USD Weakens At Improved Market Sentiment

Jun 22 21, 11:46 GMT

The USD tended to weaken against most of its counterparts yesterday, as focus is being placed on Fed Chairman Powell’s testimony today. It should be noted on the other hand that US stockmarkets tended to be on the rise, with Dow Jones, Nasdaq and S&P 500 rising, indicative of the improved market sentiment. There seems to be some recovery in the US markets from the Fed’s hawkish surprise at yesterday’s reopening and worries about the Fed hiking rates and tapering its QE program earlier than expected seem to ease. Fed officials yesterday tended to ease market worries even further in their statements and despite some slight hawkishness in St. Louis Fed President Bullard’s and Dallas Fed President Kaplan’s statements being present, NY Fed President Williams said it was too soon to shift policy, and that he expects inflation to ease. Market attention now turns to Fed Chairman Powell who is expected to testify before Congress today and probably is to reiterate that the US economy continues to show sustained improvement and that further gains in the employment market are expected while inflationary pressures are to decline. Dow Jones rose yesterday breaking consecutively all of our resistance lines (now turned to support) and landed above the 33800 (S1) level. We see the case for the index to continue its bullish movement should the positive market sentiment continue, yet the RSI indicator below our 4-hour chart has not reached the reading of 50 yet, which may imply a stabilisation. On the other hand, the same RSI indicator has a clear upward slope pointing towards the presence of the bulls. Should the bulls actually maintain control over the index , we may see Dow Jones breaking the 34100 (R1) resistance line and aim for the 34400 (R2) resistance level. Should the market reverse the index’s direction and a selling interest be displayed by the market, we may see Dow Jones breaking the 33800 (S1) support line and aim for the 33500 (S2) support level.

Pound gains as Johnson sees improved Covid figures

GBP tended to gain against the USD, EUR, CHF and JPY yesterday as the outlook seems to improve despite the rising figure of Covid cases caused by the Delta stem of the disease. On the fundamental level, the pound may have gotten some support as UK PM Johnson stated that UK Covid data are looking good for lifting curbs, while travel restrictions may ease further. Pound traders have started to turn their attention to BoEs’ interest rate decision on Thursday and BoE policymakers seem split on whether to taper the bank’s QE program or not given also the recent acceleration of UK’s inflation rates. Today, besides fundamentals we expect the pound trader’s attention to turn the CBI industrial trends orders for the month of June. GBP/USD rose yesterday breaking the 1.3845 (S1) resistance line, now turned to support, yet during today’s Asian session, the pair stabilised, even edged lower. We tend to maintain a bias of a sideways movement, albeit the possibility of some slight bearish tendencies cannot be excluded. The RSI indicator below our 4-hour chart seems to be slightly below the reading of 50 also implying that the market has still to make up its mind for the pair’s direction. Should the pair come under selling pressure we may see cable breaking the 1.3845 (S1) support line and aim for the 1.3670 (S2) support level. Should the pair find fresh buying orders along its path we may see the pair breaking the 1.3990 (R1) resistance line and aim for the 1.4145 (R2) level.
Other economic highlights today and the following Asian session:

Today during the European session, we get UK’s June CBI industrial trends for orders while in the American session we get the number of US existing home sales for May, the Richmond Fed Composite index for June and Eurozone’s preliminary consumer confidence for June, while just before the Asian session starts we get the API weekly crude oil inventories figure. Please note that ECB Chief economist Philip Lane, Cleveland Fed President Mester and San Francisco Fed President Daly, while later Fed Chairman Jerome Powell testifies. During tomorrow’s Asian session we get Australia’s preliminary PMI figures for June and Japan’s preliminary Jibun Manufacturing PMI figure also for June, while BoJ releases the minutes of its April meeting.

US 30 Cash H4 Chart