Новини ринків

• GBP/USD grinds higher past short-term key hurdle ahead of BoE Interest Rate Decision.
• 100-HMA prods intraday Cable buyers amid pre-BoE anxiety.
• 200-HMA, fortnight-old support line keep buyers hopeful amid upbeat oscillators.
• Strong UK inflation bolsters hawkish BoE bets, markets expected 25 bps rate hike previously.

GBP/USD remains sidelined around 1.2770 amid early Thursday in Asia, struggling to extend the previous day’s upside break of a short-term key resistance line ahead of the all-important Bank of England (BoE) Interest Rate Decision. In doing so, the Cable pair portrays the pre-BoE anxiety while marking failure to cross the 100-Hour Moving Average but stays on the bull’s radar.

Not only the upside break of a one-week-old descending trend line, now immediate support around 1.27660, but the Pound Sterling’s successful trading beyond the 200-HMA joins the bullish MACD and RSI to also keep the GBP/USD buyers hopeful.

Additionally, the previous day’s strong UK inflation data also underpins the bullish bias about the Cable pair.

That said, a clear upside break of the 100-HMA hurdle surrounding 1.2780 becomes necessary for the GBP/USD pair to refresh the monthly high, currently around 1.2850.

In doing so, the 61.8% Fibonacci Expansion (FE) of its June 12-21 moves, near 1.2910, will be in the spotlight.

On the flip side, the GBP/USD pair’s fall past the resistance-turned-support line of 1.2760 could drag the Pound Sterling towards the 200-HMA support of 1.2695.

Following that, an ascending support line from June 05, close to 1.2655 at the latest, will act as the last defense of the Cable pair buyers.

Also read: BoE Preview: Banks expect 25 bps, door open to further hikes

GBP/USD: Hourly chart

Trend: Further upside expected

• Gold Price remains defensive near the lowest level since March, jostles with three-week-old support.
• Federal Reserve Chairman Jerome Powell advocates for further rate hikes and weighs on XAU/USD price.
• Economic, geopolitical fears surrounding China also keeps Gold bears hopeful.
• Hawkish Fed concerns seem already priced-in, XAU/USD sellers need positive surprise from United States data to witness further downside.

Gold Price (XAU/USD) licks its wounds at the lowest level in three months, sidelined around $1,935 after bouncing off $1,920 support. In doing so, the XAU/USD justifies the market’s inaction amid mixed statements from the United States Federal Reserve (Fed) and unimpressive updates surrounding the US-China ties and China stimulus. Additionally, broad factors about the global central bank actions and a lack of major/events also restrict the Gold Price weakness despite keeping the bears hopeful of late.

Gold Price fails to cheer Federal Reserve Chair Powell’s hawkish testimony

Gold price dropped to the lower level in three months even after Federal Reserve (Fed) Chairman Jerome Powell appear hawkish. The reason could be linked to the absence of any fresh comments, as well as contrasting statements from other Fed Officials.

In his bi-annual testimony to the House Financial Services Committee, Federal Reserve (Fed) Chairman Jerome Powell advocated for raising interest rates somewhat further by year-end. The policymaker also exemplified decelerating a car near the destination while saying, "It may make sense to move rates higher, at a more moderate pace." Even so, the Fed’s Powell mentioned, "We are very far from our inflation target." That said, most of the statements from Fed’s Powell were replicas of the last week’s FOMC statement and hence failed to impress the Gold buyers despite weighing on the US Dollar.

On the contrary, comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and the XAU/USD weakness as he said that the decision last week was a close call for him. The central bank has to “do more sniffing” before another rate hike, Fed’s Goolsbee added.

US-China story becomes interesting for XAU/USD traders

US-China tensions keep escalating after US President Joe Biden terms his Chinese counterpart “a dictator”, which in turn weighs on the Gold Price. However, Beijing discards criticism of its behavior on the human rights front but fails to exert downside pressure on the XAU/USD. China hit back on Wednesday after US President Joe Biden referred to President Xi Jinping as a "dictator", saying the remarks were absurd and a provocation, an unexpected flare-up following attempts by both sides to reduce friction, per Reuters.

Further, growing fears of the economic slowdown in China contrast with hopes of more stimulus to offer a whippy day to the Gold traders.

Powell testimony 2.0, central bankers eyed

A lack of major data/events can allow the Gold Price to pare the recent losses with eyes on major central bank decisions in the UK, Switzerland, Indonesia and Mexico. Should these policymakers appear hawkish, the fears of economic slowdown will escalate and allow the Aussie sellers to cheer the news. Additionally, Fed Chair Powell’s second round of testimony, this time before the Senate Banking Committee, will also be important to watch for clear directions.

Also read: Forex Today: US Dollar weakens despite Powell; BoE in focus after UK CPI

Gold Price technical analysis

Gold price struggles with a three-week-long descending support line, around $1,920 by the press time.

That said, the nearly oversold conditions of the Relative Strength Index (RSI) line, placed at 14, suggests bottom-picking of the XAU/USD, which in turn suggests a corrective bounce in the Gold price toward the mid-$1,900s.

However, a convergence of the 200-Exponential Moving Average (EMA) and a downward-sloping trend line from June 02, close to $1,965 by the press time, appears a short-term key hurdle for the XAU/USD bulls to cross.

Following that, a one-month-old horizontal resistance area surrounding $1,985 will be in the spotlight.

On the contrary, a clear downside break of $1,920 could quickly fetch the Gold Price to the $1,900 round figure while any further weakness will make the XAU/USD vulnerable to testing the early March swing high of around $1,858.

Gold Price: Four-hour chart

Trend: Corrective bounce expected

• NZD/USD continues an uptrend, gaining 0.56% from Wednesday’s session, trading above the 0.6200 mark.
• An upward bias shift is expected if the pair rises above the 200-day EMA at 0.6230 and breaks last week’s high of 0.6247.
• NZD/USD could aim for the May 23 high of 0.6302 and potentially the May 11 high at 0.6384, with strong support at the 100-day EMA (0.6196).

As the Asian session begins, the NXD/USD resumes its uptrend as the pair finished Wednesday’s session with solid gains of 0.56%. In addition, it formed a two-candlestick bullish engulfing chart pattern, suggesting further upside is expected. The NZD/USD exchanges hands above the 0.6200 figure, gains around 0.07%.

NZD/USD Price Analysis: Technical outlook

The NZD/USD daily chart portrays the pair trading sideways, trapped between short-term and long-term daily Exponential Moving Averages (EMAs). Even though the Kiwi (NZD) registered gains, unless it climbs above the 200-day EMA at 0.6230 and cracks the last week’s high of 0.6247, it would shift the pair bias upwards.

If NZD/USD clears those areas, the next resistance would be the May 23 high at 0.6302. Buyers are reclaiming that level, and the pair could rally towards the May 11 swing high at 0.6384 before reaching 0.6400. Conversely, the NZD/USD first support would be the 100-day EMA at 0.6196. Once broken, the next floor will be the 50-day EMA at 0.6176, closely followed by the 20-day EMA at 0.6163 and then the 0.6100 mark.

From an oscillator point of view, the Relative Strength Index (RSI), albeit in bullish territory, is almost flat, while the three-day Rate of Change (RoC) suggests the pair is pausing its downtrend.

NZD/USD Price Action – Daily chart

• EUR/USD seesaws around the highest levels in 1.5 months after snapping three-day downtrend.
• Clear upside break of 11-week-old horizontal resistance zone, bullish MACD signals direct Euro bulls toward February’s top.
• EUR/USD bears need validation from 50-DMA, Fed Chair Powell to retake control.

EUR/USD stays on the front foot at the highest levels since early May, making rounds to 1.0990 during early Thursday morning in Asia. In doing so, the EUR/USD pair manages to cheer the upside break of a nearly three-month-old horizontal resistance zone.

That said, a sustained break of the horizontal region comprising multiple levels marked since April 04, around 1.0970-55, keeps the EUR/USD buyers hopeful. Also keeping the Euro buyers hopeful are the bullish MACD signals.

However, the RSI (14) line is nearly overbought and hence the 1.1000 psychological magnet and February month’s high of near 1.1030 will challenge the EUR/USD buyers.

Following that, the yearly high marked in April around 1.1100 and an upward-sloping resistance line from February, near 1.1125 at the latest, will be in the spotlight.

Alternatively, a downside break of the 1.0970-55 support area can quickly drag the EUR/USD price toward the 50-DMA support of 1.0880, which in turn acts as the short-term final defense of the Euro buyers.

Overall, EUR/USD buyers are likely to keep the reins unless witnessing a clear downside break of the 1.0970-55 zone.

EUR/USD: Daily chart

Trend: Further upside expected

• AUD/USD struggles to defend corrective bounce off one-week low.
• US Dollar remains pressured as Fed Chair Jerome Powell fails offer any positive surprise to the markets.
• Fears of US-China tension contrast with hopes of stimulus expectations from Beijing to trouble traders.
• No major data at home, multiple central bank decisions, second-tier US statistics and Powell’s testimony 2.0 eyed.

AUD/USD fails to defend the first daily gains in four while making rounds to 0.6800 during early Thursday morning in Canberra. In doing so, the Aussie pair aptly portrays the market’s indecision after witnessing mixed signals from the US Federal Reserve (Fed) Chairman Jerome Powell and China, not to forget the lack of ability to please Aussie bulls with the Reserve Bank of Australia’s (RBA) hawkish rhetoric.

In his bi-annual testimony to the House Financial Services Committee, Federal Reserve (Fed) Chairman Jerome Powell advocated for raising interest rates somewhat further by year-end. The policymaker also exemplified decelerating a car near the destination while saying, "It may make sense to move rates higher, at a more moderate pace." Even so, the Fed’s Powell mentioned, "We are very far from our inflation target." That said, most of the statements from Fed’s Powell were replicas of the last week’s FOMC statement and hence failed to impress the markets while weighing on the US Dollar.

On the contrary, comments from Federal Reserve Bank of Chicago President Austan Goolsbee weighed on US Treasury yields and the greenback as he said that the decision last week was a close call for him. The central bank has to “do more sniffing” before another rate hike, Fed’s Goolsbee added.

Elsewhere, the US-China tensions keep escalating after US President Joe Biden terms his Chinese counterpart “a dictator” while Beijing discards criticism of its behavior on the human rights front. Further, growing fears of the economic slowdown in China contrast with hopes of more stimulus to offer a whippy day to the markets.

At home, the RBA Minutes and policymakers appeared hawkish but failed to impress the market players earlier in the week, which in turn suggests that the AUD/USD bulls have finally left the battleground and the bears are the new rulers.

Amid these plays, Wall Street closed in the negative zone for the third consecutive day while the US Treasury bond yields remained intact after a volatile day. That said, the US Dollar Index (DXY) dropped for the fourth day in a row.

Looking ahead, a lack of major data/events can allow the AUD/USD to pare the previous day’s gains with eyes on major central bank decisions in the UK, Switzerland, Indonesia and Mexico. Should these policymakers appear hawkish, the fears of economic slowdown will escalate and allow the Aussie sellers to cheer the news. Additionally, Fed Chair Powell’s second round of testimony will also be important to watch for clear directions.

Technical analysis

Despite the recent bounce off the 200-day Exponential Moving Average (EMA), around 0.6760, the AUD/USD bears remain hopeful unless witnessing a clear upside break of the previous support line stretched from May 31, close to 0.6960.

• Despite Powell's hawkish comments, AUD/JPY moves upward in early Thursday trading.
• If the AUD/JPY rises, it must surpass 96.54 to expose the 97.00 level, June 20 high at 97.41, and the year's high at 97.67.
• If AUD/JPY trends lower, it will face support levels at 96.00, 95.76 (Tenkan Sen Line), and 95.57.

The AUD/JPY climbs in the early Thursday Asian session after registering modest gains on Wednesday, despite market sentiment shifting sour on remarks of Fed Chair Powell, expressing that additional rate hikes are on the table. Therefore, Wall Street finished the session on a lower note, while the risk-sensitive AUD/JPY clung to its gains of 0.47%. At the time of writing, the AUD/JPY exchanges hands at 96.43.

AUD/JPY Price Analysis: Technical outlook

The AUD/JPY is set for additional gains in the medium term after bouncing from support at the Tenkan Sen Line at 95.76. That helped the cross-currency pair to regain the 96.00 figure, extending its gains but capped by the last year's September 20 high at 96.54.

If AUD/JPY would resume its uptrend, buyers must conquer 96.54. A breach of the latter will expose the 97.00 figure, closely followed by resistance at June 20 high at 97.41m, before testing the YTD high at 97.67. On the flip side, the AUD/JPY would test the 96.00 figure. Once cleared, the Tenkan Sen line, at 95.76, would be the next floor for the pair, followed by the June 20 low of 95.57. Downside risks will emerge below that area, at the 95.00 figure, before stumbling to the Kijun-Sen line at 93.96.

AUD/JPY Price Action – Daily chart

• DXY bears are in the market and there are prospects of a daily continuation.
• The weekly neckline would hold up as support. 

The US Dollar index, DXY,  on Wednesday, fell from 102.70 to a low of 102.022 towards last week’s 5-week low while the Fed remains on pause for the time being and over fears of a hard landing. The following illustrates the technical structure o the market and arrives at a bearish bias as follows:

DXY weekly chart

The bears need to get below the 78.6% while it moves in on the neckline of the W-formation. 

The daily chart shows that the price is on the verge of a downside correction after meeting resistance on the correction in the Fibonacci scale.

• Mexican Peso (MXN) advances against the US Dollar (USD) despite hawkish comments from Federal Reserve Chair Jerome Powell.
• Market participants expect Banxico to hold rates in the upcoming meeting, following more than 700 bps rate hikes as inflation cools.
• Fed Chair Powell’s testimony suggests at least two more rate hikes of 25 bps, though market participants anticipate only one.

The Mexican Peso (MXN) recovered territory vs. the US Dollar(USD) despite hawkish comments by the Federal Reserve (Fed) Chair Jerome Powell in its first-day appearance before the US Congress. The emerging market currency advanced, underpinned by high oil prices, while market participants looked towards the Bank of Mexico (Banxico) monetary policy decision on Thursday. The USD/MXN is trading at 17.0990, down 0.08%.

Mexican Peso rally in the hands of Banxico, with sellers eyeing the 16.00 handle

Wall Street finished with losses, as Jerome Powell delivered some hawkish remarks, emphasizing the US central bank would hike 25 bps at least two more times as he answered US House Representatives’ questions. Even though Fed members upward revised peak rates toward 5.6%, traders foresee just one 25 bps rate increase in July, as shown by the CME Fed WatchTool, with odds at 72%.

Meanwhile, Fed officials’ opinions began to diverge. Chicago and Atlanta Fed Presidents Goolsbee and Bostic adopted a dovish stance, with the former suggesting the US central bank is in wait-and-see mode, contrary to last Friday’s opinions, opening with Waller and Barkin, welcoming additional tightening.

The USD/MXN extended its losses as the greenback trended lower. The US Dollar Index, which measures the buck’s value against a basket of currencies, stumbles 0.44%, down at 102.088.

On Thursday,  Banxico is expected to hold rates for the second meeting in a row after raising rates by more than 700 bps as inflation cools down, as shown by the latest inflation report, with CPI expanding at 5.84%, below analysts’ estimates of 5.90%.

Comments made by Banxico’s officials suggested the central bank will keep rates unchanged, remaining higher for longer. But the first rate cut is expected towards the fourth quarter, as said by Goldman Sachs analysts.

USD/MXN Price Analysis: Technical outlook

The USD/MXN remains downward biased, with Tuesday’s gains being cut at half by Wednesday’s losses. The strength of the downtrend makes it challenging to project the USD/MXN pair direction. If Banxico keeps rates unchanged with a neutral tone, the USD/MXN could aim toward the 20-day Exponential Moving Average (EMA) at 17.3148, but overall positioning suggests a continuation of the downtrend. A rate hike would see the USD/MXN breaking support at 17.0000 and the pair diving toward October 2015 low of 16.3267.

• On Wednesday's session, the GBP/JPY traded in the 179.93 - 181.61 range.
• Rising Gilts amid hot inflation figures from the UK gave the British Pound traction.
• The Yen weakened on dovish BoJ minutes ahead of inflation figures on Friday.

The GBP/JPY cross trades with gains on Wednesday as hot inflation figures from the UK fueled a rise in the British Gilts, resulting in gains on the GBP ahead of Bank of England’s (BoE) monetary policy decision on Thursday. On the other hand, the Yen lost ground after the Bank of Japan (BoJ) minutes revealed that members consider it appropriate to maintain its dovish stance.

UK reported hot inflation figures 

On Wednesday, the Office for National Statistics from the UK released that inflation, as per the Consumer Price Index (CPI), rose to 8.7% YoY in May vs 8.4% and from its previous figure of 8.7% in April. In addition, the Core figure accelerated to 7.1%, above the 6.8% expected and from the last reading of 6.8%.

Considering this, the British yields are seeing gains across the curve. The 10-year bond yield rose to 4.48%, while the 2-year yield stands at 5.15% and the 5-year at 4.68%, respectively. That being said, the stronger case for BoE’s Thursday decision is a 25 basis point (bps) hike,  which is only near 15% odds of a bigger hike of 50 bps as per World Interest Rate Possibilities (WIRP). In addition, eyes will be on the updated macroeconomic forecast and the vote split of the Monetary Police Committee (MPC).

On the other hand, following the release of the dovish minutes from April’s BoJ meeting, eyes are set on Friday's inflation figures from Japan. In that sense, economists anticipate a year-on-year increase in the CPI to reach 4.1%, surpassing the previous reading of 3.5%. Additionally, the Core inflation rate, which factors out the impact of oil and food prices, is projected to rise from the previous figure of 4.1% to 4.4%.

GBP/JPY Levels to watch

According to the daily chart, the GBP/JPY holds a bullish outlook for the short term.  The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest that buyers are in control while the pair trades above its main moving averages.

Upcoming resistance for GBP/JPY is seen at the daily low of 181.60, followed by the zone at 182.00 and the cycle low at 182.12. On the other hand,The 180.50 area level is key for GBP/JPY to maintain its upside bias. If breached, the price could see a steeper decline towards the 179.90 zone and 179.50 level

GBP/JPY Daily chart

• USD/CHF bears are taking control of what could be a key support area.
• The daily chart is showing signs of a bearish continuation. 

The US Dollar erased gains on Wednesday after Federal Reserve Chair Jerome Powell said the central bank's fight to lower inflation "has a long way to go." This has seen a strong bid in the CHF and exposes further downside to follow as the charts below will illustrate:

USD/CHF weekly chart

The weekly chart is showing the price completing a return to the neckline of the W-formation in what is a 61.8% Fibonacci retracement, so far. There could be more downside to come as per the daily chart:

USD/CHF daily charts

Zoomed in, we can see that the price is on the verge of a downside extension following a 50% mean reversion of the prior bearish impulse. The bears need to stay committed at this juncture or face pressures to the trendline resistance in the coming days.

