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Fed’s Bowman: Inflation to remain elevated, rate hold necessary

Jun 25 24, 11:36 GMT

Fed Governor Michelle Bowman, in a speech today, said her baseline outlook that US inflation will return to the 2% target, provided federal funds rate remains at its current level of 5.25-5.50% "for some time." She emphasized that Fed is "still not yet at the point" where it would be appropriate to lower the policy rate.

Bowman stressed the need for Fed to "consider a range of possible scenarios" as monetary policy decisions evolve. She remains "willing" to raise interest rates "should progress on inflation stall or even reverse."

Regarding inflation outlook, Bowman noted that since the beginning of 2024, there has been only "modest" progress on inflation. Core CPI has been running at 3.8% through May, which is significantly above the average inflation rate in the second half of last year. She expects inflation to "remain elevated for some time."

Bowman also highlighted several upside risks to inflation. She mentioned that it is unlikely that further supply-side improvements will continue to reduce inflation. Geopolitical developments could also pose additional risks. Furthermore, increased immigration and continued labor market tightness could lead to persistently high core services inflation.

Full speech of Fed's Bowman here.

Brent Crude Oil Hits Two-Month High Amid Geopolitical Tensions

RoboForex Ltd

Jun 25 24, 11:24 GMT

Brent crude oil prices surged to $86 per barrel on Tuesday, marking the highest level in two months. This rise was driven by escalating geopolitical risks in Eastern Europe and the Middle East, particularly the ongoing confrontation between Israel and Hamas, which shows no sign of abating despite the involvement of international mediators backed by the US.

On the demand side, uncertainties persist. China, the world's largest oil importer, continues to face significant economic challenges, contributing to the volatile market sentiment. The retail sector in China is under pressure following disappointing results from the mid-year online sales, with Chinese consumers showing reluctance to spend amidst concerns about personal wealth, the ongoing property market crisis, delayed wages, and high youth unemployment. These factors are critical as they jeopardise China’s GDP growth target of around 5% for the year.

Brent technical analysis

On the H4 chart, Brent is currently advancing towards the $86.50 level, which is identified as the immediate target. Once this level is reached, a potential correction to $81.60 may occur, testing from above. Subsequently, the market might initiate a new growth wave aiming for $89.00, with potential to extend up to $94.00. This bullish outlook is supported by the MACD indicator, whose signal line is above zero and climbing steeply.

On the H1 chart, Brent found support at $84.00 and is now progressing through the latter stages of the current growth wave. The market has already achieved the $85.24 mark. We anticipate the formation of a narrow consolidation range around this level, with a breakout above potentially leading to further growth towards $86.50. This scenario is technically reinforced by the Stochastic oscillator, with its signal line poised above 20 and gearing up for an ascent to 80.

Market outlook

Investors should closely monitor developments in geopolitical hotspots and economic indicators from major economies like China and the US, as these could significantly sway oil prices. The current trajectory suggests bullish momentum for Brent crude, but the volatile nature of geopolitical events and economic data releases warrants cautious optimism.

USD/JPY: Bulls Gesitate on Approach to 160.00 Barrier, Potential Intervention Trigger

Windsor Brokers Ltd

Jun 25 24, 11:21 GMT

USDJPY edges lower after hitting levels just ticks away from 160 barrier, which many see as a trigger for intervention, as Japan’s authorities intervened at the end of April when the pair cracked 160 barrier.

Monday’s trading was closed in red for the first time in eight days, although long tail of daily candle suggests that bids are still very strong and markets may attack 160 level again, despite intervention threats.

Dips were so far shallow and contained by rising 5 DMA, keeping lower triggers at 158.25/157.87 (rising 10DMA / Fibo 38.2% of 154.54/159.93 upleg) out of reach for now.

Fading bullish momentum and overbought conditions on daily chart add to correction signals.

Any pullback above these supports should be considered as a healthy correction and keep larger bulls intact.

On the other hand, firm break here would point to deeper correction.

