Daily Analysis

[Zforex]

Japanese and Australian Markets Continue Winning Streak, Eyes on U.S. Federal Reserve's Monetary Policy Decision​

Japanese stocks continued their impressive rally, with the benchmark Nikkei 225 index surging by 1.47% to close at 33,502.42. This marked the fifth straight session of gains, highlighting the market's resilience amid ongoing economic challenges. Additionally, the Topix index climbed 1.31% to reach its highest level this year, closing at 2,294.53.

One of the key contributors to Japan's market success was the notable rise in Toyota's shares, which reached a 16-month high. The surge came after the automaker's shareholders voted to retain Akio Toyoda as the company's chairman, indicating strong support for the management's strategic vision.

In Australia, the S&P/ASX 200 displayed a positive trajectory, advancing by 0.32% to end at 7,161.7. This marked the third consecutive daily gain, highlighting the sustained momentum in the Australian market. Investors worldwide are eagerly anticipating the U.S. Federal Reserve's monetary policy decision, which is expected to have a significant impact on global markets. The recent release of U.S. inflation data, showing a slowdown in price pressures during May, has fueled optimism among investors. This has raised the possibility that the Federal Reserve may choose to hold off on raising interest rates during their policy announcement.According to the consumer price index, May's year-over-year increase was 4.0%, marking the slowest annual rate since March 2021. Traders have subsequently increased their bets that the Federal Reserve will keep rates unchanged on Wednesday, deviating from the trend of consecutive rate hikes witnessed in previous meetings. CME Group's FedWatch tool currently indicates a probability of over 95% that the central bank will maintain the target rate between 5% and 5.25%.

EURUSD

Softer US consumer inflation figures reaffirm market expectations of a pause in the Federal Reserve's tightening cycle. The headline CPI rose modestly in May, with the annual rate slowing to its lowest level since March 2021. However, the year-on-year inflation rate of 4.0% remains twice the Fed's target, leaving the possibility open for a 25 basis points increase at the July FOMC meeting.These factors support elevated US Treasury bond yields and lend some strength to the US dollar. On the other hand, influential European Central Bank (ECB) officials' recent hawkish comments suggest that the Eurozone still has a way to go before raising borrowing costs, despite a decline in the headline Eurozone CPI to 6.1% in May.

ECB President Christine Lagarde indicated the likelihood of additional interest rate hikes due to the absence of clear evidence that underlying inflation has peaked. This could provide support for the euro and the EUR/USD pair. Traders are cautious and await the outcomes of the upcoming FOMC decision and ECB meeting.

Looking at the technical aspect, the EUR/USD pair did not behave as expected following the release of the CPI data, and there was low volatility in the market due to the focus shifting towards the upcoming Fed meeting. It is important to highlight that the next significant resistance level can be found around the 200-day Moving Average (MA) on the 4-hour chart, aligning with the upper Parallel of the descending long-term bearish trend. Additionally, the DXY (US Dollar Index) reached its 200MA and its lower parallel

GBPUSD

In April, the UK's Gross Domestic Product (GDP) showed 0.2% growth compared to a previous contraction of -0.3%, but both Industrial Production and the Index of Services disappointed during the same period. Despite this, the GBP/USD pair remains attractive to bullish traders due to positive employment and inflation figures reported by Britain. Additionally, the Bank of England (BoE) has shown indications of potential rate hikes.

On the other hand, weak US inflation data, as reflected in the Consumer Price Index (CPI) and Core CPI figures for May, weighed down the US Dollar and supported buyers of the GBP/USD pair.

Although the initial reaction to the UK data did not significantly impact the Cable pair traders, the focus on the upcoming Federal Reserve (Fed) meeting limited the pair's hawkish sentiment. If Federal Chair Jerome Powell delivers an unexpectedly positive tone or if the economic forecasts are optimistic, it could prompt a reversal and bring back sellers.

GBP/USD is currently gaining bullish momentum in the short term, supported by favorable fundamentals. The pair has potential support levels at around 1.2590 and 1.2535, while resistance levels are located at around 1.2625 and 1.2670.

JPYUSD

The latest United States inflation data shows a slight increase of 0.1% compared to expectations of 0.2% and a previous rate of 0.4%. The annualized Consumer Price Index (CPI) has also softened to 4.0% instead of the anticipated decline to 4.1% from the previous release of 4.9%. The decline in gasoline prices is a significant factor behind the decrease in headline inflation.Furthermore, the core CPI, which excludes the impact of oil and food prices, maintained a monthly pace of 0.4% and an annualized rate of 5.3% as expected.

Given the easing labor market conditions and ongoing contraction in factory activities, the market closely watched the inflation data. The deceleration in inflationary pressures is expected to allow Federal Reserve Chair Jerome Powell to maintain a neutral interest rate policy this time.JP Morgan Asset Management analysts anticipate that the Fed will keep the federal funds rate unchanged. However, they expect the post-meeting statement and the dot plot to emphasize that this inaction should be seen as "skipping a rate hike" rather than signaling an end to monetary tightening.Aside from the Federal Reserve's policy decision, market attention will also be on the Bank of Japan (BoJ) and its interest rate decision. Economists at OCBC Bank believe it may be too soon to expect any policy shift during the upcoming Monetary Policy Committee meeting. Nonetheless, they are in favor of BoJ policy normalization due to broadening inflationary pressures and wage growth in Japan.From a technical analysis perspective, the USD/JPY pair is currently trading within a price range as market participants await the Federal Reserve (Fed) meeting and its decision. The pair maintains a significant correlation with the US 10-year Treasury yield, and yesterday's positive movement had an impact on the pair's dynamics. However, it's important to note that upcoming events scheduled for this week could influence the market outlook and potentially lead to changes in the current analysis.

XAUUSD

Soft consumer inflation figures released from the United States reaffirm market expectations of a pause in the Federal Reserve's rate-hiking cycle, providing some support to the price of Gold. In May, the Consumer Price Index (CPI) showed minimal growth, with the year-on-year rate slowing to its lowest level since March 2021. However, the annual inflation rate of 4.0% remains twice the Fed's target, keeping hopes alive for further tightening of monetary policy.The markets are still pricing in the possibility of an additional 25 basis point increase at the July Federal Open Market Committee (FOMC) meeting, leading to a sharp rise in US Treasury bond yields. This acts as a tailwind for the US Dollar and a headwind for Gold, which lacks yield. However, cautious trading prevails as market participants wait for key central bank events.The Fed's policy decision is expected to be announced later in the US session, and it is widely anticipated that the Fed will maintain its current stance. Traders will pay close attention to Fed Chair Jerome Powell's comments during the post-meeting press conference for any indications of future rate hikes. The focus will then shift to the European Central Bank (ECB) policy meeting on Thursday, followed by the Bank of Japan's (BoJ) monetary policy update on Friday. In the meantime, if risk sentiment remains weak, it may continue to support the safe-haven appeal of Gold.

Gold prices have remained within the same range for the past month. The outcome of today's Federal Reserve (FED) meeting could potentially determine the future direction of the precious metal. On the 4-hour chart, the 200-day moving average (200MA) stands as a significant resistance level, while on the daily chart, the 100-day moving average (100MA) is providing support for the price of Gold.

DAX40

European markets opened with mixed performance as investors awaited the U.S. Federal Reserve's monetary policy decision. The benchmark Stoxx 600 index showed a 0.23% increase, with sectors experiencing both gains and losses. Auto stocks rose by 0.7%, while travel stocks dipped by 1%.In the UK, April's economic growth met expectations, with a 0.2% increase driven by the services sector.Entain, the owner of Ladbrokes, saw a significant drop of 10.0% and landed at the bottom of the STOXX 600. This decline followed the announcement of its acquisition of Poland-based sports betting operator STS Holdings for £750 million ($946 million).Traders have largely priced in the expectation of the Fed keeping rates within the 5.00%-5.25% range later in the day. However, there is a 63% chance of a rate hike in July, according to the CME FedWatch tool.

The European Central Bank is set to hold its policy meeting on Thursday, and it is widely anticipated that rates will be raised by another 25 basis points in an effort to tackle persistent inflation.The DAX index started the session positively, aiming to reach the last resistance level at 16,320. Global equity sentiment remains positive, and there is a significant slowdown in inflation levels. Investors should closely monitor the next resistance level at 16,800, as it could pose a significant challenge for further upward momentum. On the other hand, if the index experiences a decline, support is expected around the 15,900 level.

