As we kick off a new week, market watchers will focus on two key events: the release of the Federal Open Market Committee (FOMC) meeting minutes and the US jobs reports. Both have the potential to influence market trends significantly and offer vital insights into the health of the US economy.
Switzerland’s Consumer Price Index (3 July 2023)
Switzerland’s CPI increased by 0.30% in May 2023 from the previous month.
For June 2023 data, which is set to be released on 3 July, analysts expect a 0.2% increase.
ISM Manufacturing PMI (3 July 2023)
The US ISM Manufacturing PMI fell to 46.9 in May of 2023 from 47.1 in April.
Analysts predict that for June 2023 data, scheduled for release on July 3rd, the index will be at 48.
Reserve Bank of Australia Rate Statement (4 July 2023)
The next cash rate will be released on 4 July 2023, with analysts expecting the central bank to hold its interest rate at 4.1%.
FOMC Meeting Minutes (5 July 2023)
Fed Chair Powell stated that multiple rate hikes are anticipated this year to combat inflation. The Fed has already raised the policy rate by 5 points since last year, impacting areas like housing and investment.
While the funds rate target remained the same in June, there could be a rise to 5.6% by year-end if economic and inflation rates don’t decelerate.
The US ISM Services PMI fell to 50.3 in May 2023 from 51.9 in April, pointing to the fifth consecutive month of expansion in the services sector, but the slowest in the current sequence.
Data for June 2023 is scheduled for release on 6 July 2023, with analysts anticipating a higher figure of 50.
Canada Employment Change (7 July 2023)
The Canadian economy shed 17.3K jobs in May 2023, the first decline in nine months.The unemployment rate rose to 5.2% after remaining at 5% for the five previous months, the first monthly increase in the unemployment rate since August 2022.
Analysts predict the June 2023 data, due on 7 July 2023, will show a further job loss of 10,000 and a rise in the unemployment rate to 5.4%.
US Jobs Report (7 July 2023)
The US economy unexpectedly added 339K jobs in May 2023, the most in four months. Concurrently, the unemployment rate increased to 3.7% in May 2023, the highest since October 2022.
Analysts predict that for June 2023, set to be released on 7 July, the Non-Farm Employment will add approximately 250k jobs, with the unemployment rate remaining steady at 3.7%.
The Dow Jones Industrial Average experienced gains as major banks passed the Federal Reserve’s stress test, while an upward revision of the GDP provided relief against recession concerns. The 30-stock index surged by 0.8%, gaining 269.76 points to close at 34,122.42. JPMorgan Chase, Goldman Sachs, Wells Fargo, and other financial stocks saw significant increases, with each rising by more than 3% and 4.5% respectively.
Positive economic data, including an upward revision in first-quarter GDP and a drop in weekly jobless claims, contributed to the overall sentiment of economic resilience. Despite the strong first half of the year, some caution is advised as Wall Street prepares for a potentially volatile second half.
The S&P 500, up by 14.5% this year, is on track for its best monthly performance since January. The Nasdaq Composite, driven by optimism surrounding artificial intelligence, has climbed nearly 30% and is poised for its best first half since 1983.
In contrast, the Dow has underperformed, with only a 2.9% increase. While the markets have shown strength, experts anticipate the possibility of consolidation and urge investors to utilize market volatility to position themselves for a broader recovery.
Overall, the passing of the stress test and positive economic indicators have contributed to a positive sentiment in the market, but caution remains as Wall Street prepares for potential market fluctuations in the second half of the year.
On Thursday, the stock market showed a generally positive performance across various sectors. The overall market, represented by the All-Sectors index, rose by 0.45%. The Financials sector led the gains with a strong increase of 1.67%, followed by Materials with a rise of 1.27% and Energy with a gain of 1.11%.
Industrials also performed well, showing a growth of 0.94%. Real Estate and Health Care sectors exhibited moderate gains of 0.87% and 0.65% respectively. Information Technology experienced a slight increase of 0.13%, while Consumer Discretionary showed a minimal rise of 0.06%.
However, some sectors faced a decline in value. Utilities experienced a slight decrease of 0.05%, while Consumer Staples saw a more notable decline of 0.15%. The Communication Services sector showed the largest decrease among the sectors, with a decline of 0.63%.
Overall, the stock market on Thursday displayed a positive performance, with notable gains in the Financials, Materials, and Energy sectors. The declines in the Utilities, Consumer Staples, and Communication Services sectors represented a small portion of the overall market movement.
