Articles

Japanese Yen sees SuzukiÂ’s gamble play out wrong way

399053   June 28, 2024 19:06   FXStreet   Market News  

• The Japanese Yen starts Friday with a fresh multi-decade low print.
• Japanese Finance Minister ShunÂ’ichi Suzuki “sense of urgency” comments failed to revert price action. 
• The US Dollar Index hovers around 106.00 again ahead of PCE inflation release. 

The Japanese Yen (JPY) sees traders taunting the Japanese government yet again, with another new historic low printed in the Yen’s performance. This Friday 161.27 was briefly hit before falling back to below 161.00. The move comes with Japanese Finance Minister Shun’ichi Suzuki repeated the same message  from Thursday that the Japanese cabinet is “watching the FX moves with a high sense of urgency”, which now has lost its impact and sees markets defying the Ministry in order to take action. 

Meanwhile, the US Dollar Index (DXY) – which gauges the value of the US Dollar against a basket of six foreign currencies – is of course in positive territory on the back of this action. Even if US data on Thursday did not allow the US Dollar to outperform, with Durable Goods flatlining and Pending Home Sales shrinking again for a second month in a row. All eyes this Friday on the US Federal Reserve’s preferred inflation gauge: the Personal Consumption Expenditures numbers. 

Daily digest market movers: Suzuki lost it already

• At 02:30 GMT, Japanese Finance Minister ShunÂ’ichi Suzuki commented he is watching FX moves with a high sense of urgency. Though this time the impact resulted in a pickup in devaluation for the Japanese Yen. Markets expected to see action this Friday, not more words and same messages. 
• At 12:30 GMT, the Personal Consumption Expenditures (PCE) for May will be released. Most important will be the monthly figures:
  • Headline PCE expected to head from 0.3% to 0.0%.
  • Core PCE should have a soft landing from 0.2% to 0.1%.
• At 13:45 GMT, Chicago Purchase Managers Index will be released. The number is expected to remain in contraction from 35.4 to 40.
• At 14:00 GMT the University of Michigan will release JuneÂ’s final reading:
  • Sentiment Index expected to head from 65.6 to 65.8.
  • Inflation expectations should remain stable at 3.1%.
• Equities have chosen to go out with a bang, and are printing green numbers across the globe. 
• 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 Overnight indexed Swap curve for Japan shows a 57.9% chance of a rate hike on July 31, and a smaller 19.8% chance for a hike on September 20. 
• The US 10-year benchmark rate trades around the middle of this weekÂ’s range near 4.30%.
• The benchmark 10-year Japan Treasury Note (JGB) trades around 1.05%, and is easing a touch for this week.

USD/JPY Technical Analysis: If tomorrow never comes

The USD/JPY has just printed a fresh multi-decade high this Friday. The catalyst for the move was the same as the one that triggered a bit of a recovery on Thursday: the words from Japanese Finance Minister Shun’ichi Suzuki. It becomes clear that markets have bought one time into these comments, and now want to see action, which is pushing the Japanese government into a corner and interventions are really looking inevitable. 

Although the Relative Strength Index (RSI) is overbought in the daily chart, a correction could still take a few more days. Should PCE data come out further disinflationary, that would not be enough to drive USD/JPY down to 151.91. Instead, look at the 55-day Simple Moving Average (SMA) at 156.53 and the 100-day SMA at 153.81 for traders to quickly build a pivot on and try to test highs again, testing the Japanese deep pockets again. 

USD/JPY Daily Chart

Pound Sterling rises ahead of US core PCE Inflation in focus

399051   June 28, 2024 18:56   FXStreet   Market News  

• The Pound Sterling moves higher against the US Dollar ahead of the US core PCE Inflation for May.
• Revised UK Q1 GDP estimates show that the economy grew at a higher pace of 0.7%.
• Fed policymakers expect rate cuts at this time are inappropriate.

The Pound Sterling (GBP) gains against the US Dollar (USD) in Friday’s London session. The GBP/USD pair rises slightly ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday. 

The core PCE inflation data, the Federal ReserveÂ’s (Fed) preferred inflation measure, is estimated to have decelerated to 2.6% year-over-year (YoY) from AprilÂ’s reading of 2.8%. On a monthly basis, the underlying inflation is expected to have grown modestly by 0.1% against the prior increase of 0.2%.

