The Nasdaq Composite and the S&P 500 ended their three-day losing streaks on Thursday, propelled by renewed investor interest in tech stocks. The Nasdaq, a tech-heavy index, surged by 0.95% to 13,630.61, while the S&P 500 rose 0.37% to 4,381.89, with both indices closing near session highs.

In contrast, the Dow Jones Industrial Average dipped slightly by 0.01% to 33,946.71. The market appeared to be in a state of pause, noted the balance between the bull and bear market sentiments, implying increased volatility and uncertainty ahead.

Investors seized the opportunity to buy major tech stocks that experienced declines earlier in the week. Tesla’s shares, despite being downgraded by a second Wall Street bank, rebounded and closed higher. Amazon’s shares surged by over 4%, Microsoft climbed 1.8%, and Apple reached a new all-time high.

However, concerns loomed in other sectors, as Boeing supplier Spirit AeroSystems saw a significant drop of over 9% due to a halt in production caused by an upcoming worker strike. Additionally, Boeing’s shares fell by over 3%, impacting the Dow’s performance.

Wednesday’s decline in the S&P 500, which marked its worst daily performance in June, was attributed to Federal Reserve Chair Jerome Powell’s statement indicating the likelihood of further interest rate hikes to combat inflation. Powell’s remarks disappointed investors who had hoped the central bank was nearing the end of its tightening cycle.

The Bank of England also raised interest rates by 50 basis points, continuing its streak of consecutive increases. The persistence of central banks worldwide in their inflation-fighting stance, even at the expense of economic growth, contributed to the overall market weakness.

Data by Bloomberg

On Thursday, across all sectors, the market experienced a slight increase of 0.37%. Among the specific sectors, Consumer Discretionary showed the highest gain with a growth of 1.53%, followed by Communication Services with a rise of 1.15%, and Information Technology with an increase of 0.92%. Health Care and Consumer Staples also saw modest gains of 0.65% and 0.51%, respectively.

However, Materials and Industrials sectors both suffered declines, with Materials showing a decrease of 0.29% and Industrials experiencing a larger decline of 0.71%. Financials, Utilities, and Energy sectors all had negative performance as well, with declines of 0.74%, 0.76%, and 1.30% respectively. Real Estate had the largest decline among the sectors, with a decrease of 1.44%.

Major Pair Movement

On Thursday, the oversold dollar index initially declined but later rebounded as Treasury yields rose and the Federal Reserve expressed a more hawkish stance, leading to risk-off flows. Despite the Bank of England’s aggressive 50bp rate hike and signs of high UK inflation, the pound struggled to surpass June’s highs, causing traders to take profits. A similar setback occurred in the EUR/USD pair, which failed to make significant progress above 1.10.

Concerns arose that the BoE and ECB were lagging behind in addressing inflation, potentially causing more widespread damage to the UK and eurozone economies compared to the United States. The dollar experienced a brief decline following higher-than-expected initial jobless claims, but this reversed as continued claims came in below forecast and the Fed Chair emphasized gradual rate hikes to manage inflation without severe economic consequences.

EUR/USD ended with a 0.28% loss, and GBP/USD was down 0.25% despite expectations of a 25bp rate hike. The market is monitoring the 10-day moving average as a potential support level for GBP/USD. If the spread between 2-year gilts and Treasury yields remains positive, there may be a pullback in the pound, enticing new buyers. USD/JPY and other yen crosses reached new highs as the yen weakened due to the contrast between the Bank of Japan’s negative rates and the rising rates of other major central banks.

Technical analysis suggests a bullish close above a certain level is imminent. On Friday, market participants will pay attention to Japanese core CPI, UK retail sales, and flash PMI readings as key event risks.

In summary, the dollar index initially declined but later recovered, driven by rising Treasury yields and a hawkish Federal Reserve. The pound and EUR/USD faced setbacks despite aggressive rate hikes, raising concerns about the central banks’ ability to address inflation effectively.

The dollar experienced a temporary dip after initial jobless claims exceeded expectations but rebounded as continued claims were lower than forecasted. The yen weakened against the dollar and other currencies due to the divergence in interest rate policies among major central banks.

Technical indicators point to potential support and bullish momentum in certain currency pairs. Notable event risks on Friday include Japanese core CPI, UK retail sales, and flash PMI readings.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Hits Multi-Month High but Retreats as US Dollar Recovers

The EUR/USD pair reached its highest level in months at 1.1011, but failed to sustain above the 1.1000 mark and corrected to around 1.0950. The US Dollar regained strength, causing the pair to decline. Expectations surrounding the European Central Bank (ECB) were overshadowed by Federal Reserve Chair Powell’s testimony, which hinted at the likelihood of more rate hikes.

Analysts are currently discussing the ECB’s final interest rate decision. Some predict a single hike in July to 3.75%, while others suggest an additional hike in September, raising the rate to 4%. These actions will depend on various factors, primarily the Consumer Price Index.

