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• RBA minutes state that the rate hike decision was close
• China’s central bank trims key lending rates

The Australian dollar has hit a bump in the road and is down 1% this week. In the European session, AUD/USD is trading at 0.6795, down 0.80% on the day.

RBA minutes – rate decision was close

The Reserve Bank of Australia has a habit of surprising the markets. The RBA’s rate hike earlier this month was a shocker, as the markets had expected rates to remain unchanged. The minutes of the meeting, released today, indicated that the decision was “finely balanced” between a pause and a hike. In support of a pause, members noted that the sharp increases in rates raised the possibility of the economy stalling. In the end, however, concerns over persistent inflation won the day as the Bank voted to hike rates by 0.25%.

The takeaway from the dovish minutes is that the RBA was very close to taking a pause and will be open to holding rates at the July meeting, depending on the data, especially inflation. The Australian dollar has fallen sharply today as investors have lowered their expectations over future rate hikes.

The RBA has backed up hawkish words with action, raising rates to 4.1%, the highest level since 2011. Still, inflation has been stickier than expected, and headline inflation jumped in April from 6.3% to 6.8%. The core rate fell from 6.9% to 6.5%, but that is incompatible with the target of 2%. The RBA has projected that inflation will not fall to 2% until mid-2025, which means more hikes are likely, barring a sharp drop in inflation.

China’s central bank announced on Tuesday that it was cutting key lending rates, in a move to boost investment and consumption. The post-pandemic recovery has been slow, and soft demand for exports has been bad news for Australia, as China is a key trading partner. China posted 4.5% growth in the first quarter, which was better than expected, but key indicators such as retail spending and industrial output missed expectations in May.

AUD/USD Technical

• 0.6772 is under pressure in support. Below, there is support at 0.6668
• 0.6836 and 0.6940 are the next resistance lines

Daily Pivots: (S1) 181.20; (P) 181.68; (R1) 182.13; More...

GBP/JPY continues to lose upside momentum as seen in 4H MACD, but there is no clear sign of topping yet. Further rally is expected to 138.2% projection of 148.93 to 172.11 from 155.33 at 187.36. On the downside, below 178.80 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

In the bigger picture, up trend from 123.94 (2020 low) is extending. Next target is 195.86 (2015 high). For now, medium term outlook will remain bullish as long as 172.11 resistance turned support holds, even in case of deep pull back.

Daily Pivots: (S1) 154.68; (P) 155.05; (R1) 155.44; More....

EUR/JPY continues to lose upside momentum as seen in 4H MACD. But there is not clear sign of topping yet. Further rise is expected to 100% projection of 139.05 to 151.60 from 146.12 at 158.67. On the downside, though, below 153.67 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise rally.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 100% projection of 124.37 to 148.38 from 138.81 at 162.82. For now, medium term outlook will remain bullish as long as 148.38 resistance turned support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.8520; (P) 0.8534; (R1) 0.8550; More...

While EUR/GBP is losing downside momentum as seen in 4H MACD, there is no clear sign of bottoming yet. Further decline is expected as long as 0.8611 resistance holds. Fall from 0.8977 should target 161.8% projection of 0.8977 to 0.8717 from 0.8874 at 0.8453. However, break of 0.8611 resistance will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, the down trend from 0.9267 (2022 high) is still in progress. It's seen as part of the long term range pattern from 0.9499 (2020 high). Deeper fall would be seen towards 0.8201 (2022 low). But strong support should be seen from there to bring reversal. This will now remain the favored case as long as 0.8717 support turned resistance holds.

Daily Pivots: (S1) 1.5883; (P) 1.5943; (R1) 1.6004; More...

Intraday bias in EUR/AUD remains neutral first, and focus in on 1.6101 support with today's rebound. Decisive break there will confirm short bottoming at 1.5846. Correction from 1.6785 could also have completed with three waves down, after hitting 100% projection of 1.6785 to 1.6134 from 1.6513 at 1.5862. Intraday bias will be turned back to the upside for 1.6513 resistance next.

In the bigger picture, price actions from 1.6785 are seen as a correction to up trend from 1.4281 (2022 low) only. Strong support should be seen around 38.2% retracement of 1.4281 to 1.6785 at 1.5828 to complete the first leg and bring rebound. However, sustained trading below 1.5828 will raise the chance of trend reversal and target 61.8% retracement at 1.5238.

Daily Pivots: (S1) 0.9765; (P) 0.9783; (R1) 0.9800; More...

EUIR/CHF's rebound from 0.9670 resumed by breaking through 0.9793 and intraday bias is back on the upside. Sustained trading above 55 D EMA (now at 0.9777) will add to case that whole correction from 1.0095 has completed. Further rise should then be seen to 0.9878 resistance next. On the downside, below 0.9744 minor support will turn intraday bias neutral first.

In the bigger picture, prior rejection by 38.2% retracement of 1.1149 to 0.9407 at 1.0072 suggests that medium term outlook is staying bearish. The pair is also capped below 55 W EMA (now at 0.9924). Down trend from 1.2004 (2018 high) is not complete yet and is in favor to resume through 0.9407 at a later stage. However, decisive break of 1.0095 resistance will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484).

The price of Brent crude oil commenced the new week in June with a marginal decline, reaching $75.70 per barrel.

Investor uncertainty regarding the expansion of energy demand remains a significant factor restricting the potential for price increases in the "black gold" market. There are currently no clear indications from global economies, particularly the United States and China, suggesting a rapid acceleration in GDP growth. Moreover, various pressures on economies, such as disruptions in the supply chain and subdued consumer demand, further contribute to this situation.

