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• AUD/USD picks up bids to refresh intraday high while consolidating the weekly loss after Aussie data.
• Australia S&P Global PMIs for June came in mixed with upbeat Manufacturing gauge contrasting with softer Services, Composite figures.
• Economic fears surrounding China, hawkish Fed signals and concerns about global recession due to higher rates weigh on AUD/USD.
• US PMIs may entertain traders but China’s holiday can restrict the Aussie pair moves.

AUD/USD renews intraday high at 0.6762 even as Australia’s S&P Global PMIs for June register mixed data on early Friday. The reason could be linked to the US Dollar’s consolidation amid recently mixed comments from Federal Reserve (Fed) and Treasury officials. However, the broad recession woes and hawkish statements from Fed Chair Powell keep the Aussie bears hopeful.

That said, the preliminary readings of Australia’s S&P Global Manufacturing PMI for June rose past 48.1 market forecast and 48.4 previous readings to arrive at 48.6 whereas the Services counterpart crossed the analysts’ estimations of 50.1 with 50.7 but slipped below 52.1 prior. With this, the S&P Global Composite PMI for the said month eased to 50.5 versus 51.6 prior.

Elsewhere, the recent downbeat comments from Thomas Barkin, President of the Federal Reserve Bank of Richmond, as well as US Treasury Secretary Jannet Yellen prod the AUD/USD bears. That said, Fed’s Barkin showed readiness to vote for rate cuts on conviction of a slowdown in inflation while US Treasury Secretary Yellen flags recession fears as Fed tightens policy.

However, the market’s rush toward the US Dollar, amid firmer US Treasury bond yields, hawkish comments from Fed Chair Powell and major central banks’ rate hikes, exert downside pressure on the AUD/USD price.

The US Dollar Index (DXY) bounced off six-week low print the biggest daily gains since early June, grinding higher around 102.40 by the pres time, whereas the US Treasury bond yields were firmer around weekly top. It should be observed that the US 10-year and two-year Treasury bond yields rose the most in a week to 3.80% and 4.79% in that order.

A slew of central banks announced interest rate increases on Thursday. Among them, the majority crossed the market consensus but failed to impress respective currencies on fears that the broad rate hikes have an economic toll, which in turn directs the market players toward the US Dollar’s haven demand. Among them, the Bank of England (BoE), informally known as the “Old Lady”, surprised markets by lifting benchmark rates by 50 basis points (bps) to 5% versus major expectations favoring a 0.25% rate hike. Further, the Swiss National Bank (SNB) matched market forecasts while announcing 25 basis points increase in its benchmark interest rate, to 1.75%. This was the fifth consecutive rate lift from the Swiss central bank. Additionally, the Central Bank of the Republic of Türkiye (CBRT) hiked rates for the first time since August 2021 whereas the Norges Central Bank announced rate increases.

Talking about the US catalysts, US Chicago Fed National Activity Index for May dropped to -0.15 versus 0.0 expected and upwardly revised 0.14 previous readings. Further, the Initial Jobless Claims reprinted the 264K figures (revised) for the week ended on June 16 compared to 260K market forecasts. It’s worth noting that the Continuing Jobless Claims dropped unexpectedly to 1.759M from 1.772M (revised) prior and 1.782M analysts’ estimations. Additionally, US Existing Home Sales marked a surprise recovery by 0.2% MoM for May compared to -0.6% expected and -3.2% prior (revised from 3.4%).

Furthermore, Fed Chairman Jerome Powell repeated most of his previous day’s remarks during his testimony 2.0, this time in front of the Senate Housing Committee. However, his statements like, “(It) will be appropriate to raise rates again this year, perhaps two more times,” allowed the US Dollar to refresh the intraday high while eyeing to reverse Wednesday’s losses.

Having witnessed the initial reaction to the Aussie data, AUD/USD pair may remain lackluster amid a holiday in China, as well as cautious mood ahead of the US PMIs for June.

Technical analysis

A daily closing below the 200-day Exponential Moving Average (EMA), around 0.6760 by the press time, becomes necessary for the AUD/USD bear’s conviction.

• GBP/USD experiences dip, shedding 0.17% following BoE’s surprise 50 bps rate hike.
• Technicals suggest a downward trend, with RSI exiting overbought conditions.
• Key levels to watch: support at a weekly low of 1.2691 and resistance at a YTD high of 1.2848.

GBP/USD opened the Asian session with a  bearish mood after hitting a weekly high of 1.2841 to see those gains evaporate as UK recession fears reignited, post the Bank of England 50 bps rate hike. The GBP/USD closed on Thursday with losses of 0.17%. At the time of writing, the GBP/USD exchanges hands at 1.2742.

Must read: GBP/USD dives following unexpected BoE rate hike, sparking UK’s recession concerns

GBP/USD Price Analysis: Technical outlook

The GBP/USD remains upward biased, and the dip towards the 1.2720 area opened the door for buyers to re-enter at a lower price level. Nevertheless, the Relative Strength Index (RSI) exited overbought conditions, which triggered a sell signal, though it’s pending breaking support of the weekly low at 1.2691.

If GBP/USD drops below the latter, the next support would be the 20-day Exponential Moving Average (EMA) at 1.2635, followed by the psychological 1.2600 price level. Once cleared, the next support would be the confluence of the June 13 daily low and the 50-day EMA at 1.2499-1.2522.

Failure to drop below the weekly low, the GBP/USD would be set to re-test the 1.2800 figure. The next stop will be the year-to-date (YTD) high at 1.2848 before reaching 1.2900.

GBP/USD Price Action – Daily chart

• WTI crude oil holds lower ground near the weekly bottom after falling the most in a fortnight.
• Clear downside break of two-week-old ascending support line, looming bear cross on MACD favor Oil sellers.
• 50-DMA adds to the upside filters; ascending trend line from early May lures black gold bears.

WTI crude oil returns to the bear’s radar, with Thursday’s heavy fall, even as the black gold traders lick their wounds near $69.50 amid the early hours of Friday’s Asian session. In doing so, the energy benchmark reverses the previous week’s corrective bounce, as well as prepares for the third weekly loss in four.

That said, WTI dropped the most in two weeks the previous day and broke an ascending support line from June 12, now immediate resistance near $71.10. Adding strength to the downside bias is the impending bear cross on the MACD indicator.

With this, the Oil price is likely to decline towards an upward-sloping support line from May 04, close to $67.90 by the press time. However, the 23.6% Fibonacci retracement of its April-May fall, around $68.75, may act as immediate support for the black gold.

It should be noted that the quote’s weakness past $67.90 trend line support will be challenged by the monthly horizontal support of around $67.10-67.00 before dragging the quote towards the yearly low marked in May, around $64.30.

Meanwhile, an upside break of the support-turned-resistance of near $71.10 isn’t a welcome note for the WTI crude oil buyers as the 50-DMA hurdle of $72.555 stands tall to challenge the Oil bulls afterward.

WTI crude oil: Daily chart

Trend: Further downside expected

“As the Fed tightens policy, a recession remains a risk,” said US Treasury Secretary Janet Yellen late Thursday.

The policymaker also added, “It is not appropriate to debate the 2% inflation target at this time.”

US Treasury Secretary Yellen also said that to ease Consumer Price Index (CPI), consumer spending may need to slow.

Market reaction

Yellen’s comments fail to move a needle in the markets amid the usual inactive hours of early Asian session on Friday. However, the support for the recession woes can add strength to the US Dollar and may exert downside pressure on the EUR/USD pair, while also allowing the Gold bears to occupy the driver’s seat.

Also read: EUR/USD pullback jostles with 1.0950 as central banks, Fed Powell propel US Dollar, PMI in focus

• EUR/USD remains pressured after reversing from seven-week high.
• Improvement in Eurozone Consumer Confidence failed to defend Euro bulls amid broad US Dollar strength.
• Hawkish central bank moves, Fed Chair Powell’s defense of rate hike trajectory renews US Dollar buying.
• Flash PMIs for June will be crucial for immediate directions.

EUR/USD bears attack short-term key support as the quote struggles to extend the previous day’s reversal from a seven-week top near 1.0950 amid the early hours of Friday’s Asian session. The Euro pair dropped the most in three weeks the previous day while taking a U-turn from the highest levels since early June, despite the upbeat Eurozone statistics, as the US Dollar cheered upbeat US Treasury bond yields and hawkish comments from Fed Chair Jerome Powell.

On Thursday, the preliminary readings of Eurozone Consumer Confidence for June improved to -16.1 from -17.4 prior and versus the -17.0 expected. On the other hand, US Chicago Fed National Activity Index for May dropped to -0.15 versus 0.0 expected and upwardly revised 0.14 previous readings. Further, the Initial Jobless Claims reprinted the 264K figures (revised) for the week ended on June 16 compared to 260K market forecasts. It’s worth noting that the Continuing Jobless Claims dropped unexpectedly to 1.759M from 1.772M (revised) prior and 1.782M analysts’ estimations. Additionally, US Existing Home Sales marked a surprise recovery by 0.2% MoM for May compared to -0.6% expected and -3.2% prior (revised from 3.4%).

More importantly, a slew of central banks announced interest rate increases on Thursday. Among them, the majority crossed the market consensus but failed to impress respective currencies on fears that the broad rate hikes have an economic toll, which in turn directs the market players toward the US Dollar’s haven demand.

That said, the Bank of England (BoE), informally known as the “Old Lady”, surprised markets by lifting benchmark rates by 50 basis points (bps) to 5% versus major expectations favoring a 0.25% rate hike. Further, the Swiss National Bank (SNB) matched market forecasts while announcing 25 basis points increase in its benchmark interest rate, to 1.75%. This was the fifth consecutive rate lift from the Swiss central bank. Additionally, the Central Bank of the Republic of Türkiye (CBRT) hiked rates for the first time since August 2021 whereas the Norges Central Bank announced rate increases.

Elsewhere, Fed Chairman Jerome Powell repeated most of his previous day’s remarks during his testimony 2.0, this time in front of the Senate Housing Committee. However, his statements like, “(It) will be appropriate to raise rates again this year, perhaps two more times,” allowed the US Dollar to refresh the intraday high while eyeing to reverse Wednesday’s losses.

On the same line, Federal Reserve (Fed) Governor Michelle Bowman said that "Additional policy rate increases" will be needed to reach a sufficiently restrictive level and control inflation.

However, the recent downbeat comments from Thomas Barkin, President of the Federal Reserve Bank of Richmond, prod the EUR/USD bears as the policymaker showed readiness to vote for rate cuts on conviction of a slowdown in inflation.

Against this backdrop, the Wall Street benchmark closed mixed but the US Treasury bond yields were firmer. That said, the US 10-year and two-year Treasury bond yields rose the most in a week to 3.80% and 4.79% in that order.

Moving on, EUR/USD traders should pay attention to the US, Germany and Eurozone preliminary PMIs for June for clear directions. Should the EU data keeps printing softer figures, the Euro pair’s latest retreat will extend.

Technical analysis

The nearly overbought RSI conditions challenge the EUR/USD buyers as they reverse after failing to cross the February month’s high of 1.1033. However, a three-week-old ascending support line, close to 1.0950, puts a floor under the prices of the Euro pair for the short term.

• AUD/JPY sees minor recovery but remains under pressure with a 0.84% weekly loss.
• The pair shows signs of losing momentum, with RSI exiting overbought territory.
• Upside and downside targets were set, with potential falls to 95.82 and gains challenging 97.67.

The AUD/JPY recovers some ground following Tuesday’s loss of more than 1%, posting back-to-back days of gains, though it remains at around the September 20 daily high at 96.54. As Friday’s Asian session begins, the AUD/JPY exchanges hands at 96.63, registering minimal losses of 0.05%.

AUD/JPY Price Analysis: Technical outlook

The AUD/JPY is still trading with losses of 0.84% in the week but remains upward-biased as price action sits above the Ichimoku Cloud. Nevertheless, the Tenkan-Sen level, at 95.82, is closing into the candlestick, suggesting that the uptrend is losing momentum, opening the door for a pullback.

In addition, the Relative Strength Index (RSI) indicator exited from overbought territory. At the same time, the three-day Rate of Change (RoC) portrays buyers losing momentum. Hence, the AUD/JPY path of least resistance is downward in the near term.

The AUD/JPY first support would be the 96.00 figure. Break below will tumble the AUD/JPY pair toward the Tenkan-Sen Level at 95.82. The AUD/JPY next stop would be the Senkou Span A at 94.89, and the Kijun-Sen Level at 93.96.

Conversely, if AUD/JPY resumes upwards and breaks above the June 19 low of 96.73, the 97.00 figure would be up for grabs. Upside risks lie at the year-to-date (YTD) high of 97.67, ahead of challenging last year’s high at 98.59.

AUD/JPY Price Action – Daily chart

• Gold Price renews three-month low after five-day losing streak, pressured of late.
• Hawkish central bank actions amplify economic fears and underpin US Dollar demand, weighing on XAU/USD.
• Mostly upbeat United States data, upbeat statements from Federal Reserve Chairman Jerome Powell also bolstered USD and favored Gold sellers.
• Preliminary readings of PMIs for June eyed for further directions of Gold Price as it approaches $1,900 support confluence.

Gold Price (XAU/USD) remains depressed at the lowest levels since mid-March as bears attack the $1,913 level as the XAU/USD traders begin Friday’s Asian session with bears in power. That said, the bullion dropped the most in two weeks the previous day after major central banks and their policymakers advocated for higher rates, which in turn suggests more toll on the global economy amid tighter labor markets and higher inflation. The same joins the hawkish comments from the US Federal Reserve (Fed) Chairman Jerome Powell and mostly upbeat United States data to favor the US Dollar and weigh on the Gold Price.

Gold Price drops on central banks’ hawkish play

Gold Price declines in the last five consecutive days as bears prod the lowest levels in three months amid hawkish central bank actions, as well as the mixed US data. That said, a slew of central banks announced interest rate increases on Thursday. Among them, the majority crossed the market consensus but failed to impress the respective currencies amid fears that the broad rate hikes have an economic toll, which in turn directs the market players toward the US Dollar’s haven demand and drowns the Gold Price.

That said, the Bank of England (BoE), informally known as the “Old Lady”, surprised markets by lifting benchmark rates by 50 basis points (bps) to 5% versus major expectations favoring a 0.25% rate hike.

Further, the Swiss National Bank (SNB) matched market forecasts while announcing 25 basis points increase in its benchmark interest rate, to 1.75%. This was the fifth consecutive rate lift from the Swiss central bank. Additionally, the Central Bank of the Republic of Türkiye (CBRT) hiked rates for the first time since August 2021 whereas the Norges Central Bank announced rate increases.

Fed Chair Powell, US data weigh on XAU/USD price

Apart from the aforementioned rate hikes, hawkish statements from Fed Chair Jerome Powell also underpinned the US Dollar and joined mostly upbeat US data to propel the US Dollar and weigh on the Gold price.

On Thursday, Fed Chairman Jerome Powell repeated most of his previous day’s remarks during his testimony 2.0, this time in front of the Senate Housing Committee. However, his statements like, “(It) will be appropriate to raise rates again this year, perhaps two more times,” allowed the US Dollar to refresh the intraday high while eyeing to reverse Wednesday’s losses.

On the same line, Federal Reserve (Fed) Governor Michelle Bowman said that "Additional policy rate increases" will be needed to reach a sufficiently restrictive level and control inflation.

Talking about the data, US Chicago Fed National Activity Index for May dropped to -0.15 versus 0.0 expected and upwardly revised 0.14 previous readings. Further, the Initial Jobless Claims reprinted the 264K figures (revised) for the week ended on June 16 compared to 260K market forecasts. It’s worth noting that the Continuing Jobless Claims dropped unexpectedly to 1.759M from 1.772M (revised) prior and 1.782M analysts’ estimations. Additionally, US Existing Home Sales marked a surprise recovery by 0.2% MoM for May compared to -0.6% expected and -3.2% prior (revised from 3.4%).

It should be noted, however, that the recent downbeat comments from Thomas Barkin, President of the Federal Reserve Bank of Richmond, allow the Gold Price to lick its wounds near the multi-month high. However, the bearish trend remains intact.

Amid these plays, Wall Street benchmark closed mixed but the US Treasury bond yields were firmer.

Moving on, preliminary readings of the June month’s PMIs for the key economies will be crucial to watch for the intraday directions. However, major attention will be given to the market’s reaction to the recently hawkish central bank actions.

Gold Price technical analysis

Gold Price justifies a successful downside break of the $1,942 support confluence, now resistance, while approaching another key level towards the south.

That said, a convergence of the 50% Fibonacci retracement of the XAU/USD upside from late November to May 2023 and a seven-month-old support line, near $1,900, appears a short-term important support to watch for the Gold bears, especially amid the oversold conditions of the Relative Strength Index (RSI) line, placed at 14. It’s worth noting that the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator add strength to the downside bias.

In a case where the Gold Price breaks the $1,900 support, the odds of witnessing a slump toward the 61.8% Fibonacci retracement near $1860, also known as the golden ratio, will be in the spotlight.

Alternatively, a downward-sloping resistance line from mid-May and the 38.2% Fibonacci retracement level join the 100-DMA to highlight the $1,942 as a crucial resistance to watch during the Gold Price recovery.

Should the XAU/USD crosses the $1,942 hurdle, February’s high of around $1,960 may act as an extra filter towards the north.

Gold Price: Daily chart

Trend: Limited downside expected

“Fed is still a ‘good way away’ from the 2% inflation target,” said Thomas Barkin, President of the Federal Reserve Bank of Richmond.

Key statements

Market reaction

The news fails to inspire the US Dollar bulls amid broad hawkish concerns versus the latest dovish remarks from the Fed policymakers. Even so, the US Dollar Index (DXY) defends the previous day’s bounces off a six-week low, around 102.40 by the press time.

• USD/JPY bulls could be about to throw in the towel.
• Bears are a correction although note the bullish trend remains solid. 

The Japanese yen held near 143 per dollar and at the bullish cycle's weakest levels while the BOJ is expected to keep ultra-low interest rates unchanged and maintain its current yield curve control policy. Bank of Japan Governor Kazuo Ueda reiterated the bank’s resolve to maintain an ultra-loose monetary policy to sustainably achieve the 2% inflation target which leaves the Yen vulnerable. However, there are prospects of a meanwhile correction as the following illustrates. 

USD/JPY daily charts

Bulls are riding a bullish cycle into the 143 area with eyes on 145.00 higher up. However, a correction could be on the cards. 

USD/JPY M15 chart

On a meanwhile downside scenario, on the 15-minute chart, we can map out the structures around 142.93 and 142.76 for levels that might guard against a significant correction over the coming day(s).

The daily chart's 38.2% Fibonacci retracement and the 50% mean reversion levels align with the 15-minute structure near 142.50 and 142.20 as potential downside targets, albeit, still on the front side of the bullish trend:

• The NZD/USD reversed its course during the American session, falling from a high of 0.6222 to 0.6180.
• The US reported mixed mid-tier data.
• Chair Powell’s hawkish remarks during his second-day testimony before the US Congress boosted US yields.

On Thursday, the NZD/USD cleared daily gains, which saw the pair jumping to a daily high of 0.6222 past the 100-day Simple Moving Average (SMA). However. it failed to consolidate above it and retreated to 0.6180. In that sense, hawkish remarks by Jerome Powell during his testimony before the US Senate fueled US bond yields and helped the Greenback gain traction. On the New Zealand side, no relevant reports will be released on Thursday.

Investors bet on higher rate hikes by the Fed following Chair Powell’s testimony

In his appearance before the US Senate's Banking, House, and Urban Affairs Committee, Powell reiterated that the central bank has a considerable distance to cover. He provided reassurance that monetary policy remains effective in its efforts to combat inflation. Chair Powell also confirmed that the Federal Open Market Committee (FOMC) generally believes that raising rates once more this year and potentially twice more would be appropriate. As a reaction, the 2-year bond yield jumped to its highest level since March to 4.8% and gave further traction to the USD. 

On the other hand, the US Bureau of Census Analysis revealed 260K Jobless Claims for the week ending June 16, slightly exceeding the expected 262,000. Additionally, the Chicago Fed National Activity index contracted by 0.15 in May vs the consensus of 0, and Existing Home Sales reached 4.3M, surpassing the consensus estimate of 4.25M, indicating resilience in the housing sector.

Attention now turns to the release of the S&P Global PMIs on Friday, where investors will get a clear outlook regarding the US economy’s health.

