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South Africa Trade Balance (in Rands) rose from previous 10.47B to 20.09B in May

399074   June 28, 2024 20:02   FXStreet   Market News  

EUR/USD rises as US Dollar declines ahead of US core PCE Inflation reading

399068   June 28, 2024 19:51   FXStreet   Market News  

• EUR/USD edges higher near 1.0700 ahead of US core PCE Inflation data for May.
• The US Dollar drops on firm Fed rate-cut prospects.
• The near-term outlook of the Euro is uncertain ahead of French elections and the Eurozone preliminary HICP.

EUR/USD recovers to near the crucial support of 1.0700 in Friday’s European session. The major currency pair rises as the market sentiment remains positive ahead of the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday at 12:30 GMT.

The underlying inflation data would influence market speculation on the Federal Reserve (Fed) reducing interest rates from the September meeting, according to the CME FedWatch tool, which also shows that there will be two rate cuts this year. Contrary to market expectations, Fed officials see only one rate cut this year as signaled in the latest dot plot.

On Thursday, Atlanta Fed Bank President Raphael Bostic said rate cuts would become appropriate when they are convinced that inflation is on a clear path towards 2%. When asked about a concrete timeframe for rate cuts, Bostic said “I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year,” Reuters reported.

The US PCE report is expected to show that core price pressures grew at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to have decelerated to 2.6% from 2.8% in April. 

Daily digest market movers: EUR/USD is expected to face volatility ahead of key Eurozone events

• EUR/USD holds ground near 1.0700 as the US Dollar corrects. While the EuroÂ’s outlook appears to be uncertain ahead of the French elections outcome and the Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for June, which will be published on Tuesday.
• Investors worry that new government formation in France could boost spending plans, which could result in a deepening budget crisis. The uncertainty over French elections deepened after French President Emmanuel Macron called for a snap election when his party suffered defeat in the European elections to Marine Le PenÂ’s far-right National Rally (RN). However, the victory of the National Rally is not inevitable due to the formation of the French left, also known as the Popular Front.
• Investors will pay close attention to the Eurozone preliminary HICP data as it will provide clues about European Central BankÂ’s (ECB) subsequent rate cuts. The ECB began its rate-cut cycle from early JuneÂ’s policy meeting in which it reduced its key rates by 25 basis points (bps).
• Meanwhile, the broader decline in price pressures in major nations of the Eurozone has boosted expectations of more rate cuts by the ECB. In France, the preliminary annual Consumer Price Index (CPI) declined expectedly to 2.5% from the prior release of 2.6%. Annual HICP in Spain decelerated to 3.5% from the former reading of 3.8% but remained higher than expectations of 3.4%, while price pressures in Italy were mixed.

Technical Analysis: EUR/USD hovers close to 1.0700

EUR/USD trades inside ThursdayÂ’s trading range as investors await the US core PCE inflation reading to make decisive positions. The downward-sloping border of the Symmetrical Triangle pattern formation on a daily time frame continues to remain a major barrier for the Euro bulls. A fresh downside would appear if the asset delivers a decisive breakdown of the above-mentioned chart pattern.

The shared currency pair establishes below the 200-day Exponential Moving Average (EMA) near 1.0780, suggesting that the overall trend is bearish.

The 14-period Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would trigger if the oscillator slips below the same.

Silver Price Analysis: Silver bounces off support and approaches cluster of MAs

399066   June 28, 2024 19:49   FXStreet   Market News  

• Silver has bounced off key support and risen up towards the cluster of the 50 and 100-period SMA. 
• The overall short-term trend remains bearish, however, with a risk the precious metal could roll over at any time. 
• Silver is in a falling channel, but the upper boundary has been briefly breached increasing the risk it could break again. 

Silver (XAG/USD) has bounced off key support at the June 13 low, and is currently trading up towards the 50 and 100-period Simple Moving Averages (SMA). 

Despite the bounce, the precious metal is in a falling channel formation and the short-term trend is still, on balance, bearish. This suggests the odds favor bearish bets and a continuation lower once the recovery runs out of steam and rolls over. However, there are no signs yet that this is happening.

Silver 4-hour Chart 

If price does fall back down and pierces below $28.57, the June 26 low that would reconfirm the downside bias, with the next target lying at the lower channel line, at around $27.50. 

If Silver continues recovering and breaks on a closing basis above the 50 and 100 SMAs at $29.49 and $29.56 respectively, however, it would probably indicate a continuation higher to the upper channel line at around $29.90. This is also a major resistance level at the top of a four-year consolidation zone. A decisive break above that level would indicate a reversal in the short-term trend. 