Major Pair Movement
The dollar index experienced a 0.34% increase as a result of the upward revision of Q1 GDP and the anticipation of two more rate hikes, causing 2-year Treasury yields to surge by 15 basis points. This surge brought the yields closer to the peak observed in March before the banking crisis.
Two-year bund yields also rose by 7 basis points and are approaching their March highs at 3.395%, while 2-year Treasury yields reached a peak of 5.084% in March. Eurozone core inflation for June is forecasted to be 6.7% year-on-year, slightly lower than the previous figure of 6.9%, and U.S. May core PCE is expected to remain at 4.7%.
However, the core PCE is currently at its highest level since December, while eurozone core inflation, if it meets the forecast, would be at its lowest since December.
The disparity between the European Central Bank’s rates at 3.5% and the inflation rate remains significant, whereas the Federal Reserve’s target range of 5.0-5.25% is higher than the core PCE.
Considering the overall economic data, the dollar has benefited from the divergent performance of the eurozone and the United States, which may result in less negative bund-Treasury yield spreads and a potentially higher EUR/USD exchange rate.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Slips as Stronger US Dollar Gains Momentum from Robust Economic Data
The EUR/USD experienced a second consecutive day of losses as it fell below 1.0900, primarily due to a strengthening US Dollar driven by encouraging economic data. Inflation figures in the Eurozone displayed a mixed picture, revealing a slowdown in Spain and a rebound in Germany that came as no surprise.
German inflation in June slightly increased by 6.4%, mainly attributed to reductions in energy prices and transportation costs. However, experts noted that if these factors were excluded, the inflation rate would have declined.
The Eurozone Consumer Price Index data is eagerly awaited on Friday, as the European Central Bank has already indicated an upcoming rate hike in July due to persistently high inflation. Meanwhile, Federal Reserve Chair Powell reiterated a hawkish stance, with policymakers expecting further rate hikes this year.
US economic data exceeded expectations, with Initial Jobless Claims dropping to a four-week low of 239K. The Core Personal Consumption Expenditure Index, the Fed’s favoured inflation gauge, will be closely watched on Friday, as positive figures could solidify expectations of a rate hike soon.
According to technical analysis, the EUR/USD pair moved lower on Thursday and reached the lower band of the Bollinger Bands. Currently, the price is moving just above the lower band of the Bollinger Bands which shows that there’s a possibility that the price will move slightly higher to the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 36, suggesting that the EUR/USD is slightly bearish.
Resistance: 1.0904, 1.0965
Support: 1.0842, 1.0780
XAU/USD (4 Hours)
XAU/USD Resilience Fades as Strong US Dollar Drives Gold to March Lows
XAU/USD faced vulnerability despite recovering from losses, as a strong US Dollar drove Gold to its lowest level since March at $1,892. However, a subsequent rebound brought it back to the $1,910 range, alleviating bearish pressure.
The overall outlook for bulls remains complicated due to various fundamental factors. US data surpassed expectations, with Initial Jobless Claims hitting a four-week low at 239K, Continuing Claims unexpectedly dropping to 1.742 million, and Q1 GDP growth being revised higher to 2%.
Conversely, Pending Home Sales in May slid 2.7%, defying expectations of a 0.2% increase. The positive labour market and GDP figures indicate a robust US economy, potentially paving the way for further tightening by the Federal Reserve (Fed). US Treasury Yields surged to weekly highs, impacting XAU/USD, with the 10-year yield reaching 3.86%, its highest level since March.
Concurrently, the US Dollar gained momentum, pushing the DXY above 103.30, a two-week high. Although Gold experienced a sharp rebound after dipping below $1,900, it encountered resistance below $1,915 and eventually stabilized around $1,910.
Despite the temporary relief, the bias remains on the downside for Gold, as factors such as Powell’s hints of higher interest rates and robust US data continue to work against the precious metal. The upcoming release of the Core Personal Consumption Expenditure Index on Friday holds significant importance for both the Fed’s decision-making and the future of Gold.
According to technical analysis, the XAU/USD pair is moving lower to as low as $1,892 before going back higher and is able to reach the lower band of the Bollinger Bands. Currently, the price is moving higher to reach the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 42 from the lower level, indicating that the XAU/USD is trying to move back in a neutral stance.
The S&P 500 saw minimal movement on Wednesday as investors closely analyzed Federal Reserve Chair Jerome Powell’s remarks regarding future monetary policy. Powell emphasized the likelihood of more restrictive measures to combat inflation, including potential consecutive interest rate hikes.