 

[Zforex]

"Global Markets React: Japan Rebounds, European Equities Rise, and Central Banks Maintain Policies"​

In Japan, stocks initially declined but later rebounded, resulting in the Nikkei 225 gaining 0.18% and the Topix making slight advancements. These indexes had previously ended a five-day winning streak on Thursday. Meanwhile, Hong Kong's Hang Seng index continued its upward trend, rising by 0.69% after a 2% surge the previous day. Mainland Chinese stocks also experienced gains, with the Shanghai Composite increasing by 0.37% and the Shenzhen Component rising by 0.55%.On Friday, the Bank of Japan opted to maintain its ultra-loose monetary policy, aiming to support fragile economic growth amidst global uncertainty. As anticipated by economists, the central bank kept its short-term interest rate target at -0.1% and made no adjustments to its yield curve control policy.

In Europe, equity markets were poised to open positively on Friday, following the upward trend of global markets. This was driven by speculation that US interest rates might be approaching their peak due to a slowdown in the American economy and the Federal Reserve's decision to pause its tightening campaign in June.

Contrary to the ECB's decision to raise its benchmark policy rate by an additional 25 basis points, ECB President Christine Lagarde emphasized during a press briefing that they were not considering pausing. She stated, "We are not thinking about pausing," and hinted at the possibility of another rate increase in July.

While the ECB chose to tighten fiscal policies, the Federal Reserve, on the other hand, decided on Wednesday to refrain from raising interest rates. However, they announced plans for two quarter-percentage point increases by the end of the year

EURUSD

On Thursday, the EUR/USD experienced a significant surge, reaching its highest level in a month at 1.0952. The pair is maintaining its gains, indicating that the rally may not be over yet. This strong performance can be attributed to the European Central Bank's (ECB) hawkish stance and the overall weakness of the US Dollar.As anticipated, the ECB raised its interest rates by 25 basis points while keeping the forward guidance unchanged. ECB President Lagarde emphasized that there is still work to be done and expressed that another rate hike in July is the most likely scenario. Inflation forecasts were revised upwards, and the market has already priced in a 25 basis point increase at the next meeting.The rise in German bond yields coupled with a decline in Treasury yields has contributed to the strengthening of the EUR/USD. Despite Federal Reserve Chair Powell's hawkish tone on Wednesday, it did not have a lasting impact on the US Dollar. While inflation data from the Eurozone is scheduled for release on Friday, it is not expected to have a significant impact as these figures are final estimates. On the other hand, market participants will be focusing on the University of Michigan Consumer Sentiment Index from the US. The recent central bank meetings will continue to be analyzed and digested by market participants.In terms of technical analysis, the EUR/USD pair made a bullish movement we didn’t saw from more than 4 Months and found resistance at 1.0960 level. A possible correction can happen and the level to watch is 1.0912 but the CPI data today may surprise. In case of a breakout to the upper side the 1.1000 is a good level to watch followed by the 1.1050.

GBPUSD

The GBP/USD pair is currently stabilizing near its highest level in 14 months, hovering around the 1.2780-70 range in the early morning of Friday in London. The Pound Sterling, having experienced its most substantial gain in a week, has been rising for three consecutive days, reaching a multi-month high. This upward movement can be attributed to the general weakness of the US Dollar and concerns regarding a potentially hawkish stance from the Bank of England (BoE).

Despite a mixed set of UK economic data earlier in the week, the bullish momentum of GBP/USD remained intact due to worries about a more hawkish BoE, primarily driven by previously positive inflation figures. In April, the UK's Gross Domestic Product (GDP) showed a growth of 0.2%, matching expectations and recovering from the previous -0.3% contraction. However, industrial production declined during the same period, and both manufacturing production and the Index of Services for the three months leading up to April fell short of expectations.

The US Dollar Index (DXY) is seeing some buying interest after recording its largest daily loss in three months, currently trading around 102.30. This uptick in the DXY is providing support for buyers of the Pound Sterling. However,

GBP/USD got bullish momentum touching right now the 1.2800 and waiting for more developments. A possible correction may take the pair down toward the 1.2700. The next reistane level in case of continuation are the 1.3000 and 1.3200 levels.

JPYUSD

The Japanese Yen (JPY) is experiencing weakness across various currency pairs following the Bank of Japan's (BoJ) decision to maintain its accommodative monetary policy stance in order to support fragile economic growth. As anticipated, the BoJ kept its short-term interest rate target at -0.1% and made no changes to its yield curve control policy after a two-day meeting. The central bank also maintained its view that inflation will decelerate later in the year, indicating its intention to remain dovish amidst global uncertainties. The USD/JPY pair is benefiting from this, in addition to a slight strengthening of the US Dollar (USD) on the final day of the week.

After recording substantial losses in the past three days, the US Dollar Index (DXY), which measures the USD against a basket of currencies, is experiencing a modest rebound from a five-week low. This rebound is supported by a slight increase in US Treasury bond yields. However, expectations that the Federal Reserve (Fed) is approaching the peak of its policy tightening cycle limit the potential for a significant USD rally. The release of Thursday's underwhelming US macroeconomic data, including Industrial Production, Weekly Jobless Claims, and Retail Sales, has raised doubts about the possibility of additional interest rate hikes by the Fed.

From a technical analysis standpoint, the USD/JPY pair is showing continued upward movement, reaching once again the level of 141.50 and moving towards the next target at 142.20.

XAUUSD

The Gold Price (XAU/USD) is facing challenges as it struggles to maintain its rebound from a three-month low. Market participants are eagerly seeking further clues to confirm the cautious optimism surrounding the potential July rate hike. Additionally, the mixed US data released recently and the lack of conviction among traders regarding the Fed's rate hike in July are also posing challenges for the XAU/USD bulls, despite similar statements made by policymakers on Wednesday.

In addition to these factors, concerns are emerging that China's economic recovery may slow down, despite the state planner's intentions to expedite key projects. This is exerting downward pressure on the Gold Price. Moreover, the cautious sentiment ahead of mid-US data releases and the upcoming testimony of Fed Chair Jerome Powell next week are adding to the challenges faced by XAU/USD optimists, particularly following this week's central bank actions.

The price of gold is currently trading within a descending triangle pattern, with its value hovering around the 1960 levels. Traders are eagerly awaiting further developments to determine whether a breakout towards the 1980 area or a retreat towards the support level at 1933 is more likely. The movement of the US Dollar has a significant impact on the price of gold, and monitoring the levels of the Dollar Index (DXY) today may provide valuable insights into the potential future levels for gold.

DAX40

European stock markets cautiously opened with positive sentiment on Friday as investors analyzed the European Central Bank's (ECB) latest monetary policy decision. At the start of trading, the pan-European Stoxx 600 index showed a 0.2% increase, with most sectors displaying slight gains. Mining stocks led with a minor uptick of 0.6%, followed by a 0.4% rise in oil and gas. On the other hand, the retail sector experienced a 0.2% decline, while the automobile sector saw a marginal decrease of 0.1%.

The ECB chose to raise its benchmark policy rate by an additional 25 basis points. During the press briefing following the decision, ECB President Christine Lagarde stated, "We are not thinking about pausing." She emphasized that the journey is not yet finished and hinted at another rate increase in July.

In contrast, the Federal Reserve, in its decision on Wednesday, decided to refrain from a rate hike for now, but indicated the likelihood of two quarter-percentage point increases before the end of the year.

The DAX index price stick to the 16330 waiting for today CPI. On the other hand, if the index experiences a decline, support is expected around the 15,900 level.

 

[Zforex]

Asia-Pacific Markets React to China's Rate Cuts and European Markets Remain Cautious"

The Asia-Pacific markets experienced mixed trading on Tuesday as investors analyzed the decision made by China's central bank to reduce the one-year and five-year loan prime rates by 10 basis points each to 3.55% and 4.20% respectively. This move caused concern about Chinese economic growth and the absence of fresh stimulus measures from Beijing. The lending rate cuts implemented by banks were deemed insufficient, resulting in a decline in Chinese property companies' stocks. During the June meeting, the Reserve Bank of Australia (RBA) released minutes indicating that it decided to raise its benchmark interest rate to 4.1%. This decision was prompted by an observation that inflation data had shifted upward and that it would take longer for domestic inflation to reach its target. In Japan, the Nikkei 225 index initially experienced losses but later rebounded, gaining 0.17%. However, the Topix index ended the day with a decrease of 0.36%.

