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USD/INR remains tepid due to expected foreign inflows, awaits US PCE Price Index

399032   June 28, 2024 18:05   FXStreet   Market News  

• The Indian Rupee gains ground due to expected foreign inflows on bonds joining J.P. MorganÂ’s Emerging Market Bond Index.
• Indian equity markets appreciate due to the return of foreign institutional investors and growing purchases in index heavyweights.
• US Core PCE to be released on Friday; expected to decrease YoY to 2.6% from the previous 2.8%.

The Indian Rupee (INR) extends its gains due to expected foreign inflows as Indian bonds join the JP Morgan Emerging Market (EM) Bond Index on Friday. Foreign investors have already invested approximately $10 billion into the securities eligible to join JPMorgan’s index, according to Business Standard. Meanwhile, Goldman Sachs anticipates at least $30 billion more in inflows in the coming months as India’s weighting on the index steadily rises to 10%.

Indian Rupee traders would likely observe key economic data on Friday, including the Federal Fiscal Deficit for May and FX Reserves for the week ending June 17.

On the US DollarÂ’s (USD) front, Core PCE Price Index inflation is projected to decrease YoY to 2.6% from the previous 2.8%. This data is seen as the Federal Reserve’s (Fed) preferred inflation gauge.

Daily Digest Market Movers: Indian Rupee offers gains due to risk aversion

• Indian equity markets extend gains due to the return of foreign institutional investors and growing purchases in index heavyweights. Traders maintain an upside momentum for the Indian equity markets, buoyed by optimism about the upcoming union budget for 2024-2025 and solid domestic economic data. The Reserve Bank of India (RBI) expects the economy to grow by 7.2% in FY 2025, further lifting market sentiment.
• Federal Reserve (Fed) Board of Governors member Michelle Bowman noted on Thursday that she is still not ready to support a central bank rate cut with inflation pressures still elevated. Bowman said, adding “We are still not yet at the point where it is appropriate to lower the policy rate, and I continue to see a number of upside risks to inflation,” per Reuters.
• US Gross Domestic Product Annualized expanded by 1.4% in Q1, slightly higher than the previous reading of 1.3%, but continuing to point to the lowest growth since the contractions in the first half of 2022.
• US Initial Jobless Claims showed on Thursday that the number of people claiming unemployment benefits fell to 233,000 in the week ending June 21, below market expectations of 236,000. The claim count fell for a second consecutive week since hitting the 10-month high of 243,000 earlier in June.
• The first US presidential debate between President Joe Biden and Republican Presidential Nominee Donald Trump began on CNN News. Biden acknowledged that “inflation had driven prices substantially higher than at the start of his term but said he deserves credit for putting ‘things back together again’ following the coronavirus pandemic.” In response, Trump condemned elevated inflation levels. He suggested that tariffs would decrease deficits and urged scrutiny of countries like China, per Reuters.
• The S&P Global Ratings retained its growth forecast for India at 6.8% for FY25, citing high interest rates and government spending boosting demand in the non-agricultural sectors.
• On Tuesday, RBI Governor Shaktikanta Das said that India is on the verge of a major structural shift in its growth trajectory, moving towards sustained 8% GDP growth. Das attributes this growth to several key drivers, including structural reforms such as the Goods and Services Tax (GST), reported by The Economic Times.

Technical analysis: USD/INR falls below 83.50

The USD/INR trades around 83.40 on Friday. The analysis of the daily chart shows a broadening pattern, suggesting a potential correction before a downward movement. The 14-day Relative Strength Index (RSI) is below the 50 level, indicating a bearish bias.

The USD/INR pair tests the immediate support at the 50-day Exponential Moving Average (EMA) of 83.40. A break below this level could potentially strengthen the bearish bias, which could lead the pair toward the lower boundary of the broadening pattern, around the 83.30 level.

Resistance on the upside is anticipated near the upper boundary of the broadening formation, around 83.70, followed by the psychological level of 84.00.

USD/INR: Daily Chart

Italy Trade Balance non-EU climbed from previous €4.907B to €5.771B in May

399031   June 28, 2024 18:02   FXStreet   Market News  

Ireland Retail Sales (YoY) fell from previous -0.9% to -1% in May

399030   June 28, 2024 18:02   FXStreet   Market News  

USD/CNH: A break below 7.2800 might weigh the USD – UOB Group

399029   June 28, 2024 17:52   FXStreet   Market News  

Barring a break below 7.2920, the US Dollar (USD) could rise and test the major resistance level at 7.3100. USD could break above 7.3100, but it is too early to tell if the next significant resistance at 7.3400 will come into view, UOB Group analysts suggest.

