Articles

Gold weakens on Fed comments

398337   June 26, 2024 19:05   FXStreet   Market News  

• Gold weakens after several Federal Reserve officials voice their reluctance to cut interest rates yet. 
• 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.  

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. 

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 speakers’ stand one after another and said they think it is still too early to cut interest rates. 

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 Fed’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. 

Of key interest to Gold traders will be the US Personal Consumption Expenditures (PCE) Price Index for May out on Friday, the Federal Reserve’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. 

Technical Analysis: Gold creeps lower towards key support 

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. 

XAU/USD Daily Chart

 

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. 

If so, then a break below the pattern’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. 

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. 

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. 

US MBA mortgage applications w.e. 21 June +0.8% vs +0.9% prior

398336   June 26, 2024 19:02   Forexlive Latest News   Market News  

High risk warning:

Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading and seek advice from an independent financial or tax advisor if you have any questions.

Advisory warning:

FOREXLIVE™ is not an investment advisor, FOREXLIVE™ provides references and links to selected news, blogs and other sources of economic and market information for informational purposes and as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect’s individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically hereby acknowledges clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided on an “as-is” basis as a general market commentary and does not constitute investment or trading advice, and we do not purport to present the entire relevant or available public information with respect to a specific market or security. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information, or with respect to any of the content presented within its website, nor its editorial choices.

Disclaimer:

FOREXLIVE™ may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Finance Magnates CY Limited

United States MBA Mortgage Applications declined to 0.8% in June 21 from previous 0.9%

398335   June 26, 2024 19:02   FXStreet   Market News  

AUD/USD hits resistance near 0.6690 after rally inspired by hot Aussie Inflation

398332   June 26, 2024 18:51   FXStreet   Market News  

• AUD/USD loses some intraday gains as the US Dollar rises strongly.
• AussieÂ’s hot CPI report for May has prompted RBA rate-hike bets.
• Investors shift focus to the US core PCE Inflation report for May.

The AUD/USD pair surrenders some of its intraday gains after reaching to near 0.6690 in WednesdayÂ’s European session. The Aussie asset struggles to extend the rally inspired by the hotter-than-expected Australian monthly Consumer Price Index (CPI) data for May.

The data showed that price pressures grew at a robust pace of 4.0% from the estimates of 3.8% and the prior release of 3.6%. As per the inflation report, high prices of fuel, food, electricity and rentals were prompted inflationary pressures.

Stubbornly higher Australian inflation data has kept hopes of more rate hikes by the Reserve Bank of Australia (RBA) on table. Currently, the RBA has been maintaining its Official Cash Rate (OCR) at 4.35% from last eight months.

Meanwhile, the US Dollar (USD) rises to near the crucial resistance of 106.00 as the Federal Reserve (Fed) continues to support the maintenance of the current interest rate framework for a longer period. The US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, jumps to near the crucial resistance of 106.00. On Tuesday, Fed Governor Michelle Bowman said interest rates need to remain high for some time to bring inflation under control.

Contrary to FedÂ’s remarks on the interest rate outlook, market participants expect that the Fed will cut interest rates twice this year and will start the policy-normalization process from the September meeting.

On the economic front, investors await the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for May, which will be published on Friday.

AUD/USD: A slight chance of breaking above 0.6685 – UOB Group

398331   June 26, 2024 18:49   FXStreet   Market News  

For the time being, Australian Dollar (AUD) is likely to trade between 0.6600 and 0.6685, UOB Group strategists note.

A breach of 0.6685 is possible

24-HOUR VIEW: “AUD dipped to 0.6627 two days ago and then recovered to a high of 0.6668. Yesterday, we pointed out that ‘the recovery did not result in any clear increase of momentum.’ We added, “Instead of continuing to recover, AUD is more likely to consolidate between 0.6635 and 0.6675.’ Our view was not wrong, as AUD subsequently traded in a range of 0.6636/0.6673, closing slightly lower at 0.6648 (-0.13%). While we continue to expect AUD to trade in a range, the softened underlying tone suggests a lower range of 0.6625/0.6665.”

1-3 WEEKS VIEW: “Our update from two days ago (24 Jun, spot at 0.6640) is still valid. As indicated, the current price action is likely part of a range-trading phase. For the time being, AUD is likely to trade between 0.6600 and 0.6685.”

