Articles
Precious metals stall amid USD strengthening – TDS
398387 June 26, 2024 22:26 FXStreet Market News
Precious metals are losing a bit of steam amid a strengthening US Dollar (USD), TDS Senior Commodity Strategist Ryan McKay notes
Economic data to influence appetite for Gold
“Looking forward, traders are watching the data like hawks and a host of economic data this week could influence the macro cohort’s appetite for Gold (XAU/USD).”
“The PCE data will be top of mind after the below consensus CPI and PPI data, and we look for the core segment to advance at its softest monthly pace of the year at 0.13%. Further signs that inflation is easing could start to generate more certainty around the Fed’s cutting path.”
“On the flip side however, we see only limited scope for downside should data come in hot. Indeed, CTAs hold a margin of safety above $2,200/oz before any material selling, while physical demand from central banks and Asian precious metals appetite continues to support the market.”
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US Dollar jumps above 106.00 handle in DXY and prints nearly a fresh two-month high
398386 June 26, 2024 22:21 FXStreet Market News
- The US Dollar trades firmly in the green against nearly all major peers.Â
- A light data calendar is ahead as markets digest hawkish Fed comments.Â
- The US Dollar index breaks through 106.00 and heads higher
The US Dollar (USD) is outmatching other currencies on Wednesday for the second day in a row with some help from US Federal Reserve (Fed) officials, who seem to have turned more hawkish. Federal Reserve Governor Michelle Bowman lit the fire on the fuzz by saying that a rate hike is still an option while she sees too many potential risks that could still drive inflation higher. Her thesis became reality just a few hours later, after neighbouring country Canada released red-hot inflation numbers.
On the economic front, a rather light calendar ahead of ThursdayÂ’s Gross Domestic Product (GDP) final estimate and FridayÂ’s Personal Consumption Expenditures (PCE) Price Index release. Still, traders will need to watch out for the Bank Stress Test report, to be published at 20:30 GMT, in which the Fed analyzes how healthy US banksÂ’ balance sheets are in case of financial market distress.Â
Daily digest market movers: Out of the parc
- The Japanese Yen is cracking under pressure from the Greenback, with USD/JPY poping above the magic 160.00 level and printing a multi-decade high.Â
- Markets got spooked by comments from Federal Reserve Governor Michelle Bowman on Tuesday, saying she is “willing to raise the target rate at a future meeting if inflation progress stalls or reverses”, while she “expects US inflation to remain elevated for some time, still seeing a number of upside inflation risks.”
- At 11:00 GMT, the weekly Mortgage Applications Index from the Mortgage Bankers Association (MBA) came in and went from 0.9% to 0.8%.
- At 14:00 GMT, New Home Sales data for May is due to come out. Analysts expect sales to increase slightly to 640,000 from AprilÂ’s 634,000.Â
- The US Treasury is heading to markets to allot a 5-year Note in the markets at 17:00 GMT.Â
- The FedÂ’s Bank Stress Test report will come out near 20:30 GMT.Â
- Equities are not licking this US Dollar strength, and are dipping lower in both Europea and the US.Â
- The CME Fedwatch Tool is broadly backing a rate cut in September despite the recent comments from Fed officials, with odds now standing at 59.5% for a 25 basis point cut. A rate pause stands at a 34.1% chance, while a 50-basis-point rate cut has a slim 6.4% possibility.Â
- The US 10-year benchmark rate trades at 4.28%, and trades ath the high for this week. Â
US Dollar Index Technical Analysis: Roaring USD
The US Dollar Index (DXY) is rolling for a second day in a row, and is breaking out of its sideways pattern. The DXY is now trading just below the high of May and could rally further, should upcoming US data outperform again. Clearly the recent hawkish messages from Fed officials are spooking markets in the fear of having missed out on any signals that would signal an uptick in inflation is again at hand.Â
On the upside, the first level to watch is 105.88, which triggered a rejection at the start of May and on Friday last week. Further up, the biggest challenge remains at 106.52, the year-to-date high from April 16. A rally to 107.20, a level not seen since April 2023, would need to be driven by a surprise uptick in US inflation or a sudden hawkish shift from the Fed.Â