USD is unlikely to break above 7.3100

24-HOUR VIEW: “On Wednesday, USD soared to 7.3080 before pulling back. Yesterday (Thursday), we indicated that ‘the pullback from the high in overbought conditions suggests that instead of continuing to rise, USD is more likely to trade in a range, probably between 7.2920 and 7.3060.’ USD subsequently traded in a narrower range than expected (7.2941/7.3040). Despite the quiet price movements, the underlying tone has improved to some extent. Today, barring a break below 7.2920 (minor support is at 7.2970), USD could rise and test the major resistance at 7.3100. From here, there does not appear to be sufficient momentum for USD to break clearly above this level.”

1-3 WEEKS VIEW: “There have been no significant changes since our update yesterday (27 Jun, spot at 7.2990). As indicated, after the strong advance in USD two days earlier, there is there is still room for USD to rise further. However, while USD could break above 7.3100, it is too early to tell if the next significant resistance at 7.3400 will come into view. Overall, only a breach of 7.2800 (no ‘strong support’ level) would mean that the advance in USD from last has ended.”

USD/JPY: The pair to reach 161.00 in short term – UOB Group

399028   June 28, 2024 17:45   FXStreet   Market News  

The US Dollar (USD) is likely to trade in a range between 160.20 and 161.00. Strong momentum suggests further USD strength. Resistance levels are at 161.00 and 161.50, UOB Group analysts note.

USD needs to breach 159.40 to become weaker

24-HOUR VIEW: “After USD surged two days ago, we indicated yesterday that it ‘could test 161.00 first before levelling off.’ However, USD traded in a range between 160.27 and 160.86, closing largely unchanged at 160.74 (-0.03%). The price action appears to be part of range trading phase. Today, USD is likely to trade between 160.20 and 161.00.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (27 Jun, spot at 160.60). As highlighted, ‘while conditions are severely overbought, strong momentum suggests further USD strength.’ Resistance levels are at 161.00 and 161.50. On the downside, should USD breach 159.40 (no change in ‘strong support’ level), it would suggest that the USD strength from early last week has come to an end.”

GBP/USD Forecast: Pound Sterling struggles to clear key technical level

399026   June 28, 2024 17:40   FXStreet   Market News  

• GBP/USD stays below 1.2650 following Thursday’s modest recovery.
• May PCE inflation data from the US could drive the USD’s valuation on Friday.
• Quarter-end flows could trigger irregular movements in markets heading into the weekend.

Following Wednesday’s sharp decline, GBP/USD registered modest gains on Thursday. The pair, however, failed to pull away from the key 1.2640 level, reflecting the buyers’ hesitancy.

Earlier in the day, the UK’s Office for National Statistics reported that the annualized Gross Domestic Product (GDP) growth for the first quarter got revised higher to 0.3% from the 0.2% announced in the flash estimate. This data failed to trigger a noticeable market reaction.

Early Friday, GBP/USD trades in a relatively tight range below 1.2650. In the second half of the day, the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s (Fed) preferred gauge of inflation, for May.

On a monthly basis, the core PCE Price Index, which excludes volatile food and energy prices, is forecast to rise only 0.1% following the 0.2% increase recorded in April. A reading at or below the market expectation could feed into expectations for a Fed rate cut in September and hurt the USD. On the flip side, markets could turn reluctant to bet on a September policy pivot if the monthly core PCE Price Index rises 0.2% or more. In this scenario, GBP/USD could stay on the back foot.

Profit-taking and position adjustments on the last trading day of the second quarter could trigger sharp actions in currency pairs and distort the impact of the PCE inflation data on financial assets.

GBP/USD Technical Analysis

The 100-day and the 50-day Simple Moving Averages (SMA) form a key pivot level at 1.2640. If GBP/USD confirms this level as resistance, technical sellers could take action and open the door for an extended slide toward 1.2600 (psychological level, static level), 1.2580 (Fibonacci 50% retracement) and 1.2550 (200-day SMA).

On the upside, 1.2670 (50-period SMA on the 4-hour chart) aligns as interim resistance before 1.2710-1.2720 (200-period SMA, Fibonacci 23.6% retracement of the latest downtrend) in case GBP/USD starts using 1.2640 as support.