Soft inflation figures would boost expectations of early rate cuts by the Fed, while hot numbers will diminish Fed rate-cut prospects and strengthen the US DollarÂ’s appeal. At the time of writing, the US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, trades close to the crucial resistance of 106.00.

According to the CME FedWatch tool, 30-day fed funds futures pricing data suggest that traders have priced in two rate cuts this year, and the policy-easing cycle will begin at the September meeting. On the contrary, Fed officials advocate for keeping interest rates at their current levels until they are convinced that inflation will decline to the desired rate of 2%.

On Thursday, Fed Governor Michelle Bowman reiterated that the central bank is not yet at a point where it is appropriate to reduce interest rates. She warned of more rate hikes if progress in disinflation appears to stall or reverse.

Daily digest market movers: Pound Sterling performs strongly after upbeat UK Q1 GDP revised estimates

• The Pound Sterling strengthens against its entire peers after the United Kingdom (UK) Office for National Statistics (ONS) reported in its revised Q1 Gross Domestic Product (GDP) report that the economy expanded at a higher rate of 0.7% quarter on quarter (QoQ) than estimates and the preliminary release of 0.6%. On an annualized basis, the economy grew by 0.3%, upwardly revised from 0.2%. 
• Meanwhile, uncertainty ahead of UK elections and the timing of the Bank of England (BoE) rate cut will keep the Pound Sterling on its toes. According to the latest exit polls, the Opposition Labor Party is expected to win from the UK Prime Minister Rishi Sunak-led Conservative Party.
• For the BoE rate-cut timeframe, investors expect that the majority of officials will vote for reducing interest rates in the next monetary policy meeting, which will be held on August 1. Policymaker Swati Dhingra and Deputy Governor Dave Ramsden have been supporting rate cuts, and it will be crucial to see which members join them.
• The reason for the high probability of the BoE lowering borrowing rates in August is the return of annual headline inflation to the bankÂ’s target of 2%. However, price pressures in the service sector are still higher than what is required to make rate cuts appropriate.

Pound Sterling Price Today:

Technical Analysis: Pound Sterling remains below 61.8% Fibo retracement support

The Pound Sterling holds key support near 1.2600 against the US Dollar. The GBP/USD pair trades inside Thursday’s trading range as investors prefer to remain sideways ahead of the release of the US inflation data. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590. 

The pair has dropped below the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a consolidation ahead.

Mexican Peso looking for direction after BanxicoÂ’s dovish hints

399049   June 28, 2024 18:51   FXStreet   Market News  

• The Mexican Peso recovers the losses made following the Banxico meeting on Thursday. 
• A change in the distribution of voting and language of the statement suggests a higher change of interest-rate cuts in the future. 
• USD/MXN trades in volatile ups and downs with no clear trend in the short-term.

The Mexican Peso (MXN) recovers most of the losses it endured after the Bank of Mexico (Banxico) meeting on Thursday. Banxico decided to leave interest rates unchanged at 11.00% and although the decision was widely expected, the change in the language of the statement and the division of voting were not. 

These changes suggest Banxico is more likely to cut interest rates in the future than was previously supposed (dovishness). This, in turn, had a moderately weakening effect on the Mexican Peso, since lower interest rates are generally bearish for currencies because they attract lower foreign capital inflows. 

At the time of writing, one US Dollar (USD) buys 18.36 Mexican Pesos, EUR/MXN is trading at 19.64, and GBP/MXN at 23.21.

Mexican Peso weakens after changes to voting and Banxico language

The Mexican Peso recovers the losses incurred following the Banxico policy meeting. Several changes to the language of the accompanying statement and the inclusion of a single vote to cut interest rates – by Omar Mejia – were new developments that gave the meeting a dovish slant. 

The key changes to the statement were as follows: 

• At the previous meeting one member had voted to raise interest rates by 0.25%, in contrast at the June meeting a member voted to cut interest rates by 0.25%. 
   
• Overall it gave little weight to the PesoÂ’s devaluation, according to analysts at Rabobank.
   
• “Of note was the seemingly little weight the Bank placed on recent MXN depreciation filtering through to higher inflation. Overall, we would argue there is a dovish tilt that leaves the door wide open to further rate cuts this year,” Rabobank said in its note.
   
• Nevertheless, near-term inflation forecasts were revised up due to pass-through from the weaker Mexican Peso, however, longer-term forecasts were left unchanged.
   
• New language was added about economic activity slowing down, including “the balance of risks to growth of economic activity is biased to the downside”.
   