NZD/USD Levels to watch

According to the daily chart, the NZD/USD holds a neutral outlook for the short term as indicators have turned flat but slightly tilted to the downside. In addition, the 20-,100- and 200-day Simple Moving Averages are converging towards the 0.6150 levels and potential bullish or bearish crosses may determine the short-term trajectory.

On the downside, support levels line up at the 200- and 20-day SMAs at 0.6153 and 0.6118 respectively, followed then by the 0.6100 area. On the upside, the 100-day SMA at 0.6205, the daily high at 0.6222 and the 0.6250 area stand as short-term resistances.

• Silver prices nosedive 1.8% as they breach crucial support, with sights set on $21.00.
• XAG/USD’s bearish momentum strengthens after falling below the 200-day EMA.
• Recouping 200-day EMA could lead to stabilized trading activity.

Silver price plunges past the May 26 daily low support at $22.68, extending its losses towards the $22.20 area with sellers eyeing the $21.00 handle. Therefore, XAG/USD Is trading at $22.23, down by 1.80% after hitting a daily high of $22.72, slightly below the 200-day Exponential Moving Average (EMA)

XAG/USD Price Analysis: Technical outlook

Given the backdrop, XAG/USD’s turned bearish after falling below the 200-day EMA and below the prior’s market structure swing low of May 26. The Relative Strength Index (RSI) indicator is also still in bearish territory. At the same time, the three-day Rate of Change (RoC) has printed its lowest level since the beginning of February 3, after the 4.69% plunge that began the snowball fall of Silver prices toward the lowest price of the year, at $19.92.

The XAG/USD first support would be the $22.00 figure. A breach of the latter will expose the March 16 swing low of $21.47, followed by the March 10 daily high at $20.78. Once cleared, the next test would be the year-to-date (YTD) low of $19.92.

Conversely, if XAG/USD buyers stepped in and claimed the 200-day EMA, that could pave the way for sideways price action.

XAG/USD Price Action – Daily chart

After the central bank meetings and Fed Chair Powell's comments, attention will turn back to economic data. On Friday, the flash readings of the PMIs are due, starting with Australian numbers in the Asian session. Another relevant report will be Japanese inflation. Later in Europe, Eurozone PMIs and UK Retail Sales data will be released.

Here is what you need to know on Friday, June 23:

US equities finished mixed on Thursday, while crude oil and commodities tumbled. At the same time, US Treasury yields moved higher. Markets digested rate hikes from the Swiss National Bank and the Bank of England, and the second day of testimony from Federal Reserve Chair Powell, who repeated that interest rates will likely raise further.

The latest data releases in the US were mixed. Initial Jobless Claims totaled 264,000 in the week ending June 17, the highest level since October 2021; on the positive side, Continuing Claims declined to 1.759 million. The Chicago Fed National Activity Index fell in May to -0.15 from 0.14. Existing Home Sales rose to 4.3 million (annual rate), surpassing expectations and offering another strong number from the housing sector. On Friday, the US S&P Global PMI are due. Fed speakers include Bullard, Mester and Bostic. 

The US Dollar Index rose marginally but enough to end a three-day negative streak to close near 102.50, after hitting weekly lows under 102.00. The US 10-year Treasury bond yield rose and settled at 3.79%, near the weekly range top. The 2-year yield closed at 4.79%, its highest since March.

EUR/USD pulled back from monthly highs above 1.1000 to the 1.0950 area. The trend is up but the pair lost bullish momentum. On Friday, the Eurozone HICP PMI will be released. These numbers will offer the first glimpse of economic performance in June.

The Bank of England raised interest rates by 50 basis points in a 7-2 vote. Despite the larger-than-consensus hike, the Pound weakened. The announcement points to more tightenight ahead. The slide of the Sterling reflects concerns about the economic outlook and the potential impact of rate hikes on activity. More economic data is due from the UK on Friday, including May Retail Sales and the June S&P Global PMI. GBP/USD finished lower below 1.2750 on a volatile session. 

USD/JPY rose above 143.00 and posted its highest close since November. The Japanese Yen fell across the board amid higher government bond yields and the monetary policy divergence. In Japan, the National Consumer Price Index is due on Friday, before the Jibun Bank PMI. The inflation figures are crucial for expectations about when the Bank of Japan could abandon its ultra-accommodative monetary policy. The annual rate is expected to rise from 3.5% to 4.1%. 

USD/CHF finished modestly higher, around the 0.8950 area. The pair continues to move sideways with a bearish bias. The Swiss National Bank (SNB) raised its key interest rate by 25 basis points to 1.75%, as expected.

AUD/USD dropped and posted the lowest close in a week around 0.6750. The pair has support at 0.6745/50. The Australian S&P Global PMI is due on Thursday.

USD/CAD fell despite lower crude oil prices and posted the lowest close since October 2021 around 1.3150. The Loonie outperformed.

The Central Bank of the Republic of Turkey raised interest rates from 8.5% to 15%. The Norges Bank hiked its policy rate by 50 bps to 3.75%. The Bank of Mexico kept interest rates unchanged at 11.25% as expected. Bank Indonesia kept the repo policy rate unchanged as expected at 5.75%. 

• USD/CAD bears are in the market but bulls stepping in.
• Bulls target a move back into the void left behind.

USD/CAD was on the back foot on Thursday as the Loonie added to its recent gains despite a sharp decline in oil prices. Meanwhile, from a technical perspective, we could be in for a meanwhile bullish correction as the following will illustrate. 

USD/CAD daily charts

The market is bearish and is headed towards a price imbalance between the current lows and near 1.3050 on the downside. However, a correction could be on the cards in the meanwhile, albeit remaining bearish while on the front side of the bearish trendline:

Zooming in, we can see a void of prices on the way to the trendline resistance and an imbalance of buys between the 1.3180 and 1.3205. A move higher to mitigate the price imbalance would align with the 50% mean reversion of the daily bearish impulse.

• On Thursday the GBP/JPY traded in the 180.71 - 182.51 range.
• BoE hiked rates by 50 bps and the MPC stated that they will do “what’s necessary” to bring down inflation to 2%.
• Gilts rose after the decision, giving further traction to the GBP.

In Thursday's session, the GBP gained ground against the JPY on the back of a hawkish Bank of England decision to raise rates by 50 basis points (bps) vs the 25 bps expected. As a result, rising British yields are tractioning the Sterling. However, investors are seeing a spooky outlook in the UK as the Fortune 500 (FTSE) saw sharp losses.  In addition, hawkish remarks by Powell in its testimony before the US Senate, which hinted at more rate hikes this year, further weakened the Yen. All eyes are now on inflation data from Japan.

Markets asses BoE’s decision

The Bank of England (BoE) raised interest rates from 4.5% to 5% with seven members of the Monetary Policy Committee (MPC) agreeing to a rate hike while two of them voted to hold the rates steady. In the statement, the Bank acknowledged that significant upside news in recent data points is set to contribute to inflationary pressures and that they will do “what is necessary to return inflation to 2% in the medium term”.

As a reaction, the British Bond market is experiencing increases in yields across different maturities. The 10-year Bond yield has climbed to 4.43%, while the 2-year yield is at 5.14%, and the 5-year yield is at 4.63%. Moreover, BoE’s hawkish stance significantly weakened the British Financial Times Stock Exchange 100 Index (FTSE) which fell to its lowest level since the beginning of June, following the decision, indicating a negative market sentiment in the UK, as more rate hikes tend to be associated with less economic activity. 

On the other hand, market participants will keep an eye on Japanese inflation data from May in the early Friday Asian session. The headline Consumer Price Index is expected to accelerate to 4.1% YoY in May and the core measure to 4.4% YoY. In that sense, a hot inflation reading may force the Bank of Japan (BoJ) to reconsider its ultra-dovish stance and consider rate hikes.

GBP/JPY Levels to watch

Technically speaking, the GBP/JPY maintains a bullish outlook for the short term, as per indicators on the daily chart. However, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both showing signs of exhaustion, indicating that the upside potential for the GBP is limited without a healthy downward correction.

In case the cross continues to gain traction, the following resistance line up at the daily high at 182.55, followed by the next round levels at 183.00 and 183.50. On the other hand, supports are seen at 182.00,181.00 and 180.00.

GBP/JPY Daily chart

• Gold price is meeting support and there is a focus on the upside ahead of key data.
• US PMIs are eyed for Friday as a potential catalyst. 

Gold price is down on the day after falling from a high of $1,935 to a low of $1,912.82 with the market getting behind the US Dollar and US yields. 

Gold prices fell to the lowest in three months on Thursday as investors fear that US interest rates will rise as the central bank looks to slow the US economy to lower inflation. Fed's Chairman Jerome Powell addressed the Senate Banking Panel and repeated that interest rates are likely to continue on an upward path and that no cuts to rates are coming anytime soon.

The US Dollar, as measured by the DXY index, is currently higher by 0.33% and has travelled between a low of 101.921 and 102.467 so far, The move higher is making gold more expensive for international buyers. Bond yields also moved up which is bearish for gold since it offers no interest. The US 10-year note rallied to a high of 3.808% from a low of 3.711% while the two-year note was last seen paying 4.789%, up 1.42%. 

'' 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,'' analysts at TD Securities explained. ''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 sceptical about the Fed's hawkish communication.''

The Fed is data-dependent. This makes Friday's data a key event and perhaps we will see a deceleration in the price ahead of the data. Manufacturing will be what will be key as the PMI registered its first decline this year in May, while the services PMI continued to improve, posting its fifth consecutive gain last month.

Gold technical analysis

As per the prior day's analysis, Gold Price Forecast: XAU/USD bears eye a breakout, whereby the wick on the daily chart was noted and was expected to be filled in the coming session as a catalyst for a selling programme into support in and around $1,913, we have seen a low of $1,912.82.

Gold prior analysis

There were prospects of a downside continuation on the weekly chart.

Gold daily charts, prior analysis

it was stated, ''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.''

Gold update

As illustrated, the weekly and daily chart analysis played out. 

Gold price outlook

We might see a reversion at this point, into the M-formation's neckline. 

On the other hand, should the bears sink in their teeth, the $1,880s will be vulnerable:

• GBP/USD loses 0.26% as BoE's unexpected 50 bps rate hike raises recession fears.
• UK inflation data trigger aggressive BoE action, prompting a curve inversion in GILTs.
• Powell reiterates the near-term rate hike plan, pushing GBP/USD lower.

GBP/USD extended its losses after hitting a daily high of 1.2841 after the Bank of England (BoE) surprised the markets by hiking rates 50 bps but failed to underpin the Pound Sterling (GBP). Late in the New York session, the GBP/USD is trading at 1.2735, down 0.26%.

Sterling slides as investors fret over UK economic outlook

On Thursday, the BoE's decision to lift rates to the 5% threshold caught off guard market participants, which foresaw a quarter of a percent increase to the Bank Rate. But Wednesday, inflation data in the United Kingdom (UK) spurred an aggressive reaction by Andrew Bailey and Co, a sign seen by investors that the central bank is behind the curve.

The BoE's decision deepened an inversion of the 2 to 10-year curve in GILTs, a sign that investors expect a recession in the British economy.

On Wednesday, UK's inflation data revealed Office for National Statistics (ONS) saw the Consumer Price Index (CPI) at 8.7% YoY in May vs. projections for an 8.4% drop, while core CPI stood at its highest level since 1992 at 7.1%.

The GBP/USD lost traction after the BoE's decision due to renewed fears that higher interest rates in the UK could trigger a recession. GBP/USD skyrocketed toward its daily high before stabilizing at around 1.2770. After that, GBP/USD returned most of its gains, reaching a low of 1.2725, before settling around current exchange rates.

Across the pond, the US economic agenda featured the second-day testimony of the Federal Reserve Chair Jerome Powell. Powell reiterated his posture, agreeing with the dot plots, as he said: "We (Fed) think we are within a couple of rate hikes of the level we need to be." He emphatically commented no rate cuts are expected and will have to wait until the Fed is confident that inflation is slowing towards its 2% target.

Data-wise, the US Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims reached their highest level since October 2021, growing by 264K exceeding estimates of 260K. At the same time, the US Commerce Department released the US Current Account widened to $219.3 billion in Q1, from a revised $216.2 billion in Q4 2022, exceeding estimates of $217.5 billion.

Existing Home Sales in May grew at a 0.2% MoM pace, above estimates of a -0.5% plunge, more than the upward revised April-s -3.2%  contraction.

Upcoming events

The UK economic docket will feature Retail Sales for May and S&P Global PMIs. On the US front, the agenda will reveal S&P Global PMI data and Federal Reserve officials crossing the newswires.

GBP/USD Technical Levels

• EUR/JPY rose to its highest level since September 2008 to a daily high of 156.52.
• Upbeat confidence data from the EU and rising German yields give the Euro traction.
• All eyes are now on Japanese inflation data.

On Thursday, the EUR/JPY continued to advance to a fresh cycle high near 156.70 as the Euro gained traction amid rising German yields and better-than-expected Consumer Confidence data from the European Union. On the other hand, all eyes will be on Japanese inflation data in the early Friday session.

Rising German yields gave the Euro traction

Consumer Confidence data released by the European Commission from June came in at -16, better than the -17 expected and from its previous -17.4 reading. For the rest of the session, the European calendar will have nothing relevant to offer as the main driver of the pair seems to be the yield and monetary policy divergence between the European Central Bank (ECB) and Bank of Japan (BoJ) which favor the Euro.

German Bund yields are experiencing increases across different maturities. The 10-year Bund yield has climbed to 2.48%, while the 2-year yield is currently at 3.24%, and the 5-year yield stands at 2.63%. In addition, adding to the Yen’s weakness, Chair Powell’s comments in his second-day of testifying before the US Congress boosted the US yields as he stated that "it will be appropriate to raise rates again this year and perhaps two more times."

On the JPY’s side, its price dynamics may be influenced by Friday’s inflation figures from Japan from May, which are expected to have seen an acceleration both in the headline and core figures. If inflation is greater than expected, it could support the Yen as it will put pressure on the BoJ to abandon its ultra-accommodative monetary policy stance, which tends to attract foreign capital inflows, supporting the local currency. 

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 showing strength, standing in positive territory, but are overbought, suggesting buyers may take some gains before a downward correction. When RSI is overbought it is also a warning to longholders not to add to their positions. 

Upcoming resistance for EUR/JPY is seen at the nearest round levels as the cross stands at multi-year highs. In that sense, the 157.00 zone and the 157.50 level, stand as short term resistances. On the other hand, The 155.50 zone is the immediate support level for the pair. A break below this level could pave the way towards the 155.00 area and then potentially to the 154.00 level.

• USD/MXN ascends by 0.28%, buoyed by a robust USD and higher US bond yields.
• Powell’s reaffirmation of future Fed rate hikes underpins the US Dollar.
• Market participants eye Banxico’s impending monetary policy decision.

The USD/MXN pair advances during the North American session on mixed market sentiment, underpinned by higher US bond yields and a solid US Dollar (USD). Traders’ focus is on the Bank of Mexico (Banxico) monetary policy decision late in the New York session. The USD/MXN is trading at 17.1824, up 0.38%.

Market participants anticipate Banxico will keep rates unchanged as the US Dollar rises

US equities trade mixed as stocks fluctuated between gains and losses, a headwind for the USD/MXN. Major European central banks raising rates, led by the Bank of England (BoE) hiking rates by 50 bps, spurred recessionary fears as banks struggled to curb inflation.

The USD/MXN printed a leg-up supported by comments the Federal Reserve Chair Jerome Powell reiterated his Wednesday stance, at the one expressed by the dot-plots, as he said: “We (Fed) think we are within a couple of rate hikes of the level we need to be.” He emphatically commented no rate cuts are expected and will have to wait until the Fed is confident that inflation is slowing towards its 2% target.

Data-wise, the US Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims reached their highest level since October 2021, growing by 264K exceeding estimates of 260K. At the same time, the US Commerce Department released the US Current Account widened to $219.3 billion in Q1, from a revised $216.2 billion in Q4 2022, exceeding estimates of $217.5 billion.

Recently crossing the wires, Existing Home Sales in May grew at a 0.2% MoM pace, above estimates of a -0.5% plunge, more than the upward revised April-s -3.2%  contraction.

Aside from this, Banxico is expected to keep rates unchanged at 11.25%, though set to remain at higher levels, as stressed by the bank’s Governing Council in its May meeting. Bank of Mexico Governor Victoria Rodriguez Ceja commented the central bank needs to be cautious as the bank faces a complex outlook and uncertainty regarding monetary policy. She added that keeping rates at their current level would be required for a prolonged period.

Upcoming events

Banxico’s monetary policy decision would be due at around 19:00 GMT. The US economic agenda will feature the release of S&P Global PMIs and the Fed parade, which would keep USD/MXN traders entertained.

USD/MXN Price Analysis: Technical outlook

The USD/MXN continues to bottom at around 17.00 during the last seven days. But in the medium term, the USD/MXN remains downward biased, threatening to dive below the 17.00 handle, eyeing October 2015 lows of 16.3267 as it continues on its way towards the 16.0000 mark. Oscillators support the thesis of the Mexican Peso (MXN) strengthening, as the Relative Strength Index (RSI) sits at bearish territory, while the three-day Rate of Change (RoC) shows that buyers are gathering momentum.

If USD/MXN holds its ground above 17.00, that will increase buyers’ odds of reaching the 20-day Exponential Moving Average (EMA) at 17.3215, as the pair edged toward the May 16 low of 17.4038.

• Central bank rate hikes, led by BoE, stoke fears of diminished oil demand.
• WTI falls despite recent OPEC+ output cuts and surprise dip in US crude inventories.
• Traders shift focus to China’s upcoming factory activity data amidst concerns over an economic slowdown.

Western Texas Intermediate (WTI), the US crude oil benchmark, plummeted more than 3% after more central banks led by the Bank of England (BoE) raised interest rates, which weigh on growth, suggesting less demand for oil. At the time of writing, WTI is trading at $69.28 per barrel after hitting a daily high of $72.61.

Crude oil tumbles over 3% as central banks tighten, and China’s economy weakens

Investors sentiment remains fragile, though shifted slightly positive, as US equities trade mixed. WTI erased Wednesday’s gains. Increased concerns over an economic slowdown in China weigh on Oil prices, despite the crude output cuts foreseen by OPEC+, as seen in the latest rate cuts implemented by the People’s Bank of China (PboC).

Aside from this, the BoE raised rates by 50 bps, dampening the economic outlook in the UK., as higher rates could slow economic growth.

In the meantime, the US Federal Reserve (Fed) Chair Jerome Powell concluded its first-half testimony before the US Congress, maintaining its neutral stance, reiterating that two interest rate increases are still on the table.

Nevertheless, traders seem to ignore the latest Fed dot plots revealed last week, as shown by the CME FedWatch Tool, as they only expect one additional increase in July of 25 bps as odds lie at 76.9%.

A US Energy Information Administration (EIA) report revealed that crude inventories fell by 3.8 million barrels last week to 463.3 million, below analysts’ expectations for a 300,000-barrel rise.

Meanwhile, WTI traders’ focus shifted towards releasing China’s factory activity next week, which could shed some light on the strength of China’s economy.

WTI Technical Levels

• USD/CHF found support at a low of 0.8905 and then jumped to 0.8965.
• SNB hiked rates by 25 bps as expected. 
• USD gained traction on the back of rising US bond yields during Chair Powell’s testimony.

On Thursday, the USD/CHF showed volatility – falling to a daily low of 0.8905 and then recovering to 0.8965. Initially, the CHF gained some traction after the Swiss National Bank (SNB) hiked rates by 25 basis points, but the rise in US bond yields, following US data and Federal Reserve (Fed) Chairman Jerome Powell’s testimony, limited the Swiss currency’s upside potential.

Investors asses SNB and US data 

The Swiss National Bank raised its key rates by 25 basis points (bps), as the markets expected, to 1.75%. In addition, in the statement, the bank noted that It cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term. Moreover, they stated that they expect GDP to remain robust and that the unemployment rate will increase slightly. The announcement strengthened the Swiss Franc, pushing USD/CHF south, as higher interest rates tend to attract inflows of foreign capital.

The US Bureau Census of Analysis released the Jobless Claims for the week ending on June 16, which came in at 264K vs the 262k expected and from the previous 260k reading. In addition, the Chicago Fed National Activity index came in at 0.15 contraction vs the consensus, which had been for the reading to remain unchanged. Moreover, Existing home sales data showed strength in the housing sector as they came in at 4.3M vs the 4.25M expected by the consensus.

