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• USD/CAD extends decline near 1.3715 in Wednesday’s early Asian session.
• The weaker Retail Sales report triggered speculation that Fed will start to cut interest rates in a few months.
• Extended gains in crude oil prices continue to underpin the commodity-linked Loonie for the time being.

The USD/CAD pair trades in negative territory for the fourth consecutive day around 1.3715 during the early Asian session on Wednesday. The rise of crude oil prices to the two-month top provides some support to the commodity-linked Loonie. Additionally, weaker Retail Sales prompted traders to focus on the timing of Fed rate cuts again, which capped the upside for the pair.

Economic activity in the United States remained subdued in the second quarter. The US Retail Sales rose 0.1% MoM in May from a 0.2% decline in April, below the market expectation for an increase of 0.2%, the Commerce Department reported Tuesday. The US Dollar (USD) weakened against its rivals after the weaker-than-expected Retail Sales report as it fueled the likelihood that the Federal Reserve (Fed) will start to cut interest rates in a few months.

Fed officials maintain a cautious stance and emphasize that further confidence in good inflation readings is needed. On Tuesday, New York Fed President John Williams said that he expected interest rates to come down gradually as inflation eases. Boston Fed President Susan Collins stated that despite progress on inflation, price growth remained persistently over the Fed's 2% inflation objective, adding that it is still too early to say whether or not inflation is on course toward the target.

On the Loonie front, extended gains in crude oil prices are likely to lift the Canadian Dollar (CAD) in the near term as Canada is the largest Oil exporter to the United States (US).

The Bank of Canada (BoC) Summary of Deliberations will be released later on Wednesday and traders will take more cues on prospects of additional interest rate cuts from the Canadian central bank. Last week, the BoC decided to cut its benchmark policy rate by 25 basis points (bps) to 4.75%, while signaling further cuts. Former BoC governor David Dodge said last week that the move made “good sense” and the timing of future rate cuts will depend on “the continued progress on inflation,”

• EUR/USD continues to recover from a near-term low around 1.0667.
• Euro sees mid-tier data docket until Friday’s PMI prints.
• US markets heading into a midweek holiday, market flows to be throttled.

EUR/USD is drifting slowly higher in tepid market conditions heading into a quiet Wednesday that sees low-impact EU data and darkened US markets for a midweek holiday shutdown. Broad-market sentiment continues to grind its way upwards as investors shrug off overly cautious talking points from a slew of Federal Reserve (Fed) officials.

Forex Today: Markets’ attention crosses the Channel

Federal Reserve officials lean into cautious stance as policymakers wait for further signs of easing

Wednesday’s economic calendar is muted regarding the Fiber, with US markets darkened for the Juneteenth midweek holiday and only mid-tier releases on offer for the Euro. the European Central Bank’s (ECB) latest Economic Bulletin will be released, and German Producer Price Index (PPI) figures are expected to recover. MoM German PPI is forecast to tick up to 0.3% from the previous 0.2%, and annualized German PPI is expected to rebound to -2.0% YoY from -3.3%.

EUR/USD traders will be hunkering down for the wait to Friday’s Purchasing Managers Index (PMI) print, where the trading week will wrap up with an update on economic activity expectations for June. The Pan-European HCOB manufacturing PMI is expected to climb to 47.9 MoM from 47.3, with the Services component forecast to tick up to 53.5 from 53.2. On the US side, both the Manufacturing and Services components are expected to decline. The Manufacturing component is forecasted to decrease to 51.0 from 51.3, and the Services PMI is expected to drop to 53.3 from 54.8.

EUR/USD technical outlook

EUR/USD is struggling under the weight of technical pressure from the 200-hour Exponential Moving Average (EMA) at 1.0767. Bids have struggled to recover above 1.0750 despite pushing up from near-term lows around 1.0670. 

Daily candlesticks are poised for a bullish extension to the 200-day EMA near the 1.0800 handle, but descending technical resistance from late December’s peaks near 1.1140 are weighing on bullish momentum, and a downside reversal could drag the Fiber into fresh lows for 2024 below 1.0600.

EUR/USD hourly chart

EUR/USD daily chart

• WTI climbed back above $80.00 on Tuesday as bullish recovery continues.
• Hopes of a summertime uptick in demand are bolstering Crude Oil bets.
• Energy traders are shrugging off another barrel buildup in API Crude Oil barrel counts.

West Texas Intermediate (WTI) US Crude Oil broke decisively above $80.00 per barrel on Tuesday as barrel traders shrugged off another build-up in American Petroleum Institute (API) Weekly Crude Oil Stocks. Energy markets are betting on an upswing in fossil fuel demand heading into summer to sop up extra supply throughout global Crude Oil markets, even as the Organization of the Petroleum Exporting Countries (OPEC) and its extended network of non-member ally states, OPEC+, prepares to axe voluntary production cuts that were meant to support Crude Oil prices and crimp global supply.

According to the API, US Weekly Crude Oil Stocks rose 2.264 million barrels for the week ended June 14, clamping down on the previous week’s -2.428 million barrel drawdown. Distillate Stocks also rose 538K barrels, though Gasoline Stocks Change declined 1.077 million barrels, though significantly less than the previous week’s -2.549 million barrel drawdown. Investors with a calculator nearby will note that this week’s 2.264 million barrel addition to API weekly counts brings the supply overhang of US Crude Oil to over 17 million barrels since the first week of January 2024.

Geopolitical turmoil continues to attack a fear premium to Crude Oil markets after a Ukranian drone strike successfully ignited a Russian fuel tank facility this week, and Israel-Palestinian tensions continue to simmer. Coupled with ambiguous hopes of a summertime uptick in demand, energy markets are shrugging off bearish factors, like US Crude Oil overproduction and disappointing Chinese demand figures last week.

WTI technical outlook

US Crude Oil is accelerating into bullish territory as WTI pushes off rising technical support from the last notable swing low into $72.50. WTI crossed over $80.50 on Tuesday to test $80.70 as barrel traders push prices higher in a bid to capture previously lost territory.

This week’s bullish push in WTI has sent US Crude Oil above the 200-day Exponential Moving Average (EMA) at $78.86. WTI has also cracked a descending trendline drawn from 2024’s peak bids near $87.00, and a failed push higher could drag WTI bids back down to the $76.00 region.

WTI hourly chart

WTI daily chart

• Silver maintains gains above $29.50 for the second day, buoyed by rate cut speculation.
• Neutral to downward bias with first support at the 50-DMA near $29.01.
• Key resistance levels at $30.25 (June 12 high) and $31.00, with YTD high at $32.51 in sight.

Silver recovered some ground and traded above $29.50 for a second consecutive trading day, up by 0.30%. May’s US Retail Sales data disappointed investors and fueled expectations that the US central bank could cut rates this year. This weighed on US Treasury yields and the Greenback.

XAG/USD Price Analysis: Technical outlook

Silver’s metal is showing a neutral to downward bias after hitting an eleven-year high of $32.51. Since then, it has retreated towards the area near the 50-day moving average (DMA) at approximately $29.01, the first support level.

Momentum shows that neither buyers nor sellers remain in charge, as the Relative Strength Index (RSI) hovers at around the 50-midline.

That said, if XAG/USD rises past the $30.00 figure, the grey metal will extend its gains. The first resistance would be the June 12 high of $30.25 followed by the $31.00 mark, ahead of challenging the year-to-date (YTD) high of $32.51.

Conversely, if XAG/USD sellers keep prices below $30.00, the first support would be the 50-day moving average (DMA) at 29.01, followed by the 100-DMA at $26.40, followed by the May 2 low of $26.02.

XAG/USD Price – Daily Chart

• The Kiwi sees gains against the Yen, approaching the 97.00 resistance point.
• Daily chart indicators reflect strength, hinting at potential up-move continuation.
• Resistance looms at 97.00- 98.00; however, strong buying traction could drive a breakout to the upside.

In Tuesday's session, the NZD/JPY pair saw promising upticks, edging closer to the 97.00 resistance point after a strong defense of the 20-day Simple Moving Average (SMA) at 96.30, which has proven to be resilient against sellers' attempts.

The daily Relative Strength Index (RSI) for NZD/JPY now registers 63, indicating a positive shift and an increase in buying momentum. On the other hand, the Moving Average Convergence Divergence (MACD) continues to print decreasing red bars, suggesting the ongoing consolidation phase may ease for an upward climb.

NZD/JPY daily chart

In a determined effort, buyers continue to hold their positions above the 20-day Simple Moving Average (SMA) in a bid to solidify the bullish trend's longevity. The recent upward shifts noted in the daily technical indicators highlight an intention among market participants to bring the consolidation phase to an end. In the last sessions, the pair side-ways traded using the 20-day SMA as a support and buyers seem to be back on track after a brief breather.

Incoming trading sessions might see the pair navigating the territory between support levels at 96.30 (20-day SMA) and 95.00, and resistance level at 97.00, aiming for the recent high near 97.30. Notably, the resilience of buyers defending the 20-day SMA at 96.30 is a promising sign for a potential upward continuation. Below those levels, the long-term 100 and 200-day Simple Moving Averages (SMAs) at approximately 92.00 - 91.00, respectively, continue providing overall support for the bullish narrative.

Chief Economist of the Reserve Bank of New Zealand (RBNZ) Paul Conway gave a speech on inflation during the early Wednesday market session, noting that inflation troubles exist on both sides of the RBNZ's policy stance.

Key highlights

• GBP/USD cycling 1.2700 as markets get ready for UK CPI inflation update.
• US holiday to leave Wednesday markets thin.
• BoE rate call looms ahead on Thursday, another rate hold is expected.

GBP/USD is churning around the 1.2700 handle as markets gear up for a lopsided Wednesday market session with a US holiday session on the cards and a fresh update on UK Consumer Price Index (CPI) inflation on the docket. Another rate call from the Bank of England (BoE) looms ahead later in the week, followed by a packed economic calendar on Friday with UK Retail Sales, UK Purchasing Managers Index (PMI), and US PMIs to round out the trading week.

Forex Today: Markets’ attention crosses the Channel

Market sentiment was broadly pinned into the midrange on Tuesday, with a flurry of appearances from Federal Reserve (Fed) officials hammering home the Fed’s cautious stance as policymakers continue to wait for further evidence of cooling inflation before making a decision on interest rates.

Federal Reserve officials lean into cautious stance as policymakers wait for further signs of easing

UK CPI inflation is expected to tick higher MoM in May, forecast to print at 0.4% versus the previous 0.3%. Meanwhile, annualized UK CPI inflation is still forecast to ease to 3.5% YoY versus the previous 3.9%. A US market holiday will leave a hole in Wednesday’s market flows with US institutions darkened in observance of the Juneteenth holiday.

The BoE is rounding the corner with a fresh rate call slated for Thursday. Markets are broadly expecting the UK’s central bank to keep rates on hold at 5.25%, with seven Monetary Policy Committee (MPC) members expected to vote to keep rates on hold for the time being. Two MPC members are expected to vote in favor of a quarter-point rate cut, in line with the previous meeting’s voting outcome.

Friday will wrap up the trading week with a hectic economic calendar, with UK Retail Sales, UK PMIs, and US PMIs plugging the chute. UK Retail Sales are forecast to recover to 1.5% MoM in May compared to the previous month’s -2.3% decline.

Friday’s UK Manufacturing PMI is expected to print slightly lower at 51.0 versus the previous 51.2, while the UK Services PMI component is forecast to tick up slightly to 53.0 from 52.9. On the US side, the Manufacturing and Services components are both expected to recede, with the Manufacturing component forecast to tick down to 51.0 from 51.3 and the Services PMI expected to decline to 53.3 from 54.8.

GBP/USD technical outlook

Rough consolidation has marred near-term technicals on GBP/USD, and the pair is trapped just beneath the 200-hour Exponential Moving Average (EMA) at 1.2727. Momentum has stalled out after the Cable etched in a near-term high near 1.2860 last week.

Daily candlesticks are clattering against technical support at the 50-day EMA at 1.2673, keeping the pair bolstered above the 200-day EMA near 1.2597. A heavy supply zone is weighing on bullish momentum above 1.2800, and a break in bullish pressure may drag the pair back to the year’s lows near 1.2300.

GBP/USD hourly chart

GBP/USD daily chart

• Despite declining below the 20-day SMA, the NZD/USD recovers some losses to stabilize at 0.6140.
• Short-term outlook remains bearish, but seller momentum isn’t that strong..
• Bulls must recover the 20-day SMA at 0.61450.

On Tuesday, the NZD/USD extended its decline, initially dropping to 0.6095, but managed to pare the majority of its losses by the end of the trading day. Buyers staged a comeback, pushing the pair back towards 0.6140. However, the short-term outlook still leans towards the downside, but the day's recovery is a positive sign for the pair.

According to the daily chart, the Relative Strength Index (RSI) at 53 suggests a neutral situation. This implies that the market is neither overbought nor oversold, providing some room for upward movement if the buying pressures can keep the momentum. However, the Moving Average Convergence Divergence (MACD) continues to print red bars, which confirms the presence of the sellers.

NZD/USD daily chart

For the NZD/USD, the immediate support resides at 0.6100. Deeper support is available at the convergence of the 100-day and 200-day SMAs at 0.6069 and 0.6062 respectively, which can provide a solid footing for the pair in case of an extended downside move. A break below these SMA convergence points could point towards a huge sell signal.

In contrast, the pair's main resistance remains around the 20-day SMA at 0.6145 and above at the recent high at the 0.6220 level. A breakout above this consolidation range could be interpreted as a buy signal, suggesting the current bearish sentiment could be coming to an end.

• USD/JPY reaches daily high above 158.00, trading above key moving averages.
• Technical indicators show bullish momentum, with resistance at 158.25 and 158.44.
• Key support levels include 157.00, Senkou Span A at 156.16, and Kijun-Sen at 155.93.