It is worth highlighting the weakened position of the US dollar, which provides some local support for oil prices. During periods of US currency depreciation, commodities tend to become more appealing for investment.

Technical Analysis:

On the H4 timeframe, Brent crude oil appears to be forming the structure of a third upward wave. Currently, it has risen to 76.06, and the market continues to consolidate around this level. There is a possibility of a breakout above this range, leading to the continuation of the third wave towards 79.19. Following the attainment of this level, a corrective pullback to 76.66 cannot be ruled out. Subsequently, there is a potential for further growth towards 80.60. The technical analysis supports this scenario, as the MACD indicator's signal line has recently broken above the zero level, displaying confident growth towards new highs.

On the H1 timeframe, Brent has already formed an upward wave structure, reaching 76.06. The market is presently consolidating around this level, indicating a pattern of a continued upward trend. The projected target for this wave of growth is 79.30. Technical confirmation is provided by the Stochastic oscillator, with its signal line surpassing the level of 50 and exhibiting steady growth towards 80.

GBPUSD has been in a prolonged uptrend since October 2022 supported by its long-term ascending trendline. Even though the pair stormed to a fresh 14-month high of 1.2847 on Friday, it quickly pared some gains due to reaching overbought conditions.

The momentum indicators currently suggest that bullish forces are holding the upper hand. Specifically, the RSI is hovering slightly below its 70-overbought mark, while the MACD is strengthening above its red signal line in the positive zone.

Should buying pressures intensify and the price jump to fresh multi month highs, immediate resistance could be found at the 1.3000 psychological mark. Surpassing that zone, the pair might ascend towards the March 2022 low of 1.3160, which could serve as resistance in the future. A violation of that territory may set the stage for the March 2022 high of 1.3295.

Alternatively, if the pair reverses lower, the previous high of 1.2678 could act as the first line of defense. Should that floor collapse, the spotlight may turn to 1.2445 before the May low of 1.2307 comes under examination. Further retreats could then cease at 1.2195, which served both as resistance and support in the past months.

Overall, GBPUSD seems to have the necessary momentum to edge higher and extend its structure of higher highs. However, a downside correction should not be ruled out as the pair has approached overbought conditions. 

EURJPY experienced a huge week after a bullish triangle breakout, appreciating by more than 3.0% to an almost 15-year high of 155.37 in what was the fastest rally in more than a decade.

The bulls are trying to revive their positive momentum near their recent highs as the RSI and the stochastic oscillator are flagging overbought conditions. Note that the MACD is currently testing a former peak area, raising some caution too.

The nearest obstacle could be around 156.00, where the resistance trendline which connects all the highs from January 18 is positioned. A significant extension higher could lift the price up to the 2007-2008 constraining zone of 159.40-160.00, unless the 157.55 barrier cools upside pressures beforehand.

In the case the price stalls around the 161.8% Fibonacci extension of the 151.60-146.12 downfall at 155.00, the focus will turn to the broken long-term ascending line from August 2020 at 153.75. Failure to pivot there might provoke a quick downfall into the 152.30-151.60 area, where April's ascent topped. The 20-day simple moving average (SMA) is converging to the same region, while slightly lower, the pair may look for support within the 150.50- 150.00 territory before the 50-day SMA comes under examination.

All in all, the latest spike in EURJPY could motivate some profit-taking, especially if the pair proves unable to claim the 155.00-156.00 zone. 

Asian markets flashed red on Tuesday, following the disappointing stimulus from Chinese banks.

A sense of discontent lingered across Asia this morning amid the lack of fresh stimulus from Beijing and smaller than expected cut in China’s key lending benchmarks. European futures are pointing to a negative open with investors adopting a guarded approach ahead of key risk events. In the currency space, the dollar is creeping higher amid the risk-off sentiment while gold remains trapped within a range.

US markets were closed on Monday for the Juneteenth holiday so volumes were lacklustre, but this could be another volatile week for global financial markets. All eyes will be on Fed Chair Jerome Powell’s semi-annual report to Congress, Fed speeches, and the Bank of England meeting among other key events.

Focus on Jerome Powell testimony

Fed Chair Jerome Powell will be under the spotlight this week as he provides his semi-annual monetary policy report to Congress on Wednesday and Thursday.

Powell is widely expected to repeat comments from his post-Fed meeting press conference, which had a hint of caution but still opened the door to higher rates down the road. As things stand, the latest dot plot indicates two more 25-basis point rate hikes in the coming months. Investors will be closely watching the testimony for any fresh clues on the timing of the rate increases. Should Powell strike a hawkish note, this could boost the dollar. Alternatively, if he is more downbeat and fails to provide fresh clues, this may weaken the dollar. It may also be worth keeping a close eye on speeches from Federal Reserve Bank of St. Louis President James Bullard and New York President John Williams on Tuesday which could offer additional insight ahead of Powell’s testimony.

Commodity spotlight – Gold

Gold remains trapped within a range on the daily charts with support at $1932 and resistance at $1985. The precious metal needs a fresh fundamental spark to breakout of its current range, and this could come in the form of Powell’s testimony, Fed official’s speeches, or US economic data. Gold bulls could push prices beyond the $1985 resistance on growing expectations around the Fed’s hiking campaign coming to an end. This may be fuelled by cautious remarks from Powell or Fed officials. Alternatively, prices may sink below $1932 if a hawkish Powell boosts the dollar and fuels expectations around US rates remaining higher for longer.