Furthermore, during his second testimony before the US Congress, Jerome Powell, chair of the Federal Reserve (Fed) noted that the Federal Open Market Committee (FOMC) broadly feels it will be suitable to raise rates again this year and perhaps two more times. As a reaction, shorter-term US bond yields rose, with the 2-year rate jumping to its highest level since Friday to 4.78%, seeing a 1% increase. This supported the US Dollar and led USD/CHF to recover. 

USD/CHF Levels to watch

According to the daily chart, despite indicators gaining some traction, the general outlook is still negative. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) stand in negative territory, indicating that the bears have the upperhand.

Resistance levels to watch: 0.90, 0.9010 and the 20-day Simple Moving Average (SMA), 0.9025.

Support Levels to watch: 0.8930, 0.8905 (daily low), 0.89 (psychological mark).

USD/CHF Daily chart

Jerome Powell, Chairman of the Federal Reserve System (Fed), presents the Semi-Annual Monetary Policy Report and responds to questions before the Senate Banking, House and Urban Affairs Committee.

Key takeaways

"We don't see a lot of evidence of additional credit tightening on top of what had been seeing, but keeping our eyes out for that."

"As we get closer to our destination we have slowed down, to avoid the mistake of going too far."

"People on committee overwhelmingly believe one or two more rate hikes will be appropriate."

"Housing activity has kind of hit a bottom now."

"Strength in housing now is new buyers; market seems to be improving."

"If economy performs as expected, 2/3 of committee think it will be appropriate to raise rates twice more this year."

"We think we are within a couple of rate hikes of the level we need to be."

"We want to be confident inflation will continue to move down."

"We don't see rate cuts any time soon."

"Test for any rate cut is confidence that inflation is moving down."

"Fed projections at the median has some rate cuts next year, but will depend on the economy."

"Inflation has proven more persistent than expected."

"Rate cuts will have to wait until confident inflation moving down to 2%."

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."

• USD/JPY ascends to a YTD peak of 142.88 as Fed Chair Jerome Powell’s hawkish commentary strengthens the US Dollar.
• Global economic slowdown fears resurface as major central banks, including the Bank of England, tighten monetary conditions.
• USD/JPY benefits from rising bond yields and dovish commentary from Bank of Japan board member Asahi Noguchi.

USD/JPY climbs to new year-to-date (YTD) highs at around 142.88 on Thursday, as the Federal Reserve (Fed) Chair Jerome Powell gets ready to finish its two-day testimony before the US Congress. Hawkish comments by Powell rattled Wall Street and underpinned the US Dollar (USD), recovering lost ground. The USD/JPY exchanged hands at 142.82 after hitting a low of 141.61.

Mixed economic data overshadowed by hawkish Fed rhetoric and BoJ dovishness

Global equities trade with losses. Aside from Powell’s comments on Wednesday, three major central banks raised rates, with the Bank of England (BoE) surprising the markets with a 50 bps hike, though it failed to boost the Pound Sterling (GBP). However, sentiment dampened as more central banks tightened monetary conditions, reigniting fears of a global economic slowdown.

Back to the US, data from the US Bureau of Labor Statistics (BLS) showed Initial Jobless Claims printing at its highest level since October 2021, jumping by 264K exceeding estimates of 260K. At the same time, the US Commerce Department released the US Current Account widened to $219.3 billion in Q1, from a revised $216.2 billion in Q4 2022, exceeding estimates of $217.5 billion.

Recently crossing the wires, Existing Home Sales in May grew at a 0.2% MoM pace, above estimates of a -0.5% plunge, more than the upward revised April-s -3.2%  contraction.

Even though data was mixed, the USD/JPY gained traction as bond yields rose. The US 10-year Treasury note yields 3.783%, five basis points higher than its open, underpinning the USD. The US Dollar Index (DXY) measures the buck’s value vs. its peers, advances to 102.377, and gains 0.30%.

On the Japanese front, the USD/JPY gets some help from dovish comments made by the Bank of Japan (BoJ) board member  Asahi Noguchi favoring the ultra-loose monetary policy to ensure wages, seen as a pivotal factor to drive inflation to its 2% target over a sustained period. Noguchi added that while core inflation is above the BoJ 2% target, it is seen as getting below the latter as the effect of high raw material prices “dissipates.”

Upcoming events

The Japanese economic agenda will feature inflation data, with most May readings expected to surpass the prior’s month data. In the US, S&P Global PMIs, and Fed speakers, are expected to deliver proper direction to the USD/JPY pair.

USD/JPY Price Analysis: Technical outlook

The USD/JPY is still upward biased, threatening to crack the 143.00 mark. If buyers conquer the latter, there would be no resistance between the current exchange rate and last year’s November 10 high of 146.59. The only possible resistance would be the October 27 daily low-turned resistance at 145.10. USD/JPY failure to crack 143.00, could open the door for further downside, like the November 22 high turned support at 142.24, followed by the 142.00 figure.

Jerome Powell, Chairman of the Federal Reserve System (Fed), presents the Semi-Annual Monetary Policy Report and responds to questions before the Senate Banking, House and Urban Affairs Committee.

Key takeaways

"We expect the labor market to continue to gradually cool."

"We also expect inflation to move down this year."

"Strong majority of committee believes two more rate hikes before end of year."

"Decision last week was to move more slowly."

"We will do what it takes to get inflation down to 2% over time."

"Staff has been briefing governors on capital proposal, but still there are changes, even this morning."

"We will wait for final version to really go through and evaluate the proposals."

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), presents the Semi Annual Monetary Policy Report and responds to questions before the Senate Banking, House and Urban Affairs Committee.

Key takeaways

"One reason labor demand and supply is getting into better balance is the strong rebound in immigration."

"There may be a bit more tightening in the pipeline from banking stress than there would be otherwise."

"We are close to where the destination is on rates."

"It makes sense to move at a careful pace."

"We don't want to overdo it."

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 discuss Gold (XAU/USD) outlook.

Political tensions ahead of the 2024 presidential election have increased

Jerome Powell, Chairman of the Federal Reserve System (Fed), presents the Semi Annual Monetary Policy Report and responds to questions before the Senate Banking, House and Urban Affairs Committee.

Key takeaways

"Headline inflation has come down, but that's largely from energy and food prices not principally a function of monetary policy."

"We are seeing progress in supply chains."

"We have not seen much progress in services inflation."

"We still have a long way to go."

"I dont think monetary policy is becoming less effective."

"There's no consensus agreement on how long it takes monetary policy to affect economy, but a year and change is not a bad way to look at it."

"We have identified banks that have a higher concetration of commercial real estate, working with them."

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."

The Mexican Peso is trading at its strongest level against the US Dollar in seven years. Economists at Commerzbank discuss MXN outlook.

Mexico is seen as a potential major beneficiary of nearshoring activities 

Jerome Powell, Chairman of the Federal Reserve System (Fed), presents the Semi-Annual Monetary Policy Report and responds to questions before the Senate Banking, House and Urban Affairs Committee.

Key takeaways

"FOMC broadly feels it will be appropriate to raise rates again this year and perhaps two more times."

"We kept rates on hold to give ourselves more time to make decisions."

"A strong majority of the committee feels there is a little further to go with rate hikes."

"It would be perfect, but no guarantee, that labor market can get into better balance without unemployment rising."

"There's a clear need to strengthen supervision and regulation for banks of SVB's size."

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."

EUR/USD had a good day yesterday. Kit Juckes, Chief Global FX Strategist at Société Générale, anlayzes what is needed to see a sustained move above the 1.10 level.

EUR/USD has been driven more by short-term position adjustments than anything fundamental

• Eurozone Consumer Confidence Indicator rose to -16.1 in June.
• EUR/USD continues to fluctuate below 1.1000 after the data.

Consumer sentiment in the Euro area improved modestly in June with the Consumer Confidence Indicator edging higher to -16.1 from -17.4 in May, the European Commission reported on Thursday. This reading came in better than the market expectation of -17. 

For the EU, the Consumer Confidence Indicator rose by 1.1 percentage point to -17.2.

Market reaction

EUR/USD inched higher with the initial reaction to this report and was last seen trading virtually unchanged on the day at 1.0990.

• Existing Home Sales in the US rose unexpectedly in May.
• US Dollar Index stays in daily range above 102.00.

Existing Home Sales in the US rose 0.2% in May to an adjusted annual rate of 4.3 million, the National Association of Realtors (NAR) reported on Thursday. This reading followed the 3.2% decline recorded in April and came in better than the market expectation for a decrease of 0.6%.

Commenting on the report, "mortgage rates heavily influence the direction of home sales," said NAR Chief Economist Lawrence Yun. "Relatively steady rates have led to several consecutive months of consistent home sales."

Market reaction

The US Dollar showed no immediate reaction to this data and the US Dollar Index was last seen trading modestly higher on the day at 102.20.

Economists at CIBC Capital Markets discuss USD/JPY outlook. 

Wages are the key

• USD/TRY trespasses the 24.00 hurdle followed the CBRT hike.
• Markets perceives as insufficient the CBRT rate raise.
• The central bank hiked rates by 650 bps to 15.00%.

It is never enough for the Turkish lira, is it not?

On Thursday, the Turkish lira experienced a significant decline, reaching record lows against the US dollar and pushing USD/TRY well above the 24.00 level.

USD/TRY ignores CBRT rate hike

The Turkish currency's depreciation gained further momentum as the rate hike fell short of market participants' expectations. The CBRT raised the One-Week Repo Rate by 650 basis points to 15.00% during its event.

It is important to note that there was a consensus among analysts that the first rate hike since August 2021 would be around 20%, especially after President Erdogan appointed M. Simsek as the Finance Minister and H. Erkan as the CBRT Governor following the May 28 elections.

The central bank's objective with this move was to initiate the process of monetary tightening, establish a trajectory towards lower inflation, stabilize inflation expectations, and manage pricing behavior.

The CBRT reaffirmed its commitment to the 5% inflation target and did not rule out the possibility of implementing additional measures for monetary tightening to achieve this target.

Moreover, the lira faced additional selling pressure as domestic banks ceased interventions aimed at supporting the struggling currency.

What to look for around TRY

USD/TRY now seems to have embarked on a consolidative phase in the upper end of the recent range.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy. By appointing Mehmet Simsek and Hafize Gaye Erkan, both former Wall Street bankers, to oversee the country's finances, President R. T. Erdogan seems to suggest a possible move away from heavy state intervention in favor of letting the market dictate the fair value of the currency.

Although it remains uncertain whether Mr. Erdogan's preference for combating inflation through lower interest rates will allow Simsek and Erkan's orthodox approach to monetary policy to thrive, the news of their appointment has been so far cautiously welcomed by market participants. 

In a broader sense, price action around the Turkish currency is expected to continue to revolve around the performance of energy and commodity prices, which are directly tied to developments from the Ukraine conflict, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: Consumer Confidence (Monday) – Capacity Utilization, Manufacturing Confidence (Wednesday) – CBRT Interest Rate Decision (Thursday) – Economic Confidence Index, Trade Balance (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 3.39% at 24.3105 and faces the next hurdle at 24.6139 (all-time high June 12) followed by 24.00 (round level). On the downside, a break below 20.5294 (55-day SMA) would expose 19.8125 (100-day SMA) and finally 19.2064 (200-day SMA).

"Additional policy rate increases" will be to reach a sufficiently restrictive level and control inflation, Federal Reserve (Fed) Governor Michelle Bowman said on Thursday, per Reuters.

Bowman noted that inflation is still unacceptably high, despite the recent drop seen in headline numbers. 

"Although tighter monetary policy has had some effect on economic activity and inflation to date, we have seen core inflation essentially plateau since the fall of 2022," she added.

Market reaction

The US Dollar Index clings to small daily gains near 102.20 following these comments.

The Bank of England (BoE) hiked the Bank Rate (key policy rate) by 50 bps to 5.00%. EUR/GBP initially moved lower but fully retraced the move within the hour. Economists at Danske Bank discuss the pair’s outlook.

Stay negative on GBP despite 50 bps surprise

Economists at Commerzbank analyze the Fed’s approach to CBDC (central bank digital currency).

The accounts which banks hold with the Fed already constitute this castrated form of CBDC

• EUR/USD recedes from earlier monthly highs past 1.1000.
• Extra gains could revisit the 20223 high around 1.1100.

EUR/USD comes under selling pressure soon after hitting fresh monthly tops north of 1.1000 the figure on Thursday.

In the meantime, the pair’s outlook remains constructive for the time being. Against that, a rapid breakout of the June high at 1.1012 (June 22) carries the potential to spark a challenge of the YTD peak at 1.1095 (April 26) just ahead of the round level at 1.1100.

Looking at the longer run, the positive view remains unchanged while above the 200-day SMA, today at 1.0559.

EUR/USD daily chart

• AUD/USD has retreated from 0.6800 amid a strong recovery in the USD Index.
• S&P500 is expected to open on a bearish note due to the cautious market mood.
• The RBA is expected to announce a final hike of 25 bps in September and will push rates to 4.85%.

The AUD/USD pair has sensed tough barricades after a short-lived pullback to near the round-level resistance of 0.6800 in the New York session. The Aussie asset has retreated as the US Dollar Index (DXY) has shown a solid recovery after attracting significant bids near 102.00.

S&P500 is expected to open on a bearish note amid a cautious market mood. The risk-aversion theme is in action as investors are baffled about further policy action by the Federal Reserve (Fed). Economists at Rabobank expect the Fed to hike in July, a more moderate pace would imply skipping September and that would leave us with November as the meeting for the second hike. However, even the Fed’s own staff expects the economy to be in a mild recession by then. Therefore, we continue to leave a second hike out of our forecasts.

The USD Index has rebounded to near 102.30 after the release of mildly higher United States weekly Initial Jobless Claims data. The US Department of Labor has reported that jobless claims for the week ending June 16 were higher at 264K than expectations of 260K. Jobless claims have landed higher-than-anticipated fourth time in a row. Labor market conditions are consistently losing their heat and it could force the Fed to go light on interest rates in July.

On the Australian Dollar front, recovery in inflationary pressures and upbeat Employment could force the Reserve Bank of Australia (RBA) to hike interest rates further. Economists at TD Securities expect one final 25 bps hike in Sep, taking the cash rate to 4.85%. Whether the RBA takes the cash rate above 5% will be dependent on how quickly the stock of excess savings is run down.

• DXY remains under pressure and briefly pierces 102.00.
• Extra losses could see the 101.00 zone revisited in the near term.

DXY now regains some composure following the earlier pullback to the sub-102.00 region, or new multi-week lows, on Thursday.                                                                                           

Despite the ongoing rebound, the index remains well under pressure. That said, there is the palpable probability that a deeper pullback could drag DXY to the area of lows seen in April and May around 101.00. Dow from here emerges the 2023 low around 100.80 recorded on April 14.

Looking at the broader picture, while below the 200-day SMA at 105.14 the outlook for the index is expected to remain negative.

DXY daily chart

Yesterday brought Fed Chair Jay Powell's testimony in front of Congress. Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes Powell’s remarks.

Powell sounded at most as hawkish as he had done two weeks ago

• Natural Gas continues to recover from Tuesday’s lows amid weaker US Dollar and heatwave demand.
• Norwegian outages continue to ravage the supply outlook and underpin already low prices. 
• If temperatures across the Western world continue to remain elevated, Natural Gas could see further gains, according to analysts. 

Natural Gas price continues its recovery on Thursday, undoing much of the damage done by the sharp declines witnessed 48 hours ago. Gas prices have been held aloft by a mixture of a weaker US Dollar and hotter-than-expected summer weather in the Western world. Temperatures in Texas, for example, are breaking records and the trend is set to continue for 7-10 days, according to forecasters. If the summer is hotter overall, it will quickly put pressure on Natural Gas supplies used in air conditioning, according to a report by Natural Gas World.  

XNG/USD is trading at $2.650 MMBtu, at the time of writing, entering the US session on Thursday.  

Natural Gas news and market movers 

• If the unexpectedly warm weather witnessed in much of the west continues, it could increase demand for Natural Gas used to power air conditioning and push up prices, according to Natural Gas World (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. 
• A decline in the US Dollar following US Federal Reserve (Fed) Chairman Jerome Powell’s testimony to the US Congress on Wednesday is giving Natural Gas a boost, as the commodity is mainly priced and traded in the world’s reserve currency. 
• Gas prices have rallied over recent weeks due to concerns regarding Norwegian supply after longer-than-expected outages reported at Gas plants in Norway. 
• 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.
• Yet at the same time, European storage facilities remain relatively high. They 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 Natural Gas terminal 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.  
• 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 after coming out of a prolonged lockdown. 
• US Natural Gas Storage data is scheduled for release at 14:30 GMT on Thursday. Economists' forecast Gas stocks to rise to 88 billion cubic feet (bcf) from 84 bcf. 

Natural Gas Technical Analysis: Pulling back within a broader downtrend

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 2023. Bullish convergence occurs when price makes new lows but RSI fails to copy. 

Natural Gas would need to break above the last lower high of the long-term downtrend at $3.079 MMBtu, however, 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 temporarily reversed its prior short-term uptrend.  

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.  

Natural Gas: Four-hour Chart

The recent cliff-edge decline from Tuesday’s highs was not the flag pole of a bearish flag pattern as originally speculated. Price has recovered too much for it to be a bear flag. What is more likely is that the initial decline could be the ‘A’ leg of an ABC correction, with the rebound on Wednesday leg ‘B’ and a move down expected when wave ‘C’ finally unfolds. 

Wave C is likely to be at least a Fibonacci 61.8% length of wave A, suggesting a possible end target in the short-term of around $2.450.   
 

• EUR/JPY advances to fresh peaks past 156.00.
• Next on the upside comes the 156.80 region.

EUR/JPY adds to Wednesday’s positive performance and surpasses the 156.00 mark for the first time since late September 2008.

In the meantime, further gains should clear the YTD high at 156.52 (June 22) to then refocus on the weekly top recorded in late September 2008 at 156.83, which precedes the key round level at 157.00.

While extra gains remain on the cards, the ongoing overbought conditions of the cross are indicative that further retracements should not be ruled out at some point in the short-term horizon.

So far, further upside looks favoured while the cross trades above the 200-day SMA, today at 144.69.

EUR/JPY daily chart

The Swiss National Bank (SNB) has raised its key interest rate by a further 25 basis points to 1.75%. Economists at ING discuss CHF outlook after the SNB avoided the more aggressive 50 bps rate hike option.

SNB hikes rates by 25 bps and signals further tightening still to come

• Gold price has shown a V-shape sell-off around $1,930.00 amid a recovery in the USD Index.
• US weekly jobless claims have landed at 264K, similar to their prior release but higher than expectations of 260K.
• Gold price is looking to deliver a break below the Descending Triangle chart pattern.

Gold price (XAU/USD) has retreated after a solid recovery to near $1,930.00 in the early New York session. The precious metal has faced selling pressure despite the weekly jobless claims for the week ending June 16 have landed marginally higher than expectations. The US Department of Labor has reported that first-time jobless claims were 264K, similar to their prior release while the street was anticipating a figure of 260K.

S&P500 futures have recovered some losses, however, a weak opening is broadly expected. Investors have underpinned the risk-aversion theme as more rate hikes by the Federal Reserve (Fed) could accelerate fears of a recession in the United States.

Jobless claims have remained higher than expectations straight for the fourth time in a row. Higher jobless claims indicate that labor market conditions are critically losing their appeal. Easing US labor market conditions could propel the chances of only one interest rate hike by year-end.

The US Dollar Index (DXY) has rebounded to near day’s high around 102.16 as investors are providing more value to hawkish testimony by Fed chair Jerome Powell against dovish commentary by Atlanta Fed President Raphael Bostic and Chicago Fed Bank President Austan Goolsbee. The 10-year US Treasury yields have climbed above 3.75%.

Gold technical analysis

Gold price is looking to deliver a break below the Descending Triangle chart pattern formed on a two-hour scale. The downward-sloping trendline of the aforementioned chart pattern is plotted from June 02 high at $1,983.00 while the horizontal support is placed from May 30 low at $1,932.12. The 200-period Exponential Moving Average (EMA) at $1,953.62 is acting as a barricade for the Gold bulls. Horizontal resistance is plotted from May 05 low around $2,000.00.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Gold two-hour chart

We may be heading into a ‘low-volatility regime’ in equities, according to economists at Société Générale.

Equities on the cusp of a ‘low-volatility-regime’?