The USD/JPY edges higher for the fourth straight day and registers modest gains of 0.08% after hitting a daily high above 158.00. Fears that Japanese authorities could intervene in the FX space keep the pair within familiar levels, trading at 157.85 at the time of writing.

USD/JPY Price Analysis: Technical outlook

The uptrend in the USD/JPY remains, though price action suggests that buyers remain cautious on Japanese intervention woes. The major is trading above the 50, 100, and 200-day moving averages (DMAs), further confirming the upward bias supported by the Relatives Strength Index (RSI), which shows momentum is bullish.

If USD/JPY climbs above 158.00, the next resistance level would be the 158.25 high hit on June 17, followed by the April 26 peak at 158.44. If those levels are cleared, the year-to-date (YTD) high of 160.32 would be next.

Conversely, sellers can challenge key support levels if USD/JPY drops below 157.00. The first one would be the Senkou Span A at 156.16, followed by the Kijun-Sen at 155.93. The next demand area would be the Senkou Span B at 155.52.

USD/JPY Price Action – Daily Chart

• AUD/JPY got propelled near 105.00 on Tuesday, driven by the Reserve Bank of Australia RBA's hawkish hold.
• Tusaday's move confirms a positive short-term outlook.
• Fundamentals may have driven the pair out of the consolidation phase seen in the last sessions.

In Tuesday's session, the AUD/JPY pair received a boost following the Reserve Bank of Australia (RBA)'s hawkish hold, with the momentum propelling the pair towards the 105.00 level. In the last sessions, price action saw a consolidation above the 104.00 level, which supported the pair now to retest cycle highs.

On the daily scale, the Relative Strength Index (RSI) stands at 62, indicating rising buying pressure and shifting into bullish territory. However, it is important to observe that the Moving Average Convergence Divergence (MACD) line is below the signal line, hinting that there is still bearish activity. Traders will need to keep an eye on a possible crossover in the upcoming sessions to confirm the continuation of Tuesday's bullish movements.

AUD/JPY daily chart

To sum it up, the AUD/JPY pair's solid performance on Tuesday supplements a broader bullish trend, with the trend's strength substantiated by the pair's value above the 20-day, 100-day, and 200-day SMAs. In the next sessions, traders can expect the pair to continue its uptrend movement within the 105.00-106.00 range as bulls have terrain to continue climbing with indicators far from overbought conditions.

On the flip side, if there is a breach below the established support level at 104.00 (20-day SMA), the pair may be prompted to find new support levels. The 102.50 and 100.35 levels are hence seen as the next potential support lines.

• Gold gains as softer-than-expected US Retail Sales boost rate cut expectations.
• Fed officials' comments reveal mixed views on the timing of potential rate cuts.
• 10-year Treasury yield drops six basis points to 4.219%, reflecting market speculation on future rate cuts.

Gold prices rose on Tuesday after economic data from the United States (US) hinted that consumer spending is constraining due to a softer-than-estimated Retail Sales report. This fueled speculation that the Federal Reserve (Fed) could begin its easing cycle this year. The XAU/USD trades at $2,327, up 0.51%.

The US Department of Commerce revealed that May’s Retail Sales improved compared to April’s data, which was downwardly revised but missed the mark. That data reignited investors' rate cut hopes as the Fed signaled in the last meeting that current monetary policy is appropriate.

Other data showed that Industrial Production improved in May, followed by a downward revision in April.

Aside from economic data, Fed officials have crossed the newswires. New York Fed President John Williams said that interest rates would decrease gradually if the disinflation process continued to evolve toward the Fed’s 2% annual core inflation goal. Despite dodging a question about a rate cut in September, he added, “I think that things are moving in the right direction.”

Richmond Fed President Thomas Barkin was cautious, saying he needs to see more data before easing. Later, Boston Fed President Susan Collins said she isn’t carried away about just one good reading on inflation and added that it’s not time to cut rates.

The newly named St. Louis Fed President, Alberto Musalem, stated that he needs to see an evolution in the disinflation process before voting to cut rates. He added that if inflation halts, he favors a rate hike, though it’s not his base case scenario.

Even though most policymakers struck a neutral stance, US Treasury yields reflect investors beginning to price in rate cuts. The 10-year Treasury note yield is down six basis points at 4.219%.

Data from the Chicago Board of Trade (CBOT) shows traders expect 36 bps of easing during the year via December’s 2024 fed funds rate contract.

Daily digest market movers: Gold price jumps as US yields drop

• US Dollar Index (DXY) decreased by 0.05% to 105.27, putting a lid on Gold prices.
• US Retail Sales for May increased by 0.1% MoM, improving from April's 0.2% decline but falling short of the 0.2% estimate. On an annual basis, sales decreased from 2.7% to 2.3%.
• US Industrial Production in May surpassed expectations of a 0.3% increase, rising by 0.9% MoM.
• Last week's CPI report raised the odds of a Fed rate cut in September from 57% to 62%, according to the CME FedWatch Tool.
• Despite the US CPI report showing that the disinflation process continues, Fed Chair Jerome Powell commented that they remain “less confident” about the progress on inflation.

Technical analysis: Gold price remains bearishly biased despite rising

Gold price is neutral to downwardly biased as the bearish Head-and-Shoulders chart pattern remains in play. Although the yellow metal achieved a leg up in the near term, momentum favors sellers, which can be seen by the Relative Strength Index (RSI).

If XAU/USD drops below $2,300, the next support would be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further losses lie beneath as sellers would eye the Head-and-Shoulders chart pattern objective from $2,170 to $2,160.

Conversely, if Gold extends its gains past $2,350, key resistance levels emerge like the June 7 cycle high of $2,387, ahead of challenging the $2,400 figure.

• Dow Jones holding onto familiar levels with US markets set for mid-week break.
• US Retail Sales missed the mark on Tuesday, raising economic activity concerns.
• Investors are putting in double-duty trying to brush off Fed caution.

The Dow Jones Industrial Average (DJIA) is treading water on Tuesday as investors buckle down for the mid-week Juneteenth holiday. US Retail Sales missed the mark in May, and Federal Reserve (Fed) officials have been working double duty on Tuesday to try and tamp down broad-market expectations for an upcoming rate cut that may not materialize as policymakers await further signs of easing inflation.

US Retail Sales grew by a scant 0.1% MoM in May, missing the forecast 0.2%. The previous month’s print was also revised down to -0.2% from 0.0%. Core Retail Sales, or Retail Sales excluding automobiles, declined 0.1% and missing the forecast growth of 0.2%, with the previous release also getting revised to -0.1% from 0.2%.

Federal Reserve officials lean into cautious stance as policymakers wait for further signs of easing

A flurry of Fed official appearances on Tuesday hammered home the Fed’s desire to wait until more inflation data is collected before making any decisions on policy rates. Fed heads from multiple Federal Reserve banks noted that despite a sharp downturn in inflation in recent data, stubborn inflation prints from the first quarter of 2024 continue to spook rate discussions, and policymakers noted the relative strength of the US economy and a still-tight labor market as reasons there is no rush to deliver rate cuts at a pace that markets continue to hope for.

At current cut, the CME’s FedWatch Tool still shows that rate markets are pricing in nearly 70% odds of at least a quarter-point rate trim from the Fed in September.

Dow Jones news

The Dow Jones is roughly balanced on Tuesday, with roughly half of the index’s constituent securities in the green for the day. Losses are being led by Boeing Co. (BA), which declined nearly 2% to $174.94 per share. Goldman Sachs Group Inc. (GS) climbed 1.5% to $456.96 per share, closely followed by Verizon Communications Inc. (VZ), which gained 1.4% to cross above $40.00 per share.

Dow Jones technical outlook

The Dow Jones is hamstrung in the middle on Tuesday, cycling chart territory around 38,800.00 as markets struggle to find a reason to push too far in either direction. The DJIA is trading into technical congestion at the 50-day Exponential Moving Average (EMA) at 38,808.33, and daily candlesticks are swamped out in the middle despite holding tightly to bullish chart levels above the 200-day EMA at 37,411.02.

Dow Jones five minute chart

Dow Jones daily chart

The FX universe traded in a flattish mood on Tuesday, while investors remained mainly focused on the timing of Fed rate cuts. Next of note will be the release of UK inflation data ahead of the BoE gathering, while flash PMIs will close the week.

Here is what you need to know on Wednesday, June 19:

The USD Index (DXY) alternated gains with losses around 105.30 amidst declining yields across the curve. The NAHB Housing Market Index will be only due on June 19.

EUR/USD could not sustain an early uptick to 1.0760, receding to the 1.0730 region as the US session drew to a close. On June 19, EMU’s Current Account and Construction Output will be published.

GBP/USD traded in a vacillating fashion and ended barely changing just above the 1.2700 barrier. The release of the UK Inflation Rate takes centre stage on June 19.

USD/JPY kept the constructive view unchanged, although a close above 158.00 remained elusive. The Reuters Tankan Index, Balance of Trade results and the BoJ Minutes are all due on June 19.

AUD/USD regained composure and partially faded three consecutive sessions of losses. The Australian calendar is empty on June 19.

WTI prices added to the ongoing uptrend and advanced to seven-week highs near the $81.00 mark per barrel.

Gold prices maintained their consolidative range intact around the $2,330 region per troy ounce on the back of weak yields and the lack of direction in the Dollar. Silver charted humble gains, although it remained below the key $30.00 mark per ounce.

• AUD/USD recovered much of its previous losses in Tuesday’s session, following RBA decision.
• USD started the week softly, and its declines extended following weak Retail Sales figures.
• If the Fed and RBA policies diverge, the Aussie might see further gains.

The Australian Dollar (AUD) witnessed sizable gains against the US Dollar (USD) following Tuesday’s Reserve Bank of Australia (RBA) meeting, which concluded with a hawkish hold.

Despite the underlying weakness in the Australian economy, stubbornly high inflation has prompted the RBA to postpone rate cuts. On the US side, disinflation signals have boosted confidence in a September interest rate cut by the Federal Reserve (Fed).

Daily digest market movers: Australian Dollar buoyant after RBA’s hawkish hold

• Reserve Bank of Australia, as widely expected, left the cash rate static at 4.35% and reiterated that “the Board is not ruling anything in or out.”
• Furthermore, Governor Bullock confirmed that the board discussed rate hike options with a rate cut not being contemplated at this time.
• Resolute tone surrounding Australia's inflation backdrop implies that threshold for policy easement remains high.
• RBA disclosed that "inflation remains above target and proves persistent" and reiterated that "the Board anticipates it will be a while still before inflation is sustainably within the target range."
• On the US front, the US Census Bureau released that Retail Sales, a crucial measure of household spending, grew at a slower-than-anticipated pace in May of 0.1% against the projected 0.2%.
• Slower Retail Sales growth might create significant pressure on the US Dollar, as it is set to bolster investors' belief in the gradual disinflation process.
• CME FedWatch Tool indicates higher probabilities of interest rates starting to decrease from the September meeting, with one or more rate cuts implied in November or December.

Technical analysis: Bullish signals gain traction, pending confirmation

The Relative Strength Index (RSI) has now risen above 50, signifying a shift in momentum. Concurrently, the Moving Average Convergence Divergence (MACD) registers shrinking red bars, hinting at declining selling pressure and a potential reversal.

However, the short-term outlook remains negative unless buyers consolidate above the 20-day Simple Moving Average (SMA) now set at 0.6640. As the AUD/USD struggles with the 20-day SMA, investors should continue to monitor the region of 0.6560-0.6550, where the 100-day and 200-day Simple Moving Averages (SMAs) meet. That support level might be retested in the upcoming sessions if bulls fail to confirm their surge.

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Tuesday that recent inflation figures have been very positive, and Fed officials hope to see further easing in the future.

Key highlights

Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem noted on Tuesday that inflation progress may be a longer, slower process than many market participants currently hope. St. Lousi Fed President noted specifically that the labor market remains particularly tight, and that it could take entire months or quarters before policies drag inflation back to convicing Fed target levels.

Key highlights

• Mexican Peso rises as Private Spending and Aggregate Demand show solid economic performance.
• Political concerns ease with support for AMLO’s judiciary reform, discussions to start soon.
• US Dollar weakened by lower-than-expected Retail Sales and downward revisions for previous months.

The Mexican Peso registered solid gains on Tuesday against the Greenback due to upbeat Mexican economic data and a softer-than-expected Retail Sales report from the United States (US). Woes surrounding changes to the Mexican Constitution had eased, a tailwind for the emerging market currency. The USD/MXN trades at 18.40, down 0.67%

Mexico’s economic schedule revealed that Private Spending expanded more than 2023 last quarter in Q1 2024. Alongside that, Aggregate Demand shows the economy remains solid, and it might deter the Bank of Mexico (Banxico) from easing monetary policy due to risks of inflation reacceleration.

In the meantime, presumptive President Claudia Sheinbaum revealed that citizens support current President Andres Manuel Lopez Obrador's (AMLO) judiciary reform, according to three surveys commissioned by Mexico’s ruling party, Morena.

“These polls are information, they don't have another objective,” Sheinbaum said in a press conference. “This is just information to be considered in the discussions that will start in the coming days.”

Across the border, Retail Sales in May were slightly shy of estimates, a sign of economic slowdown. However, downward revisions for the previous months hurt the US Dollar, which according to the US Dollar Index (DXY), edges down 0.05% at 105.28

Despite that, the USD/MXN exchange rate would continue to be driven by political uncertainty as some of the reforms pushed by AMLO to change the Mexican Constitution threaten the state of law.