• The same mention of slowing activity preceded the interest-rate cut in March, according to economists at advisory service Capital Economics.
   
• Further, Banxico added that it saw scope for, “discussing reference rate adjustments”.
   
• “Our sense is that policymakers have opened the door to a 25bp cut at the August meeting,” said Capital Economics, adding “Even so, once the easing cycle is resumed, we expect that rates will be lowered more gradually than most anticipate.”
   
• Rabobank expects two 0.25% rate cuts from Banxico in 2024, with a policy rate of 10.50% to end the year.
   
• Capital Economics are more dovish, expecting four rate cuts and an end-of-year policy rate of 10.00%. 

Technical Analysis: USD/MXN displays volatility 

USD/MXN rose after the Banxico meeting to touch a weekly high of 18.60, however, it has since fallen back down to the 18.30s. 

The pair moved up after the formation of a three-wave ABC correction. This suggests the possibility the pair might not be correcting the short-term downtrend but instead has entered a short-term uptrend. 

USD/MXN 4-hour Chart 

However, the evidence is not strong either way and ultimately the direction of the short-term trend is unclear at the moment.  

A move below 18.06 (June 26 low) would suggest the downtrend was resuming and probably see a continuation down to 17.87 (June 24 low).

Alternatively, if USD/MXN rallies and breaks above 18.60 (June 28 high), it is likely to continue up to 18.68 (June 14 high), followed by 19.00 (June 12 high). A break above 19.00 would provide strong confirmation of a resumption of the short-and-intermediate term uptrend.

The direction of the long-term trend remains in doubt. 

GBP: Modest upward revisions to first quarter GDP – ING

399048   June 28, 2024 18:50   FXStreet   Market News  

GBP/USD is edging higher today – helped in part by an upward revision to the first quarter GDP data, Global Head of Markets at ING Chris Turner notes.

Positive quarter GDP pushed Sterling upwards

“Encouragingly, consumption seemed to be the biggest driver here. However, we still forecast the Bank of England (BoE) will begin cutting rates in August and will start to signal that in speeches once the 4 July general election has passed.”

“Somewhat amazingly, UK rates are still priced very similarly to the US. We have a much greater conviction that UK rates will come lower and that Pound Sterling (GBP) will be dragged lower too. GBP/CHF has had a decent bounce off of 1.1200, but we look for the move to stall ahead of 1.1400 and a return to 1.12 this summer.”

Bitcoin Weekly Forecast: BTC price correction could end in July, according to seasonal data

399043   June 28, 2024 18:49   FXStreet   Market News  

• US spot Bitcoin ETFs registered slight outflows this week.
• On-chain data shows that minersÂ’ selling activity is increasing, signaling bearish momentum.
• US and German governments collectively transferred to exchanges 4,690.28 BTC, valued at $287.57 million.
• Seasonal  data shows that BTC could see gains in July.

Bitcoin (BTC) price appears poised for a decline this week, influenced by slight outflows in US spot ETFs, selling activity among BTC miners, and a combined transfer of 4,690.28 BTC to centralized exchanges by the US and German governments. Technical indicators hint that BTC may undergo a further 5% correction in the near term before potentially continuing its upward trajectory.

Bitcoin miners selling pressure increases

Bitcoin miners have sent their BTC to the exchanges at an average daily rate of 8,592.14 BTC during this week, 29% more than last week, according to the Bitcoin Miner to Exchange Flow data reported by CryptoQuant. 

This transfer of funds to exchanges could respond to the immediate need to cover the cost or to gain excess gains by selling at the price BTC miners consider to be overvalued. Both cases are correlated to sell action, which naturally leads to interpreting this reason as a price drop, which indicates a bearish sign for Bitcoin.

Bitcoin Miner to Exchange Flow (Total) chart

Major government BTC transfers spark FUD

Data from Arkham Intelligence shows that the US Government transferred 3,940.28 BTC, valued at $241.22 million, to Coinbase Prime Deposit on Wednesday. This Bitcoin was initially seized from narcotics trafficker Banmeet Singh and forfeited during a trial in January 2024. 

Additionally, this week,  data from Lookonchain shows that the German government executed a transfer of 750 BTC, valued at $46.35 million. In a separate transaction, a smaller transfer of 0.001 BTC to Flow Traders indicates a potential test transaction or a preliminary step toward BTC sale through that entity. 

Over the past week, German authorities have transferred 2,100 BTC, equivalent to $135.22 million, to platforms such as Coinbase, Bitstamp, and Kraken. Currently, the German government holds 45,609 BTC, valued at $2.81 billion.