During the Asian session, New Zealand will report trade data and Credit Card Spending. The focus later will be on the Bank of England decision. The central banks of Switzerland, Turkey, Indonesia, and Mexico will also announce their monetary policy decisions. Fed Chair Powell will present testimony again. Jobless Claims and Existing Home Sales data are due in the US.

Here is what you need to know on Thursday, June 22:

US stocks declined for their third session as central bankers continue to point to further tightening. The rebound from weekly lows faded late in the American session.

Federal Reserve (Fed) Chair Powell delivered his semi-annual report to the House Committee on Financial Services. He repeated on Wednesday that higher interest rates are needed to bring inflation back to the target. His message was a copy-paste from the tone he delivered after last week's FOMC meeting. Powell will speak again on Thursday before the Senate Banking Committee, but he should not bring anything new. 

On Thursday, US Jobless Claims, the Chicago Fed National Activity Index, and Existing Home Sales data are due. Those figures will be relevant economic indicators, given that the next FOMC meeting is "live".

The US dollar dropped despite cautious market sentiment, amid a decline in US Treasury yields. The DXY dropped for the fourth consecutive day, despite Powell's hawkish tone, ending slightly above 102.00

On Thursday, the Bank of England will announce its decision on monetary policy. A 25 basis point rate hike is expected, however, UK inflation data raised the probability of a larger hike. The Pound spiked after inflation figures but then tumbled across the board. GBP/USD finished flat at 1.2760, helped by a weaker US dollar, while EUR/GBP surged from monthly lows at 0.8520 to 0.8600.

BoE Preview: Banks expect 25 bps, door open to further hikes

EUR/USD surged from 1.0900 to 1.0990, reaching monthly highs, with the Euro outperforming amid hawkish talk from European Central Bank members.

Antipodean currencies rose during the American session. The Kiwi outperformed, with AUD/NZD pulling back to 1.0940. NZD/USD rose above 0.6200, while AUD/USD tested levels above 0.6800. It will be a holiday in China on Thursday and Friday for the Dragon Boat Festival. New Zealand will report trade data and Credit Card Spending on Thursday.

USD/CHF erased three days of gains, falling toward 0.8900. The Swiss National Bank (SNB) is expected to raise rates by 25 basis points on Thursday. Chair Jordan will deliver a press conference.

SNB Preview: Two scenarios and their implications for EUR/CHF – Credit Suisse

USD/CAD posted its lowest daily close since September 2022, around 1.3165. Data released on Wednesday showed Retail Sales rose 1.1% in April, above the expected 0.2%, and the New Housing Price Index in May climbed 0.1%, above the market consensus of 0%. The minutes of the latest Bank of Canada meeting showed no surprises. Members agreed that policy needed to be more restrictive, considering that the 'economy remained clearly in excess demand'.

USD/MXN continues to trade near the 17.00 area, at multi-year lows, with a bearish bias. It found resistance at 17.25 on Wednesday and pulled back. The Bank of Mexico is expected to keep its key interest rate unchanged at 11.25% on Thursday.

Bank Indonesia is also expected to keep interest rates unchanged at 5.75%. The USD/IDR dropped on Wednesday after testing levels above 15,000

USD/TRY continued to trade steadily around 23.60 ahead of Thursday's Central Bank of the Republic of Turkey decision. The central bank is expected to raise interest rates sharply, by more than 1,000 basis points from the current 8.5%. Such a move would represent a change towards economic orthodoxy after a dramatic Lira depreciation and inflation hitting levels above 80.0%.

Cryptocurrencies rose sharply, with BTC/USD rising more than 5% above $30,000, the highest level in two months. Ethereum climbed towards $1,900.Crude oil prices rose more than 2% to the strongest level in two weeks. The WTI barrel surpassed $72.50
 

• Gold price is under pressure at key levels.
• Markets were focussed on the Fed's Chairman Powell.

The Gold price was offered on Wednesday even as the US Dollar fell and bond yields climbed. XAU/USD fell from a high of $1,939.57 to a low of $1,919.24. 

Markets were reacting to the congressional testimony from Federal Reserve chair Jerome Powell on Wednesday ahead of the Senate on Thursday. Treasury yields were mixed after Powell's appearance before the House Financial Services Committee, bearish for gold which offers no interest.

The Fed had left interest rates unchanged at its June meeting, so there was an emphasis on that as to why in the face of inflation. Powell told lawmakers the fight against inflation still "has a long way to go" and that despite a recent pause in interest rate hikes officials agreed borrowing costs would likely need to move higher. Powell said it may make sense to still raise rates at a more moderate pace. As a consequence,  investors broadly expect rate hikes to resume at the Fed's July meeting. 

''Whilst he said that it makes sense to slow the frequency of rate hikes, there is a difference between the speed at which rates rise and the level to which rates ultimately need to get,'' analysts at ANZ Bank said. 

''The FOMC wants to observe the effects of the very rapid hiking cycle on the real economy and retain optionality whilst maintaining its commitment to low and stable inflation. There is merit in that strategy – albeit it has caused some volatility in markets, which tend to prefer clarity to nuance,'' the analysts argued. ''Powell’s testimony did not deviate from the strategy that interest rate decision will be made on a meeting-by-meeting basis. Data momentum will be key in coming months.''

Meanwhile, analysts at TD Securities explained that ''while the yellow metal has remained locked in a tight range over the last weeks, the lackluster price action is revealing some implicit weakness as the metal fails to rally despite a slumping USD.''

''Given our gauge of CTA positioning continues to suggest extremely limited outflows, it is possible that discretionary traders are growing their net short position following the latest FOMC meeting, suggesting traders aren't skeptical about the Fed's hawkish communication,'' the analysts argued. 

Gold weekly chart

We have prospects of a downside continuation on the weekly chart.

Gold daily charts

From a daily perspective, we are moving into testing the lows while on the front side of the bearish trend. The wick on the chart could've filled in the coming session and this could be the catalyst for a selling programme into support in and around $1,913.

• GBP/USD recovers following UK inflation data release as the US Dollar weakens.
• Fed Chair Jerome Powell’s comments on rate hikes keep investors nervous, though fails to weigh on the GBP/USD.
• BoE is expected to raise rates by 25 bps to 4.75% in the coming decision, with a possibility of a 50 bps increase.

GBP/USD recovered some ground following the release of inflation data in the United Kingdom (UK), which initially underpinned the GBP/USD. Nevertheless, it reversed its gains, as investors doubted the Bank of England (BoE) could tame inflation without damaging the economy. The GBP/USD trades at 1.2773, above its opening price after hitting a daily low of 1.2689.

Pound Sterling gains amid investor anticipation for potential rate hike

A risk-off impulse keeps Wall Street pressured as the Federal Reserve Chairman Jerome Powell commenced its two-day testimony in the US Congress. Powell commented that the US central bank would continue to raise rates, despite reducing growth, to contain stubbornly high inflation.

Moreover, Jerome Powell added that the decisions would be taken meeting-by-meeting based on incoming data and that “it may make sense to move rates higher, at a moderate pace.”

GBP/USD traders should be aware of last week’s Fed’s decision to keep rates unchanged at 5.00%-5.25%. However, officials upward revised peak rates above the 5.50% threshold, which seems to be seen as too high according to CME FedWatch Tool data. Odds for a 25 bps Fed rate hike at the July meeting are 74.4%, but investors are not foreseeing rates past the 5.25%-5.50% range.

Meanwhile, UK consumer inflation data rose by 8.7% YoY in May, unchanged from April’s data, though exceeded estimates of 8.4%. Core inflation, which excludes volatile items, expanded by 7.1% YoY, above forecasts of 6.8%, putting pressure on the Bank of England (BoE) to take measures to curb inflation.

On Thursday, the BoE is expected to raise rates by 25 bps to 4.75%. However, the latest round of inflation data augmented expectations the BoE could raise rates by 50 bps, as money markets odds lie at a 50% chance of a half-point rise.

Upcoming events

The UK will feature the BoE’s decision. The US economic agenda will feature the Current Account, the Chicago Fed National Activity Index, and Initial Jobless Claims. Also, the Fed Chair Jerome Powell will continue its two-day testimony before the US Congress, while some officials would cross newswires.

GBP/USD Price Analysis: Technical outlook

The GBP/USD remains upward biased, as Wednesday’s price action is forming a hammer preceded by a two-day downtrend. If GBP/USD clears the 1.2800 figure, buyers could threaten to cling to 1.2900, but first, they will need to crack the year-to-date (YTD) high at 1.2848. If the BoE surprises with a hawkish hike, the GBP/USD could be poised to test 1.3000. Conversely, sellers need a daily close below 1.2764 if they would like to drag prices toward 1.2600, but they need to surpass the 20-day EMA at 1.2611.

• WTI jumped to its highest level since June 8, reaching $72.70.
• Powell didn’t deliver hawkish surprises, maintaining his stance from last Wednesday’s presser.
• A positive market mood and rising stocks fueled the rise in black gold.

The West Texas Intermediate (WTI) rose to its highest level in two weeks and then stabilized at $72.40 following Jerome Powell’s testimony before the US Congress. Despite hinting at additional hikes, he noted that the economy and the labor market remain strong, which fueled a positive market environment and a recovery in US stocks. In addition, the USD, measured by the DXY index, fell to 102.05, seeing more than 0.40% losses.

Stocks recover after Powell’s testimony

Before the US Congress, Jerome Powell, Chair of the Federal Reserve (Fed) of the US, stated that “nearly all FOMC participants expect it will be appropriate to raise interest rates somewhat further by year-end”. However, he brought optimism to markets stating that he sees wages moderating, and as he confirmed that the decision will remain data-dependent. Expectations of the Fed nearing the end of its tightening cycle strengthen the WTI as Oil prices tend to be negatively correlated with interest rates.

In addition, the US stock markets cleared part of daily losses following the comments but continued to correct the overbought condition seen in last week’s impressive gains.

For the rest of the week, the focus will shift to US Jobless Claims data on Thursday and S&P Manufacturing PMI data on Friday for investors to continue modeling their expectations towards the next Fed meeting in July. As for now, as per the CME FedWatch tool, investors are discounting a 25 basis point (bps) hike.

WTI Levels to watch

The daily chart suggests that the WTI holds a neutral to bullish stance for the short term. Despite indicators regaining traction and jumping to positive territory, the price still remains below the 100 and 200-day Simple Moving Average (SMA).

That being said, upcoming resistances line up at $73.00, followed by the 100-day SMA at $74.45 and the $75.00 psychological mark. On the other hand, supports are seen in the $72.00 area, followed by the 20-day SMA at $70.77 and the $70.00 zone.

WTI Daily chart

• USD/CAD bears eye a run to test key areas on the downside. 
• Bears move in as US Dollar falls away. 

The Bank of Canada minutes have come out recently and the central bank agreed that fresh economic data would determine the need for further rate hikes. Nevertheless, the markets are pricing in a roughly 72% chance that the central bank will raise its policy rate by 25 basis points next month. Consequently, the CAD is bid while the Greenback is on the backfoot on a dovish Federal Reserve bias. This leaves the outlook bearish for USD/CAD as shown on the charts as follows:

USD/CAD daily charts

Zoomed in, we can see the price darting towards a test of the -272% Fibonacci level while on the front side of the bearish trendline. There are several key levels on the downside with the first in and around the -272% Fibo in the 1.3130s, the next in the 1.3070s and then the 1.3040s. 

• EUR/GBP tests 20-day EMA ahead of challenging the 0.8600 figure.
• Oscillators portray buyers gaining momentum in the near term; long-term, further EUR/GBP downside is expected.
• The EUR/GBP YTD low at 0.8518 could be the next support.

EUR/GBP rallies on Wednesday, after the release of inflation in the UK, spurred a knee-jerk reaction, with most Pound Sterling (GBP) Currency pairs gaining to the detriment of the GBP. At the time of writing, the EUR/GBP is trading at 0.8597, above its opening price by 0.52%, after hitting a low of 0.8524.

EUR/GBP Price Analysis: Technical outlook

From a daily chart perspective, the EUR/GBP is downward biased, though testing the 20-day Exponential Moving Average (EMA) at 0.8595, which, if breached, will put the 0.8600 figure for grabs. It should be said; in the near term, the EUR/GBP bias is neutral to slightly upward, as the Relative Strength Index (RSI) indicator aims up, about to turn bullish. Moreover, the three-day Rate of Change (RoC) is the largest since March 23.

If the EUR/GBP surpasses those levels, the next stop would be the 50-day EMA at 0.8664. Upside risks lie at the confluence of the 200 and the 100-day EMAs, at 0.8702 and 0.8708, respectively. However, if EUR/GBP resumes its downtrend, the first support would be the June 20 daily high at 0.8581, followed by the psychological 0.8550 area. Once broken, the EUR/GBP's next support would be the year-to-date (YTD) low of 0.8518.

EUR/GBP Price Action – Daily chart

• BoC’s Summary of Governing Council deliberations shows members agree the economy remained clearly in excess demand. 
• At the June meeting, the BoC raised interest rates by 25 basis points. 
• USD/CAD trades at the lowest since August 2022. 

The Bank of Canada's Summary of Deliberations from the June 7th meeting when it unexpectedly raised its key interest rate by 25 basis points to 4.75%, showed member view that with the resurgence in household spending growth, the pickup in consumer confidence, and the slowing in disinflationary momentum, monetary policy did not look to be sufficiently restrictive.

The document notes that members expressed doubt about the durability and strength of ongoing disinflation and were concerned that inflation could become stuck materially above the 2% target.

Key takeaways from the Summary of Governing Council deliberations:

Market reaction: 

The USD/CAD is trading under 1.3170, at the lowest level since mid-August. Earlier on Wednesday, Canadian retail sales and the New Housing Price Index surpassed expectations, keeping the Loonie strong. 
 

• EUR/JPY soared above the 155.50 zone, hitting a fresh cycle high of 155.75.
• ECB’s Nagel and Schnabel pointed at additional rate hikes.
• Investors await Friday’s inflation data from Japan.

The EUR/JPY is gaining ground on Wednesday following comments from European Central Bank’s (ECB) speakers which fueled a rise in German bond yields making the Euro gain appeal. On the other hand, the JPY seems to be losing interest after dovish clues seen in Bank of Japan’s (BoJ) April meeting minutes. All eyes are now on Friday inflation data for May.

Yield divergence favors the Euro post-ECB speakers

On Wednesday, ECB’s Isabel Schnabel stated that they should be “stubborn” because inflation remains “stubborn”, while Joachim Nagel claimed that he is confident that inflation will come back to target but that “there is still way to go”. As a reaction, the German yields are seeing gains across the curve. The 10-year bond yield rose to 2.41%, while the 2-year yield stands at 3.19% and the 5-year yields 2.56%, respectively. In that sense, as higher domestic yields attract foreign capital, the Euro strengthens. 

As for now, according to WIRP (World Interest Rate Possibilities), markets are expecting a 25 basis point (bps) hike at the next ECB July meeting. Additionally, the market bet on a 60% probability of another 25 bp rate hike in September, which is expected to increase to around 90% probability in the fourth quarter. If this rate trajectory materializes, the maximum deposit rate will reach 4.0%.

On the other hand, following the release of the dovish minutes from April’s BoJ meeting, all eyes are set on Friday inflation figures from Japan. The Consumer Price Index (CPI) is expected to rise to 4.1% (YoY) vs. the previous 3.5%, while the Core inflation rate, which excludes the influence of oil and food prices, is projected to rise to 4.4% from the previous release of 4.1%.

EUR/JPY Levels to watch

Technically speaking, the EUR/JPY maintains a bullish 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 pointing north and the pair trades above its main moving averages, suggesting that the buyers have the upper hand. However, indicators show overbought conditions suggesting that the cross may still be poised for another downward correction.

A move above the 155.75 area (daily high) would suggest a continuation of the bullish trend for EUR/JPY, with next resistances at the psychological mark at 156.00 and 156.50 area. On the other hand, immediate support for the cross is seen at the 155.50 zone level, followed by the psychological mark at 154.00 and the 153.50 zone.

EUR/JPY Daily chart

• Powell’s testimony pressured the US Dollar, fueling modest EUR/USD gains.
• ECB rate hike expectations for July boost euro despite divided view amongst ECB members.
• Key events: ECB General Council Meeting, US unemployment claims, and Fed speakers.

EUR/USD snaps three days of consecutive losses and rises toward the 1.0960 region as the US Federal Reserve (Fed) Chair Jerome Powell answers questions at the US House of Representatives on his first day of testimony. Risk aversion, and high US Treasury bond yields, drive the market’s narrative, though the EUR/USD pair climbs on broad US Dollar (USD) weakness. At the time of writing, the EUR/USD exchanges hands at 1.0961 after bouncing from 1.0905 lows.

ECB rate hike fuels rally despite divided views on further tightening

US equities are trading with losses amidst Powell’s testimony. The Fed Chair reiterated the Fed would continue to tighten monetary policy but stressed the central bank would make its decisions meeting-by-meeting based on incoming data.

The Federal Reserve (Fed) kept rates unchanged on June 14 while upward revising the Federal Funds Rate (FFR) peak at 5.6%. Even though it strengthened the greenback, Powell’s press conference struck a balanced tone,

Meanwhile, at the time of writing, Fed Chair Powell is answering questions at a hearing at the Capitol. He said that “it may make sense to move rates higher, at a moderate pace,” and emphasized the speed and level of rates “are separate.” He said inflation “has a long way to go” despite moderating somewhat “since the middle of last year,” and when asked about changing its 2% target, Powell said, “It’s our goal and will remain our goal.”

Although it capped the EUR/USD advance post-FOMC on June 15, the EUR/USD rallied sharply on the back of the European Central Bank (ECB), raising rates by 25 bps and opening the door for further tightening.

In the meantime, a raft of European Central Bank (ECB) speakers was featured during the day, with most of them expressing the need to get core inflation under control. Nevertheless, it has begun a split of points of view, with most hawks eyeing rate hikes in July and September, while others, like Kazimir, expressed that the continuation of tightening policy “is not certain.”

Upcoming events

The Eurozone (EU) economic docket would feature the ECB General Council Meeting. The US agenda will feature unemployment claims alongside further Federal Reserve speakers.

EUR/USD Price Analysis: Technical outlook

The EUR/USD remains trading sideways after dipping from year-to-date (YTD) highs reached on April 25 at 1.1095, towards the 1.0630s area. Even though the EUR/USD rallied from 1.0690 toward 1.0970s, buyers must reclaim 1.1000 to challenge the YTD high before breaching the 1.1100 mark. If EUR/USD reclaims 1.1100, that will clear the path to 1.1200. Otherwise, failure to conquer 1.1000 would keep sellers hopeful of lower prices. EUR/USD’s first support would be the 20-day Exponential Moving Average (EMA) at 1.0840, followed by the 50-day EMA at 1.0834. Once cleared, the next stop will be the 100-day EMA at 1.0784.

