of late.
• Upbeat oscillators suggest continuation of sideways grind in XAG/USD price.
• Downside break of immediate support line signals intraday weakness of the quote.

Silver Price (XAG/USD) picks up bids to reverse the week-start losses around $24.00, up 0.20% intraday amid the early hours of Tuesday’s Asian session. In doing so, the bright metal justifies bullish MACD signals and the upbeat RSI (14) line while ignoring a downside break of the three-week-old rising trend line.

It should be noted that the XAG/USD remains sidelined between the 21-DMA and the 50-DMA since May 08 and hence the latest downside break of the trend line support, now immediate resistance near $24.10, may not impress the bears.

Even if the Silver Price rises past the $24.10 hurdle, the 50-DMA resistance of around $24.40 and the monthly high of near $24.55 can challenge the XAG/USD bulls.

In a case where the Silver Price remains firmer past $24.55, the odds of witnessing a run-up toward the yearly high of close to $26.15 can’t be ruled out. Though, the $25.00 round figure may offer an intermediate halt during the rise.

Alternatively, the 21-DMA support of $23.65 restricts the immediate downside of the Silver Price before highlighting the previous weekly low surrounding $23.20 and the $23.00 round figure.

Following that, May’s low of $22.70 and the 61.8% Fibonacci retracement of its March-May upside, near $22.30, should act as the last defense of the XAG/USD bulls before giving control to the bears.

Overall, Silver price is likely to witness intraday weakness but the moves are likely to remain within the aforementioned DMA envelope.

Silver Price: Daily chart

Trend: Sideways