The upcoming release of the flash Purchasing Managers’ Index (PMI) for June on Friday will hold significance. Projections indicate a potential increase in German Manufacturing PMI to 43.5, while the Service PMI is expected to decline from 57.2 to 56.2. The Eurozone Manufacturing PMI is anticipated to remain at 44.8, with the Service PMI predicted to decrease from 55.1 to 54.5.

On Thursday, US yields rose, providing support to the US Dollar. After three days of decline, the US Dollar Index climbed back above the 102.00 level. Chair Powell reiterated that interest rates are likely to rise in the coming months, with the Federal Reserve’s decision relying on a balance between economic performance and inflation indicators.

Thursday’s data revealed that Initial Jobless Claims reached their highest level since October 2021, but there was a positive note with an increase in Existing Home Sales. The June PMI figures, to be released on Friday, will be closely monitored.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair experienced a correction move on Thursday and was able to break inside the support and resistance levels and move back to the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 53, indicating that the EUR/USD is back in a neutral stance for the last day of the week.

Resistance: 1.0965, 1.1003

Support: 1.0920, 1.0890

XAU/USD (4 Hours)

US Dollar Appreciates as XAU/USD Hits Lowest Level in Months

The US Dollar strengthened, causing XAU/USD to reach its lowest point since mid-March. The currency pair, currently trading slightly above the $1,912.78 mark, has declined for four consecutive days. Despite some initial struggles, the USD remained robust, especially after Federal Reserve Chairman Jerome Powell’s testimony on the Semi-Annual Monetary Policy Report before the Senate Banking Committee. Powell indicated that the committee largely supports one or two more rate hikes, while rate cuts are not expected. He acknowledged the persistent nature of inflation but expressed the desire for confidence in its downward trajectory.

Simultaneously, disappointing macroeconomic data in the United States added to concerns and exerted additional pressure on high-yield stocks. Initial Jobless Claims for the week ending June 16 exceeded expectations at 264K, while the Q1 Current Account showed a deficit of $219.3 billion. Additionally, the May Chicago Fed National Activity Index unexpectedly declined to -0.15, and May Existing Home Sales saw a modest 0.2% increase, surpassing the projected -0.6% decrease.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower and created a push to the lower band of the Bollinger Bands. There is potential for a slight upward movement, aiming to reach the middle band. Currently, the Relative Strength Index (RSI) is at 26, indicating that the XAU/USD is in an oversold stance.

Resistance: $1,930, $1,950

Support: $1,912, $1,885

Economic Data

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In a temporary halt to the recent market rally, stocks experienced a decline on Wednesday. Investor sentiment was influenced by Federal Reserve Chair Jerome Powell’s remarks on inflation. The Dow Jones Industrial Average dropped 0.30%, the S&P 500 declined by 0.52%, and the Nasdaq Composite slid 1.21%, marking the third consecutive day of losses for all three indexes.

The pullback was particularly evident among major tech stocks that had seen significant gains due to the hype around artificial intelligence. Amazon shares fell by approximately 0.8% following a lawsuit by the Federal Trade Commission, accusing the company of misleading customers and obstructing cancellation attempts. Nvidia, which witnessed an impressive 200% surge this year, saw a 1.7% decrease. Google-parent Alphabet and Netflix also experienced declines of over 2%.

The decline in stocks was further fueled by disappointing earnings reports. FedEx shares fell over 2% after reporting weaker-than-expected revenue for the last quarter, while Winnebago’s shares dropped nearly 1.3% due to the company’s failure to meet third-quarter revenue estimates.

Investor attention was also drawn to Powell’s statements, where he indicated the likelihood of future interest rate hikes in response to combating inflation. Although the central bank refrained from raising rates after 10 consecutive hikes, Powell mentioned the possibility of two more quarter-percentage-point moves this year. This cautious outlook contributed to the pause in the recent market exuberance, as investors reassessed their positions following the S&P 500’s highest level since April 2022 and its five consecutive positive weeks.

Data by Bloomberg

On Wednesday, there were varied price changes across different sectors. The energy sector experienced a positive gain of 0.92%, followed by utilities with a gain of 0.84%, and industrials with a gain of 0.57%. Consumer staples and materials sectors also saw modest gains of 0.39% and 0.35% respectively. Health care had a minimal increase of 0.06%.

However, some sectors experienced losses. The largest decline was observed in the information technology sector, which had a decrease of 1.41%. This was followed by communication services with a decline of 1.35%, and consumer discretionary with a decline of 1.17%. The financials sector also experienced a slight decrease of 0.19%. Real estate had the largest loss among the sectors, with a decline of 0.45%.

Major Pair Movement

On Wednesday, the dollar index experienced a 0.45% decline as Fed Chair Jerome Powell’s testimony and comments indicated uncertainty about the extent of future policy tightening by the U.S. central bank. Powell’s comparison of the gradual tightening to slowing down a car as it approaches its destination worried dollar traders, leading to further losses.

