Articles

Gold dips as Fed rate cut speculation rises post-US PCE data

399244   June 29, 2024 20:35   FXStreet   Market News  

• Gold falls from daily highs, pressured by elevated US Treasury yields.
• May US PCE Index meets forecasts, fuels hope for 2024 Fed rate cuts.
• US 10-year yield hits 4.339%, a high since June 12; DXY at 105.80, down 0.08%.

Gold prices retreated during FridayÂ’s session after an inflation report revealed progress in the disinflationary process and raised hopes that the Federal Reserve (Fed) would cut interest rates in 2024. Even though the golden metal jumped and hit a four-day high of $2,339, it retreated somewhat, with XAU/USD trading at $2,324, down 0.12%.

Bullion prices seesawed after the announcement of the US Personal Consumption Expenditures (PCE) Price Index report for May, which was aligned with estimates and painted an optimistic outlook for American consumers hit by higher prices.

Initially, XAU/USD climbed to a four-day high, but as traders digested the data, US Treasury yields climbed and Gold dropped.

The yield in the US 10-year Treasury note is advancing by five and a half basis points, up to 4.339%, the highest level since June 12. Despite this, the Greenback has failed to follow suit yet recovered from reaching daily lows, with the US Dollar Index (DXY) hovering at around 105.80, down 0.08%.

Other data showed that American consumer sentiment improved slightly compared to JuneÂ’s preliminary reading, which trailed MayÂ’s report.

Some Fed officials crossed the newswires, adopting a cautious approach. Richmond’s Fed President Thomas Barkin didn’t provide any hints regarding cutting interest rates, yet commented that monetary policy shows signs of “lagging,” implying the economy eventually will slow down.

His colleague, San FranciscoÂ’s Mary Daly, stated that inflation is cooling, that monetary policy is working, and that inflation is expected to hit the FedÂ’s target by the end of 2025.

Daily digest market movers: Gold price advances, capitalizing on soft US Dollar

• US PCE for May was lower than AprilÂ’s by 0.3%, coming in at 0% MoM, as expected. Core PCE increased by 0.1% MoM, matching estimates but below the previous reading of 0.3%.
• Fnal reading of US Consumer Sentiment for June was 68.2, down from MayÂ’s 69.1 but an improvement over the preliminary reading of 65.8. Inflation expectations remained steady at 3% for both the short and long term.
• According to CME FedWatch Tool, odds for 25-basis-point Fed rate cut in September are at 69%, up from 64% before US PCE release.
• December 2024 fed funds rate futures contract implies Fed will ease policy by just 35 basis points (bps) toward the end of the year.

Technical analysis: Gold price slumps after testing Head-and-Shoulders neckline

Gold remains on the defensive after a Head-and-Shoulders chart pattern emerges, which hints bullion might edge lower. Momentum shows that neither buyers nor sellers are in control, but the Relative Strength Index (RSI) remains tilted bearish.

If XAU/USD drops below $2,300, the next stop would be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further losses lie underneath, with sellers eyeing the Head-and-Shoulders chart pattern objective from $2,170 to $2,160.

Conversely, if Gold reclaims $2,350, that will expose additional key resistance levels like the June 7 cycle high of $2,387, ahead of challenging the $2,400 figure.

Uniswap, Shiba Inu are undervalued while Bitcoin, Ethereum and Toncoin are overvalued, on-chain data shows

399242   June 29, 2024 20:33   FXStreet   Market News  

• On-chain metrics identify crypto tokens as undervalued and overvalued based on trader returns. 
• SantimentÂ’s MVRV Z-Score reveals Bitcoin, Ethereum and Toncoin are overvalued, Uniswap and Shiba Inu are undervalued. 
• UNI, SHIB prices dropped 9% and 4% this week. 

Data from crypto intelligence tracker Santiment shows that Uniswap (UNI) and Shiba Inu (SHIB) are the most notable large market capitalization assets that are currently undervalued. The data also shows that Bitcoin (BTC), Ethereum (ETH) and Toncoin (TON) are overvalued. 