This sudden movement of funds by the US and German authorities could have sparked FUD (Fear, Uncertainty, Doubt) among traders, potentially influencing BitcoinÂ’s 2.5% price decline this week.

 

Bitcoin spot ETFs display weakness

US spot Bitcoin ETFs have seen outflows persist for three consecutive weeks, according to Coinglass data, starting with a $174.5 million outflow on Monday. This was followed by a modest inflow totaling $63.8 million over the next three days. Despite this inflow, the overall net outflow by Thursday amounted to $110.7 million. This reduction hints at a minor waning of investor confidence, potentially foreshadowing a temporary dip in BitcoinÂ’s price, as ETF Net Inflow data is essential for gauging investor sentiment and market dynamics in Bitcoin ETFs.

Total Bitcoin Spot ETF Net Inflow (USD) chart

Bitcoin could have double-digit gains in July

Bitcoin Monthly returns (%) data, reported by Coinglass, shows historical bounce backs for BTC price in July. Historically, following negative Junes, BTC has rebounded with double-digit gains in July. Over the past five years, periods of post-June drawdowns have often led to BTC rallies of over 9.6%, occasionally reaching as high as 24%.

Tracking monthly returns helps market participants assess trends, evaluate investment strategies, and anticipate potential market movements based on historical performance.

Bitcoin Monthly returns (%) chart

Bitcoin faces resistance at the lower band of the descending wedge

Bitcoin price broke below the descending wedge on Monday, declining approximately 7.5% to retest its crucial weekly support near $58,375 and rebounded by 5.8% on Tuesday.

Since Tuesday, BTC has faced resistance at the lower boundary of the broken descending wedge. At the time of writing, Bitcoin trades around $61,347.

If the lower boundary of the descending wedge around $62,000 holds as resistance, BTC could decline roughly 5% to reach its weekly support near $58,375.

On the daily chart, the Relative Strength Index (RSI) and the Awesome Oscillator (AO) are below their respective neutral levels of 50 and zero. This indicates that, according to these momentum indicators, the bearish sentiment prevails, suggesting the potential for further decline in BTCÂ’s price.

BTC/USDT daily chart

However, if BTC closes above the $63,956 level and forms a higher high in the daily time frame, it could indicate that bullish sentiment persists. Such a development may trigger a 5% rise in BitcoinÂ’s price, revisiting its next weekly resistance at $67,147.

Gold could witness volatility after PCE inflation data

399041   June 28, 2024 18:46   FXStreet   Market News  

• Gold is likely to witness increased volatility after the US PCE inflation data release on Friday. 
• A lower PCE reading would support the yellow metal as it would, in turn, result in lower interest rates – a benefit to non-yielding Gold. 
• XAU/USD has broken above a key trendline, further invalidating the bearish H&S topping pattern that had been forming.  

Gold (XAU/USD) edges marginally lower, trading in the $2,320s on Friday, ahead of the main economic data event for the week, the US Personal Consumption Expenditures (PCE) – Price Index for May. 

The PCE is the US Federal Reserve’s (Fed) preferred inflation gauge, and since the Fed is in charge of setting interest rates, the result could influence their trajectory. 

Gold is a non-interest-bearing asset so the level of interest rates impacts its value. Higher interest rates make Gold less attractive to investors whilst the opposite is true of lower rates. 

Gold could see volatility from PCE data

Gold will probably experience volatility after US PCE data is released at 12:30 GMT. The consensus estimate is for PCE inflation to fall to 2.6% year-over-year (YoY) in May from 2.7% in April, and to stay unchanged at 0.0% month-over-month (MoM) after rising 0.3% in April.

Core PCE is expected to cool to 2.6% from 2.8% previously on a YoY basis and  0.1% from 0.2% on a MoM basis. 

“Our US economists think that core PCE should increase by +0.17% (MoM), based on the CPI and PPI data that we’ve already got. In turn, that would cut the year-on-year rate to 2.63% (YoY), the lowest in over three years,” says Jim Reid, Global Head of Macro at Deutsche Bank. 

Fed speakers sounding more optimistic

Commentary from Fed speakers regarding the outlook for interest rates also influences Gold prices, and these were mixed on Thursday.

Atlanta Fed President Raphael Bostic said the Fed had started penciling in future rate cuts, which suggests more concrete plans rather than the vague data dependency of previous Fed-speaker comments. 

