Sample Category Title
Technical Outlook and Review
DXY:
The DXY (US Dollar Index) chart currently shows a bearish momentum, indicating a downward trend in price.
Several factors contribute to this momentum. Firstly, the price is below a major descending trend line, suggesting that bearish momentum is likely to continue. Additionally, the price is below the bearish Ichimoku cloud, further reinforcing the bearish sentiment.
There is a potential for a bearish reaction off the first resistance level at 103.32, which is an area of overlap resistance. This level may act as a point of resistance where sellers could potentially enter the market.
On the downside, the first support level at 103.02 can be considered as a level of support. It is a pullback support level, indicating a potential area where buyers could step in.
The second support level at 102.71 is an additional area of support, representing an overlap support level.
EUR/USD:
The EUR/USD chart currently shows a bullish momentum, indicating an upward trend in price.
Several factors contribute to this momentum. Firstly, the price is above a major ascending trend line, suggesting the potential for further bullish momentum. Additionally, the price is above the bullish Ichimoku cloud, further reinforcing the bullish sentiment.
In the short term, there is a possibility for the price to drop further towards the first support level at 1.0783 before potentially bouncing back and rising towards the first resistance at 1.0829.
The first support level at 1.0783 is significant as it represents an area of overlap support. It is a level where buyers may step in to support the price.
The second support level at 1.0734 is another area of support, representing an overlap support level.
On the upside, the first resistance level at 1.0829 acts as a pullback resistance, potentially causing the price to face selling pressure.
Similarly, the second resistance level at 1.0861 is a swing high resistance, which further reinforces the potential for price reversal or a stall in upward movement.
GBP/USD:
The GBP/USD chart currently exhibits a bullish momentum, indicating an upward trend in price.
One of the contributing factors to this momentum is that the price is above the bullish Ichimoku cloud. This suggests a positive sentiment and potential for further upward movement.
In the short term, there is a possibility for the price to drop further towards the first support level at 1.2588 before potentially bouncing back and rising towards the first resistance at 1.2676.
The first support level at 1.2588 is significant as it represents an area of overlap support and coincides with the 50% Fibonacci retracement level. Traders may consider this level as a potential area of support where buyers may step in.
The second support level at 1.2543 is a pullback support level, providing additional support to the price.
On the upside, the first resistance level at 1.2676 acts as a pullback resistance, potentially causing the price to face selling pressure.
The second resistance level at 1.2738 represents the 100% Fibonacci projection, further reinforcing its significance as a potential level where the price might encounter resistance.
USD/CHF:
The USD/CHF chart currently shows a bullish momentum, indicating an upward bias in price movement.
There is a potential for a bullish continuation towards the first resistance level at 0.9117. This resistance level is significant as it represents an area of overlap resistance where the price has previously encountered selling pressure.
The second resistance level at 0.9150 is a swing high resistance, further reinforcing its significance as a potential barrier to upward movement.
On the downside, the first support level at 0.8966 acts as a swing low support. Traders may consider this level as a potential area of support where buyers may enter the market.
Additionally, there is an intermediate resistance level at 0.9028, which represents a Fibonacci confluence of the 50% Fibonacci retracement and the 61.80% Fibonacci projection. This level may act as a temporary barrier to further upward movement.
USD/JPY:
The USD/JPY chart currently shows a bullish momentum, indicating an upward bias in price movement.
There is a potential for a bullish break through the first resistance level at 140.23. This resistance level is significant as it represents a multi-swing high resistance, suggesting that a break above this level could lead to further upward movement.
The second resistance level at 142.11 is a swing high resistance, further reinforcing its significance as a potential barrier to upward movement.
On the downside, the first support level at 140.23 acts as a pullback support. Traders may consider this level as a potential area of support where buyers may enter the market.
Additionally, there is a second support level at 138.79, which represents an overlap support level. This level may provide additional support if the price experiences a retracement.