• NZD/USD peaks near 0.6200, then stabilizes around 0.6160 to then recover to 0.6190.
• Fed’s Powell hints at more rate hikes and a spooky outlook required to reduce inflation.
• USD gains recovers traction on the back of rising bond yields and falling stock indexes.

On Wednesday, the NZD/USD faces some volatility jumping to a high of 0.6200 and then stabilizing at 0.6190 as during the mid-American session, Federal Reserve (Fed) Chair Jerome Powell’s hawkish comments helped the USD gain traction. In that sense, a risk-averse market signaled by falling stock indexes and a strong Dollar may limit the Kiwi’s gains.

Bond yields rise while US Stocks fall following Powell’s comments

In his testimony before the US Congress, Jerome Powell, Chair of the Federal Reserve (Fed), commented that, “nearly all FOMC participants expect it will be appropriate to raise interest rates somewhat further by year-end” and that, “reducing inflation is likely to require a period of below-trend growth, some softening of labor market conditions.” In that sense the expectations of more hikes combined with the “cost” of reducing inflation worsened the market’s mood and gave the US Dollar traction.

In response, the US bond yields are seeing gains across the curve. The 10-year bond yield has risen to 3.77%, while the 2-year yield stands at 4.74% and the 5-year yields 4.01%, respectively. Elsewhere, on Wall Street, stock markets weaken, as all three major indices fall into negative territory. The S&P 500 index, also known as SPX, has experienced a slight decline of 0.42%. Similarly, the Dow Jones Industrial Average, or DJI, has seen a modest drop of 0.45%, while the Nasdaq Composite (NDX), has recorded a decrease of 0.34%.

The focus now shifts to US Jobless Claims from the second week of June, to be released on Thursday and the S&P manufacturing PMI from the month of June on Friday, where investors will get additional information regarding the US economy and continue modeling their expectations towards the next Fed meeting in July.

NZD/USD Levels to watch

According to the daily chart, the technical outlook for the NZD/USD is neutral to bearish for the short term as despite clinging into slight daily gains, indicators have lost ground and are showing a deceleration of the bullish momentum. If the bulls want to reignite their momentum, they should defend the 200-day Simple Moving Average (SMA) at 0.6156.

On the downside, support levels line up at the mentioned 200-day SMA, followed by the 20-day SMA at 0.6108, and the 0.6100 psychological mark. On the upside, in case the bulls regain traction, the 100-day SMA at 0.6210 is the first resistance to retake, which could pave the way towards 0.6235 and the monthly high at 0.6245.

NZD/USD Daily chart

Economists at Credit Suisse analyze Gold (XAU/USD) technical outlook.

XAU/USD to find a major floor at the 200-DMA at $1,850/49

Jerome Powell, Chairman of the Federal Reserve System (Fed), testifies before the House Financial Services Committee and responds to questions from congressional lawmakers.

Key takeaways

"This economy is very strong."

"A very strong labor market is driving the economy."

"Inflation is moving down gradually."

"The thing that troubles people is really inflation."

"While raising rates can be painful, it slows demand."

"We want to get back to price stablity, want to get back to that place where inflation is low enough that people don't think about it."

"We are on a journey to get to price stability, we have quite a ways to go but we are making progress."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

• XAG/USD sinks below key $22.96, the 200-day EMA level.
• Bearish RSI and RoC indicate a strong sell-off, warranting further XAG/USD downside.
• XAG/USD upside resistance was found at a $23.00 handle, followed by a challenge of the 100-day EMA.

Silver price pierces below the 200-day Exponential Moving Average (EMA) of $22.96 as sellers pile in, dragging prices towards a new two-month low of $22.50, as high US Treasury bond yields pressure the precious metals segment. At the time of writing, XAG/USD trades at $22.75, while Gold (XAU/USD) spot exchanges hands at $1931.02, down 1.64% and 0.23%, respectively.

Risk-off sentiment is weighing on the precious metals segment. Investors remain uncertain as the Fed Chair Jerome Powell commences his two-day testimony at the US Congress, which you can follow here. The US 10-year Treasury note yields 3.775% and gains 4.6 bps, while US real yields, directly influencing XAG/USD’s prices, climb five bps to 1.555%.

XAG/USD Price Analysis: Technical outlook

The XAG/USD remains neutral to downward biased, though it could shift to the downside if XAG/USD prints a daily close below the May 25 swing low of $22.68. That would mean the Silver price breaking the 200-day Exponential Moving Average (EMA) threshold and, from a technical perspective, turning XAG/USD bearish.

Further cementing XAG/USD bearish case is the Relative Strength Index (RSI) indicator at negative territory, while the three-day Rate of Change (RoC) continues to plunge as sellers gain momentum.

That said, in that outcome, XAG/USD could dive towards the March 21 daily low at $22.14 before challenging the $22.00 figure. A breach of the latter will expose the March 16 low at $21.47, followed by the $21.00 mark.

Conversely, if XAG/USD reclaims the 200-day EMA, that could expose the $23.00 handle on the upside, followed by the 100-day EMA at $23.52.

XAG/USD Price Action – Daily chart

Jerome Powell, Chairman of the Federal Reserve System (Fed), testifies before the House Financial Services Committee and responds to questions from congressional lawmakers.

Key takeaways

"The status of the Dollar as world's reserve currency is very important."

"Fed's inflation and employment mandates are perfectly equal."

"We should focus heavily on inflation, as we are far from that goal now."

"We will return to 2% inflation."

"We are moving the balance sheet back down, but won't go back to a scarce reserve level."

"It is important that the balance sheet not just grow with every cycle."

"Demand for reserves can be volatile."

"We don't want to be in the same position as last reduction cycle."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

Economists at TD Securities discuss the Bank of England interest rate decision and its implications for the GBP/USD pair.

+50 bps Hike (35%): Hawkish Guidance

Base Case +25 bps (50%): Hawkish Language

Dovish Hike (15%): +25 bps, Pushing Back on Market Pricing

• Powell’s testimony and Fed rate hike influence USD/JPY, which remains underpinned by high US bond yields.
• Further USD/JPY upside is expected as BoJ members support monetary easing.
• Key data: US unemployment claims, Fed speakers, and BoJ member Noguchi’s speech.

The USD/JPY exchanges hands at around the 142.00 handle on Wednesday, after hitting a low of 141.28, as the Federal Reserve (Fed) Chair Jerome Powell’s two-day testimony in the US Congress begins. Risk aversion is another of the drivers of the day while US Treasury bond yields, rise.

Market odds favor Fed rate hike in July; dovish BoJ remakers keep JPY subdued

Following the latest week’s monetary policy, Powell struck the markets with a balanced press conference, though tilted dovish as seen by the market’s reaction. Since then, Fed officials have stressed the need to curb inflation to its 2% target, as said recently by Vice-Chair Nominee Philip Jefferson and the Fed board nominee member Lisa Cook.

Traders’ odds for a 25 basis point rate hike by the Fed lie at 81.8%, as shown by the CME FedWatch Tool. Nevertheless, market participants are not expecting an additional increase, as they see rates peaking at 5.25%-5.50%, contrary to the Fed’s dot-plots, revealed in the Summary of Economic Projections (SEP).

In the meantime, the USD/JPY remains underpinned by US Treasury bond yields, namely the 10-year benchmark note, gaining four and a half basis points, up at 3.769%. The US Dollar Index, which measures a basket of six currencies vs. the greenback, surprisingly tumbles 0.16%, at 102.367.

Meanwhile, at the time of writing, Fed Chair Powell is answering questions at a hearing at the Capitol. He said that “it may make sense to move rates higher, at a moderate pace,” and emphasized the speed and level of rates “are separate.”

Aside from this, Bank of Japan (BoJ) members leaned dovish, as April’s meeting minutes showed members mentioning that it is important to continue with monetary easing. Some members stressed that past price increases are passed on to consumer prices with a lag.

In the meantime, during the Asian session, the BoJ Governor Kazuo Ueda commented the economy is picking up moderately, though the central bank will maintain the monetary policy as it stands. BoJ Board member Adachi commented that inflation is faster than he expected but added it’s too early to tweak “easy” monetary policy. Adachi sees upside and downside risks to the price outlook, but downside risks are more extensive in the long term, suggesting that it’s appropriate to continue monetary easing.

Given the backdrop, the USD/JPY would likely continue to uptrend, though Japanese authorities would scrutinize the pair. Lately, they have been vocal about the exchange rate, so USD/JPY buyers must know that an intervention can occur.

Upcoming events

Fed Chair Jerome Powell will continue its two-day testimony at the US Congress, while Fed speakers will continue to grab the headlines. Data-wise, US unemployment claims would be revealed on Thursday. The Japanese agenda will feature the BoJ board member Noguchi.

USD/JPY Price Analysis: Technical outlook

From a technical perspective, the USD/JPY remains upward biased but at a crossroads, as it remains unable to decisively distance from last year’s November 22 high of 142.24. It should be said the Relative Strength Index (RSI) indicator is bullish, while the three-day Rate of Change (RoC) depicts USD/JPY buyers remaining in charge. If USD/JPY climbs above 142.24, that will expose resistance at 143.52, the October 5 swing low, followed by the 145.00 psychological level.

Economists at CIBC Capital Markets analyze EUR/USD outlook.

Paring in EUR longs for now

See – EUR/USD: Less gloomy outlook for the US economy relative to the Euro area to weigh on the pair – Danske Bank

Jerome Powell, Chairman of the Federal Reserve System (Fed), testifies before the House Financial Services Committee and responds to questions from congressional lawmakers.

Key takeaways

"There is an expectation that ratio of job openings to unemployed people will come down."

"That's a way for labor market to become less tight without having unemployment rise."

"There are still significant labor shortages."

"Data is suggesting a gradual cooling in labor market, but we still have significant excess demand over supply."

"Housing supply and demand are getting back into line."

"Housing inflation will come down significantly this year, next year."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

Jerome Powell, Chairman of the Federal Reserve System (Fed), testifies before the House Financial Services Committee and responds to questions from congressional lawmakers.

Key takeaways

"Our banks are very strongly capitalized."

"We are very far from our inflation target."

"We are strongly committed to getting inflation back down to 2% over time."

"We learned from Silicon Valley that there is a need for stronger supervision, regulation for banks of that size."

"There are situations in which we need to be more forceful, not in all situations though."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

Economists at ANZ Bank discuss GBP/USD outlook.

Year-end forecast for GBP/USD maintained at 1.30

Economists at Société Générale analyze USD/JPY technical outlook.

Converging towards 142.50/142.80

See: USD/JPY to break above 142.25/50 toward next resistance at resistance at 145.00/12 – Credit Suisse

Jerome Powell, Chairman of the Federal Reserve System (Fed), testifies before the House Financial Services Committee and responds to questions from congressional lawmakers.

Key takeaways

"Level for rates and speed of rate hikes are separate."

"Early in process, speed was important, less so now."

"It may make sense to move rates higher, at a more moderate pace."

"We are moderating the pace, much as you might decelerate a car as near destination."

"Regulation should be transparent, consistent, not too volatile."

"Capital is central to banking regulation."

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

Banxico will announce its latest rate decision on Thursday, June 22. Economists at Rabobank analyze MXN's outlook ahead of the meeting.

No change to the 11.25% policy rate

• EUR/USD keeps the inconclusive price action well in place.
• Further weakness could retest the 55-day and 100-day SMAs.

EUR/USD keeps the range bound theme in place above 1.0900 on Wednesday.

Despite the current inconclusive price action, further gains remain well on the table for the time being. That said, the pair needs to surpass the monthly high at 1.0970 (June 16) ideally in the very near term to allow for a potential test of the psychological 1.1000 mark.

The inability to advance in a convincing fashion in the next sessions could spark a corrective move to, initially, the 55-day SMA at 1.0881 prior to the 100-day SMA at 1.0806. The loss of the latter should alleviate the pair’s upside pressure.

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0554.

EUR/USD daily chart

While being buffeted by a stronger USD earlier in the quarter, the CAD has rallied as the Bank of Canada (BoC) resumed rate hikes. Economists at ANZ Bank analyze Loonie's outlook.

The BoC is likely not finished with monetary policy tightening

The Bank Indonesia (BI) is seen keeping its policy rate unchanged at 5.75% this week, according to Economist at UOB Group Lee Sue Ann.

Key Takeaways

• DXY maintains the weekly bounce well in place on Wednesday.
• Further advance is expected to challenge the 103.00 zone.

DXY advances for the fourth session in a row and retests weekly highs around 102.70 on Wednesday.                                  

Immediately to the upside, the index faces the next hurdle at the 103.00 round level, which appears reinforced by the proximity of the temporary 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 105.18 the outlook for the index is expected to remain negative.

DXY daily chart

The Bank of England (BoE) will announce its Interest Rate Decision on Thursday, June 22 at 11:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks.

The “Old Lady” is expected to hike rates by 25 basis points (bps) to 4.75%. Red-hot inflation might intensify the chances of a 50 bps interest rate hike, tough.

Nomura

SocGen

TDS

Danske Bank

Rabobank

BMO

Citi

• Natural Gas finds support after Tuesday’s decline as higher-than-expected air-conditioning demand puts a floor under prices.
• Concerns regarding Norwegian supply after data showed a slump in May and news of earlier-than-expected outages further supports. 
• Possible bear flag on the four-hour chart bodes ill for prices and could tempt bears back into the fray. 

Natural Gas price consolidates on Wednesday after the sharp decline witnessed in previous sessions. Hotter-than-expected weather is one factor preventing deeper declines, with forecasts of temperatures in Texas reaching 100 degrees Fahrenheit this week, expected to put pressure on Gas supplies used in air conditioning, according to a report by Natural Gas World.  

XNG/USD is trading at $2.570 MMBtu, at the time of writing, as we enter the US session on Wednesday.  

Natural Gas news and market movers 

• Demand for air conditioning is expected to be robust due to hotter-than-expected weather in the Western hemisphere as the summer season gets underway.
• If this week’s unexpectedly warm weather is a precursor of more to come, then demand for Natural Gas for air conditioning could start to outstrip demand, according to Natural Gas World (NGW). 
• NGW forecasts Cooling Degree Days (CDD), a standard metric used in the industry, to average 332 Fahrenheit days this summer (June - August), on a par with the three-year average. 
• Yet if temperatures surprise to the upside as it looks possible, it will soon put pressure on the grid and raise prices, says NGW.
• “Weather is unpredictable and our forecasts are conservative as a result, so if temperatures are warmer than the three-year average, gas for power demand averages will be higher than expected.” NGW reports. 
• Natural Gas prices as per the Netherlands-based Transfer Title Facility (TTF) recovered over 10% overnight on continued Norwegian supply concerns. 
• The TTF rose to $11.92 per million British thermal units (MMBtu) on 20 June after sinking to $10 MMBtu the day before from a high of over $14, according to NGW. 
• Gas prices rose on Tuesday after production data from the Norwegian Petroleum Directorate (NPD) in May, came out 7.3% below forecasts.
• Norway produced 274 Mega Standard Cubic Meters (MSm³) of Gas in May, 21.9 MSm³ less than forecast and less than the 339.8 produced in April and the 324.1 MSm³ in May 2022.
• This further exacerbates Norwegian supply concerns after the news of longer-than-expected outages at Norwegian Gas plants. 
• The European market has also been impacted by rumors of an earlier-than-expected closure of the Groningen Gas field in the Netherlands. 
• Norwegian supply is now critical to the European continent after it replaced Russia as the main supplier in 2022, when Norwegian Gas accounted for 23% of imports compared to Russia’s 15%, according to a report by CNN. 
• “The European gas market — and by extension the global gas market — [is] certainly not out of the woods in terms of adequately matching supply with demand,” Tom Marzec-Manser, head of Gas analytics at ICIS, told CNN.
• That said the position is not as precarious as in previous years: European storage facilities are now 73% full — a much higher level than the 56% averaged at the same time of the year over the past five years, according to data from Gas Infrastructure Europe (reported by CNN).
• In addition, news of a deal between Romanian Gas operator RomGaz and Southeast European Gas producer Petrom OMV to build a new platform in the Black Sea is likely to ease regional demand concerns, according to Offshore Energy. 
• The Neptun Deep offshore Gas field will make Romania the largest Gas producer in the EU, and a net exporter.  
• “To give an example of the project’s size: the estimated natural gas production is equivalent to ~30 times the current annual demand of ~4,300,000 households. It is also a major step forward for our Strategy 2030 that aims at supporting the energy transition in Romania and in the region.” Said Christina Verchere, CEO of OMV Petrom. 
• Asian rivalry for Europe’s limited supply is likely to be less than in previous years after Japan and South Korea recorded much higher stores and the Chinese economy continues to falter. 
• The ongoing Atlantic hurricane season in the US could further increase demand in the US. 

Natural Gas Technical Analysis: Short-term uptrend within a longer-term bearish picture

Natural Gas price is in a long-term downtrend since turning lower at the $9.960 MMBtu peak achieved in August 2022. That said, bearish momentum has tapered off considerably since February 2023. This is evidenced by the bullish convergence of the Relative Strength Index (RSI) momentum indicator with price, beginning in May this year. Bullish convergence occurs when price makes new lows but RSI fails to copy. 

In actual fact, the RSI started rising well before price did, which was indicative of an underlying change in environment. Until price goes a bit higher, however, the trend remains down. 

Natural Gas would need to break above the last lower high of the long-term downtrend at $3.079 MMBtu to indicate a reversal in the broader trend. 

As things stand, a break below the $2.110 MMBtu year-to-date lows would provide a signal for a continuation down to a target at $1.546 MMBtu. This target is the 61.8% Fibonacci extension of the height of the roughly sideways consolidation range that has been unfolding during 2023. 

Natural Gas: Weekly Chart

On the daily chart, it can be seen that price is going sideways, although it has now broken above both the 50 and not the 100-day Simple Moving Average (SMA), which is a short-term bullish sign. 

Natural Gas: Daily Chart

The four-hour chart shows the pair has reversed its prior short-term uptrend.  

Natural Gas: Four-hour Chart

The steep decline witnessed on Tuesday broke below the last lower high at roughly $2.650 and could spell a change in direction for Natural Gas in the short term.  

The RSI has exited overbought (above 70), which is a signal for bulls to close their long positions and bears to open short positions. 

Price action on the four-hour chart may have formed a bear flag, with the recent cliff-edge decline from Tuesday’s highs as the ‘flag pole’ and the consolidation on Wednesday as the ‘flag square’.  

Natural Gas: Four-hour Chart

If so, price will probably break lower and extend a similar, or Fibonacci 61.8%, of the length of the pole, to a target at roughly $2.430, around where the 200-4hr SMA is situated.   

A decisive break below $2.558 would be required to activate the flag pattern and confirm more downside. Such a break would need to be composed of a long red bearish four-hour candlestick, which breaks below the level and closes near its lows, or three red candlesticks in a row that break below the level. 