Daily digest market movers: Mexican Peso on defensive amid risk-aversion

• Mexico’s Aggregate Demand for Q1 2024 rose by 1.5% QoQ, exceeding 2023’s Q4 by 0.4%. In the twelve months to Q2, it expanded 2.6% YoY, above the 2.2% in Q4 2023.
• Private Spending grew 1.5% QoQ in the first quarter of 2024, above the previous 0.9% reading. In the yearly comparison, spending rose by 3.6%, lower than the 5.1% in the previous figures.
• USD/MXN stabilizes following last week’s verbal intervention by Banxico Governor Victoria Rodriguez Ceja, who said the central bank is attentive to volatility in the Mexican currency exchange rate and could act to restore “order” in markets.
• Today’s data and the Mexican currency depreciation could deter Banxico from easing policy in the next meeting on June 27. A rate cut could weaken the Mexican Peso and expose the USD/MXN year-to-date high at 18.99.
• US Retail Sales for May came at 0.1% MoM, which improved compared to April’s -0.2% plunge but still missed the estimates of 0.2%. Annually based, sales dipped from 2.7% to 2.3%.
• US Industrial Production in May exceeded projections of 0.3%, increasing by 0.9% MoM.
• Last week’s CPI report increased the odds of a Fed rate cut in September from 57% to 62%, according to the CME FedWatch Tool.

Technical analysis: Mexican Peso remains firm as USD/MXN drops below 18.50

The USD/MXN is bullishly biased despite dipping to a five-day low of 18.29 as momentum shows buyers are in charge. The Relative Strength Index (RSI) is bullish above the 50-midline, indicating that bullish momentum is intact.

Buyers achieving a daily close above 18.50 could pave the way for further upside. Next would be the year-to-date high of 18.99, followed by the March 20, 2023, high of 19.23. A breach of the latter will sponsor an uptick to 19.50, ahead of the psychological 20.00 mark.

Conversely, if sellers push prices below the April 19 high of 18.15, that will keep the exotic pair trading within the 18.00-18.15 range.

Lorie Logan, President of the Reserve Bank of Dallas reiterated that inflation remains too high, although tremendoous progress has been made. 

Key Takeaways

• Canadian Dollar churns as market focus gets pulled elsewhere.
• Canada remains absent from the economic calendar until Wednesday.
• Mid-week release of the BoC’s Summary of Deliberations on the cards.

The Canadian Dollar (CAD) is broadly mixed on Tuesday as CAD traders find their focus pulled elsewhere. A data-light week has sent the Canadian Dollar adrift, giving a mixed performance against the major currencies board.

Canada has a low-impact week on the cards with strictly mid-tier data releases scheduled. However, CAD traders will still want to keep an eye out for the Bank of Canada’s (BoC) latest Summary of Deliberations slated to be released on Wednesday, as well as Canadian Retail Sales scheduled for Friday.

Daily digest market movers: CAD set adrift as Fedspeak, US data dominate

• A plurality of policymakers from the US Federal Reserve (Fed) are making appearances on Tuesday, working steadily to try and force down rate cut expectations amidst stubbornly-high inflation.
• Fed policymakers remain cautious on inflation, gradual progress expected
• US Retail Sales failed to recover as strongly as forecasts anticipated in May, coming in at 0.1% versus the expected 0.2%. The previous month’s figure was also revised lower to -0.2% from the initial 0.0%.
• US Retail Sales ex Autos declined 0.1% in May, flubbing the 0.2% forecast while the previous print was also revised down to -0.1% from 0.2%.
• BoC’s Summary of Deliberations on Wednesday are unlikely to reveal much new from the Canadian central bank, but there won’t be much else for CAD traders to watch with US markets slated to be shuttered for the Juneteenth holiday.

Technical analysis: Canadian Dollar gives mixed performance on Tuesday

The Canadian Dollar (CAD) is broadly mixed on Tuesday, gaining ground against the US Dollar (USD) and Japanese Yen (JPY) but falling back against the Swiss Franc (CHF) and Australian Dollar (AUD). The CAD climbed around a quarter of one percent against the Yen and a scant tenth of one percent against the Greenback, but fell nearly seven-tenths of one percent against the Swiss Franc and decline half of a percent against the Aussie.

USD/CAD slipped back into all-too-familiar consolidation levels on Tuesday, treading water in a rough consolidation range between 1.3760 and 1.3720. Near-term momentum remains hung up on median bids at the 200-hour Exponential Moving Average (EMA) at 1.3730.

Despite holding in bullish territory above the 50-day EMA at 1.3674, daily candlesticks remain sluggish, trading on the low side of last week’s peak bids near 1.3790. Bullish momentum has drained out of USD/CAD, and bidders may be primed for a fallback to rising technical support below the 1.3700 handle.

USD/CAD hourly chart

USD/CAD daily chart

Federal Reserve (Fed) Board of Governors member Adriana Kugler delivered a speech at the Peterson Institute for International Economics on Tuesday, noting that while inflation remains too high, recent inflation data has been encouraging. Fed Governor Kugler also made a point of cautioning that progress to inflation targets may be gradual.

Key highlights

• US Dollar lost ground on lower-than-anticipated Retail Sales figures, which fuel dovish bets on the Fed.
• Markets are digesting comments from Fed officials for placing their bets on the rate cut cycle.
• Investors continue challenging the Fed and bet on more than one cut in 2024.

On Tuesday, the US Dollar, as measured by the DXY Index (DXY), registered a decline, settling at 105.30. This downturn was mainly invoked by markets reacting to recent comments from Federal Reserve (Fed) officials in combination with the less than anticipated Retail Sales data for May.

The US economic outlook is riddled with mixed signals, but signs of disinflation are starting to arise, which may weaken the USD.

Daily digest market movers: DXY under pressure on disappointing Retail Sales figures

• Markets are now processing words from Fed speakers along with the just-released Retail Sales figures for May.
• On the data front, the US Census Bureau reported May's Retail Sales data growth at a slower pace of 0.1% against the projected 0.2%.
• A softening in Retail Sales growth could potentially affect the US Dollar by affirming investors' belief in the ongoing disinflation process.
• Regarding the Fed speakers, Cleveland Fed President Loretta Mester expressed her preference to observe a "longer run of good-looking inflation data" before any significant decisions are taken.
• Simultaneously, Neel Kashkari, President of the Minneapolis Fed, intimated that the Fed might wait until December for any further rate cuts, favoring the acquisition of more data before any actions are undertaken.
• Several other speakers will be on the wires on Tuesday, and their words might shake the USD.

DXY technical analysis: Momentum flattens, bulls running out of time

Technical indicators suggest a flattening momentum but still retain a positive stance. The Relative Strength Index (RSI) remains above the 50 level, while the Moving Average Convergence Divergence (MACD) continues to print green bars.

With the bullish activity taking a pause, the DXY Index continues to hold above its 20, 100 and 200-day Simple Moving Average (SMA). The slowing down of the momentum from last week might indicate a possible slowdown in the recent rally of the DXY.

Federal Reserve (Fed) Bank of Boston President Susan Collins noted on Tuesday that despite significant progress made on inflation by the Fed and its policies, there's still plenty of work to be done. As Boston Fed President Collins noted, inflation remains stubbornly high, and it will likely take more time than many had initially hoped to bring price growth back down to the Fed's 2% target.

Fed policymakers assess inflation data, weigh policy options

Key highlights

• GBP/USD trades below 1.2700 after hitting a two-day high of 1.2720.
• Resistance at a broken support trendline could lead to further price drops.
• Key support levels: 1.2656 (June 14 low) and 1.2643/34 (100-DMA confluence and May 3 high).

The Pound Sterling creeps lower against the US Dollar on Tuesday, amid a scarce economic docket in the UK following the release of mixed data in the United States. At the time of writing, the GBP/USD trades at 1.2688, down 0.12%.

GBP/USD Price Analysis: Technical outlook

Following a dip to a multi-week low of 1.2656, the GBP/USD has shown signs of resilience, managing to regain some ground. However, it's important to note that it still hovers below a one-month broken support trendline turned resistance, which could potentially lead to further price drops.

Momentum shows that sellers remained unchanged, as revealed by the Relative Strength Index (RSI).

If GBP/USD drops below 1.2700, the exchange rate will continue to fall and face the first support, at 1.2656, the June 14 low. Once cleared, the next stop would be the 100-day moving average (DMA) confluence and the May 3 high at 1.2643/34, ahead of 1.2600.

Conversely, if GBP/USD climbs past 1.2720/30, that could exacerbate a rally toward 1.2800.

GBP/USD Price Action – Daily Chart

Crude Oil continues to prove resilient, with upside momentum firming and Commodity Trading Advisors (CTAs) remaining on the bid, TDS commodity strategists say.

Upside momentum in Oil remains resilient

“We still argue that the rally could start to fade as these CTA flows taper. Indeed, any drop below $80.20/bbl and $84.12/bbl for WTI and Brent crude respectively would see CTAs ease up on their buying and liquidated a portion of the recently acquired length.”

“Aside from the resurgent CTA flows, there is still more relative concern about Q4 balances and beyond, which should serve as a resistance to major upside.”

• USD/CHF refreshes three-month low near 0.8830 as sluggish US Retail Sales growth boosts Fed rate cut hopes.
• Retail Sales, excluding automobiles, contract steadily by 0.1%.
• The Swiss Franc will dance to the tunes of the SNB’s policy outcome.

The USD/CHF pair prints a fresh three-month low near 0.8830 in Tuesday’s American session. The Swiss Franc asset weakens as the US Dollar (USD) falls on the backfoot after the United States (US) Census Bureau reported that Retail Sales returns into positive trajectory in May after contracting 0.2% in April, downwardly revised from a flat performance. However, the pace at which Retail Sales grew was slower at 0.1% than expectations of 0.2%.

The report showed that lower sales at service stations due to fall in gasoline prices and decline in prices of automobiles were responsible for slower growth. Sluggish consumer spendings would dent growth outlook and boosts market speculation for Federal Reserve (Fed) rate cuts in the September meeting.

Retail Sales excluding automobiles, a close measure to consumer spending that accounts for two-thirds of the economy, contracts at a steady pace of 0.1%. This would force economists to revise down expectations for Q2 Gross Domestic Product (GDP) growth.

The CME FedWatch tool shows that the probability for rate cuts in the September meeting has increased to 67% from 61.5%, recorded on Monday. Traders have priced in two rate cuts this year while Fed policymakers continue to argue in favor of reducing interest rates only once as they want to see inflation declining for months.

On the Swiss Franc front, investors await the Swiss National Bank’s (SNB) interest rate decision, which will be announced on Thursday. A close call is expected from the SNB as Swiss exports have become competitive in global markets and imports have become costly due to weak Swiss Franc, which could revamp price pressures again. However, price pressures have remained below the 2% since June 2023 on a year-on-year basis.

Precious metals traders are watching the data like hawks, and this morning's weak US Retail Sales data has given the complex a boost, TDS analysts say.

Markets are on the sidelines in Gold

“Macro investors have remained underpositioned in Gold (XAU/USD) relative to a typical cutting cycle. Macro traders seem to be happy waiting on the sidelines until there is more certainty on the timing of the coming Fed cuts. As a trend of weakening data begins to form, these investors will be more likely to enter the fray, which could ultimately be the next catalyst needed for another leg higher.”

“In this sense, the back-and-forth price action in the Yellow Metal saw some modest selling from Commodity Trading Advisors (CTAs) recently, but these positions could be added back above $2,346/oz.”

The rumblings are starting as we look ahead to China’s third plenum set for July. So far, the latest round of stimulus has failed to solidify markets as data from the property market remains weak, while the latest industrial demand data also came in soft overnight, TD Securities commodity strategists note.

All metals are within range of potential CTA selling triggers

"With households already heavily in debt it is entirely likely the latest property market measures have done little to incentivize new debt to be taken on, particularly as housing prices continue their trend lower, challenging the long-held narrative that prices only go up in the long-run. The market is now hoping that China will announce of new domestic based consumption stimulus measures."

"However, despite this festering optimism, industrial metal prices continue to weaken. Our gauge of commodity demand is weakening amid a precarious global macro landscape, and our return decompositions across the complex confirm the demand side is finally starting to weigh heavy on the metals as the early summer euphoria fades."

"Our return decomposition framework is also showing a major drag in Copper from idiosyncratic factors, such as positioning. This suggests that the red metal could still be prone to additional downside in the near-term as bloated positions are cut. Copper has a margin of safety before the next selling trigger; however, aluminum, zinc, lead and nickel are all within range of potential CTA selling triggers."

• USD/CAD breaks out of a large symmetrical triangle price pattern, activating upside targets. 
• Though it has backed and filled since the break, the probabilities favor a continuation higher. 
• A break above the June 11 high would provide additional bullish confirmation. 

USD/CAD has decisively broken above the upper borderline of a large Symmetrical Triangle price pattern on the daily price chart. 

USD/CAD Daily Chart

The long green bullish candle that formed on June 7 and accompanied the upside breakout from the Triangle qualifies as the decisive break and activates the bullish targets for the pattern. The conservative target for the pattern lies at 1.3881, the 0.618 Fibonacci extrapolation of the height of the Triangle from the breakout point higher. 

A more bullish target lies at 1.3978, the 100% extrapolation of the height of the triangle northwards. 

Although price action has been slightly bearish since the June 7 breakout, the odds favor a resumption of the initial move higher. A break above 1.3791 (June 11 high) would provide further bullish confirmation. 

A decisive breakdown from the triangle would reverse the trend and suggest a move down to an initial target at roughly 1.3472. 

French election poses downside risks for the Euro (EUR). The uncertainty surrounding this election is high given the rapidly-shifting polls and two-step voting process where results between rounds can swing massively. OAT-Bund spreads have widened to levels last seen in 2017 and European stocks have collapsed, TDS strategists note.

European politics imply scope for further Euro downside

“In case of a hung parliament, domestic policies will be hard to pass and this opens the door to another election cycle next year. An outright majority by Le Pen's RN can keep the risk premium in the EUR intact from bigger spending goals and a more constrained relationship with the EU.”