Uniswap and Shiba Inu present buy opportunity 

On-chain data suggests UNI and SHIB are two undervalued assets and sidelined buyers can “buy” these assets while they are in the “opportunity” zone. BTC, ETH and TON are more likely to witness a correction in their prices, since the assets are overvalued by market participants. 

The Santiment chart shows BTC, ETH and TON are in the overbought territory, DOGE and MATIC are in neutral territory, while UNI and SHIB are undervalued. 

The Market Value to Realized Value (MVRV) Z-score is a metric that helps identify tops and bottoms in asset prices. When MVRV is high, the asset is overvalued, when it is relatively low, it is undervalued, and the territory is marked accordingly in the Santiment chart below. 

MVRV ratio (Z score) for UNI, SHIB, BTC, ETH, TON

UNI and SHIB have noted a 9% and 4% decline in their prices in the past week. UNI trades at $8.985 on Saturday while SHIB is changing hands at $0.00001714. The two assets are likely to recover based on the on-chain metric. 

BTC, ETH and TON are trading at $61,076, $3,402 and $7.585 respectively. 

Judge dismisses part of SEC case against Binance, big win for secondary market sales of crypto

399239   June 29, 2024 17:33   FXStreet   Market News  

• US District Judge Amy Berman Jackson dismissed the SECÂ’s claim that secondary sales of BNB token qualify as securities. 
• Bulk of the agency’s lawsuit against Binance can proceed per the Judge’s ruling.
• The Judge cited a ruling from the Ripple case where the economic reality of transactions matters when applying Howey Test. 
• BNB lost nearly 3% of its value in the past week, BinanceÂ’s native token trades at $571.40 on Saturday. 

A US Judge offered market participants clarity on the secondary market sales of digital assets and dismissed part of the Securities and Exchange Commission’s (SEC) lawsuit against Binance. In the lawsuit the SEC claims that the secondary market sales, or sales on an exchange, of the native token Binance Coin (BNB) qualify as a security. 

The ruling Judge cited a ruling from the SEC vs. Ripple lawsuit, marking a big win for crypto traders. 

Bulk of SEC lawsuit against Binance can proceed

Judge Amy Berman Jackson dismissed part of the SEC’s lawsuit against Binance on Friday. The ruling marks a milestone for crypto traders; it was determined that secondary sales of Binance’s BNB token do not qualify as securities under the Howey Test. 

Of 13 counts, 10 will proceed entirely and two partically. One count is entirely dismissed post Judge Jackson’s ruling. The count that was entirely dismissed is related to the sales of Binance USD (BUSD), a stablecoin that is now partially defunct. 

SEC vs. Binance

Judge Jackson says that the governmentÂ’s reliance on the assertion that crypto assets are the embodiment of investment contracts is not enough to treat BNBÂ’s secondary market sales as securities. Ripple proponent attorney Bill Morgan explains Judge Jackson’s ruling and why it matters in a recent tweet on X:

In her ruling in the SEC vs. Ripple lawsuit, Judge Analisa Torres says that secondary market sales of XRP do not satisfy the Howey test and therefore are not investment contracts. 

The SEC has been pushing the theory that crypto tokens may not be securities, they are investment contracts. Judge Jackson’s ruling brings relief to crypto traders on the issue of secondary market sales of cryptocurrencies and concludes that assets are not investment contracts since they do not satisfy the Howey test. 

BNB loses 3% value this week

Binance coin (BNB) has been in a state of decline since June 6 high of $721.80. BNB dropped to June 24 low of $551.20. The momentum indicator Moving Average Convergence Divergence (MACD) shows underlying negative momentum in BNB’s price trend. 

BNB could rally towards $591.50, the 23.6% of the Fibonacci retracement level of the decline from June 6 to 24. 

BNB/USDT daily chart

Binance coin could find support at the June 24 low of $551.20, as seen in the chart above. BNB trades at $571.40, at the time of writing. 