Mild dollar selling expected for month-end – CA

398330   June 26, 2024 18:46   Forexlive Latest News   Market News  

The selling of the dollar should be “mild” this month-end, with their model indicating the strongest sell signal to be against the euro. Meanwhile, the firm also notes that their corporate flow model suggests the euro currency to be in demand this month-end.

Just keep this in your back pocket in case, as we approach the final few trading days of June. As an aside, the time to watch for any of these shenanigans tends to be closer towards the London fix on the final day. But the flows can also crop up in the few sessions before.

USD/INR appreciates due to expiration of monthly futures contracts

398328   June 26, 2024 18:45   FXStreet   Market News  

• The Indian Rupee depreciates as the demand for US Dollar emerges due to expiration of monthly currency futures contracts.
• Indian bonds are scheduled to be included in the JP Morgan Emerging Market Bond Index on June 28.
• Higher crude prices limit the upside of the INR as India is the world’s third-largest Oil consumer.

The Indian Rupee (INR) loses ground as the demand for the US Dollar emerges, which could be attributed to the expiration of monthly currency futures contracts. However, the INR may limit its downside due to expectations of foreign inflows, as Indian bonds are set to enter the JP Morgan Emerging Market (EM) Bond Index on June 28.

The US Dollar extends its gains on Tuesday, supported by the advance of the US Treasury yields.  The recent comments by Federal Reserve (Fed) officials indicated that the central bank is not in a rush to start its rate-cutting cycle.

Investors await key US economic data releases later this week. The revised US Gross Domestic Product (GDP) for the first quarter (Q1) is scheduled to be released on Thursday, followed by the Personal Consumption Expenditure (PCE) Price Index on Friday.

Daily Digest Market Movers: Indian Rupee may limit its downside due to expected foreign inflows

• Foreign investors have already invested approximately $10 billion into the securities eligible to join JPMorganÂ’s index on June 28, according to Business Standard. Meanwhile, Goldman Sachs anticipates at least $30 billion more in inflows in the coming months as IndiaÂ’s weighting on the index steadily rises to 10%.
• The rise in crude oil prices, driven by expectations of strong summer driving demand, could pressure the Indian Rupee. As the world’s third-largest oil consumer after the United States and China, India is significantly impacted by fluctuations in oil prices.
• Reuters cited Fed Governor Michelle Bowman repeating her view on Tuesday that holding the policy rate steady for some time will likely be enough to bring inflation under control. Meanwhile, Fed Governor Lisa Cook said it would be appropriate to cut interest rates “at some point” given significant progress on inflation and a gradual cooling of the labor market, though she remained vague about the timing of the easing.
• 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.
• RBI Governor Shaktikanta Das stated on Tuesday 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.
• India is expected to become a $4 trillion economy in 2025, surpassing Japan by early next fiscal year to become the world’s fourth largest economy, according to Indian Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal.

Technical analysis: USD/INR hovers around the level of 83.50

The USD/INR trades around 83.50 on Wednesday. The daily chart analysis shows a broadening pattern, representing increasing volatility. This chart pattern suggests a potential correction before moving lower. The 14-day Relative Strength Index (RSI) is positioned below the 50 level, indicating a bearish bias.

The immediate support appears at the 50-day Exponential Moving Average (EMA) at 83.40. A break below this level could exert pressure on the USD/INR pair to navigate the region around the lower boundary of the broadening bottom around the level of 83.30.

On the upside, the USD/INR pair may find resistance at the upper boundary of the broadening formation around the level of 83.70, followed by the psychological level of 84.00.

USD/INR: Daily Chart

EUR: French election and US PCE to guide the EUR/USD – ING

398327   June 26, 2024 18:40   FXStreet   Market News  

EUR/USD is trading close to 1.07 following a soft session for risk sentiment on Tuesday, INGÂ’s analyst Francesco Pesole notes.

Rehn gives a nudge to market doves

“The OAT:Bund 10-year spread continues to hover around 75-80bp, which may well be the level at which it will approach the French election on Sunday. A poll of polls by Bloomberg published yesterday sees a widening of Marine Le Pen National Rally’s lead to over 35% with the leftist New Popular Front alliance stable at 28%.”

“ECB official Olli Rehn sounded relatively dovish in an interview this morning, saying that market pricing for two more rate cuts in 2024 looked ‘reasonable’. While investors aren’t hugely hinging on ECB communication at the current juncture, Rehn’s words were a signal of tolerance towards inflation bumps, which is a euro negative.”