On the downside, 105.52 is the first support ahead of a trifecta of Simple Moving Averages (SMA). First is the 55-day SMA at 105.23, safeguarding the 105.00 round figure. A touch lower, near 104.66 and 104.48, both the 100-day and the 200-day SMA form a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation.Â
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
AUD/USD Price Analysis: Trading in a “range-within-a-range”
398384 June 26, 2024 22:18 FXStreet Market News
- AUD/USD is trading in a narrow range in the middle of a multi-week range.Â
- The pair is in a sideways trend which is expected to extend.Â
- The contraction in volatility may be a harbinger of great volatility to come.Â
AUD/USD has started trading in a mini range within a range on the 4-hour price chart. The pair has been going sideways since the middle of May but since June 19 the waves of buying and selling have narrowed still further.Â
AUD/USD 4-hour Chart
AUD/USD could move either higher or lower within the range. A break above the mini-range high at 0.6679 would probably indicate a continuation up to the range ceiling at 0.6709. Likewise a break below the mini-range low at 0.6625 would probably lead to a move down to the range floor at 0.6590.Â
The short-term trend is sideways and as long as price remains within the bounds of the range it will likely keep extending within the range – “the trend is your friend” after all.Â
Eventually the pair will break out of its range and the move is likely to be very strong since it is a general rule of markets that periods of low volatility like now are followed by periods of high volatility.Â
An upside breakout is marginally more likely to happen because the trend prior to the formation of the range was bullish.Â
A decisive break above the ceiling of the range would see a follow-through to a conservative target at 0.6770. A decisive break below the range floor on the other hand would indicate a follow-through to an initial target at 0.6521.Â
A decisive break would be one in which a longer-than-average candle broke out of the range and closed near its high or low, or three successive candles of the same color broke cleanly through the range top or bottom.Â
The targets are generated using the technical-analysis method of extrapolating the height of the range by a Fibonacci 0.618 ratio higher (in the case of an upside break) or lower (in the case of a downside break). A more generous target would come from extrapolating the full height of the range.Â
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EUR/USD declines below 1.0700 as Fed Bowman pushes rate-cut hopes to 2025
398382 June 26, 2024 22:17 FXStreet Market News
- EUR/USD slips below 1.0700 as the Fed maintains hawkish guidance on interest rates.
- FedÂ’s Bowman sees no rate cuts this year.
- Investors will focus on the US core PCE and preliminary inflation data for the major economies of the Eurozone this week.
EUR/USD declines below the round-level support of 1.0700 in Wednesday’s American session. The major currency pair remains on the backfoot as the Euro’s near-term outlook weakens amid uncertainty over European Union (EU) legislative elections and growing speculation that the European Central Bank (ECB) could deliver subsequent rate cuts.
Fears over Eurozone elections intensified after French President Emmanuel Macron called for a snap election when his party suffered defeat in preliminary results from Marine Le PenÂ’s far-right National Rally (RN). The Euro could face more pressure if the shared continent sees a major policy shift.
Meanwhile, expectations for the ECB to deliver back-to-back rate cuts improve as the German economic outlook appears to be worsening due to weak demand prospects. Data showed on Monday that the German IFO Expectations index unexpectedly dropped to 89.0 from the estimates of 91.0 and the former release of 90.3 (downwardly revised from 90.4). On the data release, IFO President Clemens Fuest said, “The German economy is having difficulty overcoming stagnation.”
This week, investors will focus on preliminary June inflation data for Spain, France, and Italy, which will be published on Friday.Â
Daily digest market movers: EUR/USD weakens as US Dollar rises further
- EUR/USD comes under pressure as the US Dollar (USD) advances due to hawkish guidance on interest rates by Federal Reserve (Fed) policymakers, who continue to argue in favor of maintaining the current interest rate framework as they want to see a decline in inflation for months before considering rate cuts. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to a crucial resistance of 106.00. The United States (US) inflation declined more than expected in May, however, officials expect that a one-time decline in price pressures will be insufficient to make rate cuts appropriate.
