Currency Pairs Market Analysis

[Solid ECN]

Gold and Big Tech Stocks in Retreat​

Precious metals quotes under pressure, gold loses more than 1%, profit taking on Big Tech stock

The second half of today's session brings increased volatility on the dollar, which also translates into clear movements on precious metals. Gold and silver fared quite well today and were trading on the upside until 3pm BST. However, sentiment changed after the publication of the Bank of Canada's surprise interest rate decision. The EURUSD pair turned back from its daily highs and precious metals moved lower.

It is worth noting that this is the second unexpected hike this week. The Bank of Australia also decided to raise interest rates at yesterday's RBA meeting. These decisions were prompted by the latest macroeconomic data, which points to the need to further cool inflation.

In the US stock markets, we have seen a reduction in the recent upward momentum, primarily in the technology stocks that make up the NASDAQ. The sizable declines are mainly recorded by the largest companies. Alphabet (GOOGL.US) loses 3.3%, Microsoft (MSFT.US) over 2.7% and Amazon (AMZN.US) close to 3.4%.

On the other hand, investors' attention is attracted by the huge disparity between the quotations of indices such as the S&P 500 (US500) and NASDAQ (US100) and the Russell 2000 (US2000) small-cap benchmark. As reported by Goldman Sachs bank's trading desk, the record jump in call option ETF's volume on the Russell index may indicate, a gaining 'soft landing' narrative, which may indicate a return of interest around previously underperforming smaller companies.

Looking technically at the chart of gold, the price has been moving in a downtrend since 4 May. At the beginning of June, the price reacted at the resistance height at $1981, but sellers failed to push the price to new lows and a correction was generated. The corrective movement was stopped today, however, at the height of the 100-period average at $1968, from where a dynamic retracement took place. If the current sentiment does not change, an attack on the recent minima at $1932 is not excluded.​

 

[Solid ECN]

EURUSD​

• US indices finished yesterday's trading higher. S&P 500 gained 0.62% to 4,294 points, Dow Jones moved 0.50% higher to 33,833 points and Nasdaq 100 added 1.27% to 14,484 points. The Russell 2000 dropped 0.41%, as investors were taking profits after a good session the day before.​
• Asian stock markets are poised for their second consecutive week of gains, buoyed by the prospect of economic stimulus in China and the S&P 500's transition into a bull market.​
• Japanese markets bounced back from a two-day downturn - Nikkei climbed 1.66% to 32,174 points and Australian stocks also rebounded after a three-day decline - S&P/ASX 200 dropped 0.11%.​
• South Korean stocks have hit their highest point since June of the previous year - Kospi gained 1.25%. ​
• Indices from China decreased by around 0.25%​
• European futures point to a flat opening of the European cash session today, DAX futures are traded 0.06% lower at 16,014 points.​
• The Chinese Consumer Price Index (CPI) Year on Year (YoY) remained as expected at 0.2%, while the Producer Price Index (PPI) YoY fell to -4.6%, lower than the forecasted -4.3%.​
• The Bank of Japan's Governor Ueda stated that the bank is implementing policies to achieve a stable 2% inflation rate.​
• A spike in US unemployment claims to the highest level since October 2021 indicates a softening labor market, which lowered the expectations that the Federal Reserve would keep interest rates elevated for a prolonged period.​
• Despite the S&P 500's return to a bull market, an analyst from Bank of America has stated that the overall market sentiment remains pessimistic.​
• Analysts at Bank of America believe that as long as inflation remains high globally and particularly in the US, the EURUSD is likely to remain weak. Currently, the carry trade is also applying downward pressure on the euro.​
• Saudi Arabia reportedly threatened the US with economic repercussions last fall due to oil price reductions, according to the Washington Post.​
• Precious metals trade mixed - gold trades flat, silver gains 0.15%, platinum gains 1.25% and palladium jumps 0.18%​
• Binance.US has halted USD deposits and warned of a potential pause in fiat withdrawals in response to the "extremely aggressive and intimidating tactics" employed by the SEC and intended to safeguard customers and the platform.​

EURUSD chart - according to BoA a sustained rally in EURUSD would necessitate a change in the Federal Reserve's stance, Interval H1.​

 

[Solid ECN]

Economic Calendar: Quiet start to a busy week​

• European indices set for slightly higher opening​
• Fed, ECB and BoJ rate decisions this week​
• US CPI and retail sales, Chinese monthly activity data for May​

Futures markets point to a slightly higher opening of the European cash session after a rather upbeat trading during the Asian session earlier today. Overall, weekend was uneventful and markets were not offered any major news that could impact price action at the beginning of the week.