Meanwhile, EUR/USD rose by 0.65%, surpassing previous highs after the Fed and ECB meetings, and approaching the significant psychological barrier of 1.10. The market expects two more rate hikes from the ECB before a prolonged plateau, while only one additional hike from the Fed is anticipated before rate cuts begin next year.

Sterling initially experienced losses but later recovered, returning to a flat position. Concerns about the UK’s inflation, which reached its highest level since 1992 at 7.1% in April, raised worries that the Bank of England (BoE) would need to implement substantial tightening measures, potentially leading to a challenging economic situation.

Market uncertainty regarding the extent of rate hikes by the BoE resulted in a 10-basis point increase in two-year gilts yields. However, expectations remain steady at a total of 150 basis points of hikes and a terminal rate of 6%. The doubts surrounding additional Fed hikes pulled the sterling up from its 10-day moving average support level of 1.2691, edging closer to Tuesday’s highs.

On the other hand, the Bank of Japan (BoJ) maintained its negative policy rate, implemented yield curve control, and engaged in extensive asset purchases. This policy contrast with other central banks, including the Fed, propelled USD/JPY to new highs in 2023 at 142.37.

However, significant resistance at 142.50 prevented further gains. To surpass this resistance, USD/JPY may require support from U.S. jobless claims data on Thursday and Japan’s consumer price index (CPI) release on Friday, reinforcing the bullish divergence between the Fed and BoJ policies.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Surges as Euro Outperforms and US Dollar Weakens amid Fed Chair Powell’s Comments

The EUR/USD pair experienced a surge on Wednesday, reaching its highest level in a month at 1.0989, with the Euro displaying strength while the US Dollar weakened due to lower Treasury yields. Federal Reserve Chair Powell’s comments during his testimony to the House Financial Services Committee provided no surprises.

In contrast, the German IFO Institute warned of a sharper-than-expected German recession, leading to uncertainty about the European Central Bank’s (ECB) future rate hikes. However, ECB members Schnabel and Nagel remained hawkish, suggesting more work needs to be done. Despite UK inflation numbers, the Euro continued to outperform, particularly against the GBP.

Meanwhile, Fed Chair Powell reiterated the FOMC’s message from the recent monetary policy meeting, emphasizing potential rate hikes if the economy performs as anticipated. The US Dollar faced additional pressure as US yields turned negative, pushing the EUR/USD closer to the 1.1000 level. While no significant data from the European Union was expected on Thursday, the US would release Jobless Claims and Existing Home Sales reports. Furthermore, the Bank of England’s decision could potentially impact the markets.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair experienced a strong movement on Wednesday and able to break our resistance level and create a push to the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 74, indicating that the EUR/USD is back in a bullish trend which can create another higher movement.

Resistance: 1.1003, 1.1034

Support: 1.0920, 1.0957

XAU/USD (4 Hours)

XAU/USD Recovers from Three-Month Low as US Dollar Loses Momentum on Powell’s Comments

The price of gold (XAU/USD) bounced back from a recent three-month low of $1,919.12 per troy ounce as the US Dollar lost steam following statements made by Federal Reserve Chairman Jerome Powell. Initially, the Greenback had strengthened in anticipation of a hawkish stance from the Fed chief.

However, Powell’s remarks, which echoed the latest Federal Open Market Committee (FOMC) Minutes, indicated that while the US economy was growing at a modest pace and the labour market remained tight, inflation was gradually decreasing, and consumer strength was waning.

This assurance alleviated market concerns, leading to a recovery in stock markets and a decline in the US Dollar against major currencies.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower and has reached the lower band of the Bollinger Bands. There is potential for a slight upward movement, aiming to reach the middle band. Currently, the Relative Strength Index (RSI) is at 38, indicating that the XAU/USD is bearish but still in a neutral stance.

Resistance: $1,939, $1,950

Support: $1,932, $1,924

Economic Data

Stocks experienced a decline on Tuesday, marking the first trading day of the week, as the market took a breather after a recent rally that had propelled it to levels not seen in over a year. The Dow Jones Industrial Average fell by 245.25 points (0.72%) to reach 34,053.87, while the S&P 500 and Nasdaq Composite declined by 0.47% and 0.16%, respectively.

Energy stocks, along with Intel, Nike, and Boeing, weighed on the market with notable drops of more than 3%. Conversely, homebuilders, including PulteGroup, D.R. Horton, and Lennar, outperformed following a robust housing report. Nvidia also defied the downward trend, posting a gain of over 2% amidst the broader market decline.

Investors were coming off a strong week, with the S&P 500 and Nasdaq Composite delivering their best weekly performances since March. The S&P 500 rose 2.6% and the Nasdaq gained 3.25%, while both indexes reached their highest levels since April 2022. The market responded favourably to the Federal Reserve’s decision to skip a rate hike in June, although policymakers are projecting two quarter-point increases later in the year.

Despite uncertainties surrounding future Fed policies, investor bullishness has been on the rise, reaching its highest level since November 2021. As economic data remains limited in the current shortened trading week, traders are closely monitoring market sentiment and its potential impact on stock performance.