The target for the flag also lies at about the same level as the 100 and 50-day SMAs, further enhancing it as a possible floor for prices to pause and find support. 
 

• AUD/USD has extended its losses to near 0.6750 as more interest rate hikes by the Fed have been confirmed.
• Fed Powell has confirmed that long-term inflation expectations are well-anchored.
• The commentary from new Fed nominees will be in focus.

The AUD/USD pair has stretched its downside momentum to 0.6750 in the early New York session. The Aussie asset is attracted significant offers as hawkish testimony from Federal Reserve (Fed) chair Jerome Powell at Congress is acting as a tailwind for the US Dollar Index (DXY).

S&P500 futures are set to open on a negative note as hawkish Jerome Powell’s testimony has triggered fears of a recession in the United States. Investors have underpinned the risk-aversion theme as higher interest rates by the Fed would weigh heavily on economic activities.

The US Dollar Index (DXY) is showing wild swings in a restricted range around 102.60. Signs of sheer volatility contraction in the USD Index are expected to be followed by a solid breakout. The 10-year US Treasury yields have climbed sharply above 3.76%.

Fed Powell has confirmed that long-term consumer inflation expectations are well-anchored, however, the journey of bringing down inflation to 2% is far from over. All Fed policymakers are in favor of more interest rate hikes this year as the extent of the impact of tight credit conditions on inflation, Employment, and economic activities is uncertain.

Going forward, commentary from new Fed nominees will also be in focus. Governor Lisa Cook and vice chair Philip Jefferson have cleared their intentions that a slowdown in price pressures is their major focus so that the economy can return to sustainable growth.

On the Australian Dollar front, preliminary S&P PMI data (June) will be in focus. As per the preliminary report, Manufacturing PMI is seen declining to 48.1 vs. the prior release of 48.4. Services PMI is expected to drop sharply to 50.1 against the former release of 52.1.

USD/BRL recently broke out of its 4.90-5.10 trading range and has been trading around 4.80 lately. How long can the BRL rally last? Economists at Commerzbank analyze the pair’s outlook.

Less hawkish BCB expected

Jerome Powell's, Chairman of the Federal Reserve System (Fed), prepared testimony for delivery to the House Financial Services Committee, showed that the Fed Chairman will repeat that nearly all FOMC participants expect it will be appropriate to raise interest rates "somewhat further" by year-end.

Key takeaways

"Process of getting inflation back down to 2% has a long way to go."

"Seeing some effects of monetary tightening but will take time for full effects of monetary restraint to be realized, especially on inflation."

"Labor market remains very tight, but nominal wage growth showing signs of easing, job vacancies have declined this year."

"Longer-term inflation expectations appear to remain well anchored."

"Tighter credit conditions are likely to weigh on economic activity, hiring and inflation but extent remains uncertain."

"We will continue to make our decisions meeting by meeting based on incoming data, implications for outlook and balance of risks."

"We remain committed to bringing inflation back down to our 2% goal, keep inflation expectations well anchored."

"Reducing inflation is likely to require period of below-trend growth, some softening of labor market conditions."

"US banking system is sound and resilient."

"Recent bank failures and resulting financial stress have highlighted importance of having appropriate rules and supervisory practices for banks of this size."

"Committed to addressing these vulnerabilities to make for a stronger and more resilient banking system."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen moving sideways slightly above 102.50.

Economist at UOB Group Lee Sue Ann suggests the BSP could refrain from hiking rates at this week’s monetary policy meeting.

Key Takeaways

• Gold price is showing volatile spikes around $1,930.00 amid Fed Powell's testimony at Congress.
• Fed Powell has confirmed that policymakers are in favor of further interest rate hikes this year.
• Gold price is on the edge of the horizontal support of the Descending Triangle chart pattern.

Gold price (XAU/USD) is showing extremely volatile action around $1,930.00 as Federal Reserve (Fed) chair Jerome Powell has sounded hawkish while delivering testimony in front of Congress. The precious metal is strongly defending the $1,930.00 despite Fed Powell having confirmed more rate hikes this year.

S&P500 futures have extended losses further as investors are hoping that expectations of more interest rate hikes from the Federal Reserve (Fed) have pushed the United States economy toward recession. The US Dollar Index (DXY) is showing volatile spikes but is still inside the woods around 102.60. The 10-year US Treasury yields seem choppy around 3.75%.

Fed Powell has confirmed that policymakers are in favor of further interest rate hikes this year as the process of getting inflation back down to 2% has a long way to go. The Fed believes that tight credit conditions are expected to put pressure on economic activities, inflation, and labor market conditions, however, the extent remains uncertain.

Chances of a recession in the United States economy are well solid as more interest rates by the Fed would impact the scales of manufacturing and service activities significantly.

Jerome Powell has confirmed that the central bank will be data-dependent and long-term consumer inflation expectations are well-anchored.

Gold technical analysis

Gold price is on the edge of the horizontal support of the Descending Triangle chart pattern formed on a two-hour scale, which is placed from May 30 low at $1,932.12. The downward-sloping trendline of the aforementioned chart pattern is plotted from June 02 high at $1,983.00. 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) has slipped into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Gold two-hour chart

Economists at Société Générale discuss Turkish Lira outlook ahead of the CBRT meeting. 

Return to some policy orthodoxy and tourist revenues inflow to support TRY

• Retail Sales in Canada increased at a stronger pace than expected in April.
• New Housing Price Index rises 0.1% in May, first increase since August 2022. 
• USD/CAD remains around 1.3210/20, marginally lower for the day.

Statistics Canada reported on Wednesday that Retail Sales rose by 1.1% on a monthly basis in April. This reading came in higher than the market expectation for an increase of 0.2%.

“Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—increased 1.5% in April.  In volume terms, retail sales increased 0.3% in April”, Statistics Canada noted in its publication. Excluding motor vehicle and parts dealers sales advanced 1.3%.   

"Statistics Canada is providing an advance estimate of retail sales, which suggests that sales increased 0.5% in May. Owing to its early nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 40.6% of companies surveyed. The average final response rate for the survey over the previous 12 months was 89.2%."

A different report showed a “slight uptick in new home prices in Canada in May”. The New Housing Price Index increased 0.1% month over month in May, its first increase since August 2022, surpassing expectations of 0%. 

Market reaction

The USD/CAD remained steady, hovering around 1.3210/20 following the upbeat report. At the same time, Federal Reserve Chair Powell's speech was released and strengthened the US Dollar somewhat.

• USD/CAD has dropped sharply to near 1.3210 as Canadian Retail Sales have expanded to 1.1% vs. 0.2% as expected.
• Oil prices are expected to show some action after the release of the oil inventory data for the week ending June 16.
• The US Dollar Index is demonstrating signs of sheer contraction in volatility as investors are awaiting commentary from Jerome Powell.

The USD/CAD pair has witnessed selling pressure as Statistics Canada has reported surprisingly higher Retail Sales data (April). The economic data has expanded by 1.1% while the street was anticipating an expansion of 0.2%. Last month, Canadian Retail Sales contracted by 1.5%.

Upbeat Retail Sales data might force the Bank of Canada (BoC) to raise interest rates further as higher households' demand would eventually propel price pressures.

Analysts at CIBC affirm that some cracks appeared within the Canadian labor market in May, but these “may not yet be wide enough to convince the Bank of Canada that inflation is about to meaningfully cool off.”

Meanwhile, S&P500 futures have extended their losses as the market mood is turning precautionary ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony. The US Dollar Index (DXY) is demonstrating signs of sheer contraction in volatility as investors are expected to build fresh positions after assessing commentary from Jerome Powell.

Investors are keenly focusing on whether Jerome Powell will stick to its prior guidance of pushing interest rates further by 50 basis points (bps) this year or to remain data-dependent.

On the oil front, oil prices are expected to show some action after the release of the oil inventory data by the United States American Petroleum Institute (API) for the week ending June 16.

It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will support the Canadian Dollar.

GBP underperforms after another CPI overshoot. Economist at Scotiabank analyze Sterling outlook.

Focus on BoE 

Economists at Société Générale discuss the Mexican Peso outlook. 

MXN should continue to benefit from a soft USD

EUR is underpinned by European Central Bank (ECB) hawks, economists at Scotiabank report.

Price action leans bullish

See: EUR/USD should continue to feel at ease in the area around 1.09 – Commerzbank

• USD/CHF is consolidating below 0.9000 as the focus shifts to SNB policy and Powell’s testimony.
• US equities are expected to remain volatile as a continuation of hawkish guidance from the Fed would accelerate fears of recession.
• SNB Jordan is expected to raise interest rates by 25 bps to 1.75%.

The USD/CHF pair is consistently oscillating in a narrow range below the psychological resistance of 0.9000 in the European session. The Swiss Franc asset is showing a subdued performance as the upside seems capped due to non-directional performance by the US Dollar Index (DXY) and expectations of an interest rate hike by the Swiss National Bank (SNB).

S&P500 futures have turned negative again as investors are turning cautious ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony. US equities are expected to remain volatile as a continuation of hawkish guidance from the Fed would accelerate fears of recession.

The US Dollar Index (DXY) is displaying topsy-turvy moves around 102.60. Economists at ING believe the first week of July is when we’ll get the most important set of data releases in the United States, so Powell’s words can determine whether DXY will end the quarter above or below the 102.00 mark.

Contrary to the USD Index, US Treasury yields have not lost their resilience. The 10-year US Treasury yields have climbed to near 3.76%.

On the Swiss Franc front, the interest rate decision by the SNB will be in focus. Among G10 economies, the Swiss economy is operating at the lowest inflation levels, recorded at 2.2% in May. SNB Chairman Thomas J. Jordan is expected to raise interest rates by 25 basis points (bps) to 1.75%. Reuters reported SNB Jordan cited that "It's really important to bring Swiss inflation to a level of price stability," He further added it would not be a good idea to wait for inflation to rise and then raise interest rates. "When inflation remains under 2% for a long time, we don't have a problem,"

USD continues to consolidate broadly ahead of Fed Chairman Powell’s semi-annual congressional testimony to a House panel. Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes the greenback outlook.

Dovish comments from Powell will weigh on the USD

Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes GBP after UK CPI data and ahead of tomorrow's Bank of England (BoE) Interest Rate Decision.

Risk of a 50 bps rate hike tomorrow has increased

See: Sterling has limited upside potential on more data surprises – ING

• Jerome Powell testimony in the US Congress will be a top-tier market moving event.
• New clues on the Federal Reserve interest rate hike path are awaited.
• US Dollar, stock markets and other asset classes could see big swings on Fed Chair words.

Jerome Powell, Chairman of the Federal Reserve System (Fed), will testify on June 21 before the House Financial Services Committee. The hearing, entitled “The Federal Reserve’s Semi-Annual Monetary Policy Report”, will start at 14:00 GMT (10:00 US Eastern Standard Time), and it will have the full attention of all financial market players. 

Jerome Powell is expected to address the main takeaways of the semi-annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed acknowledged that the outlook for fed funds rate is subject to considerable uncertainty, while reiterating that inflation in core services ex-housing has not shown any signs of easing. Although the Fed left its policy rate unchanged at the range of 5-5.25% following the June policy meeting as expected, the hawkish revision to the terminal projection rate in the Summary of Economic Projections suggested that policymakers see the need to for additional tightening later this year. According to the CME Group FedWatch Tool, markets are pricing in a stronger than 70% probability of a 25 bps hike in July.

Members of House will question Powell about the policy outlook and its potential impact on the economy. The banking crisis in March unveiled the negative impact of high interest rates on financing conditions and heightened fears over an economic slowdown. Uncomfortably high inflation and the strong labor market, however, should allow the US central bank to stay focused on reinstating price stability. 

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
 

CAD holds low 1.32 zone ahead of Retail Sales, summary of BoC deliberations. Economists at Scotiabank analyze USD/CAD outlook.

How much more tightening?

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the latest trade balance results in Malaysia.

Key Takeaways

Economists at Danske Bank discuss Oil outlook.

OPEC+ looks to have a preference for Brent to trade in the $80-110 range

• EUR/JPY reverses two consecutive daily pullbacks on Wednesday.
• Current overbought conditions still sign potential declines ahead.

EUR/JPY regains composure and breaks above the key hurdle at 155.00 the figure on Wednesday.

While extra gains remain on the cards, the ongoing overbought conditions of the cross are indicative that further retracements 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 144.62.

EUR/JPY daily chart

EUR/USD has experienced a large range-bound consolidation after probing the multiyear trend line near 1.1070/1.1100. Economists at Société Générale analyze the pair’s technical outlook.

Last week’s low of 1.0730 is important support

USD/JPY has seen further tactical gains. Economists at Credit Suisse analyze the pair’s technical outlook.

Temporary pause

Has the Aussie lost its sparkle? Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes AUD outlook

RBA rates to be 75 bps below Fed rates by year-end

Economists at Credit Suisse analyze GBP/USD technical outlook.

Support moves to the 13-day exponential average at 1.2636

Senior Economist at UOB Group Alvin Liew reviews the latest NODX figures in Singapore during May and their impact on economic growth prospects.

Key Takeaways

• USD/CAD is making efforts for extending its recovery above 1.3250 ahead of Canadian Retail Sales.
• What’s driving caution in the market is the approach to be adopted by the Fed in its journey toward achieving price stability.
• Monthly Retail Sales data is seen expanding by 0.2% against a contraction of 1.4% witnessed earlier.

The USD/CAD pair is struggling in extending its recovery above the immediate resistance of 1.3250 in the London session. A volatile action is anticipated from the Loonie asset as investors are awaiting the release of the Canadian Retail Sales data for April.

S&P500 futures have turned positive after recovering gains generated in the Asian session. A decent recovery has been observed in the risk appetite of market participants. However, the overall market mood is still cautious as investors are awaiting fresh guidance from Federal Reserve (Fed) chair Jerome Powell in his testimony.

The US Dollar Index (DXY) is inside the woods as investors have been sidelined. What’s driving caution in the market is the approach to be adopted by the Fed for its further journey toward achieving price stability. Investors want to know whether the central bank will hike interest rates further by 50 basis points (bps) as confirmed in the monetary policy statement or will adopt a data-centric approach to maintain the growth outlook.

Meanwhile, the Canadian Dollar will be impacted by the Retail Sales (April) data. 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 has 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 oil price is showing topsy-turvy moves above $71.00 despite a dovish policy stance by the People’s Bank of China (PBoC). It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will support the Canadian Dollar.

Gold price remained under pressure from rising US Treasury bond yields, economists at ANZ Bank report.

Fall in the USD is not helping Gold

Further upside in USD/CNH should remain in the pipeline while above the 7.2000 level, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew.

Key Quotes

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for the fourth session in a row on Tuesday, now by nearly 10K contracts. On the other hand, volume kept the erratic performance well in place and went up by almost 31K contracts.

Natural Gas: Gains remain limited around $2.70

Tuesday’s marked retracement in prices of natural gas was on the back of diminishing open interest and rising volume, exposing further range bound theme for the time being. In the meantime, sporadic bullish attempts are expected to keep facing decent resistance in the $2.70 region per MMBtu.

• Gold price is expected to extend its downside journey below $1,930.00 ahead of Fed Powell’s testimony.
• Investors are eager to know whether Fed Powell would choose a 50 bps rate hike or a data-dependent approach.
• Gold price is on the edge of the horizontal support of the Descending Triangle pattern.

Gold price (XAU/USD) has concluded its less-confident pullback move to near $1,940.00 in the European session. The precious metal is expected to show further downside below $1930.00 as US Treasury yields have shown resilience ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures have turned flat after choppy moves as investors have sidelined ahead of Fed Powell’s testimony. The US Dollar Index (DXY) is showing topsy-turvy moves around 102.60. A volatile action is anticipated from the USD Index as the street is mixed in Fed’s 50 basis points (bps) interest rate hike vs. data-dependent approach. Contrary to the choppy USD Index, US Treasury yields look firmer. The 10-year US Treasury yields are holding above 3.74%.

Going forward, the entire focus will be on Jerome Powell's words. Economists at ING believe the first week of July is when we’ll get the most important set of data releases in the United States, so Powell’s words can determine whether DXY will end the quarter above or below the 102.00 mark.

Later this week, US weekly jobless claims data will remain in focus. The US Department of Labor has reported higher-than-anticipated first-timer jobless claims straight for the past three weeks. Further jump in claims would convey that labor market conditions are easing further.

Gold technical analysis

Gold price is on edge of the horizontal support of the Descending Triangle chart pattern formed on a two-hour scale, which is placed from May 30 low at $1,932.12. The downward-sloping trendline of the aforementioned chart pattern is plotted from June 02 high at $1,983.00. 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) has slipped into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Gold two-hour chart

This week's attention will focus on the appearance of Fed Chair Jerome Powell in front of the House of Representatives (today) and the Senate (tomorrow). Antje Praefcke, FX Analyst at Commerzbank, discusses EUR/USD outlook. 

The Fed is increasingly navigating by sight

Japanese Prime Minister Fumio Kishida is sounding upbeat on the nation’s economic outlook, in his speech on Wednesday.

Key quotes

Market reaction

USD/JPY is off the highs, consolidating at around 142.00 ahead of Fed Chair Jerome Powell’s testimony. The spot is up 0.40% on a daily basis.

While presenting its economic projections on Wednesday, Germany’s influential IFO Institute warned that the German recession will be sharper than expected.

Key takeaways

"The German economy is only very slowly working its way out of the recession."

“German GDP expected to grow by 1.5% in 2024, down from 1.7% previously forecast.”

“German economy expected to contract by 0.4% this year vs. 0.1% drop previously forecast.”

“Germany's inflation seen at 5.8% in 2023, 2.1% in 2024.”

“German unemployment rate expected to remain steady at 5.3% this year, before rising to 5.5% in 2024.”

Market reaction

EUR/USD is unperturbed by the above findings, trading better bid at 1.0920, as of writing.

• NZD/USD seesaws between tepid gains/minor losses through the early European session.
• A modest USD strength caps the upside amid worries about a global economic slowdown.
• The downside seems limited ahead of Fed Chair Jerome Powell’s congressional testimony.

The NZD/USD pair struggles to capitalize on its modest intraday gains and seesaws between tepid gains/minor losses through the first half of the European session on Wednesday. Spot prices currently trade around the 0.6165 region, nearly unchanged for the day, and remain well within the striking distance of a one-week low touched on Tuesday.

The Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps this year, acts as a tailwind for the US Dollar (USD), which, in turn, is seen as capping the upside for the NZD/USD pair. Apart from this, worries about a global economic slowdown further benefits the Greenback's safe-haven status and undermines the risk-sensitive Kiwi. The downside, however, remains cushioned, at least for the time being, as traders keenly await the Fed Chair Jerome Powell's semi-annual congressional testimony before placing fresh directional bets.