Economic calendar for today is empty and markets seem to be in wait-and-see mode ahead of decisions from 3 major central banks later this week - FOMC, ECB and BoJ. While BoJ is most likely to hold rates unchanged, decisions from FOMC and ECB will not be as obvious. FOMC will decide between no change and 25 bp rate hike while ECB will most likely hike but may surprise with size. Apart from central banks, investors will also be offered some top-tier data releases, like for example CPI and retail sales data from the United States or monthly activity data from China.

Central bankers' speeches today​

• 7:30 am BST - ECB Simkus​
• 3:00 pm BST - BoE Mann​

Key events in the later part of the week

Tuesday​

• 10:00 am BST - Germany, ZEW index for June​
• 1:30 pm BST - US, CPI inflation data for May​

Wednesday​

• 7:00 am BST - UK, GDP report for April​
• 7:00 pm BST - FOMC rate decision​

Thursday​

• 3:00 am BST - China, monthly activity data for May​
• 1:15 pm BST - ECB rate decision​
• 1:30 pm BST - US, retail sales for May​

Friday​

• Tentative - Bank of Japan rate decision​
• 3:00 pm BST - US, University of Michigan index for June​

 

[Solid ECN]

GBPUSD - Chart of the Day

Economic outlook
The robust labor data suggest that the UK economy is doing better than predicted despite high inflation and rising central bank interest rates. The job report indicates that workers are demanding and receiving pay awards, which, coupled with businesses' higher pricing intentions, risk of a wage-price spiral. As such, the Bank of England may decide to continue raising interest rates to fight inflation.

Post-publication of the labor data, GBPUSD has seen a modest rise. The pair is currently hovering near the highs, although the jump only roughly halves the losses from the previous day. Given that markets have already priced in about 100 bps worth of future rate hikes, this report doesn't significantly change that. Therefore, the gains for the pound may be more limited if solely reacting to the labor data. Additionally, GBPUSD performance will be highly reactive to the upcoming US CPI inflation report and the tone set by the Federal Reserve. The possibility of a future rate hike in July by the Federal Reserve may support dollar and could put a downward pressure on GBPUSD currency pair.​

 

[Solid ECN]

USDJPY

USDJPY is on the move today with Japanese yen being the worst performing G10 currency while US dollar is one of the top performers. USDJPY is up almost 1% on the day. USD strengthening is driven by yesterday's FOMC meeting, which in spite of a pause in rate hikes, turned out to be very hawkish. This is because the new dot-plot showed a median rate expectation at 5.6% for end-2023, an increase from 5.1% in March dot-plot. This also means that FOMC members see two more 25 basis point rate hikes this year while market expectations prior to the meeting were for one more hike yesterday or at the July meeting before ending the cycle. Hawkish message sent by Fed led to a major repricing in market expectations with swap market no longer pricing in Fed rate cuts this year.

This hawkish turn from Fed is not only supporting USD but also putting pressure on JPY. This is because it signals that divergence between Fed and BoJ policies will continue to grow. Bank of Japan will announce its next monetary policy decision on Friday but no change to the level of rates or other monetary policy settings is expected.

Taking a look at the USDJPY chart at D1 interval, we can see that the pair is trading in an upward channel. Pair broke above a local high from late-May 2023 and is now trading at the highest level since late-November 2022. USDJPY is approaching a mid-term resistance zone in the 142.00 area. Note that the upper limit of the channel can be found slightly above this resistance.​

 

[Solid ECN]

Economic Calendar: US Holiday opens a busy week

​

• European indices set for lower opening​
• US traders off to observe a holiday​
• Rate decisions from BoE, SNB and Norges Bank later this week​

European index futures point to a slightly lower opening of the European cash session today. This comes after declines on Wall Street on Friday and after a rather downbeat Asia-Pacific session earlier today. Oil is trading lower at the beginning of a new week after a number of banks cut GDP growth forecast for China over the weekend and Bloomberg reported that Iranian oil exports reached a 5-year high.

