Новини ринків

• Gold Price remains depressed at three-month low despite recent bounce off $1,900 support confluence.
• Multiple central bankers backed restrictive monetary policies at European Central Bank Forum but ruled out recession woes, favoring XAU/USD sellers.
• US Dollar cheers Federal Reserve Chairman Jerome Powell’s support to “higher for longer” rate expectations, weighing on the Gold Price.
• Fed Chair Powell’s speech, second-tier employment, activity and spending numbers eyed for clear XAU/USD direction.

Gold Price (XAU/USD) portrays a corrective bounce at the lowest level in three months, marked the previous day, as it renews its intraday peak around $1,910 amid early Thursday in Asia. In doing so, the XAU/USD consolidates the latest losses even as the central bankers defend the “higher for longer” rate bias and increasing odds of the tussles between the United States and China.

Gold Price stays bearish on central bankers’ hawkish tones

Gold Price remains on the bear’s radar, despite the latest consolidation, as major central bankers keep defending the restrictive monetary policies in their latest speeches at the European Central Bank (ECB) Forum on central banking in Sintra.

Firstly, Federal Reserve (Fed) Chairman Jerome Powell reiterated support for two rate hikes while ruling out the economic downturn as the most likely case. On the same line, ECB President Lagarde stated that they still have ground to cover and also added, “If the baseline stands, we know we will likely hike again in July.” Further, Bank of England (BoE) Govern Andrew Bailey showed readiness to do what is necessary to get inflation to target.

It’s worth noting, however, that Bank of Japan (BoJ) Governor Kazuo Ueda appeared as an exception at the ECB Forum on central banking as the policymaker defended the dovish bias while saying, “(There is) still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth.”

Apart from the hawkish central bankers, fears of the US-China tension and challenges for the ECB hawks, amid recession woes and mixed bias of the policymakers at home, also facilitate the XAU/USD’s downside.

That said, ECB policymaker Mario Centeno and US Treasury Secretary Janet Yellen recently offered more clues to favor the Gold bears but failed to gain major attention.

ECB’s Centeno said, per Reuters “We are reaching the time when monetary policy may pause”. On the other hand, US Treasury Secretary Yellen recently flagged mixed concerns about the US-China ties by suggesting a visit to Beijing but showed readiness to defend US interests.

Furthermore, the upbeat outcome of the US Banking Stress Test adds strength to the bearish bias surrounding the Gold Price.

The Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.

Against this backdrop, S&P500 Futures print mild gains even after Wall Street closed mixed and yields remained sidelined after falling the previous day. Further, the US Dollar Index (DXY) snapped two-day downtrend and refreshed the weekly top on Wednesday, which in turn exerts downside pressure on the XAU/USD.

More proofs of higher rates need to convince XAU/USD bears

While the aforementioned catalysts are enough to convince the Gold sellers, fresh short positions may need more proof of the higher rates across the board, as well as of the US-China tussle and economic pessimism ex-US.

With this, today’s speech of Federal Reserve Chairman Jerome Powell in Madrid, as well as the US Weekly Initial Jobless Claims and Germany’s preliminary inflation data for June, will be eyed closely for clear directions.

Also read: Gold Price Forecast: XAU/USD extends its weekly slide and flirts with $1,900

Gold Price Technical Analysis

Gold Price languishes at the lowest levels in 3.5 months as bears attack the $1,900 support confluence comprising an upward-sloping trend line from late November, a six-week-old falling support line and the 50% Fibonacci Retracement of November-May upside.

That said, the metal’s sustained downside break of the 100-DMA joins the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator to keep the XAU/USD sellers hopeful.

However, the below 50.0 levels of the Relative Strength Index (RSI) highlights the need for consolidation in the Gold Price during the further south run.

It’s worth noting that an area comprising February 09 swing high and the mid-March bottom, around $1,890-85, acts as an additional downside filter for the XAU/USD.

Following that, the Gold Price fall towards the 61.8% Fibonacci retracement level surrounding $1,857 can’t be ruled out.

Meanwhile, the XAU/USD’s recovery remains elusive below the $1,943-44 resistance comprising the 100-DMA and the 38.2% Fibonacci retracement.

Also likely to challenge the short-term Gold Price upside is a descending resistance line from June 02, near $1,955 at the latest.

Overall, Gold Price is likely to stay bearish but the downside appears long and bumpy.

Gold Price: Daily chart

Trend: Further downside expected

• EUR/USD consolidates recent losses but lacks recovery momentum after snapping two-day winning streak.
• ECB’s Centeno recently prod policy hawks even as Lagarde & Company kept rate hike bias intact.
• Fed’s Powell advocates for two rate increases in 2023, rules out rate cuts.
• German inflation data, second-tier US statistics eyed for clear directions.

EUR/USD struggles to keep the bears on board, despite posting the biggest daily loss of the week and snapping a two-day uptrend the previous day, as markets reassess the previous day’s downside bias amid Thursday’s lackluster Asian session. That said, the Euro pair picks up bids to refresh its intraday high near 1.0915 as it consolidates the latest losses ahead of German inflation data.

It should be noted that the recent comments from European Central Bank (ECB) policymaker Mario Centeno and US Treasury Secretary Janet Yellen fail to inspire the EUR/USD bears, and neither did the previous day’s hawkish statements from multiple ECB officials. The reason could be linked to more hawkish statements from Federal Reserve Chairman Jerome Powell, the upbeat outcome of the US Banking Stress Test and a likely disappointment from Germany’s inflation.

ECB talks tough

Recently, ECB’s Centeno said, per Reuters “We are reaching the time when monetary policy may pause”.

On Wednesday, a slew of European Central Bank (ECB) officials, including President Christine Lagarde, advocated for higher interest rates.

Firstly, ECB President Lagarde stated that they still have ground to cover and also added, “If the baseline stands, we know we will likely hike again in July.”

That said, ECB’s Chief Economist Philip Lane warned against betting on interest rate cuts in the next two years while Vice President Luis de Guindos said that the July rate hike is set and added, “The September move will depend on data.” On the same line, ECB policymaker Boris Vujčić mentioned, “There is a good chance of a September rate hike,” whereas Madis Muller stated that the ECB needs to look at the data for rate hikes beyond July.

Furthermore, policymaker Boštjan Vasle said, “We need to keep tightening policy at our next meeting,” but Mario Centeno appears an exception as he quoted quick easing in inflation while adding, “over-hiking isn't an acceptable position.”

On the other hand, Fed Chair Jerome Powell said, “We believe there's more restriction coming, driven by the labor market.” The policymaker also ruled out the economic downturn as the most likely case.

Elsewhere, “The Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.

It should be noted that US Treasury Secretary Yellen recently flagged mixed concerns about the US-China ties by suggesting the visit to Beijing but showed readiness to defend US interests.

Amid these plays, S&P500 Futures print mild gains even after Wall Street closed mixed and yields remained sidelined.

Moving on, the preliminary readings of Germany’s inflation per the Harmonized Index of Consumer Prices (HICP) and Consumer Price Index (CPI) for June will be important to watch for the EUR/USD pair. Also, Fed Chair Jerome Powell’s speech in Madrid and the second-tier US data should offer an active session ahead.

Technical analysis

Unless breaking a three-week-old rising support line, around 1.0900 by the press time, EUR/USD bears struggle to keep the reins.

• USD/JPY extends gains for six consecutive days, hitting a new YTD high but stabilizing ahead of the Tokyo Open.
• Despite overbought signals from the RSI, the strong uptrend justifies readings above 70, with a potential reversal at 80.
• USD/JPY’s breach past 145.00 may lead to resistance at 145.10 and 146.00, while a reversal could find support at 144.00 and 143.73.

The USD/JPY extends its gains to six straight days, but as Thursday’s Asian session begins, it retraces some 0.08% ahead of the Tokyo open. On its way north, the USD/JPY reached a new year-to-date (YTD) high of 144.61 but stabilized and finished around 144.40. At the time of writing, the USD/JPY exchanges hands at around the 144.30 area.

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains upward biased but subject to verbal intervention by Japanese authorities. Even though the Relative Strength Index (RSI) suggests that prices are overbought, it remains shy of reaching extreme readings close to 80. In this case, the USD/JPY strong uptrend justifies RSI above 70, and once it comes the 80 level, the chances for a possible reversal increase.

Oscillators like the Relative Strength Index (RSI) is overbought but shy of getting to 80, while the three-day Rate of Change (RoC) suggests buying pressure is fading.

If USD/JPY climbs past 145.00, the next resistance will be the October 27 daily low at 145.10. Breach of the latter will expose the 146.00 figure, followed by the November 10 daily high at 146.59.

Conversely, if USD/JPY prints a reversal, the next support would be the 144.00 figure. Break below will expose the June 28 daily low of 143.73, followed by the November 22 daily high of 142.24.

USD/JPY Price Action – Daily chart

• USD/CAD grinds near the highest levels in fortnight after rising the most in five weeks.
• Overbought RSI, 100-SMA prods Loonie pair buyers amid sluggish session.
• Bullish MACD signals, upside break of previous resistance and rising support line from Tuesday back upside bias.

USD/CAD remains on the front foot at a two-week high, despite the early Asian session inaction around 1.3250 on Thursday. That said, the Loonie pair jumped the most in five weeks the previous day after crossing a downward-sloping resistance line from June. However, the overbought RSI (14) line and the 100-SMA appear to challenge the buyers of late.

That said, a sustained upside break of the multi-day-old resistance line, now support around 1.3210, joins the bullish MACD signals and the pair’s successful trading beyond the rising support line from Tuesday, close to 1.3240 at the latest, keeps the USD/CAD buyers hopeful.

With this, the Loonie pair is expected to overcome the immediate 100-SMA hurdle surrounding 1.3260 while targeting the early May swing low of around 1.3315.

It should be noted, however, that a convergence of the 200-SMA and 50% Fibonacci retracement of the USD/CAD pair’s April-June downturn, near 1.3390, appears a tough nut to crack for the bulls afterward.

On the contrary, a downside break of the immediate support line and the resistance-turned-support trend line, respectively near 1.3240 and 1.3210, becomes necessary for the USD/CAD bear’s return.

Following that, the yearly low marked earlier in the week around 1.3120 and the 1.3000 psychological magnet will gain the market’s attention.

USD/CAD: Four-hour chart

Trend: Further upside expected

• USD/CHF rebounds and trades with minor losses of 0.02%, rallying from two-day lows amid Federal Reserve tightening speculations.
• The USD/CHF remains neutral, testing a downslope resistance trendline, but key oscillators hint at an impending bullish turn.
• If USD/CHF reclaims 0.9000, resistance emerges at the 50-day EMA, with supports at the June 28 low and the YTD low.

As the Asian session began, the USD/CHF traded with minuscule losses of 0.02%; following Wednesday’s session, the USD/CHF pair rallied from two-day lows of 0.8922 and rose toward a daily high of 0.8687. Speculations of further tightening by the Federal Reserve (Fed) spurred a leg-up in the USD/CHF. At the time of writing, the USD/CHF exchanges hands at 0.8966.

USD/CHF Price Analysis: Technical outlook

From a medium-term perspective, the USD/CHF is neutral biased but testing a downslope resistance trendline at around the 0.8970/90 area. Oscillators like the Relative Strength Index (RSI), although in bearish territory, is about to turn bullish as it closes to the 50-midline. Meanwhile, the three-day Rate of Change (RoC) suggests buyers are gathering momentum, despite lacking the strength to pierce the 0.9000 mark.

If USD/CHF reclaims the 0.9000 figure, immediate resistance will emerge from the 50-day Exponential Moving Average (EMA) at 0.9008. above that price level lies a downslope resistance trendline drawn in late May, which passes around 0.9030/40 before the USD/CHF can rally toward the 100-day EMA at 0.9082.

Conversely, the USD/CHF first support would be the June 28 daily low at 0.8922, followed by the 0.8900 figure, ahead of challenging the year-to-date (YTD) low of 0.8819.

USD/CHF Price Action – Daily chart

“US will continue to take actions to protect national security interests with regards to China even if that imposes some economic cost,” said US Treasury Secretary Janet Yellen during her interview with MSNBC early Thursday morning in Asia.

Additional comments

Market reaction

The news offers an additional reason for the AUD/USD pair to decline further, down 0.03% intraday as bears attack the 0.6600 mark after falling the most on a day since March.

Also read: AUD/USD sellers keep the reins at three-week low near 0.6600 ahead of Australia Retail Sales

• AUD/USD licks its wounds at the lowest levels in three weeks after falling the most since early March.
• Disappointing Australia inflation, hawkish Fed comments and China concerns weigh on Aussie pair.
• Australia Retail Sales for May, mid-tier US data eyed for clear directions.

AUD/USD bears take a breather at the lowest levels since June 05, after posting the biggest daily loss in more than three months, as traders await Australia’s Retail Sales for May to extend the previous slump inflicted by Aussie inflation and hawkish Fed signals, not to forget China woes. That said, the major currency pair remains pressured near the 0.6600 round figure amid the early hours of Thursday’s Asian session.

On Wednesday, Australia’s Monthly Consumer Price Index (CPI) for May dropped to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD). Adding strength to the downside momentum was China's Industrial Profits for May which dropped nearly 19% during the first five months of 2023.

Furthermore, the fresh fears surrounding the US-China tension, due to the Wall Street Journal (WSJ) news suggesting more AI curbs for companies from Beijing, joined the early week’s upbeat US data to weigh on the AUD/USD price.

On the other hand, hawkish comments from Fed Chair Jerome Powell at the ECB Forum and upbeat US Banking Stress Test results also exert downside pressure on the AUD/USD pair.

In his speech at the European Central Bank (ECB) Forum on central banking, Federal Reserve (Fed) Chairman Jerome Powell said, “We believe there's more restriction coming, driven by the labor market.” The policymaker also ruled out the economic downturn as the most likely case.

Elsewhere, “The Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.

Against this backdrop, Wall Street closed mixed and the bond yields were down while the US Dollar Index (DXY) marked the first daily gains in three and refreshed the weekly top.

Moving on, AUD/USD traders should pay attention to the first readings of Australia’s Retail Sales for May, expected 0.1% versus 0.0%, for immediate directions. Should the numbers arrive as stronger, the Aussie pair will have a reason to consolidate the previous day’s heavy losses.

“We thought AU CPI data would unleash volatility and it has, but the trouble is, it hasn’t really clarified the market’s view on whether the RBA will hike or not next week and that’s the next hurdle for the AUD, and by correlation the Kiwi,” said Analysts at the ANZ.

Apart from the Aussie data, the revised version of the US Gross Domestic Product (GDP) for the first quarter (Q1) 2023 and second-tier employment data could also entertain the traders. Furthermore, Fed Chair Powell is again scheduled for a speech in Madrid at a conference on Financial Stability and hence may allow the traders to witness a volatile day ahead.

Technical analysis

Although the oversold RSI (14) prods the AUD/USD bears, the pair’s sustained trading below the 200-DMA, around 0.6690 by the press time, directs the bears toward the 0.6580 support.

“We are reaching the time when monetary policy may pause,” said European Central Bank (ECB) policymaker Mario Centeno early Thursday in Asia.

“We’re very close,” added ECB’s Centeno.

It’s worth noting that the policymaker was the only exception among a slew of European speakers who backed further rate hikes at the ECB Forum on central banking in Sintra. That said, ECB’s Centeno quoted quick easing in inflation while adding, “over-hiking isn't an acceptable position.”

EUR/USD stays pressured

Following the downbeat comments, EUR/USD retreats towards 1.0900, close to 1.0915 by the press time. It should be observed that the Euro pair dropped the most in a week while snapping a two-day uptrend the previous day even as most ECB policymakers appeared hawkish. The reason could be linked to the upbeat comments from Fed Chair Jerome Powell.

Also read: EUR/USD Forecast: No clear direction despite retreat

• NZD/USD bears are in the market as the US Dollar perks up. 
• The Fed is back in focus as central bank divergence drives the markets. 

NZD/USD is flat in the open in Asia after falling out of the sky this week from a high of 0.6200 and reaching a low of 0.6069 on Wednesday. The pair was sunk on the back of the movements in the Aussie following the inflation data.

Analysts at ANZ Bank explained, ''in the Kiwi’s case, 0.6080/85 support (23.6% Fibo of the April-June fall) hasn’t been solid, but it’s just above there as we write.''

''We thought AU CPI data would unleash volatility and it has, but the trouble is, it hasn’t really clarified the market’s view on whether the RBA will hike or not next week and that’s the next hurdle for the AUD, and by correlation the Kiwi.''

''We expect a hike, mostly because we don’t think inflation is falling quickly enough, but let’s see. NZ ANZBO data today will be watched closely, which may add some local flair to the Kiwi narrative, which remains very global,'' the analysts explained. 

Meanwhile, the US Dollar has perked up. Signs of economic resilience to higher borrowing costs wiped out the recent support from safety demand while the US Dollar makes traction as US data remain strong.  More US data will come out this weekend so far it has been an improvement on last weeks.

The latest data showed that US Consumer Confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.

As for sentiment around the Federal Reserve, the WIRP suggests a 25 bp hike is nearly priced in for September, with odds of a second 25 bp hike topping out near 10% for November. Analysts at Brown Brothers Harriman explained that the  PCE data on Friday may help solidify those odds, with headline expected at 3.8% YoY vs. 4.4% in April and core expected to remain steady at 4.7% YoY.

• AUD/JPY kicks off the Asian session with a retreat, trading at 95.30, down 0.05% amid RBA rate hike speculations and disappointing CPI results.
• AUD/JPY plummets after failing to breach the Tenkan-Sen line at 96.41, hitting a two-week low of 95.15 but remaining above the Ichimoku Cloud, upholding the uptrend.
• Further falls may lead AUD/JPY to the Kijun-Sen line at 93.96 or the previous year’s daily high at 93.35.

The AUD/JPY retreats as the Asian session begins after registering huge losses of 1% on Wednesday, courtesy of speculations the Reserve Bank of Australia (RBA) would not raise rates as the Consumer Price Index (CPI) was below estimates. Therefore, the AUD/JPY is trading at 95.30, down 0.05%.

AUD/JPY Price Analysis: Technical outlook

The AUD/JPY tumbled sharply after failing to pierce the Tenkan-Sen line at 96.41, extending its losses past the 96.00 figure, achieving a two-week low of 95.15. Despite the AUD/JPY pullback, it remains above the Ichimoku Cloud, confirming the uptrend, though about to face support at the Senkou Span A line at 95.18.

A fall below the latter could drag AUD/JPY prices toward the Kijun-Sen line at 93.96, slightly below the 94.00 figure, followed by last year’s December 13 daily high turned support at 93.35.

Conversely, if AUD/JPY buyers reclaim the 96.00 psychological level, that could open the door to recapturing the Tenkan-Sen resistance level at 96.41. Once cleared, the next resistance would be the 97.00 mark before testing the year-to-date (YTD) high of 97.67.

AUD/JPY Price Action – Daily chart

• The EUR/GBP pair rose to a high since May 31 of 0.8658 and then closed at 0.8636.
• Christine Lagarde delivered hawkish comments stating a hike by the ECB in July is likely and took off the table a pause.
• Falling British yields weight on the GBP.

The EUR/GBP currency pair has surged to its highest level since May 31, reaching 0.8658 before retracing slightly to 0.8635. This upward movement was primarily influenced by Christine Lagarde's hawkish comments, in which she confirmed the likelihood of an interest rate hike by the European Central Bank (ECB) in July and dismissed the possibility of a pause. Simultaneously, the GBP experienced weakness due to declining British yields. 