SEC sues Consensys over Metamask. What does this mean for users?

399238   June 29, 2024 07:02   FXStreet   Market News  

• SEC filed a lawsuit against Consensys in a District Court in New York.
• SEC’s lawsuit alleged that Consensys violated securities laws through its Metamask platform.
• The lawsuit could stir FUD among Metamask users, considering it is the largest ERC-20 wallet.

In a lawsuit on Friday, the Securities & Exchange Commission (SEC) accused Consensys of using its Metamask wallet for the sale of unregistered securities and to act as an unregistered broker.

SEC accuses Consensys of securities law violation

The SEC’s lawsuit claimed that Metamask’s swapping and staking features made it an unregistered broker, thus violating securities laws.

“By allegedly collecting hundreds of millions of dollars in fees as an unregistered broker and engaging in the unregistered offer and sale of tens of thousands of securities, Consensys inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,” said Gurbir S. Grewal, SEC’s Division of Enforcement director.

The SEC alleged that Consensys sold unregistered securities to users via Lido and Rocket Pool. The agency said that since the protocols’ services are sold as an investment contract, they qualify as securities.

SEC also argued that MATIC, MANA, CHZ, SAND and LUNA tokens are unregistered securities, and since they were available on Metamask, Consensys acted as an unregistered broker.

Whether Metamask temporarily takes custody of the assets during the swap/staking process may play a key role in how the suit pans out:

SEC earlier issued a Wells notice to Consensys in April, hinting at an intention to take legal action against the company.

Consensys took the initiative and sued the SEC, accusing the regulator of overstepping its boundaries in trying to regulate Ethereum as a security while stating that its Metamask swap and staking features don’t fall under the SEC’s oversight. While the SEC dropped its Ethereum investigation, it went ahead and sued Consensys.

The lawsuit against Consensys adds to the ongoing legal battles between regulatory agencies and major players in the cryptocurrency space. It may also set a tone of fear, uncertainty and doubt (FUD) among Metamask users as it’s the largest ERC-20 token wallet.

Coinbase exchange was also recently involved in a similar case with the SEC after being charged with functioning as an unregulated broker via its Coinbase wallet. However, the case was dismissed in March after the judge stated that SEC’s accusations “fall short of demonstrating that Coinbase acts as a ‘broker’ by making Wallet available to customers.”

In a related development, Coinbase took legal action against the SEC on Thursday, alleging the agency refused to release information about crypto regulations in accordance with the Freedom of Information Act (FOIA).

Silver Price Analysis: XAG/USD climbs above $29.00 on soft US PCE

399236   June 29, 2024 06:12   FXStreet   Market News  

• Silver up 0.49, boosted by lower US inflation data and Fed rate cut prospects.
• Technical analysis shows bearish trends; RSI indicates selling pressure with lower highs, lower lows.
• Resistance levels: $29.19 (50-DMA), $31.54 (June 7 high), $32.00, $32.51 (YTD high).
• Support points: $29.00, $28.28 (June 10, 2021, high), $28.00, $27.01 (May 8 low), $26.82 (100-DMA).

Silver price registered gains of 0.49% as inflationary figures released by the US Bureau of Economic Analysis (BEA) dipped as expected, reigniting Fed rate cut hopes amongst investors. Therefore, the Greenback edged lower, while XAG/USD traded at $29.13 after hitting a daily low of $28.78.

XAG/USD Price Analysis: Technical outlook

After forming a quasi ‘double top,’ the Silver price extended its losses, which amounted to more than 10% after it peaked at around $32.51 on May 20. The uptrend seems exhausted, as shown by different signals: momentum shifted bearishly as the Relative Strength Index (RSI) entered seller territory, while successive series of lower highs and lower lows confirm the change of the trend.

If buyers want to regain control, they must clear the 50-day moving average (DMA) at $29.19. Once hurdle, the next level would be the June 7 high of $31.54. Clearing this would aim for $32.00 before challenging the year-to-date (YTD) high of $32.51.

