Articles

XAU/USD: The price to end the year at $2,000 – ABN AMRO

398737   June 27, 2024 21:40   FXStreet   Market News  

Gold (XAU/USD) prices set a high earlier in the year, but have lost momentum since then. There is a divergence in drivers and strong, traditional relationships have broken down. Analysts at ABN AMRO are cautious on the outlook for Gold prices and keep their forecast at $2,000 per ounce for December 2024.

Gold loses upside momentum

“Gold prices this year were supported by: investors buying the Yellow Metal on the futures markets and in other forms; central banks forming Gold reserves; technical picture. The rally has lost momentum since the high of $2,450 that was set on 20 May 2024. Prices are already under the 50-DMA.”

“The important support zone is $2,220-2,275, where previous tops and bottoms are layered. Below that level, the next support zone is $2,115, where the 200-DMA comes in. If prices decline below the 200-DMA the long-term trend turns negative.”

“We remain cautious for the outlook for Gold prices: the trend in Gold prices is positive, but the momentum is declining; it is unusual for Gold prices to have positive relationships with the US dollar and 5yr and 10yr US real yields; there is no shortage in physical Gold. We keep our year-end forecast of $2,000 per ounce for now.”

 

WTI crude oil touches $82 with eyes on Lebanon

398736   June 27, 2024 21:36   Forexlive Latest News   Market News  

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Finance Magnates CY Limited

Japanese Yen might see both government and BoJ act at same time

398734   June 27, 2024 21:26   FXStreet   Market News  

• The Japanese Yen slightly recovers from its multi-decade low of 160.87 against the US Dollar seen on Wednesday.
• The Yen finds some support after comments from Japanese Finance Minister ShunÂ’ichi Suzuki. 
• The US Dollar Index falls back below 106.00 ahead of US Q1 GDP, Durable Goods Orders and weekly Jobless Claims. 

The Japanese Yen (JPY) is licking its wounds it incurred after its steep decline Thursday when markets started playing a chicken game with the Japanese government. The Japanese Yen sank to 160.87 against the US Dollar (USD), even lower than the level of 160.20 seen at the end of April right before the Japanese Ministry of Finance intervened and pushed the USD/JPY back to 151.95. Early comments during the Asian session on Thursday from Japanese Finance Minister Shun’ichi Suzuki seemingly had more impact than the comments from Masato Kanda, Vice Minister for International Affairs, on Wednesday when the actual move occurred. 

Meanwhile, the US Dollar Index (DXY) – which gauges the value of the US Dollar against a basket of six foreign currencies – somewhat looking for direction ahead of a packed economic calendar. Besides the final reading of the US Gross Domestic Product (GDP) print for Q1, traders will also wait for the Durable Goods Orders numbers for May. As each week, the Initial and Continuing Jobless Claims are set to be released as well on Thursday, making it a very charged US session. 

Daily digest market movers: BoJ stirs up

• At 01:30 GMT, Japanese Finance Minister ShunÂ’ichi Suzuki commented on the recent moves in the Japanese Yen. Suzuki said they are watching currencies closely and will act when needed, though Suzuki declined to comment on specific FX levels.
• Reuters cites severals banks which got consulted by the Bank of Japan during European hours, asked for their expectations over the range and pace of tapering. The survey will certainly be used in the upcoming meeting with the BoJ and bond market participants on July 9th and 10th.  
• At 12:30 GMT, most of the ThursdayÂ’s important data points will all come out at the same time:
  • US Gross Domestic Product numbers for Q1:
    • Headline GDP is expected to head to 1.4% from 1.3%.
    • Headline Personal Consumption Expenditures (PCE) Prices for the quarter should remain stable at 3.3%.
    • Core PCE should remain as well stable at 3.6%.
  • Durable Goods Orders for May:
    • Headline Durable Goods Orders are expected to contract by 0.1% from the prior positive 0.6% in April.
    • Durable Goods Orders ex Transportation are expected to slide lower to 0.2% from 0.4% in April.
  • Initial Jobless Claims for the week ending June 21 are expected to remain rather stable at 236,000 from the previous weekÂ’s reading of 238,000. Continuing Claims are expected to remain stuck with a marginal move from 1,828,000 to 1,820,000. 
• Equities are having issues again on Thursday and look to be on track for a negative week overall. US futures are all down less than half a percentage. 
• 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 56.3% for a 25-basis-point cut. A rate pause stands at a 37.7% chance, while a 50-basis-point rate cut has a slim 6.0% possibility. 
• The Overnight indexed Swap curve for Japan shows a 64.0% chance of a rate hike on July 31, and a smaller 52.8% chance for a hike on September 20. 
• The US 10-year benchmark rate trades near the weekly high at 4.33%.
• The benchmark 10-year Japan Treasury Note (JGB) trades around 1.07%, nearing highs not seen since 2011.