The Sterling Pound loses interest on recession fears in the UK

The GBP came under pressure as falling British yields weighed on the currency. The 2-year, 5-year, and 10-year bond yields experienced declines of over 1%, contributing to the weakening of the pound against its major counterparts. In that sense, falling yields signal major bond demand and a negative market expectation towards the British economy, applying selling pressure on the Sterling.

Christine Lagarde's statements on Wednesday during the ECB forum in Sintra, indicated a strong likelihood of an interest rate hike in July if the prevailing conditions remain consistent. She made it clear that she does not foresee a pause in monetary policy adjustments in the foreseeable future, and her hawkish stance gives the Euro a boost against the Sterling. 

Attention now turns to confidence data figures from the Eurozone and the German Consumer Price Index (CPI) preliminary readings on Thursday. In addition, Gross Domestic Product (GDP) and Personal Consumer Expenditures (PCE) data from the US from Q1 will also impact market dynamics.

EUR/GBP Levels to watch

According to the daily chart, the outlook clearly favours the Euro over the GBP. The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) both show a strong bullish momentum. However, the 100 and 200-day Simple Moving Averages (SMA) are about to perform a bearish cross, which could limit the upside potential.

Resistance Levels to watch: 0.8658 (daily high), 0.8670,0.8695.
Support Levels to watch: 0.8600, 20-day SMA at 0.8633, 0.8645.

EUR/GBP Daily chart

The Federal Reserve released its annual stress test to large banks. According to central banks, the results “demonstrates that large banks are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.”

All banks passed the tests showing that have enough capital to weather an economic crisis. 

Key takeaways from the report: 

“All 23 banks tested remained above their minimum capital requirements during the hypothetical recession, despite total projected losses of $541 billion. Under stress, the aggregate common equity risk-based capital ratio—which provides a cushion against losses—is projected to decline by 2.3 percentage points to a minimum of 10.1 percent.”

“Under the severely adverse scenario, the aggregate CET1 (common equity tier 1) capital ratio of the 23 banks falls from an actual 12.4 percent in the fourth quarter of 2022 to its minimum of 10.1 percent, before rising to 10.7 percent at the end of the projection horizon. The 2.3 percentage point aggregate decline this year is smaller than the aggregate decline of 2.7 percentage points last year, but comparable to aggregate declines in recent years.”

• The GBP/JPY fell to a low of 182.14, seeing more than a 0.50% loss on the day, then stabilising near 182.55.
• British yields fell sharply, weakening the Sterling Pound after Gov. Bailey’s speech at the ECB forum.
• Kazuo Ueda kept its dovish tone, worrying about inflation being below the BoJ’s target.

The GBP/JPY finally corrected downwards after five consecutive days of gains, with a loss of over 0.50% on the day, as falling British yields dampened the appeal of the British pound. Despite the correction, the Japanese Yen remains vulnerable as Kazuo Ueda maintains a dovish stance, expressing concerns about inflation falling below the Bank of Japan's target—eyes on inflation data from Japan at the early Friday Asian session.

British gilts weakened somewhat after Bailey’s speech 

On Wednesday, Governor Andrew Bailey from the Bank of England (BoE) stated that “they are not nearly done” regarding monetary policy as he showed concerns about core inflation being “much stickier” than headline inflation, which he expects to come down markedly in 2023.

In the meantime, the British bond yields are declining and show that investors are seeing a negative outlook on the UK’s economy, and they signal a higher demand for bonds. In that sense, the 2,5 and 10-year yields declined more than 1% falling to 5.13%, 4.55% and 4.30%.

Contrarily, Kazuo Ueda continued to express a dovish perspective by affirming that "underlying inflation remains below the targeted level." He further indicated that a potential policy adjustment would be considered when inflationary pressures align with the Bank of Japan's forecasts. In that sense, inflation figures as per the Tokyo Consumer Price Index (CPI) from June, to be released early Friday, will affect the JPY price dynamics. As for now, investors foresee an acceleration of the headline figure to 3.8% YoY and the Core measure to 4.4%.

GBP/JPY Levels to watch

According to the daily chart, despite the downward correction, the bullish outlook for the cross is still intact. However, the Relative Strength Index (RSI) is still in overbought territory, suggesting that the additional downward movements shouldn’t be removed.

Support levels to watch: 181.80,181.00, 180.00
Resistances levels to watch: 183.00,183.50,184.00

GBP/JPY Daily chart

• Silver is on the verge of a break one way or the other. 
• Coiled around a 38.2% Fibo resistance, its make of break time for the white metal. 

Silver is at a crossroads midweek and has made a correction into a 38.2% Fibonacci level and meeting the old lows where the structure was recently broken in the bearish impulse. The following will illustrate the market structure on the daily and 4-hour timeframes. 

Silver daily chart

This may serve as resistance but there is an imbalance, the greyed area above that aligns with a prior resistance and around a 50% mean reversion target. The bears are relying on a lower high to form.

Silver H4 chart

The 4-hour chart shows the price resisted which may serve as a lower daily high. On the other hand, the bulls could be about to make their moves and form a higher low with the price imbalance above as a target that aligns with the 50% mean reversion and then the 61.8% Fibonacci retracement level. 

After the ECB Sintra Forum, the focus turns to economic data. On Thursday, Japan and Australia will report on retail sales. The New Zealand ANZ Business Survey is also due during Asian hours. Later in the day, the focus will be on inflation data from the Eurozone. The US will report Jobless Claims, a new estimate of Q1 GDP, and Pending Home Sales.

Here is what you need to know on Thursday, June 28:

Central bankers at Sintra ratified their respective monetary policy stance and the 'data-dependence' path, which came as no surprise. The focus now turns to economic data, particularly inflation. Bank of England's (BoE) Bailey, European Central Bank (ECB) Lagarde, and Federal Reserve's (Fed) Powell mentioned that there is still work to do, as they see inflation above the target for the time being and do not see rate cuts on the horizon.

Australia and Italy reported a slowdown in their annual Consumer Price Index rates, with readings below expectations. On Thursday, it will be the turn of Germany and Spain to report their data, ahead of Friday's Eurozone release. The US will report on Friday the Core Personal Consumption Expenditure Index, the Fed's preferred measure of consumer inflation.

'I don't see us getting back to 2% inflation this year or the next; I see us making progress,' said Fed Chair Powell at the Sintra Forum. He will speak again on Thursday during European hours in Madrid at a conference on Financial Stability. No surprise are expected to emerge. Regarding economic data, the US will release the weekly Jobless Claims, a new reading of Q1 GDP, and Pending Home Sales.

On Wednesday, US stocks finished mixed, while US Treasury yields declined in line with global bonds, despite signals from central bankers that more rate hikes are likely. Gold initially printed new lows near $1,900, but then trimmed losses. Crude oil prices rebounded, with the WTI barrel dropping to test monthly lows near $67.00 before starting to recover and ending the day with a gain of 2.20%.

The US Dollar Index rose 0.35%, boosted by Fed rate hike expectations and finishing near 103.00, the highest daily close in two weeks. Ahead of the end of the month and the quarter, trade flows could trigger volatility.

EUR/USD briefly traded under 1.0900 but then rebounded to 1.0920. Despite falling versus the US Dollar, the Euro was among the top performers. EUR/GBP jumped to 0.8655, the highest level in a month. GBP/USD lost more than a hundred pips, stabilizing above 1.2600. 

USD/JPY continued to climb and reached a fresh multi-month high above 144.50. BoJ's Ueda offered no signs of a pivot. Data from Japan to be released on Thursday includes retail sales and Consumer Confidence.

The Aussie tumbled after Australian CPI declined in May to 5.6%, the lowest level in 13 months, from 6.8%, below the market expectation of 6.1%. These numbers increased bets that the Reserve Bank of Australia (RBA) will keep rates unchanged at next week's meeting. On Thursday, Australia will report retail sales. AUD/USD is testing levels under 0.6600 and remains under pressure.

NZD/USD suffered its worst daily decline in weeks, breaking below 0.6100. The Kiwi lagged, with AUD/NZD rebounding from weekly lows toward 1.0900. The ANZ Business Survey is due on Thursday.

USD/CAD rose for the second day in a row, climbing to the highest level in two weeks above 1.3250. The Loonie remains under pressure after the softer-than-expected inflation reading on Tuesday.

• Risk-averse US equities trading and Powell’s hawkish stance, suggesting further tightening, have bolstered the USD.
• BoE Governor Bailey noted persistent UK inflation and pledged commitment to achieving the inflation target.
• Expectations for a 25 basis point rate hike in July have increased, with the CME FedWatch Tool indicating odds of 84.3%, up from June’s 76.9%.

GBP/USD plunges during the North American session after remarks by the US Federal Reserve (Fed) Chair Jerome Powell overshadowed words from the Bank of England (BoE) Governor Andrew Bailey, with both policymakers suggesting more tightening is needed amidst high inflation pressures. The GBP/USD is trading at 1.2645, down 0.81% or more than 100 pips, at the time of writing.

Risk-off mood sees USD surge on Powell's tightening hints, leading to a 100-pip dip in GBP/USD

The GBP/USD extended its losses due to a risk-off impulse, as shown by US equities trading in the red. Hawkish comments by Federal Reserve (Fed) Chair Jerome Powell, saying the dot-plots are foreseeing additional tightening, bolstered the US Dollar (USD). Powell justified further tightening based on the latest US economic data that showed the resilience of the US economy, as he said that policy “has not been restrictive for long.” He added the Fed needs to see more softening in the labor market.

Aside from this, the BoE Governor Andrew Bailey said the UK economy had shown signs of resilience. Bailey added, “Data has shown clear signs of persistent inflation,” and said he would do “what is necessary to get inflation to target.” The BoE Governor added, “The market, I don’t think, thinks we’re nearly done at the moment. They’ve got a number of further increases priced in for us. My response to that would be: ‘Well, we’ll see.”

Powell’s comments underpinned the greenback, as seen by the US Dollar Index (DXY). The DXY, a basket that measures the buck’s performance vs. six currencies, advances 0.44%, at 102.964, so far unable to crack the 103.000 mark, capped by falling US Treasury bond yields.

In the meantime, expectations for a 25 bps rate hike in July jumped, as shown by the CME FedWatch Tool, with odds at 84.3%, above June’s 27 76.9%.

The US economic agenda featured the US Trade deficit contracted by 6.1% to $-91.1 billion, vs. April’s $-97.1 billion, as shown by the US Department of Commerce. Sources cited by Reuters commented, “Even with the narrowing in May, the goods trade deficit is up by over 10% since March, and trade will likely be a drag on economic growth in the second quarter.”

GBP/USD Price Analysis: Technical outlook

The GBP/USD is shifting its bias to neutral after climbing from May 25 lows of 1.2308, which witnessed the pair reaching a new year-to-date (YTD) high of 1.2848. Since then, expectations that higher borrowing costs in the UK could tip the economy into a recession weighed on the Pound Sterling (GBP). That said, the GBP/USD has extended its losses, and as of writing, the pair tumbled below the 20-day Exponential Moving Average (EMA) at 1.2648, with sellers eyeing the 1.2600 mark. A daily close below the latter and the GBP/USD would slide towards the 50-day EMA at 1.2541. In the case of GBP bulls eyeing to recover the lost ground, they must reclaim 1.2685 to remain hopeful of conquering 1.2700.

• The EUR/JPY rebounded from a daily low of 157.22 and stabilised around 157.60.
• Christine Lagarde hinted at a rate hike in July and discarded a rate pause, while Governor Ueda sounded dovish.
• Italian inflation figures from June came in soft, and German confidence data weakened the Euro.

On Tuesday, the EUR/JPY found support at the 157.42 area and then jumped to the 157.60 area still trading with losses. Meanwhile, German bond yields trade in the red, weakened by soft Italian inflation figures and weak German confidence data, but recovered some losses. Conversely, Kazuo Ueda from the Bank of Japan (BoJ) focused on inflation being below target and maintained its dovish stance.

German yields recovered somewhat but are pressured down by Italian and German data

On Wednesday, Christine Lagarde made a statement suggesting that if the current situation remains unchanged, it is highly probable that there will be an interest rate hike in July. She emphasised that she does not contemplate a pause in the near future. As a result, the German 2-year bond yield, which had initially experienced a decline, managed to bounce back from its daily lows of 3.16% to 3.20%. This development was primarily driven by investors' renewed interest in the German bond market, leading to increased demand for the Euro currency.

However, German yields weakened in the yearly European session after the report of Italian figures from June. The Consumer Price Index (CPI) dropped below the consensus to 6.4% vs the 6.8% expected from its previous reading of 7.6%. In addition, Germany reported weak Consumer Confidence data at the early European session as the Growth from Knowledge (GfK) survey came in at -25.4 in July, from a downward revised -24.4 in June.

On the other hand, Ueda maintained its dovish tone stating “underlying inflation is below target” and that he’ll consider a policy change once inflationary pressures align with the Bank of Japan (BoJ) forecasts.

EUR/JPY Levels to watch

Based on the daily chart analysis, the EUR/JPY’s positive outlook is intact, and the bulls took a slight breather. However, it is still important to consider the possibility of a correction, as indicated by the Relative Strength Index (RSI) remaining in the overbought territory since mid-June.

If a technical correction, support levels are 157.00, 156.50, and 156.00. These levels are significant round numbers and could provide support for the cross. On the other hand, if bulls regain momentum, there are resistance levels to monitor at 158.00, 158.50, and 159.00.

EUR/JPY Daily chart

• Gold price is under pressure as the Fed outlook remains hawkish. 
• US data this week has been supportive to the Greenback, so far. 

Gold price was lower on Wednesday losing ground to a fresh low at $1,902.87 from a high of $1,917.28, weighed down by a rising US Dollar even as US Treasury yields fell. Gold price was trading at its lowest in three months as the outlook of tighter monetary policy lifted the Greenback and raised the opportunity cost of holding precious metals.

Signs of economic resilience to higher borrowing costs wiped out the recent support from safety demand while the US Dollar makes traction as US data remain strong. 
Data this week has been an improvement n last and the latest data showed that US Consumer Confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.

Consequently, markets are starting to price in that second Fed hike this year as analysts at Brown Brothers Harriman noted: ''WIRP suggests a 25 bp hike is nearly priced in for September, with odds of a second 25 bp hike topping out near 10% for November.  PCE data Friday may help solidify those odds, with headline expected at 3.8% YoY vs. 4.4% in April and core expected to remain steady at 4.7% YoY.''

However treasury yields were lower on the day, and that would have been expected to be bullish for Gold price because it pays no interest. The US two-year note was last seen paying 4.716%, down 17.1 basis points, while the yield on the 10-year note was down 5.1 basis points to 3.716%. In the meantime, Federal Reserve Chair Powell said that two additional rate hikes are not off the table during the European Central Bank’s annual forum on central banking, repeating what he said during the Summary of Economic Projections, on the quest to bring down inflation. Gold price is therefore on the back foot as the Federal Reserve is suggesting it will add further 50-basis points of rate hikes before the end of the year, keeping the carrying cost of owning gold, which pays no interest, high.

Gold technical analysis

The Gold price is in the bear's lair, pressured below trendline resistance and on the backside of the prior bullish trendline. 

The price fell out of the inside day's range and sank into longs to then print a new low of the week and month. Therefore, a short squeeze could be on the cards as follows:

Gold price H4 charts

On the 4-hour chart, the bulls are moving in and eye the imbalance as per the greyed area on the chart that will either act as resistance or give way to a run towards the trendline resistance. A break of the resistance will open risk to the range between $1,919 and $1,930.

On the other hand, if the resistance plays its role, then the bears will be on the hunt for a fresh low:

• Despite Fed Chair Jerome Powell’s hawkish tone, USD/MXN declined to 17.0651, a 0.09% decrease.
• Powell emphasized the US economy’s resilience and potential for further tightening, notwithstanding labor market softness.
• USD/MXN continues to dip, hovering just above the day’s low of 17.0452, unaffected by Powell’s remarks.

USD/MXN extends its losses past the 17.1000 figure, drops for the fourth consecutive day, after hitting a daily high of 17.1231 amidst hawkish remarks by the US Federal Reserve (Fed) Chair Jerome Powell at a panel hosted by the European Central Bank (ECB). The USD/MXN is trading at 17.0651, down 0.09%.

Mexican Peso holds steady as US Dollar experiences losses, extending the USD/MXN’s downward trend for a fourth consecutive day

Wall Street trades mixed, as the S&P and the Dow Jones register minuscule losses amidst the US Government restricting NVIDIA chipmaking availability to China. Meanwhile, Fed Chair Jerome Powell stated that monetary policy “has not been restrictive for long,” highlighting that most Fed policymakers are still seeing additional tightening, as seen in the dot-plots report. Powell commented that the US economy remains resilient, based on the latest data, and downplayed a possible recession. He added that the US central bank needs to see more softening regarding the labor market.

After Powell’s hawkish comments, the USD/MXN did not stop its fall, though it remains slightly above the daily low of 17.0452.

Data-wise, the US Trade deficit contracted by 6.1% to $-91.1 billion, vs. April’s $-97.1 billion, as shown by the US Department of Commerce. Sources cited by Reuters commented, “Even with the narrowing in May, the goods trade deficit is up by over 10% since March, and trade will likely be a drag on economic growth in the second quarter.”

On the Mexican front, an absent economic calendar keeps traders leaning on market sentiment and dynamics surrounding the greenback. The Bank of Mexico (Banxico) decision to hold rates unchanged at 11.25% in the latest monetary policy decision was expected to weaken the Mexican Peso (MXN). But the interest rate differential with other currencies makes the “carry trade” attractive, as Banxico is expected to maintain borrowing costs higher for longer.

Given the backdrop, the USD/MXN downtrend remains intact, influenced by economic factors. The only way the pair could shift gears is a central bank divergence, like Banxico cutting rates while the Fed increases them, shrinking the interest rate differential. Another factor that could derail the MXN from appreciating further would be a recession in the United States (US), which would see increased outflows from emerging markets towards safe-haven assets.

Upcoming events

The US economic agenda will disclose Initial Jobless Claims, GDP data, housing data, and a slew of Federal Reserve speakers.

USD/MXN Price Analysis: Technical outlook

The USD/MXN is downward biased but is trading sideways, capped on the upside by the June 23 high of 17.2644 and by support at the year-to-date (YTD) low of 17.0215. A breach of the latter will expose the 17.00 mark, followed by an October 2015 low of 16.3267. On the other hand, the break above the June 23 high will expose the May 17 low of 17.4038, seen as intermediate resistance, ahead of testing the 50 and 100-day EMAs, each at 17.5409 and 17.9352, respectively.

• WTI jumped from a low of $67.10 to a daily high of $69.40.
• EIA Crude Oil Stock declines were significantly higher than the consensus.
• US Dollar strength after Powell’s speech at the ECB forum may limit the upside potential for Oil.

The price of WTI (West Texas Intermediate) Crude Oil experienced a notable jump, rallying from a low of $67.10 and stabilizing around $69.42, seeing more than 2% gains. This surge was triggered by the EIA Crude Oil Stocks data release, which reported a significant drop in inventories that surpassed market expectations. However, the upside potential for oil prices may face limitations due to the recent strength of the US Dollar following Jerome Powell's speech at the ECB (European Central Bank) forum, in which he hinted at more rate hikes.