Bostic expected an interest-rate cut in the fourth quarter as likely followed by four quarter-point cuts in 2025, adding that when the Fed starts cutting rates, it will be the “first in a series; that is a reason for the patience.” 

Bostic also dismissed concerns flagged regarding the weakening labor market, saying, “businesses say they see no cliff ahead for the job market.”

Another bugbear for the Fed has been high services-sector inflation. However, there are signs this is also cooling, according to the Atlanta Fed President. 

His colleague, Fed Board of Governors member Michelle Bowman, however, was more cautious on Thursday, saying, “The Fed is not at a point yet where it can consider making a rate cut.”

Market-based gauges of what the Fed will do next are a bit more optimistic, seeing a relatively high circa 64% probability of the Fed cutting interest rates at (or before) the Fed’s September meeting. The estimate is from the CME FedWatch tool, which calculates chances using 30-day Fed Funds futures prices. 

GoldÂ’s longer-term prospects look bright

Gold’s long-term prospects remain positive according to most analysts. Geopolitical uncertainty in the Middle East, Ukraine, from climate change and tech-driven economic challenges, are all risk factors that feed the demand for Gold as a safe haven.    

Gold also has a complex relationship with the US Dollar (USD). Whilst a strong US Dollar is negative for Gold because it is priced in USD, it has also lifted demand from mainly Asian central banks as a hedge against their own currencies’ devaluation against the US Dollar. 

The BRICS trade confederation is also using Gold as a replacement for the US Dollar as the primary medium for global trade. Given its position as a stable, safe store of value, Gold is the most reliable alternative as a means of exchange between nations with different, often volatile domestic currencies. 

“The rest of the world is trying to make sure they’re not as dependent on the US Dollar. For them, gold offers another opportunity to hold an asset that is still a pretty significant store of value,” said Joy Yang, Head of Index Product Management & Marketing at MarketVector Indexes, in a recent interview with Kitco News. 

Yang thinks these “global trends” will push Gold higher in the future – back up to  $2,400, although the kicker will be the Fed’s decision to finally begin cutting interest rates. 

Technical Analysis: Gold breaks above trendline, further invalidating H&S

Gold makes another breach of the downsloping trendline that connects the “Head” and “Right Shoulder” of the now invalidated bearish Head and Shoulders (H&S) pattern that formed on the precious metal during April, May and June.

XAU/USD Daily Chart

 

Although the breaches have invalidated the case for an orthodox H&S reversal pattern forming, it is still possible a more complex “multi-shouldered” topping pattern may have formed that might still prove bearish. Overall, the probabilities are lower, however. 

If the upside trendline break holds, Gold will likely rise to the $2,369 level (high of June 21). A break above that would be an even more bullish sign, with the next target at $2,388, the June 7 high. 

Alternatively, assuming the compromised topping pattern’s neckline at $2,279 is broken, a reversal lower may still follow, with a conservative target at $2,171 and a second target at $2,105 – the 0.618 ratio of the high of the pattern and the full ratio of the high of the pattern extrapolated lower. 

There is a risk that the trend is now sideways in both the short and medium term. In the long term, Gold remains in an uptrend. 

WTI sets to close positively for third straight week on firm Fed rate-cut prospects

399040   June 28, 2024 18:45   FXStreet   Market News  

• WTI looks all set to close on a bullish note for a straight third week.
• Firm Fed rate-cut prospects have improved Oil price appeal.
• Upside risks to the widening Middle East crisis have stemmed supply concerns.

West Texas Intermediate (WTI), futures on NYMEX, post a fresh eight-week high near $82.00 in FridayÂ’s European session. The Oil price is set to close on a positive note for the straight third week amid firm speculation that the Federal Reserve (Fed) will start reducing interest rates from the September meeting.

According to the CME FedWatch tool, traders see a 64% chance of the central bank reducing interest rates from their current levels in the September meeting. The tool also shows that there will be two rate cuts this year instead of one, as projected by Fed officials in their latest dot plot.

For fresh cues on the interest rate outlook, investors will pay attention to the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published at 12:30 GMT. Annually, price pressures are estimated to have decelerated to 2.6% from the prior release of 2.8%. On month-on-month, the underlying inflation data is expected to have grown at a slower pace of 0.1% from the prior release of 0.2%.

Soft inflation figures would boost expectations of early rate cuts by the Fed. The scenario will improve the overall demand outlook, which will be favorable for the Oil price.