USD/CAD:
The USD/CAD chart currently exhibits a bullish momentum, indicating an upward trend in price movement.
There is a potential for a bullish continuation towards the first resistance level at 1.3411. This resistance level is significant as it coincides with an overlap resistance and the 38.20% Fibonacci retracement, suggesting that it could act as a barrier to further upward movement.
The second resistance level at 1.3448 represents the 50% Fibonacci retracement. This level may also provide resistance to the bullish momentum.
On the downside, the first support level at 1.3323 acts as a pullback support, indicating a potential area where buyers may step in to support the price.
Additionally, there is a second support level at 1.3275, which represents an overlap support level. This level may provide additional support if the price experiences a retracement.
AUD/USD:
The AUD/USD chart currently shows a bearish momentum, indicating a downward trend in price movement.
There is a potential for a bearish continuation towards the first support level at 0.6721. This support level is significant as it acts as a pullback support, suggesting that buyers may step in to provide some temporary support to the price.
The second support level at 0.6692 represents an overlap support level. It adds further significance to the potential support zone and may attract buying interest.
On the upside, the first resistance level at 0.6811 is an overlap resistance level. It may act as a barrier to any upward movement and provide selling pressure.
Additionally, the second resistance level at 0.6873 represents a pullback resistance and coincides with the 38.20% Fibonacci retracement. This level may reinforce the bearish momentum and could attract sellers into the market.
NZD/USD
The NZD/USD chart currently shows a bearish momentum, indicating a downward trend in price movement.
There is a potential for a bearish continuation towards the first support level at 0.6108. This support level is significant as it represents a pullback support and coincides with the 61.80% Fibonacci retracement level. It suggests that buyers may step in and provide temporary support at this level.
The second support level at 0.6307 represents a swing low support, further reinforcing its importance as a potential level for price to find support.
On the upside, the first resistance level at 0.6232 is an overlap resistance level. It may act as a barrier to any upward movement and provide selling pressure.
Additionally, the second resistance level at 0.6266 represents a pullback resistance. It suggests that sellers may become more active at this level, potentially limiting the bullish momentum.
DJ30:
The DJ30 (Dow Jones Industrial Average) chart currently exhibits a bearish momentum, indicating a downward trend in price movement.
There is a potential for a bearish continuation towards the first support level at 33880.40. This support level is significant as it represents an overlap support and coincides with the 50% Fibonacci retracement level. It suggests that buyers may step in and provide temporary support at this level.
The second support level at 33733.84 is also an overlap support and represents a confluence of the 61.80% and 38.20% Fibonacci retracement levels. This further reinforces its importance as a potential level for price to find support.
On the upside, the first resistance level at 34166.57 is a pullback resistance. It may act as a barrier to any upward movement and provide selling pressure.
Additionally, the second resistance level at 34352.44 represents a swing high resistance. It suggests that sellers may become more active at this level, potentially limiting the bullish momentum.
GER30:
The GER30 chart currently exhibits a bullish momentum, indicating an upward trend in price movement.
There is a potential for a bullish continuation towards the first resistance level at 16388.79. This resistance level is significant as it represents a swing high and is further reinforced by the presence of Fibonacci expansions at -61.8% and 100%.
In case of a pullback, the first support level at 16072.72 can provide an area of support. This support level is considered an overlap support, adding to its significance.
Additionally, there is an intermediate resistance level at 34352.44, which acts as a swing high resistance.
Similarly, an intermediate support level at 16208.55 is identified as an overlap support, potentially providing temporary support during minor price retracements.
US500
The US500 (S&P 500) chart currently exhibits a bullish momentum, indicating an overall positive bias in price movement. This is supported by the fact that the price is above a major ascending trend line, suggesting the potential for further bullish momentum.
In the short term, there is a possibility of a further drop towards the first support level at 4326.9. This support level is significant as it coincides with a 23.60% Fibonacci retracement, making it a strong area of support to watch. From there, a potential bounce may occur, leading to a rise towards the first resistance level at 4386.6. This resistance level is an overlap resistance, indicating a potential area where selling pressure could be encountered.