Crude Oil Stocks dropped more than expected in the third week of June.

According to the US Energy Information Administration (EIA), the Crude Oil stockpiles dropped by 9.603M in the week ending in June 23 vs the expected 1.757M drop. In that sense, as the data showed a larger-than-expected drop in Oil stocks, it suggests that demand for Oil is outpacing supply, indicating a tightening market and favouring the WTI price.

During the ECB forum in Sintra on Wednesday, Jerome Powell, the chairman of the Federal Reserve (Fed) of the US, delivered hawkish messages. He indicated that he would not rule out the possibility of making consecutive interest rate moves, considering that the labour market could push up inflation. While acknowledging the potential economic downturn, Powell stated it is not the most probable scenario. Since growth goes hand in hand with demand for Oil his comments appear to be boosting the prices of WTI.

It's worth noting that higher interest rates and a weaker economy tends to be negatively correlated with Oil prices. So, hawkish Fed expectations and weak signals from the US economy may challenge the Black Gold’s upside potential.

WTI Levels to watch

Based on the daily chart analysis, the short-term outlook for WTI (West Texas Intermediate) appears neutral. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) have turned flat but remain in negative territory, suggesting a slight bearish dominance. 

Looking at the downside, support levels are identified at the $67.10 lows, followed by the $66.80 area and the $66.50 zone. These levels may provide temporary price support, potentially slowing downward movement. On the other hand, the first level to retake is located at the 20-day Simple Moving Average (SMA) of $70.33. If the price surpasses this level, the next resistance areas are around $70.50 and the psychological mark of $71.00.

WTI Daily chart

• EUR/USD tumbles to 1.0917, down 0.40%, after hawkish remarks by Fed Chair Jerome Powell and ECB's President Christine Lagarde.
• Both policymakers’ commitment to bringing inflation down saw the greenback outperform the euro, with the EUR/USD falling to a daily low of 1.0896.
• Powell’s remarks boosted the US dollar, pushing the US Dollar Index up 0.45% to 102.970, as market expectations for a 25 bps rate hike in July increased to 84.3%.

EUR/USD snaps two days of straight gains drop on hawkish remarks by the US Federal Reserve (Fed) Chair Jerome Powell, who shared a panel with the European Central Bank (ECB) President Christine Lagarde. Even though both policymakers struck hawkish remarks, the greenback finished with the upper hand. At the time of writing, the EUR/USD is trading at 1.0917, down 0.40%, after hitting a weekly high of 1.0976 on Tuesday.

Hawkish comments by Fed Chair Powell and ECB President Lagarde drive the greenback higher, leading to a drop in EUR/USD

Wall Street is trading mixed, with the Dow Jones being the outlier, registering losses of 0.15%. Fed Chair Powell and ECB’s Lagarde shared a panel on Wednesday where policymakers talked about monetary policy. The ECB President Christine Lagarde said there is ground to cover, and if the baseline scenario stands, the European Central Bank will pull the trigger in July. She added that core inflation was not dropping as expected and did not comment on the September meeting.

At the same time, Fed Chair Powell said that policy “has not been restrictive for long,” emphasizing that most of the dot plot still sees two more increases. He added, “US economy is quite resilient and latest data consistent with that” and added the Fed needs to see more softening in the labor market.

Albeit both policymakers remain committed to bringing inflation down, Lagarde’s failure to commit to an additional hike in September hurt the Euro (EUR), as seen by the EUR/USD pair falling toward the daily low beneath the 1.0900 figure, at 1.0896 before recovering some ground.

Nevertheless, Powell’s comments boosted the greenback, as the US Dollar Index climbs 0.45%, at 102.970 shy of piercing the 103.000 marl. Meanwhile, expectations for a 25 bps rate hike in July jumped, as shown by the CME FedWatch Tool, with odds at 84.3%, above June’s 27 76.9%.

In recent data, the US Trade deficit contracted by 6.1% to $-91.1 billion, vs. April’s $-97.1 billion, as shown by the US Department of Commerce. Sources cited by Reuters commented, “Even with the narrowing in May, the goods trade deficit is up by over 10% since March, and trade will likely be a drag on economic growth in the second quarter.”

Regarding the Eurozone data, the German GfK Consumer Sentiment showed consumer confidence is foreseen to fall to -25.4 in July, from a downward revised -24.4 in June. The report noted that elevated prices are eroding the households purchasing power. Also, consumers are spending less due to declining economic and income expectations.

Upcoming events

In the Eurozone area, the docket will feature inflation data in Germany and Spain. The latter will also reveal the business confidence poll. Across the pond, the US economic agenda will disclose Initial Jobless Claims, GDP data, housing data, and a slew of Federal Reserve speakers.

EUR/USD Price Analysis: Technical outlook

From a technical perspective, the EUR/USD remains neutrally biased but slightly tilted to the downside as the current EUR/USD trading session continues to edge lower. If EUR/USD achieves a daily close below the June 27 open of 1.0905, a bearish-engulfing candle pattern emerges, suggesting that further downside is expected. If that scenario happens, the EUR/USD next support would be the 20-day Exponential Moving Average (EMA)  at 1.084, followed by the 50-day EMA at 1.0851 and the 1.0800 mark. On the flip side, the EUR/USD first resistance would be the weekly high of 1.0976, followed by the psychological 1.1000 mark.

• The NZD/USD fell to its lowest low since June 8, at 0.6070 during the American session.
• Jerome Powell hinted at consecutive rate hikes driven by the labor market.
• Markets discount higher probabilities of a 25 bps hike by the Fed in July, favoring the USD.

The NZD/USD currency experienced significant selling pressure, reaching its lowest level since June 8 at 0.6070 during the American session. This downward movement was triggered by hints from Jerome Powell, the Chairman of the Federal Reserve (Fed), indicating the likelihood of consecutive interest rate hikes driven by the labor market. Consequently, market participants have started assigning higher probabilities to a 25 basis points hike by the Fed in July, strengthening the US Dollar against the New Zealand Dollar.

Hawkish bets on the Fed and easing economic-downturn fears boost the USD 

On Wednesday, during the European Central Bank (ECB) forum in Sintra, Jerome Powell continued giving investors hawkish clues. He stated that he wouldn’t take a “move at consecutive meetings off the table” as the labor market may contribute to an uptick in inflation. Regarding economic activity, he mentioned that it is possible to get a downturn but that its not “the most likely case”.

As per the CME FedWatch Tool, investors are betting on higher odds of nearly 84% of the Federal Reserve (Fed) hiking by 25 basis points (bps) at the next July 31 meeting. As a reaction, the Greenback, measured by the DXY index, trades near 103.00 with a 0.45% gain on the day.

On the other hand, Activity Outlook and Business Confidence data from the Australia and New Zealand Banking Group will be the highlight in early Thursday’s Asian session, which could affect the Kiwi’s price dynamics.

NZD/USD levels to watch

According to the daily chart, the technical outlook for the short term for the NZD/USD has turned negative as sellers gained significant momentum. The Relative Strength (RSI) and Moving Average Convergence Divergence (MACD) fell to negative territory while the pair now trades below the 200 and 20-day Simple Moving Averages (SMA).

Support levels to watch: 0.6050,0.6040 and 0.6030 (strong support seen at the beginning of June).
Resistances: 0.6090, 20-day SMA at 0.6138 (former support), 200-day SMA at 0.6158.

NZD/USD Daily chart

• USD/CAD climbs sharply to 1.3248, gaining more than 0.40% after Jerome Powell’s remarks at the European Central Bank (ECB) Sintra event.
• Powell’s suggestion of two more increases in the Fed’s policy boosted the pair, driving it to a new two-week high at 1.3276.
• Market odds for a Fed 25 bps rate hike in June rose to 84.3%, driving the US dollar higher.

USD/CAD climbed sharply on Wednesday, helped by the US Federal Reserve (Fed) Chair Jerome Powell’s remarks at the European Central Bank (ECB) Sintra event, reiterating the Fed would likely hike two times as shown by the dot-plots. The USD/CAD is trading at 1.3248, gains more than 0.40% after hitting a daily low of 1.3188.

Fed Chair's signals for future rate hikes and disappointing Canadian inflation figures drive USD/CAD higher

US equities are trading mixed, with the Dow Jones and S&P printing losses, while the heavy-tech Nasdaq holds to its gains. The session’s highlight has been the Chair Powell noting that policy “has not been restrictive for long,” emphasizing that most of the dot plot still sees two more increases. He added, “US economy quite resilient and latest data consistent with that” and added the Fed needs to see more softening in the labor market.

The USD/CAD reacted to Powell’s remarks, and hit a new two-week high at 1.3276, as market participants, increased the odds for a Fed 25 bps rate hike in June to 84.3%, compared to yesterday’s 76.9%, as reported by data of the CME FedWatch Tool.

Consequently, the greenback is strengthening, as shown by the US Dollar Index (DXY), which gains 0.42%, up to 102.943. Nevertheless, US Treasury bond yields are dropping, with the US 10-year benchmark note rate at 3.748%, two basis points lower than its opening price.

Regarding data, the US Trade deficit narrowed by 6.1% to $-91.1 billion, compared to April’s $-97.1 billion, as revealed by the US Department of Commerce. Sources cited by Reuters commented, “Even with the narrowing in May, the goods trade deficit is up by over 10% since March, and trade will likely be a drag on economic growth in the second quarter.”

Aside from this, the latest inflation report from Canada was softer than expected after the Bank of Canada (BoC) delivered a 25 bps rate hike on a sudden shift of monetary policy stance. The Consumer Price Index (CPI) in May grew 3.4% YoY vs. 4.4% the prior month, the lowest level since June 2021. The common Core rose by 5.2% YoY, vs. 5.7% in April, the weakest since March 2022. After the data release, expectations for further tightening of the Boc fell, as odds for a hike on July 12 rose to 50%, below the 70% at the beginning of the week.

Upcoming events

The US economic agenda will feature the US Initial Jobless Claims for the last week and the release of the Gross Domestic Product (GDP) figures and Pending Home Sales.

USD/CAD Price Analysis: Technical outlook

The USD/CAD reacted upward on Powell’s remarks but failed to crack the 20-day Exponential Moving Average (EMA) at 1.3280, suggesting that sellers remain in charge, around the 1.3300/1.3280 area. The Relative Strength Index (RSI) points upward but has yet to cross the bullish territory, so the USD/CAD remains exposed to selling pressure. Meanwhile, the three-day Rate of Change (RoC) suggests buyers are entering the market but not as strong as expected.

The USD/CAD would shift to neutral bullish if buyers reclaim the February 2 daily low of 1.3260 and extend its gains past 1.3300. Otherwise, any rallies could be used for USD/CAD sellers to reposition and enter at a better price.

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, speak alongside Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda at a policy panel at the 2023 ECB Forum on Central Banking.

Key takeaways

Ueda: "Some smaller, regional Japanese banks are sitting on non-negligible amounts of valuation losses."

Lagarde: "We are looking to complete our operational framework review in the next 6-9 months.

Powell: "I don't see anything that would make us want to adjust speed of balance sheet adjustment right now."

Powell: "I don't see us getting back to 2% inflation this year or the next; I see us making progress."

Between the start of the year and 4 May, Gold prices rallied by 13%. Since then, they have lost momentum. Strategists at ABN Amro have downgraded their Gold price forecast for 2024 to $2,000 (from $2,200 before). They now have for 2023 and 2024 a year-end forecast of $2,000.

Being long at current levels may not be attractive

Economists at Wells Fargo remain somewhat hesitant on the medium term prospects for the British Pound and Canadian Dollar.

Aggressive BoE easing next year should restrain the UK currency

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, speak alongside Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda at a policy panel at the 2023 ECB Forum on Central Banking.

Key takeaways

Bailey: "It would not be the right thing to do to change the inflation target."

Bailey: "Market doesn't think we are not nearly done at the moment."

Powell: "US economy is quite resilient and latest data are consistent with that."

Powell: "Inflation proved to be more persistent than expected."

Powell: "Watching commercial real estate very carefully."

Powell: "Commercial real estate worries played no part in June decision."

Powell: "We don't target particular parts of the market."

Lagarde: "Transmission of policy is likely to be less rapid than in the past due to fixed rate mortgages."

Lagarde: "We may have underestimated the resilience of our economies."

Ueda: "We're seeing signs of inflation expectations rising but they not fully in line with the inflation target."

Attractive real interest rates have led to a significant appreciation of the Peso. Banxico's wait-and-see stance suggests that the MXN will trade at a strong level for the time being, in the view of economists at Commerzbank.

Banxico's vigilance to continue to support the Peso in the face of a still uncertain inflation outlook

Source: Commerzbank Research

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, speak alongside Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda at a policy panel at the 2023 ECB Forum on Central Banking.

Key takeaways

Ueda: "Still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth."

Ueda: "Economy is going to expand slightly above potential for some time."

Bailey: "Brexit is not part of a strong labor market story."

Lagarde: "We are not seeing enough tangible evidence of falling underlying inflation."

Lagarde: "Second quarter was not great for manufacturing."

"Lagarde: "Manufacturing does not give great hope for a strong recovery."

Powell: "There is significant disinflation in pipeline from rents but it will take time."

Powell: "We need to see more softening in labour market."

Powell: "We're getting the softening we need but slower than expected."

Powell: "Significant probability is we get a downturn but it's not the most likely case."

Why is the Euro still weak against the Dollar? Fundamentally, the Dollar/Euro exchange rate is explained by the relative attractiveness of the United States and the Eurozone for capita, economists at Natixis report.

EUR/USD fluctuates in the short term mainly in line with monetary policy expectations

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, speak alongside Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda at a policy panel at the 2023 ECB Forum on Central Banking.

Key takeaways

Lagarde: "We still have ground to cover."

Lagarde: "If the baseline stands, we know we will likely hike again in July."

Bailey: "UK economy turned out to be much more resilient."

Bailey: "Data showed clear signs of persistence of inflation."

Bailey: "We will do that is necessary to get inflation to target."

Powell: "Policy hasn't been restrictive for very long."

Powell: "We believe there's more restriction coming, driven by labor market."

Powell: "Strong majority for two more rate hikes in dot plot."

Powell:  "As you get closer to target, you're closer to a place where risks become more in balance."

Powell: "Wouldn't take moving at consecutive meetings off the table."

• EUR/USD fades part of the recent optimism and retests 1.0920.
• Next on the downside comes the 55-day SMA around 1.0880.

EUR/USD gives away some of the recent 2-day gains and slips back to the 1.0925/20 band on Wednesday.

In case the selling pressure gathers extra impulse, the pair could see the 55-day SMA, today at 1.0883, revisited in the near term. Below the latter, the weekly low at 1.0844 (June 23) could become the next support to watch for.

Looking at the longer run, the positive view remains unchanged while above the 200-day SMA, today at 1.0578.

EUR/USD daily chart

• The Aussie is under pressure after the release of Australian inflation data.
• The US Dollar is gaining momentum ahead of central bankers' panel.
• The AUD/USD is approaching the 0.6600 support level, falling sharply for the second day in a row.

After a brief consideration around 0.6640, the AUD/USD resumed its decline and tumbled towards 0.6600, reaching fresh weekly lows. The pair was trading lower following Australian inflation data and more recently, due to the stronger US Dollar across the board during the weekend.

First Australian inflation, then a stronger Dollar 

Inflation data from Australia came in below expectations, with the Monthly Consumer Price Index annual rate decelerating to 5.6% in May, below the market consensus of 6.1%. The Trimmed CPI also decelerated to 6.1% in May from 6.7% in April. These numbers weighed on rate hike expectations from the Reserve Bank of Australia next week and sent the Aussie down across the board. 
The AUD/USD dropped to 0.6619 during the Asian session and then rebounded modestly. After moving around 0.6640, the pair recently broke to the downside due to a stronger US Dollar across the board, tumbling to 0.6603, the lowest level in three weeks. It remains under pressure trading near the lows. 

Market participants are now awaiting a European Central Bank (ECB) panel at the Sintra Forum with the participation of Bank of England's Bailey, Bank of Japan's Ueda, ECB's Lagarde, and Fed's Powell. Hawkish expectations from the Fed and the ECB have been benefiting the USD and the EUR during the last sessions. EUR/AUD is up on Wednesday for the eighth consecutive day and is trading above 1.6500, the highest since early May.

Looking at 0.6600

The pair is moving with a clear bearish bias, looking for the next support area. If it breaks below 0.6600, the next support might be seen at the 0.6580 area, followed by 0.6550. On the upside, 0.6635 is the immediate resistance, followed by 0.6665.

Technical levels 

S&P 500 needs to clear 4410 to ease immediate thoughts of a correction lower for strength back to 4448, potentially 4500/4535, which analysts at Credit Suisse look to cap.

Key near-term support is seen at 4346/28

• USD/JPY is approaching 145.00 amid sheer strength in the USD Index.
• S&P500 futures have posted nominal losses ahead of opening as investors are cautious about Powell’s speech.
• A survey from Reuters showed that the BoJ could intervene in FX moves if the Japanese Yen depreciates to 145.00 against the US Dollar.

The USD/JPY is rising swiftly towards the crucial resistance of 145.00 in the early New York session. The asset has been fueled with immense strength as the US Dollar Index (DXY) has printed a fresh three-day high at 102.90.

S&P500 futures have posted nominal losses ahead of opening as investors are cautious about the speech from Federal Reserve (Fed) chair Jerome Powell at the European Central Bank (ECB) forum of Central Banking. Market mood has turned risk-averse as investors are hoping that Fed Powell would continue reiterating a hawkish stance.

The US Dollar Index has jumped strongly supported by expectations of hawkish guidance from Fed Powell and firmer US Durable Goods Orders data. US Census Bureau reported that Durable Goods Orders have expanded by 1.7% while the street was anticipating a contraction of 1%. May’s Durables data has outperformed April’s figure of 1.2%.

A hawkish guidance is expected from Jerome Powell as core inflation in the United States economy is showing persistent and labor market conditions are still tight despite higher interest rates and tight credit conditions by commercial and regional banks.

Meanwhile, a survey from Reuters showed that the Bank of Japan (BoJ) could intervene in FX moves if the Japanese Yen depreciates to 145.00 against the US Dollar. Japanese Finance Minister Shunichi Suzuki reiterated on Wednesday that he “will respond appropriately to excessive FX moves if necessary.”

Later this week, Tokyo’s Consumer Price Index (CPI) data will be keenly watched. Headline CPI is seen accelerating to 3.8% while core inflation could jump to 4.4%.

Economists at Wells Fargo expect further Lira depreciation going forward.

Lira depreciation to stay, and risks still tilted to the downside

• DXY leaves behind two sessions in a row with losses.
• Immediately to the upside emerges the weekly top at 103.13.

DXY manages to gather some fresh buying interest and advances with firm pace after two consecutive daily pullbacks on Wednesday.                                                                  

The index thus manages to regain some upside traction and now faces the next interim hurdle at the 100-day SMA at 103.04. The surpass of this level should open the door to a move to the weekly top of 103.16 (June 23).

Above the latter, the index could see its downward bias mitigate somewhat.

Looking at the broader picture, while below the 200-day SMA at 104.99 the outlook for the index is expected to remain negative.

DXY daily chart

• EUR/GBP has quickly jumped to near 0.8640 as ECB is expected to raise interest rates further.
• ECB Lagarde reiterated that more interest rate hikes are appropriate to make monetary policy sufficiently restrictive.
• Investors are awaiting the speech from BoE Bailey for further guidance.