Res: 159.70; 160.00; 160.19; 160.87.
Sup: 158.66; 158.25; 157.87; 157.38.

Bitcoin’s Attractive Drop

FxPro

Jun 25 24, 11:19 GMT

Market Picture

The cryptocurrency market was falling to a total capitalisation of $2.2 trillion at the end of the day on Monday but managed to add over 2% to the lows, recovering to $2.25 trillion, down 0.5% from the day before.

The technical picture in Bitcoin is almost perfect. The low price of $58.2K coincided with the lower boundary of the descending range, was as close to the 200-day moving average as possible, and almost duplicated the impulsive lows of early May. On the daily charts on Monday, BTC closed in the oversold RSI area, and today, it is already trying to get out of it. All this looks like a tempting signal to buy this dip. However, it may well turn out to be a bull trap, although we give less priority to such a scenario.

Bitcoin’s share of the total crypto market capitalisation is near 54%. Since March, there has been an acceleration in the decline of the share of “other” coins, as buyers’ interest has focused on the leading coins. Such dynamics are typical signs of the first half of the 4-year cycle in Bitcoin, and sustained interest in altcoins may not come until next year.

News background

Bitcoin fell below $60,000 amid news of the Mt.Gox payout. The trustee of the bankrupt 2014 exchange, Mt.Gox, announced plans to begin paying out compensation in Bitcoin, Bitcoin Cash and cash in early July. Mt.Gox is expected to distribute more than $9 billion in assets by 31 October 2024.

According to CoinShares, investments in crypto funds fell by $584 million last week after an outflow of $600 million a week earlier; the two-week decline came after five weeks of inflows. Bitcoin investments were down $630 million; Ethereum was down $58 million.

According to Deribit, the options market has been betting on Ethereum, which will rise to $4,000 by September.

Block CEO Jack Dorsey said he sees Bitcoin not just as a currency but as the dominant global reserve asset that could topple the U.S. dollar.

Cryptocurrency and NFT holders in The Open Network (TON) ecosystem have faced massive phishing attacks to steal assets. Malicious links and malicious bots are being spread in Telegram groups, particularly under the guise of airdrop announcements.

CADJPY Aims for April’s Multi-Year High

XM.com

Jun 25 24, 09:07 GMT

CADJPY surpasses key resistance levels, but enters overbought zone
Next resistance at 117.93; support at 115.80-116.00
Canadian CPI inflation due for release at 12:30 GMT

CADJPY is in the third consecutive week of gains, having experienced an impressive rally to almost reach the 117.00 round level following the rebound near the 50-day simple moving average (SMA) at 113.20.

The bulls accelerated successfully above April’s closing price of 115.78 last Friday, surpassing the constraining lines from the summer of 2023. The focus is now on the 117.28 top and the ascending line, which connects the 2022 and 2024 highs at 117.93. A move higher could take a rest near the 119.50 barrier taken from October-November 2007, while a steeper increase could halt near the 121.00 round mark, where the 161.8% Fibonacci extension of May’s sharp downfall is located.

Based on the RSI and stochastic oscillator, the market is in an overbought state. Hence, the bulls might have limited room for improvement, though only a step below the 115.80-116.00 region could give the lead to the bears.

If the price tumbles below 115.80, the decline could stretch into the 114.80-115.00 territory, where the 20-day SMA is located. A step lower could then re-challenge the key 50-day SMA and the long-term support trendline at 114.00, a break of which could cause an aggressive downfall towards the 112.93 base.

Despite trading within bullish territory, CADJPY’s recent price surge might encourage some investors to take profits. A break below 115.80 could neutralize the short-term outlook again.

Gold Reverses Back Below 50-day SMA

XM.com

Jun 25 24, 08:16 GMT

Gold retreats after unsuccessful break above 50-day SMA
The price extends its structure of lower highs
Momentum indicators turn bearish

Gold had been in a steady recovery from its recent one-month low, which led to the price closing above its 50-day simple moving average (SMA) last Thursday. Despite the violation of that crucial hurdle, bullion reversed back lower after failing to jump above the upper end of the Ichimoku cloud.