Conversely, and the path of least resistance, if XAG/USD slides below $29.00 that could put into play the June 10, 2021, high turned support at $28.28, ahead of exposing the psychological $28.00 mark.

Key support levels lie underneath the latter, with the May 8 swing low of $27.01 up next before challenging the 100-DMA at $26.82.

XAG/USD Price Action – Daily Chart

NZD/JPY Price Analysis: Bullish bias continues as pair surpasses 98.00

399234   June 29, 2024 06:09   FXStreet   Market News  

• NZD/JPY’s bullish run persists as the cross surges past 98.00, marking fresh highs since 2007.
• The 20-day SMA provides robust support at 96.90.
• The strong bullish outlook stays intact, but a consolidation looms.

On Friday, the NZD/JPY cross made significant strides, gaining momentum and setting new cycle highs beyond 98.00. Notably, this represents the pair’s highest position since 2007, substantiating the strong bullish bias. However, given the overbought conditions, a healthy correction would be necessary.

The daily chart’s Relative Strength Index (RSI) value now sits at 68, entering the overbought territory. This demonstrates a continued bullish advance from earlier in the week, indicating that positive momentum still drives the pair. Despite these strong bullish indicators, the Moving Average Convergence Divergence (MACD) is not turning out green bars, suggesting that buyers may be losing their momentum.

NZD/JPY daily chart

Going forward, market participants keep a keen eye on the immediate support level of 97.00, with additional support at 96.90, close to the 20-day SMA and the previous low of 95.00. Moreover, they have trained their sights on the resistance targets of 98.50 and 99.00. A decisive breach above the ongoing range will provide further confirmation of the upside potential while slipping beneath the 20-day SMA could signal a more profound correction.

EUR/USD drifts into familiar midranges after Friday goes nowhere

399231   June 29, 2024 06:02   FXStreet   Market News  

• EUR/USD wraps up trading week at familiar technical levels near 1.0700.
• German data broadly missed the mark early Friday.
• US PCE inflation met expectations, but good mood was brief.

EUR/USD pivoted into a sideways grind on Friday, wrapping up a flat trading week after Fiber traders found little reason to push the pair meaningfully in either direction. German import prices and labor figures broadly miss the mark, and US Personal Consumption Expenditure Price Index (PCE) inflation failed to spark a meaningful bid despite printing at forecasts.

German Unemployment Change clocked in higher than expected, showing 19K German consumers were added to unemployment figures in June. This is more than the forecast 15K, but still below the previous monthÂ’s 25K. The German Unemployment Rate also ticked higher to 6.0% versus the forecast hold at 5.9%.

Forecasting the Coming Week: Data, politics and the ECB Forum take centre stage

On the US side, Core PCE Price Index inflation ticked down for the year ended May, cooling to 2.6% from the previous 2.8%. While the decline in key inflation readings will be a welcome addition to recent inflation data, it failed to spark a meaningful risk-on bid for investors as the figure was nowhere near cool enough to drive the Federal Reserve (Fed) towards an accelerated pace of interest rate cuts.

US Personal Income rose 0.5% MoM in May compared to the forecast 0.4% and previous 0.3%, but US Personal Spending came in at 0.2% versus the forecast 0.3%, and the previous print saw a slight downside revision to 0.1% from the initial 0.2%.

The University of Michigan (UoM) Consumer Sentiment Index rose to 68.2 in June, up from the previous 65.6 and climbing over the forecast 65.8. However, UoM 5-year Consumer Inflation Expectations ticked down to 3.0% in June, down from the previous 3.1% but inflation expectations continue to ride well above the FedÂ’s inflation target of 2% annually.

Coming up next week, European inflation numbers will be landing on markets early in the week with German Harmonized Index of Consumer Prices (HICP) figures on Monday, followed by pan-EU HICP inflation on Tuesday. Next week also marks the next US Nonfarm Payrolls (NFP) labor data dump, slated for next Friday.