From a technical perspective, the NZD/USD pair on Tuesday found some support near the 38.2% Fibonacci retracement level of the downfall witnessed in May. The subsequent recovery, however, falters near 50% Fibo. level. This, along with the recent failure to find acceptance above a confluence comprising the 200-day Exponential Moving Average (EMA) and the 61.8% Fibo. level favours bearish traders. That said, neutral oscillators on the daily chart make it prudent to wait for some follow-through selling below the overnight swing low, around the 0.6135 region, before placing fresh bearish bets.

The NZD/USD pair might then turn vulnerable to weaken further below the 0.6100 round-figure mark and test the 23.6% Fibo. level, around the 0.6080-0.6075 region. Failure to defend the said support levels will expose the YTD low - levels just below the 0.6000 psychological mark - touched on May 31. Spot prices could extend the downward trajectory further towards testing the next relevant support near the 0.5945-0.5940 zone.

On the flip side, the daily swing high, around the 0.6185 region, which coincides with the 50% Fibo. level, now seems to act as an immediate hurdle ahead of the 0.6200 mark. Any subsequent move up might continue to confront stiff resistance and remain capped near the 0.6230 confluence. That said, a sustained strength beyond the 0.6245-0.6250 area, or the monthly top touched last week, will negate the bearish bias and pave the way for some meaningful upside for the NZD/USD pair.

NZD/USD daily chart

Key levels to watch

European Central Bank policymaker Peter Kazimir said on Wednesday that he is not certain whether the central bank will continue its rate hike cycle in September.

Key quotes

“In September continuation of tightening policy is not certain.”

“For me, we would need to have core inflation under control to stop tightening.”

“APP sales aren't on agenda at the moment.”

Market reaction

EUR/USD is keeping its range play intact at around 1.0920, awaiting Fed Chair Jerome Powell’s testimony for a fresh nudge.

Tomorrow’s SNB meeting could be a decisive event for EUR/CHF. Economists at Credit Suisse envisage two scenarios.

Hawkish (60% odds)

Hiking by 50 bps would cement the SNB’s inflation-fighting credentials amid the recent trend of lower headline and core inflation rates. This hawkish scenario could be even more powerful were the SNB to signal further interest rate hikes in the future and should be Franc supportive. 

Dovish (40% odds)

Hiking 50 bps but hinting at an end to the rate hiking cycle or ‘only’ raising rates by 25 bps combined with a dovish language should lead to a weaker Swiss Franc. The peak in the implied policy rate is near. Such a dovish scenario should lead to a softer CHF on a short- and medium-term basis.

The EUR/CHF target for end of this quarter is 0.96000

We stick with our current 0.9600 EUR/CHF target for the end of this quarter and would not rule out even lower levels in the medium term should our hawkish scenario unfold. Should the SNB decide not to live up to our hawkish expectations, we would not rule out a potential squeeze higher toward parity in EUR/CHF.

• USD/JPY has scaled strongly above 142.00 as the USD Index has remained firm.
• Investors are keenly focusing on whether Fed Powell will stick to its prior guidance of pushing interest rates further or to remain data-dependent.
• It seems that the consistent ultra-dovish interest rate policy by the BoJ is doing justice with its job.

The USD/JPY pair has quickly jumped above 142.00 as the US Dollar has remained firm in the European session. Strength in the US Dollar is coming from caution in the market participants stemming ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures have recovered their entire losses posted in Asia and have turned positive, portraying a decent recovery in the risk appetite of the market participants. 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) is struggling in stretching its recovery above 102.60 as the market has turned baffled about Jerome Powell’s guidance. Investors are keenly focusing on whether Jerome Powell will stick to its prior guidance of pushing interest rates further by 50 basis points (bps) this year or remain data-dependent.

Meanwhile, the Japanese Yen is going to dance to the tunes of Consumer Price Index (CPI) data (May), which will release on Friday. As per the preliminary report, annualized headline CPI is seen accelerating to .1% vs. the prior release of 3.5%. Core inflation that excludes the impact of oil and food prices is seen climbing to 4.4% against the former release of 4.1%.

It seems that the consistent ultra-dovish interest rate policy by the Bank of Japan (BoJ) is doing justice to its job. BoJ Governor Kazuo Ueda has cleared that wages and domestic demand are needed to elevate further to grow inflation domestically.

We have just had the release of the May CPI report in the UK and once again it is a bad report. Economists at MUFG Bank analyze the implication of the latest inflation data ahead of the Bank of England (BoE) meeting tomorrow.

Another UK CPI upside surprise points to a possible 50 bps hike by BoE

Fed Chair Powell starts two days of Congress testimony today. A successful hawkish message could give the Dollar some support into the next key releases, economists at ING report.

USD set to remain overwhelmingly more sensitive to data

UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew note that extra upside in USD/JPY now loses some momentum.

Key Quotes

• Silver is seen consolidating the overnight slump to a fresh monthly low.
• The technical setup supports prospects for additional near-term losses.
• A sustained strength beyond $24.00 might negate the negative outlook.

Silver enters a bearish consolidation phase on Wednesday and oscillates in a narrow trading band just above the $23.00 mark, or a fresh monthly low touched the previous day.

From a technical perspective, the recent repeated failures to find acceptance above the 200-period Simple Moving Average (SMA), followed by the overnight slump favour bearish traders. Moreover, oscillators on the daily chart have again started drifting into negative territory. That said, the Relative Strength Index (RSI) on hourly charts flash oversold conditions and warrants some caution before positioning for any further slide. Nevertheless, the XAG/USD seems vulnerable to adding to its weekly losses registered over the past two days.

A sustained break and acceptance below the $23.00 mark will reaffirm the negative outlook and drag the white metal towards testing the May monthly swing low, around the $22.70-$22.65 region. This is followed by the very important 200-day SMA, currently around the $22.40-$22.35 area. Failure to defend the latter will mark a fresh bearish breakdown and expose the $22.00 round-figure mark. The downward trajectory could get extended further towards the next relevant support near the $21.50-$21.45 horizontal zone en route to the $21.00 round figure.

On the flip side, the $23.60-$23.65 region now seems to act as an immediate hurdle ahead of the 200-period SMA on the 4-hour chart, around the $23.90 area. Some follow-through buying beyond the $24.00 mark might trigger a short-covering move and lift the XAU/USD towards the $24.50-$24.55 zone, or the monthly peak touched last week. The latter should act as a pivotal point, which if cleared decisively should allow bulls to reclaim the $25.00 psychological mark and test the $25.30-$25.40 resistance zone.

Silver 4-hour chart

Key levels to watch

The BRL strengthened to a one-year high of 4.7595/USD earlier this week. Economists at Société Générale analyze USD/BRL technical outlook.

Break of 4.75 can lead the pair lower towards next supports at 4.69

• Euro alternates gains with losses around the 1.0920 region.
• Stocks markets in Europe extend the weekly decline early on Wednesday.
• The cautious trade prevails ahead of key testimony by Powell.
• The risk-off mood continues to weigh on the risk complex.
• Further recovery remains in place for the greenback.

As the markets opened in Europe on Wednesday, the EUR struggled to make gains, causing the EUR/USD pair to remain around the low-1.0900s. This lack of direction could be attributed to investors' caution ahead of Chief J. Powell's semiannual testimony before Congress later in the day.

Market participants anticipate a hawkish message from Powell during this key event. It's worth noting that at the June FOMC event, rate setters indicated a possibility of resuming the tightening campaign in July, with projections pointing towards two more 25 bps rate hikes or a 50 bps raise.

While Powell's testimony takes centre stage on Wednesday, the markets are also closely monitoring the likely next decisions on interest rates by both the Federal Reserve and the European Central Bank (ECB).

There are no data releases scheduled in the euro zone on Wednesday, but the usual weekly MBA Mortgage Applications and the API's weekly report on US crude oil stockpiles are due across the Atlantic.

Daily digest market movers: Euro looks at Powell for near-term direction

• Pre-Powell cautiousness continues to favour the US Dollar.
• Powell’s testimony is expected to fall on the hawkish side.
• Sticky UK inflation prompts extra tightening by the BoE in H2 2023.
• China, recession concerns maintain the risk appetite subdued so far.
• The FX universe continues to monitor the ECB-Fed divergence.

Technical Analysis: There is still room for a move to 1.1000

EUR/USD seems to have met some decent contention around the 1.0900 neighbourhood so far this week. In order to continue its upward momentum, the EUR must quickly surpass the monthly high at 1.0970 (June 16) to potentially allow for a test of 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 1.0880. 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).

Here is what you need to know on Wednesday, June 21:

The risk-averse market environment helps the US dollar (USD) hold its ground mid-week as investors await FOMC Chairman Jerome Powell's testimony before the House Financial Services Committee. The economic calendar will not be offering any high-impact macroeconomic data releases and comments from central bank officials will be looked upon for fresh catalysts.

Reflecting the sour market mood, Shanghai Composite and Hang Seng indexes both lost more than 1% on Wednesday. Additionally, US stock index futures trade in negative territory following the dismal performance of major equity indexes on Tuesday. The US Dollar Index (DXY) clings to small daily gains above 102.50 after having closed the previous three trading days in the green. 

Hot inflation data from the UK helped Pound Sterling find demand in the early European morning on Wednesday. Annual inflation, as measured by the change in the Consumer price Index (CPI), held steady at 8.7% in May, surpassing the market expectation of 8.4%. The Core CPI, which excludes volatile food and energy prices, rose 7.1% in the same period, compared to analysts' estimate of 6.8%. On an encouraging note, the Producer Price Index declined on a monthly basis. Following an initial spike above 1.2800, GBP/USD edged lower and stabilized above 1.2750.

EUR/USD continues to fluctuate in a very tight channel above 1.0900 for the second straight day on Wednesday. European Central Bank (ECB) policymakers Joachim Nagel, Isabelle Schnabel and Fabio Panetta will be speaking later in the day.

Following Tuesday's slide, USD/JPY gathered bullish momentum and was last seen trading above 142.00. “The Bank of Japan (BoJ) will patiently maintain an easy monetary policy to stably and sustainably achieve the 2% price target accompanied by wage growth,” the central bank Governor Kazuo Ueda repeated on Wednesday.

USD/CAD moves up and down in a narrow band above 1.3200. Statistics Canada will release Retail Sales data for April later in the session.

AUD/USD stays under bearish pressure and trades in negative territory below 0.6800 on Wednesday.

Gold price suffered large losses on Tuesday as investors reacted to the potential negative impact of a slowdown in China to the yellow metal's demand outlook. XAU/USD stays relatively quiet below $1,940 early Wednesday.

Bitcoin gathered bullish momentum and advanced to its strongest level since the first week of May above $28,800. Ethereum gained more than 3% on Tuesday and extended its rally to beyond $1,800 early Wednesday.

EUR/USD trades slightly above the 1.09 level. Economists at ING analyze the pair’s outlook.

Some downside risks for EUR/USD today

See – EUR/USD: Gradual appreciation of the Euro towards the end of the year – Commerzbank

• AUD/USD has faced immense pressure around 0.6800 as the focus shifts to Fed Powell’s testimony.
• New Fed nominees have cleared their intentions that a slowdown in price pressures is their major focus.
• The Australian Dollar has shown a bumpy ride as RBA minutes turn out to be less hawkish than expected.

The AUD/USD pair has witnessed significant selling pressure after a short-lived pullback to near the round-level resistance of 0.6800 in the London session. The Aussie asset has dropped vertically to near 0.6760 as investors are worried ahead of the Federal Reserve (Fed) chair Jerome Powell's testimony and Australia’s preliminary S&P PMI (June) data, which is scheduled for Thursday.

S&P500 futures have trimmed some losses posted in Asia, portraying a marginal recovery in the risk appetite of the market participants. The overall market mood is still cautious as a reiteration of hawkish guidance from Jerome Powell would stimulate fears of a recession in the United States.

The US Dollar Index (DXY) is facing barricades in extending its recovery above 102.65 as the street is divided about interest rate guidance. As per the CME Fedwatch tool, more than 50% chances are in favor of only one interest rate hike from the Fed by year-end. The US Treasury yields are showing a decent recovery. The yields offered on 10-year US Treasury bonds have jumped above 3.75%.

Meanwhile, new Fed nominees Governor Lisa Cook and vice chair Philip Jefferson have cleared their intentions that a slowdown in price pressures is their major focus so that the economy can return to sustainable growth.

The Australian Dollar has shown a bumpy ride as Reserve Bank of Australia (RBA) minutes turn out to be less hawkish than expected. RBA minutes indicate that policymakers were mixed about hiking interest rates further in June or its postponement to July. However, May’s Employment data released after RBA monetary policy has confirmed further policy-tightening.

Going forward, Aussie’s preliminary S&P PMI data (June) will be in focus. Manufacturing PMI is seen declining to 48.1 vs. the prior release of 48.4. Services PMI is expected to drop sharply to 50.1 against the former release of 52.1.

• EUR/GBP meets with some supply following the release of a stronger UK CPI report.
• The data lifts bets for more aggressive BoE rate hikes and boosts the British Pound.
• The ECB’s hawkish outlook helps limit the downside ahead of the BoE on Thursday.

The EUR/GBP cross comes under some selling pressure following the release of the latest UK consumer inflation figures on Wednesday and drops to a fresh daily low during the early European session. Spot prices, however, manage to recover a few pips in the last hour and currently trade with only modest intraday losses, around mid-0.8500s.

The UK Office for National Statistics (ONS) reported that the headline UK CPI increased by 0.7% in May and the yearly rate held steady at 8.7% as compared to consensus estimates for a modest fall to 8.4%. Furthermore, core inflation, which excludes volatile energy, food, alcohol and tobacco prices, accelerated from 6.8% in April to the 7.1% YoY pace during the reported month, or the highest rate since March 1992. This, in turn, reaffirms market bets for a further policy tightening by the Bank of England (BoE), which, in turn, provides a goodish lift to the British Pound and exerts some downward pressure on the EUR/GBP cross.

In fact, the markets are now pricing in a greater chance of a jumbo 50 bps BoE rate hike on Thursday. Moreover, sticky inflation and a persistently tight labor market have forced investors to increase their forecast for peak interest rates to 6.01% by February 2024. The immediate market reaction, however, remains limited as traders now seem reluctant to place aggressive bets and prefer to move to the sidelines heading into the key central bank event risk. Apart from this, a modest US Dollar (USD) strength caps the Sterling, which, along with the European Central Bank's (ECB) hawkish outlook, limits losses for the EUR/GBP cross.

It is worth recalling that the ECB hiked interest rates for the eighth straight time last Wednesday, by 25 bps to 3.5% or the highest in 22 years and signalled that additional rate hikes will be needed to bring Eurozone inflation to its medium-term target of 2%. In the accompanying policy statement, the ECB raised its inflation projection for this year to 5.1% from 4.6%, suggesting that the central bank is still not done with its policy tightening, which, in turn, is seen lending some support to the shared currency. That said, the aforementioned fundamental backdrop supports prospects for a further depreciating move for the EUR/GBP cross.

Technical levels to watch

Another inflation surprise in the UK. Economists at ING analyze Sterling outlook after CPI data.

Another inflation surprise

In the opinion of UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew, AUD/USD has now likely moved into a consolidative phase.

Key Quotes

Open interest in crude oil futures markets rose by around 19.3K contracts after four consecutive daily pullbacks on Tuesday, according to preliminary readings from CME Group. In the same line, volume set aside four daily drops and went up by around 68.2K contracts.

WTI could slip back below the $70.00 mark

Tuesday’s daily retracement in prices of WTI was accompanied by increasing open interest and volume. That said, further weakness now appears on the table in the very near term, with the tangible probability of another drop to the sub-$70.00 region.

EUR/SEK has advanced sharply. Economists at Danske Bank analyze the pair’s outlook. 

Short-term overbought, medium-term bullish case intact

• Pound Sterling is displaying volatile moves as UK inflation has accelerated.
• Higher United Kingdom price pressures are going to propel the need for bulk rate hikes from the Bank of England.
• UK firms have been offering higher wages to offset supply shortage vs. excess demand deviation.

The Pound Sterling (GBP) is experiencing wild moves after United Kingdom inflation for May has turned out to be more persistent than expected. The GBP/USD pair might attract buyers as surprisingly higher inflationary pressures in Britain will propel the need for bulky hikes in the interest rates by the Bank of England (BoE).

Tight labor market conditions in the United Kingdom have fueled inflationary pressures. Households demand has remained elevated as higher earnings provided the luxury of having more disposable individuals.  Fears of bigger interest rate hikes by the UK central bank have accelerated, which might scale down the deviation of the Federal Reserve’s higher interest rates significantly. The Pound Sterling is bound to stay bullish versus the US Dollar while this central bank discrepancy continues.

Daily digest market movers: Pound Sterling gains traction as UK inflation soars

• UK inflation figures have surprisingly landed higher than expectations and have propelled chances of a 50 basis point interest rate hike by the Bank of England on Thursday.
• The monthly headline Consumer Price Index (CPI) for May expanded at a pace of 0.7%, matched April’s pace but remained higher than the estimated speed of 0.5%.
• Annualized headline inflation remained steady at 8.7% while the market was anticipating a deceleration to 8.4%.
• Core UK CPI that excludes oil and food prices has accelerated to 7.1% versus the consensus and the former release of 6.8%.
• A quarterly survey done by the Bank of England shows that consumer inflation expectations for the coming 12 months have softened to 3.5% in May against the prior release of 3.9% being recorded in February, while five-year inflation expectations remained steady at 3.0%.
• BoE Governor Andrew Bailey said last week that inflation will come down, but it will take longer than expected while speaking before the House of Lords Economic Affairs Committee.
• Shortages of labor due to Brexit, early retirement, and the 45-year high food price index have remained major contributors to persistence in UK inflation.
• BoE policymaker Catherine Mann said last week that wage increases of 4.0% would be a challenge to returning CPI to 2.0%.”
• UK firms have been offering higher wages to offset the deviation between excess demand and supply shortage of labor.
• Reuters reported that human resources data firm XpertHR said the median basic pay settlement in the three months to the end of May remained at 6%, keeping pressure on the central bank for raising interest rates further.
• The US Dollar Index has remained inside the woods ahead of Federal Reserve (Fed) Chair Jerome Powell’s testimony to the US Congress on Wednesday.
• Investors would like to see whether Jerome Powell would stand on guidance already delivered as the street is anticipating only one rate hike by year-end while the central bank guided two more interest rates.
• As per the CME Fedwatch tool, more than 50% chances are in favor of only one interest rate hike from the Fed by year-end.
• The overall risk profile is showing caution as Wall Street Journal (WSJ) reported that China is planning military training facility in Cuba, to which US Secretary of State Antony Blinken has shown deeper concerns.
• Federal Reserve board member Lisa Cook and vice chair Philip Jefferson have backed taming sticky inflation.