If the bullish momentum continues, the price may encounter the second support level at 4298.6, which aligns with a 38.20% Fibonacci retracement. Conversely, if bearish pressure intensifies, the price may struggle to break above the first resistance level and experience a deeper pullback.
BTC/USD:
The BTC/USD chart currently exhibits a bearish momentum, as the price is below a major descending trend line, suggesting a potential continuation of the bearish trend.
There is a possibility for the price to make a bearish break off the first support level at 25,252 and drop towards the second support level at 24,451.
The first support level at 25,252 is considered a pullback support, indicating a potential area where buyers might step in. If the price breaks below this level, it could indicate further downward movement towards the second support level at 24,451.
On the upside, the first resistance level at 25,607 acts as a pullback resistance, potentially causing selling pressure and hindering upward movement. The second resistance level at 26,105 is an overlap resistance, adding to its significance as a potential barrier for price advancement.
ETH/USD:
The ETH/USD chart currently shows a bearish momentum, with the price below a major descending trend line, indicating a potential continuation of the bearish trend.
There is a possibility for the price to make a bearish break off the first support level at 1,683.88 and drop towards the second support level at 1,605.41.
The first support level at 1,683.88 is considered a pullback support, suggesting a potential area where buyers might enter the market. However, if the price breaks below this level, it could indicate further downward movement towards the second support level at 1,605.41.
On the upside, the first resistance level at 1,722.00 acts as a pullback resistance, potentially causing selling pressure and impeding upward movement. The second resistance level at 1,760.95 is an overlap resistance, adding to its significance as a potential barrier for price advancement.
WTI/USD:
The WTI (West Texas Intermediate) chart currently exhibits a bearish momentum, indicating a downward trend in price.
There is a potential for a bearish continuation towards the first support level at 67.51, which is a multi-swing low support level. This level has previously acted as a support level where price found temporary stability. In case of a further decline, the second support level at 64.78, also a multi-swing low support, may come into play.
On the upside, the first resistance level at 70.66 acts as an overlap resistance, potentially causing selling pressure and hindering upward movement. Additionally, the second resistance level at 74.24 is also an overlap resistance level, reinforcing its significance as a potential barrier for price advancement.
XAU/USD (GOLD):
The XAU/USD (Gold/USD) chart currently shows a bearish momentum, indicating a downward trend in price. This is supported by the fact that the price is below a major descending trend line, suggesting the presence of bearish momentum.
There is a potential for a short-term rise towards the first resistance level at 1966.26. This resistance level is significant as it has previously acted as a swing high resistance, where price faced selling pressure.
If the bullish momentum persists, the second resistance level at 1980.08, an overlap resistance, may come into play. This level could potentially provide a stronger barrier for further upward movement.
On the downside, the first support level at 1933.95 is an overlap support, indicating a potential area where buyers could provide support and prevent further decline. If the bearish momentum continues, the second support level at 1914.16, also an overlap support, may be tested.
Crude Oil Price Faces Uphill Task Near $72
Key Highlights
- Crude oil price recovered losses and climbed above $68.
- A major bearish trend line is forming with resistance near $70.80 on the 4-hour chart.
- EUR/USD climbed higher above the 1.0820 resistance.
- The Fed kept interest rates at 5.25%.
Crude Oil Price Technical Analysis
Crude oil price found support near the $66.80 zone against the US Dollar. The price started a fresh increase above the $68.00 resistance zone.
Looking at the 4-hour chart of XTI/USD, the price even cleared the $68.80 resistance but stayed below the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).
It faced sellers near the 50% Fib retracement level of the recent decline from the $73.26 swing high to the $66.79 low. There is also a major bearish trend line forming with resistance near $70.80 on the same chart.