Data by Bloomberg

On Tuesday, the overall market performance showed a decline of 0.47% across all sectors. However, there were a few sectors that experienced positive movement. Consumer Discretionary had a gain of 0.75%, indicating increased consumer spending on non-essential goods.

In contrast, Health Care saw a slight decrease of 0.15%. Communication Services and Information Technology both experienced declines of 0.29% and 0.44% respectively.

Financials had a larger decline of 0.69%, while Consumer Staples and Industrials experienced decreases of 0.75% and 0.76% respectively. Real Estate and Utilities were among the sectors with the largest declines, with decreases of 1.11% and 1.17% respectively.

Materials and Energy had the most significant declines, with decreases of 1.26% and 2.29% respectively, indicating a negative trend in these sectors.

Major Pair Movement

Last week, the US dollar and Japanese yen experienced declines against major currencies, which were corrected this week. The correction came ahead of Federal Reserve Chair Jerome Powell’s upcoming testimony and was driven by factors such as the Fed’s pause in rate hikes, the ECB’s ongoing rate-hiking efforts, and the Bank of Japan’s commitment to maintaining its easing policies.

The euro faced pressure due to a drop in German PPI and the euro zone’s current account surplus. Additionally, the market responded to a significant increase in US housing starts. Meanwhile, the UK pound fell after a sharp surge, and the yen strengthened against the Australian dollar, pound, and euro, influenced by Treasury yields and safe-haven demand.

This week, all eyes are on Powell’s testimony as the market seeks clarity on the Fed’s future monetary policy direction. Market expectations currently suggest only one more rate hike, contrasting with the Fed’s projection of two additional hikes. Meanwhile, the euro is anticipated to see a slower retreat compared to the US dollar, with the market pricing in two more rate hikes by the ECB.

In the UK, there is anticipation around the BoE meeting and the possibility of a rate hike. The market currently prices in a 25 basis point hike, with a chance of a 50 basis point hike. Overall, market dynamics and central bank actions continue to shape currency movements, with investors closely monitoring economic indicators and policy announcements.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Falls as China’s Rate Cut Fails to Calm Markets, US Dollar Gains Momentum

The EUR/USD pair experienced a decline, reaching 1.0891, as market sentiment turned sour, favouring the US Dollar. Concerns about China’s economic health intensified after the local central bank, the People’s Bank of China (PBoC), lowered key interest rates by 10 bps.

However, financial markets remained skeptical of the effectiveness of the rate cuts and sought refuge in the American currency. European Central Bank (ECB) Governing Council member Olli Rehn’s comments on the gradual easing of underlying inflation did not surprise the market, reinforcing the central bank’s previous message.

In addition, disappointing Eurozone data, including the lower-than-expected April Current Account surplus and a decline in Construction Output, contributed to the Euro’s weakness. The US Dollar received a final boost from positive US economic indicators, with Building Permits rising by 5.2% MoM in May and Housing Starts surging 21.7%, surpassing market expectations.

As anticipation builds for Federal Reserve (Fed) Chairman Jerome Powell’s semi-annual testimony before Congress, the US Dollar maintains its strength, with his remarks and subsequent Q&A session expected to influence the markets.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair experienced a flat movement on Tuesday and created a narrower range for the upper and lower bands of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 56, indicating that the EUR/USD is back in a neutral stance before deciding on the next movement.

Resistance: 1.0963, 1.1034

Support: 1.0892, 1.0803

XAU/USD (4 Hours)

XAU/USD Plummets as US Traders Return Amid Economic Concerns and Positive US Data

The price of gold (XAU/USD) experienced a significant drop as American traders resumed trading after a long weekend, resulting in a decline of approximately $20, reaching a low of $1,929.94 per troy ounce. This decline was influenced by the strengthening US dollar due to worries about China’s economic slowdown. The People’s Bank of China (PBoC) reduced two key lending rates for the first time since August of the previous year, surprising the market with a 10-basis point cut that fell short of expectations.

While the US dollar initially struggled, it gained momentum after the release of optimistic US macroeconomic data, including a remarkable 21.7% surge in Housing Starts and a 5.2% increase in Building Permits for May, as reported by the US Census Bureau.

Although Asian and European stock markets experienced minor losses, Wall Street saw a significant decline, with the three major indexes down by around 1% each. Meanwhile, demand for government bonds kept Treasury yields in check, with the 10-year note currently offering 3.71%, reflecting a 5-basis point decrease on the day.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower and has reached the lower band of the Bollinger Bands. There is potential for a slight upward movement, aiming to reach the middle band. Currently, the Relative Strength Index (RSI) is at 41, indicating that the XAU/USD is still in a neutral stance.

Resistance: $1,950, $1,963

Support: $1,932, $1,924

Economic Data

Sydney, Australia, 19 June 2023 – Over a month into the campaign, the King of the Hill Trading Contest, organised by leading online trading platform VT Markets, has been a rousing success thus far. The contest, which began on 1 May 2023, has attracted over 200 participants from 14 countries worldwide, all competing for international recognition and a share of the whopping total prize pool of US$60,000.