Economic calendar for today is empty with no top-tier releases scheduled. Trader should also keep in mind that liquidity conditions on the markets may be limited, especially in the afternoon, as traders from the United States will be off to observe a holiday and there will be no Wall Street trading session today (changes to trading hours on xStation listed below).

However, things get more interesting later into the week with a number of events that can move the markets. Those include rate decisions from Swiss National Bank, Bank of England and Norges Bank on Thursday, flash PMIs for June on Friday as well as semiannual testimonies from Fed Chair Powell on Wednesday and Thursday.

Central bankers' speeches

​

• 9:00 am BST - ECB Simkus​
• 12:00 pm BST - ECB Lane​
• 12:40 pm BST - ECB Schnabel​
• 2:00 pm BST - ECB Villeroy​
• 7:00 pm BST - ECB De Guindos​

Trading hour changes because of US holiday

​

• No trading - CORN, SOYBEAN, WHEAT, SUGAR, COCOA, COFFEE, COTTON, LEANHOGS, CATTLE, SOYOIL​
• Trading until 4:30 pm BST - VIX​
• Trading until 6:00 pm BST - TNOTE, US100, US30, US500, US2000​
• Trading until 6:30 pm BST - OIL, LSGASOIL​
• Trading until 7:30 pm BST - GOLD, SILVER, PLATINUM, PALLADIUM, OIL.WTI, NATGAS, GASOLINE​

 

[Solid ECN]

AUDUSD

The Australian dollar is one of the worst performing G10 currencies at the beginning of a new week. While there was no major news coming out from Australia over the weekend, there was some worrisome news relating to China - Australia's largest trading partner. A number of large financial institutions - including Goldman Sachs, UBS and Nomura - decided to cut their 2023 GDP growth forecasts for China. Goldman Sachs explained its decision saying that fiscal and monetary stimulus in China will not be enough to generate a strong growth impulse.

China, 2023 GDP growth forecasts

​

• Goldman Sachs: 5.4% vs 6.0% previously​
• Nomura: 5.1% vs 5.5% previously​
• UBS: 5.2% vs 5.7% previously​

RBA minutes are scheduled for release tomorrow at 2:30 am BST and will be a potential mover for AUD. RBA delivered an unexpected rate hike at its latest meeting and traders will look for a hints on whether this means that more rate hikes are coming. There is a feeling that recent upbeat data as well as the more hawkish stance of other central banks will encourage RBA to deliver another rate hike at July meeting as well.

Taking a look at AUDUSD at D1 interval, we can see that the pair halted an advance after reaching the 0.6885 resistance zone recently. Pair experienced a massive, almost-7% rally in the first half of June and given how steep those gains were, a correction or a period of profit taking cannot be ruled out. However, should the ongoing pullback deepen, the first support level to watch will be zone marked with 38.2% retracement of the upward impulse launched in October 2022.​

 

[Solid ECN]

Will ECB end rate hikes in July?

EURUSD is pulling back today, following a steep rally that took place last week. Last week's advance was driven by ECB rate hike on Thursday. ECB President said at a post-meeting press conference that further tightening will likely be needed.

According to Gediminas Simkus, chief of Lithuanian central bank and ECB member, a rate hike in July should be delivered and it is not a matter of discussion. However, Simkus also said that ECB is nearing rate peak and it is too early to declare what decision will the Bank make at a meeting in September.

Money markets are almost fully pricing-in a July rate hike and an over-60% chance of a similar move in September.

EURUSD is pulling back noticeably today and is looking towards an important support zone, marked with 61.8% retracement of the last major downward impulse. This area was tested on Friday already but bears failed to break below. Moreover, a lower limit of the Overbalance structure can be found slightly below and further strengthens a support in the area.​

 

[Solid ECN]

AUDUSD​

• The Reserve Bank of Australia (RBA) considered its last interest rate hike as a finely balanced decision.​
• There is increasing frustration due to the lack of stimulus in China.​

The Australian dollar (AUD) has become more volatile following the release of RBA minutes and the People's Bank of China (PBoC) interest rate decision. The RBA's minutes revealed a balanced stance in votes regarding interest rates, which dampened expectations of further tightening in the near future. However, the RBA remains committed to achieving its target range for inflation. Furthermore, the AUD's performance has been influenced by concerns about the Chinese economy's recovery after the COVID-19 pandemic. As investors worry about China's economic outlook, the Australian dollar, often seen as a liquid proxy for the Chinese yuan, has declined. The absence of new policy stimulus from Beijing has led to frustration in the markets, affecting the AUD's performance alongside a drop in the Chinese yuan.

