The US Dollar dropped again overnight, with the DXY index ending at 97.42. There aren’t any major economic reports or Federal Reserve discussions for the markets to focus on; the attention is instead on existing home sales data. The bullish trend on the daily chart is weakening, and the Relative Strength Index is also declining. Current support is at the 97 level, while resistance can be found at 97.60, 98.50, and 99.60 at various retracement levels.

Market Reactions

In the meantime, the USD/JPY is retreating during the early European hours, moving closer to the 1.1700 level. GBP/USD is stable around 1.3550, bolstered by positive sentiment from a new US-Japan trade deal. Gold prices have slightly recovered from daily lows but remain subdued due to the optimism over the US-Japan agreement. Binance Coin (BNB) reached a new high of $804.70, surpassing Solana’s market cap, with total capitalization exceeding $110 billion. Forex trading involves significant risks and may not be appropriate for everyone; high leverage can magnify both profits and losses. It’s crucial to carefully consider your investment goals, experience, and risk tolerance before trading foreign currencies. With the current state of the US Dollar, we advise derivative traders to brace for increased volatility. The latest Consumer Price Index for May showed a cooler reading of 3.3%, putting initial pressure on the Dollar. However, the Federal Reserve’s updated forecast now expects only one interest rate cut in 2024, which provides a strong support against any major sell-off.

Technical Analysis and Strategy

We’re focusing on the 104 level on the index as a key support zone, noting significant buying interest there. Resistance is forming around 105.50, a level tested multiple times since April. We consider selling out-of-the-money puts near support and calls near resistance as a good strategy to gain premiums in this range-bound market. The yen pairing is particularly sensitive, trading close to the 157 level where Japanese officials intervened with over $60 billion in late April and early May. This creates a risk of another sharp drop if authorities decide to intervene again. We recommend avoiding aggressive long positions and buying puts as a hedge against any sudden actions. Meanwhile, the pound is stable around 1.2700, but we think this is a short-term calm before a potential decline. UK inflation data suggests cooling, leading the market to believe there’s over a 60% chance the Bank of England will cut rates by its September meeting. This divergence from the more hawkish US central bank could cause a gradual drop in the currency pair during the summer. Gold has retreated from its all-time high above $2,400 per ounce, but we see this as healthy consolidation. Central banks are still buying at record levels, with China adding to its reserves for the 18th month in a row before pausing in May, providing strong demand for the metal. We suggest using any dips towards the $2,300 support level to start or build long-term call positions. In the crypto market, Binance Coin has recently pulled back from its record high above $700. Its market cap of around $88 billion reflects the competitive nature as funds shift between major digital assets. Traders should stay alert; the optimism that fueled the recent rally seems to be fading, which could require protective strategies. Create your live VT Markets account and start trading now.

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