USD/JPY Technical Analysis: BoJ survey sign on the wall?

The USD/JPY is trading off its multi-decade high, freshly printed on Wednesday at 160.81. For now, the words from Japanese Finance Minister Shun’ichi Suzuki are having a bit of an impact, though the question is how long the impact will last as the attention will start to die down. The Japanese government is playing a dangerous game, though, seeming to bet on weak US data on Thursday and Friday, which would trigger a pullback in the DXY and might see Yen strengthen without aid from the Japanese government. 

Although the Relative Strength Index (RSI) is overbought in the daily chart, a correction could soon occur. If weaker US data, when that plays out and is undoubtedly not a certainty, will be enough to drive USD/JPY down to 151.91 remains to be seen. Instead, look at the 55-day Simple Moving Average (SMA) at 156.39 and the 100-day SMA at 153.69 for traders to quickly build a pivot on and try to test highs again, testing the Japanese deep pockets again. 

USD/JPY: Daily Chart

Mexican Peso takes a breather after two-day decline ahead Banxico meeting

398732   June 27, 2024 21:26   FXStreet   Market News  

• The Mexican Peso is taking a breather after a two-day decline. 
• Thursday will see the Banxico policy meeting and Mexican labor and trade data. 
• USD/MXN completes an ABC correction higher and reaches a critical turning point.

The Mexican Peso (MXN) trades little-changed on Thursday as traders catch their breath after two straight days of depreciation. This may be a “calm before the storm” effect ahead of the Bank of Mexico (Banxico) monetary policy meeting at 19:00 GMT, a potentially market-moving event for the Peso. 

At the time of writing, one US Dollar (USD) buys 18.30 Mexican Pesos, EUR/MXN is trading at 19.58, and GBP/MXN at 23.15.

Mexican Peso trades flat after two-day drop

The Mexican Peso trades flat in the run-up to the Banxico policy meeting on Thursday.  An overwhelming majority of economists expect the central bank to maintain its policy interest rate at its current 11.00% level. Of the 25 economists surveyed by Bloomberg, 23 expect the central bank to keep interest rates unchanged. A recent survey by Mexican lender Citibanamex showed that the majority of respondents expect Banxico to keep its policy rate unchanged – although most expect a cut in August.

The high interest-rate differential between Mexico and most major economies has kept the Mexican Peso strong. Relatively higher interest rates attract greater inflows of foreign capital. Therefore, deciding not to cut interest rates might be bullish for the Peso, although given that this outcome has been widely predicted, the market may already have priced it in.

Many analysts have changed their minds about Banxico cutting interest rates due to the sharp depreciation in the Peso after the June 2 election. They now see imported inflation as a factor further weighing against immediate interest-rate cuts. 

Rabobank’s Senior Strategist Christian Lawrence was one analyst who expected Banxico to cut interest rates in June. However, he changed his opinion in light of the sharp devaluation of the Mexican Peso since the election, which “has acted as a de facto cut.” 

The same goes for economists at Standard Chartered: “We now expect Banco de México (Banxico) to stay on hold instead of cutting by 25bps at its 27 June meeting, amid sharp currency depreciation driven by elevated political noise and fiscal uncertainty,” said the bank in a recent note. 

Prior to the Banxico decision, at 12:00 GMT, the Mexican Unemployment Rate and Balance of Trade (BoT) for May will also be released. 

Unemployment is expected to rise to 2.7% from 2.6% in the previous month, and the BoT is forecast to show the deficit shrinking to $2.04 billion from $3.75 billion previous.

Better-than-expected data might support MXN. 

Technical Analysis: USD/MXN completes ABC correction and reaches crossroads

USD/MXN has completed an ABC corrective pattern higher on the 4-hour chart. 

The pair is now at a critical juncture. If it continues to make higher highs, it could mean the short-term downtrend has reversed. Alternatively, a recapitulation would suggest the downtrend is resuming, and the pair could move to lower lows. 

USD/MXN 4-hour Chart 

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). 