A decisive break would be one accompanied by a long green up candle that broke clearly above the level and closed near its high or three green candles in a row that broke above the level. 

It is worth noting that Silver temporarily broke out of the top of the falling channel on June 20, and although it quickly fell back, the fact it breached the integrity of the channel, albeit temporarily, indicates the upper channel line has been weakened and is more likely to be broken again. This adds a slightly bullish tone to the charts. 

USD/CNH: 7-day trend of fixing higher breaks – OCBC

399065   June 28, 2024 19:49   FXStreet   Market News  

USD/CNH slipped after USD/CNY fix came in lower this morning, breaking the past 7-day trend of fixing higher everyday, FX strategist at OCBC Christopher Wong notes.

Third plenum to set long term policy

“Pair was last at 7.2929. Momentum is bullish though RSI shows signs of easing from near overbought conditions. Resistance at 7.30, 7.31 levels. Support at 7.2705 (21 DMA).”

“That said, apart from today, the recent USD/CNY fixings have followed a pattern that continued to reinforce our view that authorities are pursuing a measured pace of RMB depreciation. Change in daily fix on average was about +17.4 pips (19 Jun – 27 Jun) vs. average daily change of about 4.9 pips/day since May 2024.”

“Elsewhere, China announced third plenum will be held on 15 – 18 July to set long term policy on a wide range of economic and political issues.”

USD/JPY: Markets still eyeing intervention – OCBC

399064   June 28, 2024 19:45   FXStreet   Market News  

USD/JPY continued to power through 161 this morning. This is the highest level since 1986, FX strategist at OCBC Christopher Wong notes. 

JPY intervention seems inevitable

“There are expectations that Japanese authorities could soon intervene. While the level of Japanese Yen (JPY) is one factor to consider, officials do focus on the pace of depreciation as the intent of intervention is to curb excessive volatility.”

“As such, the path of least resistance for USD/JPY may still be to the upside, for now. Pair was last at 160.65. Bullish momentum on daily chart intact while RSI in in overbought conditions. Next resistance at 161.20 (138.2% fibo projection of 2023 low to 2023), 164 levels. Support at 157.70 (21 DMA), 156.60 (50 DMA).”

India Bank Loan Growth: 19.2% (June 10) vs previous 19.8%

399063   June 28, 2024 19:35   FXStreet   Market News  

US Dollar sideways as Trump is on track and Yen retreated

399061   June 28, 2024 19:33   FXStreet   Market News  

• The US Dollar has Trump and Suzuki to thank for its early recovery on Friday. 
• All eyes on the Fed’s preferred inflation gauge: PCE
• The US Dollar index hovers around 106.00, back to WednesdayÂ’s levels. 

The US Dollar (USD) is having difficulties in pricing in all events and elements that are moving in the markets. Traders are still digesting the Trump-Biden debate where nearly everyone saw former US President Donald Trump as the victor. Not much time though to fret over the event, with risk increasing that the Japanese Ministry of Finance might intervene later this Friday after the Japanese Yen hit a fresh multi-decade low against the US Dollar and snapped above 161. 

On the US economic calendar front, only one element which counts, and that is the Fed’s preferred core inflation gauge: Personal Consumption Expenditure Index. Disinflation is expected to remain on track. So only a very large disinflationary surprise would be able to weaken the US Dollar, while an in-line or bigger number would mean a stronger Greenback by the end of this week. 

Daily digest market movers: PCE ahead

• At 12:30 GMT, The Personal Consumption Expenditures for May are to be released:
  • Core Monthly PCE expected to head from 0.2% to 0.1%.
  • Headline Monthly PCE is expected to slide from 0.3% to 0.0%.
  • Yearly Headline PCE should abate from 2.7% to 2.6%.
  • Yearly Core PCE seen heading from 2.8% to 2.6%.
• The Chicago Purchase Managers Index (PMI) is to be released at 13:45 GMT. Expectation is for the number to remain in contraction from 35.4 to 40.0.
• At 14:00 GMT, the University of Michigan will release its final reading for June:
  • Consumer Sentiment to remain quite stable at 65.8, coming from 65.6.
  • Inflation expectations locked in at 3.1%.
• Equities are trying to close this week off on a high note, with already several green closures in Asia, while European and US equities are in the green. 
• The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Federal Reserve (Fed) officials. The odds now stand at 57.9% for a 25-basis-point cut. A rate pause stands at a 35.9% chance, while a 50-basis-point rate cut has a slim 6.2% possibility. 
• The US 10-year benchmark rate trades near the weekly high at 4.30%.