“Growth convergence with US might not be able to save the EUR. The political fabric of EU is becoming strained and making it harder to address bigger issues like energy crises, tech and industrial changes, and management of alliances with US/ China. French gridlock or worse a more Euro-skeptic government could weigh on the economic outlook and the EUR.”

“We remain bearish EUR vs USD, GBP, CHF. We remain USD bulls on three pillars - growth/ inflation exceptionalism and rising geopolitical risks. The USD remains the best global hedge. In RV, we like EUR/GBP downside as a Labour win in the UK with prospects of greater integration with EU can help price out the Brexit premium. Our quant macro framework is also bearish EUR.”

Richmond Federal Reserve Bank President Thomas Barkin said on Tuesday that May inflation data was very encouraging, per Reuters.

Fed policymakers not in a hurry to cut rates, looking for further progress in inflation.

Key takeaways

"We are clearly on the back side of inflation."

"Hard to know how much signal to take from inflation last year, or this quarter, or last couple of weeks."

"On the goods side, I hear pricing power is waning."

"On services side, I still think firms are exploring raising prices as much as possible."

"Shelter and services inflation is not quite there."

"I didn't get more confidence in Q1 this year about inflation, we'll see where we go."

Market reaction

These comments don't seem to be impacting the US Dollar's valuation in a noticeable way. At the time of press, the USD Index was down 0.1% on the day at 105.23.

• Silver price rebounds strongly from $29.00 as slower US Retail Sales growth weighs on the US Dollar and bond yields.
• Sluggish US Retail Sales growth has prompted Fed rate-cut bets for September.
• US households cut spending on discretionary items.

Silver price (XAG/USD) bounces back strongly from the crucial support of $29.00 in Tuesday’s American session. The white metal struggles to gain ground even though the United States (US) Retail Sales grew meagrely by 0.1%, slower than expectations of 0.2% after contracting by 0.2% in April, downwardly revised from a stagnant performance.

The US Census Bureau reports that households cut heavily on discretionary items as banks remain reluctant to increase credit growth due to fears of an increase of delinquency costs. Sales at service stations were lower due to soft gasoline prices.

Slower-than-expected Retail Sales growth suggests deepening household crises due to higher interest rates by the Federal Reserve (Fed). This has weighed on the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders its entire losses and drops to 105.30.

10-year US Treasury yields slump to 4.25%. Lower yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Slower growth in the US Retail Sales has boosted expectations of early rate cuts by the Federal Reserve (Fed). The CME FedWatch tool shows that the probability for rate cuts in the September meeting has increased to 67% from 61.5%, recorded on Monday.

Silver technical analysis

Silver price trades in a Falling Channel chart pattern in which each pullback is considered as a selling opportunity by market participants. The asset aims to shift above the 200-period Exponential Moving Average (EMA), which trades around $29.40.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a consolidating ahead.

Silver four-hour chart

Even though the GBP/USD struggles to hold above 1.27 after last week's bearish close, the pair continues to find support in the upper 1.26s, Shaun Osborne, the Chief FX Strategist at Scotiabank, argues.

GBP to establish a base in the upper 1.26s or in the high 1.25s

“UK CPI data tomorrow is expected to see prices rise 0.4% in the May month but slow to 2.0% in the year. Policymakers are expected to leave the Bank Rate on hold at 5.25% Thursday, however, given still elevated core inflation (forecast to slow to 3.5% in May).”

“The latest opinion poll data show Labour’s substantial lead holding up while PM Sunak’s Conservatives are sagging below 20%, polling at or close to their lowest ever levels of support.”

“Cable continues to find firm support in the upper 1.26s. But there is little staying power in gains which have struggled to hold 1.27+ levels after last week’s bearish close for the GBP. It feels like the pound has more work to do to establish a base—either holding in the upper 1.26s or finding a foothold at a lower level in the high 1.25s perhaps before it can steady and improve.”

• Industrial Production in the US grew at a stronger pace than expected in May.
• The US Dollar Index stays in daily range below 105.50.

Industrial Production in the US grew 0.9% on a monthly basis in May, the US Federal Reserve (Fed) reported on Tuesday. This reading came in better than the market expectation for an increase of 0.3%.

"Manufacturing output posted a similar gain of 0.9% after declining in the previous two months," the Fed noted in its press release. "At 103.3% of its 2017 average, total industrial production in May was 0.4% higher than its year-earlier level. Capacity utilization moved up to 78.7% in May, a rate that is 0.9 percentage point below its long-run (1972–2023) average."

Market reaction

The US Dollar Index showed no immediate reaction to this report and was last seen trading virtually unchanged on the day at 105.34.

• NZD/USD makes a partial recovery in the minutes after the release of US Retail Sales data for May. 
• The data shows sales were lower than expected, and that preliminary estimates for April were over optimistic. 
• The New Zealand Dollar trades on the back foot amidst weaker services data and GDP. 

NZD/USD recovers almost a quarter of a percent to trade in the 0.6110s after the US Dollar (USD) softens, following the release of monthly US Retail Sales data, which shows shoppers tightened their belts in both April and May. 

Retail Sales rose 0.1% month-over-month in May but fell below the 0.2% forecast by economists. April’s flat reading, meanwhile, was revised down to a negative 0.2%, according to data from the US Census Bureau, released on Tuesday. 

Retail Sales ex Autos, declined 0.2% MoM – falling below the 0.2% consensus estimate and the downwardly revised 0.1% decline in April. The April figure itself was revised down from a positive 0.2% preliminary reading. 

Both the lower-than-expected readings for May and the downward revisions for April weighed on the US Dollar (USD), but lifted NZD/USD, which measures the buying power of a New Zealand Dollar (NZD) in terms of USD. The data indicates a slowdown in consumer spending in the US which will probably filter through to lower inflation, and lower interest rates. Lower interest rates negatively impact currencies as they reduce foreign capital inflows. 

Market expectations of the future course of US interest rates were revised down following the release. Prior to the release the probability of the Federal Reserve (Fed) making a 0.25% rate cut in September was 55%. After the release this increased to 60%, according to the CME FedWatch Tool, which uses the price of 30-day Fed Funds Futures to calculate its estimates. The probability that interest rates will fall by either 0.25% or 0.50% by September, meanwhile, rose to nearly 68%. 

The increased probabilities suggest the Fed could cut interest rates more than once in 2024. This comes despite the bank’s last set of forecasts in June penciling in only one 0.25% rate cut before year end. The hawkish forecast (of the view that interest rates will remain high) has been behind the USD’s appreciation over recent sessions and NZD/USD’s weakness. 

Recent commentary from Fed officials has backed the bank’s hawkish stance. Minneapolis Fed President Neel Kashkari said on Sunday that he thought it a “reasonable prediction” that the Fed would reduce interest rates only once this year.  On Monday, Philadelphia Fed President Patrick Harker added further support to the view after he said that keeping rates where they were for a bit longer would help get inflation down and mitigate upside risks.

The New Zealand Dollar, meanwhile, trades broadly weaker after data showed the New Zealand’s services sector slumped in May, hitting the lowest level since August 2021. In addition, GDP data for the country has shown two consecutive quarters of negative growth, meeting the definition of a recession. This, in turn, has increased bets the Reserve Bank of New Zealand (RBNZ) will cut interest rates in the near-term, with a 0.25% cut now fully priced in for the November meeting, according to Trading Economics. 

The Euro (EUR) is modestly higher on Tuesday's session, reflecting a mild narrowing in 10Y OAT/Bund spreads. The gap remains relatively significant (75bps), however, as tensions in the Eurozone persist, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Push above 1.0750 to form solid base for EUR/USD

"Germany’s ZEW survey for June reflected a smaller than forecast improvement in investor expectations, rising to 47.5, from May’s 47.1. Germany’s growth momentum is improving slowly."

"Spot gains on Monday left a bullish imprint on the daily chart via a strong, piercing line signal on the daily candle chart. The EUR has drifted back somewhat from earlier gains so far today but the EUR’s rise from the upper 1.06 area suggests a potential low/reversal in place."

"The EUR remains some distance still from technically “safe” ground but gains through 1.0750 would be supportive of a base developing here and give the EUR a bit more lift. Support is 1.0665/75."

The Canadian Dollar (CAD) is a little softer on the day but continues to range trade between the recent US Dollar (USD) peak and trough, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Markets are waiting for a push in USD/CAD

“The CAD is still holding up somewhat better than our high frequency fair value estimate would suggest is appropriate, however. The estimated equilibrium is little changed around the 1.3820 area today. There are no domestic data releases due, leaving spot trends subject to the broader USD direction and external factors, such as risk appetite, for now.”

“Recall that Friday’s Commodity Futures Trading Commission (CFTC) data showed speculators, real money and hedge fund traders are currently holding a combined record net short position in the CAD. Fresh incentives are needed for markets to add to short CAD positioning.”

“Spot movement remains limited between support at 1.3690 and resistance at 1.3790. The CAD has managed to close a little higher on the session over the past two days, resisting USD gains but the broader technical setup still leans mildly USD-positive. Intraday trend signals are flat but the longer-term DMI signals are bullish-leaning for the USD.”

In an interview with Fox Business, New York Federal Reserve President John Williams noted that recent inflation data have been encouraging and added that he expects inflation to continue to come down, per Reuters.

Fed officials in no rush to cut rates, looking for further progress in inflation.

Key takeaways

"Rate cut path depends on data."

"The US economy is doing well, it's in better balance."

"Fed decisions will depend on the economy."

"Things are moving in the right direction for monetary policy."

"Expecting interest rates to come down gradually as inflation eases."

"Politics will not influence Fed rate decisions."

"We have a very strong economy and incomes are growing."

"Interest rates will come down over next few years."

"3% inflation is not the new norm, Fed will get inflation to 2%."

"We still have a very strong labor market with some hiring slowing."

Market reaction

The US Dollar struggles to gather strength following these comments. At the time of press, the US Dollar Index was unchanged on the day at 105.35.

• Retail Sales in the US rose less than expected in May.
• US Dollar Index retreated below 105.50 after the data.

Retail Sales in the United States rose 0.1% on a monthly basis in May to $703.1 billion. This reading followed the 0.2% decline recorded in April and came in slightly below the market expectation for an increase of 0.2%.

"Total sales for the March 2024 through May 2024 period were up 2.9% from the same period a year ago," the publication read. "Retail trade sales were up 0.2% from April 2024, and up 2.0% above last year."

Market reaction to US Retail Sales

The immediate reaction to this report caused the US Dollar to weaken against its rivals. The US Dollar Index retreated from daily highs after the data and was last seen flat on the day at 105.35.

• GBP/JPY recovery appears to have slowed near 200.00 as UK Inflation comes under the spotlight.
• The UK annual headline inflation is expected to return to BoE’s 2% target.
• The BoJ postponed plans to reduce bond-buying operations.

The GBP/JPY pair struggles to extend recovery above the psychological resistance of 200.00 in Tuesday’s New York session. The cross is expected to trade sideways as investors shift focus to the United Kingdom (UK) Consumer Price Index (CPI) data for May, which will be published on Wednesday.

Economists expect that the UK Office for National Statistics (ONS) will report a sharp decline in the annual core CPI, which strips off the more volatile items, to 3.5% from 3.9% in April. In the same period, the headline inflation is expected to return to the bank’s target of 2.0% from the prior reading of 2.3%. The monthly headline inflation is estimated to have grown at a faster pace of 0.4% from 0.3% in April.

A more-than-expected decline in UK inflation data will boost expectations of early rate cuts by the Bank of England (BoE). Though headline inflation is expected to return to 2%, investors will keenly focus on service inflation, which has been a major barrier to the BoE’s move towards policy normalization.

Inflation in the UK service sector is majorly driven by strong growth, which has turned out to be persistent in the past few months. Average earnings excluding bonuses, which is a measure of wage inflation, have grown steadily by 6.0% for a straight three-period period. The pace at which wages are growing is significantly higher than what is needed to build confidence among BoE officials to consider rate cuts.

On the Tokyo front, the Japanese Yen is weak across the FX domain as the Bank of Japan (BoJ) pushes plans of tapering bond-buying operations to the July meeting. BoJ Governor Kazuo Ueda left interest rates unchanged but didn’t rule out expectations for further policy tightening in July.

This week, the major trigger for the Japanese Yen will be the National CPI data for May, which will be published on Friday. National CPI excluding Fresh Food is estimated to have accelerated to 2.6% from the prior reading of 2.2% on a year-on-year basis.

• AUD/USD has started an up leg within its range. 
• The move is facing tough resistance from a cluster of Moving Averages but will probably eventually extend higher.
• A decisive breakout of the range will change the trend, making it more directional. 

AUD/USD bounces off the floor of a range it has formed since the middle of May. The pair is in a sideways trend which, given “the trend is your friend”, is more likely than not to extend. This suggests the up leg which began on Monday will probably continue rising to the range highs at circa 0.6709.

AUD/USD 4-hour Chart

AUD/USD is currently encountering resistance from three major Simple Moving Averages (SMA) on the 4-hour timeframe, the 50, 100 and 200 SMAs. Whilst this is  obstructing further upside price will probably eventually break above the cluster. A close above 0.6640 would provide added confirmation of more upside, and probably lead to move up all the way to the range ceiling.

As long as price remains within the bounds of the range it will likely keep oscillating. A decisive breakout of the range would be required to signal a change to a more directional trend. An upside break is marginally more likely to happen because the trend prior to the formation of the range was bullish. The breakout move is likely to be volatile given the range highs and lows have been touched multiple times. 

A decisive break above the ceiling of the range would see a follow-through to a conservative target at 0.6770; a decisive break below the range floor would indicate a follow-through to an initial target at 0.6521. 