Should the latest weakness persist, initial support could be found at the 2,286-2,777 range, defined by the May and June lows. Sliding beneath that zone, the price could challenge the March resistance of 2,223, which could serve as support in the future. Further declines could then stall at 2,145, a region that has acted both as support and resistance in recent months.

On the flipside, if the price rotates back above the 50-day SMA, the latest rejection region of 2,368 could prove to be the first barricade for the bulls to overcome. Higher, the June peak of 2,388 may prevent further upside attempts ahead of the April high of 2,430. Failing to halt there, the price might revisit its record high of 2,450.

In brief, gold dipped below its 50-day SMA, extending its structure of lower highs. Therefore, a solid move above the restrictive trendline drawn by connecting these lower highs is needed for the price to escape its short-term bearish pattern.

Japanese Yen Technical Outlook: USD/JPY, EUR/JPY & GBP/JPY

MarketPulse

Jun 25 24, 07:50 GMT

FX intervention chatter returns, but is it enough for the ailing JPY?
USD/JPY at psychological 160.00 handle.
EUR/JPY prints morningstar candlestick pattern, hinting at the potential for further upside.

Fundamental Overview

The Japanese Yen continues to tread water against its G 7 peers as its monetary policy stance continues to be scrutinized. Many analysts, myself included, had hoped for a bold approach from Bank of Japan (BoJ) Governor Ueda at the June meeting of the BoJ.

The Governor however opted to remain cautious given the existential risks which have become a hot topic for central banks globally. Following a swathe of Central Bank meetings in June, the one commonality seems to be the uncertainty from the global geopolitical sphere, which many central banks see as the main risk for the second half of 2024.

Since the BoJ meeting in June, the Japanese Yen has come under renewed selling pressure. FX intervention has been used in the past by the central bank, but this doesn’t seem to have a lasting impact anymore.

Comments from policymakers and Japanese officials have had a similarly lackluster impact of late. Thus the comments this morning from top FX diplomat Masato Kanda is unlikely to rescue the ailing JPY. Mr Kanda stated authorities are prepared to step in to support the Japanese yen 24 hours a day, if necessary, the Yen was trading below 160 per US dollar and remains there for now. This was followed by comments this morning from Moody’s Analyst Christian De Guzman, who stated that the BoJ is likely to take time raising interest rates. Another hint that market participants may be in for a bumpy ride when it comes to the Japanese Yen in the coming months.

The Week Ahead: Japanese and US Inflation Data

Looking ahead to the rest of the week, there is a fair bit of data which could have an impact on Japanese Yen pairs. Most notably the US PCE data (Federal Reserve’s preferred inflation gauge) and of course the Japanese unemployment rate and Tokyo inflation numbers. ANy increase in the PCE number or a print above estimates could lead to US dollar strength as market participants may view it as a sign that rates may remain higher for longer.

The Japanese unemployment data may prove key as one of the sticking points for BoJ Governor Ueda has been improving wage growth. A rise in unemployment may signal that wage growth may remain stagnant while a drop in unemployment could be seen as signs of a tight labor market which usually results in upward pressure on wage growth.

Finally, geopolitics remains a significant focus, and this week could be pivotal for developments in the Middle East. Any increase in tensions between Israel and Hezbollah might drive investors toward safe-haven assets. Additionally, the week concludes with the first round of the French Parliamentary elections which could have a lasting impact on the Euro and by extension EUR/JPY moving forward.

Japanese Yen Technical Outlook

USD/JPY

Looking at USDJPY from a technical perspective, the weekly chart below shows a very bullish close last week with no wick to the upside. This is usually a sign of the momentum in play and this is also the first time the weekly candle has closed above 158.300 (the previous weekly candle high close).

USD/JPY Weekly Chart – June 24, 2024