From the technical perspective, AUDUSD price is 0.6% lower at 0.6810. The price attempted to break above a resistance level at 0.6887 but faced rejection, resulting in a retracement towards the support zone around 0.6793. Currently, the price consolidates and if it fails to hold above this 0.6793 level, the next support zone can be found around 0.6707. On the other hand, if the price manages to bounce back, it can potentially come back towards 0.6887.​

 

[Solid ECN]

USDCHF Technical Analysis

USDCHF pair is currently rising and is expected to breach the 0.8996 (50 SMA in Yellow) level and attack 0.9093. However, caution is advised for upcoming trading as breaching the last level will cancel the negative effect of the double top pattern and lead the price to start a new bullish wave. The targets for this wave begin at 0.9032.

Therefore, due to the contradiction between the technical indicators, it is recommended to stay aside until the price confirms breaching 0.8996 resistance or breaking 0.8956 (25 SMA in Blue) support. It should be noted that breaking this support will push the price to resume the bearish trend and head towards 0.89071 followed by 0.88869 areas mainly.


Price action signal​

• Sell with SL above the LUW (long upper wich) candle at 0.9007​
• TP 1: 0.8956​
• TP 2: 0.8901​

 

[Solid ECN]

GBPCAD

Looking at the daily chart, the GBPCHF pair consequently dropped value from 1.6917. We have the "upper long wick" candle in the daily time frame suggesting possible decrease in the price with SL above the wick.

Zooming to the 4H time frame, the price reacted to 1.67992 - 1.67921 support area. The market for this instrument is considered bullish as long as this level is intact, and another rise to 1.6917 would be possible.

Trigger chart is the 1H time frame. Entry price is 1.6806 with the first target at 1.6847 followed by 1.6917.

​

 

[Solid ECN]

USDJPY ​

The USDJPY is forming a double top pattern on the 1H chart, reacting to the resistance at 142.24. The pair couldn't close above the aforementioned level.

By zooming out to the 4H chart, we see an "upper long wick" candle giving a signal with a risk of getting stopped above the last high and a 1 to 1 ratio reward around 141.27.

​

 

[Solid ECN]

EURUSD Confirms the Breach

EURUSD pair confirmed breaching 1.0966 after ending yesterday above it, starting today with more positivity to reach 1.1000 barrier, which supports the continuation of the expected bullish trend on the intraday and short term basis, and the way is open to achieve our next main target at 1.1072.

The positive effect of the inverted head and shoulders' pattern still active, and supports the continuation of the bullish wave, which gets continuous support by the EMA 25 and EMA50, noting that the continuation of the bullish wave requires holding above 1.0940.​

 

[Solid ECN]

Economic Calendar: Survey Data from Germany and US, central bankers speeches

​

• European indices set for flat opening​
• Survey data from Germany and the United States​
• Speeches from ECB and SNB members​

Markets remain calm after a short-lived Russian coup that took place over the weekend. PMC Wagner rebelled against the Russian Ministry of Defense, took control of few Russian cities and launched an armored column towards Moscow. However, agreement between Wagner and the Kremlin was brokered by Belarusian leader Lukashenko and rebellion ended before any hostilities took place.

European index futures point to flat opening of today's cash session on the Old Continent. Energy commodities and precious metals are trading slightly higher while the US dollar is pulling back. Economic calendar for today is light. Traders will be offered German IFO indices for June in the morning as well as Dallas Fed index for June in the afternoon. Apart from that, EUR and CHF may see some moves today as we have a number of SNB and ECB officials scheduled to speak.