“Still, EUR/USD price action into the weekend will be determined by French election positioning and Friday’s US PCE. We have a bias for a weakening in the pair today and tomorrow back to June’s lows (1.0670), before a rebound on Friday on encouraging PCE figures”.

USD/JPY slowly testing the waters above the 160.00 mark

398326   June 26, 2024 18:36   Forexlive Latest News   Market News  

It’s all a psychological game now when it comes to USD/JPY. The pair is testing waters above the 160.00 mark again, with traders cautious about jumping the gun and incurring the wrath of Japanese officials.

From a technical perspective, it’s clear skies for USD/JPY above 160.00 with the 1990 high merely seen at 160.40. Above that, it’s pretty much picking what you feel like. The more obvious one would be the 165.00 mark but again, a key question in all of this is how quick does price action race from here to there.

The ball is now over to the Japan MOF and BOJ’s court. Are they fine with relaxing the threshold and only stepping in again when traders get overeager? Or are they going to try and stamp their authority one way or another?

Pound Sterling drops from 1.2700 against USD ahead of US core PCE inflation

398324   June 26, 2024 18:35   FXStreet   Market News  

• The Pound Sterling declines against the US Dollar as investors shift focus to the US core PCE inflation data for May.
• UKÂ’s high wage inflation refrains BoE policymakers from committing to interest rate cuts.
• Uncertainty over the UKÂ’s parliamentary elections will keep the Pound Sterling on tenterhooks.

The Pound Sterling (GBP) weakens against the US Dollar (USD) in Wednesday’s London session. The recovery move in the GBP/USD pair from the more than five-week low of 1.2620 appears to have stalled near the round-level resistance of 1.2700 as investors shift focus towards the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for May, which will be published on Friday.

Investors will pay close attention to the US core PCE inflation data as it is the Federal ReserveÂ’s (Fed) preferred inflation gauge. This data will provide fresh cues about when and how far interest rates will be reduced this year. Annually, the underlying inflation data is estimated to have softened to 2.6% in May from the prior release of 2.8%, with monthly figures growing at a slower pace of 0.1% from 0.2% in April.

Currently, investors expect the Fed to kickstart its rate-cutting cycle at the September meeting and extend it further in November or December.

On the contrary, Fed policymakers continue to advocate maintaining interest rates at their current levels for longer until they get evidence that inflation will return to the desired rate of 2%. Fed officials want to see inflation declining for months to gain confidence in rate cuts and, therefore, delivering a hawkish guidance.

On Tuesday, Fed Governor Michelle Bowman supported the continuation of the current policy framework for some time to tame price pressures. She kept hopes of more rate hikes on the table if disinflation stalls or reverses. When asked about timing for rate cuts, Bowman said she doesnÂ’t see any this year.

Daily digest market movers: Pound Sterling weakens against Australian Dollar and USD

• The Pound Sterling performs strongly against a majority of its peers as fears of policy divergence have intensified due to strong wage growth in the United Kingdom. However, the Pound weakens against the Australian Dollar and the USD. AustraliaÂ’s monthly Consumer Price Index (CPI) rose strongly by 4.0% from expectations of 3.8% and the prior release of 3.6%, which weighed on expectations of more rate cuts by the Reserve Bank of Australia (RBA).
• Unlike the Swiss National Bank (SNB), the Bank of Canada (BoC), and the European Central Bank (ECB), which have begun their policy-easing cycle, the Bank of England (BoE) has not committed to rate cuts in the near term.
• The UKÂ’s high wage growth keeps inflation persistent in the service sector, making interest rate cuts inappropriate in the current situation. Although headline inflation has returned to the desired rate of 2%, officials see service inflation as a preferred measure for decision-making on interest rates and want it to decline for months to gain confidence in lowering borrowing rates.
• Currently, investors expect that the BoE will start reducing interest rates from the August meeting. Meanwhile, political uncertainty in the UK economy is expected to keep the Pound Sterling on its toes. Market participants expect that the opposition Labour Party has the upper hand in parliamentary elections on the Conservative Party. The first round of UK parliamentary elections will commence on July 4. 

Pound Sterling Price Today:

Technical Analysis: Pound Sterling drops from 1.2700

The Pound Sterling faces pressure near 1.2700 against the US Dollar. The GBP/USD pair continues to find sellers near the 20-day Exponential Moving Average (EMA), which trades around 1.2700. Meanwhile, the 50-day EMA is acting as support at around 1.2670.

The Cable trades above 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.