Technical Analysis: Pound Sterling aims to recapture its annual high at 1.2850

The Pound Sterling has rebounded moderately after correcting to near the crucial support of 1.2700. The Cable is consistently approaching north in a Rising Channel chart pattern in which each pullback is considered a buying opportunity by the market participants. Sentiment for Cable is extremely bullish as short-to-long-term Exponential Moving Averages (EMAs) are upward-sloping. Also, momentum oscillators are oscillating in the bullish range supporting range extension.

Bullish bias for the Cable would strengthen if it manages to climb above the fresh annual high around 1.2850.  The upside momentum could exhaust if Cable drops below the previous month’s high around 1.2669.

• USD/MXN has printed a fresh day's high at 17.24 amid a risk-aversion theme.
• Fed Powell is expected to deliver hawkish guidance as core inflation in the United States is still showing persistence.
• Banxico is expected to keep interest rates steady consecutively for the second time.

The USD/MXN pair has printed a fresh day's high at 17.24 in the early European session. The major is in a bullish trajectory as the market sentiment is showing caution and the US Dollar Index (DXY) is trying to come out of the woods.

S&P500 futures have posted minimal losses, carry-forwarding bearish cues observed on Tuesday. The risk-aversion theme is in action as investors are worried ahead of Federal Reserve’s (Fed) chair Jerome Powell's testimony. The US Dollar Index (DXY) has attempted a break above the consolidation formed in a range below 102.60.

Going forward, Fed Powell’s testimony will remain in focus. Fed Powell is expected to deliver hawkish guidance as core inflation in the United States is still showing persistence. Inflation in the US service sector has remained elevated and excess demand for labor than its supply indicates that more interest rate hikes are required to bring down inflation.

Apart from the Fed Powell’s testimony speech from the latest Fed nominees will also be in focus. Fed Governor Lisa Cook and vice chair Philip Jefferson have backed taming sticky inflation.

Meanwhile, headlines that China is preparing a military training facility in Cuba against the US have put investors on their toes.

On the Mexican peso front, investors are awaiting the interest rate decision by the Bank of Mexico (Banxico), which will be announced on Thursday. A poll from Reuters shows that Banxico will keep interest rates steady consecutively for the second time. Till now, the central bank has hiked interest rates to 11.25%. Investors should know that Mexican inflation has already softened to 5.84% in May than its annual peak of 8.7%.

• GBP/JPY prints the first daily gains in three after UK inflation data, snaps two-day losing streak.
• UK CPI, Core CPI both rose past market forecasts in May.
• Clear bounce off 100-HMA, upbeat oscillators also favor the pair buyers.
• Weekly resistance line prods immediate upside as bulls brace for fresh multi-month high.

GBP/JPY justifies upbeat UK inflation data to regain upside momentum, snapping two-day downtrend, amid early Wednesday morning in London. That said, the cross-currency pair jumps 80 pips to refresh its intraday high near 181.60 before recently making rounds to the mid-181.00s.

UK Consumer Price Index (CPI) for May rose past 8.4% market expectations to reprint the 8.7% YoY figure. That said, the Core CPI, which excludes volatile food and energy items, rose past analysts’ estimations and previous readings of 6.8% YoY to register a 7.1% YoY increase in inflation numbers for the said month.

Apart from the UK inflation data, the GBP/JPY pair’s clear rebound from the 100-Hour Moving Average (HMA), around 180.60 by the press time, joins the bullish MACD signal to also keep the pair buyers hopeful.

It’s worth noting, however, that the RSI (14) line approaches the overbought territory and hence a downward-sloping trend line from Monday, close to the 182.00 round figure, appears a tough nut to crack for the bulls.

In addition to the 182.00 hurdle, the latest multi-month high of near 182.15 also acts as an upside filter for the GBP/JPY pair before directing it towards the December 2015 peak of around 186.35.

Alternatively, a downside break of the 100-HMA level of near 180.60 will need validation from the 180.00 round figure and the latest swing low of 179.90 to convince intraday sellers.

Even so, the 200-HMA and a two-week-old rising support line, respectively near 178.15 and 177.65, will challenge the GBP/JPY bears before giving them control.

GBP/JPY: Hourly chart

Trend: Further upside expected

“The Bank of Japan (BoJ) will patiently maintain an easy monetary policy to stably and sustainably achieve the 2% price target accompanied by wage growth,” the central bank Governor Kazuo Ueda said on Wednesday.

Additional quotes

Market reaction

USD/JPY is testing 142.00, catching fresh bids on the dovish comment from the BoJ Governor. The pair is up 0.40% on the day.

• Gold Price drops for the fourth consecutive day as bears cheer downside break of key support confluence.
• China-inflicted risk aversion joins hawkish Fed talks and upbeat US data to weigh on XAU/USD price.
• Fed Chair Jerome Powell’s ability to defend the hawkish halt will be eyed by the Gold sellers to keep the reins.

Gold Price (XAU/USD) remains on the back foot as bears prod $1,930 support confluence with eyes on Fed Chair Jerome Powell’s bi-annual testimony. In doing so, the XAU/USD drops for the fourth consecutive day amid a firmer US Dollar and sour sentiment, mainly led by China.

That said, the US Dollar Index (DXY) stays defensive around 102.60 while keeping the four-day uptrend without marking keen interest to move toward the north. Even so, the geopolitical fears surrounding the US and China weigh on the sentiment and put a floor under the US Dollar’s haven demand. Also underpinning the US Dollar’s run-up, as well as weighing on the Gold price are the upbeat US housing numbers and hawkish Fed signals published the previous day.

Apart from that fears that China’s inability to mark upbeat growth can endanger the Gold demand from one of the world’s biggest XAU/USD consumers also weigh on the precious metal prices. Late on Tuesday, The Straits Times marked the second consecutive monthly easing on China’s Gold demand.

Looking forward, a light calendar ahead of Fed Chair Jerome Powell’s bi-annual testimony may test the Gold sellers but the buyers are less likely to return to the table.

Also read: Gold Price Forecast: XAU/USD keeps sight on $1,918 and Fed Chair Powell’s testimony

Gold Price: Key levels to watch

As per our Technical Confluence Indicator, the Gold Price has already breached the two short-term key supports around $1,936 and $1,931 respectively. However, the $1,930 round figure and the previous bottom of around $1,925 prods the XAU/USD bears on an important day.

That said, the Gold Price presently seesaws around $1,930 support confluence comprising Pivot Point one-week S1.

Following that, the Pivot Point one-day S1 will act as the final defense of the XAU/USD bulls around $1,925, a break of which could drag the Gold bears toward the $1,900 round figure.

Meanwhile, the previous monthly low of around $1,931 prods the Gold buyers ahead of the Fibonacci 23.6% on the daily and weekly chart, around $1,936.

It’s worth noting that the Gold Price run-up beyond $1,936 will need to stay firmer past the $1,945 hurdle comprising the Fibonacci 38.2% on the weekly chart to push back the bearish bias.

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.

• GBP/USD picks up bids to pare weekly loss, the first in four, after upbeat British inflation data.
• UK CPI reprints 8.7% YoY for May versus 8.4% expected, Core CPI matches 6.8% market forecasts and previous readings.
• Hawkish Fed talks, upbeat US data and sour sentiment put a floor under the US Dollar despite recent inaction.
• Fed Chair Jerome Powell’s bi-annual testimony eyed ahead of Thursday’s BoE announcements.

GBP/USD jumps 60 pips to pierce 1.2800 before retreating to 1.2760 as market players reassess the UK inflation data heading into Wednesday’s London open.

UK Consumer Price Index (CPI) for May rose past 8.4% market expectations to reprint the 8.7% YoY figure. That said, the Core CPI, which excludes volatile food and energy items, matches analysts’ estimations to register a stagnant increase in inflation, with 6.8% YoY numbers.

With the upbeat UK inflation numbers, as well as the previously published strong British jobs report, the Bank of England (BoE) appears all set to announce another increase in its benchmark interest rate on Thursday. Preparations for the same seem to have favored the GBP/USD buyers of late.

However, the US Dollar’s ability to grind higher for the fourth consecutive day, despite recent inaction, challenges the GBP/USD pair buyers even as the UK inflation favors BoE hawks.

That said, the US Dollar Index (DXY) stays defensive around 102.60 while keeping the four-day uptrend without marking keen interest to move toward the north. The US Dollar’s latest strength could be linked to hawkish comments from the Fed policymakers, mainly the nominees, and strong US housing data. Additionally, the geopolitical fears surrounding the US and China weigh on the sentiment and put a floor under the US Dollar’s haven demand.

Against this backdrop, S&P500 Futures pause the week-start retreat from the highest levels in 14 months, mostly inactive near 4,436 by the press time, whereas the US 10-year Treasury bond yields pare Tuesday’s losses around 3.74% at the latest.

Having witnessed the initial market reaction to the UK inflation data, the GBP/USD pair traders should keep their eyes on the risk catalysts while waiting for the bi-annual testimony of Fed Chair Jerome Powell. Above all, Thursday’s BoE Interest Rate Decision will be the key for the Cable pair traders to watch for clear directions.

Technical analysis

The overbought RSI (14) line and the GBP/USD pair’s inability to stay beyond the key resistance line signals the extension of the previous two-day downtrend towards the previous monthly high of around 1.2680. Adding strength to the said key support is the 10-DMA.

• United Kingdom CPI increased 8.7% YoY in May vs. 8.4% expected.
• Monthly British CPI inflation data arrived at 0.7% in May vs. 0.5% expected.
• The GBP/USD pair jumps to test 1.2800 on upbeat UK CPIs.

According to the latest data published by the UK Office for National Statistics (ONS) on Wednesday, the United Kingdom's annual Consumer Price Index (CPI) accelerated 8.7% in May, at the same pace seen in April. The market consensus was for an 8.4% increase.

Meanwhile, the Core CPI gauge (excluding volatile food and energy items) increased 7.1% YoY last month, compared with a 6.8% rise seen in April while outpacing estimates of a 6.8% clip.

The monthly figures showed that the UK Consumer Price Index advanced 0.7% in March vs. 0.5% expectations and 1.2% prior.

The UK May core CPI ex-energy, food, alcohol and tobacco increased 0.8% MoM.

The UK Retail Price Index for May accelerated 0.7% MoM and 11.3% YoY, beating expectations across the time horizon.

Commenting on the inflation data, UK Finance Minister, Jeremy Hunt, noted, “we know how much high inflation hurts families and businesses across country.”

“We will not hesitate in our resolve to support Bank of England as it seeks to squeeze inflation out of our economy,” he added.

FX implications

In a knee-jerk reaction to the UK CPI data, the GBP/USD pair jumped nearly 40 pips to test 1.2800 before reversing slightly to 1.2790, where it now wavers. The pair is up 0.19% on the day.

GBP/USD: 15-minutes chart

Why does UK inflation matter to traders?

The Bank of England (BOE) is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase in interest rates or the reduction of bond buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

• USD/CHF prints four-day uptrend within short-term bullish chart pattern.
• 200-HMA prods Swiss Franc sellers inside the rising channel.
• Previous resistance line, 100-HMA act as extra filter towards the south.
• SNB’s anticipated rate hike jostles with Fed’s hawkish halt to lure buyers.

USD/CHF prints mild gains around 0.8990 as it remains firmer for the fourth consecutive day heading into Wednesday’s European session. In doing so, the Swiss Franc (CHF) pair seesaws inside an upward-sloping trend channel stretched from the last Friday.

Apart from the bullish chart pattern, the upbeat RSI (14) line and the pair’s successful trading beyond the 100-Hour Moving Average (HMA) also keep the USD/CHF pair buyers hopeful.

Even so, the likely divergence between the monetary policy practice between the Swiss National Bank (SNB) and the Federal Reserve (Fed) prods USD/CHF pair buyers ahead of Fed Chair Jerome Powell’s bi-annual testimony and SNB Interest Rate Decision, up for publishing on Wednesday and Thursday respectively.

That said, the 200-HMA hurdle surrounding the 0.9000 psychological magnet restricts the immediate upside of the USD/CHF pair ahead of the stated channel’s top line, close to 0.9020 by the press time.

In a case where the Swiss Franc pair remains firmer past 0.9020, multiple levels around 0.9050-55 can prod the bulls ahead of directing them towards the monthly high of near 0.9120.

Meanwhile, the stated channel’s bottom line, near 0.8980, restricts the immediate downside of the pair ahead of the resistance-turned-support stretched from June 12, close to 0.8975.

Following that, the 100-HMA level of around 0.8958 will act as the last defense of the buyers before highlighting the monthly low marked the last Friday at around 0.8900.

USD/CHF: Hourly chart

Trend: Further recovery expected

FX option expiries for June 21 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0780 1.9b
• 1.0870 453m
• 1.0900 529m
• 1.0920 567m
• 1.0950 683m

- GBP/USD: GBP amounts     

• 1.3000 385m

- USD/JPY: USD amounts                     

• 140.85 400m
• 141.00 952m
• 142.00 869m

- USD/CHF: USD amounts        

• 0.8750 818m
• 0.8950 690m
• 0.9000 837m

- AUD/USD: AUD amounts

• 0.6425 470m
• 0.6885 437m

- USD/CAD: USD amounts       

• 1.3275 631m

- NZD/USD: NZD amounts

• 0.6000 1b

- EUR/GBP: EUR amounts        

• 0.8685 649m

GBP/USD could still revisit 1.2900 as long as it keeps the trade above the 1.2700 yardstick, suggest UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew.

Key Quotes

Further comments are flowing in from the Bank of Japan (BoJ) board member Seji Adachi, this time speaking about the central bank’s yield curve control (YCC) policy.

Key quotes

Market reaction

USD/JPY was last seen trading at 141.7, adding 0.22% on the day.

• The index trades slightly bid near the 102.60 region.
• Investors remain cautious amidst China and Powell.
• Fed’s Powell will testify before congress later in the session.

The greenback, when tracked by the USD Index (DXY), manages to keep the weekly recovery well in place around the 102.60 region on Wednesday.

USD Index focuses on Powell

The index so far advances for the fourth session in a row on Wednesday, as investors’ concerns over the recovery in China remain well in place along with rising prudence ahead of the first semiannual testimony by Chair J. Powell.

On the latter, consensus among traders anticipates a hawkish tone from Powell. Despite maintaining interest rates at their previous meeting last week, policymakers' projections indicate the likelihood of approximately two more 25 bps rate hikes or alternatively, a single half-point increase.

In the US data space, MBA Mortgage Applications is due along with the weekly report on US crude oil inventories by the API.

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 Wednesday.

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: 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 0.07% at 102.60 and the breakout of 103.06 (100-day SMA) would open the door to 104.69 (monthly high May 31) and then 105.18 (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 fades bounce off the lowest levels in nine months, renews intraday low of late.
• Oil price recovers amid geopolitical concerns, hopes of China stimulus.
• US Dollar cheers upbeat US data, hawkish Fed signals but cautious mood ahead of Powell’s testimony prod greenback buyers.
• Canada Retail Sales for May will also be important to watch for intraday clues.

USD/CAD prints the first daily loss in three around 1.3210 as it braces for the top-tier Canada and the US catalysts ahead of Wednesday’s European session. In doing so, the Loonie pair justifies the recently firmer price of WTI crude oil, Canada’s key export item, as well as the inactive US Dollar Index (DXY).

That said, the DXY struggles to extend the four-day downtrend amid mixed concerns about the Fed and the US-China tussle. Also likely to challenge the USD/CAD buyers, as well as favor the Oil Price recovery, could be China’s latest efforts to tame the recession woes, recently by the People's Bank of China (PBoC) rate cut and Ministry of Finance’s (MoF) announcement of cutting the purchase tax during 2024-25 and 2026-27.

On the other hand, the geopolitical fears surrounding the US and China weigh on the sentiment and put a floor under the US Dollar’s haven demand. Recently, China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China. Late on Tuesday, US President Joe Biden termed Chinese President Xi Jinping a dictator and flagged concerns of intense Sino-American tension earlier in the day.

Additionally, hawkish comments from the Fed policymakers, mainly the nominees, and strong US housing data also allowed the USD/CAD bears to remain sidelined despite retaking control.

Against this backdrop, the US Dollar Index (DXY) stays defensive around 102.60 while keeping the four-day uptrend without marking keen interest to move toward the north. Additionally, WTI crude oil prints the first daily gains in three around $71.60 while &P500 Futures pause the week-start retreat from the highest levels in 14 months.

Moving on, Canada’s monthly Retail Sales for April will precede Fed Chair Jerome Powell’s bi-annual testimony to entertain traders.

Technical analysis

USD/CAD retreats from a three-week-old resistance line, around 1.3245 by the press time, as bears approach the yearly low marked earlier in the week surrounding 1.3180.

CME Group’s flash data for gold futures markets noted traders increased their open interest positions for the third session in a row on Tuesday, this time by around 7.1K contracts. Volume followed suit and went up by around 97.1K contracts, partially reversing the previous marked pullback.

Gold faces extra consolidation

Tuesday’s daily decline in gold prices was on the back of rising open interest and volume, suggesting that further losses lie ahead in the very near term. The yellow metal, however, is expected to maintain the current consolidation in place since mid-May. Occasional bouts of weakness are still seen supported around $1925 per troy ounce.

Bank of Japan (BoJ) board member Seji Adachi is back on the wires this Wednesday, making some comments on the Japanese inflation outlook.

Additional quotes

Market reaction

At the time of writing, USD/JPY is trading close to the intraday high of 141.86, up 0.22% on the day.  

Further upside in EUR/USD is expected to retest the 1.0955 level in the next few weeks, according to UOB Group’s Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew.

Key Quotes

• EUR/USD is oscillating above 1.0900 as the focus shifts to Fed Powell’s testimony.
• Investors would like to see whether Fed Powell would stand on guidance already delivered.
• ECB Lagarde has confirmed that a rate hike in the July meeting is appropriate.

The EUR/USD pair is demonstrating a non-directional performance above the round-level support of 1.0900 in the Asian session. The major currency pair is following the footprints of the sideways US Dollar Index (DXY), which is expected to provide action after Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures are showing nominal gains generated in Tokyo after reporting bearish sentiment on Tuesday. US equities posted negative returns on Tuesday as investors wrapped up their positions quickly after a long weekend.

The US Dollar Index has turned sideways after retreating from the 102.80 resistance awaiting Fed Powell’s testimony. No doubt, Fed Powell has already delivered hawkish guidance as labor market conditions are still tight and inflationary pressures are twice the desired rate. Investors would like to see whether Fed Powell would stand on guidance already delivered as the street is anticipating only one rate hike by year-end while the central bank guided two more interest rates.

On the Eurozone front, major contributors to stubbornly high inflation are the cost of food, alcohol, and tobacco while rising prices of services are the second contributor. Eurozone inflation has been recorded at 6.1% in its final reading, which is still thrice the required 2% rate and supports the need for further interest rate hikes.

The European Central Bank (ECB) has already pushed interest rates to 4% in June and ECB President Christine Lagarde has confirmed that a rate hike in the July meeting is appropriate.