Economic release schedule gets more interesting later into the week with CPI inflation from Europe and PCE data from the United States.​

• 9:00 am BST - Germany, IFO Business Climate index for June. Expected 90.8. Previous: 91.7​
• 9:00 am BST - Poland, unemployment rate for May. Expected: 5.1%. Previous: 5.2%​
• 3:30 pm BST - US, Dallas Fed manufacturing index for June. Expected: -20.0. Previous: -29.1​

Central bankers' speeches

​

• 8:15 am BST - ECB Villeroy​
• 9:40 am BST - SNB Jordan​
• 3:00 pm BST - ECB McCaul​
• 3:25 pm BST - SNB Maechler​
• 6:30 pm BST - ECB President Lagarde​
• 6:30 pm BST - ECB De Cos​

 

[Solid ECN]

GBPUSD

GBPUSD pair's decline halted at the 1.2675 level, where it found solid support. It then began to rise and attempt to recover on an intraday basis, which suggests that it is heading towards building a new bullish wave. The targets of this wave begin with testing the broken support of the main bullish channel that has now turned into resistance at 1.2815. It is worth noting that breaching this level will push the price back to the mentioned channel and achieve additional gains that reach 1.2900 areas.

Therefore, we expect to witness more bullish bias in the upcoming sessions, supported by the technical indicators' positivity. It is important to consider that breaking 1.2675 will stop the bullish wave and push the price to achieve bearish correction on an intraday and short-term basis.​

 

[Solid ECN]

USDJPY

Summary of Opinions from Bank of Japan's June meeting was released overnight and while the document is often overlooked by investors, this time it deserves some attention. The document noted that while the Bank expects CPI inflation to moderate towards the middle of the current fiscal year (Q4 2023), it does not expect it to slow below 2% target. Bank of Japan said that inflationary pressures in the economy increased as employment and income situations improved and tourism demand recovered. Moreover, it was noted that one BoJ member called for an early revision of the yield curve control programme. While it is still a minority, it hints that a change in attitude may be taking place and it may be more evident at BoJ's next meeting (27-28 July, 2023).

Japanese yen gained on those news and is the best performing G10 currency now. Taking a look at USDJPY chart at D1 interval, we can see that a recent rally on the pair slowed after reaching the upper limit of the upward channel. Recent gains on the pair have been quite quick and steep therefore one cannot rule out some profit taking. However, should pullback deepen and the pair break back below 142.00 price zone, it may hint that a larger correction is underway. In such a scenario, 138.25 support zone will be on watch. On the other hand, should it turn out to be just a brief pause in the upward move and bulls regain control, a 144.00 swing level should be seen as the first potential resistance.​

 

[Solid ECN]

EURUSD

EURUSD pair has been hovering around the EMA50 since morning. As long as the price remains above 1.0860, our bullish overview will remain valid for today. We are waiting to test 1.0940 initially. It is worth noting that breaching this level will push the price to 1.1075 as the next main station. However, breaking 1.0860 will stop the bullish trend and push the price to turn to decline.

The expected trading range for today is between 1.0850 support and 1.1000 resistance.​

 

[Solid ECN]

USDCHF

USDCHF pair returns to test the key resistance 0.8959 (fibo 0.236) after the decline that it witnessed yesterday, noticing that AO loses its positive momentum clearly, waiting to motivate the price to resume the expected bearish trend for the upcoming period, which targets 0.8909 followed by 0.8820 levels mainly.

The EMA50 supports the suggested bearish wave, which will remain valid conditioned by the price stability below 0.8965 – 0.8980 levels.​

 

[Solid ECN]

NZDUSD

The NZDUSD currency pair is currently exhibiting positive trading patterns and is attempting to surpass the 50-day exponential moving average (EMA50), which has been providing significant resistance against price movements. We anticipate further upward movement in order to achieve our positive targets, which begin at 0.6220 and extend to 0.6290. Notably, we have observed two bullish engulfing candlestick patterns on the 4-hour time frame, which serve to confirm the strength of the current bullish trend.

Overall, we expect the bullish trend scenario to remain valid and active, provided that the price does not break below 0.6140 and hold with a daily close below this level.​

 

[Solid ECN]

EURUSD

During her inaugural speech at the ongoing central banking conference in Sintra, Portugal, President Lagarde announced that the ECB will raise interest rates at its next meeting in July. The banker indicated that inflationary pressures in the services sector would be a key theme for further rate hikes (a drop in sentiment in this sector/services inflationary pressures could encourage the ECB to ease monetary decisions).

Inflation in EMU remains high all the time, and the second inflationary wave is only now starting to materialize. The banker also sees a growing impact of higher wages on inflation.

The EURUSD pair has rallied during today's session and is approaching the resistance levels marked last week.​