Traders across Europe, Southeast Asia, and Greater China are competing to see who can grow the most profits and be the King of the Hill. As of writing, the Southeast Asia competition has the highest profit margins, with the competing traders racking up $7679.51 so far, compared to Europe’s $1249.17 and Greater China’s $3,283.45. Southeast Asia also has the highest profit rates of all the regions. Most profits have been generated through trading XAUUSD, GBPJPY, and BTCUSD, which have been the three most popular trading products at the contest’s halfway mark.

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In observance of the Juneteenth holiday, the regular trading session was suspended on Monday, providing investors with a break after a positive week. Despite minor slips on Friday, the S&P 500 and the Nasdaq Composite recorded their best weekly performances since March, with the S&P 500 rising by 2.6% and the Nasdaq adding 3.25%.

The Federal Reserve’s decision to hold off on a June rate hike was well-received by investors, contributing to the market’s upward momentum. While upcoming economic data is limited, investors remain optimistic about the market’s direction as they await the release of housing starts data and prepare for key appearances by Federal Reserve officials.

Fed Chair Jerome Powell’s remarks at a press conference last week indicated that the central bank has yet to finalize its policy decisions ahead of the July meeting. However, the decision to skip a June rate hike broke the Fed’s streak of ten consecutive interest rate increases. Despite the uncertainty surrounding future Fed policy, stocks have continued to rise, reflecting investors’ confidence.

Looking ahead, investors will closely monitor the housing starts data scheduled for release on Tuesday, while also anticipating appearances by New York Fed President John Williams, Fed Vice Chair for Supervision Michael Barr, and Fed Chair Jerome Powell, who is set to testify before Congress later in the week. Additionally, the market will pay attention to the quarterly report from shipping giant FedEx, which will be released after the closing bell on Tuesday.

Data by Bloomberg

On Friday, the overall performance of the market showed a decline, with all sectors experiencing negative movements except for utilities, materials, and consumer staples. The sectors that saw positive gains were utilities with +0.53%, materials with +0.11%, and consumer staples with +0.05%.

On the other hand, the sectors that recorded losses were health care with -0.01%, energy with -0.11%, real estate with -0.11%, industrials with -0.15%, consumer discretionary with -0.18%, financials with -0.22%, information technology with -0.82%, and communication services with -1.00%. These sectors experienced varying degrees of decline, with information technology and communication services being the hardest hit.

Major Pair Movement

In the currency markets, the British pound (GBP) remains strong despite a slight dip of 0.25%. This comes as good news for the Bank of England (BoE) and inflation, as UK supermarkets report a decrease in food production costs for the first time since 2016. The easing of food price inflation contributes to the positive outlook for the British economy.

Meanwhile, the Australian dollar (AUD) has recovered against the US dollar (USD), rising above the 0.6859 level after reaching a low of 0.6835 on Monday. The AUD/JPY cross also saw a boost, increasing by 0.50% from its lowest point. The upcoming release of the Reserve Bank of Australia (RBA) minutes is expected to impact market pricing and potentially influence the RBA’s decision regarding interest rates in July. Currently, the market is anticipating a 58% chance of a 25-basis point hike to 4.35%.

Regarding the USD/JPY pair, the uptrend remains intact, but there are concerns about a divergence in the Relative Strength Index (RSI). In thin trading due to a holiday, USD/JPY has held within a narrow range of 141.50-142.00. The Bank of Japan (BoJ) continues to adopt a dovish stance, preventing excessive appreciation of the yen.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Trades with Modest Losses as Speculative Interest Remains Optimistic

The EUR/USD pair experienced slight declines in a quiet Monday session as the markets digested last week’s central bank activities. Speculative interest grew more optimistic as the tightening cycle neared its end, potentially averting potential recessions, and inflation gradually eased from its mid-2022 peak. The US Dollar strengthened due to position adjustments following last week’s sell-off but remained fundamentally weak, reflecting the prevailing preference for riskier assets. While the Eurozone’s macroeconomic calendar had limited impact, statements from European Central Bank (ECB) members, such as Philip R. Lane and Isabel Schnabel, elevated expectations for additional rate hikes. Lane deemed a hike in July appropriate, with September’s decision dependent on data, while Schnabel expressed concerns about past underestimations of inflation and suggested the potential for further rate increases this year. Looking ahead, upcoming releases of the April Current Account and Construction Output in the EU, along with May Building Permits and Housing Starts in the United States (US), will provide further insights. Additionally, Federal Reserve (Fed) Chairman Jerome Powell’s upcoming testimony before Congress on Wednesday may offer fresh clues on future monetary policy directions.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moves slightly lower on Monday as the US market is in holiday reaching the middle band of the Bollinger Bands, with the potential to reach slightly lower before goes back higher. The Relative Strength Index (RSI) is currently at 58, indicating that the EUR/USD now in slowly back to the neutral stance.