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

• USD/JPY picks up bids to reverse the previous day’s retreat from the highest levels in seven months.
• Upside break of immediate resistance line, firmer oscillators favor intraday buyers of Yen pair.
• 100-HMA joins bottom-line of weekly rising wedge to restrict short-term downside.
• Bulls need to cross 142.55 to topple fears of a pullback.

USD/JPY regains upside momentum, after reversing from the yearly top the previous day, as it makes rounds to the intraday high of around 141.75 heading into Wednesday’s European session.

In doing so, the Yen pair cheers the latest breakout of an immediate resistance line stretched from the yearly top marked on Monday while bouncing off the 141.40 support confluence comprising the 100-Hour Moving Average (HMA) and lower line of a one-week-old rising wedge.

It’s worth observing that the bullish MACD signals and the firmer RSI (14) line, not overbought, add strength to the upside bias about the USD/JPY pair.

With this, the risk barometer pair is all set to approach the yearly peak surrounding 142.25, with the 142.00 round figure acting as immediate resistance.

However, the aforementioned rising wedge’s top line, close to 142.55 by the press time, restricts the Yen pair’s advances past 142.25.

In a case where the USD/JPY bulls manage to defy the bearish chart pattern by crossing the 142.55 resistance, they can aim for a horizontal area surrounding 145.00 that encompasses the early September 2022 top and the last October’s bottom.

On the flip side, a downside break of the 141.40 support confluence isn’t an open welcome for the USD/JPY bears as the 200-HMA and a fortnight-long rising trend line, close to 140.50 and 139.80 in that order, could check the sellers.

USD/JPY: Hourly chart

Trend: Further upside expected

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for May month is due early on Wednesday at 06:00 GMT.

Given the recently released upbeat UK employment data, coupled with the hawkish concerns about the Bank of England’s (BOE) next moves, today’s British inflation numbers will be the key for the GBP/USD traders. Also increasing the importance of the UK CPI is the looming BoE Interest Rate Decision, on Thursday.

That said, the headline CPI inflation is expected to ease to 8.4% YoY in May, versus 8.7% prior. Further, the Core CPI, which excludes volatile food and energy items, is likely to remain unchanged at 6.8% YoY. Talking about the monthly figures, the CPI could ease to 0.5% versus 1.2% prior.

Also important to watch is the Retail Price Index (RPI) figures for May, expected to mark a reduction to 0.5% MoM and 11.2% YoY versus 1.5% and 11.4% priors in that order.

How could it affect GBP/USD?

GBP/USD stays defensive above 1.2750, mildly bid near 1.2765 by the press time, as it lacks follow-through of the previous two days’ downbeat performance ahead of the key UK inflation data. Even so, the US-China tension and comparatively more hawkish comments from the Fed, than the Bank of England (BoE) officials, join the fears of the UK’s recession to prod the Cable pair buyers.

However, upbeat UK employment numbers and the Bank of England (BoE) policymakers’ push for higher rates keep the hopes of witnessing more Pound Sterling upside alive ahead of the key British inflation data.

That said, considering the recent improvement in the British data and expectations of overcoming the labor problems, the softer UK inflation data may help the GBP/USD bears to retake control. It’s worth noting that a positive surprise from the UK CPI or Core CPI should be traded with a pinch of salt amid hawkish Fed bets.

Technically, the Cable pair recently bounced off the bottom line of the stated rising wedge, which in turn joins the steady RSI (14) to suggest further recovery of the quote. However, the 21-SMA surrounding 1.2435 restricts the immediate upside of the GBP/USD price.

Key notes

GBP/USD Price Analysis: Cable dribbles around resistance-turned-support near 1.2770 ahead of UK inflation

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

About the UK CPIs

The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of the GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).

• Gold price struggles to gain any meaningful traction and oscillates in a range on Wednesday.
• The hawkish outlook by major central banks acts as a headwind for the non-yielding XAU/USD.
• Economic woes help limit the downside ahead of Fed Chair Powell’s congressional testimony.

Gold price oscillates in a narrow band through the Asian session on Wednesday and now seems to have found acceptance below a technically significant 100-day Simple Moving Average (SMA). The XAU/USD currently trades just above the $1,935 area and remains well within the striking distance of a three-month low touched last week.

Hawkish major central banks cap gains for Gold price

Concerns over rising interest rates turn out to be a key factor that continues to act as a headwind for the non-yielding Gold price. It is worth mentioning that 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 on Thursday.

Bets for more rate hikes by Federal Reserve also weigh on XAU/USD

Furthermore, the Federal Reserve (Fed) last week forecasted a higher peak interest rate and signalled that borrowing costs may still need to rise as much as 50 bps this year. The expectations were lifted by strong housing market data from the United States (US) on Tuesday, showing that Housing Starts surged to a 13-month high in May. Moreover, permits for future construction also climbed during the reported month, suggesting that the housing market may be turning a corner after taking the biggest hit from the Fed's fastest monetary policy tightening campaign since the 1980s.

Investors now look to Fed Chair Powell’s congressional testimony

The Fed's hawkish outlook continues to act as a tailwind for the US Dollar (USD), which is seen as another factor contributing to capping the upside for the Gold price. The USD, however, lacks bullish conviction on the back of rising speculations that the Fed is nearing the end of its year-long rate-hiking cycle. Traders also seem reluctant and prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's semi-annual congressional testimony, which will be looked for clues about the future rate-hike path. This will help determine the next leg of a directional move for the XAU/USD.

Worries about economic downturn help limit losses for Gold price

In the meantime, the prevalent cautious mood might continue to lend some support to the safe-haven Gold price and help limit the downside, at least for the time being. The market sentiment remains fragile on the back of growing concerns about a global economic downturn, particularly in China. This, to a larger extent, overshadows an interest rate cut by the People’s Bank of China (PBoC) on Tuesday and continues to dent investors’ appetite for riskier assets. This is evident from the lack of any meaningful buying in the equity markets and drives some haven flows.

Gold price technical outlook

From a technical perspective, acceptance below the 100-day SMA could be seen as a fresh trigger for bearish traders and might have already set the stage for further losses. Some follow-through selling below the $1,925-$1,924 zone, or the monthly low, will reaffirm the negative outlook 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, any meaningful recovery beyond the $1,942 zone (100-day SMA) might continue to attract fresh supply and remain capped near the $1,962-$1,964 region. The next relevant hurdle is pegged near the $1,970-$1,972 zone ahead of the $1,983-$1,985 region. A sustained strength beyond the said barriers might trigger a fresh bout of a short-covering move, allowing the Gold price to surpass the $2,000 psychological mark and climb further towards the $2,010-$2,012 resistance.

Key levels to watch

• USD/CNH seesaws around the highest levels since November 2022, sidelined of late.
• China’s inability to please markets with stimulus measures, PBoC rate cuts weigh on Yuan.
• US Dollar benefits from hawkish Fed signals, upbeat US data and fears of Sino-American tussles.
• Fed Chair Powell’s bi-annual testimony will be key to watch for clear directions.

USD/CNH buyers keep the reins for the fourth consecutive day as they prod the highest levels since November 2022 during early Wednesday in Europe. In doing so, the offshore Chinese Yuan (CNH) pair justifies the broad weakness of the Chinese currency, as well as the US Dollar strength, amid upbeat US data and hawkish Federal Reserve (Fed) clues. Additionally, favoring the pair buyers are the market’s fears of the US-China tension and the monetary policy divergence between the People’s Bank of China (PBoC) and the Fed.

Earlier in the day, China’s Ministry of Finance (MoF) recently announced its intention to take drastic measures while cutting the purchase tax during 2024-25 and 2026-27. The same joins the latest headlines from Reuters suggesting the Chinese government advisers call for more stimulus measures.

That said, the People's Bank of China (PBoC) first cut in the two key lending rates (namely the Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate) for the first time in almost a year to propel the market’s liquidity and tame calls of economic slowdown. However, the moves failed to inspire the CNH bulls and drowned the currency toward the fresh yearly low.

On the other hand, the geopolitical fears surrounding the US and China weigh on the sentiment in Asia and fuel the USD/CNH prices amid a dicey market. Recently, China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China. Late on Tuesday, US President Joe Biden termed Chinese President Xi Jinping a dictator and flagged concerns of intense Sino-American tension earlier in the day.

Elsewhere, hawkish comments from the Fed policymakers, mainly the nominees, and strong US housing data also fuel the USD/CNH price as markets await Fed Chairman Jerome Powell’s bi-annual testimony.

Above all, USD/CNH buyers cheer the monetary policy divergence between the PBoC and the Fed.

Technical analysis

A six-week-old ascending trend channel, currently between 7.2200 and 7.1400, restricts short-term moves of the USD/CNH pair. Also acting as an immediate downside filter is the 21-DMA level of 7.1280. It’s worth noting that the RSI and MACD conditions suggest buyers are running out of steam.

• AUD/USD prints mild gains to pare the biggest daily loss in a month, snaps three-day losing streak.
• Rejection of monthly bullish channel keeps Aussie bears hopeful unless the quote stays below 0.6890.
• Multiple technical levels, bullish MACD signals and upbeat RSI conditions challenge bears.

AUD/USD bulls struggle to regain the 0.6800 round figure while printing mild gains around intraday high of 0.6799 heading into Wednesday’s European session. In doing so, the Aussie pair prints the first daily gains in four while bouncing off the 200-day Exponential Moving Average (EMA).

However, the previous day’s clean rejection of the three-week-old bullish channel keeps the AUD/USD sellers hopeful unless the quote rises past the stated channel’s lower line, close to 0.6890 by the press time.

Also acting as the upside filter is the 0.6900 round figure and the top line of aforementioned rising channel, near the 0.7000 threshold.

It’s worth noting that the MACD signals are still bullish and the RSI (14) line suggests continuation of the latest rebound by staying above 50.0 but not overbought.

As a result, the AUD/USD buyers may keep the reins unless the quote stays beyond the 200-EMA level of 0.6760.

Even if the quote drops below 0.6760, the 50% Fibonacci retracement level of 0.6665 and the lows marked in April and March, respectively near 0.6575 and 0.6565, can test the AUD/USD bears before giving them control.

Fundamentally, the AUD/USD pair faces multiple challenges from the Fed and China concerns

AUD/USD: Daily chart

Trend: Limited recovery expected

• USD/INR prints four-day losing streak as markets await Fed Chair Powell’s bi-annual testimony.
• Hawkish Fed talks, upbeat US data and China woes propel US Dollar amid sluggish markets.
• Upbeat WTI crude oil price, Fed vs. RBI play weigh on Indian Rupee.

USD/INR grinds higher around the intraday top surrounding 82.15 as it rises for the fourth consecutive day heading into Wednesday’s European session. In doing so, the Indian Rupee (INR) not only bears the burden of the upbeat US Dollar but also justifies fears emanating from China and upbeat Oil price.

That said, the US Dollar Index (DXY) stays defensive around 102.60 while keeping the four-day uptrend without interest moves toward the north. With this, the greenback’s gauge versus the six major currencies cheers upbeat US data and hawkish Fed talks.

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, which in turn favor the DXY bulls. 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%).

On the other hand, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, 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, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

It should be noted that the geopolitical fears surrounding the US and China weigh on the sentiment in Asia and weigh on the Indian Rupee (INR). China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China. Late on Tuesday, US President Joe Biden termed Chinese President Xi Jinping a dictator and flagged concerns of intense Sino-American tension earlier in the day.

Further, WTI crude oil prints the first daily gains in three around $71.50 and exerts additional downside pressure on the INR, due to India’s reliance on energy imports and the record-high deficit. Additionally, the Reserve Bank of India’s (RBI) latest inaction fails to match the tunes with the Fed’s hawkish halt and hence keeps the USD/INR bulls hopeful.

Meanwhile, China’s efforts to push back the recession woes prod the USD/INR buyers amid a sluggish session. That said, China’s Ministry of Finance (MoF) recently announced its intention to take drastic measures while cutting the purchase tax during 2024-25 and 2026-27. The same joins the market's concerns that the US data hasn’t been too impressive to allow the bears to take a breather.

Amid these plays, S&P500 Futures pause the week-start retreat from the highest levels in 14 months, mostly inactive near 4,436 by the press time, whereas the US 10-year Treasury bond yields pare Tuesday’s losses around 3.74% at the latest.

Looking ahead, risk catalysts and Fed concerns can keep the USD/INR pair firmer as markets await Fed Chairman Jerome Powell’s bi-annual testimony.

Technical analysis

A clear bounce off the seven-month-old rising support line, around 81.90 by the press time, allows USD/INR buyers to aim for a fortnight-long falling trend line resistance line, close to 82.25 at the latest.

• NZD/USD remains confined in a narrow trading band through the Asian session on Wednesday.
• A modest USD strength, along with economic woes, act as a headwind for the risk-sensitive Kiwi.
• Investors now look to Fed Chair Jerome Powell’s testimony before placing fresh directional bets.

The NZD/USD pair struggles to capitalize on the overnight bounce from the 0.6135-0.6130 area or a one-week low and oscillates in a narrow band through the Asian session on Wednesday. Spot prices currently trade around the 0.6165-0.6170 region, nearly unchanged for the day, with bulls awaiting sustained strength beyond the 200-hour Simple Moving Average (SMA) before positioning for any meaningful intraday appreciating move.

The US Dollar (USD) attracts some dip-buying following the previous day's modest pullback from the 50-day SMA and is seen as a key factor acting as a headwind for the NZD/USD pair. 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 and continues to lend some support to the Greenback. Apart from this, worries about a global economic downturn, particularly in China, further benefit the safe-haven buck and contribute to capping the upside for the risk-sensitive Kiwi.

Investors, however, seem convinced that the US central bank is nearing the end of its year-long policy tightening cycle. This had led to the recent decline in the US Treasury bond yields, which is capping gains for the USD and helping limit the downside for the NZD/USD pair, at least for the time being. Traders also seem reluctant to place aggressive bets and now seem to have moved to the sidelines, awaiting Fed Chair Jerome Powell's two-day semi-annual congressional testimony, starting this Wednesday, before positioning for the next leg of a directional move.

Market participants will closely scrutinize Powell's comments for fresh clues about the Fed's future rate-hike path. This, along with speeches by a slew of influential FOMC members, will play a key role in driving the USD demand and provide some impetus to the NZD/USD pair later during the early North American session. That said, the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999 favours bearish traders and suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch

• GBP/JPY attracts some buyers on Wednesday and stalls this week’s pullback from a multi-year top.
• The BoJ’s dovish stance undermines the JPY and lends support amid bets for a 25 bps BoE rate hike.
• Investors look to the UK consumer inflation data for a fresh impetus ahead of the BoE on Thursday.

The GBP/JPY cross edges higher during the Asian session on Wednesday and recovers a part of the previous day's slide to levels just below the 180.00 psychological mark. The cross currently trades with a mild positive bias, around the 180.70-180.75 area, and for now, seems to have stalled its retracement slide from the highest level since November 2015 touched on Monday.

The Japanese Yen (JPY) weakens a bit after the minutes of the April Bank of Japan (BoJ) meeting showed that the nine-member board saw the need to maintain ultra-loose policy given uncertainty over the global economy and the wage outlook. This turns out to be a key factor lending some support to the GBP/JPY cross. Apart from this, expectations that the Bank of England (BoE) will be far more aggressive in policy tightening to combat stubbornly high inflation act as tailwind spot prices.

In fact, the BoE is widely expected to hike the benchmark rates by 25 bps on Thursday, to 4.75% or the highest since April 2008. Moreover, the markets are pricing in the possibility of a bigger, 50 bps lift-off. The bets were reaffirmed by the upbeat UK jobs data released last week, which came in to show near-record wage growth and has led to concerns about inflationary pressures in the country. Hence, the focus will remain on the release of the latest UK consumer inflation figures on Wednesday.

The headline UK CPI is anticipated to come in at 0.4% for May, down from 1.2% registered in the previous month. Meanwhile, the yearly rate is seen easing to 8.5% as compared to the 8.7% print in April and core CPI, which excludes oil and food prices, is forecasted to hold steady at 6.8%. Any positive surprise will reaffirm hawkish BoE expectations and boost the British Pound. However, rumours that the BoJ will intervene to support the domestic currency could cap gains for the GBP/JPY cross.

Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the key central bank event risk - the BoE monetary policy meeting on Thursday. Nevertheless, the aforementioned fundamental backdrop favours bullish traders and suggests that the path of least resistance for the GBP/JPY cross is to the upside. Hence, any meaningful pullback could still be seen as a buying opportunity, which, in turn, should help limit the downside for spot prices, at least for now.

Technical levels to watch

• Market sentiment remains dicey as traders await top-tier events of the week.
• S&P500 Futures pause two-day downtrend, yields lick their wounds amid light calendar in Asia.
• US-China tussle intensifies after Biden’s comments, Fed hawks remain hopeful as Chairman Powell braces for bi-annual Testimony.

The risk profile remains unclear during early Wednesday, after witnessing sour sentiment the previous day. That said, the market’s cautious mood could be linked to the anxiety ahead of the week’s key data/events.

While portraying the risk appetite, S&P500 Futures pause the week-start retreat from the highest levels in 14 months, mostly inactive near 4,436 by the press time, whereas the US 10-year Treasury bond yields pare Tuesday’s losses around 3.74% at the latest.

If we trace the key catalysts, geopolitical fears surrounding the US and China will join the hawkish central bank comments and mixed data. Also likely to have favored the intraday traders in consolidating the previous moves are China’s efforts to push back the recession woes. That said, China’s Ministry of Finance (MoF) recently announced its intention to take drastic measures while cutting the purchase tax during 2024-25 and 2026-27. The same joins the market's concerns that the US data hasn’t been too impressive to allow the bears to take a breather.

Alternatively, China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China. It’s worth noting that US President Joe Biden termed Chinese President Xi Jinping a dictator and flagged concerns of intense Sino-American tension earlier in the day.

Furthermore, officials from the European Central Bank (ECB) and the Federal Reserve (Fed) have been mostly hawkish despite witnessing the mixed data, especially in Germany, and weigh on the sentiment.

On Tuesday, multiple Fed Nominees backed higher rates while the ECB Officials tried to push back concerns that the bloc’s central bank is approaching the policy pivot. It should be observed that the US housing numbers were too upbeat on Tuesday while the German Producer Price Index (PPI) printed disappointing data.

Amid these plays, the US Dollar Index (DXY) take a breather after a three-day downtrend whereas the Gold Price printed mild gains after breaking the key support during the previous losing streak.

Looking ahead, UK inflation and speeches from multiple central bankers from the US, Europe and the UK may entertain the traders. However, Fed Chair Jerome Powell’s bi-annual testimony will be crucial to watch for clear market directions.

Also read: Forex Today: US Dollar bulls fight back

• Natural Gas Price clings to mild gains after falling the most in three months.
• Market’s consolidation ahead of top-tier data/events allows XNG/USD to lick its wounds at weekly low.
• Fears surrounding China economic growth, hawkish Fed concerns weigh on energy prices amid firmer US Dollar.