A decisive break would be one in which a longer-than-average candle broke out of the range and closed near its high or low, or three successive candles of the same color broke cleanly through the range top or bottom. 

The targets are generated using the technical-analysis method of extrapolating the height of the range by a Fibonacci 0.618 ratio higher (in the case of an upside break) or lower (in the case of a downside break). A more generous target would come from extrapolating the full height of the range.

• The US Dollar trades broadly unchanged ahead of a big slew of economic data and public comments from Federal Reserve officials.
• European sovereign bond spreads ease, with French markets partially recovering from last week’s losses. 
• The US Dollar index trades below 105.50, facing significant support and resistance levels nearby. 

The US Dollar (USD) trades broadly steady on Tuesday, a big day in terms of US economic data and comments from Federal Reserve (Fed) policymakers ahead of the US  Juneteenth public holiday on Wednesday. Before enjoying a day off in the middle of the week, traders are starting to pull back their earlier bets favoring the Greenback against the Euro following the European bond market rout last week. With sovereign bond spreads in the Eurozone easing, it looks like markets are digesting political jitters in Europe, with the focus turning back to US data and interest-rate projections. 

On the US economic data front, Tuesday’s calendar offers a chunky batch of data, the most important one being  Retail Sales, a key indicator for consumer spending. Credit card sales data suggest that Retail Sales could come in higher than expected for May. Apart from this, it is also a busy day for the Fed watchers as six US Federal Reserve speakers will make public comments throughout the day. 

Daily digest market movers: Here comes the Fed

• On US data, the main course will be served at 12:30 GMT with US Retail Sales for May:
  • Headline Retail Sales expected to increase by 0.2% after being unchanged in April.
  • Retail Sales without transportation are seen growing at a stable 0.2%.
  • Revisions for the previous numbers, if significant, might also move markets.
• At 12:55 GMT, the US Redbook Index for the second week of June is expected. The previous release was at 5.5%.
• At 13:15 GMT, Industrial Production and Capacity Utilization data for May will be released. Industrial Production is expected to increase by 0.3% after being unchanged a month earlier. Capacity Utilization seen heading to 78.6% from 78.4%.
• An army of Fed speakers will have comments for the markets:
  • Federal Reserve Bank of Richmond President Thomas Barkin speaks at 14:00 GMT about the US economic outlook at a Market News International webcast.
  • Federal Reserve Bank of Boston President Susan Collins will speak at 15:40 GMT at the 2024 annual meeting and 10th year anniversary of the Lawrence Partnership.
  • Federal Reserve Governor Adriana Kugler participates in a conversation about the US economic outlook and monetary policy at the Peterson Institute for International Economics at 17:00 GMT.
  • At the same time Federal Reserve Bank of Dallas President Lorie Logan participates in a conversation about the current state of the US economy at the Headliners Speaker Series in Austin.
  • Freshly appointed Federal Reserve Bank of St. Louis President Alberto Musalem delivers a speech and participates in a moderated Q&A about the US economic outlook and monetary policy at the CFA Society St. Louis Luncheon near 17:20 GMT.
  • The cherry on the cake will be Federal Reserve Bank of Chicago President Austan Goolsbee, who participates in a monetary policy discussion at the 2024 Marshall Forum on the University of Chicago campus at 18:00 GMT.
• Equity markets are shaking off their losses from last week with green across the globe. US futures are also mildly in the green after Nvidia reached a new all-time high on Monday.
• The CME FedWatch Tool shows a 40.4% chance of the Fed interest rate remaining at the current level in September. Odds for a 25-basis-points rate cut stand at 55.0%, while a very slim 4.6% chance is priced in for a 50-basis-points rate cut.
• The benchmark 10-year US Treasury Note trades higher for the week, near 4.28%. 

US Dollar Index Technical Analysis: Water under the bridge

The US Dollar Index (DXY) is seeing its safe-haven inflows abate on Tuesday with markets dialling down on their bets of political turmoil in Europe after the election outcome. With sovereign bond spreads in the Eurozone easing from their distressed levels, it looks like the Greenback might need to look somewhere else for support. Fed speakers will be holding the key as their comments might move the DXY should the hawkish stance prevail even after those softer inflation numbers. 

On the upside, no big changes to the levels traders need to watch out for. The first is 105.52, where the DXY is trading around this Tuesday, which is a barrier that held during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again. Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. 

On the downside, the trifecta of Simple Moving Averages (SMA) is still playing support. First is the 55-day SMA at 105.11, safeguarding the 105.00 figure. A touch lower, near 104.57 and 104.47, both the 100-day and the 200-day SMA are forming a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation. 

• USD/CHF declines as the Swiss Franc appreciates against the US Dollar. 
• An upwards revision to Swiss economic growth forecasts supports CHF. 
• Uncertainty about whether the SNB will cut interest rates on Thursday further supports the Franc. 

USD/CHF trades in the 0.8870s on Tuesday, around a quarter of a percent lower on the day, after the release of Swiss government data showed an upwards revision to growth forecasts in 2024. The pair is further pressured by a lack of progress on inflation brings into doubt an expected interest-rate cut from the Swiss National Bank (SNB) at its meeting on Thursday. 

The Gross Domestic Product (GDP) growth rate in Switzerland is forecast to reach 1.2% in 2024 – up from the 1.1% predicted in March – according to figures released by the State Secretariat for Economic Affairs (SECO), on Monday. The GDP growth rate in 2025, meanwhile, is expected to be 1.7%, unchanged from the March estimate.

Consumer prices are forecast to rise by an annual 1.4% in 2024, a downward revision from the 1.5% in March, according to SECO, and in line with the Swiss Statistical Office’s Consumer Price Index (CPI) reading of 1.4% in May.

Despite the downward revision to inflation in the SECO report, the market consensus is that inflation is not making sufficient progress lower to warrant a cut in interest rates by the Swiss National Bank (SNB) on Thursday. 

The May CPI reading showed no change from April’s 1.4% and as a result of this lack of progress on inflation, investors dramatically revised down their expectations of the SNB cutting interest rates at the June meeting. From a probability of 80% prior to the release of May CPI, the probability fell to roughly 50% after, according to Trading Economics. Since lower interest rates are generally negative for a currency, the decline in probabilities led to a strengthening of CHF (decline in USD/CHF). 

The SNB was the first major central bank to begin cutting interest rates when it reduced its key policy rate by 0.25% to 1.5% at its policy meeting in March.

The US Federal Reserve (Fed), in comparison, continues to be reluctant to cut its Fed Funds Rate, which still stands in a range between 5.25% - 5.50%. The differential between the Swiss and US policy rates advantages the US Dollar (USD), and the USD/CHF pair. Investors are drawn to higher interest rates because of the greater return they can earn, increasing foreign capital inflows. 

Although the SECO data showed an upward revision to growth estimates, the report stated that a 1.2% increase in GDP would still be “significantly below average” and the Swiss would not fully recover until 2025.   

“Given that industrial production capacities are far from being fully exploited and financing costs are high, a decline in investment is to be expected. Foreign trade, on the other hand, will be able to provide some support, particularly due to the depreciation of the Swiss franc in recent months,” SECO’s report stated. 

• The Oil price remains firm near $80.00 as expectations for the Fed reduce interest rates twice this year.
• Investors digested voluntary production cuts announced in the OPEC meeting.
• Summer vacation season in the Northern Hemisphere strengthens the Oil demand outlook.

West Texas Intermediate (WTI), futures on NYMEX, cling to gains near the psychological resistance of $80.00 in Tuesday’s European session. The Oil price remains firm as investors expect a substantial growth in demand due to severe heatwaves in the Northern Hemisphere amid the summer vacation season. The arrival of summer prompts the demand for energy, which is favorable for the Oil price.

The strength in the Oil price is also backed by firm speculation that the Federal Reserve (Fed) will trim interest rates twice this year. The expectations for two rate cuts were boosted by soft United States (US) Consumer Price Index (CPI) report for May, which indicated that progress in inflation declining towards the 2% target has resumed. Growing speculation for Fed rate cuts pleases the Oil price outlook as policy expansion spurts growth.

In today’s session, investors will focus on the monthly US Retail Sales data for May, which will be published at 2:30 GMT. The Retail Sales data is estimated to have grown by 0.2% after remaining flat in April.

Meanwhile, investors have also shrugged off voluntary cuts in overall oil production by communicated by OPEC+ members after their meeting in the first week of June.

The Oil price remains firm even though China’s economic data for May missed estimates. In May, the House Price Index deflated by 3.9%, and Industrial Production and YTD Fixed Asset Investment grew slower than expected by 5.6% and 4%, respectively. However, Retail Sales rose by 3.7%, beating expectations of 3% and the prior release of 2.3%. It is worth noting that China is the world’s largest importer of Oil, and its weak economic health impacts the Oil demand outlook.

• Natural Gas tries to snap its four-day losing streak on Tuesday.
• Traders assess a mixture of data, while European Gas storages are 73.41% full. 
• The US Dollar Index trades a touch higher after its downbeat performance on Monday. 

Natural Gas price (XNG/USD) trades broadly flat on Tuesday and holds above the $2.80 level while trying to avoid a five-day losing streak. The easing pressure over the energy commodity price comes after Israel Prime Minister Benjamin Netanyahu dismantled its war cabinet, and convoys with humanitarian aid were allowed into the Gaza region on June 17th. This defuses a period of stress in the region ever since October 10, 2023, when Hamas attacked the Israeli music festival. 

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, started the week on the back foot, though it is mildly in the green ahead of US Retail Sales data for May, which will be released later in the day. Markets are starting to dial down the European election risk and are beginning to focus back on US data. Add no less than six US Federal Reserve (Fed) speakers lined up for this Tuesday, and the Greenback is set to face some substantial moves. 

Natural Gas is trading at $2.87 per MMBtu at the time of writing.  

Natural Gas news and market movers: Hard to choose which data point counts

• According to Bloomberg data, European combined Liquified Natural Gas (LNG) storages are filled up nearly 73.41%, back at levels from mid-January earlier this year. 
• Shell Plc will buy LNG trader Pavilion Energy from the Singaporean state-owned company Temasek Holdings. Pavilion Energy trades and ships LNG in Asia and Europe, Reuters reports. 
• Norwegian gas flow into Europe is back to normal after a series of unforeseen outages, Gassco reports to Bloomberg. 
• Var Energi and VNG extend their collaboration for another 12 years, with an agreement from Var Energi to deliver 5 billion cubic meters of LNG to VNG, Bloomberg reports. 

Natural Gas Technical Analysis: Europe’s reserves on track

Natural Gas prices are set to ease further despite efforts from traders to keep XNG prices at current levels. With European Ggas storages on track to be filled up in time when the heating season kicks in, the risk of sluggish demand could take over. Add in there the easing tensions from the Middle East, and the near term outlook for LNG looks bleak. 

The pivotal level near $3.08 (the high from March 6, 2023) remains key after its false break last week. In addition, the red descending trendline at $3.10 will also weigh on this area as a cap. Further up, the fresh year-to-date high at $3.16 is the level to beat. 

On the downside, the 200-day Simple Moving Average (SMA) acts as the first support near $2.54. Should that support area fail to hold, the next target could be the pivotal level near $2.14, with interim support by the 55-day SMA near $2.44. Further down, the biggest support comes at $2.18 with the 100-day SMA. 

Natural Gas: Daily Chart

• EUR/USD finds pressure near 1.0740 as the US Dollar strengths ahead of US Retail Sales data for May.
• The US Retail Sales are expected to have grown by 0.2% after remaining flat in April.
• ECB policymakers remain concerned as the inflation outlook appears to be stubborn.

EUR/USD struggles to extend recovery above 1.0740 in Tuesday’s European session. The major currency pair faces pressure as the Euro remains on the backfoot due to political turmoil in France and strength in the US Dollar (USD) ahead of the United States (US) Retail Sales data for May.

The Euro has been under pressure since French President Emmanuel Macron called for a snap election after the Centralist alliance suffered a defeat from Marine Le Pen's National Rally (RN) in the European Parliament elections. Investors worry that the formation of the RN government would trigger a financial crisis in the European Union’s (EU) second-largest economy. The RN has promised a lower retirement age, energy price cuts, more public spending, and "France first" economic policies in its manifesto.

On the monetary policy front, European Central Bank (ECB) policymakers continue to emphasize keeping interest rates steady in the near term, as an aggressive policy-easing approach could revamp price pressures again. The ECB reduced its Deposit Facility Rate by 25 basis points (bps) for the first time since 2019 in the Jue meeting as price pressures were stubbornly higher due to the Covid pandemic and the Russia-Ukraine war.

Daily digest market movers: EUR/USD exhibits subdued performance 

• EUR/USD consolidates in a tight range above 1.0700 as investors shift focus to the monthly US Retail Sales data for May, which will be published at 12:30 GMT. The Retail Sales data – a key measure of household spending – is estimated to have grown by 0.2% after remaining unchanged in April. 
• A lower-than-expected rise in the Retail Sales data could result in substantial pressure on the US Dollar as it will boost confidence that the progress in the disinflation process will continue. Currently, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recovers strongly after correcting modestly to 105.25. Weak Retail Sales data would also prompt market expectations for the Federal Reserve (Fed) to reduce interest rates twice this year.
• The CME FedWatch tool shows higher probabilities that interest rates will start declining from the September meeting, with more rate cuts in November or December. On the contrary, upbeat Retail Sales data will strengthen the US Dollar’s appeal and force traders to pare bets that support rate cuts for September. 
• Meanwhile, Fed policymakers hold their argument that there will be only one interest rate cut this year. Officials have acknowledged that the progress in inflation declining to the desired rate of 2% has resumed after the Consumer Price Index (CPI) report for May showed that price pressures cooled down more than expected. Though the soft CPI report was a relief for policymakers, they wanted to see inflation declining for months before the commencement of the policy-normalization process.
• On Monday, Philadelphia Fed Bank President Patrick Harker supported keeping rates at their current levels for now to maintain downward pressure on inflation in various sectors such as housing and services, notably auto insurance and repairs. When asked about the interest rate outlook, Harker sees one cut in benchmark rate this year if his economic forecast plays out, Reuters reported.