On the upside, the first major resistance is near the $70.80 level. The next key resistance is near $71.50 and the 100 simple moving average (red, 4-hour), above which the price may perhaps accelerate higher.
On the downside, initial support is near the $68.20 level. The next major support sits near the $67.00 level. Any more losses might call for a test of the $65.00 support zone in the coming days.
Looking at EUR/USD, the pair gained bullish momentum and was able to climb further higher toward the 1.0850 resistance zone.
Economic Releases to Watch Today
- US Initial Jobless Claims - Forecast 249K, versus 261K previous.
- US Retail Sales for May 2023 (MoM) – Forecast -0.1%, versus +0.4% previous.
DAX Incomplete Elliott Wave Bullish Sequence Favors Higher
Short Term Elliott Wave View in DAX suggests the rally from 3.20.2023 low is in progress as a 5 waves impulse. Up from 3.20.2023 low, wave 1 ended at 15298.49 and pullback in wave 2 ended at 14809.82. Index then extends higher in wave 3 towards 16331.94. Pullback in wave 4 is unfolding as a zigzag Elliott Wave structure. Down from wave 3, wave ((a)) ended at 15726.5 and wave ((b)) ended at 16079.73. Wave ((c)) lower ended at 15629.12 which completed wave 4. Index has resumed higher in wave 5.
Internal subdivision of wave 5 is unfolding as a 5 waves impulse Elliott Wave structure. Up from wave 4, wave ((i)) ended at 16114.84 and pullback in wave ((ii)) ended at 15909.85. Index then resumes higher again in wave ((iii)). Up from wave ((ii)), wave (i) ended at 16020.28 and wave (ii) ended at 15913.95. Expect the Index to extend higher 1 more leg to complete wave (iii), then it should pullback in wave (iv) before it resumes higher again. Near term, as far as pivot at 15629.38 low stays intact, expect dips to find support in 3, 7, or 11 swing for further upside.
DAX 1 Hour Elliott Wave Chart
DAX Elliott Wave Video
https://www.youtube.com/watch?v=gmoTr7pV9qg
Fed Review: Powell’s Hawkish Bluff
- The Fed held rates unchanged at 5.00-5.25% as widely anticipated. However, the updated 'dots' surprised hawkishly, signalling two more 25bp rate hikes.
- Between the lines, Powell did hint that the Fed is seeing underlying inflation cooling. While the strong macro data calls for hawkish communication, we doubt the rate hikes will end up materializing, and make no changes to our Fed call.
While the decision to pause rate hikes was widely anticipated, all eyes were on the communication regarding possibility of future rate hikes. The FOMC participants surprised hawkishly, as the median end-2023 Fed Funds forecast rose by 50bp to 5.50-5.75%.
However, between the lines of Powell's communication, one could still hear that the Fed is now seeing underlying inflation moderating. As we wrote in Global Inflation Watch, 14 June, wage-sensitive components of inflation especially in the broader services sector, have recorded a clear slowdown over the past months. Some slack is slowly building into the labour markets, evident in household employment declining by 310k in May. In Powell's words, 'the things we need for disinflation are coming into play'.
But the disinflationary process will be gradual, and as long as realized inflation stays high, the Fed needs to sound hawkish. Powell emphasized the Fed's commitment to bringing inflation down, while firmly signalling the possibility of further hikes. But it will be up to the markets to call the Powell's bluff, and as only 19bp is currently priced in by September, it does not seem like the message was all that convincing after all.
While financial conditions were not discussed in detail, we know from past minutes that FOMC participants are well aware of the inflation-prolonging risk of allowing financial conditions to ease prematurely, as was the case in early 2023.
