• S&P closes higher for the 5th week in a row. The NASDAQ index up for the 8th week
• WTI Crude Oil futures settles at $71.78
• Treasury semi-annual currency report says no major US trading partners manipulated FX
• Baker Hughes oil rig down -4 at 552
• European equity close: French stocks lead a strong finish to the week
• Reminder: It’s a long weekend in the US
• Fed mon pol report: Bringing inflation down will require period of below-trend growth
• NY Fed underlying inflation gauge 3.5% vs 4.0% prior
• April final UMich consumer sentiment 63.9 vs 60.0 expected
• „Reading the tape“ in the USDJPY.
• Richmond Fed Barkin: Comfortable doing more on interest rates if demand does not slow
• Waller: It’s ‚disturbing‘ that core inflation not improving
• US consumer sentiment wraps up a whirlwind week
• Fed’s Waller: US economy is still ‚ripping along‘
• The GBP is the strongest and the JPY is the weakest as the North American session begins
• ForexLive European FX news wrap: Yen fall continues, ECB leaves door open for Sept hike

The day and week is ending with the GBP as the strongest and the JPY as the weakest.

The JPY sharp fall was triggered by the Bank of Japan rate decision. The Bank of Japan (BOJ) decided to keep its short-term interest rate target at -0.1% and its 10-year Japanese Government Bond (JGB) yield target around 0%, with a band up and down 0.5% each. This decision, part of the BOJ’s yield curve control (YCC) strategy, was made unanimously. In the statement, the BOJ observed that Japan’s economy is improving, and it expects the moderate recovery to continue. They noted that key economic indicators such as exports, output, capital expenditure, and consumption are exhibiting moderate increases. However, core consumer inflation is expected to decelerate towards the middle of the fiscal year. The BOJ noted that inflation expectations, which had previously heightened, are now moving sideways. The BOJ reiterated that there’s considerable uncertainty surrounding Japan’s economic outlook, primarily driven by global factors.

BOJ’s new Governor Kazuo Ueda made additional comments indicating that more time is needed to achieve the 2% inflation target. He anticipates inflation to slow down around the middle of fiscal year 2023. He mentioned the need for careful monitoring of foreign exchange and financial markets and that the BOJ has refrained from changing its policy as Japan’s inflation isn’t sustainable.

The news – preUS session – sent the USDJPY and JPY crosses sharply higher (JPY lower). The biggest mover was the GBPJPY at 1.44%, and all but the CHFJPY moved greater than 1% on the day.

In the North American session, the University of Michigan’s (UMich) Consumer Sentiment data for June 2023 exceeded expectations. The overall consumer sentiment came in at 63.9, which was higher than the expected 60.0 and the previous value of 59.2.

The data reflects increased confidence in current economic conditions, which came in at 68.0, surpassing the expected 65.5 and prior 64.9. Consumer expectations also saw an increase to 61.3, exceeding the anticipated 56.5 and the previous 55.4.

The one-year inflation expectations tumbled to 3.3%, down from 4.2%, marking the lowest value since March 2021. If only the core/services inflation would follow that trend. The 5-10 year inflation expectations move was not so dramatic, declining slightly to 3.0% compared to the previous 3.1%.

The consumer sentiment was likely helped by resolution of the debt ceiling talks which may have given a temporary boost to confidence simply because it was not a default disaster.

Also released was the Fed’s semi-annual monetary policy report ahead of the Fed Chair Powells testimony on Capitol HIll on Wednesday and Thursday (key event next week). In the report, the Federal Reserve indicated that the outlook for the funds rate is subject to considerable uncertainty, with further policy actions dependent on evolving economic conditions. The Fed reiterated that negative income does not impact its operations. It highlighted that slowing inflation might depend, in part, on further easing of the tight labor market conditions. Moreover, the report noted that the core services inflation, excluding housing, has not shown signs of easing, implying persisting inflationary pressures.

In the international context, several major foreign central banks continued tightening their monetary policy but emphasized the need for caution due to uncertainties and lags in the transmission of policy actions. Furthermore, the Fed raised concerns about somewhat elevated indicators of future business defaults.

The report detailed that financial conditions have tightened further since January, with bank credit conditions tightening even more since March. The Fed said it’s ready to adjust the pace of balance sheet contraction if needed, underlining its flexible approach to policy adjustment.

Significantly, the Fed observed that the turmoil in the banking system in March had reportedly left an imprint on bank lending conditions, especially for mid-sized and small banks. Bringing inflation down to the target level is likely to require a period of below-trend growth and some softening of labor market conditions, according to the report. This all comes against the backdrop of inflation being well above the target and the labor market being very tight.

A few Fed members, restarted the Fed-speak after two weeks of silence ahead of the rate decision on Wednesday.