US core PCE inflation set to retreat in May, increasing chances of Federal Reserve rate cut

399025   June 28, 2024 17:35   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).”

Major currencies move back to little changed on the day

399024   June 28, 2024 17:34   Forexlive Latest News   Market News  

Dollar pairs are sitting near flattish levels on the day now, and that includes USD/JPY too. The pair was up earlier at around 161.00 but is now trading back to flat levels around 160.75 on the day. Other dollar pairs are also not doing a whole lot, with EUR/USD and GBP/USD sitting roughly flat as well.

TON and Telegram narrative may be overvalued according to new research

399021   June 28, 2024 17:33   FXStreet   Market News  

• Toncoin, Telegram narrative may be overestimated according to analysts at Blockworks Research. 
• The social media messaging app has a relatively low number of daily active users, and no EVM compatibility. 
• TON investors have consistently taken profits on their holdings, per Santiment data.
• TON trades at $7.605, down nearly 2.5% on Friday. 

The Telegram narrative for Toncoin (TON) has gained relevance among market participants, as TON price rallied nearly 20% in June on the OKX exchange. However, a new analysis from Blockworks Research suggests that TON and the Telegram narrative may be overvalued.

On-chain data shows TON traders have consistently realized gains on their holdings this week. 

TON is trading at $7.605 on OKX, at the time of writing. 

TON and the Telegram narrative, is it overestimated?

Data from Blockworks Research shows that the TON and Telegram narrative has gained popularity among traders. According to the report, market participants are betting on TON to be the next Solana (SOL) or Ethereum (ETH) this cycle. 

Analysts argue that the market has likely overestimated Telegram’s distribution, TON’s non-compatibility with the Ethereum Virtual Machine (EVM), and the underlying programming language. 

While the messaging app has a global reach and significant Monthly Active Users (MAUs), the number of Daily Active Users (DAUs) is relatively low compared to other platforms. This signals low penetration and a less monetizable userbase than the market appreciates.

DAU/MAU ratio for social media applications 

Additionally, the TON ecosystem is not compatible with EVMs and its native programming language does not have as significant a community as others like Solidity and Rust. Analysts at Blockworks Research have cited these reasons to conclude how the demand for the platform, its usage and market share is likely overestimated. 

The Telegram narrative likely catalyzed nearly 20% gains in the TON price in June. Drawing parallels between Telegram and WeChat, analysts explain that WeChat is served only in China and the US market is dominated by tech giants. Therefore, Telegram could face several challenges to grow further in terms of users and market share in the US. 

The report reads:

Despite these realities, TON is priced for tremendous growth, leaving new investors with little margin of safety.

TON traders took profits all week

TON investors have realized gains on their holdings since June 22, nearly all week. The positive spikes in Santiment’s Network Realized Profit/Loss metric show traders’ profit-taking activities. TON has sustained 20% in gains in June despite holders realizing gains on their assets. 

TON Network Realized Profit/Loss vs. price

TON hit its monthly high of $8.288 on June 15, currently trading nearly 9% below that level. 

NZD/USD: The next support level to watch is 0.6040 – UOB Group

399020   June 28, 2024 17:26   FXStreet   Market News  

The New Zealand Dollar (NZD) is likely to trade sideways between 0.6065 and 0.6115. It may continue to weaken, and the next support level to watch is 0.6040, UOB Group analysts say.

A breach above 0.6135 to end the NZD weakness

24-HOUR VIEW: “While we expected further NZD weakness yesterday, we indicated that ‘the major support at 0.6040 is unlikely to come under threat.’ We also indicated that ‘there is another support at 0.6060.’ NZD weakened less than expected to 0.6069 before recovering to end the day unchanged at 0.6083. The price action is likely part of a sideways trading phase. Today, we expect NZD to trade between 0.6065 and 0.6115.”

1-3 WEEKS VIEW: “There is not much to add to our update from yesterday (27 Jun, spot at 0.6080). As highlighted, NZD is likely to continue to weaken. The next support level to watch is 0.6040. Overall, only a breach of 0.6135 (no change in ‘strong resistance’ level) would mean that the NZD weakness from early last week has ended.”

Greece Retail Sales (YoY) declined to -6.3% in April from previous 5.2%

399019   June 28, 2024 17:18   FXStreet   Market News  

Pound Sterling trades in limited range with US core PCE Inflation in focus

399017   June 28, 2024 17:12   FXStreet   Market News  

• The Pound Sterling exhibits a subdued performance 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) trades subdued against the US Dollar (USD) in Friday’s London session. The GBP/USD pair edges down this week as investors remain cautious 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 strengthens against its major peers

• 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 establishes above 1.2600

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.