European markets opened the new trading week with a decline, reflecting investor unease regarding the economic outlook. The Stoxx 600 index, a benchmark for European markets, closed 1% lower on Monday, with nearly all sectors experiencing negative performance. The remarks made by policymakers are expected to garner significant attention. Scheduled speakers include European Central Bank Vice-President Luis de Guindos, Bank of Spain Governor Pablo Hernandez de Cos, and Bank of Finland Governor Olli Rehn. German producer prices rose at their slowest pace in more than two years in May, according to data released on Tuesday, in a further sign inflation in Europe's largest economy is easing

EURUSD

According to recently released data on Tuesday, German producer prices experienced their slowest increase in more than two years in May, indicating a further decrease in inflation within Europe's largest economy.

The lineup of scheduled speakers for the upcoming events includes prominent figures such as European Central Bank Vice-President Luis de Guindos, Bank of Spain Governor Pablo Hernandez de Cos, and Bank of Finland Governor Olli Rehn.

On Wednesday, Fed Chair Jerome Powell is set to present his semi-annual report to Congress. Additionally, Federal Reserve Bank of St. Louis President James Bullard, along with his counterparts from New York and Chicago, are also among the speakers scheduled for this week.

The price action of the EURUSD is finding support at the 1.0912 level also the DXY correcting from the 100MA on the 4H after this level played the same role for the last 4 times. The next support level is around 1.0880, followed by 1.0860 for EURUSD if a breakout happens, while the next resistance level will be again the 1.0950 level.

GBPUSD

The Bank of England (BoE) is expected to raise interest rates by 25 basis points due to high inflation, which is four times its target. This decision follows improved growth numbers and economic activity, contrasting with the Federal Reserve's recent meeting, where rate hikes may end. The current rate of 5-5.25% is deemed high enough to impact inflation and labor market pressure. Confidence in central bank projections has waned due to their inability to address inflation, leading to persistent inflationary pressures.Economists warn of a severe recession and job losses if interest rates reach the predicted 6% level, causing mortgage costs to rise and businesses, especially smaller ones, to struggle with borrowing costs. The BoE aims to curb inflation, but this raises concerns of a recession, with potential consequences such as increased mortgage payments, insolvencies, unemployment, and reduced consumer spending, possibly leading to a housing market crash. Prime Minister Rishi Sunak faces a challenging position as he balances price control with the risk of a recession before an upcoming election. Higher borrowing costs also limit government support for distressed borrowers and increase the cost of servicing government debt.Even without a recession, the UK's long-term growth prospects are expected to be sluggish, with living standards falling behind other G-7 nations. The corporate sector's struggles with interest costs and rising insolvencies pose a potential trigger for a recession, which could have a catastrophic impact on the overall economy through widespread job losses and declining consumer demand. The BoE is under pressure to strike the right balance between curbing inflation and avoiding a crash due to persistently high prices and wages, which increase the risk of a "policy error."GBP/USD experienced a minor correction yesterday, primarily due to the strength observed in the Dollar. However, the market is currently exhibiting positive sentiment, with a solid bullish trend expected.

JPYUSD

On Friday, the Bank of Japan (BoJ) maintained its outlook that inflation would decelerate later this year, emphasizing its commitment to supporting a fragile economic rebound amid global uncertainties.

Meanwhile, the Federal Reserve (Fed) indicated last week that there might still be a need for a 50 basis points increase in borrowing costs by year-end. This announcement swiftly prompted market reactions, with expectations now pricing in a 25 basis points rate hike at the upcoming July Federal Open Market Committee (FOMC) meeting. Consequently, US Treasury bond yields have risen, contributing to the recent recovery of the US dollar from its lowest point in over a month, which in turn provides additional support for the USD/JPY currency pair.

USD/JPY has finally reached the anticipated resistance level of 142.20, and as expected, it is currently undergoing a correction. The previous bullish trend was expected to be both lengthy and sustained. The current level holds significance, and if it is surpassed, it may pave the way for the next historical levels near 145.00. Alternatively, a less probable correction could potentially push the price back to 141.00.

XAUUSD

Concerns over China's economic slowdown are gaining traction as the People's Bank of China (PBoC) reduces its benchmark Loan Prime Rates (LPRs) by 10 basis points, in line with market expectations. This move follows recent downward revisions in China's growth forecasts by prominent banks like Goldman Sachs and JP Morgan, fueling apprehensions about weakened energy demand given China's significant role as a major consumer of gold.

In contrast, officials from the European Central Bank (ECB) and the Federal Reserve (Fed) have maintained a more hawkish stance, raising concerns about a global economic slowdown, thereby exerting downward pressure on the price of gold.

Looking ahead, significant attention will be directed towards Fed Chair Jerome Powell's testimony and the preliminary readings of June's Purchasing Managers' Index (PMI) for a clearer short-term outlook.

Gold's upward momentum faced formidable resistance from a bearish descending triangle pattern, resulting in a decline in price until it found support at 1947. This support coincided with a decrease in the DXY (U.S. Dollar Index) and a decline in the yields of U.S. 2/10-year bonds. In relation to support levels, the initial one to consider is at 1945, followed by a significant support level at 1933. A breach below this level might indicate a substantial sell-off in the price of Gold.

 

[Zforex]

"Asia-Pacific Gains, SoftBank Shifts to Offensive Mode, Powell's Forecasts Impact Global Markets, and Bitcoin Surges"​

Asia-Pacific markets mostly experienced gains, although the Nikkei 225 in Japan fell by 0.19%, undoing its progress from Wednesday. On the other hand, the Topix index increased by 0.53%. The decline in the Nikkei 225 was influenced by U.S. Federal Reserve Chairman Jerome Powell's statement, in which he predicted additional interest rate hikes this year and highlighted the time required to achieve the 2% inflation target.

SoftBank Chairman and CEO, Masayoshi Son, announced plans to shift from a defensive stance to an offensive one, aiming to seize opportunities in the AI industry. SoftBank's strategy involves building up cash reserves, and the company has amassed five trillion yen ($35.3 billion) to support its objectives. Son expressed enthusiasm about embracing an offensive approach and emphasized SoftBank's aspiration to lead the AI revolution.

In contrast, European markets are expected to open negatively on Thursday, following the cautious sentiment sparked by Jerome Powell's forecast. During his testimony before the House Financial Services Committee, Powell revealed that most participants in the Federal Open Market Committee (FOMC) anticipate raising interest rates to some extent by the year's end.

Investors in the United Kingdom are closely monitoring the Bank of England's upcoming monetary policy announcement. It is anticipated that the central bank will increase rates due to persistently high inflation, although there is disagreement among market participants regarding whether the rate hike will be 25 or 50 basis points.

On Thursday morning, Powell is scheduled to present the Semiannual Monetary Policy Report to the Senate Banking Committee. Investors will be attentive to any further remarks he makes regarding inflation and interest rates.

During Wednesday's trading session, the price of Bitcoin reached a peak of $30,749.45, marking its highest level since April 14. This surpasses the previous occasion when Bitcoin traded as high as $31,102 on April 26.

EURUSD
Federal Reserve Chairman Jerome Powell confirmed that more interest rate increases are likely due to persistently high inflation. However, he acknowledged that bringing inflation down to the target of 2% will take time. Despite signs of a loosening labor market, there is still a shortage of available labor compared to job openings. The Federal Open Market Committee (FOMC) expects two additional interest rate hikes by the end of the year. Inflation, particularly core inflation, remains well above the target despite some moderation. The Fed decided to hold off on rate hikes in a recent meeting to assess the impact of previous tightening measures and suggested a more moderate pace for future increases.

In a different context, the German IFO Institute warned of a sharper-than-expected recession in Germany. European Central Bank (ECB) member Kazimir expressed uncertainty about the ECB's continuation of rate hikes in September. However, ECB members Schnabel and Nagel maintained a hawkish stance, emphasizing that there is still work to be done. Market expectations support further rate hikes from the ECB, which has been favorable for the euro.

The price action of the EURUSD continued higher at the 1.1000 level as market pricing a more ECB hikes in the next meetings but still not sure about the Fed ones. The next resistance level to watch would be 1.1050.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1080	1.1050	1.1000	1.0950	1.0912	1.0860

GBPUSD
The expectation is widespread that the Bank of England (BoE) will raise its policy rate by 25 basis points (bps) to reach 4.75%. Given the absence of a post-meeting press conference, market participants will carefully scrutinize the policy statement for any new insights into the future direction of the policy.