- On Tuesday, Fed Governor Michelle Bowman delivered hawkish guidance on interest rates. Bowman said they are not at a point where rate cuts become appropriate. She pushed back expectations of rate cuts to 2025 and warned of more hikes if disinflation appears to stall or reverse.
- Contrary to the FedÂ’s hawkish outlook on interest rates, investors expect two rate cuts this year, and the policy-easing process will begin in the September meeting. For more cues on the interest rate outlook, investors await the core Personal Consumption Expenditures Price Index (PCE) data for May, which will be published on Friday.
- According to the estimates, the PCE inflation report will show that price pressures grew at a slower pace of 0.1% month-on-month from the prior release of 0.2%. Annually, the underlying inflation is expected to rise modestly by 2.6% from 2.8% in April. Soft inflation data would boost expectations of the Fed reducing interest rates in September, while hotter-than-expected figures would weaken them.
Euro Price Today:
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| Â | EUR | USD | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| EUR | Â | -0.41% | -0.01% | 0.05% | -0.15% | -0.36% | 0.30% | -0.16% |
| USD | 0.41% | Â | 0.40% | 0.48% | 0.28% | 0.03% | 0.69% | 0.26% |
| GBP | 0.00% | -0.40% | Â | 0.08% | -0.14% | -0.36% | 0.32% | -0.14% |
| JPY | -0.05% | -0.48% | -0.08% | Â | -0.23% | -0.47% | 0.21% | -0.24% |
| CAD | 0.15% | -0.28% | 0.14% | 0.23% | Â | -0.28% | 0.43% | -0.03% |
| AUD | 0.36% | -0.03% | 0.36% | 0.47% | 0.28% | Â | 0.66% | 0.22% |
| NZD | -0.30% | -0.69% | -0.32% | -0.21% | -0.43% | -0.66% | Â | -0.44% |
| CHF | 0.16% | -0.26% | 0.14% | 0.24% | 0.03% | -0.22% | 0.44% | Â |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical Analysis: EUR/USD auctions below 50-day EMA
EUR/USD falls slightly below the crucial support of 1.0700. The major currency pair faces selling pressure near the downward-sloping border of a Symmetrical Triangle in the daily chart near 1.0750, which is plotted from 28 December 2023 high around 1.1140. The pair trades below the 50-day Exponential Moving Average (EMA), which indicates that the short-term outlook 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.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Breaking: Japanese Yen drops to multi-decade lows against US Dollar, eyes on BoJ
398381 June 26, 2024 22:12 FXStreet Market News
The Japanese Yen (JPY) declined to its weakest level since 1990Â against the US Dollar on Wednesday, with USD/JPY touching 160.40 during the European trading hours.Â
On April 29, the Bank of Japan (BoJ) intervened in the foreign exchange (FX) market and triggered a sharp decline in USD/JPY after the pair hit 160.20. At the time of press, USD/JPY was trading a few pips above this level.
Japanese Finance Minister Shunichi Suzuki repeated earlier in the week that they will continue to take appropriate steps to respond to the declining value of the currency. Meanwhile, Japan Chief Cabinet Secretary Yoshimasa Hayashi said on Monday that excessive volatility in currency markets is undesirable and added that they will closely monitor the FX moves and take necessary steps if needed.
Bank of Japan FAQs
Gold declines on Fed comments
398379 June 26, 2024 22:09 FXStreet Market News
- Gold weakens after several Federal Reserve officials voice their reluctance to cut interest rates yet.Â
- The market continues to see a high probability of a cut in September, however.
- XAU/USD pulls back after a break higher invalidates orthodox H&S pattern. Â
Gold (XAU/USD) edges lower to around $2,310 on Wednesday as investors mull comments from Federal Reserve (Fed) officials, who continue to appear reluctant to cut interest rates amid stubbornly high inflation. The expectation that interest rates will remain elevated is negative for Gold as it keeps the opportunity cost of holding the non-coupon-yielding asset high.Â
Gold steadily declines on hawkish Fedspeak
Gold ticks marginally lower on Wednesday following an over-half a percent decline on the previous day. Several Fed officials came up to the speakersÂ’ stand one after another and said they think it is still too early to cut interest rates.Â
Fed Governor Lisa Cook said that “at some point, it will be appropriate to cut rates,” but added that maintaining them at their current level was the right strategy at the moment “to respond to the economic outlook.”