The EUR/GBP pair has climbed swiftly to near the crucial resistance of 0.8640 in the European session. The cross has picked immense strength as the European Central Bank (ECB) is consistently reiterating the need for more interest rate hikes as core inflation in the Eurozone is extremely persistent.

ECB President Christine Lagarde reiterated that more interest rate hikes are appropriate to make monetary policy sufficiently restrictive to tame stubborn inflation. Inflation in Eurozone is thrice the desired rate of 2% and further policy-tightening is appropriate to bring down inflation.

Meanwhile, fears of a longer recession in the German economy could halt the rally in the Euro. Risks of an elevated recession in the German economy have fueled as business morale has slipped consecutively for the second time. The Ifo Institute reported that the business climate index fell to 88.5 in June from the 91.5 figure recorded in May.

Investors should note that the German economy has already reported a technical recession by registering a contraction in Gross Domestic Product (GDP) consecutively for two quarters.

On the Pound Sterling front, investors are awaiting the speech from Bank of England (BoE) Governor Andrew Bailey at the European Central Bank (ECB) forum of Central Banking. Investors will keenly focus on the interest rate guidance as inflationary pressures in the United Kingdom are not signaling any slowdown despite consistent policy-tightening by the central bank.

Recent jumps in prices of second-hand automobiles and air travel have offset the impact of declining gasoline prices, which pushed the headline Consumer Price Index (CPI) higher than expectations.  

Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes USD/CAD technical outlook.

Trend momentum has turned bullish

EUR/USD retains a firm undertone in the mid-1.09s. Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes the pair’s outlook.

ECB sticks with hawkish outlook

• EUR/JPY clinches new YTD highs just below the 158.00 mark.
• Extreme oversold conditions should trigger a correction soon.

EUR/JPY comes under pressure soon after hitting new highs for the year in levels just shy of 158.00 the figure on Wednesday.

Considering the ongoing price action, further gains appear on the cards in the very near term. That said, the continuation of the uptrend should meet the next significant resistance not before the weekly high of 163.09 (August 22 2008).

The current extreme overbought conditions of the cross, however, are indicative that a corrective decline 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 144.98.

EUR/JPY daily chart

• USD/CHF has shown a recovery move to near 0.8960 as Fed Powell is expected to reiterate the hawkish stance.
• S&P500 futures have recovered the majority of the gains, portraying a recovery in the risk appetite of the market participants.
• USD/CHF is jumped to near the horizontal resistance of the Ascending Triangle chart pattern.

The USD/CHF pair has refreshed its day’s high at 0.8964 as the US Dollar Index (DXY) has got back in action ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, which is scheduled at 13:30 GMT.

S&P500 futures have recovered the majority of the gains, portraying a recovery in the risk appetite of the market participants. Investors are digesting expectations from hawkish commentary from Fed Powell as the central bank has already conveyed that two small interest rate hikes are appropriate by year-end. Jerome Powell is widely expected to reiterate its hawkish stance at the European Central Bank (ECB) forum of Central Banking.

The US Dollar Index (DXY) is making efforts for coming out of the woods, which could be done by climbing above the immediate resistance of 102.70.

USD/CHF is jumped to near the horizontal resistance of the Ascending Triangle chart pattern plotted from June 26 high at 0.8969 on an hourly scale. The aforementioned pattern indicates a sheer contraction in volatility. Upward-sloping trendline of the chart pattern is placed from June 26 low at 0.8912.

The Swiss Franc asset has comfortably shifted above the 50-period Exponential Moving Average (EMA) at 0.8948, which indicates that the short-term trend is bullish.

The Relative Strength Index (RSI) (14) is testing territory above 60.00. Confident stability above the same would activate the bullish momentum.

Going forward, 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.

In an alternate scenario, 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.

USD/CHF hourly chart

GBP/USD maintains its break of key resistance from the downtrend from June 2021. Economists at Credit Suisse analyze the pair’s technical outlook. 

Support at 1.2687/86 needs to hold to suggest the risk can still marginally stay seen higher

Economists at Wells Fargo continue to believe the best opportunities for currency strength and outperformance exist in emerging markets.

The most attractive yield opportunities continue to be found in the emerging market

• AUD/USD is in a non-directional phase ahead of Fed Powell’s speech.
• The market mood is showing a decline in risk appetite as central banks are expected to deliver hawkish guidance.
• Australian labor market conditions are still tight and might force the RBA to continue hiking interest rates further.

The AUD/USD pair is demonstrating a sideways auction around 0.6640 in the European session. The Aussie asset has turned sideways after a vertical sell-off inspired by softening of the Australian monthly Consumer Price Index (CPI) beyond expectations.

S&P500 futures are holding losses in London as investors are cautious ahead of speech from central bank governors at European Central Bank (ECB) forum. The market mood is showing a decline in the risk appetite of investors as central banks are expected to deliver hawkish guidance, which would fuel fears of global recession.

The US Dollar Index (DXY) is oscillating in a narrow range around 102.60 as investors have sidelined ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. No doubt, Fed Powell has already announced that the central bank will tighten policy further but at a ‘careful pace’. Despite the consistent softening of United States inflation, current price pressures are still double the desired rate, which can be contained by pushing interest rates further.

Meanwhile, the Australian Dollar is expected to deliver more weakness after a higher-than-expected slowdown in the pace of inflation. Monthly CPI decelerated to 5.7% vs. the estimates of 6.1% and the former release of 6.8%. Thanks to the sharp decline in gasoline prices, which slowed down the pace of inflation.

Inflation has softened more than expected, however, Australian labor market conditions are still tight and might force the Reserve Bank of Australia (RBA) to continue hiking interest rates further. Investors should note that the RBA has already raised its Official Cash Rate (OCR) to 4.10%.

In the UK, the impression remains of a central bank that is merely reacting to the inflation development. Economists at Commerzbank analyze the GBP outlook. 

Scepticism about whether the BoE will manage to fight the high inflation sustainably to weigh on the GBP

Source: Commerzbank Research

USD/CHF risk is still seen lower for 0.8823/19, but with support expected to start to show here, economists at Credit Suisse report.

Mild negative bias

Bank of England's rate hikes are set to continue, bolstering the British Pound, according to economists at Goldman Sachs.

Concerns regarding aggressive rate hikes weakening the currency are unwarranted

• The US Dollar is flaring up as the Greenback gains in Asia. 
• Wednesday’s focus will be on Powell speaking in Sintra and some third-grade macro data.
• The US Dollar Index is in the green and pops back above the important threshold of 102.50. 

The US Dollar (USD) flips 180 degrees, booking substantial gains in Asia after the US considers new curbs on AI chip exports to China.. The Greenback is outperforming against the Chinese Yuan at a six-month high and against the Japanese Yen. This translates into substantial gains for the US Dollar Index, which is back above 102.50.

Wednesday’s focus is on US Federal Reserve (Fed) Chairman Jerome Powell, who is set to speak at 13:30 GMT at the European Central Bank’s symposium in Sintra, Portugal. Markets are to get some more insight on the US economy through a small batch of data, Wholesale Inventories and the Goods trade Balance for May. Later, at 20:30 GMT, the US Bank Stress Test report will be interesting to read through. 

Daily digest: US Dollar roars back 

• Reports are coming from Washington that the US Commerce Department is set to close loopholes on AI chip exports to China. 
• At 11:00 GMT, US MBA Mortgage Applications are set to come out. The previous number was at 0.5%, with no expectations pencilled in for the current number.
• Around noon, 12:30 GMT, Goods Trade Balance and Wholesale Inventories are coming in. The Goods Trade Balance stood at a deficit of  $96.1 billion in April. Wholesale Inventories are expected to contract 0.2%, more than the 0.1% decline registered a month earlier. 
• Markets will hear from US Fed Chairman Jerome Powell  at 13:30 GMT as he is set to speak at the ECB’s symposium in Sintra. Markets already moved substantially on Tuesday after the opening remarks from ECB President Christine Lagarde, with the Euro outpacing the US Dollar. 
• The US Treasury is heading to the markets to place a 7-year Note. 
• Asian equities are in the green, with the Chinese Hang Seng Index posting gains for a second consecutive day.. The Japanese Topix is jumping 2%. European equity indices have taken over the positive tone, while US futures are mildly in the red. 
• The CME Group FedWatch Tool shows that markets are pricing in a 76.9% chance of a 25 basis points (bps) interest-rate hike on July 26th. The certainty of one more hike has increased as US Fed Chairman Jerome Powell remained hawkish in the recent two hearings before the US Congress, though markets remain reluctant to price in that second rate hike.  
• The benchmark 10-year US Treasury bond yield trades at 3.76% and sees yields climbing while bond prices fall. Markets are further unwinding their safe haven holdings.

US Dollar Index technical anlysis: US lashes out to China on AI

The US Dollar trades in a very dispersed and extreme manner as most notable performances are against the Chinese Yuan and the Japanese Yen, both trading at a six-month low against the Greenback. Biggest loser of the day is the New Zealand Dollar, which is losing over 1% against the US Dollar. This values the US Dollar Index above an important psychological threshold at 102.50, . 

On the upside, the 100-day Simple Moving Average (SMA) briefly touched at 103.04 remains as the level to break above and hold. That attempt failed last week, and could demand more conviction from the Greenback in order to head and stay above that level. Once that happens, look for 103.50 as the next key level to the upside. 

On the downside, the 55-day SMA near 102.63 is being breached again, losing its importance after being chopped up several times last week. As mentioned, 102.50 will be vital to hold from a psychological point of view.  In case the DXY slips below 102.50, more weakness is expected with a full slide to 102.00 and a retest of June’s low at 101.92.

What is US Dollar Index (DXY)?

The US Dollar Index, also known as DXY or USDX, is a benchmark index that was established by the US Federal Reserve in 1973. DXY is widely used as a tool measuring the US Dollar (USD) value in global markets. The index is calculated by measuring the US Dollar’s performance against a basket of six foreign currencies, the Euro, the Japanese Yen (JPY), Swedish Krona (SEK), the British Pound (GBP), the Swiss Franc (CHF) and the Canadian Dollar (CAD).

With 57.6%, the Euro has the biggest weight in the index followed by the JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%). Hence, a sharp decline in the EUR/USD pair could help the US Dollar Index rise even if the US Dollar weakens against some of the other currencies in the basket.

USD/CAD has in the view of economists at Credit Suisse completed an important top below key support at 1.3227/25 to mark an important change of trend lower.

A major top has been established

Above support from the 55-Day Moving Average at 1.0887, EUR/USD can maintain a slight upside bias in the broader sideways range, analysts at Credit Suisse report.

Euro may still be seeing the formation of a broader topping process

Economists at Société Générale analyze USD/JPY technical outlook.

Last month's high of 141 expected to be a short-term support

European Central Bank (ECB) policymaker, Boštjan Vasle, said on Wednesday, “we need to keep tightening policy at our next meeting.”

Additional quotes

“Inflation remains persistent.”

“Beyond that, we will remain data dependent.”

“But the burden of proof will be on invalidating a rate hike, rather than validating one.”

Market reaction

At the time of writing, EUR/USD is keeping its range play intact at around 1.0950, almost unchanged on the day.

• Gold price is declining towards the $1,900.00 support ahead of Fed Powell’s speech.
• Investors are cautious that hawkish remarks from Jerome Powell would propel fears of a recession in the US economy.
• Gold price has tumbled to near the 61.8% Fibonacci retracement at $1,909.00.

Gold price (XAU/USD) has challenged the crucial support of $1,910.00 in the London session. The precious metal is declining towards the psychological support of $1,900.00 as investors are expecting hawkish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell.

S&P500 futures have posted decent losses overnight as investors are cautious that hawkish remarks from Jerome Powell would propel fears of a recession in the United States economy. According to HSBC Asset Management the US will enter a downturn in the fourth quarter, followed by a “year of contraction and a European recession in 2024.

The US Dollar Index (DXY) is struggling to sustain above the critical resistance of 102.60 despite the market mood has turned cautious. It is highly likely that Fed Powell would stick to the guidance delivered earlier that the central bank will hike interest rates at a ‘careful pace’. San Francisco Fed Bank President Mary Daly suggested that two more rate hikes this year is a “very reasonable” projection.

Meanwhile, the US Durable Goods Orders data (May) also remained resilient despite tight monetary policy by the Fed. The economic data expanded by 1.7% while the street was anticipating a contraction of 1%. May’s Durables data has outperformed April’s figure of 1.2%.

Gold technical analysis

Gold price has tumbled to near the 61.8% Fibonacci retracement (plotted from February 28 low at $1,804.76 to May 03 high at $2,079.76) at $1,909.00 on a four-hour scale. Downward-sloping 200-period Exponential Moving Average (EMA) at $1,952.74 indicates that more downside is in the pipeline.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-60.00, which indicates that the downside momentum is active.

Gold four-hour chart

Norges Bank set an example last week. Is it possible that the Riksbank will follow suit and also surprise the market with a 50 bps rate step tomorrow? Antje Praefcke, FX Analyst at Commerzbank, analyzes how the SEK could react to the Monetary Policy Announcement.

The Riksbank has to convince that it will not drop behind the other central banks

European Central Bank (ECB) policymaker Madis Muller said on Wednesday, the ECB needs to look at the data for rate hike beyond July.

Further comments

Related reads

• ECB’s Vujčić: Good chance of a September rate hike
• ECB Forum Preview: Central banker panel key to identify alignment or divergence on interest rates

• USD/JPY reverses modest intraday slide and climbs to a fresh YTD peak on Wednesday.
• The Fed-BoJ policy divergence continues to act as a tailwind despite intervention fears.
• Traders look to Fed Chair Powell and BoJ Governor Ueda for some meaningful impetus.

The USD/JPY pair attracts some dip-buying near the 143.75-143.70 area on Tuesday and touches a fresh high since November 2022 during the early European session. Spot prices currently trade around the 144.20-144.25 region, up 0.10% for the day, and seems poised to prolong its recent upward trajectory witnessed over the past three weeks or so.

Despite warnings by Japanese authorities to intervene again to stem losses for the domestic currencies, expectations that the Bank of Japan (BoJ) will sticks to its dovish stance undermine the Japanese Yen (JPY) and lend support to the USD/JPY pair. It is worth recalling that the BoJ Governor Kazuo Ueda recently ruled out the possibility of any imminent change in ultra-loose monetary policy settings and signalled no immediate plans to alter its yield curve control measures.

The marks a big divergence in comparison to a more hawkish stance adopted by other major central banks, including the Federal Reserve (Fed), which indicated that borrowing costs may still need to rise as much as 50 bps by the end of this year. The bets were reaffirmed by stronger-than-expected US macro data released on Tuesday. This, in turn, assists the US Dollar (USD) to gain some positive traction and turns out to be another factor acting as a tailwind for the USD/JPY pair.

Apart from this, the prevalent risk-on mood - as depicted by a further rise in the equity markets - undermines the safe-haven JPY 
and supports prospects for a further near-term aprpecaiting move. Traders, however, prefer to wait on the sidelines ahead of Fed Chair Jerome Powell and BoJ Governor Kazuo Ueda's appearance at the ECB Forum on Central Banking in Sintra. Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favour of bullish traders.

Hence, any meaningful corrective decline might still be seen as a buying opportunity and is more likely to remain short-lived. Even from a technical perspective, the USD/JPY pair has been trending higher along an upward sloping channel over the past three week or so. This further points to a well-established short-term bullish trend and adds credence to the positive outlook ahead of the release of the US Core PCE Price Index - the Fed's preferred inflation gauge on Friday.

Technical levels to watch

European Central Bank (ECB) policymaker, Boris Vujčić, said on Friday, “there is a good chance of a September rate hike,” adding that “inflation persistence means there may be no September pause.”

“I think we can engineer a soft landing,” he added.

Market reaction

At the time of writing, EUR/USD is staying confined in a narrow range around 1.0950, awaiting comments from Fed Chair Jerome Powell and ECB President Christine Lagarde later in the day.

Economists at Société Générale analyze Brent Oil technical outlook.

Overcoming $78/$79 is essential to affirm a meaningful rebound

• Euro starts Wednesday’s session slightly offered.
• Stocks in Europe open the session with decent advance.
• EUR/USD hovers around the 1.0950 region amidst risk-off mood.
• Germany’s Consumer Confidence worsens in July.
• Investors will closely follow events from the ECB Forum.

The recent two-day advance of the Euro (EUR) was somewhat limited due to renewed buying interest in the US Dollar (USD), leading to a partial retracement of the weekly gains for EUR/USD. As a result, the pair revisited the 1.0930 region early in the morning on Wednesday during the European session.

The stronger performance of the US Dollar also provided some relief to the USD Index (DXY), which had experienced negative performance earlier in the week. The index approached the 55-day SMA around 102.60.

The immediate reaction in the currency market can also be attributed to the lack of a clear direction in both the US and German bond markets. This uncertainty occurs amidst expectations of a quarter-point interest rate hike by both the European Central Bank (ECB) and the Federal Reserve (Fed) at their respective meetings in July.

The potential future actions of the Fed and the ECB in normalizing their monetary policies remain a topic of ongoing debate. This discussion takes place against the backdrop of increasing speculation about an economic slowdown on both sides of the Atlantic.

Regarding monetary policy, a notable event on Wednesday will be a Policy Discussion Panel at the ECB Forum on Central Banking in Sintra, Portugal. The panel will feature Chief Jerome Powell and ECB President Christine Lagarde, participating in the European afternoon.

In terms of data, consumer confidence in Germany, as measured by GfK, weakened to -25.4 for the month of July.

Across the Atlantic, the usual weekly Mortgage Applications tracked by the Mortgage Bankers Association (MBA) will be released, followed by preliminary figures for the Goods Trade Balance.

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

• The EUR runs out of steam on USD recovery.
• Germany’s Consumer Confidence disappoints expectations in July.
• ECB Lagarde-Fed Powell will take centre stage later on Wednesday.
• ECB’s De Guindos favours a rate hike in July.
• ECB’s Vujcic leaves the door open to a September hike.

Technical Analysis: Euro looks supported by the 55-day SMA

EUR/USD appears under pressure and should the selling bias gather impulse it could face initial support at the transitory 55-day SMA at 1.0883. The loss of this level exposes a deeper pullback to the June low at 1.0844 (June 23) ahead of the provisional 100-day SMA at 1.0814. South from here emerges the May low of 1.0635 (May 31) prior to the March low of 1.0516 (March 15) and the 2023 low of 1.0481 (January 6).

If bulls regains the upper hand, the next hurdle is then expected at the June peak of 1.1012 (June 22) prior to the 2023 high of 1.1095 (April 26), which is closely followed by the round level of 1.1100. North from here emerges the weekly top of 1.1184 (March 31, 2022), which is supported by the 200-week SMA at 1.1181, just before another round level at 1.1200.

The constructive view of EUR/USD appears unchanged as long as the pair trades above the crucial 200-day SMA, today at 1.0578.

• USD/CAD has refreshed its weekly high at 1.3230 as BoC might skip the interest rate hike ahead.
• The US Dollar Index has sensed fragile barricades around 102.70 as the focus is on the speech from Fed Powell.
• USD/CAD has delivered a breakout of the Bearish Wedge chart pattern, which indicates a bullish reversal.

The USD/CAD pair has displayed a marginal correction after printing a fresh weekly high at 1.3230 in the European session. The Loonie asset faced heavy selling pressure after Canada’s Consumer Price Index (CPI) for May softened as expected by the market participants.