His comments, made at the ECB Forum on Central Banking, alongside other global central bankers, had a mixed impact on the markets.
While the Dow Jones Industrial Average declined by 0.22%, and the S&P 500 dipped slightly by 0.04%, the Nasdaq Composite bucked the trend and closed higher for a second consecutive day. This was driven by the positive performance of tech giants such as Alphabet and Tesla, which saw gains of over 1% and 2% respectively, while Netflix shares surged by more than 3%.
These results contributed to the Nasdaq Composite’s impressive year-to-date increase of nearly 30%, leading to its strongest first half in four decades.
The divergent outcomes on Wall Street reflected a tug-of-war between market optimism and concerns over prolonged low-interest rates.
Despite the potential headwinds caused by discussions of future monetary policy, investors remained optimistic, particularly in the tech sector, riding the wave of excitement surrounding artificial intelligence, and propelling the market to significant gains in the first half of the year.
On Wednesday, the overall market saw a slight decline of 0.04%. The energy sector performed well, experiencing a gain of 1.02%, followed by communication services with a rise of 0.80%. Consumer discretionary stocks also showed a modest increase of 0.25%, while real estate saw a smaller gain of 0.21%.
However, there were some sectors that experienced declines. The utilities sector had the largest decrease, dropping by 1.48%. Materials and consumer staples also saw significant declines of 0.68% and 0.59% respectively. The healthcare sector experienced a decline of 0.35%, while information technology and industrials both had small decreases of 0.03% and 0.04% respectively. Financials also declined, albeit to a lesser extent, with a decrease of 0.18%.
Major Pair Movement
On Wednesday, the dollar index strengthened by 0.4% as weaker economic indicators in the eurozone and other regions contrasted with generally positive U.S. data. The eurozone displayed signs of economic weakness, and concerns were raised about the effectiveness of government stimulus measures in boosting the economy and commodity currencies.
In contrast, U.S. data released on Tuesday showed positive results. The market briefly responded to hawkish remarks made at the European Central Bank’s conference, but overall, the focus remained on data dependence. The upcoming days will feature inflation data from both the eurozone and the U.S., as well as jobless claims.
Sterling experienced a decline of 0.8% amid the Bank of England’s dilemma in managing inflation. The USD/JPY pair, despite some fluctuations, maintained its rally since the June meetings of the Federal Reserve and the Bank of Japan, with uncertainty injected by the Japanese side.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Rebounds as ECB Reaffirms Rate Hike Expectations, US Dollar Supported by Fed’s Hawkish Stance
The EUR/USD pair experienced a drop below 1.0900 but rebounded during the American session, aided by the European Central Bank’s (ECB) confirmation of upcoming rate hikes. The Euro received support from ECB President Lagarde’s comments, while the US Dollar benefited from rising expectations of a rate hike by the Federal Reserve (Fed) in July.
Inflation data from the Eurozone started to emerge, with Italy’s Harmonised Consumer Price Index slowing to 6.7% in June. Despite declining headline inflation, ECB members remain focused on persistent inflation concerns.
Better-than-expected US economic data further strengthened expectations of a Fed rate hike, boosting the US Dollar. More economic data is expected, including jobless claims, GDP estimates, and the Core Personal Consumption Expenditure report. While the US Dollar gains momentum against certain currencies, the Euro continues to hold its strength in the market.
According to technical analysis, the EUR/USD pair moved lower on Wednesday and reached below the middle band of the Bollinger Bands. Currently, the price is moving just below the middle band of the Bollinger Bands which shows that there’s a possibility that the price will continue to move lower. The Relative Strength Index (RSI) is currently at 44, suggesting that the EUR/USD is still in a neutral position but slightly bearish.
Resistance: 1.0922, 1.0965
Support: 1.0890, 1.0842
XAU/USD (4 Hours)
XAU/USD Under Selling Pressure as US Data and Central Bankers’ Comments Drive Risk-Off Sentiment
XAU/USD faced selling pressure for the third consecutive day, reaching a low of $1,902.80 during the American session. The US Dollar gained strength due to disappointing US data and cautious remarks from central bankers, leading to a risk-off sentiment in financial markets.
The release of the preliminary estimate of the May Goods Trade Balance, showing a deficit of $91.1 billion, and lower-than-expected Wholesale Inventories in May contributed to the shift in sentiment. During the ECB Forum on Central Banking, Federal Reserve Chairman Jerome Powell stated that inflation needs more time to align with the Fed’s target, leaving room for further monetary tightening.