Fed Governor Michelle Bowman said on Tuesday that it was not yet appropriate to cut interest rates. Inflation data would have to be moving more sustainably towards the FedÂ’s 2.0% target before it was time to “gradually lower policy rate.” At the same time, she added that baseline estimates indicated that inflation was on its way down toward the target as long as the Fed keeps policy as it is “for some time.”
On Monday, San Francisco Fed President Mary Daly said she did not believe the Fed should cut rates before it was more confident that inflation was headed towards 2.0%. Yet she also cautioned not to focus too heavily on inflation to the detriment of the labor market. If unemployment continued to rise the Fed might have to cut rates to support businesses and maintain employment, according to Reuters.
The market-based probabilities of an interest-rate cut at (or before) the FedÂ’s September meeting have nudged lower overnight from 67% to 66%, according to the CME FedWatch tool, which calculates chances using Fed Funds futures prices. Such a cut would be a bullish event for Gold.Â
Of key interest to Gold traders will be the US Personal Consumption Expenditures (PCE) Price Index for May out on Friday, the Federal ReserveÂ’s (Fed) preferred inflation gauge. A lower-than-expected result would increase the chances of the Fed going ahead with an early rate cut and support Gold price. The opposite would be the case if inflation rises.Â
Technical Analysis: Gold creeps lower towards key supportÂ
Gold creeps lower towards key support and the neckline of a possible topping pattern at $2,279 – a break below that would signal a strong down move.Â
XAU/USD Daily Chart
Â
The XAU/USD pair has 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 possible.Â
If so, then a break below the patternÂ’s neckline at $2,279 would provide confirmation of a reversal lower, with a conservative target at $2,171, and a second target at $2,105.Â
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 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.Â
A break above that would confirm a resumption of the broader uptrend.Â
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.Â
Economic Indicator
Personal Consumption Expenditures – Price Index (YoY)
The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Industrial metals fail to generate material gains – TDS
398378 June 26, 2024 22:09 FXStreet Market News
As news and speculation continue to swirl about potential domestic consumer-based stimulus being announced at China’s third plenum in July, industrial metal prices have failed to generate any material gains, TDS Senior Commodity Strategist Ryan McKay notes.
Physical demand base metals is low
“Downside momentum has proven resilient despite these lingering hopes as our gauge of commodity demand continues to weaken amid a precarious global macro landscape.”
“Inventory levels of Copper continue to surge in China, while local premiums remain low, signaling little sign of physical demand to back to euphoric positioning in the West. Top SHFE traders have also liquidated their long positions recently and have now taken a net short overnight.”
“AUM for base metal specific ETFs have also notably declined, while money manager positioning is also starting to reverse. CTA positions remain safe with a large margin of safety before the next selling trigger, however as momentum eases the level is drifting closer to market at $9,298/t.”
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United States New Home Sales (MoM) below expectations (0.64M) in May: Actual (0.619M)
398377 June 26, 2024 22:05 FXStreet Market News
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FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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United States New Home Sales (MoM) came in at 0.619M below forecasts (0.64M) in May
398375 June 26, 2024 22:02 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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United States New Home Sales (MoM) came in at 619M, above forecasts (0.64M) in May
398374 June 26, 2024 22:02 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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The US Dollar extends gains against the major currencies
398373 June 26, 2024 21:56 Forexlive Latest News Market News
The US Dollar started to appreciate in the European session and it’s adding to the gains as we head towards the European close. There was no fresh catalyst this week that justifies the current price action.
This might be just noise from quarter-end and some flows from USD/JPY which broke through the key 160.00 handle and extended the rally as the Japanese officials look more and more armless.
Do note that we hit the limits of the average daily range across most major pairs, so we might start to see some pullbacks in the next hours.
Forex Heatmap