Monthly headline CPI has registered a pace of 0.4% while the street was estimating a pace of 0.5%. Last month, headline CPI showed a velocity of 0.7%. Annualized headline inflation has decelerated to 3.4% as expected by the market participants. The Bank of Canada (BoC) has got a reason to skip policy-tightening again as May’s labor market data was also below expectations.

Meanwhile, the US Dollar Index (DXY) has sensed fragile barricades around 102.70 as the focus in on the speech to be delivered by Federal Reserve (Fed) chair Jerome Powell at 13:30 GMT.

USD/CAD has delivered a breakout of the Bearish Wedge chart pattern on a two-hour scale, which indicates a bullish reversal. Potential resistance is plotted from June 07 low at 1.3321. The Loonie asset has comfortably shifted above the 50-period Exponential Moving Average (EMA) at 1.381, which conveys that the short-term trend has turned positive.

A range shift move into the 60.00-80.00 territory from the 40.00-60.00 area has activated the bullish momentum.

Going forward, a decisive move above June 07 low at 1.3321 would drive the asset to June 12 high at 1.3384 and June 06 high at 1.3452.

On the flip side, a downside move below June 16 low at 1.3177 could expose the asset to June 22 low at 1.3139 followed by the round-level support at 1.3100.

USD/CAD two-hour chart

Outside of the US, the focus has been on comments from policymakers at the ECB’s annual conference on central banking. Economists at MUFG Bank analyze EUR outlook.

EUR/USD continues to trade toward the top of this year’s trading range

• EUR/JPY reverses modest intraday dip and climbs back closer to a nearly 15-year peak.
• Hawkish remarks by ECB officials underpin the shared currency and lend some support.
• Intervention fears hold back bulls from placing aggressive bets and cap gains the upside.

The EUR/JPY cross attracts some dip-buying near the 157.45-157.40 area on Wednesday and has now recovered a major part of its modest intraday losses. Spot prices currently steadily climb back closer to 158.00 round-figure mark and currently trade near the highest level since September 2008 touched on Tuesday.

The shared currency draws support from hawkish remarks by European Central Bank (ECB) officials, which, in turn, acts as a tailwind for the EUR/JPY cross. In fact, ECB Vice President, Luis de Guindos said that the July rate hike is set and added there is more ground to be covered on rates, though the September move will depend on data. Furthermore, ECB policymaker Madis Muller noted that risks to inflation still are on the upside and that it is too early to say where rates will end up.

This follows the overnight comments by ECB President Christine Lagarde that inflation in the Eurozone had entered a new phase that could linger for some time. Lagarde further noted that it is unlikely that in the near future the ECB will be able to state with full confidence that the peak rates have been reached. In contrast, the Bank of Japan (BoJ) Governor Kazuo Ueda recently ruled out the possibility of any change in the ultra-loose policy settings or alter the yield curve control measures.

The BoJ's dovish stance, along with the prevalent risk-on mood, undermine the Japanese Yen (JPY) and lend lending support to the EUR/JPY cross. However, speculations that Japanese authorities may intervene again to support the domestic currency help limit losses for the JPY. In fact, Japanese Finance Minister Shunichi Suzuki said on Tuesday that they will watch the forex market with a sense of urgency and would respond appropriately if currency moves became excessive. The warning was reiterated by Japan's top currency diplomat Masato Kanda earlier this Wednesday, which seems to cap gains for the cross.

Market participants also seem to have moved to the sidelines ahead of ECB President Christine Lagarde and BoJ Governor Kazuo Ueda's appearance at the ECB Forum on Central Banking, in Sintra. In the meantime, worries about economic headwinds stemming from rapidly rising borrowing costs hold back traders from placing aggressive bullish bets around the shared currency and contribute to keeping a lid on the EUR/JPY cross. Nevertheless, the fundamental backdrop favours bullish traders and suggests that the path of least resistance for spot prices remain to the upside.

Technical levels to watch

• Central bank bosses to discuss monetary policy collectively in ECB forum.
• Divergence on recent monetary policy between Fed, ECB, BoE and BoJ makes the event particularly interesting.
• Jerome Powell vocabulary will be particularly scrutinized ahead of expected rate hike in July.

Jerome Powell, Chairman of the Federal Reserve System (Fed) and Christine Lagarde, European Central Bank (ECB) President, will be speaking at the 2023 ECB Forum on Central Banking at 13:30 GMT on Wednesday, June 28th. 

Alongside Fed Chairman Powell, Bank of England Governor (BoE) Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda will also be taking part at the same panel.

The Fed left its policy rate unchanged at the range of 5%-5.25% following the June policy meeting but left the door wide open for a return to a 25 basis points (bps) rate hike in July. The ECB raised key rates by 25 bps in June and Lagarde noted that it is very likely the case that the ECB will continue to hike rates in July. In an unexpected decision, the BoE lifted its policy rate by 50 bps to 5% in response to strong wage inflation and Consumer Price Index (CPI) figures recorded in May. Finally, the BoJ maintained its loose policy settings in June but experts think the BoJ could review its Yield Curve Control strategy as early as next month for a possible tweak later this year. 

About Jerome Powell (via Federalreserve.gov)

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

• Pound Sterling is under pressure as BoE Bailey is expected to deliver hawkish remarks.
• United Kingdom government is adding measures beyond monetary tools in the inflation-control toolkit.
• Wage cuts for public sector employees would put more burden on households amid higher inflationary pressures.

The Pound Sterling (GBP) is facing selling pressure as investors are worried that the continuation of policy tightening by the Bank of England (BoE) would further dampen the economic outlook of the United Kingdom. The GBP/USD pair is going through a rough phase as more interest rate hikes by the BoE are reasonable considering that UK’s inflation is showing no signs of softening.

The speech from BoE Governor Andrew Bailey will remain in focus as investors are keen to know the consequences of higher interest rates to the United Kingdom economy and cues about the interest rate guidance. In comparison with developed economies, inflationary pressures in the British economy are extremely persistent and investors are losing their confidence in BoE policymakers and government.

Daily digest market movers: Pound Sterling stays below 1.2800 ahead of Andrew Bailey’s speech

• Investors are awaiting the speech from Bank of England Governor Andrew Bailey for interest rate guidance.
• The latest survey of 52 economists by Reuters showed that the Bank of England will raise borrowing costs 50 bps higher than was thought only two weeks ago, in two quarter-point moves, as elevated inflation proves trickier to bring down than had been expected.
• United Kingdom government has started looking beyond monetary policy measures as May’s Consumer Price Index (CPI) turned out more persistent than anticipated.
• UK FM Jeremy Hunt has urged industry regulators not to elevate profit margins by taking benefit of resilient demand.
• In addition to freezing corporate profits, wage cuts in the public sector are also under consideration as lower cash for disposal would release some heat from resilient demand.
• The image of the Conservative Party is in danger as wage cuts for public sector employees would put the burden on households in offsetting higher price pressures.
• May’s inflation was higher than expected as the impact of lower gasoline prices was neutralized by higher prices for second-hand automobiles.
• Core CPI printed a fresh high at 7.1% and made UK PM Rishi Sunak uncomfortable as he promised to halve inflation by year-end.
• Stubborn inflation was followed by a fat rate hike of 50 basis points (bps) from the Bank of England to 5%.
• The Pound Sterling has been underperforming as stick inflationary pressures are threatening the economic outlook of the British economy.
• Market sentiment has turned negative as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell for the interest rate guidance.
• As per the CME Fedwatch tool, around 77% chances are in favor of a 25 bp interest rate hike in July to 5.25-5.50%.
• The Upbeat United States Durable Goods Orders data showed promising signs of recovery in the manufacturing sector.
• US Census Bureau reported that Durable Goods Orders expanded by 1.7% while the street was anticipating a contraction of 1%. May’s Durables data has outperformed April’s figure of 1.2%.
• The US Dollar Index has refreshed its day’s high at 102.70 amid the risk-aversion theme.

Technical Analysis: Pound Sterling continues to face barricades around 1.2750

Pound Sterling delivered a steep fall after forming a Double Top chart pattern on an hourly scale around 1.2848. The Double Top pattern would be activated if the Cable surrender the round-level support of 1.2700. This would mark an activation of a bearish reversal and the US Dollar bulls might get in the driving seat.

Only a recovery move above the recent high of 1.2848 would give an upper hand to the Pound Sterling bulls. Momentum oscillators are demonstrating a non-directional performance.

The Japanese Finance Minister Shunichi Suzuki’s warnings about a weak Yen have not impressed USD/JPY. Antje Praefcke, FX Analyst at Commerzbank, discusses Yen outlook.

BoJ and Finance Minister just a toothless tiger

USD/CNH could see its upside momentum alleviate in case it breaks below the 7.1980 level in the short-term horizon, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

European Central Bank (ECB) policymaker Mario Centeno was reported on Wednesday, saying that “over-hiking isn't an acceptable position.”

Additional comments

“Economy already taking a hit, inflation will react.”

“Inflation is easing as quickly as it went up.”

“We are definitely getting to the terminal rate.”

Related reads

• ECB’s de Guindos: July rate hike is set

• EUR/USD to remain strong if the Eurozone price data confirms the ECB’s restrictive approach – Commerzbank

• Silver meets with some supply in the vicinity of the $23.00 mark, albeit lacks follow-through.
• The setup seems tilted in favour of bearish traders and supports prospects for further losses.
• A move beyond the 200-hour SMA/50% Fibo. confluence might offset the negative outlook.

Silver attracts some sellers following an intraday uptick to the $22.95 area on Wednesday and trades with a mild negative bias heading into the European session. The white metal is currently placed around the $22.80-$22.75 region, down less than 0.20% for the day, and remains well within the previous day's broader trading range.

From a technical perspective, the overnight failure near the 38.2% Fibonacci retracement level of the downfall witnessed over the past week or so and the subsequent downtick warrant some caution for bullish traders. Moreover, oscillators on the daily chart are holding in the bearish territory and have started gaining negative traction on the 1-hour chart. This, in turn, suggests that the recent bounce from the vicinity of the $22.00 mark, or a multi-month low touched last Friday, has run out of steam.

That said, it will still be prudent to wait for some follow-through selling below the $22.65-$22.55 confluence before positioning for any meaningful downside. The said area comprises the 100-hour Simple Moving Average (SMA) and the 23.6% Fibo., below which the XAG/USD might aim back to challenge the $22.00 mark. Some follow-through selling could accelerate the fall further towards the $21.70-$21.65 zone en route to the next relevant support near the $21.25 region and the $21.00 mark.

On the flip side, the $23.00 mark (38.2% Fibo. level) might continue to act as an immediate hurdle and is closely followed by the $23.15 confluence, comprising the 50% Fibo. level and the 200-hour SMA. This is followed by 61.8% Fibo. level, around the $23.40 area. A sustained strength beyond will confirm that the XAG/USD has formed a near-term bottom just ahead of the $22.00 mark and pave the way for some meaningful appreciating move in the near term.

Silver 1-hour chart

Key levels to watch

AUD/USD has fallen back towards support at the 0.6600 level after the release of the Australian CPI report for May. Economists at MUFG Bank discuss the Aussie outlook.

Weaker CPI report hits Aussie but underlying details are less favourable

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, managed to set aside part of the weekly bearish note and advance to the 102.70 region on Wednesday.

USD Index focused on Powell, risk trends

The index takes advantage of the prevailing risk off tone following the opening bell in the Euroland and reverses two straight sessions with losses on Wednesday.

The ongoing recovery in the US Dollar comes amidst inconclusive performance in the US money markets, where yields across the curve hover around Tuesday’s closing levels so far.

In the meantime, investors are expected to closely follow the participation of Chair J. Powell in a Policy Panel Discussion at the ECB Forum on Central Banking in Sintra (Portugal). It is worth noting that both the Federal Reserve and the European Central Bank are anticipated to hike their interest rates by 25 bps at their meetings in July.

In the US data space, usual weekly MBA Mortgage Applications are due in the first turn, seconded by flash Goods Trade Balance figures for the month of May.

What to look for around USD

The index manages to grab some breathing space and bounces off weekly lows in the  102.30 region (June 27).

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

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

Key events in the US this week: MBA Mortgage Applications, Advanced Goods Trade Balance, Fed Powell (Wednesday) – Final Q1 Growth Rate, Initial Jobless Claims (Thursday) – PCE, Core PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (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 up 0.08% at 102.58 and the breakout of 103.16 (weekly high June 23) would open the door to 104.69 (monthly high May 31) and then 104.99 (200-day SMA). On the other hand, the next contention emerges at 101.92 (monthly low June 16) followed by 100.78 (2023 low April 14) and finally 100.00 (round level).

European Central Bank (ECB) Vice President, Luis de Guindos, said on Wednesday, “the July rate hike is set.”

“There is more ground to be covered on rates,” de Guindos added.

Additional quotes

Market reaction

EUR/USD was last seen trading at 1.0951, down 0.06% on the day.

Economists at Wells Fargo scope for steadier Yen outperformance versus the Euro over time.

JPY should benefit from a hawkish BoJ policy adjustment in Q4-2023

The current upside bias could motivate USD/JPY to revisit the 145.00 area in the next few weeks, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

• AUD/USD retreats towards three-week low marked after Aussie inflation release amid dicey markets.
• Australia Monthly CPI flags concerns about RBA’s rate hike pause while US data underpins hawkish Fed bets.
• Lack of economic/political clarity about Australia’s biggest customer China also weighs on risk-barometer pair.
• Fed Chair Jerome Powell’s speech at ECB Forum will be crucial for clear directions.

AUD/USD drops back towards the three-week low marked after Australian inflation data as market sentiment remains dicey ahead of the key central bankers’ speeches at the European Central Bank (ECB) Forum in Sintra. That said, the Aussie pair nosedived 50-pips to 0.6618 after Australia’s Monthly Consumer Price Index (CPI) lured bears, down 0.75% on a day to around 0.6635 amid early Wednesday in Europe.

Australia’s Monthly Consumer Price Index (CPI) for May drops to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD).

It should be noted that the improvement in China Industrial Profits for May, -12.6% YoY versus -18.2% prior, appeared to have put a floor under the AUD/USD price after the Aussie inflation data.

Elsewhere, the fresh fears surrounding the US-China tension, due to the Wall Street Journal (WSJ) news suggesting more AI curbs for companies from Beijing, join the upbeat US data to weigh on the AUD/USD price.

It should be noted that contrary to the recently downbeat RBA concerns, due to the Aussie inflation, the markets place heavy bets on the Fed’s 0.25% rate hike as the latest round of the US statistics have been upbeat, which in turn keeps the Aussie pair sellers hopeful of witnessing further downside.

However, Fed Chairman Jerome Powell needs to strongly confirm the July rate hike, as well as tease a few more in 2023 and rule out the rate cuts, to defend the AUD/USD bears. Otherwise, hopes of gradual economic recovery in the US and China may underpin the consolidation of the latest losses.

Technical analysis

With a clear U-turn from the 200-DMA, around 0.6695 by the press time, the AUD/USD pair becomes vulnerable to decline towards an ascending support line from early March, close to 0.6585 at the latest.

Considering advanced prints from CME Group for natural gas futures markets, open interest extended the downtrend in place since June 14 on Tuesday, this time dropping by around 30.5K contracts, the largest single-day drop so far this year. In the opposite direction, volume went up by around 71.2K contracts, reversing the previous daily pullback.

Natural Gas: Strong resistance emerges around $3.00

Prices of natural gas retreated modestly on Tuesday amidst the strong recovery in place since mid-June. The downtick was accompanied by a sharp drop in open interest, which suggests that a corrective move lies ahead in the very near term. On the upside, the March top just above the $3.00 mark per MMBtu continues to oppose decent resistance.

Here is what you need to know on Wednesday, June 28:

Federal Reserve (Fed) Chairman Jerome Powell, European Central Bank (ECB) President Christine Lagarde, Bank of England (BoE) Governor Andrew Bailey and Bank of Japan (BoJ) Kazuo Ueda will be speaking at a panel at the ECB Forum on Central Banking in Sintra on Wednesday. The US economic docket will feature Goods Trade Balance for May and the Fed will release the Bank Stress Test results later in the day.

After the data from the US showed that New Home Sales rose at an impressive pace in May and the CB Consumer Confidence Index improved noticeably in June, the US Dollar (USD) managed to stay resilient against its rivals late Thursday. Nevertheless, the risk-positive market environment didn't allow the currency to gather bullish momentum. Early Wednesday, the US Dollar Index clings to small daily gains above 102.50 and US stock index futures trade modestly lower on the day.

During the Asian trading hours, the data from Australia showed that the Consumer Price Index (CPI) rose 5.6% on a yearly basis in May. This reading followed the 6.8% increase recorded in April and came in below the market expectation of 6.1%. Pressured by the soft inflation data, AUD/USD fell to its lowest level in three weeks, below 0.6650. 

EUR/USD climbed toward 1.1000 and registered strong gains on Tuesday. Ahead of the ECB event, the pair stays in a consolidation channel at around 1.0950.

GBP/USD is having a difficult time holding its ground and trading below 1.2750 on Wednesday after having closed in positive territory on Tuesday.

USD/JPY rally continued and the pair reached a fresh multi-month high of 144.20 on Tuesday. "We are closely watching currency moves with a strong sense of urgency,” Japan's top currency diplomat Masato Kanda said on Wednesday. "We will respond appropriately if it becomes excessive." Following these comments, the pair holds steady at around 144.00.

USD/CAD gained traction and climbed above 1.3200 on Tuesday after Statistics Canada reported that the annual CPI declined to 3.4% in May from 4.4% in April. The pair continues to stretch higher early Wednesday and was last seen trading near 1.3230.

Gold failed to benefit from the broad US Dollar weakness on Tuesday as US Treasury bond yields staged a rebound. XAU/USD stays on the back foot and trades at its weakest level since early March near $1,910.

Bitcoin snapped a three-day losing streak on Tuesday but met resistance near $31,000. Early Wednesday, BTC/USD corrects lower and trades below $30,500. Ethereum continues to fluctuate in a narrow channel below $1,900 for the sixth straight day on Wednesday.

EUR/USD remains a little dull. Economists at Commerzbank analyze the pair’s outlook.

High inflation rates would suggest that the ECB might do more

The RBA delivered another rate hike in June to take the cash rate to a fresh 11-year high of 4.10%. Economists at Rabobank maintain their call that there will be just one more hike this year to reach a terminal cash rate of 4.35% and that the most likely timing for that hike to occur is the August meeting.

Next – and final – rate hike to occur at the August RBA Board meeting

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, AUD/USD risks a deeper pullback once it clears 0.6620.

Key Quotes

FX option expiries for June 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0845-55 2.3b
• 1.0875-85 1b
• 1.0900-10 3.2b
• 1.0970-75 1.4b
• 1.1000 1.2b
• 1.1055 678m

- GBP/USD: GBP amounts     

• 1.2550 511m
• 1.2650-65 1.1b

- USD/CHF: USD amounts        

• 0.8880-85 1.1b
• 0.8890-08900 500m

- AUD/USD: AUD amounts

• 0.6550 1b
• 0.6650 850m
• 0.6705-15 683m

Open interest in crude oil futures markets remained practically unchanged just over 6K contracts on Tuesday according to preliminary readings from CME Group. On the flip side, volume reversed two consecutive daily drops and increased by nearly 460K.