Although unlikely, a 50 bps rate hike would represent a significant and unexpected shift towards a more hawkish stance, potentially favoring the GBP/USD exchange rate. In May, two policymakers voted in favor of maintaining the policy rate. If these policymakers adopt a more hawkish stance and the BoE raises the rate with a unanimous vote, the Pound Sterling could display resilience against other currencies. In such a scenario, remarks on inflation developments could influence the currency's valuation.

Since the last policy meeting, both inflation and wage inflation in the UK have remained uncomfortably high, contradicting the BoE's earlier forecasts of a sharp decline in inflation starting from April. Recognizing the persistence of elevated inflation and acknowledging the need for further tightening could stimulate demand for the Pound Sterling.

The GBP/USD pair remains in a downtrend, with market participants eagerly awaiting the upcoming Bank of England (BoE) meeting. The level of 1.2700 is currently acting as a support level, while 1.2750 is serving as resistance. Moving forward, the next anticipated resistance level for GBP/USD is around 1.3000. However, there are additional factors to consider.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

USDJPY

During discussions on the exchange rate and inflation outlook, Bank of Japan (BoJ) board member Asahi Noguchi emphasized the importance of continuous wage increases and expressed a desire for higher wages next year. Noguchi believes that nominal wages should exceed the 2% inflation target. Concerns were raised about the rapid decline of the yen last year, noting that while it negatively affects households through rising prices, it benefits firms with increased overseas profits and tourism. Noguchi emphasized the significance of domestic demand for Japan's economic recovery, especially considering the expected slowdown in overseas growth. They clarified that FX should reflect fundamentals and highlighted that monetary policy does not directly target the exchange rate.

In addition, the BoJ's decision to widen the yield target band is not considered monetary tightening, and Noguchi sees no immediate need for operational changes to the Yield Curve Control (YCC) policy. The BoJ remains committed to maintaining extraordinarily low-interest rates, leading to a prevalent strategy of shorting the yen. The market is focusing on reaching the ¥142.50 level, and a breakthrough could potentially lead to further upward movement. Many investors are seeking yield opportunities and holding the US dollar against the Japanese yen, or other currencies against the yen, provides positive swap earnings.

The USDJPY pair is currently hovering near the resistance level of 142.20, indicating a consolidation of price as market participants await further direction. A breakout above this level would signal a potential move toward the significant level of 145. However, it is worth noting that this level is considered sensitive, as it may prompt intervention from the Bank of Japan (BOJ) in the market. On the other hand, in the event of a correction, the next support level to watch for is at 140.2.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.80	142.20	141.50	141.00	140.20	139.50

XAUUSD

During his bi-annual testimony to the US House Financial Services Committee, Federal Reserve Chairman Jerome Powell maintained a hawkish stance. However, the absence of new comments and conflicting statements from other Fed officials are putting downward pressure on the US Dollar and constraining movements in the XAU/USD (gold) pair.

Despite this, major central banks' commitment to a "higher for longer" interest rate outlook and doubts surrounding China's recession concerns, along with tensions between the US and China, are exerting downward pressure on the price of gold.

Looking ahead, monetary policy announcements from the UK and Switzerland are forthcoming, which could contribute to increased market volatility. Additionally, the Bank of Canada (BOC) and Bank of Australia (BOA) are expected to raise interest rates, adding further pressure on the metal.

Gold has recently breached the support level of 1938 on the Daily chart, signaling a potential shift into selling territory. Confirmation of this trend awaits further information on future policies from central banks, particularly as the majority of developed world central banks remain hawkish and are increasing interest rates. If gold continues to decline, a significant and robust support level can be found around the 1870-1860 area, which aligns with the downward parallel of the bullish long-term trend and the 200-day moving average (200MA) on the daily chart.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2000	1980	1960	1933	1870	1800

DAX40

European shares started the day with losses as concerns over ongoing monetary policy tightening persisted. London stocks were particularly impacted due to uncertainty surrounding the magnitude of the Bank of England's interest rate increase scheduled for later in the day.

The Bank of England is expected to raise interest rates for the thirteenth consecutive time, following the release of higher-than-anticipated inflation data. However, market predictions for the rate hike were divided, with nearly equal bets placed on a 25-basis-point or 50-basis-point increase.

Rate-sensitive technology shares experienced a 1.2% decline, while auto stocks saw a more significant drop of 1.9%, leading the overall market decline.

Corporate news in Europe was relatively scarce, although a few merger and acquisition headlines garnered attention.

The DAX index managed to find temporary support around 16,000, but the today second meeting of Powell's testimonial could impact European equities. Additionally, the US equities continue the slow down.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Markets Lower as Inflation Data and Manufacturing Activity Awaited; European Equities Head for Lower Open"

Asia-Pacific markets declined on Friday as investors awaited inflation data from Japan and Singapore, along with flash estimates on Japan's manufacturing and services activity from the au Jibun Bank. Despite paring some losses, the Nikkei 225 still fell 1.45% to 32,781.54, ending an eight-day run above the 33,000 mark. The Topix, driven primarily by industrials, also dropped 1.38% and closed at 2,264.73.
Japan’s core inflation rate in May eased slightly to 3.2% year-on-year, lower than April’s 3.4% but still above the BOJ’s 2% target. The May core inflation rate was slightly above the 3.1% expected by economists polled by Reuters.

Japan’s business activity expanded at a slower rate in June, according to flash estimates by the au Jibun bank. The composite purchasing managers index fell to 52.3 in June, compared to 54.3 in May.

European equity markets were headed for a lower open on Friday, with benchmark indexes in the region set to end the week sharply lower as aggressive monetary tightening by major central banks threatened the outlook for global economic growth, hurting investor sentiment. Both the Bank of England and the Norges Bank delivered a larger-than-anticipated 50 basis point rate hike on Thursday, while the Swiss National Bank lifted rates by 25 bps. The downbeat sentiment has been reflected globally, with Wall Street heading for a losing week and Asia-Pacific markets largely lower.

In terms of data on Friday, the GfK survey showed that U.K. consumer confidence increased for a fifth consecutive month, surpassing expectations, despite significant cost-of-living pressures.

EURUSD

The dollar received support on Friday due to increased risk aversion, caused by hawkish comments from global central banks, including the Federal Reserve.
These comments raised concerns that their aggressive monetary tightening could lead to a deeper economic downturn. Federal Reserve Chair Jerome Powell stated on Thursday that the central bank would proceed with interest rate adjustments at a cautious pace. A majority of the Federal Open Market Committee members anticipate more rate hikes in the future.
While higher interest rates typically strengthen currencies, the risk of triggering an economic downturn has prompted some investors to seek safe-haven assets such as the U.S. dollar. The market's next significant concern will revolve around the possibility of a recession and the level of aggressiveness policymakers will adopt.
The price action of the EURUSD after reaching the 1.1000 level a correction happened and the 1.0860 support level is waiting for it.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1080	1.1050	1.1000	1.0950	1.0912	1.0860

GBPUSD

The UK's GfK Consumer Confidence rose to -24 in June, reaching its highest level since January 2022, surpassing the previous reading of -27 and market expectations of -26. Following this data, Reuters reported that the British economy has managed to avoid a predicted recession. GfK's measure of consumer sentiment regarding the economy for the next 12 months increased from -30 in May to -25, while perceptions of personal finances rose by seven points to -1.
However, it is important to note that concerns about a recession induced by the Bank of England (BoE) continue to put downward pressure on the GBP/USD pair. Surprising the markets, the BoE, also known as the "Old Lady," raised benchmark interest rates by 50 basis points (bps) to 5%, contrary to the widespread expectation of a 0.25% rate hike on Thursday. Nevertheless, the GBP/USD initially spiked but later dropped, as the Over-the-Counter Interest Rate Swap (OIS) pricing indicates an anticipated end to the tightening cycle sooner than expected. Furthermore, the substantial rate hike also reflects the economic challenges amid discussions of a British recession, which in turn exerted downward pressure on the Pound Sterling despite the significant interest rate increase.
During his testimony to the Senate Housing Committee, Federal Reserve Chairman Jerome Powell reiterated most of the remarks he made on the previous day.
The GBP/USD continue the correction going toward the 1.2700 area where it may find support. The long bullish trend still solid.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