• Richmond Fed President Barkin indicated that he is comfortable with implementing further interest rate increases if incoming data doesn’t show a slowing in demand, which would return inflation to the 2% target. He acknowledged that higher rates may risk a more significant slowdown, but highlighted that experiences from the 70s show the Fed shouldn’t back away from battling inflation prematurely. He maintained that the 2% target has been effective for a generation. Despite this, he notes that inflation has been stubbornly persistent, and he remained unconvinced that weakening demand will control it.
• Federal Open Market Committee member (FOMC) Waller pointed out that the US economy is still ‚ripping along‘, with the banking system appearing calm for the moment. He suggested that global impacts from expected coordinated central bank tightening haven’t fully materialized. While acknowledging recent bank failures, he noted they don’t seem to have had a significant effect on credit conditions and that monetary policy shouldn’t be changed due to poor management at a few banks. Waller emphasized the Fed’s role in using monetary policy to fight inflation and the responsibility of bank leaders to manage interest rate risk. He expressed concern that core inflation isn’t improving and anticipated it will likely require more tightening, revealing that it hasn’t come down as he previously expected. Still, he acknowledged that the labor market appears to be softening without a significant increase in unemployment.

Looking around the market today:

• Crude oil is up $1.04 at $71.85.
• Gold is trading up $2.51 or 0.13% at $1957.45. For the week of gold was little changed at -0.16%
• silver is up $0.36 or 1.49% at $24.18. Silver is ending the week down -0.34%
• Bitcoin did find a bid and traded $26,378

In the US stock market, the major indices fell on the day but closed higher for the week:

• Dow industrial average fell -0.32%, but gained 1.25% this week
• S&P index fell -0.37%, but gained 2.58%. The move higher was the largest since March 27 week and was the 5th consecutive week higher
• NASDAQ index fell -0.68%, but rose 3.25% for the week. The gain was the 8th consecutive week higher.

In the US at that market, yields move higher despite the lower inflation reading from the Michigan survey:

• 2-year yield 4.714% +6.6 basis points
• 5-year yield 3.982% +5.9 basis points
• 10-year yield 3.765% +3.5 basis points
• 30-year yield 3.854% +1.5 basis points

for the trading week:

• 2-year yield rose 11.6 basis points
• 5-year yield rose 7.0 basis points
• 10-year yield rose 2.0 basis points
• 30-year yield fell 3 basis points

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

Although the major indices are closing lower on the day, each enjoyed solid gains this week.

The S&P index is higher for the 5th consecutive week. The NASDAQ index is up for the 8th consecutive week. The Dow Industrial average is up for the 3rd consecutive week. The small-cap Russell index lagged, but still closed with a gain for the week

For the day,

• Dow Industrial Average fell -107.05 points or -0.31% at 34300.75
• S&P index fell -16.17 points or -0.37% at 4409.68
• NASDAQ index felt -93.96 points or -0.68% at 13689.56

Looking at the small-cap Russell 2000 index, it fell -13.81 points or -0.73% at 1875.46

For the trading week:

• Dow Industrial Average rose 1.25%
• S&P index rose 2.58%. That gain was the largest since March 27 week
• NASDAQ index rose 3.25%. Like the S&P, the gain was the largest since March 27

The Russell 2000 index in the current week rose 0.52%

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

It is triple witching hour this week which can increase the end of day volatility. It is also the start of a three-day weekend in the US maybe there is some liquidation/profit-taking. As a result, indices are trading to new session lows. A snapshot of the market currently shows:

• Dow industrial average -88 points or -0.25% at 34320.50
• S&P index -12.9 points are -0.29% at 4413.15
• NASDAQ index -83 points are at -0.60% at 13699.90

Microsoft shares are down $4.27 or -1.23% of $343.82 after trading to a new all-time high of $351.47. Apple shares are also lower after it traded to an all-time high today of $186.96.

Nvidia remains positive but well-off high levels. The price is up $3.35 or 0.79% of $429.90. Its high price was at $437.21.

Adobe which rose as much as $27.83 is still higher but only by $6.50 or 1.32% at $497.32

.

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

The price of crude oil is settling at $71.78. That is up $1.16 or 1.64%. The high reached $72.01. The low price was at $70.18.

For the trading week, the price is up $1.76 or 2.52%.

The low price for the week was reached on Monday at $66.82. The high price was today’s high at $70.01.

Looking at the hourly chart above, the price moved below the low price from May 31 at $67.03, but could not sustain momentum.

In trading yesterday, the price moved back above its 200-hour moving average (green line currently at $70.30). In trading today there was a brief move below the 200-hour moving average but it was quickly reversed and the price stepped higher into the settlement.

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

This week, the Fed took a slightly more hawkish approach than
expected by keeping interest rates steady at 5.00-5.25 but raising the
projected terminal rate in the Dot Plot by 50 basis points. The Fed decided to
pause and collect more economic data before making a decision about a possible
interest rate hike in July. This cautious approach may be justified by the
weaker details found in the latest NFP report, the ISM Services PMI report, and the CPI report, although the core readings remain at elevated
levels.