Technical Analysis: EUR/USD remains below 200-day EMA

EUR/USD faces pressure in an attempt to surpass the immediate resistance of 1.0740. The downward-sloping border of the Symmetrical Triangle formation on a daily timeframe, plotted from the high of December 28, 2023, at 1.1140, is acting as a major barrier for the Euro bulls.

The major currency pair is expected to find support at 1.0636, near the upward-sloping trendline of the chart pattern plotted from the low from October 3, 2023, at 1.0448, and the horizontal cushion plotted from April 16 low around 1.0600.

The long-term outlook of the shared currency pair has also turned negative as prices dropped below the 200-day Exponential Moving Average (EMA), which trades around 1.0800.

The 14-period Relative Strength Index (RSI) falls below 40.00. Should the momentum turn bearish if it sustains below the same?

• Federal Reserve officials await more "good inflation" data before cutting rates.
• Jerome Powell reiterates data-dependent approach, says they will make decisions meeting by meeting.
• Federal Reserve policymakers are divided over the timing of the policy pivot.

Federal Reserve (Fed) left the policy rate unchanged at 5.25%-5.5% following the June policy meeting, as expected. The revised Summary of Economic Projections (SEP), the so-called dot plot, showed that policymakers were divided over the near-term rate outlook. Four of 19 officials saw no rate cuts in 2024, seven projected a 25 basis points (bps) rate reduction, while eight marked down a 50 bps cut in the policy rate.

Fed policymakers speak on policy outlook

Fed Chairman Jerome Powell refrained from hinting at the timing of the rate reduction in the post-meeting press conference. "We need further confidence, more good inflation readings but won't be specific about how many to start rate cuts," Powell explained.

Following the Fed event and May inflation data, the probability of the Fed leaving the policy rate unchanged in September declined toward 30% from 50%, according to the CME FedWatch Tool. 

With the Fed's blackout period coming to an end after the June meeting, investors will pay close attention to comments from policymakers in the near term. 

Cleveland Fed President Loretta Mester said that she would like to see a "longer run of good-looking inflation data," and Minneapolis Fed President Neel Kashkari stated over the weekend that it would be a “reasonable prediction” that the Fed will wait until December to cut interest rates, adding that the central bank is in a very good position to get more data before making any decisions. Meanwhile, President of the Philadelphia Fed, Patrick Harker, leaned into a cautious stance on Monday, noting that the Fed may need to keep rates where they are for longer than markets currently hope.

• Gold edges lower as risk-on dominates the market, preferencing riskier assets over safe-havens.
• A survey by the World Gold Council expected central-bank demand to remain sturdy in 2024, adding a backwind to Gold price.
• XAU/USD continues forming a bearish Head-and-Shoulders pattern on the daily chart. 

Gold (XAU/USD) price edges lower, exchanging hands in the $2,310s on Tuesday as an overall positive risk tone to markets weighs on the safe-haven precious metal. The decline comes despite a survey from the World Gold Council (WGC) showing respondents expect demand to remain strong in 2024.  

Gold retreats as risk-on dominates markets

Gold declines over a quarter of a percent on Tuesday as demand for riskier assets diverts attention away from the safety-linked Gold.

US stock indexes reached new all-time highs on Monday on the back of another rally in tech stocks. The good mood continued into the Asian session when most bourses in the East also booked gains. 

Current market expectations see the US Federal Reserve (Fed) making a 0.25% cut to the Fed Funds Rate by September, as roughly 55% probable. This comes despite the Fed upping its estimate of the future path of interest rates at its June meeting – a negative for non-yielding Gold.

Gold survey shows central-bank buying bonanza to last

Central banks are purported to now account for about a quarter of total Gold purchases, and demand from the sector is likely to remain strong in 2024, according to a survey by the World Gold Council, published on Tuesday. 

The WGC’s “2024 Central Banks Gold Reserves Survey” results showed that 81% of respondents expected overall central-bank Gold reserves to increase in 2024, 19% for them to remain the same, and none to fall. 

This was higher than the 2023 survey results, which showed 71% expected overall central bank reserves to increase, against 28% that they would remain unchanged and 1% that they would fall.

It was the highest percentage of respondents who expected reserves to increase since the WGC first started the survey in 2019. 

When asked whether they expected their central bank specifically to increase its Gold reserves in 2024, 29% said they thought it would, 68% thought it would remain unchanged and only 3% expected it to fall. This was also the highest percentage of affirmations for the question since the survey began. 

The most important driver for central banks to hoard Gold was as a “long-term store of value/inflation hedge” according to the survey, with 42% rating it as a “highly relevant factor” in its decision-making process.

The survey findings suggest longer-term demand for Gold from central banks is likely to remain robust – a supportive factor for the Gold price.

Technical Analysis: Gold forms Head-and-Shoulders top

Gold appears to be completing a bearish Head-and-Shoulders (H&S) price pattern on the daily chart. These patterns tend to occur at market tops and signal a change of trend. 

XAU/USD Daily Chart

The H&S on Gold has completed a left and right shoulder (labeled “S”) and a “head” (labeled “H”). The so-called “neckline” of the pattern appears to be at the $2,279 support level (red line). 

The declining momentum signaled by the Relative Strength Index (RSI) during its development corroborates the pattern.

A decisive break below the neckline would validate the H&S pattern and activate downside targets. The first more conservative target would be $2,171, calculated by taking the 0.618 Fibonacci ratio of the height of the pattern and extrapolating it lower from the neckline. The second target would be at $2,106, the full height of the pattern extrapolated lower. 

A break above $2,345, however, would bring the H&S into doubt and could signal a continuation higher, to an initial target at the $2,450 peak. 

• USD/JPY moves higher above 158.00 amid firm US Dollar.
• The US Dollar remains firm as the Fed restricts a number of rate cuts this year to one.
• The Japanese Yen remains vulnerable as the BoJ postponed plans of reduction in bond-buying operations.

The USD/JPY pair jumps above 158.00 in Tuesday’s European session. The asset strengthens as the US Dollar (USD) recovers strongly after a modest correction. The US Dollar exhibits a strong performance as Federal Reserve (Fed) policymakers continue to reiterate their projection for only one rate cut this year.

On Monday, Philadelphia Fed Bank President Patrick Harker said he sees one cut in benchmark rates this year if his economic forecast plays out, Reuters reported.

On the contrary, financial markets expect that the Fed will deliver two rate cuts by the year-end. Market speculation for rate cuts twice this year strengthened after the Consumer Price Index (CPI) report for May showed that inflation cooled down at a faster pace. This also increased confidence among investors that the progress in the disinflation process has resumed.

Fed policymakers also acknowledged the soft inflation as encouraging. However, officials said that they want to see inflation declining for months before announcing rate cuts.

Meanwhile, investors shift focus to the United States (US) Retail Sales data for May, which will be published at 12:30 GMT. The US Census Bureau is expected to report an increase in the Retail Sales by 0.3% after remaining flat in April.

On the Tokyo front, the Japanese Yen continues to face selling pressure as the Bank of Japan (BoJ) has pushed plans for reducing bond-buying operations to the July meeting. This has deepened fears of limited scope for policy tightening.

This week, investors will focus on Japan’s National Consumer Price Index (CPI) data for May. Annual National CPI excluding Fresh Food is expected to have accelerated to 2.6% from the prior reading of 2.2%.

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $29.20 per troy ounce, down 0.89% from the $29.46 it cost on Monday.

Silver prices have increased by 14.64% since the beginning of the year.

The Gold/Silver ratio, which shows the number of troy ounces of Silver needed to equal the value of one troy ounce of Gold, stood at 79.20 on Tuesday, up from 78.72 on Monday.

Investors might use this ratio to determine the relative valuation of Gold and Silver. Some may consider a high ratio as an indicator that Silver is undervalued – or Gold is overvalued – and might buy Silver or sell Gold accordingly. Conversely, a low ratio might suggest that Gold is undervalued relative to Silver.

(An automation tool was used in creating this post.)

• Germany’s ZEW Economic Sentiment Index improves slightly to 47.5 in June.
• EUR/USD keeps losses below 1.0750 after the mixed German and Eurozone ZEW surveys.

The headline German ZEW Economic Sentiment Index edges a tad higher from 47.1 in May to 47.5 in June. The market consensus was for a 50.0 print.

The Current Situation Index, however, dropped from -72.3 in May to -73.8 in the same month, missing the estimates of -65.0 in the reported period.

The Eurozone ZEW Economic Sentiment Index arrived at 51.3 in June, much higher than the May reading of 47.0. The data surpassed the market expectations of 47.8.

Key points

“Both the sentiment and the situation indicators stagnate.”

“These developments must be interpreted in the context of a constant situation indicator for the eurozone as a whole.”

“In contrast, the inflation expectations of the respondents increase, which is likely related to the inflation rate in may, which turned out higher than what was expected.”

Market reaction

The EUR/USD pair is little changed after the mixed German and Eurozone ZEW surveys. The pair is losing 0.13% on the day to trade near 1.0720, at the press time.

• The Mexican Peso trades in a tight range on Tuesday as the currency recovers from the post-election sell-off.
• President-elect Claudia Sheinbaum seeks to calm markets with positive messages about the economy and the popularity of reforms.
• USD/MXN continues pulling back in the midst of a short and medium-term uptrend. 

The Mexican Peso (MXN) fluctuates within a range on Tuesday as the sell-off after the elections, which saw the currency lose on average 10% against its key counterparts, runs out of steam. 

Market risk appetite remains solid after US stock indexes reached new all-time highs on Monday led by a rally in tech, and Asian investors carried the baton through into their session. The risk-on tone provides a constructive backdrop for the Peso, which tends to perform better when investors have more appetite for risk.  

At the time of writing, a single US Dollar (USD) buys 18.53 Mexican Pesos, EUR/MXN is trading at 19.88 and GBP/MXN at 23.52.

Mexican Peso bottoms out after heavy selling

The Mexican Peso oscillates within tight margins on Tuesday as the bearish squeeze that saw the currency sell off dramatically following the June 2 elections, loses momentum. 

Despite lingering concerns about a raft of constitutional reforms the new left-leaning coalition government wishes to make, which range from increasing the minimum wage to judicial reform, speculators appear to have eased off pushing the Peso lower. 

Analysts at Capital Economics see USD/MXN as fair priced at 19.00, the June 12 high. The overweight long position that had built up in the Peso when it climbed to the 16.20s in May, has likely now been fully cremated. 

Incoming President Claudia Sheinbaum sought to calm investors on Monday, saying “Mexico’s economy is healthy and strong, and [there is] nothing to worry about.”

She further cited independent polls commissioned over the weekend that indicated the controversial judicial reforms proposed by her party – which market commentators have held responsible for the Peso’s sell-off – are backed by the population at large. 

On the data front, the USD/MXN pair could face volatility after the release of US Retail Sales data for May. In Mexico, meanwhile, the statistics office INEGI will release GDP Aggregate Demand for Q1. 

Technical Analysis: USD/MXN still pulling back within an uptrend

USD/MXN is still in the midst of a pullback within an uptrend. It is possible the correction could have further to run, however, thereafter the dominant bull trend is likely to reassert itself. The next target higher is situated at 19.22 (March 2023 high).

USD/MXN Daily Chart 

A break above Friday’s high at 18.68 would provide additional confirmation of more upside towards the target at 19.22.

The Relative Strength Index (RSI) has just exited the overbought zone, however, further suggesting a risk the correction could still go deeper. That said, the established uptrend is likely to resume eventually.

The short and medium term trends are now firmly bullish. The direction of the long-term trend, however, is in doubt after the break above the October 2023 high. Previous to that, it was bearish. 

• USD/CAD holds its key support of 1.3700 with eyes on monthly US Retail Sales data for May.
• While the Fed advocates one rate cut this year, traders have priced in two.
• The BoC may extend its policy-easing spell in July.

The USD/CAD pair remains well-supported above the round-level cushion of 1.3700 in Tuesday’s European session. The Loonie asset holds gains as the US Dollar (USD) rebounds after a slight corrective move. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains above 105.00 as Federal Reserve (Fed) policymakers continue to advocate for one rate cut this year.

Fed officials have acknowledged the cooler-than-expected consumer and producer inflation reports but don’t want to rush to reduce interest rates before they see inflation declining for months to gain significant confidence.

Contrary to the Fed’s latest interest rate projections, market speculation for two rate cuts this year have strengthened. The CME FedWatch tool shows that the rate-cut process will begin from the September meeting and there will be subsequent rate cuts in the November or December meeting.

Meanwhile, investors shift focus to the United States (US) Retail Sales data for May, which will be published at 12:30 GMT. The Retail Sales data—a key measure of consumer spending—is estimated to have increased by 0.3% after remaining stagnant in April. Robust consumer spending indicates a stubborn inflation outlook and will diminish hopes of rate cuts in September, while soft numbers will do the opposite.

On the Loonie front, rising expectations that the Bank of Canada (BoC) will cut interest rates further in the July meeting have kept the Canadian Dollar on the backfoot. The BoC delivered a rate cut of 25 basis points (bps) in its June policy meeting, as expected. BoC’s preferred inflation measure- the core Consumer Price Index (CPI), which excludes various volatile items- has come down below the 2% target, and the Unemployment Rate has risen to 6.2%, which forced the BoC to start unwinding the restrictive interest rate framework.