EUR/USD technical outlook

The Fiber ran directly into technical barriers on Friday, getting swamped out at the 200-hour Exponential Moving Average (EMA) at 1.0715. The pair continue to battle with the 1.0700 handle, and bidders have been thus far failing to throw off a near-term pattern of lower highs.

EUR/USD daily candlesticks continue to grind out a rough consolidation pattern as the pair struggles on the low side of the 200-day EMA at 1.0788. As buyers continue to show signs of exhaustion, a downside break to 2024Â’s bottom bids at 1.0600 becomes increasingly likely.

EUR/USD hourly chart

EUR/USD daily chart

Dow Jones Industrial Average grinds into the middle amid churning Friday markets

399228   June 29, 2024 05:10   FXStreet   Market News  

• Dow Jones continues to churn near 39,000.00 as markets await signs of rate cuts.
• US PCE Price Index inflation came in as-expected, easing slightly.
• Despite easing key inflation indicators, figures still remain too high for Fed.

The Dow Jones Industrial Average (DJIA) briefly rallied to 39,440.00 early Friday after US Personal Consumption Expenditure Price Index (PCE) inflation figures printed as markets broadly expected. However, risk appetite settled quickly, and equities slumped back below the dayÂ’s opening bids as investors found little has actually changed in the outlook for timing rate cuts from the Federal Reserve (Fed).

Core PCE Price Index inflation ticked down to 2.6% YoY in May, meeting median forecasts and cooling slightly from the previous 2.8%. However, figures still remain well above the FedÂ’s 2% annual inflation target, and the plodding progress in cooling inflation is unlikely to light a fire underneath the US central bank to begin cutting rates sooner rather than later.

According to the CMEÂ’s FedWatch Tool, rate markets are now pricing in 66% odds of at least a quarter-point rate cut from the Federal Open Market Committee (FOMC) on September 18, up slightly from the 60% odds that were priced in before the PCE Price Index inflation print.

US Personal Income rose to 0.5% MoM in May, beating the forecast increase to 0.4% from the previous 0.3%. However, Personal Spending only rose 0.2% versus the forecast 0.3%, and the previous figure saw a slight revision to 0.1% from 0.2%.

The University of Michigan (UoM) Consumer Sentiment Survey rebounded firmly to 68.2, vaulting over the forecast uptick to 65.8 from the previous 65.6. UoM 5-year Consumer Inflation Expectations also ticked lower, down to 3.0% from the previous 3.1%. Despite a slight easing in where consumers expect inflation to be in the next five years, the figure still remains higher than Fed targets. 

Consumer price growth expectations continue to hold on the high end, plagued by recent memory of “transitory” inflation pressures that lasted for at least six consecutive quarters. Consumers also remain keenly aware that core inflation figures continue to ride at three-decade highs compared to the long-run average.

Dow Jones news

The Dow Jones was roughly on-balance on Friday, with about half of the indexÂ’s constituent securities in the green, though sharp losses in key stocks are dragging the index lower on the day. Salesforce Inc. (CRM) recovered from a jittery bearish pullback heading into the companyÂ’s private shareholder meeting this week. The stock is trading up 2.5% on Friday, testing $260.00 per share.

Nike Inc. (NKE) was battered badly on Friday, facing steep enough losses to drag the Dow Jones lower single-handedly. Nike revealed updated forward guidance on Friday, and the company now expects a 10% decline in revenues in the first quarter of 2025 in a reversal of previous guidance that anticipated steady growth in 2025. NKE is down over 20% on the day, trading into a multi-year low of $75.00 per share.

Dow Jones technical outlook

Despite finding a fresh high for the week on Friday, the Dow Jones continues to trade into median levels just north of the 39,000.00 handle. Intraday price action has been slowly drifting higher through the week. Still, volatility has left the index in a notably wobbly stance, and bullish runs tend to be followed immediately by short side slumps.