Fed Chair Powell said that
a hike at the July meeting is an active consideration, but he refrained from
making any firm commitments. When the Dot Plot was released, the market quickly
bid the US Dollar, but the value returned to its original levels once Powell’s
press conference started. Overall, this indicates that the Federal Reserve is
prepared to take further action to reduce inflation, but their decisions will
depend on the economic data. Yesterday, the number of US Jobless Claims once again missed forecasts by a
big margin, which may indicate a weakening labour market.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that once the NZDUSD
broke out of the trendline, the
pair rallied strongly to the 0.6247 high. The sellers don’t have any strong resistance level to
lean onto now while the buyers can start targeting the 0.6389 level. The moving averages have
crossed to the upside which should be a signal for more upside incoming. The
price has also overstretched a bit as we can see by the distance from the blue
8 moving average. In such instances, we can generally see some consolidation or
a pullback into the moving average before the next move.

NZDUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the red 21
moving average has been acting as dynamic support for the buyers and we can
expected it to keep doing so in case we get the pullback. In fact, from a risk
management perspective, the buyers should wait for the price to pull back into
the 0.6182 support where they will encounter the 21 moving average and also the
daily 8 moving average for further confluence. The
sellers, on the other hand, will want to see the price breaking below the
support zone to pile in and target the 0.6084 level.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is struggling a bit at the 0.6240 high as we head into the weekend. As
mentioned earlier, the buyers would be better off to wait for the price to
pullback into the 0.6182 support, while the sellers should wait for the price
to break below the support zone before piling in for shorts. Eventually, it
will depend on the data going forward.

Today, the market
will pay special attention to the University of Michigan consumer sentiment
report. Last time, the market reacted strongly to this report because long-term
expectations for inflation showed a significant increase, going up from 3.0% to
3.2%. However, the number was later adjusted to 3.1%. So, if we see another
rise in long-term inflation expectations, it’s likely that the value of the
dollar will go up. On the other hand, if the data doesn’t meet the forecasts,
we can expect the dollar to depreciate.

This article was written by FL Contributors at www.forexlive.com.

• Core inflation holding around 5% could require rate hike in September, possibly beyond
• Not yet seeing beginning of slowdown in core inflation

That’s a better take as he even goes as far as to attach a figure for what may be a trigger. It’s all down to the data now to confirm if there will be any further rate hikes beyond the summer for the ECB then.

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

It has been a storming run for AUD/USD ever since testing the 0.6500 mark as buyers have certainly not relented in the rebound to its highest levels since February this week. Here’s a look at the daily chart:

The pair is down 0.2% to 0.6869 at the moment but it isn’t really hurting the technical breakout this week. Buyers have managed to do a lot since the break above the 100 (red line) and 200-day (blue line) moving averages, maintaining the more bullish bias since.

The following break of the April and May highs near 0.6800 has also been key in trading yesterday, reaffirming a stronger bias for further upside momentum.

As things stand, there is little resistance before getting the 0.7000 so that could keep buyers incentivised in chasing a push higher. A hot Australian jobs report this week is also bolstering odds for a RBA rate hike in July and if equities continue their good form, a more positive risk mood should also help the pair stay buoyed in the sessions ahead.

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

• Policy is on restrictive terrain, it isn’t a support to growth
• Rates should remain in restrictive territory for some more time after the summer

Again, they’re just alluding to rates staying high beyond the summer but falling short of actually confirming a rate hike in September. The door is open though and that seems to be all markets need to be convinced, at least for now.

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

From a technical standpoint, this is one of the more attractive dollar charts at the moment in my view. The pair had largely been consolidating around 1.3300 to 1.3900 since the end of last year, and finally we might be seeing a break in that range.

The drop this week takes out the key trendline support (white line) and more importantly, the weekly close now may be set for a break below the November low of 1.3225. That will be a massive win for sellers if they can hold steadfast in their conviction.

Just going by the chart, it should lend to a break below 1.3200 and there is very little support standing in the way of a further run lower in USD/CAD.

The 100 and 200-week moving averages are seen at 1.3037-69 currently and they may be what offers buyers some reprieve before testing the 1.3000 mark itself. That does afford sellers with some room to roam in the meantime but the risk for those staying long in the loonie is that of oil prices I would say.

Even though equities have been enjoying a good run of form, oil has not been able to find much comfort ever since the Saudi surprise earlier this month. That could help to prevent a slide in USD/CAD but if equities continue to stay firm while the dollar flounders, the technical picture is certainly making a case for a further drop in the pair.

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

As markets are still digesting the aftermath of the Fed decision yesterday, gold is finding it rough to stay afloat as Treasury yields are continuing to hold up. Gold had previously found support from its 100-day moving average (red line) in recent weeks but that level appears to be giving way now.

And from a technical perspective, that will be a massive blow to buyers in trying to maintain their resolve of searching for a rebound after the fall since May.

A firm break and hold below the key technical support above frees up the path towards testing $1,900 next before sellers may start to search for a push towards the 200-day moving average (blue line).

As mentioned previously, I’m still a firm advocate of staying bullish in gold in the long-term but I like the thought of a deeper pullback to find more attractive opportunities in this space. Patience is key. And all else being equal, a push back towards the 200-day moving average would definitely get the bulls salivating again I would say.

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