On the geopolitical front, deepening risks of widening Middle East tensions have also prompted the Oil priceÂ’s appeal. Israeli Defense Minister Yoav Gallant warned a massacre in Lebanon if Hezbollah launches a war. The spread of war from Gaza to Lebanon would result in supply chain disruptions.

EUR: Bracing for the French first round – ING

399039   June 28, 2024 18:40   FXStreet   Market News  

It looks like investors are already bracing for the outcome of Sunday’s first round of French parliamentary elections. The 10-year OAT-Bund sovereign yield spread is trading at a wide 82bp and EUR/USD is trading around 1.07, Global Head of Markets at ING Chris Turner notes.

Euro to go back under 1.07 ahead of the French elections

“The question for the market is whether a Le Pen government looks at the French bond market and starts dropping some of its plans for seemingly unfunded tax cuts. Our eurozone team suspects it will be too early for a new government to substantially water down its pre-election pledges and that it may well be tough road into September.”

“Ahead of the weekend election, today sees the European Central Bank (ECB) release its consumer inflation expectations for May. Three-year expectations currently sit at 2.4% and a drop under there would add to expectations that the ECB could cut again in September.

Today’s EUR/USD game plan could see a brief spike to 1.0745/60 on the lunchtime US inflation data, but we would not be surprised to see it end the day back under 1.07.

Fed’s Barkin: Will proceed deliberately on policy

399038   June 28, 2024 18:35   FXStreet   Market News  

Richmond Federal Reserve President Thomas Barkin said on Friday that he will proceed deliberately on monetary policy while delivering prepared remarks at the Global Interdependence Center in Paris, per Reuters.

Key takeaways

“Lags are still are playing out, policy tightening will eventually slow the economy further.”

“Agility is key, must adjust according to new information.”

“Services and shelter price-setters still have room to push prices higher.”

“Open to the idea that rate hikes are not constraining economy as much as we think, given remarkable strength we are seeing.”

Market reaction

These comments don’t seem to be impacting the US Dollar’s valuation in a meaningful way. At the time of press, the US Dollar Index was virtually unchanged on the day at 105.90.

USD: Everyone expects a soft inflation number today – ING

399037   June 28, 2024 18:17   FXStreet   Market News  

There is a very strong consensus around a 0.1% month-on-month core PCE deflator for May today. Remember this is the Federal Reserve’s (Fed) preferred measure of inflation and following a 0.2% MoM prior reading should give the Fed confidence to start cutting rates later this year, Global Head of Markets at ING Chris Turner notes.

US PCE poses downside risks for the US Dollar

“The market does not fully price in the first Fed rate cut until November and thus there should be room for US short-dated rates to drop as focus shifts more squarely to a September rate cut. US two-year Treasury yields have been consolidating just above 4.70% for the last couple of weeks and a 0.1% MoM core PCE on Friday should make them break lower and drag the dollar with it.”

“The challenge, however, is politics. Last night’s presidential debate on CNN saw 67% polling awarding the victory to Donald Trump. We see a potential Trump administration as more positive for the dollar both via looser fiscal policy and also via a more aggressive trade/tariff environment.”

“The Dollar Index (DXY) is now hovering around 106 helped in part by the unchecked rise in USD/JPY. Here, the market seems reasonably calm. This makes it more difficult for Japanese authorities to intervene. DXY will face downside risks from the US inflation data, but we suspect it will find buyers in the 105.50/60 region as investors will prefer to hold dollars over the weekend.”

 

EUR/USD remains subdued ahead of US core PCE Inflation reading

399035   June 28, 2024 18:09   FXStreet   Market News  

• EUR/USD drops to near 1.0700 amid uncertainty ahead of US core PCE Inflation data for May.
• The US Dollar exhibits strength on the FedÂ’s hawkish remarks.
• The near-term outlook of the Euro is uncertain ahead of French elections and the Eurozone preliminary HICP.

EUR/USD edges down to near the crucial support of 1.0700 in FridayÂ’s European session. The major currency pair corrects modestly as the market sentiment is slightly cautious 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 remains on toes ahead of key Eurozone events

• EUR/USD falls to near 1.0700 as the EuroÂ’s outlook appears to be uncertain ahead of 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 inside Symmetrical Triangle formation

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.

Ireland Retail Sales (MoM) climbed from previous -1.2% to -0.6% in May

399034   June 28, 2024 18:05   FXStreet   Market News