The Dow Jones is still trading above technical support from the 50-day Exponential Moving Average (EMA) at 38,895.76, but price action continues to middle on the low side of recent all-time highs set above the 40,000.00 major price handle.

Dow Jones five minute chart

Dow Jones daily chart

Australian Dollar strong after US PCE figures

399227   June 29, 2024 05:09   FXStreet   Market News  

• AUD rose against USD due to US inflation reduction and a potential dovish stance from the Fed.
• Soft PCE data from the US may benefit the Aussie policy divergence between the RBA and Fed.
• RBA’s delayed rate cuts could bolster the Aussie, contrasting with other G10 central banks’ reduction strategies.

Friday’s session recorded a significant uplift in the Australian Dollar (AUD) against the US Dollar following an unexpected inflation reduction in the US in May. As a result, expectations of a possibly dovish stance from the Federal Reserve (Fed) grew, leading to a likely divergence in policy with the Reserve Bank of Australia (RBA).

The Australian economy demonstrates minor signs of weakness. However, the heightened inflation rates maintain a stubborn resilience, preventing the RBA from implementing potential rate cuts. The RBA is foreseen delaying rate cuts, making it one of the last G10 country central banks to adopt a reduction policy. These delayed cuts might enhance the further strengthening of the Aussie.

Daily digest market movers: Aussie continues to strengthen amid robust CPI figures

• In terms of the data at hand, the Australian Dollar’s strength was bolstered by increased expectations of the RBA further hiking rates after hot Consumer Price Index (CPI) data reported earlier in the week.
• Market indications are now pricing in approximately 40% odds of a 25-basis-point rate hike from RBA on September 24, extending to 50% leading up to November 5.
• US inflation fell to 2.6% YoY in May from 2.7% in April, according to the US Bureau of Economic Analysis. This decrease matched market expectations.
• On a monthly basis, the Personal Consumption Expenditures (PCE) Price Index remained static. The core PCE Price Index rose by 2.6%, a decrease from the 2.8% escalation that was recorded in April.
• As a result, this downtrend toward the FedÂ’s 2.0% target bumped the probability of a Fed interest rate cut in September to 66%, up from 64% prior to the PCE release, as per the CME FedWatch Tool.

Technical analysis: AUD/USD maintains buyer interest above 20-day SMA

From a technical outlook, the indicators displayed signs of recovery with the Relative Strength Index (RSI) staying above 50, and the Moving Average Convergence Divergence (MACD) printing a fresh green bar. Critical to the future momentum of the pair will be the defense of the 20-day Simple Moving Average (SMA) at 0.6640. As long as buyers manage to sustain above this key level, the future outlook appears promising.

Notably, on Friday, the pair managed to lift back above the 20-day SMA, after dipping to a low of 0.6620, a key indication that buyer defenses remain robust.

AUD/JPY Price Analysis: Bulls persist, pair firmly above 107.00

399225   June 29, 2024 05:05   FXStreet   Market News  

• AUD/JPY extends its gains, reaching new highs past 107.00 on Friday.
• Indicators hint at possible downward correction due to overbought conditions.

On Friday, the AUD/JPY pair continued its uptrend, achieving new highs beyond 107.00, surpassing yet again its 2013 high levels.

On a daily scale, the Relative Strength Index (RSI) of the AUDJPY has spiked to 74 from 65 last Thursday. This sharp increase signals a strengthening bullish momentum but simultaneously places the pair in an overbought position, which might incite a downward correction. The Moving Average Convergence Divergence (MACD) shows a continuation of the rising green bars, indicating that the bullish momentum remains strong however an adjustment might be on the horizon due to overbought conditions.

AUD/JPY daily chart

On the broader outlook, the AUD/JPY pair demonstrates persistent bullish trends, which is reinforced by its position above the 20-day, 100-day, and 200-day Simple Moving Averages (SMAs). However, traders should monitor the pair for potential corrections, given the more pronounced indicators for overbought conditions.