USDGBP

The US Dollar Index reached a new daily high at 102.70 amid significant uncertainty in global markets. According to the CME FedWatch tool, there is approximately a 77% likelihood of the Federal Reserve implementing a hawkish interest rate policy at its July meeting. Despite the tight labor market conditions, the chances of a hawkish policy in July remain strong.
On Thursday, the US Department of Labor reported a slight increase in initial jobless claims for the week ending June 16. This marks the fourth consecutive week in which jobless claims exceeded expectations. The claims amounted to 264K, matching the previous release and slightly surpassing the expected 260K.
Regarding the Japanese Yen, inflationary pressures have unexpectedly weakened despite the ongoing monetary stimulus by the Bank of Japan (BoJ). Headline inflation has decelerated to 3.2%, falling short of the estimated increase of 4.1% and remaining lower than the previous release of 3.5%. Core inflation, which excludes volatile oil and food prices, reached 4.3%, slightly lower than the estimated 4.4% but higher than the previous release of 4.1%.
The USDJPY encountered resistance at the 143.50 level, which coincides with the upper parallel of a bullish channel. This suggests a potential correction, particularly following the upward movement and the breakout of the 142.20 level, which could act as a support.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.80	142.20	141.50	140.20	140.20	139.50

XAUUSD
On the previous day, several central banks reiterated their intention to maintain low interest rates for an extended period and expressed concerns regarding the economic slowdown, particularly considering rising inflation and geopolitical uncertainties. The risk-off sentiment was strengthened by a combination of mixed second-tier data from the United States and the hawkish testimony from Federal Reserve (Fed) Chairman Jerome Powell. Richmond Fed President Thomas Barkin also echoed economic concerns, aligning with US Treasury Secretary Janet Yellen's remarks earlier on Friday.
The gold sell-off witnessed yesterday was a continuation of the previous breakout, with indications pointing towards further selling as the most likely outcome. Both fundamental and technical factors suggest that higher yields are currently more appealing than investing in the yellow metal. The next target is expected to be the 1870-1860 area, which serves as a final reference point.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2000	1980	1960	1933	1870	1800

DAX40

European shares opened on Friday with a decline following a week filled with central bank policy announcements that reinforced expectations of prolonged higher interest rates. Meanwhile, Siemens Energy experienced a significant drop in its share price as it withdrew its annual profit outlook.
The STOXX 600 index decreased by 0.3%, contributing to a total loss of 2.8% for the week thus far. Investors have been digesting the news of additional interest rate hikes from major central banks such as the Bank of England, Norges Bank, and the Swiss National Bank, along with concerns regarding persistent higher inflation.
Germany's DAX index recorded a 0.7% decline, leading the losses among regional peers, primarily due to a sharp 30.3% drop in the shares of Siemens Energy. The company, which supplies equipment and services to the power sector, warned that the effects of quality issues at its Siemens Gamesa wind turbine unit would have long-term repercussions.
Furthermore, market participants will closely monitor various economic reports, including the flash reading of eurozone manufacturing and services PMIs.
The DAX is going down the 16000-level indicating more selloff is waiting as the majority of developed world stock markets are falling with fears of recession. The next big support is around the 15669 level.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Markets Lower as Inflation Data and Manufacturing Activity Awaited; European Equities Head for Lower Open"​

Asia-Pacific markets rose as investors digested a slew of manufacturing activity reports that showed slowing output in the region.

China’s Caixin manufacturing purchasing managers index for June came in at 50.5, slightly higher than expectations of 50.2 by a Reuters poll. China’s official government PMI readings posted a third straight month of contraction.

Mainland China markets demonstrated positive movement, with the Shanghai Composite increasing by 0.72% and the Shenzhen Component rising by 0.18%. Hong Kong's Hang Seng index also experienced gains, climbing 1.29%, while the Hang Seng Tech index surged over 2%.

The People's Bank of China again pushed back on a weaker yuan by fixing the currency well above expectations, but these official fixings are having less and less of an impact in the market and offshore dealers are testing to see if Chinese banks actually sell dollars to support the yuan.

Japan's Nikkei 225 led the region in gains, rising by 1.46%, accompanied by a 1.11% increase in the Topix index. South Korea's Kospi advanced by 1.39%, while the Kosdaq surged by 1.81%. Private surveys conducted in South Korea and Japan also indicated a slowdown in factory activity for the month.

European stock markets are set to open higher on Monday after closing the first half of the year 8.8% higher.

Eurozone inflation fell more than expected for the month of June, down to 5.5%, but core inflation continued to increase. The rate of price prices remains well above the European Central Bank’s 2% target.

Asia-Pacific markets rose Monday as investors digested a slew of manufacturing activity reports that showed a slump in output from the region.

News that U.S. Treasury Secretary Janet Yellen will visit China from July 6-9 was taken as another sign the two powers were trying to defrost their relationship, though expectations are far from high.

The text discusses factors influencing the EUR/USD pair in the market. Rising bets for a 25-basis points interest rate hike by the European Central Bank (ECB) in July provide support for the pair. However, the US Dollar (USD) is gaining strength due to the Federal Reserve's (Fed) hawkish stance, which is holding back bullish investors. The Euro Zone Harmonized Index of Consumer Prices (HICP) decelerated in June, but the Core HICP increased, reaffirming expectations for more rate hikes by the ECB. The Fed's indication of potential borrowing cost increases and the likelihood of a 25-basis points lift-off in July also impact the market. The US PCE Price Index slowed down, but it remains above the Fed's target, supporting the possibility of further policy tightening. Elevated US Treasury bond yields support the USD and limit the EUR/USD pair.

In the short term, there are indications that the EUR/USD pair may be forming a descending triangle pattern, implying the likelihood of continued downward movement. At the same time, the DXY (US Dollar Index) is also displaying a third leg higher, potentially signaling a breakout above the critical resistance level at 103.40.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1080	1.1050	1.1000	1.0950	1.0912	1.0860

Consumer confidence in the UK improved in June, reaching its highest level since January 2022. The British economy has managed to avoid a predicted recession, as indicated by the GfK Consumer Confidence data. However, concerns about a potential recession and the Bank of England's actions continue to weigh on the GBP/USD pair. The BoE surprised the market by raising interest rates by 50 basis points, leading to a temporary spike in the pound but later a decline. The Pound Sterling faces downward pressure despite the rate hike due to expectations of an earlier end to the tightening cycle. In the US, the Federal Reserve Chairman reiterated previous remarks, while the US Dollar had a strong week but was impacted by softer-than-expected inflation figures, reducing expectations of future rate hikes.

Currently, the GBP/USD pair is demonstrating a downward trend in the short term, with the support level identified around 1.2600-1.2550. A decisive drop below this level has the potential to indicate the conclusion of the prevailing bullish long-term trend.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

The USD/JPY pair is influenced by Japan's Tankan Manufacturing Survey, which supports the Bank of Japan's dovish monetary policy stance due to expectations of low inflation. Disappointing final prints of Japan's Jibun Bank Manufacturing PMI for June also impact the pair. Concerns about Japan's intervention in the market have eased, but mixed news about China and upcoming data/events create caution among USD/JPY bulls. US Treasury Secretary Janet Yellen's visit to China yields mixed responses. US inflation figures, including the Personal Consumption Expenditure (PCE) Price Index, show a slight slowdown, challenging the Federal Reserve's rate hike expectations. These factors influence the behavior of USD/JPY buyers.

The USD/JPY pair has approached the critical resistance level of 145.00 and is currently hovering around it. There are concerns in the market about a potential intervention, which is impacting sentiment, as the Yen is depreciating at a faster pace.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.80	142.20	141.50	141.00	140.20	139.50

The US Dollar (USD) has rebounded, attracting buyers and impacting the price of gold. Recent US data shows a slowdown in inflation, but it remains above the Federal Reserve's target. Market expectations indicate a high probability of a rate hike at the upcoming FOMC meeting. Fed Chair Jerome Powell's remarks support the possibility of further rate increases. Other central banks' hawkish outlooks and upcoming economic data also influence market sentiment. The focus will be on the release of the US ISM Manufacturing PMI and the FOMC meeting minutes this week.