Bank of England’s Andrew Bailey mentioned the UK economy’s resilience despite persistent inflation, while ECB President Christine Lagarde hinted at a potential rate hike in July. These developments triggered selling pressure on Wall Street and initially boosted the US Dollar, although it later retraced some of its gains.
According to technical analysis, the XAU/USD pair is moving lower to reach below the previous low on June 23rd, 2023, and is able to reach the lower band of the Bollinger Bands. Currently, the price is slightly higher than the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 40, indicating that the XAU/USD is in a neutral but slightly bearish condition.
In a much-needed boost for the market, the Dow Jones Industrial Average rebounded after a seven-day slump, as investors embraced tech stocks ahead of the end of the first half.
The index gained 0.63%, or 212.03 points, closing at 33,926.74. The S&P 500 and Nasdaq Composite also experienced substantial gains of 1.15% and 1.65% respectively, signalling renewed investor confidence.
Tech giants such as Nvidia, Meta Platforms, and Microsoft spearheaded the market rally, reversing the previous day’s downturn and propelling the tech-heavy Nasdaq to surge. Additionally, consumer discretionary and travel stocks saw significant gains, driven by Delta Air Lines’ improved financial guidance, resulting in a remarkable 6.8% increase in the airline’s stock.
However, Walgreens faced a downturn of 9.3% due to a cut in its full-year profit guidance and weaker-than-expected earnings.
Despite concerns of an impending recession, the market found solace in promising economic data. May durable goods unexpectedly increased, consumer confidence exceeded expectations in June, and new home sales surpassed forecasts.
These indicators suggested that the economy remained on solid ground, dampening recession fears. As the second quarter and first half of 2023 concluded, the Nasdaq emerges as the top performer, with a 29.5% gain for the year and a remarkable 10.9% surge since April.
The S&P 500 and Dow are also set to close the quarter with gains of around 6.6% and 2%, respectively, while the month of June itself is on track to deliver a nearly 5% increase for the S&P 500 and Nasdaq, and a 3.1% advance for the Dow.
On Tuesday, the overall market showed a positive trend with a gain of 1.15%. The Consumer Discretionary sector performed well, with a significant increase of 2.06%. Similarly, the Information Technology sector also had a strong day, rising by 2.04%.
The Materials sector experienced a gain of 1.40%, while the Industrials and Communication Services sectors saw increases of 1.26% and 1.12%, respectively. Real Estate showed a modest gain of 1.11%, followed by Financials at 0.71%. The Consumer Staples sector had a smaller increase of 0.34%, and Energy and Utilities sectors had minor gains of 0.23% and 0.04%, respectively.
However, the Health Care sector experienced a slight decline of 0.20%. Overall, it was a positive day for the market, driven by strong performances in the Consumer Discretionary and Information Technology sectors.
Major Pair Movement
The dollar index experienced a 0.24% decline, mainly due to gains in EUR/USD by 0.5%. This gain was attributed to the argument for raising rates at upcoming meetings, with reduced chances of rate cuts next year due to ongoing inflationary pressures.
However, various economic indicators such as durable goods, home prices, consumer confidence, and new home sales prevented the euro from reaching its previous high. As a result, two-year Treasury yields initially experienced losses but eventually rose by 9 basis points.
The dollar’s challenge lies in the fact that the Federal Reserve is still expected to lower rates more rapidly compared to the European Central Bank. Federal Reserve Chair Jerome Powell’s appearance at the ECB’s central banker’s conclave further underscored this expectation.
The decision to pause the June rate hike has made it difficult to anticipate more than one additional rate hike unless significant US data, such as the Personal Consumption Expenditures (PCE) and June ISM (Institute for Supply Management) reports, support it.
Sterling saw a 0.3% increase, aided by improved risk sentiment and a rise in two-year gilts yields by 0.13%. The Bank of England is attempting to catch up with persistent inflation. USD/JPY experienced a 0.35% gain due to rising Treasury yields and sustained demand for carry trades, as the Bank of Japan has maintained its ultra-easy policies this month.