US Dollar Index Technical Analysis: Watch out for Japan

The US Dollar Index (DXY) may go where it wants to go in the coming days, though a sword of Damocles is hanging above its performance. The Japanese Ministry of Finance has repeated its state of emergency on the exchange rate and might intervene at any given moment as of now. That means a substantial move could unfold, which would knock out the Greenback for a moment. 

On the upside, the biggest challenge remains 106.52, the year-to-date high from April 16. A rally to 107.35, a level not seen since October 2023, would need to be driven by a surprise uptick in US inflation or a further hawkish shift from the Fed. 

On the downside, 105.53 is the first support ahead of a trifecta of Simple Moving Averages (SMA). First is the 55-day SMA at 105.27, safeguarding the 105.00 round figure. A touch lower, near 104.72 and 104.46, both the 100-day and the 200-day SMA form a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation. 

US Dollar Index: Daily Chart

India FX Reserves, USD rose from previous $652.9B to $653.71B in June 17

399060   June 28, 2024 19:33   FXStreet   Market News  

EUR/USD: French elections still pose a threat – OCBC

399059   June 28, 2024 19:29   FXStreet   Market News  

First round of French legislative election takes place on 30 Jun (Sunday), FX strategist at OCBC Christopher Wong notes.  

Elections in France determine EUR/USD price

“France’s National Assembly has 577 seats. For an absolute majority, a party needs 289. Anyone who scores >50% of the vote with a turnout of at least a quarter of the local electorate automatically wins a seat. Candidates who fail to garner at least 12.5% of the vote will be eliminated. Those who won >12.5% of the votes will go into the second-round face-off on 7 Jul.”

“The Euro (EUR) was last at 1.07 levels. Bearish momentum on daily chart shows signs of fading while RSI was flat. 2-way trades still likely ahead of French election on Sunday. Support at 1.0660/70 levels (recent low) before 1.06 levels. Resistance at 1.0770 (50 DMA), 1.0810 (38.2% fibo retracement of 2024 high to low, 100 DMA).”

US Core PCE inflation Preview: Federal Reserve preferred indicator expected to decline further

399058   June 28, 2024 19:21   FXStreet   Market News  

• The core Personal Consumption Expenditures Price Index is set to rise 0.1% MoM and 2.6% YoY in May.
• Markets see a nearly 40% probability that the Federal Reserve will leave the policy rate unchanged in September.
• A hot PCE inflation report could provide a boost to the US Dollar heading into the weekend.

The core Personal Consumption Expenditures (PCE) Price Index, the US Federal ReserveÂ’s (Fed) preferred inflation measure, will be published on Friday by the US Bureau of Economic Analysis (BEA) at 12:30 GMT.

PCE index: What to expect in the Federal ReserveÂ’s preferred inflation measure

The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.1% on a monthly basis in May, at a softer pace than the 0.2% increase recorded in April. May core PCE is projected to grow at an annual pace of 2.6%, while the headline annual PCE inflation is also forecast to edge lower to 2.6%.

The US Bureau of Labor Statistics (BLS) reported earlier in the month that the Consumer Price Index (CPI) rose 3.3% on a yearly basis in May, while the core CPI increased 3.4% in the same period, down from 3.6% in April.

Previewing the PCE inflation report, “CPI and PPI data suggest core PCE inflation lost further momentum in May, with the series advancing 0.13% m/m — its lowest monthly gain of the year and following a 0.25% April expansion,” TD Securities analysts said. “We also look for the headline PCE and the supercore to print 0.0% each in May. Separately, personal spending likely advanced 0.3% m/m, with income rising 0.4%”, they added.

When will the PCE inflation report be released, and how could it affect EUR/USD?

The PCE inflation data is slated for release at 12:30 GMT. The monthly core PCE Price Index gauge is the most-preferred inflation reading by the Fed, as itÂ’s not distorted by base effects and provides a clear view of underlying inflation by excluding volatile items. Investors, therefore, pay close attention to the monthly core PCE figure.

The CME Group FedWatch Tool shows that markets currently price in a 37.7% probability of the Federal Reserve (Fed) leaving the policy rate unchanged in September. This market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the event.