WTI could revisit the sub-$67.00 region

WTI prices dropped sharply on Tuesday on the back of unchanged open interest and a sharp uptick in volume. That said, there is room for extra decline in the commodity in the very near term, with the immediate target at the June low below the $67.00 mark per barrel (June 12).

• EUR/GBP consolidates weekly gains ahead of key central bankers’ speeches.
• Bullish chart formation, upbeat MACD signals keep pair buyers hopeful.
• 200-SMA adds to the upside filters as ECB versus BoE play appears less interesting.

EUR/GBP aptly portrays the pre-event anxiety as it pares the weekly gains with mild losses around 0.8595 heading into Wednesday’s European session.

In doing so, the cross-currency pair reverses from the confirmation point of the Inverted Head-and-Shoulders (H&S) bullish chart pattern before speeches from Bank of England (BoE) Governor Andrew Bailey and the European Central Bank (ECB) President Christine Lagarde.

That said, the bullish MACD signals also keep the EUR/GBP pair buyers hopeful.

However, the latest bullish consolidation may direct the quote toward 0.8570 while any further downside could lure bears and challenge the monthly low, as well as the yearly bottom, surrounding 0.8520.

In a case where the EUR/GBP breaks the 0.8520 level, a quick fall toward the 0.8500 threshold can’t be ruled out.

On the flip side, a clear upside break of the 0.8605 hurdle will confirm the inverted H&S bullish chart formation. However, the 200-SMA hurdle of 0.8620 may act as an additional upside filter for the bulls.

Following that, the late May swing high of around 0.8720 may prod the EUR/GBP bulls during the run-up aiming for the theoretical target of the inverse H&S, namely around 0.8730.

EUR/GBP: Four-hour chart

Trend: Further upside expected

The Rupiah is one of the few currencies in the region still offering positive carry over the USD. Economists at ANZ Bank analyze IDR outlook.

IDR resilience can be maintained

• GBP/JPY has corrected to near 183.00 as investors are awaiting the speech from BoE Bailey.
• Hawkish interest rate guidance is anticipated from Andrew Bailey as UK’s May inflation turned out highly persistent.
• Broader weakness in the Japanese Yen has propelled chances of a stealth intervention.

The GBP/JPY pair has shown a corrective move to near 183.00 in the early London session. The cross has shown correction after posting a fresh seven-year high at 183.76. Selling pressure in the cross stemmed as investors are awaiting the speech from Bank of England (BoE) Governor Andrew Bailey, which is scheduled at 13:30 GMT.

Hawkish interest rate guidance is widely anticipated by Andrew Bailey as inflationary pressures in the United Kingdom turned out highly persistent. Headline Consumer Price Index (CPI) landed higher than expectations as weak gasoline prices were offset by stable food inflation and rising prices for recreational goods and services, air travel, and second-hand cars. Core CPI that excludes volatile oil and food prices printed a fresh high of 7.1%, which has made BoE Bailey and UK PM Rishi Sunak.

Considering the fact that restrictive monetary policy by the central bank is failing to put a lid over stubborn United Kingdom inflation, UK FM Jeremy Hunt looked beyond quantitative measures and discussed with industry regulators about limiting profit margins. Also, wage cuts in the public sector are under consideration.

On the Tokyo front, broader weakness in the Japanese Yen has propelled chances of a stealth intervention by the Bank of Japan (BoJ). Japanese Finance Minister Shunichi Suzuki said that he “will respond appropriately if FX moves become excessive.”

Also, the speech from BoJ Governor Kazuo Ueda will be keenly watched. Investors will keep an eye on commentary about a tweak in the Yield Curve Control (YCC) and an exit from the ultra-dovish policy.

• GBP/USD remains on the back foot amid market’s cautious mood ahead of key speeches from BoE, Fed leaders.
• UK two-year Gilts jump to 15-year high, markets place 20% bets on 6.5% BoE rate peak.
• Upbeat US data, fears emanating from China allow US Dollar to consolidate weekly gains.
• Fed’s Powell has a tough task convincing bulls than BoE’s Bailey but British recession may lure Cable bears.

GBP/USD clings to mild losses around 1.2730 heading into Wednesday’s London open, reversing the previous day’s rebound amid mixed catalysts of late.

Even so, escalating fears of higher interest rates at the Bank of England (BoE) and the resulted UK recession woes weigh on the Pound Sterling prices. On the contrary, mostly upbeat US data joins mixed concerns about China to prod the Cable sellers.

While portraying the same, the UK’s two-year Gilt jumps to the highest levels in 15 years, to 5.24% at the latest, as well as flagging fears of a 6.5% BoE peak rate in 2024.

On the other hand, hopes of more stimulus from China contrasts with the growing fears of slower economic recovery in Beijing, as well as the fears of the Sino-American tussles due to the latest AI curbs on Chinese Chip manufacturing companies, luring the GBP/USD bears. Further, a slew of the US data allowed the US Dollar to pare intraday losses and increase the hawkish Fed bets, which in turn prod the Pound Sterling bulls of late. Notable among them were the Durable Goods Orders, Conference Board's (CB) Consumer Confidence Index and a few housing numbers.

Against this backdrop, S&P500 Futures pare the biggest daily jump in a fortnight with mild losses whereas the US Treasury bond yields remain depressed after rising in the last two consecutive days to portray the market’s dicey momentum.

Looking ahead, speeches from BoE’s Bailey and Fed Chair Powell will be crucial to watch for the immediate GBP/USD moves. Major attention, however, will be given to the UK recession woes, which in turn could please GBP/USD bears.

Technical analysis

A 12-day-old rising support line, near 1.2720 by the press time, restricts the short-term downside of the GBP/USD pair.

GBP/USD is still expected to navigate within the 1.2650-1.2850 for the time being, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

Japanese Finance Minister Shunichi Suzuki reiterated on Wednesday that he “will respond appropriately to excessive FX moves if necessary.”

Additional comments

Related reads

• Japan’s Top FX Diplomat Kanda: Will respond appropriately if weak Yen turns excessive
• Yen hopes for FX intervention

Japan's top currency diplomat Masato Kanda warned against the Japanese Yen's ongoing weakness on Wednesday.

Key quotes

"We are closely watching currency moves with a strong sense of urgency.”

"We will respond appropriately if it becomes excessive."

Kanda's comments came after the Yen slumped to a fresh seven-month trough to 144.21 against US Dollar overnight.

Market reaction

At the time of writing, USD/JPY is trading at 143.90, down 0.09% on the day.

CME Group’s flash data for gold futures markets noted traders scaled back their open interest positions for the third session in a row on Tuesday, this time by around 2.3K contracts. Volume, instead, kept the choppy activity well in place and increased by around 33.5K contracts.

Gold appears capped around $1940

Tuesday’s pullback in gold prices was on the back of shrinking open interest, which hints at the idea that a potential rebound could be in the offing in the very near term. On this, occasional bullish attempts are expected to meet initial resistance around the $1940 region per troy ounce, an area coincident with the 100-day SMA.

• NZD/USD has refreshed its two-week low at 0.6113 amid a bleak outlook for China.
• Investors have turned risk-averse ahead of the speech from Fed Jerome Powell.
• NZD/USD is consistently forming lower highs, which indicates that investors are capitalizing on each pullback as a selling opportunity.

The NZD/USD pair has printed a fresh two-week low at 0.6113 in the early European session. More downside in the Kiwi asset is anticipated as Chinese economic prospects are worsening further due to bleak demand and weak exports.

China’s National Bureau of Statistics (NBS) reported that corporate profits contracted 12.6% in May above an 18.2% drop in April due to weak households demand. It is worth noting that New Zealand is one of the leading trading partners of China and the weak economic outlook of China would be weighing pressure on the New Zealand Dollar.

S&P500 futures are showing caution despite a bullish settlement on Tuesday. Investors have turned risk-averse ahead of the speech from Federal Reserve (Fed) chair Jerome Powell to assess the interest rate guidance.

The US Dollar Index (DXY) is struggling to keep stability above the immediate resistance of 102.60.

NZD/USD is consistently forming lower highs on a two-hour scale, which indicates that investors are capitalizing on each pullback as a selling opportunity. The Kiwi asset has been failing to auction above the 200-period Exponential Moving Average (EMA) at 0.6160, which portrays that the long-term trend is bearish.

Action in the Relative Strength Index (RSI) (14) indicates that 60.00 is a barricade and territory below 40.00 is consistently tested. This conveys that the bullish momentum is active.

Further downside below the intraday low at 0.6113 will expose the asset to June 05 low at 0.6041. A slippage below the latter would expose the asset to psychological support at 0.6000.

Alternatively, a confident break above May 17 high at 0.6261 will drive the Kiwi asset toward May 19 high at 0.6306 followed by May 08 high around 0.6360.

NZD/USD two-hour chart

• Gold Price stays defensive as traders struggle within jungle to technical levels ahead of key ECB Forum speeches.
• Upbeat US data, fears of Sino-American tussle prod XAU/USD bulls.
• Receding fears of recession in US, China allow Gold buyers to remain hopeful.
• Fed Chair Powell needs to back further rate hikes to convince XAU/USD sellers.

Gold Price (XAU/USD) struggles to defend the corrective bounce ahead of the top-tier central bankers’ speeches at the European Central Bank (ECB) Forum. Apart from the cautious mood ahead of the key event, mixed concerns about China, one of the world’s biggest Gold customers, and firmer US data also test the XAU/USD traders.

Hopes of more stimulus from China contrasts with the growing fears of slower economic recovery in Beijing, as well as the fears of the Sino-American tussles due to the latest AI curbs on Chinese Chip manufacturing companies, challenge the Gold traders. On the contrary, a slew of the US data allowed the US Dollar to pare intraday losses and increase the hawkish Fed bets, which in turn prod the XAU/USD bulls of late. Notable among them were the Durable Goods Orders, Conference Board's (CB) Consumer Confidence Index and a few housing numbers.

Looking forward, speeches from ECB President Christine Lagarde, Fed Chairman Jerome Powell and Bank of England (BoE) Governor Andrew Bailey at the ECB Forum will be the key for immediate directions of the Gold price. Among them, Fed’s Powell will gain major attention as the US central bank paused rate hike trajectory and teased the US Dollar bears afterward but the policymakers have been hawkish since then.

Also read: Gold Price Forecast: XAU/USD downside opens up toward $1,885, Fed’s Powell eyed

Gold Price: Key levels to watch

Our Technical Confluence Indicator portrays multiple hurdles for Gold bears, as well as the bulls, as markets prepare for the week's key events.

That said, a convergence of the lower bands of the Bollinger on one-day and four-hour (4H) joins the previous daily low to restrict immediate XAU/USD downside bear $1,912.

Following that, the Pivot Point one-month S1 near $1,904 and the $1,900 round figure, also comprising the Pivot Point one-week S1 and one-day S2, could challenge the Gold sellers.

However, a clear downside break of the Gold price past $1,900 will make the XAU/USD vulnerable to test the early March swing high near $1,860.

Alternatively, middle band of the Bollinger on 4H joins the 100-HMA and Fibonacci 61.8% on one-day to guard immediate recovery of the Gold price near $1,925.

Should the XAU/USD manage to remain firmer past $1,925, the previous monthly low and the upper band of the Bollinger on 4H will act as the last defense of the Gold sellers near $1,935.

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.

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang note EUR/USD has now likely moved into a consolidative phase within 1.0895 and 1.1010.

Key Quotes

• EUR/USD is showing a vulnerable performance amid a recovery in the US Dollar Index.
• Chances of a restart of policy-tightening by the Fed have solidified considering resilience in US Durables data.
• Risks of a longer recession in the German economy have fueled as business morale has slipped consecutively for the second time.

The EUR/USD pair is displaying topsy-turvy moves around 1.0950 in the Asian session. The major currency pair is struggling to find direction as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell for further guidance on interest rates.

S&P500 futures are showing nominal losses in Asia. US equities remained in the grip of bulls on Tuesday as orders for United States Durable Goods remained better than projected. Upbeat demand for Durables indicates that the lagging manufacturing sector would show some recovery ahead.

US Census Bureau reported that Durable Goods Orders have expanded by 1.7% while the street was anticipating a contraction of 1%. May’s Durables data has outperformed April’s figure of 1.2%. Durables data excluding defense orders have expanded by 3.0% against expectations of a stagnant performance.

The US Dollar Index (DXY) is looking to extend its recovery above 102.62 as chances of a restart of policy-tightening by the Fed have solidified considering resilience in US Durables data. As per the CME Fedwatch tool, around 77% chances are in favor of a 25 basis point (bp) interest rate hike to 5.25-5.50%.

On the Eurozone front, the Euro remained in action on Tuesday after a hawkish speech from European Central Bank (ECB) President Christine Lagarde at the ECB forum of Central Banking. ECB Lagarde conveyed that inflation in Eurozone is extremely high and the central bank is required to make monetary policy sufficiently restrictive to tame price pressures. She further added the effect on inflation from rising wages has recently been amplified.

Risks of an elevated recession in the German economy have fueled as business morale has slipped consecutively for the second time. The Ifo Institute reported that the business climate index fell to 88.5 in June from the 91.5 figure recorded in May.

Investors should note that the German economy has already reported a technical recession by registering a contraction in Gross Domestic Product (GDP) figures consecutively for two quarters.

• USD/JPY struggles to defend upside momentum at yearly top.
• Rising wedge bearish chart formation, fears of Japan government intervention Yen sellers.
• 100-HMA, one-week-long ascending support line act as additional downside filters.
• Bulls need to provide daily closing beyond 145.10 to keep the reins.

USD/JPY buyers lack upside momentum during early Wednesday as the Yen pair seesaws near 144.00, printing mild losses heading into the European session.

The quote’s latest performance appears interesting as it stays within the weekly rising wedge bearish chart formation while making rounds to the highest levels since November 2022.

That said, the bearish MACD signals, steady RSI (14) line and chatters about the Japanese government’s market intervention also seem to challenge the USD/JPY buyers of late.

On the same line is the cautious mood ahead of Bank of Japan (BoJ) Governor Kazuo Ueda’s speech at the European Central Bank (ECB) Forum in Sintra.

With this, the USD/JPY sellers remain hopeful of consolidating the biggest monthly gains since February.

However, a clear downside break of the 143.50 support becomes necessary to confirm the bearish chart formation suggesting a theoretical target of 145.70.

Even so, the 100-Hour Moving Average (HMA) and the one-week-old rising support line, respectively near 143.30 and 142.80 act as additional downside filters to challenge the USD/JPY bears.

Meanwhile, the stated wedge’s top line of near 144.20 guards the USD/JPY pair’s immediate upside ahead of the October 2022 low of 145.10. Following that, the theoretical target of 145.70 and the 146.00 round figure may lure the pair buyers.

USD/JPY: Hourly chart

Trend: Pullback expected

• USD/CHF prints the first daily gains in three, clings to mild gains of late.
• Upbeat US data, challenges to sentiment underpin US Dollar’s corrective bounce ahead of top-tier speeches.
• SNB’s Quarterly Bulletin should be closely observed to gauge hawkish bias at Swiss central bank.
• Fed Chair Powell needs to suggest further rate hikes to defend US Dollar.

USD/CHF consolidates weekly losses ahead of the top-tier data/events as its prints mild gains around 0.8945, snapping a two-day losing streak, heading into Wednesday’s European session. In doing so, the Swiss Franc (CHF) pair also justifies the trader’s preference for the US Dollar amid cautious mood and hawkish Federal Reserve (Fed) bets.

That said, S&P500 Futures pare the biggest daily jump in a fortnight with mild losses whereas the US Treasury bond yields remain depressed after rising in the last two consecutive days to portray the market’s dicey momentum.

It should be noted that the contrasting headlines surrounding China and the upbeat US data also allow the USD/CHF to grind higher.

Talking about the China news, US President Joe Biden said late Tuesday that China has enormous problems. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.”

Previously, headlines suggesting Asian lobbyists are advocating for easier rules for Chinese equities’ overseas listing and comments from Premier Li Qiang joined the People’s Bank of China’s (PBoC) lower-than-expected fixing of the USD/CNY price to tease the Oil. Further, the US Dollar selling by major Chinese state banks, per Reuters, also weighed on the USD before the upbeat data prod the greenback bears.

On Tuesday, US Durable Goods Orders marked a surprise growth of 1.7% for May versus -1.0% market forecasts and 1.2% prior (revised). Further, the US Conference Board's (CB) Consumer Confidence Index rose to 109.7 for June from 102.5 in May (revised from 102.3). On the same line, US Housing Price Index rose to 0.7% in April from 0.5% in previous readings (revised), versus the 0.3% expected. Meanwhile, the S&P/Case-Shiller Home Price Index came in as -1.7% YoY for April, down from -1.1% prior but better than -2.6% market forecasts. Additionally, New Home Sales rose 12.2% MoM in May from 3.5% prior and 0.5% anticipated whereas the Richmond Fed Manufacturing Index improved to -7.0 in June compared to -15.0 prior and -10.0 expected.

Moving on, the Swiss ZEW Survey for June will precede the Swiss National Bank’s (SNB) Quarterly Bulletin to direct immediate USD/CHF moves ahead of Fed Chairman Jerome Powell’s speech Fed Chairman Jerome Powell

Technical analysis

The steady RSI (14) line joins the receding bearish bias of the MACD to suggest a gradual recovery in the USD/CHF price between the 50-DMA and ascending support line from early May, respectively near 0.8980 and 0.8920.

• AUD/USD drops to a fresh multi-week low in reaction to the softer Australian CPI print.
• The technical setup favours bearish traders and supports prospects for additional losses.
• Some follow-through selling below the 0.6620-15 area will reaffirm the negative outlook.

The AUD/USD pair comes under intense selling pressure during the Asian session on Tuesday and dives to over a three-week low, around the 0.6620-0.6615 region. Spot prices, however, manage to trim a part of heavy intraday losses and currently trade just below mid-0.6600s, still down 0.65% for the day.

The Australian Dollar (AUD) weakens across the board in reaction to the softer domestic data, which showed that the headline CPI decelerated sharply to the 5.6% YoY rate in May from the 6.8% seen in the previous month. This, in turn, lifts the possibility that the Reserve Bank of Australia (RBA) may soon cease its rate hike cycle. Apart from this, the emergence of some US Dollar (USD) buying exerts additional downward pressure on the AUD/USD pair and contributes to the downfall.

Spot prices, however, show some resilience below the 61.8% Fibonacci retracement level of the May-June rally as traders now move to the sidelines ahead of Federal Reserve (Fed) Chair Jerome Powell's appearance. Meanwhile, technical indicators on the daily chart have just started drifting into the negative territory and support prospects for further losses. Moreover, a sustained break and acceptance below the 0.6675 region, representing 50% Fibo. level, favours bearish traders.

The aforementioned support breakpoint should now act as an immediate hurdle for the AUD/USD pair ahead of the 0.6700 round figure, which coincides with the 100-day Simple Moving Average (SMA). Any subsequent move up is more likely to attract fresh sellers and remain capped near the 38.2% Fibo. level, around the 0.6730 region. The latter should act as a pivotal point, which if cleared will suggest that the recent sharp rejection slide from the 0.6900 mark has run its course.

On the flip side, bearish traders might now wait for some follow-through selling below the 0.6620-0.6615 area, or the daily swing low, before placing fresh bets. The AUD/USD pair might then accelerate the fall towards testing the next relevant support near the 0.6545 region. The downward trajectory could further get extended towards the 0.6500 psychological mark en route to the YTD low, around the 0.6460-0.6455 region touched in May.