The BoE raised Bank Rate 50 bps to 5.00% at today's meeting. Economists at TD Securities analyze EUR/GBP after the announcement.

More hikes ahead

• Chicago Fed National Activity Index fell modestly to -0.15 in May.
• The US Dollar Index printed weekly lows under 102.00 after the report and following Jobless Claims. 

The Federal Reserve Bank of Chicago's National Activity Index (CFNAI) dropped to -0.15 in May from 0.14 in April (revised from 0.07). This reading came in weaker than the market expectation of 0. 

“Two of the four broad categories of indicators used to construct the index decreased from April, and three of the four categories made negative contributions in May. The index’s three-month moving average, CFNAI-MA3, increased to –0.14 in May from –0.20 in April”, the Chicago Fed noted in its publication.

“The CFNAI Diffusion Index, which is also a three-month moving average, moved up to –0.09 in May from –0.14 in April. Thirty-nine of the 85 individual indicators made positive contributions to the CFNAI in May, while 46 made negative contributions.”

Market reaction: 

The US dollar weakened after the release of data and also following the Jobless Claims report. As a result, the DXY (US Dollar Index) dropped below 102.00, reaching a fresh weekly low.
 

The Czech Koruna has been trading at weaker-than-expected levels in recent weeks, but economists at ING still believe EUR/CZK should go lower.

The CZK should benefit most from a rebound in EUR/USD

• Initial Jobless Claims in the US reach 264K in the week ending June 17, to the highest level since October 2021.
• US Continuing Claims decline unexpectedly in the week ended June 10. 
• US Dollar weakens after US economic data.

Initial Jobless claims totaled 264,000 in the week ending June 17, the weekly data published by the US Department of Labor (DOL) showed on Thursday. The print follows the previous week's 262,000 (revised to 264,000) and came in above market expectations of 260,000. It matches the highest reading since October 2021.

“The 4-week moving average was 255,750, an increase of 8,500 from the previous week's revised average. This is the highest level for this average since November 13, 2021 when it was 260,000.”

Continuing Claims declined by 13,000 in the week ended June 10 to 1.759 million below market estimates of 1.782 million. The 4-week moving average was 1,770,000, a decrease of 7,500 from the previous week's revised average.

Market reaction: 

The US Dollar dropped across the board after the numbers. The DXY printed fresh weekly lows under 102.00.
 

EUR/USD regains 1.10. Economists at Scotiabank analyze the pair’s technical outlook.

Trend dynamics are bullish

The Bank of England raised Bank Rate by 50 basis points to 5.00% today. The BoE will continue to monitor the development of inflation and raise key rates further if necessary, economists at Commerzbank report.

Further tightening might be necessary

Economists at Scotiabank analyze USD/CAD technical outlook.

Resistance now aligns at 1.3175/00

• USD/TRY resumes the upside north of 23.600.
• The CBRT hiked rates for the first time since August 2021.
• The central bank raised rates by 650 bps to 15.00%.

The Turkish lira gives away part of the gains seen earlier in the week and lifts USD/TRY back to the area beyond the 23.6000 level on Thursday.

USD/TRY stronger post-CBRT

After two consecutive daily declines, the USD/TRY currency pair has rebounded and continued its upward trend past the 23.6000 level. This occurred despite investor disappointment following the Turkish central bank's decision to raise the One-Week Repo Rate by 650 basis points during its event on Thursday.

The central bank's move was intended to kick-start the monetary tightening process, establish a disinflation course, anchor inflation expectations, and control pricing behavior.

The CBRT reiterated its commitment to the 5% inflation target and did not rule out additional monetary tightening measures to achieve this target.

What to look for around TRY

USD/TRY now seems to have embarked on a consolidative phase in the upper end of the recent range.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy. By appointing Mehmet Simsek and Hafize Gaye Erkan, both former Wall Street bankers, to oversee the country's finances, President R. T. Erdogan seems to suggest a possible move away from heavy state intervention in favor of letting the market dictate the fair value of the currency.

Although it remains uncertain whether Mr. Erdogan's preference for combating inflation through lower interest rates will allow Simsek and Erkan's orthodox approach to monetary policy to thrive, the news of their appointment has been so far cautiously welcomed by market participants. 

In a broader sense, price action around the Turkish currency is expected to continue to revolve around the performance of energy and commodity prices, which are directly tied to developments from the Ukraine conflict, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: Consumer Confidence (Monday) – Capacity Utilization, Manufacturing Confidence (Wednesday) – CBRT Interest Rate Decision (Thursday) – Economic Confidence Index, Trade Balance (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 0.61% at 23.6595 and faces the next hurdle at 23.6804 (all-time high June 12) followed by 24.00 (round level). On the downside, a break below 20.5294 (55-day SMA) would expose 19.8125 (100-day SMA) and finally 19.2064 (200-day SMA).

• GBP/JPY has shown extreme wild moves as the BoE has raised interest rates by 50 bps to 5%.
• Surprisingly higher UK inflation forced the BoE to go for a bulk rate hike.
• A continuation of the already decade-long ultra-dovish interest rate policy is expected from the BoJ to keep inflation stable above 2%.

The GBP/JPY pair has shown an extremely wild gyration in a 180.70-182.50 range as the Bank of England (BoE) has surprisingly raised interest rates by 50 basis points (bps) to 5%. The street was anticipating a 25 bp interest rate hike, however, there was a sizeable risk of a bigger interest rate hike. Out of nine Monetary Policy Committee (MPC) members, seven voted in favor of a rate hike as expected by the market participants.

On Wednesday, UK inflation was surprisingly higher than expected. 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 pace of 0.5%. On an annual basis, headline inflation remained steady at 8.7% while the market was anticipating a deceleration to 8.4%.

Core UK CPI that strips off the impact of volatile oil and food prices printed a fresh high of 7.1% against expectations of steady performance. UK’s core inflation is moving in the wrong direction despite BoE Governor Andrew Bailey having raised interest rates for the 13^th time in a row.

Investors are worried that the promise of halving inflation by year-end made by UK PM Rishi Sunak will be missed amid an absence of evidence of a decline in inflationary pressures. Also, UK FM Jeremy Hunt is avoiding tax cuts as it could infuse fresh blood into inflationary pressures.

On the Japanese Yen front, a continuation of the already decade-long ultra-dovish interest rate policy is expected from the Bank of Japan (BoJ) to keep inflation stable above 2%. Meanwhile, BoJ policymaker Asahi Noguchi has warned that the effect of costly imported goods could disappear around September. Therefore, the central bank must continue keeping rates lower to ensure inflation remains well-supported above 2% through higher wages.

Gold prices have been underpinned by strong physical demand in China. Strategists at ANZ Bank analyze China Gold demand.

PBoC has added to its Gold reserves for seven straight months

• EUR/GBP surpasses the 0.8600 mark and records new tops.
• The BoE surprises markets by hiking 50 bps on Thursday.
• The central bank still sees inflation dropping markedly this year.

EUR/GBP gathers traction and breaks above the 0.8600 yardstick in the wake of the unexpected 50 bps rate hike by the BoE at its event on Thursday.

EUR/GBP keeps the weekly recovery in place

EUR/GBP maintains the bid bias well and sound for the fourth session in a row on Thursday, extending at the same time the bounce off recent 2023 lows near 0.8520 (June 19).

In fact, the cross keeps the current trading range after the BoE caught markets off guard and hiked its policy rate by 50 bps to 5.00% at its gathering on Thursday.

The decision by the central bank to raise rates more than expected seems to have been justified by the sticky and elevated UK inflation figures, particularly following the unexpected uptick in June.

The vote to hike rates was not unanimous, with usual dove members Dhingra and Tenreyro leaning towards keeping rates on hold at 4.50%.

According to the bank’s statement, second-round effects on domestic wages and prices likely to take longer to unwind than they did to emerge, while consumer prices are expected to fall significantly this year, mostly due to energy costs.

EUR/GBP key levels

The cross is gaining 0.25% at 0.8624 and faces the next hurdle at 0.8699 (55-day SMA) followed by 0.8747 (200-day SMA) and then 0.8875 (monthly high April 25). On the other hand, the breakdown of 0.8518 (2023 low June 19) would expose 0.8386 (weekly low August 17 2022) and finally 0.8249 (monthly low April 14 2022).

Economists at ING analyze the outlook of the EUR/USD pair.

European rates are going higher

See – EUR/USD: Uptrend to persist once the 1.1070/1.1100 hurdle is overcome – SocGen

The upside momentum in USD/CNH is seen picking up a more convincing pace once 7.2000 is cleared, Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group.

Key Quotes

• EUR/JPY has registered a fresh 15-year high at 156.00 as BoJ’s ultra-dovish policy will continue further.
• BoJ Noguchi has warned that the effect of costly imported goods could disappear around September.
• ECB Lagarde has already confirmed one more interest rate hike in July.

The EUR/JPUY pair has climbed vertically above the crucial resistance of 156.00 in the European session. The cross has printed a fresh 15-year high at 156.32 as the Bank of Japan (BoJ) is expected to keep the interest rate policy dovish for a longer period.

The majority of the contribution to higher Japan’s inflation is coming from costly raw materials imported by firms, which indicates that the high-inflation environment is not domestically supported. The Bank of Japan (BoJ) has been keeping the interest rate policy expansionary to accelerate wages and spurt domestic demand.

The efforts of escalating wages by the BoJ through monetary stimulus are showing positive results. In the latest monthly assessment of Japan’s economy, the government has noted a decline in the jobless rate and the positive impact of bigger wage rises awarded by major firms, as reported by Reuters.   Special thanks to capital expenditure and consumer spending that the labor market conditions are "recovering moderately".

Meanwhile, BoJ policymaker Asahi Noguchi has warned that the effect of costly imported goods could disappear around September. He further added central bank must continue lower interest rates to ensure inflation remains well-supported above 2% through higher wages.

The Euro is in an upside momentum as Inflationary pressures in Eurozone are thrice the required rate of 2%. To achieve price stability, European Central Bank (ECB) President Christine Lagarde has already confirmed one more interest rate hike in July.

Banxico's wait-and-see stance suggests continued MXN strength, economists at Commerzbank report.

Banxico is unlikely to be in a hurry to cut rates

Economists at discus Turkish Lira (TRY) outlook ahead of the Central Bank of the Republic of Türkiye (CBRT) Interest Rate Decision.

650 bps hike expected today

See – USD/TRY: Depreciation pressure on the Lira to return – Commerzbank

Bank Indonesia (BI) kept its policy rate unchanged at 5.75% today. Economists at TD Securities analyze IDR outlook.

USD/IDR is a sell on rallies

• The US Dollar slid as recession fears emerged overnight. 
• A Big batch of US data will hit markets.  
• The US Dollar Index breaks below 102.00 and is heading lower. 

The US Dollar (USD) drops after recession fears spooked investors overnight, triggered by the hawkish speech from US Federal Reserve (Fed) Chairman Jerome Powell during the semi-annual Banking Panel hearing. Equities sold off and the soured mood continued on Thursday in both Asia and Europe. Investors are fleeing equities, bonds, the Swiss Franc and the US Dollar sell off, while commodities remain unphased. 

The second day of hearings with Fed Chairman Powell is on the agenda at around 14:00 GMT, this time facing the US Senate Banking Panel, though his message is not expected to change much from his speech on Wednesday. Before, a batch of data will come out at 12:30 GMT, including  jobless claims, which  last week sparked substantial US Dollar weakness as the figure came higher than expected. At 14:00 GMT,  Existing Home sales – the final batch of housing numbers for this week –  will come out, together with The Conference Board’s Leading Economic Index.  

Daily digest: US Dollar gets punches

• A slew of US data is due at 12:30 GMT. The Chicago Fed National Activity Index is foreseen to come in at zero for May after a 0.07 increase in April. Jobless Claims data is set to be key as last week’s higher-than-expected increase in Initial Claims triggered substantial US Dollar weakness. Initial Claims for the week ended June 16 are expected at 260,000 against 262,000 la week earlier. Continuing Claims are anticipated to jump  to 1,782K against 1,775K from last week. 
• The last data points on US housing activity are due to come out at 14:00 GMT. Existing Home Sales are seen sliding from 4.28M to 4.25M, with the monthly number expected to decline 0.6%, less than the 3.4% decrease registered in April. . Meanwhile, The Conference Board’s Leading Economic Index for May is also expected at 14:00 GMT. In April, the index declined 0.6% on month.  . 
• Western Texas Intermediate (WTI) Crude Oil to be moving today once  the weekly US oil inventories are published at 15:00 GMT. Crude trades at $71, residing  at a weekly low.. 
• Apart from Fed Chairman Powell, a few other Fed members are set to speak. At 08:00 GMT Fed Governor Christopher Waller delivers opening remarks at the Central Bank of Ireland conference. Fed’s Michelle Bowman delivers opening remarks around 13:55 GMT at a Fed event hosted by the Federal Reserve Bank of Cleveland. Cleveland Fed President Loretta Mester speaks on the economic and policy outlook at the Clevelands annual Policy summit around 14:00 GMT. To close off the speakers, Richmond Fed President Tom Barkin is to speak at the Risk Management Association in Richmond, Virginia. 
• The US Treasury places a 4-week, an 8-week and a 5-year Tips bond auction. 
• Equities are in the red and in sell-off modus.  The China Hang Seng Index is down 2%, the German DAX falls over 1% and US equity futures are all three in the red. The VIX volatility index jumps back to near 14.
• The CME Group FedWatch Tool shows that markets are pricing in a 71.9% chance of a 25 basis points (bps) interest-rate hike on July 26th. The dislocation between market expectations and the Fed communication is getting bigger as Fed Chairman Powell alluded to possible two more hikes, while markets only expect one. 
• The benchmark 10-year US Treasury bond yield trades at 3.75% and remains quite stable as no real flight into bonds is unfolding. 

US Dollar Index technical analysis: breaks below important level

The US Dollar is taking a firm step back against most currencies. Gains against the South Korean Won and the Japanese Yen are softening the blow a bit, while the risk of a further jump high for the EUR/USD pair grows. This results in the US Dollar Index (DXY) breaking below 102.00, printing a new monthly low. 

On the upside, the 55-day Simple Moving Average (SMA) at 102.58 is acting as resistance and could limit any recovery. Should the DXY edge up further, look for the 103.00 psychological level as the next big challenge to the upside. The 100-day SMA at 103.06 will be key to reach should the DXY want to advance even more..  

On the downside, the psychological level near 102.00 has been breached and is no longer in play. Once price action starts to further move away from it, expect to see risk growing for nosedive move toward 100.82. That means a challenge for the low of this year and would imply a substantial devaluation for the Greenback to come. 

How does Fed’s policy impact US Dollar?

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

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

• USD/CAD has posted a fresh nine-month low at 1.3138 as USD Index looks bearish and the BoC is preparing for more rate hikes.
• Upbeat Canadian Retail Sales data has strengthened the chances of more interest rate hikes from the BoC.
• USD/CAD has faced immense selling pressure after a mean-reversion move to near nine-period EMA at 1.3272.

The USD/CAD pair has printed a fresh nine-month low at 1.3138 in the European session. The Loonie asset is facing immense pressure as investors are hoping that upbeat Canadian Retail Sales data has strengthened the chances of more interest rate hikes from the Bank of Canada (BoC).

Downside bias to the Loonie asset is also propelled by weakness in the US Dollar Index (DXY). The US Dollar Index (DXY) is testing territory below 102.00 as investors are expecting only one more rate hike by the Fed this year.

Economists at Rabobank expect the Fed to hike in July, a more moderate pace would imply skipping September and that would leave us with November as the meeting for the second hike. However, even the Fed’s own staff expects the economy to be in a mild recession by then. Therefore, we continue to leave a second hike out of our forecasts.

USD/CAD has faced immense selling pressure after a mean-reversion move to near nine-period Exponential Moving Average (EMA) at 1.3272 on a daily scale. The Lonnie asst has dropped below the horizontal support plotted around 1.3185, which has turned into resistance for the US Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00 which supports more weakness ahead.

Should the asset break below the intraday low at 1.3139, Canadian Dollar bulls would drag the asset toward 05 July 2022 high at 1.3084 followed by 18 July 2022 high at 1.3033.

On the flip side, a break above June 08 high at 1.3388 will drive the asset toward June 05 high at 1.3462 and the psychological resistance at 1.3500.

USD/CAD daily chart

GBP weakens ahead of important BoE policy meeting. Economists at MUFG Bank analyze the Pound outlook.

Will the BoE meet expectations for a larger 50 bps hike today?

EUR/CHF has staged a steady rebound. Economists at Société Générale analyze the pair's technical outlook.

Holding 0.9670 critical for persistence in up move

• NZD/USD is looking for stabilization above 0.6200 as the short-lived recovery in the US Dollar has concluded.
• S&P500 futures have posted significant losses in London as investors are worried about the United States' economic outlook.
• Dovish monetary policy by the PBoC is hurting the margins of commercial banks.

The NZD/USD pair is making efforts to achieve stability above the round-level resistance of 0.6200 in the London session. The Kiwi asset is expected to remain in the bullish trajectory as the US Dollar Index (DXY) is struggling to remain above 102.00.

S&P500 futures have posted significant losses in London as investors are worried about the United States' economic outlook. Considering testimony of Federal Reserve (Fed) chair Jerome Powell at Congress indicates that more interest rate hikes are appropriate and further policy-tightening is sufficient enough to dampen economic prospects. The risk-aversion theme has trimmed the appeal for risk-sensitive assets.

The US Dollar Index (DXY) is expected to show a perpendicular fall after dropping below 102.00. The downside bias in the USD Index has been built after dovish commentaries from Atlanta Fed President Raphael Bostic and Chicago Fed Bank President Austan Goolsbee. Both Fed policymakers are in favor of one more skip in the rate-hiking spell by the US central bank to assess the impact of interest rate hikes yet made.

Meanwhile, the New Zealand Dollar is showing strength due to the easy interest rate policy by the People’s Bank of China (PBoC). China’s central bank cuts its Loan Prime Rate (LPR) to revive the economy’s optimism, which was critically dented by pandemic controls.

Reuters reported that the dovish monetary policy by the PBoC is hurting the margins of commercial banks as households and firms are reluctant to raise credit due to bad balance sheets.

It is worth noting that New Zealand is one of the leading trading partners of China and higher monetary stimulus in China will support the New Zealand Dollar.

Norges Bank returned to 50 bps hikes today to 3.75%. Its rate projection was revised sharply higher. Economists at TD Securities consequently look for two more hikes to take the policy rate to a terminal of 4.25%.

Back to the fifty

Economists at ING discuss the Turkish Lira (TRY) outlook ahead of the Central Bank of the Republic of Türkiye (CBRT) Interest Rate Decision.

Large rate hike expected today

Economist at UOB Group Lee Sue Ann suggests the BoE will most likely hike its policy rate by 25 bps at today’s meeting.

Key Quotes

In light of the recent price action, USD/JPY could attempt a move to the 142.70 region in the short-term horizon, suggest Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group.

Key Quotes

CME Group’s flash data for natural gas futures markets noted traders reduced their open interest positions for yet another session on Wednesday, this time by around 9.4K contracts. In the same line, volume shrank by around 167.1K contracts.

Natural Gas: Next resistance comes near $2.70

Natural gas prices extended the rebound on Wednesday against the backdrop of declining open interest and volume, hinting at the idea of a potential corrective move in the very near term. That said, bullish attempts are expected to falter around the June peaks near the $2.70 mark per MMBtu (June 20).

• USD/JPY attracts some buying near the 100-hour SMA for the second straight day on Thursday.
• The price action favours bullish traders and supports prospects for a further appreciating move.
• A sustained break below the weekly trading range support is needed to negate the positive bias.

The USD/JPY pair finds support near the 100-hour Simple Moving Average (SMA) for the second straight day on Thursday and climbs back to the 142.00 neighbourhood during the early European session. Spot prices, however, remain below the YTD peak touched on Wednesday and well within a familiar trading range held since the beginning of the current week.

Against the backdrop of the recent appreciating move witnessed over the past two weeks or so, the rang-bound price action might still be categorized as a bullish consolidation phase. Furthermore, last week's sustained breakout through a horizontal resistance near the 141.00 mark supports prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is hovering just below the overbought territory and holding back traders from placing fresh bullish bets around the USD/JPY pair.