At the same time, the short-term trend remains bearish, leaving the pair at risk of a recapitulation lower. Further weakness could see it reach the 17.72 swing low made on June 4.

Alternatively, if USD/MXN rallies and breaks above 18.39 (June 26 high), it would form a higher high and suggest a new short-term uptrend was evolving. Resistance at 18.48 (2023 October 6 high) and 18.68 (June 14 high) might supply upside targets afterward.

The direction of the long and intermediate-term trends remains in doubt. 

Ripple extends decline as XRP traders realize losses around $0.47

398728   June 27, 2024 21:22   FXStreet   Market News  

• Ripple holders realized losses on their XRP tokens for the ninth consecutive day on Thursday. 
• Traders have taken over $41 million in losses since June 18, according to Santiment data.
• XRP hovers around $0.47, wiping out over 5% in value in the past seven days. 

Ripple (XRP) holds the recent decline at around $0.47 on Thursday. On-chain data shows that different cohorts of XRP investors reacted differently to the price decline, with whales holding between 1 million and 10 million XRP distributing their token holdings at a loss. 

Typically, an asset is expected to recover after a capitulation. 

Daily digest market movers: Ripple on-chain data shows traders are realizing losses

• Ripple on-chain data from tracker Santiment shows that XRP investors took over $41 million in unrealized losses between June 18 and June 27, as shown in the chart below. 
• The negative spikes in the Network Realized Profit/oLss metric show the losses taken by XRP traders in the past nine days. Consistent realization of losses by traders is considered typical of a capitulation. 

Network realized profit/ loss vs. price

• Different segments of XRP investors reacted differently to the price decline. Wallet addresses holding between 10,000 and 100,000 XRP tokens and 100,000 and 1 million coins accumulated the asset, buying the dip. 
• The group of investors holding between 1 million and 10 million XRP distributed their holdings at a loss. Typically, this segment is associated with capitulation prior to recovery in the assetÂ’s price, as seen in the chart below.

XRP supply distribution 

• In the absence of an update in the SEC vs. Ripple lawsuit, traders are watching Bitcoin price trends for cues to determine where XRP is headed. 
• XRP is hovering around $0.47, down nearly 5% in the past seven days.

Technical analysis: Ripple likely to extend losses by 3.5%

Ripple is in a downward trend, hovering around the $0.47 level on Thursday. If the decline resumes, XRP is likely to touch support at $0.4508, the June 7 low. In the event of a recovery in the altcoin’s price, XRP could fill the Fair Value Gap between $0.4731 and $0.4710 before resuming its downward trend. 

The Moving Average Convergence Divergence (MACD) indicator supports the bearish thesis, with the signal line crossing above the MACD line and the red histogram bars under the neutral line. There is underlying negative momentum in Ripple’s price trend. 

XRP/USDT daily chart 

Ripple’s close above the Fair Value Gap between $0.4825 and $0.4841 could invalidate the bearish thesis and push XRP higher toward the resistance at $0.4955. 

Gold bounces from $2,300 barrier ahead of potentially market-moving inflation data

398726   June 27, 2024 21:21   FXStreet   Market News  

• Gold bounces off the psychologically important $2,300 level after another leg of selling. 
• The pair continues to be pressured by a higher-for-longer outlook on interest rates – data on Friday could be key.
• XAU/USD approaches the neckline for a potential topping pattern – if broken, a cascade down could result.  

Gold (XAU/USD) edges higher, trading just above $2,300 on Thursday, as short-traders take profit following the last down leg from the $2,330s. The yellow metal has been pressured by comments from Federal Reserve (Fed) officials – those tasked with setting interest rates in the US – who have consistently stated that more progress has to be made on bringing down inflation before they can consider cutting interest rates. 

Their reluctance to cut rates weighs on Gold because it makes the non-interest paying asset comparatively less attractive to investors.  

Gold pressured by reluctant Fed

Gold backs and fills on Thursday after another big down-day on Wednesday as markets took their cue from a mixture of Fed speakers keeping reserved about cutting interest rates, and chart-based technical opportunism.  

In regards to interest rates, of key importance will be the release of the US Personal Consumption Expenditures (PCE) Price Index for May on Friday, which is the Federal Reserve’s (Fed) preferred gauge of inflation. A lower-than-expected result could make the Fed more optimistic about cutting interest rates. The opposite would be the case if the PCE beats expectations. 