The correction in the price of gold on Friday was a temporary movement, as the market continues to see selling pressure today. The support level around 1912 is being tested, and there is an expectation that it will be broken. The next target on the daily chart is anticipated to be the 1870-1860 area, which is considered a significant reference point.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2000	1980	1960	1933	1870	1800

European shares were slightly up on the first trading session of July, after booking a third consecutive quarter of gains, as investors braced for a week full filled with important releases, including worldwide manufacturing and services PMI data and the US jobs report.

Meanwhile, Tesla shares listed in Frankfurt rose 5% in early trading after the company said on Sunday that it delivered a record number of vehicles in the second quarter.

Last week, data showed that the Eurozone inflation fell more than expected in June but remained well above the European Central Bank’s 2% target.

The DAX, along with other US and Asian indices, concluded the second quarter on a positive note. However, the underlying fundamentals are not supportive of a further continuation of this bullish trend. There is a divergence between the macro economy and the market, which suggests that a correction may occur in the coming weeks. The current resistance level of 16400 could potentially serve as the final barrier for the price to reach.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Mixed as Australia Holds Rates, Europe Cautious, and US Fed Eyes Restrictions"

The Asia-Pacific markets experienced mixed performance as investors evaluated the Reserve Bank of Australia's decision to maintain interest rates at 4.10%. The central bank, in its June meeting minutes, acknowledged an upward shift in inflation risks. The Australia Bureau of Statistics' monthly inflation indicator indicated a slight slowdown in the price increase, with May's rate at 5.6%, primarily driven by housing prices, food, and non-alcoholic beverages. The Reserve Bank of Australia aims to keep inflation within a range of 2% to 3%.
In Australia, the S&P/ASX 200 index rebounded from earlier losses and closed its session at 7,279, representing a 0.45% increase. Meanwhile, the Australian dollar weakened by 0.3% against the U.S. dollar, reaching 0.665.
In Japan, the Nikkei 225 index retraced from its recent 33-year high established on Monday, falling by 0.98% to 33,422.53. The Topix index incurred a more modest decline of 0.62% and settled at 2,306.37. Masato Kanda, Japan's top financial diplomat, emphasized the authorities' ongoing close communication with U.S. Treasury Secretary Janet Yellen and other international officials, with a particular focus on currency-related matters.
In Europe, the stock markets traded cautiously on Tuesday, exhibiting minimal fluctuations due to thin trading. Investors were eagerly anticipating forthcoming economic data, such as the U.S. jobs report scheduled for release on Friday, as well as the commencement of the second-quarter earnings season. Major European indices, including the FTSE 100, DAX, and CAC 40, exhibited choppy movements and traded close to the flatline.
On Tuesday morning, German trade figures showed a 0.1% monthly decrease in exports and a 1.7% rise in imports, resulting in a foreign trade balance of 14.4 billion euros ($15.7 billion). Disappointing manufacturing activity data for the eurozone in June revealed contraction in all four of the region's largest economies, mainly due to the European Central Bank's ongoing policy tightening measures.
The U.S. Federal Reserve is set to release the minutes of its previous meeting on Wednesday, following Chairman Jerome Powell's indication that further restrictions are on the horizon. According to CME's FedWatch tool, market expectations currently imply an 89.9% likelihood of a 25-basis-point interest rate hike in July.

The EUR/USD experienced a recovery following the release of disappointing US data, allowing it to climb back above 1.0900 during the American session. Due to US holidays, the markets are expected to remain relatively calm on Monday. However, the Greenback is losing its momentum, and the upcoming employment data and release of the FOMC minutes will play a crucial role.
On Monday, economic data revealed a downward revision to the Eurozone's June Manufacturing PMI, with the headline figure dropping from the initial 43.6 to 43.4. The Service sector data is scheduled to be released on Wednesday. Despite these weak figures, the European Central Bank (ECB) plans to raise interest rates during the next meeting on July 22, with the odds of another hike in September being above 50% due to elevated inflation.
A weaker US dollar on Monday contributed to the rebound of the EUR/USD from 1.0870 to 1.0935, prompted by below-expectation data from the US. The ISM Manufacturing PMI decreased from 46.9 to 46, falling short of the anticipated modest increase to 47.2. Additionally, the Prices Paid Index dropped from 44.2 to 41.8, while the Employment Index declined from 51.4 to 48.1.
Hawkish comments from the Federal Reserve have provided support to the Dollar. The Fed will release the minutes of its latest meeting on Wednesday, and key labor market data, including ADP, Jobless Claims, JOLTS, and Nonfarm Payrolls, is expected on Thursday and Friday. Weak data in these reports could diminish expectations of a Fed rate hike. In the short term.
After testing breaking the descending trendline the EUR/USD is potentially forming a descending triangle pattern, suggesting further downward movement for the pair. Meanwhile, the DXY (US Dollar Index) is also forming a third leg higher, indicating a potential breakout above the key resistance level at 103.40.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1080	1.1050	1.1000	1.0950	1.0912	1.0860

The GBP (Pound Sterling) is experiencing volatile movements around the 1.2700 level, with investors eagerly awaiting the release of key Service PMI numbers following better-than-expected Manufacturing PMI data. The GBP/USD pair is lacking clear direction as the overall market sentiment remains subdued due to the Independence Day holiday in the United States. Investors' primary focus will be on the Bank of England (BoE) policymakers' guidance regarding interest rates.
The United Kingdom's economic outlook remains positive, despite the challenges confronted by BoE policymakers and the UK government, including persistently high inflation above 8.5% and the limited efficacy of tight monetary policy. Household demand remains robust, even in the wake of the Bank of England's decision to raise interest rates.
In the short term, the GBP/USD pair exhibits a downward trend finding resistance around the bearish descending trend line, with the support level being observed around 1.2600-1.2550. A break below this level could potentially signal the end of the current bullish long-term trend.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

The recent weak performance of yen pairs may be attributed to concerns about Japan's potential intervention in the market to protect its domestic currency, which has been fluctuating at its highest levels in eight months. Furthermore, the fears of a recession, indicated by the inversion of US Treasury bond yields, pose a challenge for USD/JPY buyers.
Japanese Finance Minister Shunichi Suzuki stated on Tuesday that he is maintaining close communication with the US at the vice-ministerial level regarding foreign exchange. Additionally, the top currency diplomat of Japan, Masato Kanda, mentioned that he is engaging in discussions with various countries, including the US, regarding currencies.
Meanwhile, the inversion between the US 10-year and two-year Treasury bond yields has reached a level not seen since 1981, fueling concerns about a potential recession. Reuters reported that the yield curve briefly reached its lowest point in 42 years on Monday, as investors increasingly anticipate the Federal Reserve to raise its benchmark interest rates in order to control inflation. The two-year Treasury bond yields fell to 4.85%, while the 10-year yields dropped to 3.78%. It should be noted that both benchmark yields ended Monday's trading session around 4.93% and 3.86%, respectively.
On the other hand, despite downbeat US data, which bolstered US Dollar bulls, negative sentiment allowed the greenback to make gradual gains during the holiday period. The US ISM Manufacturing PMI for June reached its lowest level in three years, remaining below the 50.0 level for the seventh consecutive month. It recorded a figure of 46.0, falling short of the expected 47.2 and the previous reading of 46.9. Furthermore, the S&P Global Manufacturing PMI for June confirmed a figure of 46.3, the lowest in five months. However, there was an improvement in Construction Spending, with a 0.9% month-on-month increase in May, surpassing the expected 0.5% and the previous 0.4% readings.
The USD/JPY pair has approached the critical resistance level of 145.00 and is currently hovering around it. There are concerns in the market about a potential intervention, which is impacting sentiment, as the Yen is depreciating at a faster pace.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.80	142.20	141.50	141.00	140.20	139.50

Traders actively participated in the market amid concerns about the global economic slowdown and the state of US-China relations. These factors contributed to the market's momentum. Another factor supporting market sentiment was the recent decision by the Reserve Bank of Australia (RBA) to refrain from implementing a third consecutive 25 basis points rate hike, which defied the prevailing consensus.
The inversion between the US 10-year and two-year Treasury bond yields reached its highest level since 1981, reigniting fears of a recession. Reuters reported that on Monday, the yield curve briefly reached its lowest point in 42 years as investors increasingly anticipate the Federal Reserve's potential increase in benchmark borrowing rates to curb inflation. This occurred as the two-year Treasury bond yields in the US dropped to 4.85%, while the 10-year yields fell to 3.78%. It's worth noting that both benchmark yields ended Monday's trading session at approximately 4.93% and 3.86%, respectively.
US data fails to tame the hawkish Fed bets and challenge the gold buyers despite the sluggish markets. On Monday, US ISM Manufacturing PMI for June dropped to the lowest level in three years, as well as stayed below the 50.0 level for the seventh consecutive month.
A surprising shift in sentiment worked yesterday led to an improve in gold price due to The US10Y and US2Y inversion reaching its highs level. The next resistance on the 4-hour chart will be the 1931 resistance level and on the daily chart is anticipated to be the 1870-1860 area, which is considered a significant reference point.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2000	1980	1960	1933	1870	1800

