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Bulls pressure a multi-year peak at 135.57 on Tuesday after shallow pullback last week, as bear-trap under 112.06 Fibo support and Friday’s bullish engulfing signaled that bulls returned to power and accelerated rebound.

Although daily studies are in full bullish setup, overbought stochastic and sideways-moving momentum, suggest bulls may face headwinds and hold in extended consolidation before fresh acceleration.

Clear break of 135.27 pivot would signal continuation of larger uptrend and expose targets at 136.98 (Fibo 138.2%) and 137.99 (Fibo 161.8%), though larger bulls will look for confirmation on a monthly close above 2002 peak at 135.16.

Rising 10DMA offers initial support at 134.42, which should hold to keep bulls intact, however, deeper dips cannot be ruled out if bulls fail to break higher, with daily Tenkan-sen (133.53) expected to contain.

Res: 136.41; 136.98; 137.99; 138.51.
Sup: 134.92; 134.42; 133.53; 133.00.

The AUDUSD remains constructive in early Tuesday, though the downside is still at risk after Monday’s action was strongly rejected at psychological 0.70 barrier, reinforced by falling 10DMA, which marks pivotal point.

Technical studies on daily chart maintain strong negative momentum and moving averages are in bearish setup, while the action is weighed by thick daily cloud, suggesting limited recovery.

Near-term bias is expected to remain negatively aligned while the action stays below 0.70 level and keep in play risk of retesting key supports at 0.6850 (June 14 low) and 0.6828 (2022 low).

Alternatively, break of 0.70 pivot would ease downside pressure, but extension above 0.7069 (June 16 recovery top) would generate stronger bullish signal.

The minutes of the Reserve Bank of Australia’s last policy meeting showed that the central bank is on track for further tightening and discussing the size of next hike, with 0.25% and 0.50% increases being on the table.

The policymakers downplayed the expectations for a super-sized 0.75% hike which many anticipated, softening Aussie’s tone.

However the situation remains quite dramatic, as the central bank expects price pressures to continue and revised their inflation forecast to 7% from previous 6% estimation that signals more rate increases, in attempts to bring rising inflation under control and start to push it towards desired 2% target level.

Res: 0.7000; 0.7051; 0.7066; 0.7091.
Sup: 0.6942; 0.6897; 0.6850; 0.6828.

BoE Chief Economist Huw Pill said today, "we will do what we need to do to get inflation back to target. And at least in my view, that will require further tightening of monetary policy over the coming months."

"When we assess inflation pressure, we need to take into account the exchange rate," he added. "We see ourselves as steering a narrow path between persistent inflation pressure and recession."

"Terms of trade shock means UK will be poorer, UK must decide how that reduction in income will be distributed."

EURJPY is still eagerly pushing for a close above the 142.00 psychological mark, which came to oppose Friday’s quick bounce on the 20-day simple moving average (SMA) and the 139.40 level.

The ascending simple moving averages are endorsing the positive trend in the market, while the rebound in the RSI, which is trying to print a new higher high above its 50 neutral mark, is an encouraging sign that buyers are still in play. The upward trajectory in the Stochastics is backing this narrative as well, though the MACD is signaling some caution as its recent improvement was not enough for the indicator to climb above its red signal line. The momentum indicators on the four-hour chart are rising at a softer pace, mirroring some discomfort among traders too.

If upside pressures persevere above the 142.00 mark, the pair may attempt to breach the 7½-year high of 144.24 with scope to meet the tough resistance line seen within the 144.40 – 145.00 region. Breaking that ceiling, the rally may accelerate up to 148.00, where the 161.8% Fibonacci extension of the latest pullback is placed.

In the event of a downside reversal, the price may immediately seek support near its 20-day SMA at 140.00, where any violation could confirm an extension towards the 50-day SMA and the tentative supportive trendline seen at 137.87. If the latter fails to add footing, the bearish action may fortify towards the 134.11 key barrier. Any step lower from here would neutralize the long-term outlook.

All in all, EURJPY is looking cautiously bullish in the short-term picture. A clear break above the 142.00 may eliminate any skepticism and shift the focus back to June's highs.

A sense of normality seems to be returning to financial markets after the brutal selloff in global shares last week. Asian stocks rebounded on Tuesday following the positive cues from European markets overnight while U.S futures moved higher after their markets were closed for a holiday. While the improving sentiment could support equity bulls in the near term, caution lingers in the air with investors likely to adopt a guarded approach towards risky assets.

In the currency arena, the dollar kicked off the week in a shaky fashion while gold waited for another fresh directional catalyst to break out of its current range. Oil prices rose 1% this morning, clawing back more of last week’s steep losses as market players focused on the tight supply dynamics in the commodity.

The week ahead promises to be eventful and potentially volatile thanks to key economic reports from major economies and Fed Chair Jerome Powell’s semi-annual testimony before Congress. Major themes ranging from inflation fears, rate hike expectations, ongoing geopolitical risks, and recession concerns will influence the market mood.

All eyes on Powell's testimony

Fed Chair Jerome Powell will be under the spotlight this week as he testifies before Congress over two days.