Whilst the Fed sits on its hands, the market is a bit more optimistic seeing a relatively high probability (62%) of the Fed cutting interest rates at (or before) the Fed’s September meeting, although this is below the 66% seen on Wednesday. The estimates are according to the CME FedWatch tool, which calculates chances using Fed Funds futures prices. 

GoldÂ’s downside capped by longer-term factors

Gold’s downside is capped by various long-term positive factors. Firstly, there is its role as a safe-haven in an increasingly fractured, uncertain world. Geopolitical uncertainty in the Middle East, Ukraine and now France ahead of its contentious elections, is making some investors nervous, as is the impact of AI-driven revolutionary economic change as well as the threat of climate change.  

The US Dollar (USD) is a further double-edged factor. A strong US Dollar has led to such a steep depreciation in mainly Asian currencies recently, prompting regional central banks to hoard Gold as a hedge against the effects. That said, a stronger Dollar also tends to lower Gold price precisely because it is priced in Dollars. 

Recently USD reached a 38-year high against the Japanese Yen (JPY) and the higher it goes the more demand Gold will see as a currency hedge. 

Another longer-term positive factor for Gold is the BRICS trade confederation’s strategy to use Gold as a replacement for the US Dollar in 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 currencies. 

Technical Analysis: Gold continues approaching key support 

Gold has steadily pushed lower towards key support and the neckline of a possible topping pattern at $2,279. A break below the neckline would signal a strong down move. 

XAU/USD Daily Chart

 

The XAU/USD pair had been forming a bearish Head-and-Shoulders (H&S) pattern over the last three months. However, the upside break on June 20 has brought the validity of the pattern into doubt. That said, a more complex topping pattern that might still prove bearish is still possibly forming. 

If so, then a break below the pattern’s neckline – even if it is not an orthodox H&S – at $2,279 would provide confirmation of a reversal lower, with a conservative target at $2,171, and a second target at $2,105. 

At the same time, it is also still possible that Gold could find its feet and continue higher. GoldÂ’s original break above the trendline and the 50-day SMA on June 20 was supposed to reach an initial, conservative target in the mid $2,380s (June 7 high), and it is still possible it could reach that target despite the fallback.

However, it would require a break above $2,350 to confirm a move up to the June 7 high. A further break above that might indicate a continuation up to the May – and all-time – high at $2,450. 

A break above that would confirm a resumption of the broader uptrend. 

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. 

EUR/GBP Price Analysis: Correcting within a medium-term downtrend

398723   June 27, 2024 21:18   FXStreet   Market News  

• EUR/GBP is correcting in a medium-term downtrend. 
• It has moved up to partially fill a price gap and will probably eventually fill the rest. 
• A break below the June 25 low would signal a resumption of the dominant downtrend.

EUR/GBP has corrected back after bottoming on June 14 at the 0.8398 lows. 

The pair appears to be in a medium-term downtrend which, given “the trend is your friend” is likely to resume once the pull-back runs out of steam. A break below 0.8431 (June 25 low) would signal such a resumption. 

EUR/GBP Daily Chart 

The initial target for a move down would be the 0.8399 June 14 low. 

The correction may still pull higher, however, as it has pulled all the way up to a gap (red shaded area). Gaps are normally filled eventually and there is, therefore, a risk of more upside evolving as price fills this gap.

EUR/GBP 4-hour Chart 

The top and bottom points of price gaps tend to represent support and resistance levels for price. As such, if price does fill the gap and reaches the top at 0.8490 there is a chance it could stall and roll over. 

Pound Sterling gains ground ahead of US core PCE inflation

398721   June 27, 2024 21:17   FXStreet   Market News  

• The Pound Sterling rises against the US Dollar but the overall direction remains uncertain.
• Economists expect that the US core PCE inflation softened in May.
• The uncertainty over the UK elections outcome keeps the Pound Sterling on its toes.

The Pound Sterling (GBP) finds a cushion above the round-level support of 1.2600 against the US Dollar (USD) in Thursday’s New York session. The GBP/USD pair gauges ground as the US Dollar registers a modest correction. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges down after posting a fresh eight-week high near 106.10.

However, the near-term outlook of the US Dollar remains firm as investors are expected to trade cautiously ahead of the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday. Core PCE inflation, the Federal ReserveÂ’s (Fed) preferred inflation measure, is estimated to grow at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April.

A scenario in which PCE inflation declines, as economists expect, would boost expectations for the Fed to begin reducing interest rates from September. According to the CME FedWatch tool, traders see a 62.3% that interest rates will be reduced from their current levels. The tool also shows that the Fed will cut interest rates twice this year. However, Fed policymakers signaled in their latest dot plot that there will be only on rate cut this year.

