• Once we’ve reached a peak on rates, they are likely to stay there for a while
• Not going to say how long that will be
• Some people in markets are pricing in rate cuts by end of the year, I’d be interested in how they are coming to that conclusion

There is a hint of sarcasm in his last point, as the narrative among central banks now is that they will keep rates higher for longer. As for the other remarks, they are consistent with what we have heard before from his colleagues.

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

Headlines:

• ECB’s Knot: Outlook for rate policy after July is unclear
• ECB’s Knot: Prolonged monetary tightening might still lead to stress in financial markets
• ECB’s Schnabel: The impact of our policy on inflation expected to peak in 2024
• BOJ’s Ueda: When we can foresee achieving price target, then will discuss exit policy
• Germany April industrial production +0.3% vs +0.6% m/m expected
• France April trade balance -€9.71 billion vs -€8.02 billion prior
• UK May Halifax house prices 0.0% vs 0.0% m/m expected
• US MBA mortgage applications w.e. 2 June -1.4% vs -3.7% prior
• Turkish lira implosion shows no signs of stopping
• OECD sees limited improvement in global growth prospects as rate hikes set to weigh

Markets:

• AUD leads, USD lags on the day
• European equities mostly little changed; S&P 500 futures flat
• US 10-year yields down 1.3 bps to 3.687%
• Gold flat at $1,961.98
• WTI crude up 1.0% to $72.45
• Bitcoin down 0.2% to $26,900

It was a mostly sideways session as markets are lacking any appetite or real conviction, with the countdown to the US CPI and Fed decision next week starting a little early.

The lack of key economic releases this week isn’t helping with that, leaving traders and investors with little to work with. There were some ECB speakers during the session but they didn’t offer anything new.

The only real eye catching detail is perhaps in Turkey, with the lira imploding further in a over 7% drop against the dollar to fresh record lows.

Besides that, equities and bond market sentiment are looking rather subdued and disinterested. Meanwhile, major currencies were initially lacking any real direction but we are seeing the dollar sit mildly lower on the day currently.

That said, the ranges are leaving a lot to be desired as USD/JPY continues to stick around 139.30-50 mostly and EUR/USD also gyrating in and around the 1.0700 mark. AUD/USD is perhaps the notable dollar pair at the moment with a push to 0.6700, its highest levels in three weeks. The pair is now running up against key resistance and large option expiries on the day.

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

The dollar is losing a little bit of ground now in European trading and the aussie is taking full advantage of that, as it seeks to post a fifth consecutive day of gains today. AUD/USD is now trading above 0.6700 for the first time in three weeks and more importantly, buyers are attempting a break above the 200-day moving average (blue line) of 0.6690.

A break above that as well as the 61.8 Fib retracement level of the swing lower last month at 0.6680 will put the focus back on the 100-day moving average (red line). That is where buyers have failed to get above since April trading and it is seen at 0.6744 currently.

Beyond that, the April and May highs close to 0.6800 will offer the next big test for AUD/USD in trying to seek a further upside leg.

This week, the aussie has been helped by the RBA surprising with a rate hike. And with little else going on in markets, it continues to find legs in this latest run higher. The daily close is going to be crucial and while the dollar might only be pushing and pulling against other major currencies at the moment, this is one to watch as it is contesting key technical levels on the week.

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

The USDJPY buyers are making a play above the 100/200 hour MA in early US trading. Those MA come in at 139.493 and 139.77. If the buyers are serious, moving away from the MAs would show their commitment.

The USDJPY pair has been trading within a fairly narrow range between 138.73 and 140.92 over the last 10 or so trading days. The pair remains near the high of the move up from May, it is just having difficulty keeping the momentum going as traders fluctuate their feelings to the intraday whims of the market.

This article was written by Greg Michalowski at www.forexlive.com.

The US dollar is at the highs of the day on a number of fronts and that’s pushed EUR/USD down 42 pips to 1.0671, breaking yesterday’s low.

The catalyst might be fixed income, where US yields are up 1-3 bps across the curve and at session highs. The RBA hike may have convinced some that global central banks will need to hike further. For what it’s worth, Fed fund futures still price just a 25% chance of a hike in June, though that rises to 80% in July.

A further leg of US dollar strength would need some help from stock market selling.

This article was written by Adam Button at www.forexlive.com.

Last Friday’s NFP report surpassed expectations once again,
extending the impressive streak to 14 consecutive beats. However, when we look
closely at the report, the specific details weren’t very positive. The
unemployment rate experienced a significant increase from 3.4% to 3.7%, marking
the largest month-over-month rise since the pandemic began. Additionally, the
average number of hours worked per week slightly decreased, which is often an
indication that employers are preparing for potential layoffs.

Overall, the report
provided something for everyone to interpret. Optimists saw solid job growth
but also recognized that the higher unemployment rate and soft average hourly
earnings could indicate a less tight labour market, potentially reducing
inflationary pressures. The decrease in average weekly hours worked might be
seen as a return to the pre-pandemic trend.

On the other hand, pessimists
focused more on the specific details rather than just the headline number since
trends are generally more important than absolute figures.