If the pair encounters a correction driving it below the 107.00 level, followed by the 106.00 level, it may find new support lines. Thus, the 104.90 (20-day SMA) level might serve as a potential support line. Meanwhile, buyers will explore uncharted territory should the pair persist in its current trend and surpass the 107.50 level.

Mexican Peso advances steadily after Banxico maintains rates

399223   June 29, 2024 05:05   FXStreet   Market News  

• Mexican Peso rebounds to 18.24 vs. US Dollar following Banxico’s decision to maintain 11.00% rate.
• Decision aligned with recent inflation data, targeting 3% inflation by Q4 2025.
• Inflation risks heightened by service sector, cost pressures, Peso fall and geopolitical tensions.

The Mexican Peso recovered ground against the US Dollar and rallied more than 1% on Friday after the Bank of Mexico (Banxico) decided to keep rates unchanged due to “idiosyncratic factors” and the Peso’s depreciation following the June 2 general election results. The USD/MXN trades at 18.24 after hitting a daily high of 18.59.

Banxico left a lifeline to the battered Peso on Thursday, holding rates at 11.00% after inflation reaccelerated, according to JuneÂ’s mid-month inflation data.

The Mexican institution expects headline inflation to converge to the bankÂ’s 3% target by Q4 2025 and acknowledged that inflation risks are skewed to the upside due to high services inflation, cost pressures, Mexican Peso depreciation and geopolitical conflicts.

Across the border, the US Federal ReserveÂ’s (Fed) preferred inflation gauge came as expected by the consensus, showing an improvement in headline and core Personal Consumption Expenditures (PCE) Price Index.

The data failed to underpin the Greenback, which remains pressured, losing some 0.16% as revealed by the US Dollar Index (DXY). Therefore, the USD/MXN might continue on the back foot toward the remainder of the day as sellers eye an April 19 high of 18.15.

Daily digest market movers: Mexican Peso strengthens after Banxico hold

• BanxicoÂ’s decision was not unanimous and was perceived as dovish as Deputy Governor Omar Mejia Castelazo opted for a quarter of a percentage rate cut.
• MexicoÂ’s central bank monetary policy statement highlighted the Governing Board expects the disinflation process to evolve and added that “Looking ahead, the board foresees that the inflationary environment may allow for discussing reference-rate adjustments.”
• A Citibanamex survey showed economists priced out fewer rate cuts by the central bank. They also revised the Gross Domestic Product (GDP) for 2024 downward from 2.2% to 2.1% YoY and expect the USD/MXN exchange rate to finish the year at 18.70, up from 18.00 previously reported.
• US PCE was lower than AprilÂ’s 0.3% and was 0% MoM as expected. Core PCE expanded by 0.1% MoM as estimated, which is also beneath the previous reading of 0.3%.
• US Consumer Sentiment final reading for June of 68.2 deteriorated compared to MayÂ’s 69.1, yet improved as the preliminary reading was 65.8. Inflation expectations remained steady in the short and long periods at 3%.
• CME FedWatch Tool shows odds for a 25-basis-point Fed rate cut at 59.5%, unchanged from the previous day.

Technical analysis: Mexican Peso climbs as USD/MXN tumbles below 18.30

The USD/MXN is undergoing a pullback after hitting a daily high of 18.59 earlier in the day, opening the door to challenging key support levels. From a momentum standpoint, sellers are gathering some steam. This is depicted by the Relative Strength Index (RSI) pointing downward though still remaining bullish, suggesting the pullback could be short-lived.

For a bearish continuation, sellers need to reclaim the April 19 high turned support at 18.15, which would pave the way toward 18.00. The next support would be the 50-day Simple Moving Average (SMA) at 17.37 before testing the 200-day SMA at 17.23.

On the other hand, if buyers achieve a decisive break above the psychological 18.50 level, the next stop would be the year-to-date (YTD) high of 18.99, followed by the March 20, 2023, high of 19.23.

Mexico Fiscal Balance, pesos dipped from previous 102.95B to -174.07B in May

399222   June 29, 2024 05:02   FXStreet   Market News