Resistance: 1.0982, 1.1034

Support: 1.0892, 1.0803

XAU/USD (4 Hours)

XAU/USD Trades Range-bound as US Markets Observe Juneteenth Holiday

Spot Gold (XAU/USD) traded within a narrow range around $1,950 on a quiet Monday, as US markets were closed for the Juneteenth Holiday and the macroeconomic calendar lacked significant events. The metal eased slightly as the US Dollar corrected from oversold conditions, but overall market sentiment remained positive, with Asian and European shares posting minor losses. This week’s focus lies on Federal Reserve Chairman Jerome Powell’s congressional testimony and the Bank of England’s monetary policy decision. Powell’s statements, usually released beforehand, will draw speculation as they may provide insights into future monetary policy. The BoE is expected to implement a 25 basis points rate hike while keeping the possibility of additional increases open, with market players eyeing a terminal rate of 6% in early 2024.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower and just break below the middle band of the Bollinger Bands, with the potential of moving lower move to reach the support level and the lower band of the Bollinger Bands. Currently, the Relative Strength Index (RSI) is at 43, indicating that the XAU/USD is in neutral stance but slightly bearish.

Resistance: $1,963, $1,972

Support: $1,939, $1,932

This week, markets brace for key events, including interest rate releases from the Bank of England and Swiss National Bank. Traders are expected to monitor these crucial announcements to shape their strategies and gain insights into the financial landscape. Stay tuned for a round-up of significant market developments. 

UK Consumer Price Index (21 June 2023)

UK’s CPI fell to 8.7% year-on-year in April 2023, the lowest since March 2022, due to a sharp slowdown in electricity and gas prices. 

The next CPI data is set to be released on 21 June, with analysts expecting the index to drop further to 8.4%.

Swiss National Bank Rate Statement (22 June 2023)

The SNB raised its policy rate by 50 bps to 1.5% in its March meeting, following a similar move in December 2022. 

Some analysts expect the next rate hike will be by another 50bps to 2.0%.

Bank of England Rate Statement (22 June 2023)

The BoE raised the bank rate by 25bps to 4.5% in May 2023, marking the twelfth consecutive rate increase. 

Some analysts anticipate that the next rate hike will amount to an additional 25 bps, bringing the interest rate to 4.75%.

German, UK and US Flash Manufacturing PMI (23 June 2023)

In May 2023, Germany’s Manufacturing PMI rose slightly to 43.2 but remained at a three-year low, while the UK’s and US’s PMIs dropped to 47.1 and 48.4, respectively. 

Analysts predict Manufacturing PMIs for June 2023 as follows: Germany at 43, the UK at 46.5, and the US at 49.7.

German, UK and US Flash Services PMI (23 June 2023)

In May 2023, US Services PMI dipped to 54.9 but remained robust since April 2022, while Germany’s hit a year-high of 57.2. The UK’s reached 55.2, marking four months of growth. 

Analysts predict Services PMIs for June 2023 as follows: Germany at 57.5, the UK at 54.4, and the US at 53.

On Thursday, the Dow Jones Industrial Average experienced a significant rally, surging over 400 points, and the S&P 500 reached a 13-month high. Investors speculated that the Federal Reserve would refrain from further interest rate hikes after the central bank decided to skip a hike this week.

The Dow Jones rose by 428.73 points (1.26%), closing at 34,408.06, while the S&P 500 increased by 1.22% to finish at 4,425.84, and the Nasdaq Composite gained 1.15% to close at 13,782.82. The market saw lower bond yields and continued strong performance in the technology sector.

Investors are now considering whether value and cyclical stocks can catch up to the growth and tech sectors. If this occurs, it could fuel further market gains. The S&P 500 is currently on its longest winning streak since November 2021 and is poised for its strongest weekly gain since March.

The index has risen 23% from its October low and 15% year-to-date. The Nasdaq has also performed well, with a gain of over 31% in 2023. Tech giants like Microsoft, Oracle, and Alibaba experienced notable stock increases, further contributing to the market upswing.

During a post-meeting press conference on Wednesday, Fed Chair Jerome Powell stated that the Federal Open Market Committee would consider the cumulative impact of monetary policy tightening over the next six weeks before making a decision on the July policy move. Investors responded positively to Powell’s remarks, indicating a willingness to take risks despite lingering uncertainty.

Powell reiterated that the central bank is likely to raise rates later this year but emphasized that their decisions would depend on monthly data. Economic data released on Thursday, including jobless claims and retail sales figures, provided investors with a better understanding of the labour market and consumer spending trends.

Data by Bloomberg

On Thursday, all sectors in the market experienced gains, with the overall market increasing by 1.22%. The health care sector led the way with a notable increase of 1.55%, followed closely by communication services and industrials, both rising by 1.54% and 1.51%, respectively. Information technology also performed well with a gain of 1.28%, while financials saw a rise of 1.26%. Other sectors that recorded gains include utilities (1.06%), energy (1.04%), consumer staples (0.93%), materials (0.85%), consumer discretionary (0.68%), and real estate (0.34%).