ECB’s Panetta: ECB will pursue normalization gradually and smoothly

398323   June 26, 2024 18:34   FXStreet   Market News  

European Central Bank (ECB) executive board member Fabio Panetta said on Wednesday that the current economic environment in the Eurozone is consistent with a normalization of the monetary stance, per Reuters.

Panetta noted that the ECB will pursue a gradual and smooth normalization, while avoiding even a ‘casual forward guidance’ on the timing of rate moves.

Market reaction

The Euro struggles to find demand following these comments. At the time of press, EUR/USD was trading at 1.0682, where it was down 0.3% on a daily basis.

Japanese Yen nears critical 160.00 level as JapanÂ’s 10-year rate hits 1%

398322   June 26, 2024 18:33   FXStreet   Market News  

• The Japanese Yen softens further, flirting with a break above 160.00.
• With pressure building to the upside in USD/JPY, the risk of a hard correction grows.
• The US Dollar Index pops higher after some hawkish Fed comments. 

The Japanese Yen (JPY) weakens again on Wednesday in a near 10-day losing streak that only had one hiccup on the way up. Traders are dipping their toes in the water to see if the Japanese Ministry of Finance is set to intervene in forex markets. Meanwhile, the Bank of Japan is still unclear on when, how and if it will cut its debt-buying program. 

Meanwhile, the DXY US Dollar Index – which gauges the value of the US Dollar (USD) against a basket of six foreign currencies – is stronger with the help from the depreciation of the Japanese Yen. The other heavyweight in the basket, the Euro, is not helping either as uncertainty builds up ahead of the French snap elections on Sunday and German consumer confidence deteriorates further. This gives the DXY a boost from outside help even though the Greenback looks overvalued seeing recent economic data. 

Daily digest market movers: Empty calendar ahead

• Gareth Berry, the FX and Rates strategist from Macquarie, is expecting the USD/JPY pair to fall to 120.00. This squeeze lower is expected to happen in the next 18 months, Bloomberg reports. 
• Head of sales and trading business at Mitsubishi UFJ Trust and Banking Corporation Takafumi Onodera noted that the Japanese authorities will not intervene until FridayÂ’s US Personal Consumption Expenditures (PCE) print. A stronger-than-expected report could spur volatility and send the Yen hurtling toward 163.00 against the US Dollar, spurring officials to make a “rate check” or intervene during a period of thin liquidity. Rate checks warn traders that authorities may be preparing to step in to support the Yen. 
• At 11:00 GMT, the Mortgage Bankers Association (MBA) will release the weekly Mortgage Application numbers for the week ending on June 21. Mortgage applications rose by 0.9% the previous week.
• At 14:00 GMT, New Home Sales data for May will come out. Analysts expect sales to increase slightly to 640,000 from AprilÂ’s 634,000. 
• The US Treasury will allot a 5-year Note in the markets at 17:00 GMT. 
• The Federal ReserveÂ’s Bank Stress Test report will come out at 20:30 GMT. 
• Equities are recovering after Nvidia (NVDA) was able to eke out gains on Tuesday at the US closing bell. The main indices in Asia are all in the green, and even the Dax and the pan-European index, Euro Stoxx 50, are recovering. US futures are rather mixed, with the Dow Jones Industrial futures in the red against Nasdaq futures in the green, and the S&P 500 caught in the middle. 
• The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 57.9% for a 25-basis-point cut. A rate pause stands at a 35.9% chance, while a 50-basis-point rate cut has a slim 6.2% possibility. 
• The Overnight indexed Swap curve for Japan shows a 56.6% chance for a rate hike on July 31, and a smaller 49.6% chance for a hike on September 20. 
• The US 10-year benchmark rate trades near the weekly high at 4.27%.
• The benchmark 10-year Japan Treasury Note (JGB) trades around 1.023%, breaking above 1% for the first time since June. 

USD/JPY Technical Analysis: Everyone looking in the same direction

The USD/JPY pair is flashing red warning lights as price action overheats too much. The best evidence is the Relative Strength Index (RSI), which is close to overbought conditions in the daily chart, while the magic 160.00 level, where Japanese authorities intervened last time, is very near. Do not expect a snap reaction immediately, as authorities will want to see if US data on Thursday and Friday could trigger some easing without sticking their neck out and intervening. At max, 163.00 on the upside could be tested on stronger US data in the coming days, while on the downside, that 151.95 level is again the pivotal support to watch.