Nevertheless, spot prices remain on track to build on over a one-month-old uptrend and climb further beyond the 142.35 area, or the highest level since November 2022 touched on Wednesday, towards reclaiming the 143.00 round figure. The upward trajectory could get extended further towards the next relevant hurdle near the 143.75 region en route to the 144.00 mark. The USD/JPY pair might eventually climb to the 144.30-144.35 intermediate hurdle, above which bulls might aim to reclaim the 145.00 psychological mark.

On the flip side, the 100-hour SMA, currently around the 141.670-141.65 area, now seems to protect the immediate downside ahead of the 141.30-141.20 area, or the weekly low. A convincing break below the latter might prompt some technical selling and drag the USD/JPY pair below the 141.00 mark, towards the 140.60-140.55 horizontal support. Any subsequent decline might attract fresh buyers near the 140.25 zone and remain limited near the 140.00 psychological mark. The latter should act as a strong base for spot prices, which if broken might shift the bias in favour of bearish traders.

USD/JPY 1-hour chart

Key levels to watch

The Bank of England (BoE ) is caught between a rock and a hard place. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes GBP outlook ahead of the Interest Rate Decision.

GBP has benefited from aggressive BoE tightening. Is that set to change?

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

• USD/MXN regain positive traction on Thursday, albeit lacks any follow-through.
• The overnight failure near the descending channel hurdle favours bearish traders.
• A move beyond the 200-period on H4 is needed to negate the negative outlook.

The USD/MXN pair attracts some buying on Thursday and reverses a part of the previous day's retracement slide from over a one-week high, around the 17.2575 area. Spot prices trade with a mild positive bias just below the 17.15 level through the early part of the European session, albeit seems to lack follow-through.

From a technical perspective, the overnight failure near a hurdle marked by the top end of a descending channel, extending from the 18.00, or the May swing high, warrants caution for bullish traders. Moreover, oscillators on the daily chart are holding deep in the bearish territory and have also recovered from the overbought zone. This makes it prudent to wait for a convincing break through the descending channel resistance, currently around the 17.2320-17.2325 area, before confirming that the USD/MXN pair has formed a near-term bottom.

The subsequent move-up has the potential to lift spot prices to the 100-period Simple Moving Average (SMA) hurdle near the 17.3200 area. Some follow-through buying will set the stage for a meaningful near-term recovery towards the 17.4265-17.4270 area en route to the 17.5020-17.5025 region and the next relevant resistance around the 17.6000 level.

On the flip side, the 17.0560-17.0555 region now seems to protect the immediate downside ahead of the multi-year low, around the 17.0245-17.0240 area. This is followed by the 17.00 psychological mark and the descending trend-channel support, which if broken decisively will be seen as a fresh trigger for bearish traders. The USD/MXN pair might then turn vulnerable to accelerate the fall towards the 16.60-16.55 zone before dropping to the November 2015 swing low, around the 16.35 region.

USD./MXN 4-hour chart

Key levels to watch

• Gold price has turned topsy-turvy around $1,930.00 as investors get baffled about further interest rate policy by the Fed.
• Mixed commentary from Fed policymakers has kept investors on their toes.
• Gold price is consistently defending the horizontal support of the Descending Triangle chart pattern.

Gold price (XAU/USD) is demonstrating topsy-turvy moves around $1,930.00 in the European session. The precious metal is displaying a non-directional performance as investors have been baffled while assessing hawkish Federal Reserve (Fed) chair Jerome Powell’s hawkish testimony and dovish commentary from Atlanta Fed President Raphael Bostic.

S&P500 futures are showing significant losses in Europe as investors are getting anxious. Caution in the United States market is deepening as the quarterly result season is going to kick off sooner. Technology stocks witnessed extreme pressure as investors are hoping the giant tech-savvy stocks would continue to provide weak guidance due to higher interest rates from the Fed.

The US Dollar Index (DXY) has retreated after a less-confident recovery move to near 102.16 as the impact of dovish commentary from Fed Bostic and Chicago Fed Bank President Austan Goolsbee has faded the impact of Jerome Powell’s hawkish testimony. Contrary to USD Index, the Treasury yields have rebounded sharply. The 10-year US Treasury Yields have jumped to near 3.75%.

Fed Bostic cited that the central bank should not raise interest rates further or it would risk "needlessly" sapping the strength of the economy. While Chicago Fed Bank President Austan Goolsbee favored allowing current interest rates required time to show their impact on the economy.

Gold technical analysis

Gold price is consistently defending 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 $1,953.62 is acting as a barricade for the Gold bulls. Horizontal resistance is plotted from May 05 low around $2,000.00.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Gold two-hour chart

Economists at Morgan Stanley discuss the Oil market outlook.

Neutral or constructive?

Norges Bank decided to increase the key rate by 50 bps to 3.75%. The Krone strengthened on the publication of the decision, with EUR/NOK falling from 11.70 to 11.57, economists at Nordea report.

A very high probability for a rate top at 4.25% by September

Swiss National Bank (SNB) governing board member Andrea Maechler said on Thursday, “SNB has sold forex in recent quarters.”

Further comments

“We will also sell foreign currency in the future if this is appropriate for monetary policy.”

“We also remain ready to buy forex if there is excessive appreciation pressure on the Franc.”

Related reads

• SNB’s Jordan: We cannot rule out further monetary policy tightening
• SNB raises key deposit rate by 25 bps to 1.75%, as expected

Swiss National Bank (SNB) Chairman Thomas Jordan is addressing a press conference after the central bank announced a 25 basis points (bps) rate hike, raising the key rate to 1.75% in the June quarter.

Key takeaways

Market reaction

USD/CHF has erased gains on the above comments, trading at 0.8930.

In the view of Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group, NZD/USD is expected to navigate between 0.6100 and 0.6245 in the next few weeks.

Key Quotes

Economists at ING discuss GBP outlook ahead of the Bank of England (BoE) meeting today.

Softer Dollar environment should keep GBP/USD bid

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

• Euro appears slightly bid in the area just below 1.1000 the figure.
• Equities in Europe opened markedly on the defensive on Thursday.
• EUR/USD trades in monthly highs near the 1.1000 mark.
• Fed Powell’s second testimony should keep the hawkish tone.
• The USD Index (DXY) challenges monthly lows near 102.00.

Despite markets’ mood seems to be tilted towards the risk-off trade in the wake of the opening bell in the old continent on Thursday, the Euro (EUR) battles to extend its Wednesday’s pronounced rebound and encourages EUR/USD to trade at shouting distance from the psychological barrier at 1.1000.

The uptick in the pair comes on the back of the so far inconclusive price action around the Greenback, which in turn motivates the USD Index (DXY) to hover around monthly lows in the 102.00 neighbourhood.

In the more macro scenario, the potential next steps from both the Federal Reserve and the European Central Bank (ECB) when it comes to the continuation of the normalization of their monetary conditions continue to be in the centre of the debate along with increasing speculation of an economic slowdown on both sides of the Atlantic.

Back at the Fed, Chair Powell hinted at the idea that more needs to be done to bring inflation back to the Fed’s 2.0% target, at the time when he left the door wide open to further tightening in the second half of the year. On this, consensus among investors signal two more 25 bps rate hikes or a 50 bps move in the next months.

Absent releases in Europe, the US calendar will gather all the attention with the publication of the usual Initial Jobless Claims, ahead of the Chicago Fed National Activity Index, the CB Leading Index, Existing Home Sales and speeches by FOMC C. Waller (permanent voter, hawk), FOMC M. Bowman (permanent voter, centrist), Cleveland Fed L. Mester (2024 voter, hawk) and Richmond Fed T. Barkin (2024 voter, centrist).

Daily digest market movers: Euro gets ready for a move above 1.1000

• The US Dollar puts the key 102.00 support to the test on Thursday.
• Market participants expect no surprises at Powell’s second testimony.
• Concerns around the Chinese recovery continue to weigh on sentiment.
• Recession jitters resurfaced on the back of imminent further tightening.
• The FX universe continues to monitor the ECB-Fed divergence.

Technical Analysis: Next on the upside comes the 2023 peak near 1.1100

EUR/USD rebounded sharply and advanced to fresh weekly highs on Wednesday. That said, the pair is expected to quickly retest the psychological 1.1000 barrier and therefore pave the way for a subsequent challenge of 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, initial support emerges at the weekly low of 1,0891 (June 20) prior to the temporary contention at the 55-day SMA at 1.0883. 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).

• AUD/USD has sensed buying interest near 0.6760 as the short-lived pullback in the USD index is concluding.
• Dovish commentary from Fed policymakers has receded the impact of hawkish Fed chair Jerome Powell’s testimony.
• Australian preliminary S&P PMI (June) data will remain in the spotlight.

The AUD/USD pair has found an intermediate support around 0.6760 in the European session. The Aussie asset remained in the bearish territory as the Australian Dollar was going through a rough phase after the release of less-hawkish Reserve Bank of Australia (RBA) minutes.

S&P500 futures have carry-forwarded losses posted in Asia to the London session, portraying caution in the risk profile. The US Dollar Index (DXY) is facing barriers after a short-lived recovery to near 102.16 as Federal Reserve (Fed) policymakers’ dovish commentary has receded the impact of hawkish Fed chair Jerome Powell’s testimony.

Meanwhile, the US treasury yields have also found support. At the press time, the 10-year US Treasury yields are hovering around 3.73%.

Investors are now focusing on the weekly Initial Jobless Claims data for the week ending June 16. The US Department of Labor has already 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.

The Australian Dollar is consistently facing pressure as RBA minutes conveyed that policymakers were mixed about raising interest rates in June. Investors should note that Australian inflation rebounded strongly to 6.8%, which hinted at severe persistence. Also, labor market conditions have turned out tighter in May, which has cemented the chances of one more interest rate hike in July.

Going forward, Australian preliminary S&P PMI (June) data will remain in the spotlight, which will release on Friday. 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/CHF attracts some intraday buyers after the SNB announced its policy decision.
• The expected 25 bps lift-off and the lack of fresh hawkish signals weigh on the CHF.
• A modest USD uptick remains support, albeit the Fed rate-hike uncertainty caps gains.

The USD/CHF pair rallies nearly 50 pips after the Swiss National Bank (SNB) announced its policy decision and touches a fresh daily, around the 0.8950 region during the early European session on Thursday.

The Swiss Franc (CHF) weakens across the board after the SNB, as was widely expected, decided to increase its benchmark sight deposit interest rate by 25 bps, from 1.50% to 1.75%. This marks the fifth successive interest rate hike, though the lack of fresh hawkish signals reaffirms expectations that the SNB will be on hold for at least the rest of the year. Apart from this, a modest US Dollar (USD) strength prompts some intraday short-covering around the USD/CHF pair.

The USD uptick, however, lacks bullish conviction in the wake of the uncertainty over the Federal Reserve's (Fed) rate hike path. In fact, a duo of Fed officials on Wednesday called for more patience on rate hikes to allow the tightening delivered so far to filter through the economy. Moreover, Fed Chair Jerome Powell sounded less hawkish during his testimony before the House Financial Services Committee and said that it may make sense to raise rates at a more moderate pace.

Powell, however, added that the fight against inflation still has a long way to go and despite a pause in interest rate hikes last week, officials agreed borrowing costs would likely need to move higher. This, in turn, helps limit the downside for the USD and acts as a tailwind for the USD/CHF pair. That said, it will still be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any further gains.

Technical levels to watch

In its June monetary policy statement, the Swiss National Bank (SNB) said that it delivered another rate hike to counter elevated inflation levels.

Also read: SNB raises key deposit rate by 25 bps to 1.75%, as expected

Key quotes

Market reaction

At the time of writing, USD/CHF is holding the higher ground near 0.8950, adding 0.12% on the day.

The British Pound (GBP) has been the best-performing G10 currency in 2023. Economists at Crédit Agricole discuss how the Bank of England (BoE) meeting could impact the Pound.

There is a significant possibility that the BoE might disappoint

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

• Pound Sterling drops amid mixed responses to Bank of England’s interest rate decision.
• Core inflation in the United Kingdom is moving in the wrong direction despite restrictive monetary policy.
• UK households are going to face purchasing power constraints due to 8.7% inflation vs. 6% earnings rate.

The Pound Sterling (GBP) has posted a correction move after fresh hot United Kingdom inflation data baffled investors about the interest rate decision from the Bank of England (BoE), which will be announced at 11.00 GMT. The GBP/USD pair has faced moderate selling pressure even if investors are worried that a surprisingly higher Consumer Price Index (CPI) could force BoE policymakers to go extremely hawkish on interest rates, which could put economic prospects in danger.

United Kingdom’s inflation remained hotter than expected in May as labor market conditions have tightened further and food price inflation has not peaked yet. Meanwhile, UK’s core inflation has printed a fresh new high of 7.1%, which has tilted expectations of market participants in favor of a fat interest rate hike from the central bank.

Daily digest market movers: Pound Sterling restricts action ahead of Bank of England meeting

• Pound Sterling witnessed a massive sell-off after UK’s May inflation data turned out to be more persistent.
• UK inflation figures were surprisingly higher than expectations as monthly headline 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%. While core UK CPI that excludes oil and food prices printed a fresh high of 7.1% versus expectations of steady performance.
• UK households are going to face high pressure amid a wide deviation between 8.7% inflation and 6% earnings rate.
• Hot inflation numbers seem uncomfortable for UK PM Rishi Sunak and BoE Governor Andrew Bailey as the former promised to halve inflation by year-end and investors believe that the latter is failing to do justice with his job of achieving price stability.
• UK FM Jeremy Hunt is reluctant to cut taxes as it could propel already elevated inflationary pressures and would undermine the impact of hawkish monetary policy.
• Investors are mixed about the interest rate policy as the latest inflation data has fueled chances of a fat interest rate hike while the other school of thought believes that a bulky rate hike would threaten the economic outlook.
• A poll from Reuters shows that the BoE would raise interest rates by 25 bps to 4.75%. This will be the 13th time interest rate hike in a row, which would push rates to the highest since 2008.
• Analysts at Rabobank expect another 25 bps hike that will lift the policy rate to 4.75%. This has been our forecast since October 2022. The upside risks to embedded inflation we flagged previously have materialized. We, therefore, add two more 25 bps hikes to our forecasts and now see rates reaching 5.25% this summer.
• A pullback move in the US Dollar Index could be faded as Federal Reserve (Fed) policymakers delivered dovish commentary.
• Atlanta Fed President Raphael Bostic cited that the central bank should not raise interest rates further or it would risk "needlessly" sapping the strength of the economy.
• Chicago Fed Bank President Austan Goolsbee favored allowing current interest rates the required time to show their impact on the economy.
• As per the CME Fedwatch tool, more than 70% chances are still in favor of a 25 bps interest rate hike in July to 5.25-5.50%.
• Fed Chair Jerome Powell cited in his testimony at Congress that bringing down inflation to 2% has a long way to go.
• Jerome Powell also confirmed that all policymakers have agreed that more rate hikes are required this year.

Technical Analysis: Pound Sterling oscillates inside Wednesday’s range

Pound Sterling faced significant barriers while attempting to climb above the round-level resistance of 1.2800. The corrective move in the Cable has found intermediate support near the 10-period daily Exponential Moving Average (EMA) at 1.2700. Broadly, the Pound Sterling is approaching north in a Rising Channel chart pattern in which each pullback is considered a buying opportunity by the market participants.

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

Following its quarterly meeting in June, assessing the monetary policy, the Swiss National Bank (SNB) announced 25 basis points (bps) increase to its benchmark sight deposit interest rate, lifting it from 1.50% to 1.75%, as widely expected.

The SNB delivered the fifth consecutive interest rate hike. Economists are now expecting the SNB to be on hold for at least the rest of the year following this month’s move.

Summary of the statement

Market reaction 

In a knee-jerk reaction to the SNB rate hike decision, the USD/CHF pair erased losses and swung back on the bids to test 0.8950, up 0.20% on the day.

About SNB Rate Decision

The Swiss National Bank conducts the country’s monetary policy as an independent central bank. It is obliged by the Constitution and by statute to act in accordance with the interests of the country as a whole. Its primary goal is to ensure price stability, while taking due account of economic developments. In so doing, it creates an appropriate environment for economic growth.

• Silver remains depressed for the fourth straight day and languishes near a three-month low.
• The setup favours bearish traders and supports prospects for a breakthrough the 200-DMA.
• Any attempted recovery could attract fresh sellers near the $23.00 mark and remains capped.

Silver enters a bearish consolidation phase on Thursday and oscillates in a narrow trading band around the $22.50-$22.60 area or a three-month low touched the previous day. The white metal, however, manages to hold its neck just above the very important 200-day Simple Moving Average (SMA) support, which should act as a key pivotal point for short-term traders.

Against the backdrop of the recent failure near the 50-day SMA, bearish oscillators on the daily chart support prospects for an eventual breakdown through the technically significant moving average. Some follow-through selling below the $22.25 area, representing the 61.8% Fibonacci retracement level of the March-May rally, will be seen as a fresh trigger for bearish traders and pave the way for further losses.

The XAG/USD might then turn vulnerable to weaken further below the $22.00 mark and accelerate the downfall towards testing the $21.70-$21.65 support zone. The downward trajectory could get extended towards the $21.25 intermediate support en route to the $21.00 round figure and the next relevant support near the $20.50 area. Bears might eventually target the YTD low, levels just below the $20.00 psychological mark.

On the flip side, any meaningful recovery attempt might now confront stiff resistance near the $23.00 mark, which coincides with the 50% Fibo. level. That said, a sustained strength beyond could trigger a short-covering rally and lift the XAG/USD to the $23.30-$23.35 intermediate hurdle en route to 38.2% Fibo. level, around the $23.70-$23.75 zone. The latter should act as a key barrier and cap any further gains.

Silver daily chart

Key levels to watch

A crucial moment for Turkish markets: CBT holds its monthly rate meeting today. Economists at Commerzbank analyze the Turkish Lira outlook – which has been relatively stable in recent days.

TRY could be stable by itself for some time as the upcoming policy environment is not known yet

The Swiss National Bank (SNB) meets to set rates today. Economists at ING analyze CHF's outlook ahead of the decision.

Majority of economists are going for a 25 bps hike

The majority of economists are going for a 25 bps hike, but a sizable minority look for 50 bps. 

Recent SNB rhetoric has remained hawkish despite core inflation dropping below 2% year-on-year. Last September, we estimated that the SNB wanted to engineer 5% nominal appreciation per year to keep the real CHF stable. That is roughly what has happened. Where we were wrong is that it has come more through USD/CHF than EUR/CHF. 

Expect a hawkish SNB today to keep USD/CHF offered – targeting May's 0.8820 low.

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

• GBP/JPY portrays pre-BoE consolidation amid sluggish markets.
• BoJ’s Noguchi defends ultra-easy monetary policy to target higher wages.
• Yields pick-up bids of late as major central banks reiterate “higher for longer” interest rate pledge.
• UK inflation underpinned hopes of higher BoE rate than 0.25% widely anticipated.

GBP/JPY remains pressured around 180.90 as it prints mild losses while bracing for the first weekly loss in six heading into Thursday’s London open. In doing so, the cross-currency pair prepares for the Bank of England (BoE) Interest Rate Decision.

While the BoE is expected to announce a 0.25% rate hike and the latest UK inflation clues have been hawkish, the GBP/JPY pair’s recent losses could be linked to the pre-BoE positioning.

That said, the previous day’s strong UK inflation data also underpins the bullish bias about the cross-currency pair. On Wednesday, 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, also crossed the 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 that, the dovish comments from the Bank of Japan (BoJ) commentary and upbeat yields also restrict GBP/JPY downside.

On Thursday, BoJ board member Asahi Noguchi said the central bank must maintain an ultra-loose monetary policy to ensure wages, seen as key to driving inflation to its 2% target, continue to increase as a trend, reported Reuters. On Wednesday, Japanese Prime Minister Fumio Kishida advocated higher wages while also saying, “Positive moves are appearing in Japan's economy.”

On the same line, BoJ Governor Kazuo Ueda said the previous day that the BoJ will patiently maintain an easy monetary policy to stably and sustainably achieve the 2% price target accompanied by wage growth.

Hence, the policymakers’ defense of the ultra-easy monetary policy to bolster wages exerts downside pressure on the Japanese Yen (JPY), especially when the US Treasury bond yields grind higher.

Against this backdrop, the S&P500 Futures mildly offered for the fourth consecutive day near 4,405 whereas the US benchmark 10-year Treasury bond yields stabilize recently advanced to 3.74% while the two-year counterpart also rise to 4.74% at the latest.