AUD/USD daily chart

Key levels to watch

• Markets in Asia-Pacific region trade mixed amid cautious mood ahead of key central bankers’ speeches.
• ASX rallied on downbeat Aussie inflation, Nikkei braces for Japanese government’s intervention.
• China stocks remain pressured on AI curbs, industrial losses but economic optimism in the West prod equity sellers.
• Leaders of the ECB, BoJ and Fed are up for speaking at the ECB Forum and will be worth observing for clear directions.

Asian shares struggle for clear directions, even with a positive touch, as top-tier central bank leaders are up for speaking at the European Central Bank (ECB) Forum. Apart from the pre-event anxiety mixed data at home also challenge the equity sellers.

That said, the disappointing Australia Inflation data pushed back hopes of another hawkish surprise from the Reserve Bank of Australia (RBA) and allowed the benchmark ASX200 to rise more than 1.0%. That said, Japan’s Nikkei 225 leads the Asian bulls as a jump in the Yen price trigger market’s chatters of government intervention.

It should be noted that MSCI’s Index of Asia-Pacific shares outside Japan prints minor losses while snapping a two-day winning streak. The same tracks the S&P500 Futures as it drops 0.20% intraday at the latest, paring the biggest daily jump in a fortnight. Further, the US Treasury bond yields remain depressed after rising in the last two consecutive days.

Elsewhere, fears of the fresh Sino-American tussles, due to the looming curbs on China AI orders from the US, join US President Joe Biden’s comments suggesting the dragon nation’s “enormous problems” weigh on the Chinese stocks. It's worth observing that the improvement in China's Industrial Profits for May, -12.6% YoY versus -18.2% prior, fails to inspire the bulls.

Against this backdrop, US Dollar recovers and the commodities grind higher but Antipodeans remain pressured.

Moving on, multiple second-tier data may entertain the intraday traders ahead of speeches from ECB President Christine Lagarde, Fed Chairman Jerome Powell and Bank of England (BoE) Governor Andrew Bailey at the ECB Forum.

Also read: Forex Today: Risk sentiment improves; focus turns to inflation data

• USD/CAD gains traction for the second straight day and recovers further from the YTD low.
• Tuesday’s softer Canadian CPI print undermines the CAD and lends some support to the pair.
• The emergence of some USD buying acts as a tailwind ahead of Fed Chair Powell’s appearance.

The USD/CAD pair builds on the previous day's goodish rebound from the 1.3115 area, or its lowest level since September 2022 and gains positive traction for the second successive day on Wednesday. The momentum lifts spot prices to a fresh weekly high, above the 1.3200 mark during the Asian session and is sponsored by a combination of factors.

The Canadian Dollar (CAD) continues to be weighed down by the softer domestic data released on Tuesday, which showed that consumer inflation fell to its slowest pace in two years. In fact, Statistics Canada reported that the headline CPI decelerated to the 3.4% YoY rate in May from 4.4% in the previous month. Moreover, the Bank of Canada's (BoC) Core CPI, which excludes volatile food and energy prices, misses consensus estimates and dropped to 3.7% on a yearly basis from 4.1% in April. Apart from this, the overnight slide in Crude Oil prices undermines the commodity-linked Loonie, which, along with a modest US Dollar (USD) strength, acts as a tailwind for the USD/CAD pair.

Tuesday's upbeat US macro data reaffirms expectations that the Fed will likely continue raising interest rates to slow demand in the overall economy, which, in turn, assists the USD to regain positive traction and snap a three-day losing streak. In fact, the US Census Bureau reported that Durable Goods Orders in the US rose for the third straight month, by 1.7% in May, against the 1% decline anticipated. Adding to this, the Conference Board's Consumer Confidence Index climbed to 109.7 in June - the highest since January 2022 - from 102.5 in the prior month. Furthermore, New Home Sales rose 12.2% in May, indicating that the US housing market has been able to weather rising interest rates.

Any meaningful upside for the USD/CAD pair, however, seems limited as markets are still pricing in a greater chance of another 25 bps rate hike by the BoC in July. Traders also seem reluctant to place aggressive bets and prefer to wait for Fed Chair Jerome Powell's appearance at the ECB Forum on Central Banking in Sintra later this Wednesday. Market participants will look for fresh clues about the Fed's future rate-hike path, which, in turn, will drive the USD demand and provide some impetus to the USD/CAD pair later during the early North American session. Apart from this, Oil price dynamics will be looked upon to grab short-term trading opportunities around the major.

Technical levels to watch

• USD/INR takes offers to refresh intraday low, justifies the previous day’s Doji candlestick.
• Bearish Doji, U-turn from 200-DMA directs Indian Rupee buyers towards 10-week-old rising trend line.
• RSI, MACD conditions suggest limited downside room for bears to cheer.
• Convergence of 50-DMA, one-month-old resistance line appears a tough nut to crack for USD/INR bulls.

USD/INR slips off buyer’s radar after a three-day attempt to stay firmer around 82.00, refreshing intraday low near 81.95 during very early Wednesday morning in Europe.

In doing so, the Indian Rupee (INR) pair justifies the previous day’s Bearish Doji candlestick, as well as multiple failures to cross the 200-DMA hurdle.

However, an upward-sloping support line from mid-April joins the receding bearish bias of the MACD signals and the below-50.0 levels of the RSI (14) line to challenge the USD/INR bears around 81.90.

Even if the Indian Rupee (INR) buyers manage to conquer the 81.90 support, the monthly low of around 81.85 can act as the additional downside filter before confirming the seller’s dominance.

Following that, the double bottom around 81.50 will be in the spotlight.

On the contrary, the 200-DMA guards the immediate recovery moves of the USD/INR pair around 82.15 before pushing the bulls toward confronting the 82.20 resistance confluence comprising the 50-DMA and a one-month-old falling trend line.

That said, the early month swing low of near 82.30 can act as the last defense of the USD/INR bears prior to giving control to the bulls.

USD/INR: Daily chart

Trend: Limited downside expected

• Gold price attracts some buyers during the Asian session, albeit lacks follow-through.
• Bets for more rate hikes by the Federal Reserve underpin the US Dollar and cap gains.
• Traders now look forward to Fed Chair Jerome Powell’s comments for a fresh impetus.

Gold price edges higher during the Asian session on Wednesday and recovers a part of the previous day's losses, though the intraday uptick lacks bullish conviction. The XAU/USD currently trades around the $1,915 region and remains well within the striking distance of its lowest level since March 16 touched last Friday.

Worsening US-China relations lend support to Gold price

The Wall Street Journal reported on Tuesday that the United States (US) is considering new restrictions on exports of artificial intelligence chips to China. This points to a further deterioration in relations between the world's two largest economies, which, to a larger extent, overshadows the latest optimism over China’s economic prospects and lends some support to the safe-haven Gold price. In fact, China's Premier Li Qiang, during the keynote speech on Tuesday at the World Economic Forum in Tianjin, said that economic growth in the second quarter will be higher than the first and is expected to reach the annual projected target of around 5%.

Federal Reserve’s hawkish outlook caps gains for XAU/USD

The upside for Gold price, however, remains capped in the wake of the Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps by the end of this year. Furthermore, Fed Chair Jerome Powell said last week that the US central bank doesn't see rate cuts happening any time soon and will wait until it is confident that inflation is moving down to the 2% target. This, along with the upbeat US macro data released on Tuesday, helps the US Dollar (USD) to regain positive traction and keeps a lid on any meaningful upside for the non-yielding Gold price, warranting some caution for bullish traders.

The US Census Bureau reported on Tuesday that Durable Goods Orders in the US rose for the third month in a row and jumped 1.7% in May, smashing consensus estimates for a decrease of 1%. Adding to this, the Conference Board's Consumer Confidence Index climbed to 109.7 in June - the highest since January 2022 - from 102.5 in the prior month. Additional data showed that sales of new single‐family houses rose 12.2% in May and indicated that indicated the US housing market has been able to weather rising interest rates. This reaffirms expectations that the Fed will likely continue raising interest rates to slow demand in the overall economy.

Focus remains on Fed Chair Jerome Powell’s appearance on Wednesday

Hence, the market focus will remain glued to Fed Chair Jerome Powell's appearance at the ECB Forum on Central Banking in Sintra later this Wednesday. Investors will look for clues about the Fed's future rate-hike path, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the US Dollar-denominated Gold price. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD is to the downside and any meaningful intraday positive move is more likely to attract fresh sellers, rather runs the risk of fizzling out quickly.

Gold price technical outlook

From a technical perspective, bearish traders now await some follow-through selling below the $1,910 level before placing fresh bets. The Gold price might then turn vulnerable to weaken further below the $1,900 round-figure mark, towards testing the very important 200-day Simple Moving Average (SMA) support, around the $1,840 region, with some intermediate support near the $1,876-$1,875 zone.

On the flip side, immediate hurdle is pegged near the $1,926-$1,927 region, above which a bout of a short-covering could lift the Gold price towards the 100-day SMA support breakpoint, currently around the $1,942-$1,943 zone. This should act as a pivotal point, which if cleared could lift the XAU/USD towards the $1,962-$1,964 area en route to the $1,970-$1,972 region and the $1,983-$1,985 barrier. This is followed by the $2,000 psychological mark and the next relevant resistance near the $2,010-$2,012 zone.

Key levels to watch

• Silver Price struggles to defend four-day uptrend, retreats from the highest levels in a week of late.
• Convergence of 200-EMA, 50% Fibonacci retracement challenges intraday XAG/USD bulls.
• Below 50.0 RSI suggests bottom-picking around the golden Fibonacci ratio.
• Multiple hurdles stand tall to challenge Silver buyers.

Silver Price (XAG/USD) struggles to defend the four-day-old winning streak as it retreats from the weekly top surrounding $23.10 to $22.90 during early Wednesday. In doing so, the bright metal portrays the failure to cross the $23.00 key upside hurdle amid bearish MACD signals.

However, the RSI (14) condition, which is below the 50.0 level, can trigger the Silver Price rebound from the 61.8% Fibonacci retracement, also known as the golden Fibonacci ratio, of the quote’s March-May upside, close to $22.25.

Following that, the $22.00 round figure and the early March swing high of $21.30 may prod the Silver sellers before directing them to the yearly low marked in March around $19.90. It’s worth noting that the $21.00 and the $20.00 round figures may act as intermediate halts during the anticipated fall in the XAG/USD price.

Alternatively, a daily closing beyond the $23.00 resistance confluence comprising the 200-Exponential Moving Average (EMA) and 50% Fibonacci retracement, needs validation from the latest peak of $23.10 to convince the Silver buyers.

Even so, a two-week-old descending resistance line and the previous support line from March, respectively near $23.80 and $23.90, quickly followed by the $24.00 threshold, can prod the XAG/USD upside.

Above all, the Silver buyers should remain cautious unless witnessing a daily closing beyond the horizontal area comprising multiple levels marked since early January 2022, near $24.50-60.

Silver Price: Daily chart

Trend: Pullback expected

• EUR/USD meets with some supply on Wednesday and is pressured by a modest USD strength.
• Any subsequent decline could find decent support near the 100/200-hour SMAs confluence.
• Traders now look to Fed Chair Jerome Powell’s comments to grab some meaningful impetus.

The EUR/USD pair comes under some selling pressure during the Asian session on Wednesday and moves away from a fresh weekly high, around the 1.0975 region touched the previous day. Spot prices currently trade just below mid-1.0900s, down around 0.15% for the day, and for now, seem to have snapped a two-day winning streak.

The Federal Reserve’s (Fed) hawkish outlook, along with the upbeat US macro data released on Tuesday, assist the US Dollar (USD) to regain positive traction, which, in turn, is seen dragging the EUR/USD pair lower. Apart from this, worries about economic headwinds stemming from rising borrowing costs overshadow the prospects for additional rate hikes by the European Central Bank (ECB) and undermine the shared currency. Traders, however, might refrain from placing aggressive directional bets ahead of Fed Chair Jerome Powell's appearance at the ECB Forum on Central Banking in Sintra later today.

From a technical perspective, any subsequent decline is more likely to find decent support near the 1.0935-1.0930 confluence - comprising the 100-hour and the 200-hour Simple Moving Averages (SMAs). The said area should act as a pivotal point, which if broken decisively might prompt some technical selling. The EUR/USD pair might then turn vulnerable to weaken further below the 1.0900 round-figure mark and accelerate the fall towards testing last week's swing low, around the 1.0845 zone. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for additional near-term losses.

On the flip side, the 1.0975 region, or the weekly top, now seems to act as an immediate hurdle ahead of the 1.1000 psychological mark. Any subsequent move-up is likely to attract some sellers around the 1.1055-1.1060 resistance and remain capped near the 1.1090-1.1100 heavy supply zone, or the YTD peak touched in April/May. A sustained strength beyond the latter will confirm a fresh bullish breakout and allow the EUR/USD pair to build on its recent rise witnessed over the past month or so.

EUR/USD 1-hour chart

Key levels to watch

• WTI remains pressured around weekly low after welcoming bears the previous day.
• Cautious optimism about China, receding fears of Russia-induced supply crunch fears weigh on Oil price.
• Anxiety ahead of top-tier central bankers’ speeches, weekly Oil inventory data also tease energy bears.

WTI crude oil remains on the back foot for the second consecutive day as bears prod the weekly low, marked the previous day, amid early Wednesday morning in Europe. That said, the black gold registers a 0.30% intraday loss while poking $67.85 by the press time.

While tracing the key catalysts, mixed headlines about the economic transition in the US and China joins the Sino-American tension, as well as the US Dollar’s rebound, gain major attention. Additionally, the commodity trader’s cautious mood ahead of the key central bankers’ speeches at the European Central Bank (ECB) Forum in Sintra also exerts downside pressure on the energy benchmark.

the economic optimism backed by upbeat US data and the risk-positive headlines from China, mainly surrounding the People’s Bank of China’s (PBoC) USD/CNY fix and chatters about more stimulus, defend the market’s optimists.

However, the fresh fears surrounding the US-China tension and cautious mood ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech at the European Central Bank (ECB) Forum in Sintra exert downside pressure on the risk appetite and the black gold.

That said, US President Joe Biden said late Tuesday that China has enormous problems. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.”

Previously, headlines suggesting Asian lobbyists are advocating for easier rules for Chinese equities’ overseas listing and comments from Premier Li Qiang joined the People’s Bank of China’s (PBoC) lower-than-expected fixing of the USD/CNY price to tease the Oil. Further, the US Dollar selling by major Chinese state banks, per Reuters, also allowed the Aussie pair to remain firmer.

Above all, receding geopolitical fears from Russia and fears of economic slowdown weigh on the WTI crude oil.

Alternatively, the weekly prints of the American Petroleum Institute’s (API) Oil inventory data came in as -2.408M versus -1.246M prior to put a floor under the Oil Price. On the same line is the global Oil producers’ push for more output cuts and macroeconomic jitters.

Moving on, the weekly official oil inventory data, released by the Energy Information Administration (EIA), expected -1.467M versus -3.83M prior can entertain the Oil traders. Additionally important will be the updates from the ECB Forum.

Technical analysis

Although the monthly horizontal support of around $67.50 restricts the short-term downside of the WTI crude oil, the 21-DMA hurdle of around $70.30 caps the immediate upside of the black gold.

• USD/JPY pulls back from a fresh YTD peak, though the downside remains cushioned.
• Intervention fears provide a modest lift to the JPY and act as a headwind for the pair.
• The BoJ-Fed policy divergence continues to lend support and limits any further losses.

The USD/JPY pair comes under some selling pressure during the Asian session on Wednesday and erodes a part of the previous day's gains to levels beyond the 144.00 mark, or a fresh high since November 2022. Spot prices currently trade around the 143.80 area, down nearly 0.20% for the day, though any meaningful corrective decline still seems elusive.

Japanese officials continue to step up warnings against the recent weakness in the Japanese Yen (JPY), which, in turn, is seen as a key factor prompting some long-unwinding around the USD/JPY pair. In fact, Japanese Finance Minister Shunichi Suzuki said on Tuesday that they will watch the forex market with a sense of urgency and would respond appropriately if the currency moves became excessive. The warning was reiterated by Japan's top currency diplomat Masato Kanda earlier this Wednesday.

Meanwhile, reports indicated that the Biden administration is considering new restrictions on exports of artificial intelligence chips to China, fueling worries about the worsening relations between the world's two largest economies. This further benefits the JPY's relative safe-haven status and contributes to the offered tone around the USD/JPY pair. That said, a big divergence in the monetary policy stance adopted by the Bank of Japan (BoJ) and other major central banks might cap the JPY.

It is worth recalling that BoJ Governor Kazuo Ueda recently ruled out the possibility of any change in the ultra-loose policy settings and signalled no immediate plans to alter the yield curve control measures. In contrast, Fed Chair Jerome Powell said last week that the central bank will likely raise interest rates again this year, albeit at a "careful pace", to contain high inflation and doesn't see rate cuts happening any time soon. This, in turn, should help limit the downside for the USD/JPY pair.

Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have formed a near-term top and positioning for any further losses. Traders might also refrain from placing aggressive bets ahead of Fed Chair Jerome Powell and BoJ Governor Kazuo Ueda's appearance at the ECB Forum on Central Banking in Sintra later this Wednesday. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the USD/JPY pair is to the upside.

Technical levels to watch

• AUD/NZD drops 50 pips to refresh multi-day low after Australia’s Monthly CPI for May disappoints.
• Nearly oversold RSI, fortnight-old support line challenge bears at monthly low.
• Bulls need successful break of three-week-old horizontal resistance to retake control.

AUD/NZD slumps 50 pips to refresh the monthly low around 1.0800 after Australia’s headline inflation data disappoint the buyers on early Wednesday. That said, the pair rebounds to 1.0825 following the data.

That said, Australia’s Monthly Consumer Price Index (CPI) for May drops to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD) versus other currencies.

While the nearly oversold RSI conditions join the two-week-old falling support line to trigger the quote’s latest bounce, the 200-SMA restricts the immediate upside of the pair near 1.0850.

Following that, a broad resistance zone comprising multiple levels marked since early June, near 1.0910-35, will be a tough nut to crack for the AUD/NZD bulls.

Meanwhile, a downside break of the immediate support line, close to 1.0790 by the press time, will direct the AUD/NZD price to the 61.8% Fibonacci retracement of the May-June upside, near 1.0750.

In a case where the exotic pair remains bearish past 1.0750, the 1.0700 round figure may act as the last defense of the bulls.

AUD/NZD: Four-hour chart

Trend: Corrective bounce expected

• AUD/USD comes under fresh selling pressure on Wednesday and dives to over a three-week low.
• The softer Australian CPI eases pressure on the RBA to hike rates further and weighs on the Aussie.
• A modest USD uptick and the worsening US-China relations also contribute to the ongoing downfall.

The AUD/USD pair meets with a fresh supply during the Asian session on Wednesday and dives to the 0.6620-0.6615 area, or over a three-week low in reaction to softer-than-expected Australian consumer inflation figures.

The Australian Bureau of Statistics reported that the headline CPI decelerated to the 5.6% YoY rate in May from 6.8% in the previous month. This eases expectations for further interest rate hikes by the Reserve Bank of Australia (RBA), which, along with worries about the worsening US-China relations, weigh on the Australian Dollar (AUD). In fact, the Wall Street Journal, citing people familiar with the matter, reported on Tuesday that the Biden administration is considering new restrictions on exports of artificial intelligence chips to China.