In case the monthly core PCE rises 0.2%, or more, in May, the immediate market reaction could cause investors to refrain from pricing in a rate reduction in September and help the USD outperform its rivals. On the other hand, a reading of 0.1%, or lower, could trigger a USD selloff ahead of the weekend and open the door for a leg higher in EUR/USD. 

Investors, however, could remain reluctant to bet on a steady recovery in the Euro ahead of the first round of French elections on Sunday, even if the PCE inflation figures make it difficult for the USD to find demand. In addition, the data will be released on the last trading day of the second quarter. Hence, quarter-end flows and position adjustments could ramp up market volatility and cause the USD to move irregularly.

FXStreet Analyst Eren Sengezer offers a brief technical outlook for EUR/USD and explains:

“Despite several recovery attempts seen in the last couple of weeks, the Relative Strength Index (RSI) indicator on the daily chart stays below 50, reflecting buyer’s hesitancy. Furthermore, EUR/USD remains within the descending regression channel coming from early June.”

“1.0740 (upper limit of the descending channel) aligns as first resistance. Once EUR/USD rises above this level and stabilizes there, 1.0790-1.0800 (100-day Simple Moving Average (SMA), 200-day SMA, psychological level) could be seen as the next resistance before 1.0900. On the downside, 1.0660 (mid-point of the descending channel) aligns as first support before 1.0600 (lower limit of the descending channel).”

DXY: All eyes on US Core PCE – OCBC

399057   June 28, 2024 19:17   FXStreet   Market News  

The Dollar Index (DXY) eased off recent highs, alongside the dip in UST yields, FX strategist at OCBC Christopher Wong notes.

US Core PCE has everyoneÂ’s attention

“Third reading of 1Q GDP report reinforced the view of growing strains on US consumer. Personal consumption was revised down to 1.5% (vs. 2% prior). Data focus today on PCE core (8:30pm SGT). Softer core CPI, PPI readings in May should see core PCE print lower.”

“A weaker than expected print should raise hopes for Fed rate cut. This should also tamper US Dollar (USD) gains, but hotter print may continue to fuel USD momentum.”

“DXY was last at 105.83. Bullish momentum on daily chart intact while RSI was flat. Resistance at 106.20. Support at 105.20 (21, 50 DMAs), 104.80 (61.8% fibo retracement of Oct high to 2024 low). Quarter-end and month-end flows may distort price action today.”

USD/CHF Price Analysis: Probably in new short-term uptrend

399055   June 28, 2024 19:09   FXStreet   Market News  

• USD/CHF is now probably in a short-term uptrend, with odds favoring bullish bets. 
• It has broken above the last lower high, a trendline and the 50 Simple Moving Average. 
• The break above the key 0.8989 resistance level provided further confirmation.  

USD/CHF is probably in a short-term uptrend after breaking above the key 0.8989 resistance level (June 11 high). The reversal in trend means the odds now favor more upside going forward. 

USD/CHF 4-hour Chart 

Upside targets for the pair lie at 0.9034 (50-day Simple Moving Average) followed by 0.9084, the 0.618 Fibonacci extension of the height of the bottoming pattern that evolved between June 11-27, and looks similar to a bullish Inverse Head and Shoulders (H&S) pattern. The distinctive square-shaped “head” that formed between June 18-20 is further evidence it might be an Inverse H&S. 

A break on a closing basis clearly above 0.9000, and the green 200-period SMA would provide bullish confirmation of a continuation of the trend.  

There are, however, signs a pullback may be evolving in the very near term. The Relative Strength Index (RSI) is overbought (shaded circle) and threatening to exit the overbought zone which would be a bearish sign. Whether or not it exits the overbought zone depends on how the current 4-hour bar closes. If it ends bullishly then the RSI will remain overbought; if bearishly it will exit overbought and suggest the beginning of a pullback. 

Another sign a pullback may be developing is the Tweezer Top Japanese candlestick bearish reversal pattern (red shaded rectangle) that has formed over the past two candles. Tweezer tops occur at market tops when two bars both rise up to a similar high before closing back down near the middle of the candle. The pattern formed looks much like a “tweezer”. It is a fairly reliable short-term reversal sign especially if followed by a bearish third candle. In this case the third candle is in the middle of completing so its not clear whether it will be red, however, it is at the time of writing. 

A pullback, if it evolves, would be expected to fall to support at around the 0.8950s initially, from where it might turn around and begin rising again, in line with the dominant short-term uptrend.