Yesterday, the US ISM Services PMI came in much lower than expected at
50.3, narrowly missing the contraction territory. The employment sub-index fell
into contraction, and the prices paid sub-index decreased substantially,
returning to the level observed in May 2020. As a result, the market adjusted
its expectations for further rate hikes from the Fed on the dovish side.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that gold has
recently bounced from the key trendline and the
50% Fibonacci retracement level.
The rally found resistance at the red 21 moving average where the sellers
pushed the price back towards the trendline. The moving averages are
still crossed to the downside so the bias remains bearish, but given the recent
disappointment in the US data we may expect more upside from here as the market
reprices rates expectations on the more dovish side. If the price breaks below
the trendline, it will open the door for a selloff into the 1800 level.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that the resistance at 1984
stalled the rally in gold and the price sold off in the aftermath of the US NFP
report. This was a curious reaction given that rates expectations were lowered
and the details in the report weren’t that good. Nevertheless, gold found
support again at the trendline and rallied yesterday as the US ISM Services PMI
missed expectations. The price is now finding resistance at the red 21 moving
average, but if the price breaks above the recent high at 1964, we should see
another test of the 1984 resistance.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see more
closely the short-term price action and the 1964 high being the key level to
break for the buyers to extend the rally towards the 1984 resistance first and
make new higher highs next. The sellers, on the other hand, will want to see
the price breaking lower and ultimately get lots of conviction if gold breaks
below the 1934 support zone.

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

The EURUSD tried to move higher in the early Asian session and heading into the European morning session, but could not sustain upside momentum above its 100 and 200 hour moving averages (blue and green lines in the chart below). Weaker data ahead of Germany (factory orders) and EU (retail sales) helped to push the currency back to the downside. Buyers turn to sellers on the move back below the 200 and 100 hour moving averages which are near converged at 1.0713 area.

The subsequent move to the downside is now trading to new session lows, and has traders looking toward the swing low from last Thursday and a swing low from intraday on Wednesday near 1.0660. Will below that level and traders will target the cycle low (May low) at 1.06351.

It would now take a move back above a swing area above 1.0704, but really the 100 and 200 hour moving averages at 1.0711 and 1.07158 to tilt the technical bias back to the upside.

This article was written by Greg Michalowski at www.forexlive.com.

• Prior was +11.3% (revised to +12.3%)
• Non-residential -34.6%
• Residential -6.1%

That’s a sharp decline but comes after a very strong month. Still, the overall value of permits at $9.6 billion is the lowest since December 2020, highlighting a looming construction slowdown.

This article was written by Adam Button at www.forexlive.com.

On Sunday, the OPEC+ delivered some more bullish
news for the oil
market as it looks like they want to keep prices above $70 level. In fact,
Saudi Arabia announced that it will make additional voluntary production cut of
1 million bpd starting in July for one month, although it can be extended based
on the market outlook. All the other members will extend their production cuts
through 2024.

The OPEC+ supply cuts are
undoubtedly bullish in the short-term but we have already seen that in a
contractionary business cycle the demand side weighs a lot on the oil market as
the latest surprising cut was completely faded and oil prices tumbled to $64
from the $83 high.

WTI Crude Oil Technical
Analysis – Daily Timeframe

On the daily chart, we can see that WTI Crude Oil
opened with a positive gap at $75 and filled it soon after during the APAC
trading session. Oil has faced lots of selling pressure around this $72-$74 resistance zone and
we will see in the next days if the OPEC+ decision is enough to boost Oil
prices or if we get another selloff like the last time. The target on the
upside would be the $83 high, while the target on the downside would be the $64
low.

WTI Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that WTI Crude Oil
has pulled back to the nearest support level at $72. Here the buyers may lean
on the blue 8 moving average to then
push to the upside and extend the rally past the $75 high. The sellers, on the
other hand, are likely to pile in here defending this resistance zone and
targeting the $64 low.

WTI Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
price has filled the gap and pulled back to its original Friday’s closing
price. Here we can find the red 21 moving average and the 38.2% Fibonacci
retracement level. We should find buyers leaning on
this support zone targeting new highs. Conversely, the sellers will look to
extend the fall in case the price breaks below the 38.2% Fibonacci level and
possibly invalidate the entire bullish setup if the price falls below the $71
level.

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

The firm argues that while overall dollar usage is still holding within historical estimates, the usage was more „bifurcated under the hood“. While the dollar’s share of traded currency volumes is just a little off record highs, at 88%, there are other evident signs of de-dollarisation elsewhere.

Of note, the firm notes that the dollar’s share as part of global central bank FX reserves has dropped to a record low of 58%. That number is still by far and out the largest in the world but it has been slipping, not really helped by the challenges the dollar is facing in dealing with the likes of Russia and China in particular.

An interesting thing to note in that pointer is that gold now comprises 15% of reserves as compared to just 11% five years ago.

Besides that, JP Morgan also highlighted a decline in the dollar’s role as part of global exports – in which the US share is now down to a record low of 9%. Meanwhile, for all the talk of countries wanting to be less dependent on China, their share has actually increased to a record high of 13%.

Going back to the first paragraph on traded currency volumes, the euro is the biggest loser there as its share shrunk by 8% in the last decade to a record low of 31%. The yuan is once again a winner in that category, rising to a record high of 7%.

However, JP Morgan says that the progress by Beijing to internationalise the yuan has been limited and that is unlikely to change much given the China’s capital controls.

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