Here is what you need to know on Tuesday, June 18:

The Australian Dollar (AUD) stays resilient against its major rivals early Tuesday as markets assess the Reserve Bank of Australia (RBA) policy announcements and Governor Michele Bullock's comments. ZEW Survey for Germany and the Eurozone will be featured in the European economic docket. Later in the day, Retail Sales and Industrial Production data from the US will be watched closely by market participants.

Following the conclusion of its June policy meeting on Tuesday, the RBA board members decided to keep the Official Cash Rate (OCR) unchanged at 4.35%, as widely expected. "Inflation is easing but has been doing so more slowly than previously expected and it remains high," the RBA noted in its policy statement and added that they expect that it will be some time before inflation is sustainably in the target range. In the post-meeting press conference, Governor Bullock said that policymakers discussed whether to hike rates at the meeting and said that they wanted to make a point that they are alert to upside risks to inflation. AUD/USD edged higher following the RBA event and was last seen rising 0.3% on the day at 0.6630.

Bullock Speech: RBA Governor speaks on interest outlook after standing pat.

Following a bullish start to the week, the US Dollar (USD) struggled to find demand in the second half of the day on Monday. As Wall Street's main indexes pushed higher after the opening bell, the USD Index turned south and closed the day in negative territory. US stock index futures trade marginally higher in the early European morning and the USD Index fluctuates in a tight channel below 105.50. Meanwhile, the benchmark 10-year US Treasury bond yield holds steady slightly below 4.3% after rising more than 1% on Monday.

The Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that there is a chance that the Japanese central bank could raise interest rates at the July meeting, depending on economic, price and financial data and information available at the time. These comments, however, failed to provide a boost to the Japanese Yen. At the time of press, USD/JPY was trading in positive territory at around 158.00.

EUR/USD benefited from the selling pressure surrounding the USD and registered modest gains on Monday. In the European morning on Tuesday, the pair stays in a consolidation phase slightly below 1.0750.

Following Friday's sharp decline, GBP/USD edged higher on Monday. The pair moves up and down in a narrow channel at around 1.2700 early Tuesday.

Gold lost its traction and closed in the red on Monday, pressured by rising US T-bond yields. XAU/USD holds steady near $2,320 in the European morning.

• The Pound Sterling struggles near 1.2700 against the US Dollar amid uncertainty ahead of the UK inflation and the BoE interest rate policy.
• The UK headline CPI is expected to have decelerated to the bank’s target of 2% in May.
• Fed’s Harker sees only one rate cut this year if his economic forecast plays out.

The Pound Sterling (GBP) faces selling pressure in an attempt to extend recovery above the round-level resistance of 1.2700 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair edges down as the US Dollar rebounds after a modest correction from a six-week high. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, holds gains above 105.00 as Federal Reserve (Fed) officials continue to argue in favor of cutting interest rates only once this year.

Fed policymakers want to see inflation decline for months to gain confidence in lowering interest rates. They remain concerned over a reacceleration in price pressures due to premature rate cuts even though the progress in the disinflation process has resumed after stalling in the first quarter of the year.

On Monday, Philadelphia Fed Bank President Patrick Harker emphasized keeping rates unchanged for now to maintain downward pressure on inflation in various sectors such as housing and services, notably auto insurance and repairs. On the interest rate outlook, Harker sees one cut in benchmark rates this year if his economic forecast plays out, Reuters reported.

On the economic front, investors will focus on the monthly United States (US) Retail Sales data for May, which will be published at 12:30 GMT. The Retail Sales data, a close measure of consumer spending that provides cues on the inflation outlook, is estimated to have increased by 0.3% after remaining flat in April.

Daily digest market movers: Pound Sterling is under pressure against the US Dollar ahead of US Retail Sales

• The Pound Sterling exhibits a mixed performance against major currencies amid uncertainty ahead of the United Kingdom (UK) Consumer Price Index (CPI) data for May, which is scheduled for Wednesday. The inflation data will provide cues about when the Bank of England (BoE) will start reducing interest rates.
• The UK CPI report is expected to show that the headline inflation has declined to BoE’s target of 2% from April’s reading of 2.3%. In the same period, the core CPI, which strips off volatile food and energy prices, is estimated to have decelerated to 3.5% from the former release of 3.9%. However, monthly headline inflation is expected to have grown at a higher pace of 0.4% from 0.3% in April.
• Investors will pay close attention to the service inflation data, which has remained a key reason for a bumpier path of inflation toward the central bank’s 2% target. Inflation in the service sector, which is mainly driven by wage growth, could remain persistent as the Average Earnings data Excluding bonuses for three months ending April – a key measure to wage growth – grew steadily by 6.0%. The pace at which wages are growing is much higher than what is needed to bring core inflation down to 2%.
• This week, the Pound Sterling is expected to remain highly volatile as the inflation data will be followed by the BoE’s interest rate policy decision, which will be announced on Thursday. The BoE is widely anticipated to keep interest rates unchanged at 5.25% for the seventh time in a row. Therefore, investors will look for cues about the future rate-cut timeframe. Currently, investors see a 57% chance of another BoE rate hold in August, Reuters reported.

Technical Analysis: Pound Sterling faces pressure near 1.2700

The Pound Sterling struggles to extend its recovery above the crucial resistance of 1.2700 against the US Dollar. The GBP/USD pair finds selling pressure near the 20-day Exponential Moving Average (EMA), suggesting that the near-term trend is uncertain. While the 50-day EMA near 1.2670 is acting as a major support for the Pound Sterling bulls.

Currently, the Cable holds the 61.8% Fibonacci retracement support (plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300) at 1.2667.

The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 range, indicating that the upside momentum has faded.

Gold prices remained broadly unchanged in India on Tuesday, according to data compiled by FXStreet.

The price for Gold stood at 6,225.58 Indian Rupees (INR) per gram, broadly stable compared with the INR 6,222.31 it cost on Monday.

The price for Gold was broadly steady at INR 72,613.95 per tola from INR 72,575.77 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

Global Market Movers: Comex Gold price awaits Fedspeak and US Retail Sales data

• The emergence of some US Dollar dip-buying acts as a headwind for the Gold price on Tuesday, though any meaningful slide seems elusive in the wake of bets for two rate cuts by the Federal Reserve in 2024.
• The Fed projected only one interest rate cut this year as compared to three projected in March, allowing the US bond yields to recover a part of last week's downfall and assisting the USD to regain positive traction.
• Moreover, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will get inflation down and mitigate upside risks, undermining the non-yielding yellow metal. 
• Meanwhile, data released on Friday showed that US import prices fell for the first time in five months in May, which, along with weaker US consumer and producer prices, suggested that inflation in the US is subsiding. 
• This keeps hopes alive for the first rate cut by the Fed in September and another in December, warranting some caution before positioning for the resumption of the commodity's recent pullback from the all-time peak.
• Investors now look forward to Tuesday's US economic docket – featuring the release of Retail Sales and Industrial Production data – for short-term trading opportunities later during the early North American session.
• Apart from this, speeches by a slew of influential FOMC members will play a key role in driving the USD demand, which, along with the broader risk sentiment, should provide some impetus to the precious metal. 

(An automation tool was used in creating this post.)

• EUR/USD weakens around 1.0730 in Tuesday’s early European session. 
• The negative outlook of the pair remains intact below the key 100-period EMA, with a bearish RSI indicator. 
• The initial support level is seen at 1.0685; the key resistance level is located in the 1.0790–1.0800 zone. 

The EUR/USD pair trades on a softer note near 1.0730 on Tuesday during the early European trading hours. The modest recovery of the Greenback drags the major pair lower. Traders prefer to wait on the sidelines ahead of the Eurozone Harmonized Index of Consumer Prices (HICP) inflation data and the US Retail Sales data. Retail Sales in the US are expected to rise 0.2% MoM in May. 

According to the 4-hour chart, EUR/USD keeps the bearish vibe unchanged as the major pair holds below the key 100-period Exponential Moving Average (EMA). The downward momentum is supported by the Relative Strength Index (RSI), which stands in the bearish zone near 43.0,. This suggests that the path of least resistance is to the downside. 

The initial support level for the major pair is seen at 1.0685, a low of  June 17. Further south, the downside target to watch is 1.0665, the lower limit of Bollinger Band. A break below the latter will see a drop to 1.0610, a low of April 19. 

On the upside, any follow-through buying above an intraday high of 1.0741 will see a rally to the crucial upside barrier at the 1.0790–1.0800 region. The mentioned level is the confluence of the upper boundary of the Bollinger Band and the psychological level. A break above this level will pave the way to 1.0852, a high of June 12. 

EUR/USD 4-hour chart

FX option expiries for June 18 NY cut at 10:00 Eastern Time, via DTCC, can be found below

- EUR/USD: EUR amounts

• 1.0600 1.4b
• 1.0670 1.5b
• 1.0675 1.3b
• 1.0725 718m
• 1.0730 842m
• 1.0750 799m
• 1.0775 1b

- GBP/USD: GBP amounts     

• 1.2450 555m
• 1.2500 666m
• 1.2560 668m

- USD/JPY: USD amounts                     

• 154.00 1.9b
• 155.00 972m
• 156.00 436m
• 158.00 489m

- USD/CHF: USD amounts     

• 0.8850 500m

- AUD/USD: AUD amounts

• 0.6440 781m
• 0.6590 621m
• 0.6700 837m

- USD/CAD: USD amounts       

• 1.3800 520m

- EUR/GBP: EUR amounts        

• 0.8600 410m

Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at a press conference following the announcement of the June monetary policy decision on Tuesday.

Bullock is responding to questions from the media, as part of a new reporting format for the central bank starting this year.

Key quotes

developing story ....

Market reaction

AUD/USD is catching a fresh bid on the above comments, up 0.15% on the day at 0.6618, as of writing.

• AUD/JPY fails to capitalize on the overnight goodish rebound from a multi-day low.
• BoJ Governor Ueda's hawkish remarks underpin the JPY and cap gains for the cross.
• The RBA’s decision to leave interest rates unchanged fails to provide any impetus.

The AUD/JPY cross attracts some sellers following an Asian session uptick on Tuesday and stalls the overnight bounce from the 103.60-103.55 area or a multi-day low. Spot prices remain on the defensive after the Reserve Bank of Australia (RBA) announced its policy decision and currently trade just above the 104.00 round-figure mark. 

As was widely anticipated, the RBA decided to keep the Official Cash Rate (OCR) unchanged at a 12-year high level of 4.35% for the fifth successive meeting in June and retained its hawkish stance. The central bank, meanwhile, is expected to leave the door open for a rate hike this year in the wake of still sticky inflation, which, in turn, could act as a tailwind for the Australian Dollar (AUD) and lend support to the AUD/JPY cross.

Data released from China on Monday underlined a bumpy recovery in the world's second-largest economy. This overshadows the RBA's higher for longer interest rate narrative and undermines antipodean currencies, including the Aussie. Meanwhile, the Japanese Yen (JPY) benefits from the Bank of Japan (BoJ) Governor Kazuo Ueda's remarks, saying that the central bank could raise rates in July depending on economic data. 

Apart from this, speculations that Japanese authorities might intervene to prop up the domestic currency further contribute to the AUD/JPY pair's downtick. That said, a generally positive risk tone, which tends to dent demand for the safe-haven JPY and lend support to the risk-sensitive Australian Dollar (AUD), should help limit any meaningful downfall ahead of the RBA Governor Michele Bullock’s press conference at 05:30 GMT.

• NZD/USD remains under some selling pressure for the fourth straight day on Tuesday.
• The USD regains positive traction amid the Fed’s hawkish stance and weighs on the pair.
• Concerns about China’s economic recovery further contribute to the modest decline.

The NZD/USD pair struggles to capitalize on the previous day's modest rebound from the 0.6100 mark, or a one-week low and trades with a mild negative bias during the Asian session on Tuesday. Spot prices remain confined in a familiar range held over the past month or so and currently hover around the 0.6120 region, down nearly 0.20% for the day amid the emergence of fresh US Dollar (USD) buying.

Against the backdrop of the Federal Reserve's (Fed) hawkish outlook, policymakers continue to argue in favor of only one interest rate cut this year. In fact, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will help get inflation down and mitigate upside risks. This remains supportive of elevated US Treasury bond yields and assists the USD to regain some positive traction, which, in turn, is seen weighing on the NZD/USD pair. 

Apart from this, mixed economic data released from China on Monday underlined bumpy recovery in the world's second-largest economy and turns out to be another factor undermining antipodean currencies, including the Kiwi. Meanwhile, weaker US consumer and producer prices suggested that inflation is subsiding, keeping hopes alive for the first Fed rate cut in September and another in December. This might cap gains for the Greenback and lend some support to the NZD/USD pair. 

Market participants now look forward to the US economic docket, featuring the release of monthly Retail Sales and Industrial Production figures. Apart from this, speeches by influential FOMC members and the US bond yields will drive the USD demand, which, in turn, should provide some meaningful impetus to the NZD/USD pair. Traders might further take cues from the broader market risk sentiment to grab short-term opportunities around the risk-sensitive New Zealand Dollar (NZD).

• WTI meets with some supply on Tuesday amid the emergence of some USD dip-buying.
• Optimism over firming fuel demand and Middle East tensions should help limit losses.
• The overnight close above the $79.50 confluence resistance also favors bullish traders.

West Texas Intermediate (WTI) US crude Oil prices edge lower during the Asian session on Tuesday and erode a part of the overnight strong gains to the $80.00 neighborhood, or a nearly three-week high. The commodity, however, manages to hold above the $79.50 confluence resistance breakpoint, comprising 50-day and 100-day Simple Moving Averages (SMA). 

The OPEC+ producer group reassured last week that a plan to raise supplies from the fourth quarter of this year could be paused or reversed based on market conditions. This comes on top of the latest optimism over strong fuel demand, bolstered by the International Energy Agency monthly report. Apart from this, expectations that a drawdown in US inventories will tighten the market in the second half of the year should act as a tailwind for Crude Oil prices.