The yuan remained stable, close to the level at which the Ministry of Finance intervened last year, with USD/CNH experiencing a 0.25% loss due to further adjustments by the People’s Bank of China. AUD/USD rose by 0.2%, although it has retraced its recent highs and is mostly consolidating following last week’s decline. USD/CAD gained 0.17% with minor assistance from slightly lower-than-expected data.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Rises on ECB’s Hawkish Stance Amid Upbeat US Data
The EUR/USD pair climbed on Tuesday as the European Central Bank (ECB) signaled a hawkish stance on inflation, while the US Dollar struggled to capitalize on positive US economic data. ECB President Lagarde mentioned that inflation in the Eurozone could persist for some time, indicating a continued path of rate hikes.
This boosted the Euro’s performance. In the upcoming days, attention will shift to inflation data from Italy, Germany, and the Eurozone, which could further impact market sentiment. Despite the US Dollar’s slight decline, it maintained stability due to expectations of a potential rate hike by the Federal Reserve in July. US yields rose during the American session, keeping the EUR/USD pair around the 1.0950 level.
According to technical analysis, the EUR/USD pair moved higher on Tuesday trying to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band of the Bollinger Bands which shows that there’s a possibility that the price will continue to move higher. The Relative Strength Index (RSI) is currently at 55, suggesting that the EUR/USD is still in a neutral position.
Resistance: 1.0965, 1.0995
Support: 1.0920, 1.0890
XAU/USD (4 Hours)
XAU/USD Consolidates as Risk Appetite Rises on Positive Economic Data
Gold (XAU/USD) continued its consolidation phase, fluctuating around the $1,920/30 range, as increased risk appetite drove demand towards more attractive assets. Asian stock markets received a boost from news of a stronger-than-expected Chinese economy, while upbeat economic data from the United States further contributed to positive sentiment.
Durable Goods Orders, Nondefense Capital Goods Orders, New Home sales, and CB Consumer Confidence all surpassed expectations, leading to gains in European indexes and a recovery on Wall Street. The US Dollar gained momentum as macroeconomic figures exceeded forecasts, causing yields to rise and putting pressure on gold (XAU/USD), which briefly dipped to $1,911.46 before recovering to approximately $1,914.
According to technical analysis, the XAU/USD pair is moving lower to reach the previous low on June 23rd, 2023, and is expected to reach the lower band of the Bollinger Bands. Currently, the price is slightly higher than the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 40, indicating that the XAU/USD is in a neutral but slightly bearish condition.
In the final week of the first half of the year, the Nasdaq Composite experienced a significant decline as investors sold off shares of technology companies that had performed well so far in 2023. The Nasdaq dropped by 1.16%, while the S&P 500 also saw a loss of 0.45%, and the Dow Jones Industrial Average dipped slightly by 0.04%.
This pullback was primarily driven by a sharp decline in technology giants such as Nvidia, Alphabet, Meta Platforms, and Tesla. Despite the setback, the Nasdaq has still seen a substantial rebound this year, fueled by renewed investor optimism in artificial intelligence and expectations of a slowdown in the Federal Reserve’s interest rate hikes.
While the technology sector experienced a decline, other segments of the market performed well in the first half of the year. The S&P 500 has gained 12.7% and the Dow is up approximately 1.7%. Although the market rally stalled last week, overall, it has been a successful first half for investors.
Traders will keep an eye on the situation in Russia following a brief rebellion by a private military group, which could potentially introduce uncertainty into the markets. Additionally, economic reports for the week are relatively light, with the focus on the personal consumption expenditures index for May and corporate earnings reports from Walgreens Boots Alliance and Nike.
On Monday, the overall market experienced a slight decline of 0.45%. However, some sectors managed to perform well, with the Real Estate sector showing the highest gain at 2.21%, followed by Energy at 1.71% and Materials at 1.00%. Utilities and Industrials also saw positive growth with increases of 0.98% and 0.79% respectively.
On the other hand, several sectors faced declines, including Information Technology leading the losses with a decrease of 1.03%, followed by Consumer Discretionary and Communication Services both experiencing declines of 1.25% and 1.88% respectively. Financials, Health Care, and Consumer Staples also saw slight declines, with decreases of 0.20%, 0.60%, and 0.03% respectively.
Major Pair Movement
GBP/USD remained steady after a day of little change, with the USD weakening slightly. The market anticipates that the Bank of England (BoE) will implement aggressive interest rate hikes, potentially raising rates by 50 basis points. However, relying solely on interest rates to control inflation may not be effective, raising concerns of a looming recession. In June, shop price inflation in the UK slowed down as retailers reduced prices.