Last week, the Federal Reserve raised interest rates by 75 basis points – its biggest increase since 1994. However, the central bank reassured markets that such jumbo-sized rate hikes would be rare. Powell’s testimony will be closely scrutinised for hints about incoming rate hikes and the outlook for the US economy. Should Powell strike a hawkish note and offer fresh insight into rates, this may boost expectations that the central bank will maintain an aggressive approach towards rates. Traders are pricing in an 89% chance of a 75-basis point rate hike at the next FOMC meeting in July.

Taking a look at the dollar, it has weakened against most G10 currencies this morning. The Dollar Index (DXY) could extend declines if a breakdown below 104.0 is achieved. Alternatively, a move above 104.50 may signal an advance towards 105.00.

Oil prices buoyed by supply worries

Oil prices pushed higher on Tuesday as investors focused on the persistent supply constraints and tightening market conditions. Given how the global commodity remains pulled and tugged by conflicting forces, this could result in more volatility down the road.

On one side of the equation, ongoing geopolitical risks and sanctions on Russian supplies continue to support prices. However, the Fed's aggressive hawkish stance has fanned concerns of an economic slowdown which will hit the demand outlook. Despite the conflicting forces, oil benchmarks are up almost 50% since the start of the year.

In regard to the technical picture, Brent crude prices remain under pressure after the steep selloff last Friday. A breakdown below $112.00 could encourage a decline towards $104 and $100. A move above $116.00 could inspire a move back towards $120.

Commodity spotlight – Gold

After the explosive volatility last week, gold has kicked off the new week on a calmer note. The lack of momentum suggests that a fresh fundamental spark needs to be brought into the picture to trigger the next major move in gold. Such a catalyst could come in the form of Fed Chair Jerome Powell’s testimony before Congress this week.

Looking at the technical picture, gold prices are trading below the 50, 100, and 200 SMA on the daily charts. Strong support can be found at $1800 and strong resistance at $1900. There seems to be minor support around $1830. A solid breakdown below this level could encourage a decline towards $1800 and $1764. A breakout above $1858 could trigger a move higher towards $1870 and $1900, respectively. Beyond $1900, the first checkpoint can be found at $1920.

Daily Pivots: (S1) 164.73; (P) 165.19; (R1) 165.91; More...

No change in GBP/JPY's outlook and intraday bias remains on the upside for retesting 168.67. Decisive break there will resume larger up trend. On the downside, however, break of 159.97 will bring deeper fall back towards 155.57 support instead.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 141.45; (P) 141.91; (R1) 142.45; More....

No change in EUR/JPY's outlook and intraday bias stays on the upside for retesting 144.23 high. Firm break there will resume larger up trend. On the downside, below 137.83 will turn bias back to the downside to extend the correction from 144.23.

In the bigger picture, up trend from 114.42 (2020 low) is in progress. Such rise is seen as the third leg of the pattern from 109.30 (2016 low). Sustained trading above 100% projection of 114.42 to 134.11 from 124.37 at 144.06 will indicate upside acceleration and target 149.76 long term resistance (2014 high). In any case, outlook will now remain bullish as long as 132.63 support holds, in case of deep pull back.

Daily Pivots: (S1) 0.8565; (P) 0.8588; (R1) 0.8607; More...

Range trading continues in EUR/GBP and intraday bias remains neutral. Further rise is expected as long as 0.8484 support holds. Break of 0.8720 and sustained trading above 0.8697 medium term fibonacci level will carry larger bullish implication. Next target is 0.9003 fibonacci level. However, break of 0.8484 will indicate rejection by 0.8697 and turn near term outlook bearish.

In the bigger picture, rise from 0.8201 medium term bottom could could either be a correction to the down trend from 0.9499 (2020 high), or a medium term up trend itself. Sustained break of 38.2% retracement of 0.9499 to 0.8201 at 0.8697 will affirm the latter case, and pave the way to 61.8% retracement at 0.9003. However, rejection by 0.8697 will maintain medium term bearishness.

Daily Pivots: (S1) 1.5062; (P) 1.5107; (R1) 1.5165; More...

Range trading continues in EUR/AUD and intraday bias remains neutral. On the upside, above 1.5187 will target 1.5277 resistance and than 1.5354 support turned resistance next. On the downside, break of 1.4759 support will suggest that rebound from 1.4318 has completed. Intraday bias will be turn back to the downside for retesting 1.4318 low.

In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend from 1.9799 (2020 high) is still expected to continue. On resumption, next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). However, firm break of 1.5354 will indicate medium term bottoming and bring stronger rally back to 1.6434 key resistance.

Daily Pivots: (S1) 1.0140; (P) 1.0167; (R1) 1.0198; More....

Intraday bias in EUR/CHF is turned neutral first with current recovery. But outlook is unchanged that corrective rebound from 0.9970 should have completed after failing 1.0505 long term resistance. Risk stays on the downside as long as 1.0513 resistance holds. On the downside, below 1.0096 will target a retest on 0.9970 low.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.