Looking forward, BoE Interest Rate Decision will be key to watch for near-term directions. Apart from that, the multiple central bank announcements, ex-BoE, and the market’s reaction to the previous day’s hawkish rhetoric comments from Fed’s Powell will be eyed for clear directions.

Technical analysis

Although the overbought RSI (14) line challenges the GBP/JPY buyers, the 5-DMA support of near the 180.00 threshold restricts the short-term downside of the cross-currency pair. That said, the bears remain off the table unless witnessing a clear downside break of the previous resistance line stretched from April 2022, close to 176.50 at the latest.

It is a big day for central bank policy meetings around the world. Economists at ING discuss implications for the US Dollar.

Rest of World catch-up with Fed sends Dollar offered

Last week's Australian labour market release for the month of May smashed market forecasts. Subsequently, economists at TD Securities now expect the RBA to hike in July and retain the August hike.

4.85% terminal, upside risk

In its monthly assessment report, the Japanese Cabinet Office upgraded its view on the country’s employment situation for the first time in 11 months, noting that the “employment trends showed "improvement recently.”

Additional takeaways

Market reaction

USD/JPY is holding steady near 141.85, uninspired by the above report.

Sterling continues to ride high. Economists at ING discuss GBP outlook ahead of the Bank of England (BoE) meeting.

Sterling can hold onto gains in the near term

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

• NZD/USD consolidates the previous day’s recovery inside one-month-old symmetrical triangle.
• Impending bull cross on MACD, sustained trading beyond 100-EMA keeps Kiwi buyers hopeful.
• Bears need to conquer 0.6200 to retake control, bulls can aim for 0.6310 on breakout.

NZD/USD clings to mild losses around 0.6190 as it reverses the previous day’s rebound heading into Thursday’s European session. In doing so, the Kiwi pair retreats within a one-month-old symmetrical triangle, funning down towards the breakout points of late.

That said, the early Thursday’s Gravestone Doji candlestick on the four-hour chart joins the downbeat sentiment to exert downside pressure on the NZD/USD price.

Suggesting another attempt to break the 100-bar Exponential Moving Average (EMA) surrounding 0.6155.

Following that, the stated triangle’s bottom line of near 0.6150 and a one-month-long horizontal support zone surrounding 0.6100 will lure the NZD/USD bears.

Meanwhile, the 61.8% Fibonacci retracement of its May 11-31 downside, near 0.6230, guards the immediate upside of the NZD/USD pair, a break of which will highlight the aforementioned triangle’s top line, close to 0.6240 at the latest.

In a case where the Kiwi pair manages to remain firmer past 0.6240, the late May swing high of around 0.6310 can act as an extra filter towards the north before giving control to the bulls.

 To sum up, NZD/USD pair is suggesting an intraday fall but the overall bullish bias remains intact.

NZD/USD: Four-hour chart

Trend: Upside expected

Fed Chair Powell delivered his semiannual monetary policy report to the House Committee on Financial Services. Economists at Rabobank analyze Powell’s remarks.

Fed remains unable to look objectively at its own role in the SVB collapse

Open interest in crude oil futures markets rose for the second session in a row on Wednesday, this time by nearly 5K contracts according to preliminary readings from CME Group. Volume, instead, resumed the downtrend and dropped by around 225.8K contracts.

WTI: Initial hurdle emerges around $75.00

Wednesday’s strong rebound in prices of WTI was accompanied by increasing open interest and a sharp drop in volume. Against that, there is still scope for further gains, while the monthly high near the $75.00 mark per barrel continues to cap the upside for the time being.

Economists at Danske Bank analyze EUR/BP outlook ahead of the Bank of England (BoE) meeting.

Look to sell GBP on aggressive BoE pricing

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

GBP/USD is now seen trading within 1.2650-1.2850 for the time being, suggest Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group.

Key Quotes

• The index alternates gains with losses near 102.00.
• Chief J. Powell will testify once again later in the session.
• Weekly Claims, housing data, Fedspeak next on tap in the docket.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, trades in a cautious tone near the 102.00 area on Thursday.

USD Index looks at data, Powell

The index navigates in the lower end of the monthly range near the 102.00 neighbourhood following Wednesday’s post-Powell sharp pullback.

Indeed, the greenback saw its decline gather impulse despite Fed’s Jerome Powell signalled that further interest rate hikes remain in store, as the battle to tackle inflation is far from over.

Chief Powell will testify once again later on Wednesday, this time before the Committee on Banking, Housing and Urban Affairs, and investors expect the message to fall in line with the previous one.

In the US data space, usual Initial Jobless Claims are due seconded by the Chicago Fed National Activity Index, the CB Leading Index, Existing Home Sales and speeches by FOMC C. Waller (permanent voter, hawk), FOMC M. Bowman (permanent voter, centrist), Cleveland Fed L. Mester (2024 voter, hawk) and Richmond Fed T. Barkin (2024 voter, centrist).

What to look for around USD

The greenback comes under pressure and challenges the key monthly support around the 102.00 zone in the second half of the week.

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: 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 0.01% at 102.07 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/TRY repeats two-week-old inaction surrounding the all-time high, renews intraday low of late.
• Turkish government lifted minimum wage by 34% earlier in the week to back odds of a bumper rate hike.
• Fed Chair Powell’s failure to please markets with hawkish statements prod US Dollar bulls.
• Turkish Lira could rally on CBRT’s heavy rate hike, expected 20.0% versus 8.5% prior.

USD/TRY takes offers to refresh the intraday low near 23.53 heading into Thursday’s European session. In doing so, the Turkish Lira (TRY) pair aptly portrays the market’s cautious mood ahead of the Central Bank of the Republic of Türkiye (CBRT) Interest Rate Decision.

Apart from the pre-CBRT anxiety, the holiday in China and caution before multiple central bank announcements from the UK, Switzerland, Mexico and Indonesia also keeps the USD/TRY traders on their toes.

It’s worth noting that a change of the CBRT leader and Turkish Finance Minister earlier in the month raised hawkish concerns about the Turkish central bank’s bold move, likely to the tune of around 1150 basis points (bps) to 20.0%. Additionally, Turkish President Recep Tayyip Erdogan’s readiness to relinquish control over the rates to tame higher inflation rates also bolsters hopes of witnessing an interesting day ahead.

Additionally, Tuesday’s announcement of a 34% hike in the minimum wage in Turkiye adds strength to the hopes of witnessing a bumper rate increase and a rally in the Turkish Lira (TRY).

On the other hand, US Dollar Index (DXY) licks its wounds at the monthly low surrounding 102.00 despite Fed Chair Jerome Powell’s failure to convince markets of its hawkish bias. That said, Fed’s Powell stuck to hawkish bias in bi-annual testimony to the US House Financial Services Committee despite marking the absence of any fresh comments, as well as contrasting statements from other Fed Officials. The same weighed on the US Dollar the previous day. That said, Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and underpin the US Dollar 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.

Looking ahead, CBRT’s ability to please the TRY bulls will be at the test as the market is too hawkish and a slightly lesser-than-expected rate hike might also tease the bears to refresh the USD/TRY top, after an initial pullback.

Technical analysis

USD/TRY pair portrays the lower high formation on the daily chart ever since it marked a Doji candlestick while refreshing the record top on June 13. The same joins the overbought RSI conditions and recently downbeat MACD signals to lure the Turkish Lira buyers to regain the 20.00 round figure.

• USD/CHF has picked strength around 0.8920, following the footprints of the USD Index.
• The downside move in the USD Index has paused for now but is not faded as Fed policymakers have delivered dovish commentary.
• The SNB is expected to raise interest rates further by 25 basis points (bps) to 1.75%.

The USD/CHF pair has attempted a recovery after building a base around 0.8920 in the early European session. The Swiss Franc asset has picked some strength after observing that the US Dollar Index (DXY) has gauged an intermediate support around 102.00.

The downside momentum in the USD Index has paused for now but is not faded as Federal Reserve (Fed) policymakers have delivered dovish commentary for further interest rate action.

Meanwhile, the interest rate decision by the Swiss National Bank (SNB), which will be announced at 7:30 GMT, will be in focus.  A poll from Reuters showed that SNB Chairman Thomas J. Jordan will raise interest rates by 25 basis points (bps) to 1.75% as the central bank believes that it is really important to bring Swiss inflation to a level of price stability.

USD/CHF is declining toward its intermediate support plotted from May 12 low around 0.8900 on a four-hour scale. The 50-period Exponential Moving Average (EMA) at 0.974 has been acting as a barricade for the US Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-60.00, which indicates that each pullback move in the asset has been capitalized as a selling opportunity by the market participants.

Going forward, a breakdown below May 12 low around 0.8900 would expose the Swiss Franc asset to April 13 low at 0.8860 followed by the ultimate support plotted from May 04 low at 0.8820.

In an alternate scenario, an upside move above the psychological resistance of 0.9000 would fade the bearish bias and will drive the asset toward June 06 low at 0.9033 and May 30 high at 0.9084.

USD/CHF four-hour chart

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

The Swiss National Bank (SNB) and the Bank of England (BoE) will be the next major central banks to announce monetary policy decisions on Thursday. In the second half of the day, the weekly Initial Jobless Claims data from the US will be looked upon for fresh impetus. The US economic docket will also feature Chicago Fed's National Activity Index and Existing Home Sales for May. FOMC Chairman Jerome Powell will speak on the policy outlook in the second day of his semi-annual congressional testimony. Finally, the European Commission will release the preliminary Consumer Confidence data for June.

On Wednesday, the US Dollar came under strong selling pressure during the American trading hours. The US Dollar Index (DXY) snapped a three-day winning streak and erased its weekly gains. The DXY stays relatively quiet, slightly above 102.00 early Thursday. 

In his prepared remarks for delivery on the first day of the testimony, Powell reiterated that nearly all FOMC participants expect it will be appropriate to raise interest rates "somewhat further" by the end of the year. "We will continue to make our decisions meeting by meeting based on incoming data, implications for outlook and balance of risks," Powell added. Following these comments, Wall Street's main indexes turned south but the USD failed to capitalize on risk aversion. According to the CME Group FedWatch Tool, the probability of the Fed raising the policy rate by 25 basis points in July declined toward 70% from 77% ahead of Powell's testimony.

GBP/USD fell below 1.2700 in the European session on Wednesday but staged a rebound later in the day. Early Thursday, the pair holds steady at around 1.2750. The BoE is widely expected to lift its policy rate to 4.75% from 4.5%. Since there will not be a press conference, investors will pay close attention to vote split and the language in the policy statement.

BoE Interest Rate Decision: Another 25 bps hike favored as UK inflation stays hot.

Following a three-day rebound, USD/CHF met resistance near 0.9000 and declined toward 0.8900 on Wednesday. The SNB if forecast to raise its key rate by 25 basis points to 1.75%. 

EUR/USD gathered bullish momentum and climbed to its highest level since in over a month, above 1.0950. The pair continues to stretch higher toward 1.1000 early Thursday.

USD/JPY advanced to a fresh multi-month high near 142.50 on Wednesday but lost its traction in the late American session. The pair trades in a narrow channel below 142.00 early Thursday. Bank of Japan (BoJ) board member Asahi Noguchi argued that a weak Yen hurts households via rising prices but benefits firms via an increase in overseas profits and a rise in inbound tourism. Noguchi further added that the monetary policy does not directly target exchange rates.

Gold price fell to its weakest level in three months below $1,920 on Wednesday but managed to stage a rebound amid retreating US Treasury bond yields in the late American session. Nevertheless, XAU/USD is finding it difficult to hold its ground early Thursday, trading in negative territory slightly below $1,930.

Bitcoin climbed above $30,000 for the first time in two months on Thursday. At the time of press, BTC/USD was up nearly 1% on the day at $30,300. Ethereum gained more than 5% on Wednesday and extended its rally early Thursday ETH/USD is already up nearly 12% this week and was last seen trading above $1,900,

FX option expiries for June 22 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0790 2b
• 1.0825 444m
• 1.0850 658m
• 1.0875 674m
• 1.0900 2.7b
• 1.1000 627m
• 1.1050 584m

- GBP/USD: GBP amounts     

• 1.2560 340m

- USD/JPY: USD amounts                     

• 141.00 381m
• 142.00 933m
• 142.50 909m

- USD/CHF: USD amounts        

• 0.8750 400m
• 0.8900 349m
• 0.8950 470m
• 0.8990 540m
• 0.9100 380m

- AUD/USD: AUD amounts

• 0.6675 465m

- USD/CAD: USD amounts       

• 1.3100 455m
• 1.3115 340m
• 1.3400 545m

- NZD/USD: NZD amounts

• 0.6000 523m

- EUR/GBP: EUR amounts        

• 0.8630 645m

• WTI crude oil pares the biggest daily gains in a week amid sluggish session.
• US Dollar’s heavy fall despite hawkish Fed signals joined price-positive API inventories to propel Oil price previously.
• Holidays in China, mixed catalysts and cautious mood ahead of multiple central bank announcements restrict WTI moves.
• EIA crude oil stockpiles, risk catalysts eyed for clear directions.

WTI takes offers to refresh the intraday low near $72.00 heading into Thursday’s European session. In doing so, the black gold consolidates the previous day’s gains, the biggest in a week, amid a sluggish Asian session, as well as due to the US Dollar’s pause in Wednesday’s downside.

Market sentiment remains slightly offbeat despite China’s holiday as fears of “higher for longer” interest rates join the US-China tension. The downbeat mood joins the hawkish bias at the Federal Reserve to put a floor under the US Dollar and weigh on the Oil price.

US Dollar Index (DXY) licks its wounds at the monthly low surrounding 102.00 despite Fed Chair Jerome Powell’s failure to convince markets of its hawkish bias. That said, Fed’s Powell stuck to hawkish bias in bi-annual testimony to the US House Financial Services Committee despite marking the absence of any fresh comments, as well as contrasting statements from other Fed Officials. The same weighed on the US Dollar the previous day. That said, Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and underpin the US Dollar 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.

It should be noted that a surprise draw in the Oil inventories, as per the American Petroleum Institute (API), -1.246M for the week ended on June 16 versus 1.024M prior, joined a heavy US Dollar fall the previous day to lure the WTI crude oil buyers. On the same line was the news suggesting the first recovery in the US Oil refining capacity, after a two-year downturn.

Elsewhere, doubts about China’s rejections of recession woes and the Sino-American tension add strength to the downbeat risk appetite, despite the dicey session, which in turn weighs on the Oil price.

While portraying the mood, the S&P500 Futures mildly offered for the fourth consecutive day near 4,405 whereas the US benchmark 10-year Treasury bond yields stabilize near 3.72% by the press time.

Looking ahead, the weekly official inventory data from the US Energy Information Administration (EIA) will join the multiple central bank announcements to entertain the energy traders.

Technical analysis

Failure to provide a daily closing beyond the 50-DMA hurdle, around $72.90 by the press time, joins sluggish markets to trigger the WTI crude oil’s consolidation.

Bank of Japan (BoJ) board member Asahi Noguchi is back on the wires this Thursday, commenting on the exchange rate value and the inflation outlook.

Additional quotes

It's important for wages to rise continuously, not just once.

Desirable for wages to rise next year more than this year.

Personally think it's necessary for nominal wages to rise more than the 2% inflation the BoJ targets.

Yens' decline late last year was too rapid.

Weak Yen hurts households via rising prices, but benefits firms via increase in overseas profits, rise in inbound tourism.

Overseas growth likely to slow toward next year, so it's important for domestic demand to underpin Japan's recovery.

FX should move stably reflecting fundamentals.

Monetary policy does not directly target FX.

We are finally seeing benefits of weak yen appearing such as more firms shifting production back to Japan.

BoJ’s decision last December to widen allowance band around its yield target was not monetary tightening.

Don't see need to make operational tweaks to YCC for time being.

We should prioritize keeping yields stably low to sustainably achieve our price target at earliest date possible.

Market reaction

USD/JPY is holding higher ground near 141.80 on the above comments. The spot is almost unchanged on the day.

Considering advanced prints from CME Group for gold futures markets, open interest shrank by just 866 contracts after three consecutive daily builds on Wednesday. Volume followed suit and went down by around 66.3K contracts, partially leaving behind the previous drop.

Gold appears supported around $1920

Gold prices briefly revisited the $1920 region, or multi-week lows, on Wednesday. The downtick was amidst shrinking open interest and volume and stands against the continuation of the downtrend for the time being. In the meantime, the precious metal remains contained around the $1920 zone per troy ounce.

Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group note EUR/USD could now head towards 1.1050 in the near term.

Key Quotes

• EUR/USD has surrendered the majority of its intraday gains as the USD Index has found intermediate support.
• The USD Index was heavily battered on Wednesday after dovish commentaries from Fed policymakers.
• Price pressures in Eurozone have decelerated heavily but are still thrice the required rate of 2%.

The EUR/USD pair has surrendered the majority of intraday gains added in the Asian session. The major currency pair has faced some selling pressure while attempting to recapture the psychological resistance of 1.1000. Late Wednesday, the shared currency pair reported a perpendicular rally, which was supported by a sell-off in the US Dollar Index (DXY).

S&P500 futures have generated some losses in Asia, carry-forwarded negative cues observed on Wednesday. On Wednesday, US equities faced immense pressure as Federal Reserve (Fed) chair Jerome Powell’s hawkish testimony weighed heavily on tech-savvy stocks.

The USD Index is looking for support after diving to near its crucial support of 102.00. The appeal for the USD index faded sharply as Fed Powell’s testimony provided clarity to investors about further policy action. Jerome Powell stated that the majority of policymakers are in favor of more interest rates this year. The focus of the central bank is to bring down inflation to 2% but it has a long way to go.

The major catalyst that has weighed pressure on the USD Index is the dovish commentary from Fed policymakers. Atlanta Fed President Raphael Bostic cited that the central bank should not raise interest rates further or it would risk "needlessly" sapping the strength of the economy. While Chicago Fed Bank President Austan Goolsbee favored allowing current interest rates required time to show their impact on the economy.

On the Eurozone front, the context of more interest rate hikes from the European Central Bank (ECB) is well supported as inflation has been confirmed above 6%. No doubt, price pressures have decelerated heavily but are still thrice the required rate of 2%. ECB President Christine Lagarde has already confirmed a rate hike in the July meeting.

• Interest rate decision from the UK central bank is due this Thursday.
• Bank of England is set to deliver another 25 bps rate hike, raising rates to 4.75%.
• Pound Sterling is likely to witness intense volatility on the BoE policy announcements.

The Bank of England (BoE) is on track to deliver its 13th straight rate hike this Thursday, as it remains on a firefighting mission to tame stubbornly high inflation levels.

Even though inflation has softened from the double-digit figures, the United Kingdom’s consumer price inflation remains one of the highest among major advanced economies. Therefore, the main focus will remain on the language in the Bank of England’s monetary policy statement for fresh cues on its rate hike outlook, in the absence of Governor Andrew Bailey’s press conference and updated economic projections. 

Bank of England interest rate decision: What to know in markets on Thursday, June 22

• GBP/USD is consolidating the recovery gains below 1.2800, as the US Dollar (USD) licks its wounds near monthly lows after less hawkish Chair Jerome Powell’s testimony-induced sell-off.
• Testifying before the House Financial Services Committee on Wednesday, Fed Chair Jerome Powell said: “inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go," adding that "nearly all" participants expected further rate increases.
• The UK inflation data came in hotter than expected, with the Core CPI hitting the highest rate since March 1992. Investors seem to be split between a 25 bps and 50 bps, with markets now pricing in a 52% probability for a 25 bps BoE June rate hike, down from about 78% seen before the UK CPI data release.
• Markets trade with caution early Thursday amid expectations of further central banks’ tightening. US S&P 500 futures are marginally lower while the benchmark 10-year US Treasury bond yields trade close to weekly troughs near 3.70%
• The BoE policy announcements will be key to the short-term direction in the GBP/USD pair while the US Jobless Claims and day 2 of Powell’s testimony will also hog some limelight.

Analysts at Societe Generale weighed, “could the BoE raise rates by 50bp tomorrow instead of 25bp? That’s the question after the latest inflation shock in the UK this morning. Core CPI accelerated to 7.1% yoy in May, a new record high. We know from last week that wage growth accelerated to 7.2% yoy. Both numbers are moving further away from the 2% inflation target (second round effects?) so the BoE may be forced to respond.”

“The dilemma facing the BoE is whether to extend the tightening cycle by a few months or step up the pace again to reach a higher peak sooner. Both scenarios risk causing havoc in the housing market,” Societe Generale added.

When will the BoE release its monetary policy decision and how could it affect GBP/USD?

