This follows from Goldman Sachs‘ call earlier this week here:

• Goldman Sachs slashed its December Brent forecast to $86 /bbl (from previous estimate $95)

As a reminder, oil prices took a hit after Goldman’s revised forecast, with WTI crude hitting a low of $66.85 earlier this week before rebounding off its 200-week moving average to just above $70 at the moment.

This article was written by Justin Low at www.forexlive.com.

• Prior -1.4%
• Market index 208.8 vs 194.7 prior
• Purchase index 163.2 vs 151.7 prior
• Refinance index 434.1 vs 409.7 prior
• 30-year mortgage rate 6.77% vs 6.81%

That’s a solid bump up in mortgage applications in the past week but it comes after several weeks of rather subdued activity. Both purchases and refinancing activity improved as rates come down just ever so slightly ahead of the Fed decision this week.

This article was written by Justin Low at www.forexlive.com.

Here’s a look at how the curve in Fed funds futures have changed since a month ago and at the start of this month:

It may seem like an eternity but it was just four weeks ago that traders were still convinced of three rate cuts by the Fed before year-end.

That pricing was ultimately reversed and it helped to spur a dollar rally in May. And earlier this month, there was still some consideration about a rate hike for June but after since talks of a „skip“ came about, we have seen that settle to where we are now.

But looking out to the end of the year, traders are quite convinced of a higher for longer narrative by the Fed.

And as policymakers are set to keep rates unchanged today, it will be a question of whether or not they can convince markets that the narrative has not changed.

If the Fed chooses to „skip“ this meeting, everyone is anticipating a hawkish pause of sorts. However, how will that look like?

For one, Powell surely cannot pre-commit to a rate hike in July. As usual, I would expect him to stress on data dependence but at the same time reaffirm that the Fed’s job is not done yet. So, if traders are hoping to get confirmation that this is just indeed a „skip“ and not a „pause“, they may end up being disappointed.

That’s a big downside risk for the dollar and it will be a key consideration for risk assets and bonds later in the day.

Besides that, there’s also the focus on the dot plots and economic projections. If that reaffirms a more hawkish narrative, what should markets focus on in the aftermath? Powell’s remarks/guidance or the overall outlook among Fed members?

Seeing as how markets have set up for the Fed to stick with a higher for longer narrative, I fear that the risk is skewed towards a disappointment. But as we saw with the US CPI data yesterday, the reaction may not be too straightforward.

This article was written by Justin Low at www.forexlive.com.

Since the rumours of
China’s reopening emerged in November 2022, Copper experienced a notable surge.
The market anticipated a surge in demand for the metal, considering China’s
position as the largest global importer and consumer of copper. However, these
expectations started to diminish due to persistent disappointments in China’s recovery
data, leading to a decline in copper imports during the first quarter of 2023.
Moreover, the contraction of Manufacturing PMIs worldwide indicated a global
manufacturing slump.

Consequently, the
„China reopening trade“ reversed, and copper returned to the levels
observed in November 2022. However, there has been a recent rebound in copper
prices driven by more positive news from China and speculation regarding
potential economic stimulus measures. This speculation arises from the
declining inflation in China, which poses a threat of transitioning into
deflation. In response, the People’s Bank of China (PBOC) has already
implemented some rate cuts, and expectations are growing for
further cuts in the MLF (medium-term lending facility) and LPR (loan prime
rate) in the coming days.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that copper’s rally
has stalled at the key 3.8245 resistance level.
The bearish trend has recently turned bullish after the price bounced from the
major upward trendline and the
3.5475 support. In fact, the moving averages have
crossed to the upside and we may be about to see a breakout to the upside as
China is trying to bolster demand with more expansionary monetary policy.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD coming
into the 3.8245 resistance. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. If the price breaks below the lower
bound of the channel, we should see the price falling back to the base of the
channel at 3.6955. A strong breakout to the upside would invalidate the bearish
setup though and lead to a rally towards the 4.000 level.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the best place for the buyers to enter the
market would be the lower bound of the channel so they can have a better risk
to reward setup. The sellers, on the other hand, can either lean on this
resistance area targeting a bigger move to the downside or wait for the price
to break the lower bound of the channel to pile in and target the 3.6955 level
first and eventually the 3.5475 support.

This article was written by ForexLive at www.forexlive.com.

The recent NFP report presented a mixed picture. While the headline
number exceeded expectations, there was also a notable increase in unemployment
and a decline in average weekly hours. These less favourable details led to a
weakening of the USD as the market began to reassess its hawkish expectations
and adopt a more cautious stance. The ISM Services PMI added to the subdued sentiment,
falling short of expectations, particularly in the prices paid sub-index, which
sparked hopes of a potential decline in core inflation.

Shifting focus to jobless claims, there was a significant deviation
from the expected number. However, seasonal adjustments were cited as the
likely culprit. On a positive note, continuing claims demonstrated further
improvement, suggesting that individuals are finding new employment relatively
quickly after experiencing a period of unemployment.

Overall, the previously hawkish
sentiment observed in May has started to fade, as evident from the recent
change in the outlook of Federal Reserve members. They have expressed a
preference for a cautious approach and avoiding significant actions during the
upcoming FOMC meeting. The latest set of data supports their concerns and
justifies their restrained approach but as we have seen yesterday with the US CPI report, core inflation remains stubbornly
high, and the month-over-month rate is stuck at 0.4%.

USDCHF Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the rally in
USDCHF has stalled at a key resistance level at
the 0.91 handle. The moving averages are
still crossed to the upside indicating a bullish bias, but they are on the
verge of a crossover as the price keeps ranging. This may turn into a bullish flag
consolidation if the price confirms it breaking above the 0.91 resistance. The
target for the buyers will be the 0.94 handle. This will depend on the next set
of economic data. If they are strong, the USD is likely to rally, but if they
are weak the USD should weaken even more.

USDCHF Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
recently broke out of the upward trendline that
acted as a strong support in the past month. The strong move after the break
was also helped by hawkish comments from the SNB’s Governor Jordan.
Technically, the price has made a new lower low in that case, so the structure
on this timeframe turned bearish, but we will need a confirmation from the data
to start seeing more follow through and the USDCHF pair falling into the 0.8858
support.

USDCHF Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have two levels to watch: the 0.9073 high and the 0.9032 low. We are likely to
range here trading into the FOMC rate decision and we might even see some
spikes that could lead to fakeouts once the Fed event gets underway, but a
break on either side should show what is the prevailing sentiment. A break to
the upside should take the USDCHF pair to the 0.91 resistance, while a break to
the downside should result in a move towards the 0.8980 low.

Today we have the FOMC rate decision to watch and in
the next days the highlights are the US Jobless Claims report on Thursday and
the University of Michigan consumer sentiment survey on Friday. Beware that the
last time the consumer sentiment survey impacted the market heavily as long
term inflation expectations showed a big jump to the upside, so another
increase may give the USD a boost while a big miss should weaken it.

This article was written by ForexLive at www.forexlive.com.