This, to a larger extent, overshadows the optimism led by Chinese Premier Li Qiang's remarks, saying economic growth in the second quarter will be higher than the first and is expected to reach the annual projected target of around 5%. Apart from this, a modest US Dollar (USD) uptick turns out to be another factor exerting some downward pressure on the AUD/USD pair and contributing to the ongoing downfall. Against the backdrop of the Federal Reserve's (Fed) hawkish outlook, Tuesday's upbeat US macro acts as a tailwind for the Greenback.

It is worth recalling that the Fed had signalled that borrowing may still need to rise as much as 50 bps by the end of this year. Furthermore, Fed Chair Jerome Powell said last week that the US central bank doesn't see rate cuts happening any time soon and is going to wait until it is confident that inflation is moving down to the 2% medium-term target. Hence, the market focus will remain glued to Powell's comments during a panel discussion at the ECB Forum on Central Banking in Sintra, due later this Wednesday and on Thursday.

Investors will look for fresh clues about the Fed's future rate-hike move, which, in turn, will play a key role in influencing the USD price dynamics and provide some meaningful impetus to the AUD/USD pair. The attention will then shift to the release of the Fed's preferred inflation gauge - the US Core PCE Price Index on Friday.

Technical levels to watch

• AUD/JPY stands on slippery grounds after Australia Monthly Consumer Price Index disappoints.
• Aussie inflation gauge drops below market forecasts and prior to 5.6% YoY for May.
• Market’s cautious mood, retreat in yields also weigh on risk-barometer pair.

AUD/JPY nosedives 60 pips as it justifies downbeat Australia data to recall bears amid early Wednesday, down 1.0% near 95.30 by the press time. Apart from Australia inflation, the risk-negative headlines surrounding China and a pullback in the yields also weigh on the cross-currency pair.

Australia’s Monthly Consumer Price Index (CPI) for May drops to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD).

Also read: Breaking: Australian CPI rises 5.6% YoY in May vs. 6.1% expected

Additionally, the fresh fears surrounding the US-China tension and cautious mood ahead of the top-tier central bankers’ speeches the at ECB forum, as well as expectations of the Bank of Japan’s (BoJ) market intervention also weigh on the AUD/JPY pair.

US President Joe Biden said late Tuesday that China has enormous problems. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.”

Amid these plays, S&P500 Futures print mild losses despite the upbeat performance of Wall Street whereas the US Treasury bond yields grind lower.

Having witnessed the initial market reaction to the Aussie inflation numbers, AUD/JPY pair traders may concentrate on the risk catalysts for clear directions. Also important will be Bank of Japan (BoJ) Governor Kazuo Ueda’s speech at the European Central Bank (ECB) Forum in Sintra.

Technical analysis

AUD/JPY pair’s U-turn from a one-week-old descending resistance line and the 10-DMA, respectively near 96.25 and 96.40, directs the bears toward the previous weekly low of around 95.25.

The latest data published by the Australian Bureau of Statistics (ABS) showed on Wednesday, Australia’s monthly Consumer Price Index (CPI) rose 5.6% in the year to May 2023, compared with April’s annual increase of 6.8%. The market consensus was for an acceleration of 6.1% in the reported period.

Key takeaways

“The most significant price rises were Housing (+8.4%), Food and non-alcoholic beverages (+7.9%) and Furnishings, household equipment and services group (+6.0%).”

“Offsetting the rise was Automotive fuel (-8.0%).”

Market reaction

The sell-off in the AUD/USD pair gathered pace on much softer-than-expected Australian CPI data. The pair is losing 0.84% on the day to trade at 0.6630, as of writing.

15-minutes chart

• USD/MXN picks up bids to snap three-day downtrend at the lowest level in a fortnight.
• Firmer RSI, multiple supports around the 17.00 teased Mexican Peso sellers.
• Weekly resistance line, 200-HMA restrict immediate recovery while 17.33 holds the key to buyer’s conviction.

USD/MXN Price remains on the front foot around the intraday high near 17.10, printing the first daily gain in four amid early Wednesday. In doing so, the Mexican Peso (MXN) pair approaches the weekly resistance line surrounding 17.11 while justifying the upbeat RSI (14) line.

However, the 200-HMA and the previous support line from June 16, respectively close to 17.14 and 17.20, can restrict further upside of the USD/MXN pair.

Even if the

USD/MXN: Hourly chart

Trend: Limited recovery expected

People’s Bank of China (PBoC) set the USD/CNY central rate at 7.2101 on Wednesday, versus previous fix of 7.2098 and market expectations of 7.2092. It's worth noting that the USD/CNY closed near 7.2425 the previous day. With this, the Chinese central bank's onshore Yuan (CNY) rate prints the lowest levels since November 2022. 

It's worth noting taht the PBoC's lower-than-expected USD/CNY fix previously weighed on the US Dollar and allow the CNY to pare recent losses near the yearly high.

About PBOC fix

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

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

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

• GBP/USD ticks lower during the Asian session on Wednesday, albeit lacks follow-through.
• The prevalent USD selling bias lends some support ahead of key central bank speakers.
• Bulls need to wait for a sustained move beyond 200-hour SMA before placing fresh bets.

The GBP/USD pair struggles to make it through the 200-hour Simple Moving Average (SMA) and edges lower during the Asian session on Wednesday. Spot prices erode a part of the previous day's strong gains to a fresh weekly high and currently trade just below mid-1.2700s, down less than 0.10% for the day.

Fears that the British economy is heading for recession, especially after a surprise 50 bps rate hike by the Bank of England (BoE), hold back traders from placing aggressive bullish bets around the Sterling Pound. This, in turn, is acting as a headwind for the GBP/USD pair, though a modest US Dollar (USD) weakness should help limit the downside, at least for the time being. Traders might also prefer to wait on the sidelines ahead of BoE Governor Andrew Bailey and Fed Chair Jerome Powell's appearance in a panel discussion at the ECB Forum on Central Banking in Sintra later this Wednesday.

From a technical perspective, the recent repeated failures to find bearish acceptance below the 1.2700 mark and the subsequent move up suggests that the corrective pullback from a 14-month low might have run its course. That said, bulls might still need to wait for a sustained strength beyond 200-hour SMA hurdle, currently pegged around the 1.2755-1.2760 region, before placing fresh bets. With oscillators on hourly/daily charts holding in the positive territory, the GBP/USD pair might then reclaim the 1.2800 mark and aim to challenge the YTD peak, around mid-1.2800s touched on June 16.

On the flip side, a convincing break and acceptance below the 1.2700 round figure will be seen as a fresh trigger for bearish traders. The GBP/USD pair might then accelerate the fall towards the next relevant support near the 1.2635 horizontal zone en route to the 1.2600 mark. Some follow-through selling will make spot prices vulnerable to accelerate the downfall further towards the 1.2500 psychological mark, with some intermediate support near the 1.2530-1.2525 region.

GBP/USD 1-hour chart

Key levels to watch

Australia’s first budget surplus in 15 years will be larger than the A$4.2 billion ($2.8 billion) seen just last month, said Australian Treasurer Jim Chalmers per Bloomberg.

The policymaker also cites the main catalysts of the upbeat budget surplus forecast as elevated commodity prices and a tight labor market that bolster revenue.

“We’re in a significantly better position,” Chalmers said in the text of a speech in the northern city of Darwin Wednesday, referring to the budget handed down seven weeks ago reported Bloomberg.

The news also spots Aussie Treasurer Chalmers as saying, “We’re expecting the surplus will be bigger than forecast.”

Also read: AUD/USD slides below 0.6700 as Australia inflation, Fed Chair Powell’s speech loom

• US Dollar Index pauses two-day downtrend but lacks recovery momentum amid cautious markets.
• Upbeat US data, China-linked optimism jostle with fresh fears about Sino-American ties to prod DXY bears.
• DXY trader’s preparations for Fed Chair Powell’s speech allow US Dollar Index to consolidate recent losses.
• Risk catalysts need to defend economic optimism, absence of US-China tussle to recall US Dollar Index sellers.

US Dollar Index (DXY) picks up bids to pause the previous two-day losing streak around 102.50 as markets brace for top-tier data/events amid mixed catalysts on early Wednesday.

That said, the economic optimism backed by upbeat US data and the risk-positive headlines from China weigh on the US Dollar. However, the fresh fears surrounding the US-China tension and cautious mood ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech at the European Central Bank (ECB) Forum in Sintra exert downside pressure on the greenback’s gauge versus the six major currencies.

US President Joe Biden said late Tuesday that China has enormous problems. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.” With these headlines, fears of the fresh US-China tussle escalated and put a floor under the US Dollar Index.

On Tuesday, headlines suggesting Asian lobbyists are advocating for easier rules for Chinese equities’ overseas listing and comments from Premier Li Qiang joined the People’s Bank of China’s (PBoC) lower-than-expected fixing of the USD/CNY price to favor the DXY bears. Further, the US Dollar selling by major Chinese state banks, per Reuters, also allowed the Aussie pair to remain firmer.

It should be noted that a slew of the US data allowed the US Dollar to pare intraday losses during late Tuesday but failed to reverse the daily loss of the greenback amid optimism. That said, US Durable Goods Orders marked a surprise growth of 1.7% for May versus -1.0% market forecasts and 1.2% prior (revised). Further, the US Conference Board's (CB) Consumer Confidence Index rose to 109.7 for June from 102.5 in May (revised from 102.3). On the same line, US Housing Price Index rose to 0.7% in April from 0.5% in previous readings (revised), versus the 0.3% expected. Meanwhile, the S&P/Case-Shiller Home Price Index came in as -1.7% YoY for April, down from -1.1% prior but better than -2.6% market forecasts. Additionally, New Home Sales rose 12.2% MoM in May from 3.5% prior and 0.5% anticipated whereas the Richmond Fed Manufacturing Index improved to -7.0 in June compared to -15.0 prior and -10.0 expected.

Amid the aforementioned catalysts, S&P500 Futures print mild losses despite the upbeat performance of Wall Street whereas the US Treasury bond yields grind higher.

Looking forward, headlines surrounding China and the global growth trajectory may entertain the DXY traders ahead of Fed Chair Powell’s key speech at the ECB Forum. “The FOMC is very clear that a period of sub-trend activity may be needed to bring inflation under control and so far, that doesn’t seem to be happening,” said Analysts at the ANZ. The same could join the latest upbeat US data to help Fed’s Powell remain hawkish and propel the DXY bulls.

Technical analysis

US Dollar Index grinds lower between a one-month-old descending resistance line and an upward-sloping support line from mid-April, respectively near 102.90 and 102.00.

• NZD/USD drifts lower during the Asian session, though the downside seems limited.
• The worsening US-China relations turns out to be a key factor weighing on the Kiwi.
• The upbeat market mood keeps the USD bulls on the defensive and lends support.

The NZD/USD pair extends the overnight rejection slide from the 0.6200 mark and remains under some selling pressure through the Asian session on Wednesday. Spot prices drop to a fresh daily low in the last hour and currently trade around mid-0.6100s, down 0.15% for the day.

Reports that the Biden administration is considering new restrictions on exports of artificial intelligence chips to China fuel worries about the worsening relations between the world's two largest economies. This, in turn, is seen as a key factor driving flows away from antipodean currencies, including the Kiwi. The US Dollar (USD), on the other hand, remains on the defensive for the third straight day and might limit the downside for the NZD/USD pair, at least for the time being.

China's Premier Li Qiang told delegates at the World Economic Forum in Tianjin on Tuesday that economic growth in the second quarter will be higher than the first and is expected to reach the annual projected target of around 5%. Apart from this, the upbeat US macro data helps ease fears of a global economic downturn and boosts investors' confidence. This led to the overnight positive move in the US equity markets and exerts some downward pressure on the safe-haven Greenback.

That said, the Federal Reserve's (Fed) hawkish outlook might continue to act as a tailwind for the USD and supports prospects for a further intraday depreciating move for the NZD/USD pair. In fact, the Fed earlier this month signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year. Moreover, the markets have fully priced in another 25 bps lift-off at the July FOMC meeting, which continues to lend support to the US Treasury bond yields and the USD.

Hence, the focus will remain glued to Fed Chair Jerome Powell's comments during a panel discussion at the ECB Forum on Central Banking in Sintra on Wednesday and Thursday. Investors will look for clues about the Fed's future rate-hike move, which, in turn, will drive the USD demand and provide some meaningful impetus to the NZD/USD pair. The market attention will then shift to the release of the Fed's preferred inflation gauge - the US Core PCE Price Index on Friday.

Technical levels to watch

Overview

Australia’s Monthly Consumer Price Index (CPI) for May, scheduled for publishing on early Wednesday around 01:30 GMT, appears the crucial data for the AUD/USD pair traders to watch.

The reason could be linked to the Reserve Bank of Australia’s (RBA) consecutive two hawkish surprises after witnessing upbeat CPI data.

It’s worth noting that markets expect 6.1% YoY print of the Aussie inflation data, versus 6.8% prior, which in suggests easing inflation pressure and a challenge for the Aussie bulls.

Ahead of the release, Citibank says,

How could AUD/USD react to the news?

AUD/USD takes offers to refresh intraday low near 0.6675, printing mild losses of late, as it reverses the previous day’s recovery moves amid the risk-negative headlines about China and hawkish Fed bets backed by upbeat US data. It should be noted that the hopes of witnessing downbeat Aussie inflation also weigh on the Aussie pair prices of late. Furthermore, the cautious mood ahead of Federal Reserve Chairman Jerome Powell’s speech also weighs on the risk-barometer pair ahead of the key Aussie data.

That said, the market players’ downbeat expectations contrast with the positive early signals for Aussie inflation and keep the AUD/USD traders on a dicey floor. Hence, a surprisingly upbeat Monthly CPI, one beyond 6.8%, won’t hesitate to bolster the hawkish RBA bets and propel the AUD/USD price. However, the run-up will also depend upon how well Fed Chair Jerome Powell manages to convince markets that the last pause in the rate hike isn’t a prolonged one.

As a result, upbeat data may only provide a knee-jerk reaction to the AUD/USD prices while defending the overall bearish trend unless marking a heavy positive surprise, which is less expected.

Technically, the AUD/USD pair’s repeated failures to provide a daily closing beyond the 200-DMA, around 0.6695 by the press time, keep the sellers hopeful.

Key notes

Australia CPI Preview: Forecasts from five major banks, easing annual inflation 

AUD/USD slides below 0.6700 as Australia inflation, Fed Chair Powell’s speech loom

About Aussie Consumer Price Index

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.

• Gold Price recovery eyes another battler with $1,930 hurdle ahead of key central bankers’ speeches at European Central Bank forum.
• Upbeat United States data, geopolitical fears from Russia limit US Dollar and prod XAU/USD bulls.
• China-inspired optimism, positioning for Federal Reserve Chairman Jerome Powell’s underpin Gold Price rebound.

Gold Price (XAU/USD) regains upside momentum, after snapping a two-day winning streak the previous day, as markets prepare for the key central bankers’ speeches at the European Central Bank (ECB) Forum in Sintra. Apart from that, the economic optimism backed by headlines from the US and China also underpins the XAU/USD rebound.

Gold Price recovers on economic optimism

Gold Price slips off the bear’s radar, after teasing them on Tuesday, as markets brace for top-tier central bankers' speeches amid the receding hopes of witnessing recession in the US and China, the world’s top-two economies.

On Tuesday, a slew of the US data allowed the US Dollar to pare intraday losses and bolstered economic optimism, which in turn allowed US President Joe Biden to rule out recession woes. The same recently underpinned the Gold Price rebound.

Notable among them were the Durable Goods Orders, Conference Board's (CB) Consumer Confidence Index and a few housing numbers. That said, US Durable Goods Orders marked a surprise growth of 1.7% for May versus -1.0% market forecasts and 1.2% prior (revised). Further, the US Conference Board's (CB) Consumer Confidence Index rose to 109.7 for June from 102.5 in May (revised from 102.3).

On the same line, US Housing Price Index rose to 0.7% in April from 0.5% previous readings (revised), versus 0.3% expected. Meanwhile, the S&P/Case-Shiller Home Price Index came in as -1.7% YoY for April, down from -1.1% prior but better than -2.6% market forecasts. Additionally, New Home Sales rose 12.2% MoM in May from 3.5% prior and 0.5% anticipated whereas the Richmond Fed Manufacturing Index improved to -7.0 in June compared to -15.0 prior and -10.0 expected.

Furthermore, China-linked optimism also underpins the Gold Price recovery due to the dragon nation’s status as one of the biggest XAU/USD customers.

Market sentiment improved the previous day on China news and favored the Gold buyers previously before the US data weighed on the XAU/USD. Notable among them were headlines suggesting that Asian lobbyists are advocating for easier rules for Chinese equities’ overseas listing and comments from Premier Li Qiang.

That said, Chinese Premier Li Qiang said on Tuesday, “China was still on track to reach its annual growth target of around 5.0% for the year.” The policymaker also added that China will introduce more pragmatic measures to expand domestic demand and stimulate market vitality.

Apart from that, the People’s Bank of China’s (PBoC) lower-than-expected fixing of the USD/CNY price, despite marking the fresh year-to-date top, also weighed on the US Dollar and favored the XAU/USD. On the same line was a Reuters piece that signaled that China's major state-owned banks reportedly sold US Dollars in the offshore spot foreign exchange market, as authorities sought to steam the recent slide in the Chinese Yuan.

China, Russia news join preparations for Fed Chair Powell’s speech to check XAU/USD bulls

While the aforementioned catalysts could be held responsible for the Gold Price recovery, the XAU/USD bulls are far from taking control amid the risk-negative headlines about China and Russia join the cautious mood ahead of Federal Reserve Chairman Jerome Powell’s speech.

US President Joe Biden said late Tuesday that China has enormous problems and raised fears about the world’s second-biggest economy, as well as triggered the fears of a US-China tussle, which in turn prod the Gold buyers. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.”

Further, Moscow’s tactical flight exercises over the Baltic Sea join the concerns that Russian President Vladimir Putin will act to restore his military confidence after Wagner Group’s mutiny to weigh on the sentiment and the Gold Price.

Additionally, keeping the Gold Price in check is the market’s preparations for Fed Chair Powell’s speech at the European Central Bank (ECB) Forum in Sintra. “The FOMC is very clear that a period of sub-trend activity may be needed to bring inflation under control and so far, that doesn’t seem to be happening,” said Analysts at the ANZ. The same could join the latest upbeat US data to help Fed’s Powell remain hawkish and weigh on the XAU/USD price.

Gold Price Technical Analysis

Gold Price remains within a monthly bearish channel, recently bouncing off the support line surrounding $1,905.

It’s worth noting, however, that the XAU/USD’s sustained trading below the 200-Exponential Moving Average (EMA) and looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator keeps the Gold sellers hopeful.

Even so, the below 50.0 conditions of the Relative Strength Index (RSI) line, placed at 14, suggests bottom-picking of the Gold Price near the $1,900 round figure, if at all the XAU/USD bears manage to defy the stated channel formation with a downside break of $1,905 support.

Hence, the Gold bears need validation from the $1,900 threshold to retake control.

On the contrary, a convergence of the aforementioned descending trend channel’s top line and the 200-EMA, close to $1,955 at the latest, appears a tough nut to crack for Gold buyers. That said, an eight-day-old descending resistance line, close to $1,930 at the latest, restricts the immediate upside of the Gold Price.

Gold Price: Four-hour chart

Trend: Further downside expected