The BoE is expected to raise the key rates by 25 basis points (bps) from 4.50% to a 15-year high of 4.75% on Thursday, June 22. The interest rate decision will be announced at 11:00 GMT, accompanied by the Minutes of the meeting.

Speaking at a parliament committee last week, BoE Governor Andrew Bailey said that inflation was taking "a lot longer than expected" to come down and the labor market was "very tight". Bailey spoke after the latest data published by the Office for National Statistics (ONS)  showed that the United Kingdom’s (UK) ILO Unemployment Rate dropped to 3.8% in the quarter to April from the 3.9% recorded in the three months to March, beating the market consensus of a 4.0% print.

Meanwhile, the number of people claiming jobless benefits dropped by 13.6K in May, compared with the expected decrease of 9.6K. The UK’s average weekly earnings, excluding bonuses, arrived at 7.2% 3Mo/YoY in April versus 6.8% prior and 6.9% expected. It’s worth noting that the April data includes the impact of a 9.7% rise in the minimum wage.

The numbers caused markets to ramp up their bets on BoE rate hikes, driving two-year government bond yields to their highest since 2008. Markets ramped up their expectations for the peak in BoE rates to as high as 6.0% by early 2024.

However, raising doubts about a potential BoE hawkish rate hike, two separate surveys released a day ahead of the UK Consumer Price Index (CPI) data showed that the UK food price inflation is easing, suggesting that it may have peaked already. “The market research firm Kantar said grocery price increases eased to 16.5% in the four weeks through June 11, down from 17.2% the previous month and the lowest reading this year. Lloyds Bank Plc said production costs for UK food and drink makers fell for the first time last month since 2016,” Bloomberg reported on Tuesday.

Wednesday’s all-important UK inflation data came in hot and reinforced the narrative that the BoE will have to keep up with interest rate increases to fight sticky inflation. According to the latest data published by the UK Office for National Statistics (ONS), the United Kingdom's annual CPI accelerated 8.7% in May, at the same pace seen in April. The market consensus was for an 8.4% increase. 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.

That said, chances for a 50 bps rate hike appear minimal, as the Bank would refrain from dipping the UK economy into recession by going for large rate hikes. Instead, markets are expecting the BoE to lean toward multiple 25 bps hikes over the course of this year. Therefore, the policy guidance and voting composition will be key to determining the next price direction in the GBP/USD pair. At the May policy meeting, two policymakers, Silvana Tenreyro and Swati Dhingra, voted to maintain rates at 4.25%.

The Pound Sterling is likely to come under intense selling pressure should the UK central bank stick to its cautious tone in the policy statement, fuelling uncertainty on the rate hike path. The GBP/USD pair is likely to correct toward 1.2600 in such a scenario. On the other hand, the major could extend the uptrend and challenge the powerful resistance at 1.2870 on a hawkish outlook.

Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “GBP/USD has charted out a Bull Flag formation on the daily candlesticks, awaiting confirmation on the BoE interest rates decision. The 14-day Relative Strength Index (RSI) has turned flat but remains well above the 50 level, suggesting that there is more room for the upside for Cable buyers.”

Dhwani also outlines important technical levels to trade the GBP/USD pair: “On the upside, a sustained move above the 1.2780 hurdle is likely to validate the Bull Flag, fuelling a fresh upswing toward the 14-month high of 1.2849. Further up, Pound Sterling buyers will challenge the 1.2900 round figure. Alternatively, strong support awaits at 1.2672, below which a sharp sell-off toward the 1.2600 threshold cannot be ruled out.” 

Bank of England Interest Rate related content

About the BoE Interest Rate Decision

The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it will be positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it will be

• Gold Price lacks clear directions as bears struggle with $1,930 key support.
• Fed Chair Powell’s unimpressive testimony, off in China restricts immediate XAU/USD moves.
• Cautious mood ahead of multiple central bank announcements also prods Gold traders.

Gold Price (XAU/USD) remains on the back foot as it jostles with short-term key support, lacks a directional sense of late, as markets await a slew of central bank decisions. Apart from the pre-announcement anxiety, the holiday in China and mixed catalysts about the Fed also restrict the Gold Price moves.

Fed Chairman Jerome Powell stuck to hawkish bias in his bi-annual testimony to the US House Financial Services Committee the previous day. However, the absence of any fresh comments, as well as contrasting statements from other Fed Officials, weighs on the US Dollar and restricts XAU/USD moves.

Even so, major central banks’ defense of the “higher for longer” interest rate view and doubts about China’s rejections of recession woes, as well as the Sino-American tension, exert downside pressure on the Gold Price.

Moving on, monetary policy announcements from the UK, Switzerland, Mexico, Turkey and Indonesia are in the pipeline and can infuse the market’s volatility.

Also read: Gold Price Forecast: XAU/USD downside bias remains intact whilst below 100 DMA at $1,942

Gold Price: Key levels to watch

Our Technical Confluence Indicator signals that the Gold Price clings to a short-term key support around $1,930 comprising Pivot Point one-week S1, previous monthly low and Fibonacci 61.8% on the daily chart.

It’s worth noting that $1,924 also checks the XAU/USD bears before giving them control. That said, the $1,924 level encompasses the previous weekly low and Fibonacci 23.6% on the daily chart.

Meanwhile, the $1,942 level comprising the Fibonacci 38.2% on the weekly chart and 100-DMA appears a tough nut to crack for Gold buyers.

Following that, the 10-DMA and Pivot Point one-week R2, close to $1,950, will precede the $1,954 resistance confluence including Fibonacci 161.8% on the daily chart and the middle band of the Bollinger.

Overall, Gold Price remains on the bear's radar below $1,954 despite the latest inaction.

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.

• USD/CAD drops to its lowest level since September 2022 during the Asian session on Thursday.
• The overnight rally in Oil prices underpins the Loonie and weighs amid subdued USD price action.
• Bets for a 25 Fed rate hike in July, economic woes help limit losses for the buck and the major.

The USD/CAD pair adds to the previous day's heavy losses and remains depressed for the second successive day on Thursday, hitting its lowest level since September 2022 around mid-1.3100s during the Asian session.

Crude Oil prices consolidate near a two-week high touched on Wednesday and continue to underpin the commodity-linked Loonie. The US Dollar (USD), on the other hand, is seen hovering around the monthly low in the wake of the overnight less hawkish remarks by Federal Reserve (Fed) Chair Jerome Powell, saying that it may make sense to raise rates at a more moderate pace. This, in turn, exerts some downward pressure on the USD/CAD pair, though a combination of factors helps limit further losses, at least for the time being.

Worries that a global economic downturn, particularly in China, act as a headwind for Crude Oil prices. Furthermore, bets for at least a 25 bps Fed rate hike in July hold back traders from placing aggressive bearish bets around the USD and lend support to the USD/CAD pair. Testifying before the House Financial Services Committee, Powell noted that the fight against inflation is still not over and despite the latest pause, officials agreed borrowing costs would likely need to move higher. This reinforced expectations for further tightening by the Fed.

Apart from this, a generally weaker tone around the equity markets could benefit the Greenback's relative safe-haven status. Moreover, the Relative Strength Index (RSI) on the daily chart is flashing oversold conditions and supports prospects for a modest recovery for the USD/CAD pair. That said, the lack of any meaningful buying suggests that the recent bearish trend witnessed over the past month or so is still far from being over and that the path of least resistance for spot prices is to the downside. This, in turn, warrants caution for bullish traders.

Market participants now look to Powell's second day of testimony before the Senate Banking Committee.  Any signals on monetary policy will influence the USD and provide a fresh impetus to the USD/CAD pair. Traders on Thursday will further take cues from the US economic docket, featuring the release of Weekly Initial Jobless Claims and Existing Home Sales data later during the early North American session. This, along with Oil price dynamics, might further contribute to producing short-term trading opportunities around the major.

Technical levels to watch

• USD/JPY rebounds from intraday low amid inactive Asian session.
• BoJ’s Noguchi defends easy-money policy to ensure higher wages, Fed Chair Powell’s testimony repeats previous hawkish comments.
• Off in China, cautious mood ahead of multiple central bank announcements restrict yields, Yen.

USD/JPY picks up bids to pare intraday losses around 141.75 amid early Thursday morning in Europe. In doing so, the Yen pair justifies recently dovish commentary from a Bank of Japan (BoJ) Official, versus the hawkish bias of Federal Reserve (Fed) Chairman Jerome Powell.

That said, Bank of Japan (BOJ) board member Asahi Noguchi said on Thursday the central bank must maintain an ultra-loose monetary policy to ensure wages, seen as key to driving inflation to its 2% target, continue to increase as a trend, reported Reuters.

On Wednesday, Japanese Prime Minister Fumio Kishida advocated higher wages while also saying, “Positive moves are appearing in Japan's economy.”

It should be noted that the Bank of Japan (BoJ) Monetary Policy Meeting Minutes for April stated, “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 government and BoJ.” The Minutes statement also said that one member flagged a tweak to the Yield Curve Control (YCC) policy while some debated the risk of being too late in raising rates.

On the same line, BoJ Governor Kazuo Ueda said the previous day that the BoJ will patiently maintain an easy monetary policy to stably and sustainably achieve the 2% price target accompanied by wage growth.

Hence, the policymakers’ defense of the ultra-easy monetary policy to bolster wages exerts downside pressure on the Japanese Yen (JPY), especially when the US Treasury bond yields grind higher.

On the other hand, Fed’s Powell stuck to hawkish bias in bi-annual testimony to the US House Financial Services Committee despite marking the absence of any fresh comments, as well as contrasting statements from other Fed Officials. The same weighed on the US Dollar the previous day. That said, Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and underpin the US Dollar 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.

It’s worth noting that doubts about China’s rejections of recession woes and the Sino-American tension add strength to the downbeat risk appetite, despite the dicey session.

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. It should be noted that the S&P500 Futures mildly offered for the fourth consecutive day near 4,405 whereas the US benchmark 10-year Treasury bond yields stabilize near 3.72% by the press time.

To sum up, the BoJ vs. Fed divergence puts a floor under the USD/JPY price despite broad US Dollar weakness.           

Technical analysis

Unless providing a daily close below the previous resistance line stretched from early March, around 141.50 by the press time, USD/JPY remains on the bull’s radar.

• USD/INR bears keep the reins at weekly low despite recent inaction.
• 10-week-old ascending support line, horizontal support zone challenge Indian Rupee bulls.
• Key SMAs, descending trend line from late May restrict immediate upside.
• Oscillators suggest limited downside room and highlight previous monthly lows.

USD/INR bears flirt with the short-term key supports around 81.90 amid the sluggish Asian session during early Thursday, mainly due to China’s holiday and cautious mood ahead of the key central bank announcements.

In doing so, the Indian Rupee (INR) pair holds onto the early-week U-turn from the 50-SMA amid the looming bear cross on the MACD.

It’s worth noting, however, that the below 50.0 RSI (14) line suggests bottom-picking of the USD/INR pair and hence highlight the ascending support line from April 14, as well as a 2.5-month-old horizontal support zone, respectively near 81.95 and around 81.85-80.

Hence, the USD/INR bears need validation from 81.80 to tighten the grip. Following that, the lows marked in May and April, close to 81.65 and 81.50 in that order, will be in the spotlight ahead of the yearly bottom of 80.88 marked in January.

On the flip side, USD/INR rebound needs validation from the 50-SMA hurdle of 82.10 to convince intraday buyers.

Even so, a downward-sloping trend line from late May and the 200-SMA can challenge the Indian Rupee sellers near 82.25 and 82.40.

Overall, USD/INR remains on the bear’s radar unless crossing 82.40 but the downside room appears limited.

USD/INR: Four-hour chart

Trend: Limited downside expected

• GBP/USD oscillates in a narrow trading band ahead of the key BoE decision on Thursday.
• Rising bets for a jumbo 50 bps lift-off continue to underpin the GBP and act as a tailwind.
• The USD languishes near the monthly low and further lends some support to the major.

The GBP/USD pair struggles to capitalize on the previous day's goodish rebound from sub-1.2700 levels, or the weekly low and oscillates in a narrow trading band through the Asian session on Thursday. The pair currently trades around the 1.2765-1.2770 area, nearly unchanged for the day, as traders now look to the highly-anticipated Bank of England (BoE) policy decision before placing fresh directional bets.

Investors on Wednesday ramped up bets for a more aggressive policy tightening by the BoE following the release of hotter-than-expected UK consumer inflation data, which defied expectations and held steady at the 8.7% YoY rate in May. Moreover, core CPI - excluding volatile energy, food, alcohol and tobacco prices - accelerated from 6.8% in April to 7.1% or the highest rate since March 1992. This comes on the back of the upbeat UK jobs data released last week, which showed near-record wage growth and forced investors to increase their forecast for peak interest rates to 6.01% by February 2024.

The expectations pushed the yield on the two-year British government bonds, which are more sensitive to rate-hike expectations, to its highest since 2008 on Wednesday. This, along with subdued US Dollar (USD) price action, continues to act as a tailwind for the GBP/USD pair heading into the key central bank event risk. In fact, the USD Index, which tracks the Greenback against a basket of currencies, languishes near the monthly low in the wake of Federal Reserve (Fed) chair Jerome Powell's less hawkish remarks overnight, saying that it may make sense to raise rates at a more moderate pace.

Testifying before the House Financial Services Committee on Wednesday, Powell added that the fight against inflation still has a long way to go and despite the latest pause, officials agreed borrowing costs would likely need to move higher. This, in turn, holds back traders from placing aggressive bearish bets around the USD and capping the GBP/USD pair. Nevertheless, the fundamental backdrop suggests that the recent pullback from a 14-month peak has run its course and that the path of least resistance for spot prices is to the upside.

Technical levels to watch

• Natural Gas price edges lower on Thursday, albeit lacks follow-through selling.
• The technical setup favours bulls and supports prospects for additional gains.
• A break below the overnight swing low is needed to negate the positive outlook.

Natural Gas price struggles to capitalize on the previous day's solid bounce from the weekly low and meets with some supply during the Asian session on Thursday. The XNG/USD currently trades around the $2.670 area, down over 0.10% for the day, though the technical setup favours bullish traders.

This week's pullback from a one-month high touched on Tuesday showed some resilience below the 38.2% Fibonacci retracement level of the rally witnessed since the beginning of this month. The subsequent rally back above the 23.6% Fibo. level adds credence to the positive outlook and supports prospects for a further near-term appreciating move. Hence, any subsequent slide might still be seen as a buying opportunity and is likely to remain limited.

The 23.6% Fibo. level, around the $2.65 region now seems to protect the immediate downside ahead of the $2.55 area, or the 38.2% Fibo. level. This is followed by the overnight low, just above the mid-$2.00s horizontal resistance breakpoint, which coincides with the 50-period Simple Moving Average (SMA) on the 4-hour chart and should act as a pivotal point. A convincing break below might prompt some technical selling and pave the way for deeper losses.

The XNG/USD might then accelerate the fall towards 61.8% Fibo. level, around the $2.40 region before eventually dropping to the $2.285-$2.275 area. The downward trajectory could get extended and expose the monthly low, around the $2.195-2.175 zone.

On the flip side, immediate resistance is pegged near the $2.755-$2.765 area ahead of the monthly top, around the $2.780 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and lift the XNG/USD beyond an intermediate barrier near $2.915, towards reclaiming the $3.000 round figure. The momentum could get extended further and eventually lift Natural Gas price to the March swing high, around the $3.075-$3.080 zone.

XNG/USD 4-hour chart

• Market sentiment remains downbeat as major central banks cite inflation woes to defend hawkish policies.
• BI, BoE, SNB, CBRT and Banxico Interest Rate Decisions to entertain traders after China-inflicted market boredom.
• S&P500 Futures print four-day downtrend, bond yields remain indecisive as Fed’s Powell fail to impress hawks despite confirming inflation fears.
• US-China tension, doubts about Beijing’s optimism also weigh on sentiment amid sluggish session.

China holidays join fears of “higher for longer” interest rates to offer a boring but downbeat Asian session on Thursday. While portraying the mood, Wall Street closed in the negative zone for the third consecutive day while the US Treasury bond yields remained intact after a volatile day. It should be noted that the S&P500 Futures mildly offered for the fourth consecutive day near 4,405 whereas the US benchmark yields stabilize by the press time.

Although Federal Reserve (Fed) Chairman Jerome Powell stuck to hawkish bias in bi-annual testimony to the US House Financial Services Committee, the absence of any fresh comments, as well as contrasting statements from other Fed Officials, weigh on the US Dollar despite sour sentiment. That said, Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and underpin the US Dollar 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.

Not only the Fed, but policymakers from the European Central Bank (ECB), Swiss National Bank (SNB) and the Bank of England (BoE) also show readiness for interest rate hikes and favor the risk-off mood. More importantly, the Central Bank of the Republic of Türkiye (CBRT) is up for a heavy 12.5% interest rate lift, from the current 8.5% level, and keeps traders on their toes.

Elsewhere, doubts about China’s rejections of recession woes and the Sino-American tension add strength to the downbeat risk appetite, despite the dicey session. China Vice Premier He Lifeng recently lauded the nation’s economic transition. “China's economic development is showing sound momentum in the first half of the year,” Chinese media Xinhua came out with the statements from China Vice Premier He Lifeng as he met Singapore's Temasek Chairman Lim Boon Heng earlier this week in Beijing.

That said, 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. “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,” said Reuters.

Amid the sluggish plays, the US Dollar Index remains pressured at the monthly low surrounding 102.00 whereas prices of Oil and Gold fade the previous day’s corrective bounce, close to $73.40 and $1,933 in that order by the press time.

Moving on, the aforementioned central bank events and the second-tier US data may entertain the market players.

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

• AUD/USD fades the previous day’s rebound from weekly low as descending trend line from Friday prod bulls.
• Key EMAs, monthly horizontal support stand tall to challenge Aussie bears.
• Easing bearish bias of MACD signals also checks sellers.
• Buyers can aim for fresh monthly high on clear break of 0.6810.

AUD/USD fails to extend the previous day’s corrective bounce off a one-week low, as well as the 100-Exponential Moving Average (EMA), amid early Thursday in Europe. In doing so, the risk-barometer pair portrays the market’s cautious mood ahead of multiple central bank announcements while also suffering from China’s holiday.

AUD/USD pair’s latest retreat could be linked to its inability to cross the weekly resistance line, around 0.6810 by the press time.

However, the quote’s sustained trading beyond the 100-EMA and 200-EMA, as well as an impending bull cross on the MACD indicator, challenge the Aussie pair sellers.

Apart from the 100-EMA and 200-EMA, respectively near 0.6745 and 0.6700, a horizontal area comprising multiple levels marked since June 02, close to 0.6640, also appears to challenge the AUD/USD bears before giving them control.

Alternatively, a successful break of the aforementioned resistance line from Friday, close to 0.6810 at the latest, can trigger the AUD/USD pair’s run-up towards refreshing the monthly top, currently around 0.6900.

It should be noted that a one-week-long horizontal region around 0.6840 acts as an extra filter towards the north.

AUD/USD: Four-hour chart

Trend: Limited downside expected

• Gold price oscillates in a narrow trading band below the 100-day SMA through the Asian session.
• A softer risk tone and subdued US Dollar price action is seen lending some support to the metal.
• Hawkish outlook by major central banks holds back bullish traders from placing aggressive bets.

Gold price struggles to capitalize on the overnight bounce from the $1,919 region, or its lowest level since March 17 and oscillates in a narrow trading band through the Asian session on Thursday. The XAU/USD currently trades around the $1,933 area, nearly unchanged for the day, and seems vulnerable to slide further.

Economic woes and a softer US Dollar lend support to Gold price

Worries about a global economic downturn continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets. Apart from this, subdued US Dollar (USD) demand is seen as another factor lending some support to the safe-haven Gold price. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low in the wake of the uncertainty over the Federal Reserve's (Fed) rate hike path.

Hawkish major central banks act as a headwind for XAU/USD                                                                            

In fact, Fed Chair Jerome Powell, testifying before the House Financial Services Committee on Wednesday, noted that inflation remains very far from the Fed's target, though it may make sense to raise rates at a more moderate pace. Powell, however, added that the fight against inflation is still not over and despite a recent pause, officials agreed borrowing costs would likely need to move higher. This, in turn, reinforced expectations for at least a 25-basis point (bps) hike in July.