The forecast for two more rate hikes relies on an optimistic growth outlook. The Fed sees 2023 GDP growth at 1.0% in Q4/Q4 basis (up from 0.4% in March), which is far from recessionary even after accounting for the strong start of the year. We do not consider such soft landing as impossible, but see risks tilted towards weaker, or modestly contractionary GDP development during H2. Furthermore, hiking rates further from here increases the risk of a hard landing down the line, which seems to be at odds with 2024 growth forecast being little changed (at +1.1%). As we wrote back in our May Fed Preview, 24 April, holding rates steady at the current restrictive level strikes the best balance between bringing inflation down, and avoiding a hard landing. We still think this holds today.
As such, we stick to our forecast, and expect no further rate changes this year. The risks are inarguably skewed towards at least one more hike, and the June Jobs Report and CPI will be the key to watch ahead of the July meeting, which will be 'live' according to Powell.
Initially, the hawkish pause weighed on the EUR/USD, but the knee-jerk reaction towards 1.0800 somewhat retraced during Powell's speech. We stick to our strategic case for a lower EUR/USD in H2, as we expect relative growth differentials to favour the USD despite lower carry. We see the cross at 1.06/1.03 on 6M/12M. Tomorrow, potentially hawkish ECB could drive the cross higher, which could give rise to selling opportunities.
FOMC Skips June, But Signals Hikes Not Done Yet
Summary
- As widely expected, the FOMC decided unanimously to refrain from raising rates at today's meeting.
- However, the Committee continued to say that "additional policy firming" may be appropriate. Furthermore, the median dot for 2023 shifted up by 50 bps. That is, most FOMC members believe that another 50 bps of tightening may be appropriate by the end of 2023. Prior to the meeting, the bond market was priced for only 25 bps of additional tightening.
- The Committee lowered its forecast of the unemployment rate at year-end 2023 and lifted its outlook for core PCE inflation at the end of the year.
- None of the 18 FOMC members at present think that a rate cut by the end of 2023 would be appropriate.
- In our view, the year-over-year rate of core PCE inflation does not need to be precisely at 2% to lead the Committee to ease policy. But, the FOMC does need to see evidence that it is heading back toward 2% on a sustained basis. We do not think that evidence will be forthcoming this year.
- We look for the FOMC to raise rates by another 25 bps at its next meeting on July 26 before calling it quits. But, we readily acknowledge that the risks to our fed funds rate forecast are skewed to the upside.
FOMC on Hold, But Leaning Toward More Tightening
As widely expected, the Federal Open Market Committee (FOMC) refrained from hiking rates at its policy meeting today, which is the first time in 11 meetings that the Committee left the fed funds rate unchanged (Figure 1). The decision to keep the target range at 5.00%-5.25% was supported by all 11 members who were eligible to vote at this meeting. The FOMC also decided to keep its pace of quantitative tightening unchanged. That is, the Federal Reserve will allow up to $60 billion of Treasury securities and up to $35 billion of mortgage-backed securities to roll off its balance sheet every month.
Today's post-meeting statement was little changed from the last statement on May 3. The Committee continued to note that economic activity is expanding at a "modest pace" and that unemployment remains low and inflation "remains elevated." The FOMC said that its decision to keep rates on hold would give it the ability "to assess additional information and its implications for monetary policy." The Committee re-iterated the phrase that it first used in the May 3 statement. That is, it will consider a number of factors to determine the extent that "additional policy firming may be appropriate to return inflation to 2 percent over time." These factors include "the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
Dot Plot Shifts Up
According to the Summary of Economic Projections (SEP), which the FOMC releases four times per year and outlines its macroeconomic forecasts, most members of the Committee believe that additional policy firming may be appropriate this year. That is, the so-called "dot plot" that was released following the March 22 meeting showed that the median FOMC member thought that a fed funds target range of 5.00%-5.25% would be appropriate at the end of 2023. The dot plot that was released today showed the median dot shifting up to a range of 5.50%-5.75% at the end of this year (Figure 2). In other words, the median FOMC member believes that another 50 bps of tightening will be needed by the end of the year "to return inflation to 2 percent over time." As we go to print, the bond market remains priced for only one more 25 bps rate hike by the end of 2023, most likely at the July meeting.