The AUD/USD currency pair showed minimal reaction to the turmoil in Russia and remained on the sidelines. The AUD/USD rally was limited by the strengthening of USD/CNH (Chinese yuan) and supported by softer US yields.
EUR/USD initially declined near the 55-day moving average but later turned positive on Monday. The currency pair demonstrated resilience in the face of Russia-related geopolitical risks and disappointing Ifo data, which could strengthen positive technical indicators and contribute to further gains.
Despite potential instability in Europe’s eastern region due to a weekend mutiny, EUR/USD traded higher as investors focused more on a potential pause in the US Federal Reserve’s rate hikes and favourable positioning for long positions.
Market expectations indicate that the Federal Reserve may implement two more rate hikes, but current US rates are factoring in only one additional increase, potentially followed by cuts later in the year. Despite a decrease in euro positions and an increase in dollar positions, EUR/USD managed to rally as investors reduced their overall exposure, suggesting a positive sign for the currency pair.
In the US, the focus is on the forthcoming weekly claims data and May’s Personal Consumption Expenditures (PCE) figures, which will likely influence market dynamics.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Rises as Markets Await Inflation Data and Central Bank Speeches
The EUR/USD pair saw a modest increase on a quiet Monday, with investors eagerly anticipating the release of key inflation data and speeches from central bank officials. The US dollar weakened slightly due to declining yields and a rebound in commodity prices. Germany’s Ifo data showed a decline, raising concerns about the country’s economic health. The European Central Bank’s forum on central banking in Sintra has begun, where ECB President Lagarde and other policymakers will address the audience. Monetary policy expectations will be influenced by the discussions and upcoming inflation data from the Eurozone and the US.
According to technical analysis, the EUR/USD pair exhibited low volatility on Monday, but the Bollinger Bands still have wide bands. Currently, the price is approaching the middle band of the Bollinger Bands from the lower band. The Relative Strength Index (RSI) is currently at 51, suggesting that the EUR/USD has returned to a neutral position.
Resistance: 1.0932, 1.0965
Support: 1.0890, 1.0863
XAU/USD (4 Hours)
XAU/USD Eases from Highs as Investors Await Central Bank Clues and Inflation Updates
Spot gold (XAU/USD) initially surged at the weekly opening but later retraced its gains during the European session. XAU/USD reached a high of $1,933.31 before settling around $1,925 per troy ounce. The US Dollar traded within narrow ranges as investors remained cautious amid central banks’ ongoing battle against inflation. Market participants are closely watching the European Central Bank (ECB) Forum on Central Banking, where ECB President Christine Lagarde is expected to provide opening remarks.
Additionally, upcoming discussions featuring central bank chiefs, including the Federal Reserve’s Jerome Powell, Bank of England’s Andrew Bailey, and Bank of Japan’s Kazuo Ueda, could provide insights into future monetary policy decisions. Inflation updates from Europe and the US are also anticipated, adding to speculations regarding central banks’ actions and their impact on the global economy. While risk sentiment is currently low and global indexes are trading negatively, market movements are limited due to the absence of significant data releases at present.
According to technical analysis, the XAU/USD pair is experiencing low volatility and a tight range on Monday, resulting in narrower movements for the upper and lower bands of the Bollinger Bands. The price is currently moving above the middle band of the Bollinger Bands, indicating the potential for a slight upward movement with the aim of reaching the upper band and our resistance levels. Currently, the Relative Strength Index (RSI) stands at 50, indicating that the XAU/USD is in a neutral position.
This week, market participants prepare for important economic events such as the release of Canada’s Gross Domestic Product (GDP) and Consumer Price Index (CPI), in addition to Australia’s CPI.
Traders are anticipated to keep a close watch on these critical updates to tailor their strategies and acquire valuable knowledge about the financial markets.
Remember to stay updated with a summary of noteworthy developments.
Canada Consumer Price Index (27 June)
Canada’s CPI rose 0.7% in April 2023 compared to March 2023 figures.
Analysts anticipate a 0.5% increase for May data, set to be released on 27 June.
Australia Consumer Price Index (28 June)
Australia’s CPI saw a 6.8% increase in the year leading up to April 2023, a rise from the 6.3% gain observed in the year ending in March 2023 – the lowest in 10 months.
Analysts predict a slower growth of 6.4% for the data covering the year to May 2023, set for release on 28 June.
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.
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.
According to technical analysis, theEUR/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.
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.
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.
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.
According to technical analysis, theEUR/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/USDRecovers 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.
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.