Adding to this, a more hawkish outlook by other major central banks keeps investors wary of the non-yielding Gold price. It is worth recalling that the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 bps hike earlier this month. Moreover, the European Central Bank (ECB) lifted rates to the highest level in 22 years, while the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates this Thursday.

Bias still seems tilted in favour of bearish traders

This, in turn, suggests that the path of least resistance for Gold price is to the downside and should hold back bullish traders from placing aggressive bets. Market participants now look to Powell's second day of testimony before the Senate Banking Committee.  Any signals on monetary policy will influence the USD and will likely affect Gold prices. Traders on Thursday will further take cues from the Weekly Initial Jobless Claims and Existing Home Sales data from the United States (US).

Gold price technical outlook

From a technical perspective, the back-to-back closer below the 100-day Simple Moving Average (SMA) could be seen as a fresh trigger for bearish traders and adds credence to the negative outlook. Moreover, oscillators on the daily chart are holding in the bearish territory and are still far from being in the oversold zone. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Some follow-through selling below the overnight swing low, around the $1,919 area, will reaffirm the bearish bias and drag the XAU/USD towards the $1,900 mark. 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 $1,840 region.

On the flip side, the 100-day SMA, currently pegged around the $1,942 zone, now seems to act as an immediate strong barrier. Any subsequent move beyond might continue to attract fresh supply and remain capped near the $1,962-$1,964 region. The next relevant hurdle is seen 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

• US Dollar Index bears attack monthly low marked in the last week.
• Fed Chair Powell’s repetitive remarks in bi-annual testimony contrasts with hawkish central bank bias elsewhere to weigh on DXY.
• Mixed concerns about US-China ties and hopes of stimulus from Beijing also exert downside pressure on greenback.
• Second round of Powell’s testimony, multiple central bank decisions and mid-tier US data eyed for clear directions.

S Dollar Index (DXY) remains pressured around the lowest levels in a month, marked the previous day, as bears seek fresh clues to extend the previous day’s heavy losses during early Thursday. In doing so, the greenback gauge versus the six major currencies prints a minor downside near 102.00 as China holidays and light calendar in Asia restrict the market’s early-day moves.

Fed Chair Jerome Powell’s bi-annual testimony to the US House Financial Services Committee failed to impress the US Dollar bulls amid the absence of any fresh comments, as well as contrasting statements from other Fed Officials. Also weighing on the DXY could be the comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and triggered the US Dollar 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.

Elsewhere, hawkish statements from the European Central Bank (ECB) officials and strong UK inflation suggest a clear rate hike at those central banks and reduce the demand for the US Dollar as Fed’s Powell struggles to convince policy hawks.

Furthermore, the rejection of recession woes for China by China Vice Premier He Lifeng also exerts downside pressure on the DXY. “China's economic development is showing sound momentum in the first half of the year,” Chinese media Xinhua came out with the statements from China Vice Premier He Lifeng as he met Singapore's Temasek Chairman Lim Boon Heng earlier this week in Beijing.

It should be noted, however, that the fears of the US-China tension and the Fed’s clear signals favoring the July rate hike restrict the immediate downside of the US Dollar Index amid sluggish markets. While portraying the sentiment, Wall Street closed in the negative zone for the third consecutive day while the US Treasury bond yields remained intact after a volatile day. It should be noted that the S&P500 Futures remain directionless around 4,405.

Moving on, a slew of central bank announcements from the UK, Indonesia, Switzerland and Mexico will entertain the DXY traders together with the second-tier data surrounding unemployment claims. Additionally important will be the second round of Fed Chair Powell’s testimony, this time before the Senate Banking Committee.

Technical analysis

A clear downside break of a 10-week-old ascending support line, now immediate resistance near 102.30, keeps the US Dollar Index (DXY) bears hopeful.

• USD/MXN holds lower grounds after snapping two-day recovery.
• Sustained trading below 100-EMA, downside break of weekly support line favor confirmation of bearish chart pattern.
• Banxico is likely to announce no interest rate change but a surprise won’t hesitate to break the key 17.00 support.
• Mexican Peso sellers remain off the table below 17.25.

USD/MXN aptly portrays the pre-event anxiety while posting mild gains around 17.13 amid early Thursday morning. In doing so, the Mexican Peso (MXN) pair licks its wounds after printing the first daily loss in three ahead of today’s Central Bank Interest Rate announcement from Mexico, namely the Banxico.

Also read: USD/MXN drops despite hawkish remarks from Fed Powell; Banxico decision in focus

Despite the latest inaction, the USD/MXN pair remains on the seller’s radar as it portrays the double-top bearish chart formation ahead of the Banxico announcements. Adding strength to the downside bias is the Mexican Peso (MXN) pair’s sustained trading below the 100-Exponential Moving Average (EMA), as well as a downside break of the one-week-old ascending trend line, intersecting each other around 17.15 by the press time.

It should be noted, however, that the below 50.0 levels of the RSI (14) line suggests bottom-picking and hence the multi-month low marked the last week around 17.00 gains major attention as the key support.

Should Banxico surprise markets with hawkish moves, the USD/MXN pair can quickly break the 17.00 support and confirm the “double tops” bearish chart formation, which in turn flashes a theoretical target of near 16.75.

Alternatively, an upside break of the 17.15 resistance confluence, mentioned above, isn’t an open invitation to the Mexican Peso sellers as the double tops near 17.25 can challenge the USD/MXN pair’s upside.

USD/MXN: Hourly chart

Trend: Further downside expected

• EUR/GBP scales higher for the fourth straight day and touched over a one-week high on Thursday.
• The ECB’s hawkish outlook continues to underpin the Euro and remains supportive of the move.
• Expectations for more aggressive BoE rate hikes might hold back bulls from placing fresh bets.

The EUR/GBP cross gains some positive traction for the fourth successive day on Thursday and trades just above the 0.8600 mark during the Asian session, or over a one-week high.

The British Pound's relative underperformance could be solely attributed to some repositioning trade ahead of the key central bank event risk - the highly-anticipated Bank of England (BoE) policy meeting. Apart from this, the recent hawkish comments by several European Central Bank (ECB) officials continue to lend some support to the shared currency and act as a tailwind for the EUR/GBP cross. It is worth recalling that ECB Executive Board member Isabel Schnabel said earlier this week that officials can’t afford to be complacent about inflation and shouldn’t worry about raising borrowing costs too far.

Separately, Slovak central bank governor Peter Kazimir said that if the ECB fails to root out inflation now, it could get entrenched in the economy and a continuation of monetary policy tightening is the only reasonable way ahead. The markets were quick to react and have now fully priced in a 4% terminal rate by October, with a 25 bps hike at the July ECB meeting seen as almost a done deal. This, in turn, assists the EUR/GBP cross to build on this week's recovery move from the 0.8520-0.8515 region, or its lowest level since August 2022, though hawkish BoE expectations might cap any further gains.

The stronger UK consumer inflation figures released on Wednesday lifted market bets for a jumbo 50 bps BoE rate hike later today. 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. In fact, the UK Office for National Statistics (ONS) reported that the headline UK CPI unexpectedly held steady at the 8.7% YoY pace in May, while core CPI - which excludes volatile energy, food, alcohol and tobacco prices - accelerated from 6.8% in April to the 7.1% YoY or the highest rate since March 1992.

This might hold back traders from placing fresh bullish bets and keep a lid on the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom ahead of the 0.8500 psychological mark and positioning for any further appreciating move.

Technical levels to watch

Bank of Japan (BoJ) board member Asahi Noguchi said on Thursday, “the BoJ’s new guidance shows its strong commitment to patiently keep easy policy.”

Additional quotes

Market reaction

USD/JPY is off lows but remains pressured near 141.80 on the above comments. The spot is up 0.07% on the day.

• EUR/USD remains on the foot at the highest levels in seven weeks despite recent inaction after refreshing multi-day top.
• Multiple ECB hawks cite inflation pressure to emphasize the need for higher rates.
• Fed Powell failed to impress markets with repeated remarks in bi-annual testimony.
• Fears of German recession, US-China tussles prod Euro buyers amid a likely sluggish day ahead.

EUR/USD refreshes the highest level since May 11 as it rises to 1.0997 during early Thursday, after snapping a three-day downtrend with the biggest daily jump in a week the previous day. That said, the Euro pair’s latest gains could be linked to the market’s appraisal of the hawkish bias at the European Central Bank (ECB), as well as a dull acceptance of the otherwise upbeat statements from Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual testimony.

Reuters quote comments from Bundesbank chief Joachim Nagel, ECB policymaker Francois Villeroy de Galhau and ECB board member Isabel Schnabel to suggest hopes of more rate hikes from the region’s central bank by citing the inflation woes. “Eurozone inflation is stubborn and may require a protracted period of high-interest rates to contain, partly due to an exceptionally tight labor market, the European Central Bank's (ECB) two German policymakers said on Wednesday,” said the news.

It’s worth noting, however, that ECB policymaker Peter Kazimir said on Wednesday that he is not certain whether the central bank will continue its rate hike cycle in September.

Also challenging the Euro bulls are statements from Germany’s IFO Institute as it warned that the German recession will be sharper than expected while also saying that the economy is only very slowly working its way out of the recession.

On the other hand, Fed Chair Powell’s testimony to the US House Financial Services Committee failed to impress the US Dollar bulls as the greenback printed the first daily loss in four after the key event. The reason could be linked to the absence of any fresh comments, as well as contrasting statements from other Fed Officials. That said, the US Dollar Index (DXY) dropped the most in a week the previous day, poking the 102.00 level by the press time.

The reason could be linked to comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and triggered the US Dollar 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.

Elsewhere, fears of the global economic slowdown and escalating US-China tension, after Beijing hits back at US President Joe Biden’s criticism of its Chinese counterpart, prod the EUR/USD pair buyers.

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. It should be noted that the S&P500 Futures remain directionless in Asia amid holidays in China and Hong Kong.

Looking ahead, Eurozone Consumer Confidence and the second-tier US data will decorate the calendar. Though, major attention will be given to a slew of central bank announcements from the UK, Indonesia, Switzerland and Mexico for clear directions. Additionally important will be the second round of Fed Chair Powell’s testimony, this time before the Senate Banking Committee.

Technical analysis

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 favoring the Euro bulls 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 upside momentum.

• NZD/USD gains some positive traction for the second successive day on Thursday.
• New Zealand’s trade data lends support to the NZD amid subdued USD demand.
• Powell’s less hawkish remarks on Wednesday keep the USD bulls on the defensive.

The NZD/USD pair trades with a positive bias for the second successive day on Thursday and is currently placed near the top end of its daily range, just above the 0.6200 round-figure mark.

The New Zealand Dollar (NZD) drew some support from the domestic trade balance data, which showed that exports to China increased by 18% in May. This helps ease jitters over the Chinese economy and largely overshadows the fact that New Zealand’s trade deficit widened from NZ$ 17.02 billion to NZ$ 17.12 billion. Additional details showed that the monthly trade surplus narrowed from NZ$ 236 million to NZ$ 46 million in May against a deficit of N$ 350 million anticipated. Apart from this, subdued US Dollar (USD) price action lends some support to the NZD/USD pair.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low and is pressured by Federal Reserve (Fed) Chair Jerome Powell's less hawkish comments on Wednesday. Testifying before the House Financial Services Committee on Wednesday, Powell noted that inflation remains very far from the Fed's target, though it may make sense to raise rates at a more moderate pace. Powell, however, added that the fight against inflation is still not over and despite a recent pause, officials agreed borrowing costs would likely need to move higher

This pushes back against market expectations that the US central bank is nearing the end of its year-long policy tightening cycle and lends some support to the USD. Apart from this, worries about a global economic downturn benefits the Greenback's relative safe-haven status and contributes to capping the upside for the risk-sensitive Kiwi, at least for the time being. This makes it prudent to wait for strong follow-through buying before placing bullish bets around the NZD/USD pair and positioning for any further intraday appreciating move ahead of Powell's second day of congressional testimony.

Technical levels to watch

“China's economic development is showing sound momentum in the first half of the year,” Chinese media Xinhua came out with the statements from China Vice Premier He Lifeng as he met Singapore's Temasek Chairman Lim Boon Heng earlier this week in Beijing.

Key comments

Market reaction is nil

There is no market reaction to the otherwise risk-positive news amid holidays in China and Hong Kong. However, AUD/USD grinds higher around 0.6800 by the press time.

Also read: AUD/USD rebound fades near 0.6800 on mixed concerns about Fed, China

• USD/CHF holds lower ground at weekly low after snapping three-day winning streak.
• Hawkish hopes from SNB, Fed Chair Powell’s failure to impress US Dollar bulls lure sellers.
• Swiss Franc buyers need more than SNB’s 0.25% rate hike to keep the reins.
• Powell’s testimony in front of Senate Banking Committee will offer extra directions.

USD/CHF remains pressured near 0.8925, poking the weekly low amid early Thursday after printing the first daily loss in four the previous day. In doing so, the Swiss Franc (CHF) pair struggles to cheer the US Dollar weakness ahead of the all-important Swiss National Bank (SNB) Interest Rate Decision.

Hawkish statements from Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual testimony to the US House Financial Services Committee failed to impress the US Dollar bulls as the greenback printed the first daily loss in four after the key event. The reason could be linked to the absence of any fresh comments, as well as contrasting statements from other Fed Officials. That said, the US Dollar Index (DXY) dropped the most in a week the previous day, poking the 102.00 level by the press time.

Talking about Powell’s testimony, Fed’s 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 USD buyers.

Meanwhile, comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and triggered the US Dollar 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.

Apart from these catalysts, hopes of China stimulus and the US-China tension also weighed on the USD/CHF prices, due to its risk-barometer status. The People’s Bank of China’s (PBoC) rate cut joins the Chinese Ministry of Finance's announcement of tax incentives to suggest more stimulus from the world’s biggest commodity user. However, fears of the global economic slowdown and escalating US-China tension, after Beijing hits back at US President Joe Biden’s criticism of its Chinese counterpart, put a floor under the US Dollar and the USD/CHF price.

Against this backdrop, Wall Street closed in the negative zone for the third consecutive day while the US Treasury bond yields remained intact after a volatile day. It should be noted that the S&P500 Futures remain directionless in Asia amid holidays in China and Hong Kong.

Moving on, the SNB’s Interest Rate Decision will be the key as markets expect 25 basis points (bps) of a rate hike but the interest rate futures recently suggest a jump in the odds favoring a 50 bps rate lift. Apart from the SNB rate announcement, Chairman Jordan’s press conference and the second round of Fed Chair Powell’s testimony, this time before the Senate Banking Committee, will also be important to watch for clear directions.

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

Technical analysis

With its clear U-turn from an eight-day-old descending resistance line and the 50-DMA, respectively near 0.8965 and 0.8980 in that order, the USD/CHF pair is likely to break the immediate support line stretched from early May, to 0.8920 at the latest. It’s worth noting that the previous weekly low of around 0.8900 may also check the bears before giving them control.

• USD/JPY pulls back from a fresh YTD peak touched on Wednesday, albeit lacks follow-through.
• Powell’s less hawkish remarks keep the USD bulls on the defensive and act as a headwind.
• The Fed-BoJ policy divergence continues to undermine the JPY and helps limit the downside.

The USD/JPY pair edges lower during the Asian session on Thursday and moves away from a fresh high since November 2022, around the 142.35 area touched the previous day. Spot prices, however, manage to hold above the 100-hour Simple Moving Average (SMA) and currently trade just below the 142.00 round-figure mark.

The US Dollar (USD) consolidates the overnight slide back closer to the monthly low in the wake of Federal Reserve (Fed) Chair Jerome Powell's less hawkish remarks and turns out to be a key factor acting as a headwind for the USD/JPY pair. Testifying before the House Financial Services Committee on Wednesday, Powell noted that inflation remains very far from the Fed's target, though it may make sense to raise rates at a more moderate pace.

Powell, however, added that the fight against inflation still has a long way to go and despite a recent pause in interest rate hikes, officials agreed borrowing costs would likely need to move higher, which helps limit the downside for the USD. Apart from this, a more dovish stance adopted by the Bank of Japan (JPY) continues to undermine the Japanese Yen (JPY) and holds back bearish traders from placing aggressive bets around the USD/JPY pair.

It is worth recalling that the minutes of the April BoJ meeting showed on Wednesday that the nine-member board saw the need to keep ultra-low interest rates to support the fragile domestic economy. Adding to this, BoJ policymaker Seiji Adachi brushed aside expectations of an early tweak in the yield curve control policy and said that it was too early to phase out ultra-loose monetary policy due to uncertainty over the price outlook.

This marks a big divergence in comparison to the Fed projections for a higher peak interest rate this year and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, any meaningful corrective decline is more likely to attract fresh buyers at lower levels and remain limited. Investors now look to Powell's second day of congressional testimony, which, along with the US macro data, might provide some impetus to the major.

Technical levels to watch

• Silver Price remains sidelined at the lowest level in three months.
• Oversold RSI (14) conditions challenge XAG/USD bears near the key Fibonacci ratio.
• Clear downside break of previous key support line favors Silver bears.
• Multiple SMAs, seven-week-old falling resistance line also challenge Silver buyers.

Silver Price (XAG/USD) licks its wounds at the lowest level in three months, mildly bid near $22.70 amid Thursday’s Asian session after refreshing the multi-day low to around $22.50 the previous day. It’s worth noting that the XAG/USD’s sustained downside break of a three-month-old rising support line and the 50% Fibonacci retracement of the March-May upside seem to keep the Silver bears hopeful.

However, the overbought RSI (14) line suggests limited downside room for the Silver bears to cheer, which in turn highlights the 61.8% Fibonacci ratio, also known as the golden Fibonacci ratio, for the XAG/USD bears to prod, around $22.30.

In a case where the Silver price ignores oversold RSI (14) and breaks the key Fibonacci retracement ratio, the mid-March swing low of around $21.50 and the early March high of near $21.30 can act as the last defense of the XAG/USD buyers.

On the contrary, the 50% Fibonacci retracement level and the support-turned-resistance line, respectively near $23.00 and $23.60 restrict short-term recovery of the Silver Price.

Though, a convergence of the 50-SMA, 100-SMA and 200-SMA, around $23.80, appears a tough nut to crack for the Silver buyers past $23..60.

Even if the XAG/USD quote rises past $23.60, the bulls need to cross a downward-sloping resistance line from early May, around $24.05, to welcome the Silver buyers.

Silver Price: Four-hour chart

Trend: Limited downside expected

• USD/CAD remains depressed at the lowest level in nine months after falling the most in a week.
• US Dollar licks its wounds after snapping three-day uptrend despite hawkish testimony of Fed Chair Powell.
• WTI seesaws around two-week high after notable rally on softer US Dollar, hopes of more Oil demand.
• Risk catalysts eyed for clear directions, Powell’s testimony 2.0 in focus.

USD/CAD stays on the back foot at the lowest levels since September 2022, after refreshing the yearly low with the biggest daily fall in a week the previous day. That said, the Loonie pair licks its wounds near 1.3160 as markets seek more clues to extend the latest fall amid firmer Oil price and the US Dollar weakness.

US Dollar Index (DXY) printed the first daily loss in four the previous day despite hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual testimony to the US House Financial Services Committee. The reason could be linked to the absence of any fresh comments, as well as contrasting statements from other Fed Officials.

On Wednesday, Fed’s 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 black gold buyers despite weighing on the US Dollar.

It should be noted that comments from Federal Reserve Bank of Chicago President Austan Goolsbee prod US Treasury yields and triggered the US Dollar 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.

Elsewhere, WTI crude oil jumped more than 1.0% to refresh the two-week high around $72.70, close to $72.50 by the press time, as hopes of more stimulus from China and increased US refining capacity lured Oil buyers, especially amid downbeat US Dollar. That said, the People’s Bank of China’s (PBoC) rate cut joins the Chinese Ministry of Finance's announcement of tax incentives to suggest more demand from the world’s biggest commodity user. Additionally, the weekly inventory draw and the first recovery in the US Oil refining capacity, after a two-year downturn, favor the energy buyers.

Alternatively, fears of the global economic slowdown and escalating US-China tension, after Beijing hits back at US President Joe Biden’s criticism of its Chinese counterpart, prod the USD/CAD bears.

Additionally, expectations that Fed Chair Powell may use tactics to convince markets of his hawkish capacity, after failing the previous day, also lures the Loonie pair buyers at the multi-day low.

Technical analysis

Failure to extend the bounce off the 1.3180-75 support region directs the USD/CAD bears toward the tops marked in May and June of the last year, close to the 1.3080-75 zone.