Furthermore, concerns that a wider Middle East conflict will lead to potential disruption to global supplies from the key producing region validate the positive outlook for the black liquid. The Israeli military said on Sunday that intensified cross-border fire from Lebanon's Hezbollah movement into Israel could trigger serious escalation. Israel added further that tensions with the Iran-aligned Houthi rebels in Yemen were bringing the region close to a wider conflict.

Meanwhile, Monday's mixed macro data out of China – the world’s top crude importer – warrants some caution for bullish traders. Adding to this, the emergence of fresh buying around the US Dollar (USD), which continues to draw support from the Federal Reserve's (Fed) hawkish outlook, might also contribute to capping gains for Crude Oil prices. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move.

• Australian Dollar trades with mild negative bias in Tuesday’s Asian session.  
• The RBA is expected to leave the key interest rate unchanged at 4.35% for the fifth consecutive meeting in June. 
• If RBA’s Bullock retains her hawkish rhetoric during the press conference, this could lift the Aussie against the US Dollar. 

The Australian Dollar (AUD) loses ground on Tuesday on the modest rebound of the US Dollar (USD). The markets turn cautious ahead of the Reserve Bank of Australia (RBA) monetary policy meeting on Tuesday. The RBA is anticipated to hold the Official Cash Rate (OCR) steady at 4.35% for the fifth meeting in a row in June. Traders will take more cues from RBA Governor Michele Bullock’s press conference. The hawkish tone from the RBA statement could boost the Australian Dollar (AUD), while the failure to affirm the hawkish expectations could exert some selling pressure on the Aussie against the Greenback. 

Investors will keep an eye on US Retail Sales and Industrial Production for May. The Federal Reserve’s (Fed) Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem and Austan Goolsbee are set to speak later on Tuesday. The stronger-than-expected data could boost the USD and create a headwind for AUD/USD. 

Daily Digest Market Movers: Australian Dollar weakens ahead of RBA interest rate decision

• "The stronger than expected Q1 CPI also makes it hard to see the RBA being sufficiently confident that inflation will return to and stay in the band by the time the November meeting comes around," said ANZ head of Australian economics Adam Boyton.
• Philadelphia Fed President Patrick Harker said on Monday that one interest-rate cut is appropriate for this year if the US economy performed as expected. Harker further stated that he’d like to see “several” evidence of improving inflation, per Bloomberg. 
• The US NY Empire State Manufacturing Index improved to -6.0 in June from -15.6. in the previous reading, above the consensus of -9.0. The index has remained in contractionary territory since November 2023. 
• Financial markets have priced in a nearly 62% odds rate cut from the US Fed on September 18, according to the CME’s FedWatch Tool.

Technical Analysis: AUD/USD hovers around the key 100-day EMA

The Australian Dollar trades on a softer note on the day. The bullish stance of the AUD/USD pair remains fragile as it hovers around the key 100-day Exponential Moving Average (EMA) on the daily chart. The pair could resume its downside trajectory if it crosses below the key EMA, as mentioned. Furthermore, the 14-day Relative Strength Index (RSI) remains below the 50-midline, supporting the sellers for the time being.

The potential downside target for AUD/USD will emerge near the confluence of the 100-day EMA and the lower limit of the Bollinger Band in the 0.6580-0.6585 zone. Extended losses will pave the way to 0.6510, a low of March 22. The next contention level is seen at  0.6465, a low of May 1. 

On the other hand, the first upside barrier is located at 0.6684, the upper boundary of the Bollinger Band. A decisive break above the mentioned level will see a rally to 0.6715, a high of May 16. Further north, the next resistance level to watch is 0.6760, a high of January 4.

• Gold price extends the range-bound trading on Tuesday amid doubts over the Fed's rate-cut path.
• Signs of easing inflation keep a September rate cut on the table and lend some support.
• A modest USD strength might cap the upside for the XAU/USD ahead of US Retail Sales. 

Gold price (XAU/USD) struggles to gain any meaningful traction on Tuesday and oscillates in a narrow trading band, around the $2,320 region during the Asian session. Against the backdrop of the Federal Reserve's (Fed) hawkish outlook last week, policymakers continue to argue in favor of only one rate cut in 2024. This remains supportive of elevated US Treasury bond yields and assists the US Dollar (USD) to attract some dip-buyers, which, in turn, caps the upside for the non-yielding yellow metal. 

Gold price, however, remains confined in a familiar range held over the past week or so and below the 50-day Simple Moving Average (SMA), warranting some caution before placing aggressive directional bets. The incoming US macro data pointed to signs of easing inflationary pressures and fueled speculation that the Fed will cut interest rates twice this year, in September and in December. This might keep a lid on the Greenback and help limit any meaningful decline for the XAU/USD. 

Daily Digest Market Movers: Gold price struggles to lure buyers amid Fed rate-cut uncertainty

• The emergence of some US Dollar dip-buying acts as a headwind for the Gold price on Tuesday, though any meaningful slide seems elusive in the wake of bets for two rate cuts by the Federal Reserve in 2024.
• The Fed projected only one interest rate cut this year as compared to three projected in March, allowing the US bond yields to recover a part of last week's downfall and assisting the USD to regain positive traction.
• Moreover, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will get inflation down and mitigate upside risks, undermining the non-yielding yellow metal. 
• Meanwhile, data released on Friday showed that US import prices fell for the first time in five months in May, which, along with weaker US consumer and producer prices, suggested that inflation in the US is subsiding. 
• This keeps hopes alive for the first rate cut by the Fed in September and another in December, warranting some caution before positioning for the resumption of the commodity's recent pullback from the all-time peak.
• Investors now look forward to Tuesday's US economic docket – featuring the release of Retail Sales and Industrial Production data – for short-term trading opportunities later during the early North American session.
• Apart from this, speeches by a slew of influential FOMC members will play a key role in driving the USD demand, which, along with the broader risk sentiment, should provide some impetus to the precious metal. 

Technical Analysis: Gold price bulls need to wait for a breakout through the 50-day SMA resistance

From a technical perspective, the $2,333-2,336 region is likely to act as an immediate hurdle ahead of the 50-day SMA support, currently pegged near the $2,344-2,345 region. This is followed by the $2,360-2,362 supply zone, which, if cleared decisively, might prompt some short-covering rally and lift the Gold price to the $2,387-2,388 intermediate hurdle en route to the $2,400 mark. A sustained strength beyond the latter will suggest that the recent corrective slide from the all-time top set in May has run its course and should allow the XAU/USD to retest the $2,450 region.

On the flip side, bearish traders need to wait for a sustained break and acceptance below the $2,300 mark before placing fresh bets around the Gold price. Some follow-through selling below the $2,285 horizontal support will confirm a breakdown and pave the way for deeper losses. The commodity might then accelerate the fall towards the next relevant support near the $2,254-2,253 region. The downward trajectory could extend further and eventually drag the XAU/USD towards the $2,225-2,220 support en route to the $2,200 round-figure mark.

Japanese Finance Minister Shunichi Suzuki said on Tuesday that interest rates are set by markets, reflecting JGB demand and various aspects. However, Suzuki declined to comment on the Bank of Japan's (BoJ) decision last week on the planned reduction of JGB purchases. 

Key quotes

Market reaction

At the time of writing, USD/JPY is trading 0.11% lower on the day to trade at 157.54. 

The Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that there is a chance that the Japanese central bank could raise interest rates at the July meeting, depending on economic, price and financial data and information available at the time.  

Key quotes

Market reaction

At the time of writing, USD/JPY is trading 0.06% lower on the day to trade at 157.63. 

• Indian Rupee holds positive ground on the softer US Dollar on Tuesday. 
• The upside of the INR might be limited amid the Fed’s hawkish tone and higher crude oil prices. 
• Investors await the US Retail Sales data for fresh impetus, which is due on Tuesday. 

The Indian Rupee (INR) gains ground amid the weaker Greenback on Tuesday. The upside of the local currency might be limited as the cautious stance from US Federal Reserve (Fed) officials is likely to influence the US Dollar (USD) for the time being. Additionally, the rebound of crude oil prices might weigh on the INR. It’s worth noting that India is the third largest consumer of oil behind the US and China. 

Nonetheless, the potential foreign exchange intervention by the Reserve Bank of India (RBI) might support the Indian Rupee and cap the upside for the pair. Looking ahead, the US Retail Sales is due on Tuesday, which is estimated to improve 0.2% MoM in May. The strong consumer spending might further boost the Greenback against the INR. Apart from this, the Fed Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem, and Austan Goolsbee are scheduled to speak later on Tuesday.

Daily Digest Market Movers: Indian Rupee edges higher despite the Fed’s hawkish stance

• India will continue to be the fastest-growing economy in Asia-Pacific in 2024, sustaining last year's domestically driven momentum, according to the rating agency Moody’s. 
• Philadelphia Fed President Patrick Harker said on Monday if the US economy performed as he expected, the Fed would be able to cut its benchmark interest rate once this year, per Reuters. 
• Cleveland Fed Bank President Loretta Mester and Chicago Fed Bank President Austan Goolsebee emphasized the need for more confidence and said they would wait for the data.
• The US NY Empire State Manufacturing Index recovered to -6.0 in June from the previous reading of -15.6. in May, above the consensus of the forecast of -9.0. The index has remained in contraction territory since November of last year.
• Investors see a nearly 62% chance rate cut from the US Fed on September 18, according to the CME’s FedWatch Tool. 

Technical analysis: USD/INR displays bullish vibe in the longer term

The Indian Rupee trades weaker on the day. The bullish outlook of the USD/INR pair remains intact as the pair has been making higher highs and higher lows since the start of June, and holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands in bullish territory around 55.50.

In the bullish case, the immediate resistance level for the pair will emerge at 83.60 (high of June 11). Any follow-through buying above this level will pave the way to 83.72 (high of April 17) en route to the 84.00 psychological mark.  

On the flip side, the key support level for USD/INR is located at 83.35 (100-day EMA). A breach of this level could expose 83.00 (round figure), followed by 82.78 (low of January 15). 

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1148, as against the previous day's fix of 7.1149 and 7.2494 Reuters estimates.

• USD/JPY is seen consolidating its recent gains registered over the past three days.
• The divergent Fed-BoJ policy stance should continue to lend support to the major.
• Any corrective decline could be seen as a buying opportunity and remain limited.

The USD/JPY pair struggles to capitalize on its gains registered over the past three days and oscillates in a narrow trading band, just above mid-157.00s during the Asian session on Tuesday. Spot prices, however, remain well within striking distance of the highest level since late April touched last Friday and seem poised to prolong the recent well-established uptrend. 

Despite the Federal Reserve's (Fed) hawkish stance, the markets have been pricing in the possibility of two interest rate cuts this year amid signs of easing inflationary pressures in the United States (US). This keeps the US Dollar (USD) bulls on the defensive for the second straight day and turns out to be a key factor acting as a headwind for the USD/JPY pair. Moreover, speculations that Japanese authorities might intervene to prop up the Japanese Yen (JPY) further contribute to capping the currency pair. 

Meanwhile, Fed officials continue to argue in favor of one interest rate cut in 2024. In fact, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will help get inflation down and mitigate upside risks. This remains supportive of elevated US Treasury bond yields and might limit the USD losses. Furthermore, the Bank of Japan's (BoJ) cautious policy approach should cap any meaningful JPY appreciating move and lend some support to the USD/JPY pair. 

The aforementioned fundamental backdrop seems tilted firmly in favor of bulls and suggests that the path of least resistance for spot prices remains to the upside. Hence, a corrective decline might still be seen as a buying opportunity as traders now look to the US macro data – monthly Retail Sales and Industrial Production figures. This, along with speeches by influential FOMC members, should provide some impetus to the USD/JPY pair ahead of the BoJ policy meeting minutes on Wednesday.

• AUD/USD holds positive ground around 0.6615 amid the softer US Dollar on Tuesday.
• The RBA is anticipated to keep rates steady at 4.35% at its June meeting on Tuesday. 
• The hawkish tones of the Fed officials might cap the upside for the pair in the near term.

The AUD/USD pair snaps the three-day losing streak near 0.6615 on Tuesday during the early Asian session. The weaker US Dollar (USD) provides some support to the pair. Investors will closely monitor the Reserve Bank of Australia (RBA) interest rate decision and Governor Michele Bullock’s press conference. 

The RBA is likely to keep the Official Cash Rate (OCR) unchanged at 4.35% for the fifth consecutive meeting in June. The stubbornly high inflation in Australia prompted the expectation that the RBA might delay the interest rate cut. If the RBA delivers a hawkish message after the policy meeting, this could lift the Australian Dollar (AUD) and create a tailwind for the pair. However, the failure to affirm the hawkish expectations could attract some sellers to the Aussie. 

Last week, ANZ bank analysts pushed back its prediction of an interest rate cut until next year, expecting the Australian central bank wouldn't lower the cash rate until next February due to hotter-than-expected inflation data in the last two months. "The stronger than expected Q1 CPI also makes it hard to see the RBA being sufficiently confident that inflation will return to and stay in the band by the time the November meeting comes around," said ANZ head of Australian economics Adam Boyton.

On the USD’s front, US Federal Reserve (Fed) Chairman Jerome Powell refrained from hinting at a specific timeline for rate cuts and reiterated a data-dependent approach in the post-meeting press conference. Cleveland Fed Bank President Loretta Mester and Chicago Fed Bank President Austan Goolsebee emphasized the need for more confidence and said they would wait for the data. Nonetheless, Minneapolis Fed President Neel Kashkari on Sunday said that it's a "reasonable prediction" that the Fed will cut interest rates once this year, waiting until December to do it. The hawkish stance of Fed officials continues to underpin the Greenback and might cap the upside for the pair in the near term.