Major European equity indexes are gradually rising in the early trading hours of Tuesday, continuing the gains observed in late June. However, the lack of fresh stimuli to guide direction has resulted in a lack of clear market trends.
Due to the Independence Day holiday in the United States, American markets are closed, resulting in lower trading volumes than usual. Additionally, the absence of significant economic releases from Europe has led to a drift higher in the markets.
Among the early gainers in Europe, travel and leisure stocks, represented by the (.SXTP) index, have shown positive movement. Ryanair shares, in particular, have seen a slight increase following the announcement of record-high monthly traffic in June.
There is a prevailing risk-off sentiment impacting the stock markets today, driven by indicators and metrics pointing towards a possible recession in the future. Furthermore, the disparity between economic performance and market levels has made investors more cautious about further advancements beyond historical levels.
The DAX, along with other US and Asian indices, concluded the second quarter on a positive note. However, the underlying fundamentals are not supportive of a further continuation of this bullish trend. And the last yesterday and today are indicating and confirming the actual risk-off mood. There is a divergence between the macro economy and the market, which suggests that a correction may occur in the coming weeks. The current resistance level of 16400 could potentially serve as the final barrier for the price to reach.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Markets Decline as Investors Digest Private Surveys on Services Activity"

Asia-Pacific markets experienced a significant decline as investors responded to newly released private surveys on services activity in the region. The Caixin services purchasing managers index for China dropped to 53.9 in June, indicating a slower rate of expansion compared to May's 57.1. Similarly, Japan's final au Jibun Bank Services purchasing managers' index (PMI) decreased from a record high of 55.9 in May to 54 in June, though both remained comfortably above the 50-mark, which separates contraction from growth.
Despite the decline, services activity in both Japan and China remained in the expansion territory for the month, albeit with a softer pace of growth. The Nikkei 225 in Japan fell 0.25% to close at 33,338.7, and the Topix also experienced a slight decline to 2,306.03. South Korea's Kospi index lost 0.53%, while the Kosdaq managed a modest 0.16% increase.
Greater China markets also faced losses, with the Shanghai Composite down 0.45% and the Shenzhen Component decreasing by 0.7%. Hong Kong's Hang Seng index dropped 1.41%, and the Hang Seng Tech index saw a decline of 1.6%.
Looking at the European markets, they were expected to open lower on Wednesday. Investors were cautious due to the signs of China's economic rebound slowing down, coupled with global economic uncertainties and the possibility of further monetary tightening. Additionally, investors were closely monitoring the upcoming Federal Reserve policy meeting minutes and the US monthly jobs report, as they could influence the outlook for US interest rates.
The European and UK calendar Today is dominated by final services and composite PMIs for June, also expected to confirm a slowing in what has been a consumption-led economic recovery.

Today's economic calendar holds significant importance for the EURUSD direction. We anticipate the release of Europe Services PMI numbers from various countries, all of which are expected to show contraction. Notably, the Spanish PMI has already reported lower than expected figures, despite remaining in expansion territory. These indications point to a slowing economy in Europe, with both manufacturing and services sectors showing reduced activity. Consequently, concerns about a potential recession are causing anxiety in the markets, with uncertainties regarding its timing and severity.
Additionally, the United States is scheduled to release factory orders data for May. However, the main focus will undoubtedly be on the minutes of the Federal Reserve's June meeting. The meeting resulted in a temporary pause in tightening policies, while also revising the outlook to include two more anticipated rate hikes.
The EUR/USD pair remains within a descending triangle pattern, indicating a continued likelihood of downward pressure for the pair. Simultaneously, the DXY (US Dollar Index) is currently forming a third leg higher, which suggests a possible breakout above the significant resistance level at 103.40. It is crucial to consider the fundamentals as the primary determining factor for any potential upward or downward movements today and in the coming days.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1046	1.1000	1.0960	1.0860	1.0840	1.0800

The recent softening of US macroeconomic data raises concerns about the Federal Reserve's ability to continue raising interest rates and dampens bullish sentiment towards the USD. The US PCE Price Index and core gauge slowed down more than expected, while the ISM Manufacturing PMI remained in contraction territory. The market focus is on the upcoming release of the June FOMC meeting minutes, which will provide insights into the Fed's policy outlook. Worries about economic headwinds from rising borrowing costs may support the USD and limit gains in the GBP/USD pair. There are also concerns about a potential recession in the British economy following the surprise rate hike by the Bank of England. The final UK Manufacturing PMI is waiting for further direction.

The recent price movement of the GBPUSD indicates increased uncertainty shortly regarding the market's interpretation of Economic Data. There are concerns about a potential slowdown in economic activity and the possibility of a recession. However, the long-term trend remains stable, and if the price surpasses 1.2850, it could lead to further price advancements.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

In June, services activity in Japan continued to expand, driven by strong demand conditions in the economy. The au Jibun Bank Japan Services PMI decreased slightly from its record high in May but remained above the growth threshold of 50. Speculations about the Japanese government intervening to prevent a sharp decline in the domestic currency affected the USD/JPY pair. Concerns over a global economic downturn boosted the safe-haven appeal of the JPY, while divergence in monetary policy between the Bank of Japan and the Federal Reserve limited the downside. The Fed signaled a potential increase in borrowing costs, but softer economic indicators raised questions about further monetary tightening.

The USD/JPY pair is hovering around the critical resistance level of 145.00 and a price accumulation is forming at that point. Concerns in the market about a potential intervention are spreading more fear about high volatility around the actual level.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.80	142.20	141.50	141.00	140.20	139.50

The Fed hinted at a 50-bps interest rate hike by the end of the year, but recent US macro data has raised doubts about their ability to tighten monetary policy. Inflation pressures eased and the Manufacturing PMI contracted, leading to scrutiny of the Fed's future rate-hike path. Meanwhile, expectations of a 25-bps rate increase in the upcoming FOMC meeting have supported US Treasury yields and the USD, weighing on gold prices. Other central banks' hawkish outlooks have also capped gains for gold. However, concerns about a global economic downturn, particularly in China, and strained US-China trade relations have provided some cushioning for gold prices.

Gold experienced a correction over the past two days due to a change in sentiment driven by recession fears. The price found resistance at the 1931 level and has been unable to surpass it so far. Today's release of the FOMC meeting minutes is expected to generate volatility and provide further guidance for the direction of gold prices.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1980	1960	1931	1912	1900	1870

On Wednesday, European shares experienced a slight decline as investors eagerly awaited key PMI data from various regions and the release of the Federal Reserve's meeting minutes to gain insights into future monetary policy. Economic developments included China's services sector exhibiting its slowest expansion in five months in June, primarily due to weakened demand. However, industrial activity in France and Spain surpassed expectations.
The ongoing technology dispute between Washington and Beijing intensified as a prominent Chinese trade policy advisor indicated that the country's implementation of export controls on metals used in semiconductor manufacturing was just the initial step.
In corporate news, financially struggling French retailer Casino unveiled a €1.35 billion rescue plan led by Czech billionaire Daniel Kretinsky.
The DAX, along with several US and Asian indices, wrapped up the second quarter with a positive outcome. Nevertheless, the fundamental factors that support this upward trend are lacking. There exists a disparity between the overall macroeconomic conditions and the market performance, indicating a potential correction in the upcoming weeks. It is worth noting that the price might encounter a significant obstacle at the current resistance level of 16400.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Markets React to Divided Fed and Anticipate Economic Data and Secretary Yellen's Visit"

The Asia-Pacific markets experienced significant declines following the release of minutes from the U.S. Federal Reserve, which revealed a divided stance on the decision to pause rate hikes in June. The central bank also indicated that future rate hikes would occur at a slower pace. The central bank also signaled a slower pace for future rate increases. The temporary pause in the Fed's tightening cycle aims to evaluate the impacts of these forceful moves, the most significant since the early 1980s.
Among the regional markets, Hong Kong's Hang Seng index led the losses, plummeting by over 3%. In mainland China, the Shanghai Composite was down by 0.65%, while the Shenzhen Component experienced a loss of 0.7%. Japan's Nikkei 225 fell by 1.7% to reach 32,773.02, and the Topix dropped by 1.3% to 2,277.08.
Goldman Sachs Group Inc. reports that Chinese investors have low expectations for significant stimulus or major economic reforms to be revealed during an upcoming key meeting later this month.
Australia's trade surplus for June amounted to 11.79 billion Australian dollars, surpassing the 11.15 billion recorded in April.
U.S. Treasury Secretary Janet Yellen is commencing her visit to Beijing this week, during which she is expected to meet with senior Chinese officials. This follows China's unexpected cancellation of the visit by the EU High Representative for Foreign Affairs Josep Borrell on Wednesday.
Traders are also eagerly awaiting U.S. jobs data scheduled for release over the next two days, as it will provide further insight into the future direction of interest rates.
The upcoming series of U.S. employment reports on Thursday and Friday will be crucial. The JOLTS report, which examines job openings, is projected to indicate a decrease in available positions, while a separate measure of jobless claims is expected to show a slight increase, suggesting a slowdown in the labor market.