Major Pair Movement

The dollar index experienced a decline of 0.78% following recent meetings and underwhelming U.S. economic data. The spread between the 2-year bund and Treasury yields tightened by 21 basis points, contributing to the dollar’s decrease. Although the Federal Reserve’s median dot plot forecast indicated two more 25 basis point rate hikes this year, the market’s expectations were slightly lower, anticipating less than one rate hike before the year’s end.

Despite disappointing U.S. reports on jobless claims, retail sales, industrial production, and regional Federal Reserve surveys, the euro (EUR/USD) and the British pound (GBP/USD) both rose by approximately 1%. The yen (USD/JPY), which initially reached new highs for 2023, experienced a modest gain after encountering resistance.

The anticipation of the Bank of Japan’s meeting and potential continued negative rates impacted the low-yielding yen. The proximity of USD/JPY to the levels where substantial intervention took place in November added to the pressure.

EUR/USD surged above key Fibonacci levels, surpassing the 50% and 61.8% retracements of its April-May decline and moving closer to the 76.4% level at 1.0987. Sterling (GBP/USD) broke out above its downtrend line encompassing highs from 2021, 2022, and 2023, as well as previous peaks from 2023 and the 61.8% retracement of its 2021-2022 decline at 1.2751.

Despite recent volatility in the bond market, the market is still pricing in at least 125 basis points of additional rate hikes from the Bank of England, given the UK’s strong economic growth and elevated inflation.

The Australian dollar (AUD/USD) gained 1.3% as part of the broader decline of the safe-haven U.S. dollar. Support came from positive sentiment surrounding Australia’s economic recovery and improved conditions in China, one of Australia’s key trading partners. Looking ahead, the U.S. economic calendar for the next week is relatively light, with the Bank of England meeting on June 22 being a notable event to watch.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Surges to One-Month High on ECB’s Hawkish Tone and Dollar Weakness

The EUR/USD pair experienced a significant surge on Thursday, reaching its highest level in a month at 1.0952. The pair maintained its gains, indicating that the rally may continue. The European Central Bank (ECB) played a key role in this upward movement by raising interest rates as anticipated, while keeping the forward guidance unchanged. ECB President Lagarde’s remarks suggested another rate hike in July, alongside higher inflation forecasts.

This news, combined with rising German bond yields and declining US Treasury yields, further bolstered the EUR/USD. Despite Federal Reserve Chair Powell’s hawkish stance, the US Dollar remained weak due to improving risk sentiment and positive US economic data. The upcoming release of Eurozone inflation data and the University of Michigan Consumer Sentiment Index in the US is anticipated to influence market sentiment.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair experienced an upward movement on Thursday and was able to reach the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 78, indicating that the EUR/USD is now in a bullish trend.

Resistance: 1.0982, 1.1034

Support: 1.0892, 1.0803

XAU/USD (4 Hours)

XAU/USD Retreats as Fed Maintains Neutral Stance, US Recession Fears Linger

The price of gold (XAU/USD) faced selling pressure after a tentative recovery, falling back from its near $1,934.74 level during the London session. The retreat came as the Federal Reserve (Fed) delivered a neutral interest rate decision, signalling that further rate hikes are on the horizon to combat persistent inflation. Market sentiment remained cautious amid concerns of a US recession, fueled by the Fed’s emphasis on ongoing inflation and tight labour market conditions.

Additionally, the US Dollar Index (DXY) experienced a decline, hovering around 103.15, as investors awaited the release of monthly Retail Sales data. Preliminary reports indicated a contraction of 0.1%, prompting a closer examination to determine if reduced prices for essentials or economic weakening were the cause.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving higher and moves above the middle band of the Bollinger Bands. Currently, the Relative Strength Index (RSI) is at 57, indicating that the XAU/USD is in a neutral stance.

Resistance: $1,963, $1,972

Support: $1,939, $1,932

Economic Data

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Stocks experienced volatility on Wednesday as the Federal Reserve took a pause in its rate-hiking campaign while signalling progress in combating inflation. Despite this, the central bank also indicated its intention to implement two more rate hikes later in the year.

The S&P 500 managed to eke out a marginal gain, closing at 4,372.59 with a 0.08% increase, while the Nasdaq Composite saw a 0.39% rise to end the session at 13,626.48, supported by strong performances from Nvidia and AMD.

On the other hand, the Dow Jones Industrial Average dipped by 0.68%, or 232.79 points, closing at 33,979.33, primarily due to losses in UnitedHealth. Notably, both the S&P 500 and the Nasdaq reached their highest levels since April 2022 during the trading session.

As anticipated by traders, the Federal Reserve announced the maintenance of unchanged interest rates, breaking a streak of 10 consecutive rate hikes. However, the markets initially responded negatively as investors focused on the central bank’s projections, which indicated an imminent resumption of rate hikes. Ed Moya, senior market analyst at Oanda, expressed concerns over the Fed’s forecast, stating that the statement and projections were so hawkish that Wall Street may regret not raising rates that day.