Natural Gas Price (XNG/USD) renews its intraday high near $2.58 as it consolidates the previous day’s heavy losses as markets prepare for Fed Chair Jerome Powell’s bi-annual testimony, as well as speeches from multiple central bankers, during early Wednesday. In doing so, the energy instrument also takes clues from China to push back the recession woes.

That said, China’s Ministry of Finance (MoF) recently announced its intention to take drastic measures while cutting the purchase tax during 2024-25 and 2026-27. The same join the market's concerns that the US data hasn’t been too impressive to allow the Fed policymakers of more rate hikes past July to weigh on the XNG/USD price.

It should be noted that the XNG/USD dropped the most since early March the previous day as the fears of China's slowdown and higher rates from the key central banks escalated. Furthermore, intensifying tension between the US and China, over Taiwan, also weighs on the XNG/USD price. Recently, China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China.

On the other hand, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, 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, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

It’s worth noting that the US Dollar rose for the third consecutive day on Tuesday, grinding higher of late, as it cheered upbeat housing data. 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%).

Elsewhere, fears of increased gas supplies from Qatar to China, as well as loads of XNG/USD output in Russia, weigh on the Natural Gas Price.

While portraying the mood, the Wall Street benchmark began the week on the negative side but S&P500 Futures remain sidelined whereas the US Treasury bond yields also snapped a two-day winning streak the previous day before posting early-day inaction of late.

Looking ahead, multiple central bankers from the US and Europe are up for their public appearances and can infuse volatility into the markets. Among them, Fed Chair Jerome Powell’s bi-annual testimony will be crucial to watch for clear directions.

Technical analysis

Despite the previous day's fall, the Natural Gas buyers can remain hopeful unless witnessing a daily closing below the convergence of the 100-DMA and a three-week-old rising support line, near $2.44.

• WTI regains positive traction, albeit remains well within the previous day’s trading range.
• The mixed technical setup warrants some caution before placing aggressive directional bets.
• The 50-day SMA hurdle is likely to act as a pivotal point and holds the key for bullish traders.

Western Texas Intermediate (WTI) Crude Oil prices build on the overnight bounce from a three-day low and gain some positive traction during the Asian session on Wednesday. The commodity, for now, seems to have snapped a two-day losing streak and currently trades around the $71.35-$71.40 region, up just over 0.70% for the day.

From a technical perspective, the recent bounce from the $67.00 mark constitutes the formation of a bullish double-bottom pattern on the daily chart. That said, oscillators on the said chart have been struggling to gain any meaningful positive traction and warrant some caution before positioning for additional gains. Hence, any subsequent move in Oil prices is likely to confront stiff resistance near the $72.00 round figure, which if cleared might trigger a short-covering rally.

The black liquid might then accelerate the momentum towards challenging the 50-day Simple Moving Average (SMA), currently pegged just above the $72.00 level. A sustained strength beyond will confirm the bullish double-bottom pattern and allow WTI Crude Oil price to reclaim the $74.00 mark. The momentum could get extended further towards the May monthly swing high, around the $74.70  area, which if cleared decisively should set the stage for a further appreciating move.

On the flip side, weakness back below the Asian session low, around the $70.80 area, could drag Crude Oil prices towards the $70.00 psychological mark. The subsequent slide will expose the $69.00 mark before the commodity eventually drops to the $68.25-$68.20 region en route to the $67.60 zone and the $67.00 strong horizontal support. A convincing break below the latter will be seen as a fresh trigger for bearish traders and make the black liquid vulnerable to sliding further.

WTI daily chart

Key levels to watch

Bank of Japan (BoJ) board member Seji Adachi said on Wednesday, “it is too early to make changes to easy monetary policy.”

Additional quotes

Market reaction

At the time of writing, USD/JPY is defending minor bids near 141.60 on the dovish BoJ commentary.

• EUR/USD takes offers to reverse late Tuesday’s corrective bounce amid four-day downtrend.
• Bullish chart formation, hawkish ECB clues challenge Euro sellers ahead of Fed Chair Powell’s bi-annual Testimony.
• Clear break of 1.0935-40 could convince EUR/USD bulls to return to the table.

EUR/USD stays on the bear’s radar for the fourth consecutive day as it reverses the late Tuesday’s corrective bounce off the weekly low amid very early Wednesday morning in Europe. In doing so, the Euro pair refreshes the intraday low around 1.0910 while staying within a bullish chart formation called a “bull flag”.

Given the sluggish RSI (14) line, the EUR/USD bears may find it difficult to keep the reins, which in turn highlights the stated flag’s bottom line and a two-week-old rising support trend line, respectively near 1.0885 and 1.0875, as short-term key supports.

Even if the Euro bears conquer the 1.0875 support and defy the bullish chart formation, the 200-Hour Moving Average (HMA) of near 1.0845 will act as the final defense of the EUR/USD bulls.

Meanwhile, EUR/USD pair’s recovery needs validation from the stated flag’s top line, around 1.0935-40 by the press time.

Following that, the monthly high surrounding 1.0970 and the 1.1000 round figure may prod the pair buyers before directing them toward the yearly high of around 1.1100 and the theoretical target of the bullish flag, close to 1.1230.

Apart from the bullish chart formation and the below 50 levels of the RSI (14) line, the cautious mood ahead of speeches from multiple European Central Bank (ECB) and the Federal Reserve (Fed) officials also prods the EUR/USD bears of late. Among them, Fed Chair Jerome Powell’s bi-annual Testimony gains major attention.

Also read: EUR/USD: ECB hawks defend Euro above 1.0900 despite Fed rate hike signals, Powell’s Testimony eyed

EUR/USD: Hourly chart

Trend: Limited downside expected

• USD/CAD struggles to capitalize on its modest recovery gains recorded over the past two days.
• A goodish pickup in Crude Oil prices underpins the Loonie and acts as a headwind for the major.
• A modest USD strength should help limit the downside ahead of Fed Chair Powell’s testimony.

The USD/CAD pair extends the previous day's late pullback from the 1.3270 area and edges lower during the Asian session on Wednesday, albeit lacks follow-through selling. Spot prices currently trade around the 1.3230-1.3225 area, down less than 0.10% for the day, and manage to hold comfortably above the YTD low touched last Friday.

A modest uptick in Crude Oil prices underpins the commodity-linked Loonie, which, in turn, is seen as a key factor acting as a headwind for the USD/CAD pair. The downside, however, remains cushioned in the wake of a mildly positive tone surrounding the US Dollar (USD), which continues to draw support from the Federal Reserve's (Fed) hawkish outlook. It is worth recalling that the US central bank last week signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year.

In fact, the markets are now pricing in another 25 bps lift-off at the July FOMC meeting and the expectations were reaffirmed by Tuesday's upbeat US housing market data. Apart from this, the overnight slump in the US equity markets, led by worries about a global economic slowdown, benefits the safe-haven Greenback and lends support to the USD/CAD pair. The USD bulls, however, refrain from placing aggressive bets amid speculations that the Fed is nearing the end of its rate-hiking cycle.

Hence, the market focus remains glued to Fed Chair Jerome Powell's two-day congressional testimony, starting this Wednesday. Investors will closely scrutinize Powell's remarks for fresh clues about the Fed's future rate-hike path. This, along with speeches by a slew of influential FOMC members, will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will also look to Canadian Retail Sales data and Oil price dynamics to grab some meaningful trading opportunities.

Technical levels to watch

People’s Bank of China (PBoC) set the USD/CNY central rate at 7.1795 on Wednesday, versus previous fix of 7.1596 and market expectations of 7.1802. It's worth noting that the USD/CNY closed near 7.1821 the previous day.

Apart from the fix, the Chinese central bank (PBoC) also shared details of the money market operations by saying that the PBoC injects a net 143 buillion Yuan at 1.9% rate.

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.

• US Dollar Index edges higher as it defends four-day winning streak amid sluggish session.
• Hawkish comments from Fed policymakers, upbeat US data joins fears of US-China tension to propel DXY.
• Market’s positioning for Fed Chair Powell’s bi-annual Testimony prod US Dollar Index bulls of late.
• DXY bulls need validation from Powell, Sino-American tussles to keep the reins.

US Dollar Index (DXY) remains firmer for the fourth consecutive day despite recent inaction around 102.60 early Wednesday. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s positioning for Federal Reserve (Fed) Chair Jerome Powell’s bi-annual Testimony amid hopes of witnessing further upside of the DXY, especially when the Fed policymakers back higher rates and the sentiment remains dicey.

That said, the news that US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator prod the DXY bulls near the intraday high. The comments flag grim concerns surrounding the US-China ties after US Secretary of State Antony Blinken’s visit to Beijing failed to provide any major positives. The same should keep the Gold pair sellers hopeful.

It should be noted that the People's Bank of China (PBoC) first cut in the two key lending rates (namely the Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate) for the first time in almost a year propel the risk-off mood and the US Dollar’s haven demand.

Talking about the central bank signals, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, 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, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

Additionally, 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, which in turn favor the DXY bulls. 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%).

Amid these plays, the Wall Street benchmark began the week on the negative side but S&P500 Futures remain sidelined whereas the US Treasury bond yields also snapped a two-day winning streak the previous day before posting early-day inaction of late.

Looking forward, a light calendar ahead of Fed Chair Jerome Powell’s bi-annual Testimony can challenge the US Dollar Index (DXY) traders. Should Fed Pair Powell defends the hawkish play of the US central bank, the DXY may have further upside to track.

Technical analysis

Unless providing a daily close beyond the 50-DMA and a two-week-old descending resistance line, respectively near 102.65 and 102.75, the US Dollar Index (DXY) bulls need to remain cautious.

• USD/JPY finds support near 100-hour SMA and stalls the overnight slide from the YTD top.
• The BoJ’s dovish stance continues to undermine the JPY and acts as a tailwind for the pair.
• The Fed rate hike uncertainty keeps a lid on any further gains ahead of Powell’s testimony.

The USD/JPY pair struggles to gain any meaningful traction on Wednesday and oscillates in a narrow trading band, just above the mid-141.00s through the Asian session. Spot prices, however, manage to hold above the 100-hour Simple Moving Average (SMA) and for now, seem to have stalled the previous day's pullback from the highest level since November 2022.

The Japanese Yen (JPY) continues to be undermined by a more dovish stance adopted by the Bank of Japan (BoJ), which, in turn, acts as a tailwind for the USD/JPY pair. In fact, the minutes of the April BoJ meeting showed that several members said it was appropriate for the central bank to continue with the current monetary easing. The minutes also revealed that Japanese Prime Minister (PM) Fumio Kishida and BoJ Governor Kazuo Ueda agreed that at this point, there was no need to change the joint statement between the government and BoJ.

Apart from this, a modest US Dollar (USD) uptick turns out to be another factor lending some support to the USD/JPY pair. The Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps and forecasting a higher peak interest rate this year, remains supportive of a mild bid tone surrounding the buck. The USD bulls, however, seem reluctant to place aggressive bets ahead of Fed Chair Jerome Powell's testimony, against the backdrop of expectations that the US central bank is nearing the end of its rate-hiking cycle.

Hence, Powell's comments will be closely scrutinized for clues about the Fed's future rate-hike path, which, along with scheduled speeches by a slew of FOMC members, will play a key role in influencing the USD price dynamics. This, in turn, should help investors to determine the near-term trajectory for 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 decline might still be seen as a buying opportunity, rather remain limited.

Technical levels to watch

• Gold Price stays pressured after breaking 100-DMA support during three-day downtrend.
• Risk aversion underpins US Dollar strength and weighs on XAU/USD price.
• Fears of economic slowdown originating from China, higher rates in the West roil sentiment and favor Gold sellers.
• Federal Reserve Chairman Jerome Powell’s bi-annual Testimony will be crucial to watch for clear directions of XAU/USD.

Gold Price (XAU/USD) holds lower ground at the weekly bottom, licking its wounds after a three-day downtrend near $1,937, as market players prepare for this week’s key event, namely the bi-annual Testimony of Fed Chair Jerome Powell. It’s worth noting that the risk-negative headlines surrounding China, hawkish Federal Reserve (Fed) news and upbeat United States (US) data allow the XAU/USD bears to remain hopeful.

Gold Price struggles to justify downbeat China, Fed catalysts

Gold Price stays defensive at around $1,937 by the press time, probing a three-day downtrend near the weekly low, as it struggles to justify the risk-negative headlines surrounding Cina and the Federal Reserve (Fed).

Recently, the news that US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator prod the XAU/USD pair’s recovery moves near the intraday high. The comments flag grim concerns surrounding the US-China ties after US Secretary of State Antony Blinken’s visit to Beijing failed to provide any major positives. The same should keep the Gold pair sellers hopeful.

Previously, 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, hawkish comments from the Fed Officials and upbeat US data also weigh on the Gold Price. On Tuesday, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, 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, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

Apart from the hawkish Federal Reserve (Fed) comments, upbeat United States (US) data also favored the Gold sellers. 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%).

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

Looking ahead, a light calendar ahead of Fed Chair Jerome Powell’s bi-annual Testimony can keep the Gold traders on a dicey floor.

Gold Price technical analysis

A daily closing below the 100-DMA flags the Gold Price downside as traders await this week’s key event, namely Federal Reserve Chairman Jerome Powell’s bi-annual Testimony.

It’s worth noting, however, that the Relative Strength Index (RSI) line is below 50.0 and the Moving Average Convergence and Divergence (MACD) indicator also flashes sluggish signals, which in turn suggests that the Gold Price has limited room toward the south.

This highlights a convergence of the 38.2% Fibonacci retracement level of the XAU/USD’s run-up from November 2022 to May 2023 and an ascending support line from late 2022, near $1,903, quickly followed by the $1,900 round figure.

In a case where the Gold price fails to rebound from the $1,900 threshold, the odds of witnessing a slump towards the 50% and 61.8% Fibonacci retracements, respectively near $1,948 and $1,793 can’t be ruled out.

Meanwhile, Gold Price recovery remains elusive unless the bulls manage to cross the 50-DMA hurdle of around $1,983.

That said, the 100-DMA and 23.6% Fibonacci retracement level, close to $1,942 and $1,972 in that order, guard short-term rebound of the XAU/USD price.

To sum up, the Gold Price lures bears with the 100-DMA breakdown but the road towards the south appears long and bumpy.

Gold Price: Daily chart

Trend: Further downside expected

• AUD/USD picks up bids to refresh intraday high while bouncing off one-week low.
• Aussie pair consolidates three-day losses amid mixed clues, cautious markets.
• Bears fail to justify hawkish RBA Minutes amid mixed comments from Bullock, PBoC rate cut.
• Upbeat US housing data, Fed talks favored US Dollar ahead of latest retreat amid pre-event positioning, Powell’s Testimony eyed.

AUD/USD stays mildly bid around 0.6790 as it prints the first daily gains in four while bouncing off the one-week low marked the previous day. That said, the Aussie pair’s recovery during early Wednesday’s Asian session could be linked to the market’s preparations for this week’s key event, namely the bi-annual Testimony of Fed Chair Jerome Powell.

It’s worth noting that the market sentiment remains dicey and allows the risk-barometer AUD/USD pair to lick its wounds near the lowest levels in a week despite the hawkish Fed signals and the risk-negatives headlines surrounding China. Additionally important to note is the hawkish Minutes of the Reserve Bank of Australia (RBA) versus the People’s Bank of China’s (PBoC) rate cut and cautious remarks of RBA Assistant Governor Michele Bullock.

Recently, the news that US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator prod the AUD/USD pair’s recovery moves near the intraday high. The comments flags grim concerns surrounding the US-China ties after US Secretary of State Antony Blinken’s visit to Beijing failed to provide any major positives. The same should keep the Aussie pair sellers hopeful.

On the same line line, downbeat prints of Australia’s Westpac Leading Index for May, to -0.27% versus -0.03% prior, also keeps the AUD/USD bears hopeful.

On the previous day, RBA Minutes defend the consecutive second hawkish surprise by terming it a trick to boost confidence that inflation will return to normal sooner. However, RBA Deputy Governor Michele Bullock said that the higher rates are the only tool the RBA has to curb inflation. The policymaker added that the employment and economy need to grow below trend for a while.

It should be noted that 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, hawkish comments from the Fed Officials and upbeat US data. On Tuesday, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, 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, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

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%).

While portraying the mood, 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, AUD/USD remains pressured despite the latest corrective bounce as market players aim for Fed Chair Jerome Powell’s bi-annual Testimony.

Technical analysis

Although the 200-day Exponential Moving Average (EMA) restricts the AUD/USD pair’s immediate downside around 0.6760, the pair’s recovery remains elusive unless crossing the previous support line stretched from May 31, close to 0.6935 by the press time. That said, the monthly peak of near 0.6900 acts as a nearby upside hurdle for the bulls to watch.

“US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator, adding that Xi was very embarrassed when a Chinese balloon was blown off course over the US recently,” said Reuters early Wednesday in Asia.

The news also shared the details of Biden’s remarks at a fundraiser in California by stating them to be a day after Secretary of State Antony Blinken met Xi on a trip to China. It’s worth noting that Blinken’s latest visit to Beijing was aimed at easing tensions between the two countries.

AUD/USD remains firmer

The news prods the AUD/USD pair’s corrective bounce off a one-week low around the intraday high of 0.6790.

Also read: AUD/USD Price Analysis: Bears seek out the daily 61.8% Fibo

• Silver Price remains pressured after falling the most in six weeks.
• Downside break of three-month-old support line, 100-DMA favor XAG/USD sellers.
• Bear cross on MACD signals further downside of the Silver Price but the below-50.0 RSI prods sellers.
• Previous monthly low, 200-DMA lures XAG/USD bears during further downside.

Silver Price (XAG/USD) seesaws around the monthly low marked the previous day, sidelined near $23.15 amid early Wednesday in Asia after falling the most in 1.5 months the previous day.

That said, the bright metal dropped heavily on Tuesday after breaking the key support line stretched from March, as well as the 100-DMA. The downside break of the previously important supports also took clues from the looming bear cross on the MACD, which in turn suggests further downside of the XAG/USD.

Hence, the XAG/USD’s further fall towards the $23.00 round figure appears imminent ahead of challenging the previous monthly low of around $22.70.

It’s worth noting, however, that the RSI (14) is below 50.0 and hence suggests limited downside room.

As a result, the Silver price may refrain from breaking the previous monthly low, if not then the 200-DMA level of around $22.45 can act as an extra filter towards the south.

Above all, the XAG/USD buyers remain hopeful unless witnessing a clear downside break of an ascending support line from September 2022, close to $21.10 by the press time.

On the flip side, the 100-DMA and the three-month-old previous support line, respectively around $23.35 and $23.55, guard immediate recovery of the Silver Price.

Following that, the 50-DMA hurdle of $24.35 gains the market’s attention as it holds the key to further advances of the XAG/USD.

Silver Price: Daily chart

Trend: Further downside expected