Data from the Eurozone showed positive inflation developments. The ECB Consumer Expectation revealed unchanged three-year median inflation expectations at 2.5%. The Producer Price Index declined to a negative annual rate of 1.5%, below the expected -1.3%. However, the final Eurozone June Services and Composite PMI were revised lower to 52.0 and 49.9, respectively. The Composite dropped below 50 for the first time since December, increasing recession fears. These figures weighed on the Euro. Germany will report Factory Orders, and Eurozone Retail Sales are due.

The US dollar rose on Wednesday despite a softer-than-expected Factory Orders report. The Greenback consolidated gains after FOMC minutes, which revealed some members favored a rate hike in June. US yields moved higher, with the 10-year yield reaching 4.95%, the highest level since mid-March. The focus now turns to US labor market data. On Thursday, ADP private employment report, Jobless Claims, and JOLTS will be released, followed by Nonfarm Payrolls on Friday.

The EUR/USD pair is currently trading within a descending triangle pattern, which suggests continued potential for downward pressure on the pair. At the same time, the DXY has returned to the previous resistance level, indicating a possible breakout above the significant resistance at 103.40. It is important to note that fundamental factors should be carefully considered as the main drivers of potential upward or downward movements this week, particularly given the market's uncertainty surrounding the economy and monetary policies.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1046	1.1000	1.0960	1.0860	1.0840	1.0800

The hawkish stance of the Federal Reserve indicates that a 25 basis points increase is expected during the upcoming FOMC meeting, leading to a rise in US Treasury bond yields. Weakened risk sentiment and concerns about a global economic downturn and trade conflict between China and the US support the safe-haven US Dollar and limit the upside potential for the GBP/USD pair. The fear of aggressive interest rate hikes by the Bank of England (BoE) increasing the risk of a UK economic recession suggests a decline in the GBP/USD pair. Market participants should be cautious before extending the recent rebound. Key upcoming events include the UK Construction PMI and various US economic reports, with the highly anticipated US monthly jobs data (NFP report) being released on Friday.
Following yesterday's FOMC minutes, no significant changes were observed for the GBPUSD pair around the 1.2700 area. The downtrend line is holding the pair at a resistance level. However, the long-term trend remains stable, and if the price surpasses 1.2850, it could lead to further price advancements.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3200	1.3000	1.2800	1.2650	1.2540	1.2460

The USD/JPY pair reached a new weekly low at 143.60 due to increased concerns about intervention in the currency market by the Bank of Japan (BoJ). Meanwhile, the US Dollar Index rose to a four-day high of 103.40 as investors believe that a 25 basis points (bps) interest rate hike by the Federal Reserve is possible.
The recently released minutes of the Federal Open Market Committee (FOMC) meeting revealed a mixed sentiment among policymakers regarding a potential small interest rate hike or keeping rates unchanged. The uncertainty stems from the elevated inflation levels and the time it will take to reach the target of 2%.
In the meantime, there is growing fear of intervention in the foreign exchange (FX) market by the BoJ or Japanese diplomats, as the Japanese Yen has depreciated to 145.00 against the US Dollar. A Reuters poll previously indicated that intervention could occur if the Japanese Yen falls to 145.00 against the US Dollar.
The USD/JPY has reached 145.00, indicating a bearish price accumulation that suggests the market is currently seeking a correction in the short-term, potentially due to concerns of intervention around these levels. The subsequent notable support level lies at 142.2, towards which the price may undergo a correction.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
147.00	146.00	145.00	143.60	142.20	141.20

In June, business activity in China's service sector grew less than expected, raising concerns about a global economic downturn. The potential risk of an escalation in the trade conflict between China and the US has also made investors wary of riskier assets, leading to a weaker tone in equity markets. As a result, the price of haven assets like gold has received support. The minutes from the June FOMC meeting indicate that most members support resuming rate hikes due to high inflation. Some members even favored raising rates in June, citing a tight labor market that could drive up wages and inflation. This strengthens market expectations of a rate hike at the upcoming FOMC meeting, causing a rise in US Treasury bond yields. Together with other central banks' more hawkish stance, this could limit the potential gains for gold.

Gold corrected it yesterday after tapping on the 1931 level several times. The FOMC minutes were hawkish, which helped boost yields and the dollar, resulting in negative effects for gold. The next support levels in the short term are 1912 and 1900, respectively.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1980	1960	1931	1912	1900	1870

European shares slumped nearly 1% on Thursday due to heightened concerns about a global economic slowdown and the possibility of future interest rate hikes. Additionally, the escalating trade battle between China and the United States added to the negative sentiment. The recently released Fed minutes from Wednesday revealed that the central bank remained unified in keeping rates unchanged during the June meeting, allowing time to assess the need for further rate hikes, despite the majority expecting future policy tightening. Investors are closely watching U.S. Treasury Secretary Janet Yellen's upcoming visit to China, as she is expected to address the recalibration of relations between the world's two largest economies, following Beijing's imposition of export restrictions on certain metals, which caused tensions to rise. In other news, German industrial orders in May exceeded expectations, primarily driven by large-scale orders for ships, spacecraft, and military vehicles.

The DAX continued its correction as economic and geopolitical tensions continue to dampen risk appetite. The Eurozone Services PMI indicated a slowdown in activity, while the European Central Bank's tightening cycle remains ongoing. The next support level is expected to be around the 15700 area.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16800	16600	16370	15650	15400	15100

 

[Zforex]

"Asia-Pacific Markets Mixed as Investors Await Key Inflation Reports and US-China Talks Conclude"

Asia-Pacific markets are experiencing mixed performance as investors await key inflation reports scheduled for this week. Among these reports are the U.S. consumer price index, which is due on Wednesday, and the producer price index, which will be released on Thursday.
China's consumer price index in June remained stagnant compared to the previous year, reaching its lowest level since February 2021. Conversely, producer prices experienced a year-on-year decline of 5.4%, marking the most significant decrease since December 2015.
U.S. Treasury Secretary Janet Yellen concluded her visit to Beijing, describing the discussions as "direct" and "productive," which has helped to strengthen bilateral relations.
Japan's Nikkei 225 index extended its five-day losing streak by declining 0.61% to close at 32,189.73, while the Topix index also experienced a 0.61% loss, concluding at 2,243.33.
According to the June jobs report from the U.S. Labor Department, the increase in payrolls was lower than expected, indicating a slowdown compared to May. Nonfarm payrolls saw a rise of 209,000, while the unemployment rate stood at 3.6%.
In early premarket trading on Monday, U.S. stock futures were lower as investors prepared for the release of inflation data and the beginning of the second-quarter earnings season. Major financial firms such as BlackRock, JPMorgan Chase, and Cit will be reporting their earnings.
The recent U.S. jobs data dampened speculations that the Federal Reserve would maintain the current interest rates this month. However, the future outlook remains uncertain. While the payroll figures fell short of estimates, they also revealed signs of wage inflation, which continues to pose a threat to the Fed's efforts in controlling price increases.
Traders will closely monitor the U.S. consumer prices data scheduled for this week. Bloomberg economists anticipate a decline in the headline number to 3.1%, although they do not believe this will deter the Fed from raising interest rates at its upcoming meeting later this month.

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