On the economic data front, Initial Jobless Claims data for the week ending June 21 were lower than projected, and the Durable Goods Orders unexpectedly expanded in Thursday’s American session. The US Department of Labor showed that individuals claiming jobless benefits were lower at 233K than estimates of 236K and the prior release of 238K. Durable Goods Orders rose at a meager growth of 0.1%. Economists forecasted them to have declined by 0.1% after an expansion of 0.6%, downwardly revised from 0.7%.

Daily digest market movers: Pound Sterling underperforms against Asian peers

• The Pound Sterling gains against its European peers and the US Dollar but is weak against Asian currencies in ThursdayÂ’s European session. In Asia, the Japanese Yen (JPY) rises as fears of JapanÂ’s intervention in the FX domain have intensified. Meanwhile, antipodean currencies are showing strength as investors expect that the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will not pivot to policy normalization this year.
• The British currency is expected to face volatility as the United Kingdom (UK) parliamentary elections are held on July 4. According to polls, UK Prime Minister Rishi SunakÂ’s Conservative Party is expected to suffer a defeat from the opposition Labour Party. 
• On the economic front, the deteriorating economic outlook due to the Bank of England’s (BoE) higher interest rates and stubborn wage growth keep policymakers concerned. The preliminary S&P Global/CIPS Purchasing ManagersÂ’ Index (PMI) for June showed that business activity in the manufacturing sector expanded at a faster pace, while operations in the service sector unexpectedly slowed. Meanwhile, high wage growth continues to empower individuals with high purchasing power, making it more difficult for policymakers to kick-start the policy-easing cycle.
• Financial markets expect the BoE to start reducing interest rates from the August meeting. Meanwhile, investors will focus on the revised UK Q1 GDP estimates, which will be published on Friday.

Pound Sterling Price Today:

Technical Analysis: Pound Sterling slides toward 200-day EMA

The Pound Sterling finds interim support near 1.2600 against the US Dollar. The GBP/USD pair has come under pressure after breaking below the crucial support of 1.2700. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590. 

The Cable 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 consolidation ahead.

Bitcoin struggles around $61,000 after US and German authorities transfer BTC to exchanges

398718   June 27, 2024 21:13   FXStreet   Market News  

• The US Government transferred 3,940.28 BTC, valued at $241.22 million, to Coinbase Prime.
• The German Government transferred another 750 BTC, valued at $46.35 million, on Wednesday.
• On-chain data shows that the miners’ selling activity is increasing, signaling bearish momentum.

Bitcoin (BTC) encountered resistance near the $62,000 mark on Wednesday and declined 1.5% to trade around $60,777 in ThursdayÂ’s American session. The US and German governments’ transfers of BTC to exchanges in the past week have contributed to market FUD (Fear, Uncertainty, Doubt) among traders. Additionally, on-chain data reveals a rise in miners’ selling activity, suggesting bearish sentiment in the market.

Daily digest market movers: Bitcoin price eases as US and German Authorities transfer BTC to exchanges

• 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. This sudden movement of funds could have sparked FUD (Fear, Uncertainty, Doubt) among traders, potentially influencing Bitcoin’s 1.5% price decline on Wednesday.

• According to data from Lookonchain, the German Government transferred 750 BTC, valued at $46.35 million, on Wednesday. Additionally, a smaller transfer of 0.001 BTC to Flow Traders suggests a possible test transaction or intention to sell BTC through that entity. Recent movements indicate that German authorities have transferred a total of 2,100 BTC, amounting to $135.22 million, to platforms including Coinbase, Bitstamp, and Kraken over the past few days. The German Government currently holds 45,609 BTC, valued at $2.81 billion.

• Strike, a company specializing in Bitcoin payments, announced via its Twitter account that it is entering the United Kingdom market. This expansion enables individuals and businesses in the UK to utilize Strike’s services related to Bitcoin and the Lightning Network. With this step, Strike’s services are now accessible in 100 countries and regions worldwide, encompassing the US, Europe, Latin America, and Africa. Given the UK’s status as the second-largest economy in Europe and the sixth-largest globally, this move presents substantial prospects for increasing Bitcoin adoption.