Why the change in the dots? The answer: the FOMC changed its forecasts of unemployment and inflation. As shown in Figure 3, the unemployment rate remains exceptionally low at present, and the Committee nows sees it rising to only 4.1% by the end of 2023 (the median participant in March forecasted it rising to 4.5% at the end of the year.) Additionally, the median forecast for the core rate of PCE inflation at year-end 2023 was lifted from 3.6% in March to 3.9% today. Interestingly, none of the 18 FOMC members at present thinks that a rate cut by the end of the year would be appropriate.
What will the FOMC need to see to start easing policy? Barring some unforeseen negative shock to the economy in the near term, the Committee wants to see evidence that inflation is returning to 2% on a sustained basis. As shown in Figure 4, the rate of inflation has eased marginally in recent months but only an optimist would look at that chart and see evidence that inflation is returning to 2%. In our view, the year-over-year rate of inflation does not need to be precisely at 2% before the Committee begins to ease policy. But, our forecast is that the core PCE deflator will increase at an annualized rate of 2.8% in Q4-2023 relative to Q3-2023, which we think is still too hot to induce the FOMC to cut rates. Consequentially, we do not look for a rate cut this year, which is consistent with the FOMC's thinking at present.
The next FOMC meeting is scheduled for July 26. We expect that the continued resilience of the economy and the elevated rate of inflation will lead the Committee to hike by another 25 bps at that meeting. Indeed, Chair Powell stated in his post-meeting press conference that the July FOMC meeting will be a "live meeting." We then look for the Committee to remain on hold for the remainder of the year. However, given today's dot plot, we readily acknowledge that the risks to our fed funds forecast are skewed to the upside. We think it will take a modest recession early next year, which will help to bring inflation lower, to induce the FOMC to ease policy. See our most recent U.S. Economic Outlook for details of our forecast.
Fed stands pat, but projections two more hikes this year, on stronger growth and core inflation
Fed keeps interest rate unchanged at 5.00-5.25% as widely expected, by unanimous vote. The new economic projections are rather hawkish, with 2023 median rate projections raised to 5.6% (two more 25bps hikes). GDP growth and core PCE inflation were revised higher while unemployment rate was revised lower.
FOMC leaves the door open for more tightening, as "the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.:
Fed added that the assessments will take into account information including "readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.".
In the new economic projections, median federal funds rates for 2023 is raised from 5.1% to 5.6%, indicating two more 25bps hike. Median projections for 2024 was raised from 4.3% to 4.6%, for 2025 raised from 3.1% to 3.4%.
Regarding 2023 median economic projections, real GDP growth was raised sharply higher from 0.4% to 1.0%, unemployment rate sharply lower from 4.5% to 4.1%, core PCE inflation from 3.6% to 3.9%.
In the new dot plot, twelve members penciled in rate hikes to 5.50-5.75% this year, with four expecting rate at 5.25-5.50%, and only two at the current 5.00-5.25%.
(FED) Federal Reserve Issues FOMC Statement
Recent indicators suggest that economic activity has continued to expand at a modest pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5 to 5-1/4 percent. Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.
US PPI Confirm Disinflationary Trends
US producer prices fell stronger than expected, potentially reinforcing the dovish argument at the Fed. For May, PPI declined by 0.3% m/m, more than the expected 0.1%, and the index gained a modest 1.1% y/y after 2.3% a month earlier.
In contrast to the core CPI, the PPI shows a return to desired inflation numbers, with the monthly price growth rate well within the Central Bank target.
The core PPI, which excludes food and energy, added 0.2% m/m and 2.8% y/y. The annual rate was lower than 3.2% a month earlier and the expected 2.9%.
Were it not for a strong labour market and the resulting robust consumer demand, the producer price development should have been regarded as a leading indicator for the CPI. However, in a full employment environment, retailers can use the situation to support their margins by justifying it with increased interest expenses.