Nonetheless, the sell-off stabilized to some extent when Fed Chair Jerome Powell, during the subsequent press conference, revealed that no decision had been made regarding the July meeting and emphasized the Fed’s progress in tackling inflation.

With the S&P 500 up over 13% this year and more than 25% from its bear market low, investors had been betting on the Fed’s impending cessation of rate hikes. Furthermore, recent economic indicators, such as May’s producer price index and consumer price index, have fueled optimism that the Fed is effectively combating inflation. The Federal Reserve’s next meeting is scheduled for July 25-26.

Data by Bloomberg

On Wednesday, the stock market witnessed mixed performances across various sectors. The Information Technology sector led the gains with a significant increase of 1.14%. Consumer Staples and Real Estate sectors also recorded positive growth, rising by 0.56% and 0.32% respectively. Communication Services saw a modest gain of 0.13%.

However, several sectors experienced losses, with Energy and Health Care both declining by 1.12%. Financials, Materials, and Industrials sectors also faced declines of 0.37%, 0.43%, and 0.29% respectively. The Utilities sector saw a slight decrease of 0.07%, while Consumer Discretionary recorded a minor loss of 0.11%. Overall, Wednesday’s trading session displayed a mixed performance across sectors, reflecting the varied market dynamics of the day.

Major Pair Movement

The US Dollar Index (DXY) dropped to its lowest level in a month, reaching around 102.95, as market sentiment leaned towards a dovish stance for the US Federal Reserve (Fed). The Fed decided to keep interest rates unchanged, signalling a pause in the rate hike trajectory.

However, the Fed Chair, Jerome Powell, delivered a bullish speech and hinted at a possible rate hike in July. The dot plot projections showed an increase in rates for 2024 and 2025, and the median rate forecasts suggested two more rate increases in 2023.

Despite the hawkish signals from the Fed, the EUR/USD continued to rise and closed at its highest level in a month above 1.0800. Attention now shifts to the upcoming European Central Bank (ECB) meeting, where a 25 basis point interest rate hike is expected.

The language used in the ECB’s statement and President Lagarde’s comments during the press conference will be crucial for the Euro’s performance. If the meeting turns out to be dovish, with hints of a potential pause in rate hikes, the Euro could face downward pressure. In the meantime, market focus will also be on key US economic data such as Retail Sales, Jobless Claims, and the Philly Fed Index.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rises to Monthly High Despite US Dollar Recovery and Hawkish FOMC; Focus Shifts to ECB Meeting and US Data

The EUR/USD pair achieved its highest daily close in a month above 1.0800, disregarding the US Dollar’s rebound following the hawkish stance of the Federal Open Market Committee (FOMC). Market attention now turns towards the upcoming European Central Bank (ECB) meeting and crucial US economic data, which gain significance in light of Fed Chair Powell’s indication that the July meeting will be a “live” session.

The ECB is expected to raise interest rates by 25 basis points, with the language used in the statement and President Lagarde’s comments during the press conference holding key implications for the Euro’s performance.

Meanwhile, the US dollar gained ground after the FOMC meeting, as the central bank hinted at future rate hikes and projected additional tightening measures by year-end. Market sentiment will likely be influenced by the Fed’s decision and forthcoming US economic indicators, including Retail Sales, Jobless Claims, and the Philly Fed Index.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair experienced an upward movement on Wednesday and was able to reach the upper band of the Bollinger Bands. It then slowly moved lower, targeting the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 55, lower than the previous higher movement, indicating that the EUR/USD might be returning to a neutral stance.

Resistance: 1.0847, 1.0893

Support: 1.0757, 1.0721

XAU/USD (4 Hours)

XAU/USD Holds Steady Amidst Dovish Fed Outlook, Focusing on Monetary Policy Announcement and Dot Plot

XAU/USD maintains modest gains within the $1,950 price range as investor sentiment improves following US inflation data supporting a dovish Federal Reserve (Fed). The Consumer Price Index (CPI) rose slower than expected in May, while the Producer Price Index (PPI) contracted, indicating downward pressure on prices and validating the Fed’s previous monetary policy measures. Although concerns persist over a tight labor market potentially driving inflation higher, policymakers have anticipated a more dovish approach and a meeting-by-meeting decision.

The market expects the Fed to hold its current stance, with the upcoming monetary policy announcement, dot plot release, and Chairman Jerome Powell’s press conference being the focal points. Market optimism regarding a conservative Fed aiding the economy in avoiding a recession has led investors to seek high-yielding assets, temporarily overshadowing XAU/USD. However, if the Fed deviates from market expectations, significant price volatility can be anticipated, with XAU/USD responding to fluctuations in the broader strength or weakness of the US Dollar.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower creating a push to the lower band of the Bollinger Bands. Currently, the Relative Strength Index (RSI) is at 36, indicating that the XAU/USD is still in a bearish condition.

Resistance: $1,955, $1,972

Support: $1,932, $1,913

Economic Data