• According to CryptoQuant data, the Bitcoin Miner to Exchange Flow (Total) metric shows the total amount of BTC transferred from a mining pool to exchange wallets. Increases in the metric indicate that many miners’ coins are exposed to selling, suggesting a bearish trend, and decreases indicate that only a few miners’ coins are exposed to selling, signaling less sell pressure.
•  In the last three days, the miners have sent their BTC to the exchanges at an average daily rate of 8,702.18 BTC. This transfer could include the immediate need to cover the cost or to gain excess gains by selling at the price they 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.

Bitcoin Miner to Exchange Flow (Total) chart

Technical analysis: BTC faces resistance at the lower band of the descending wedge

Bitcoin’s 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.

BTC was rejected by the lower band of the broken descending wedge on Wednesday. Since then, it has edged down approximately 1.75% to trade around $60,777.

If the lower boundary of the descending wedge around $62,000 holds as resistance, BTC could decline roughly 4% 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 mean 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 Bitcoin’s price, revisiting its next weekly resistance at $67,147.

United States Durable Goods Orders above forecasts (-0.1%) in May: Actual (0.1%)

398717   June 27, 2024 21:12   FXStreet   Market News  

Russia Central Bank Reserves $ down to $593.1B from previous $596.2B

398716   June 27, 2024 21:09   FXStreet   Market News  

EUR/USD extends recovery above 1.0700, broader trend remains uncertain

398714   June 27, 2024 21:09   FXStreet   Market News  

• EUR/USD finds interim support near 1.0660 while uncertainty ahead of US core PCE inflation keeps the outlook vulnerable.
• Investors see the Fed reducing interest rates twice this year.
• The Euro will dance to the tunes of the preliminary June HICP data for France, Italy, and Spain on Friday.

EUR/USD rebounds sharply on Thursday’s New York session after declining to a seven-week low near 1.0665 the day before. The major currency pair finds support as the US Dollar (USD) corrects amid uncertainty ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday. However, the near-term demand remains vulnerable amid fears of widening policy divergence between the US Federal Reserve (Fed) and the European Central Bank (ECB).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major peers, faces pressure in an attempt to move above the crucial resistance of 106.00. 

Investors will pay close attention to the US core PCE inflation data, which will provide cues about when and how much the Fed will reduce interest rates this year. The US PCE report is expected to show that core price pressures grew at a slower pace of 0.1% month-on-month in May against 0.2% in April. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April. 

Softer-than-expected inflation figures would boost expectations of early Fed rate cuts, which would be unfavorable for the US Dollar. On the contrary, hot numbers will diminish Fed rate-cut prospects.

Currently, financial markets expect that the Fed will start reducing interest rates at the September meeting and deliver subsequent rate cuts in November or December.

On the economic front, US Durable Goods Orders for May unexpectedly rose by 0.1%. Economists forecasted them to have declined by 0.1% after an expansion of 0.6%, downwardly revised from 0.7%. Fresh orders for Durable Goods are a leading indicator of core Consumer Price Index (CPI) data. Meager growth in New Orders for Durable Goods doesn’t pose significant upside risks to price pressures.

Daily digest market movers: EUR/USD will dance to the tunes of the Eurozone HICP data

• EUR/USD continues to face selling pressure near the round-level resistance of 1.0700. The EuroÂ’s near-term outlook is uncertain ahead of the EurozoneÂ’s election outcome and growing speculation that the ECB will deliver back-to-back rate cuts.
• Investors remain cautious over the outcome of the French election amid speculation that the new government would make significant fiscal policy shifts, which would widen the financial crisis. The uncertainty over the French elections was triggered after French President Emmanuel Macron called for a snap election after his party suffered defeat in preliminary results from Marine Le PenÂ’s far-right National Rally (RN).
• On the monetary policy front, ECB policymakers refrained from committing to any pre-defined interest rate path after the central bank commenced the rate-cutting cycle in its policy meeting in early June amid concerns over wage inflation. However, higher interest rates weigh heavily on overall demand, which impacts activities in manufacturing as well as the service sector.
• Going forward, preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data for June will be under the spotlight next week, as it will provide major cues about the interest rate outlook. Currently, investors expect that the ECB will deliver one more rate cut this year.

Technical Analysis: EUR/USD manages to recapture 1.0700

EUR/USD trades inside WednesdayÂ’s range as investors sidelined ahead of the US core PCE inflation reading. The downward-sloping border of the Symmetrical Triangle pattern formation on a daily timeframe remains a major barrier for the Euro bulls. A fresh downside would appear if the pair 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 this level.