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News

Australia House Price Index (QoQ) below expectations (5.5%) in 1Q: Actual (5.4%)
In recent trade today, the People?s Bank of China (PBOC) set the yuan (CNY) reference rate at 6.4070 vs. Friday at 6.3856. About the fix China maintai

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) reference rate at 6.4070 vs. Friday at 6.3856.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

US dollar index (DXY) remains sidelined around 90.51 during Tuesday?s Asian session. In doing so, the greenback gauge seesaws around a one-month-old f
  • DXY struggles for clear direction after posting a bearish candlestick formation.
  • 50-DMA adds to the upside barriers, bullish MACD favors buyers.

US dollar index (DXY) remains sidelined around 90.51 during Tuesday’s Asian session. In doing so, the greenback gauge seesaws around a one-month-old falling trend line after printing a bearish Doji candlestick the previous day.

It should, however, be noted that bullish MACD and an ascending trend line from May 25 keep buyers hopeful.

Hence, fresh upside needs to cross 50-day SMA (DMA) hurdle near 90.75 to challenge the May 13 top near 90.91 and the previous month’s high surrounding 91.45.

Meanwhile, pullback moves may aim for 90.00 but any further weakness will be questioned by the stated support line near 89.90.

Overall, DXY remains on the bull’s radar but requires confirmation of the further upside.

DXY daily chart

Trend: Pullback expected

 

GBP/JPY bulls take a breather around 155.30 during a calmer Asian session on Tuesday. The cross-currency pair jumped the most since May 27 the previou
  • GBP/JPY edges higher following the strongest run-up in 13 days.
  • Market sentiment dwindles amid pre-Fed caution, US Treasury yields snap two-day recovery.
  • UK employment report, risk catalysts will be in focus ahead of Wednesday’s FOMC.

GBP/JPY bulls take a breather around 155.30 during a calmer Asian session on Tuesday. The cross-currency pair jumped the most since May 27 the previous day amid broad recovery moves of the US Treasury yields. In doing so, the quote ignored the covid and political crisis in Japan as well as the UK.

With British PM Boris Johnson’s official confirmation of a four-week delay to the unlock, markets take the Delta variant risk seriously of late. Also negative for the pair could be French and the European Union’s (EU) warning to the UK if it alters the previously agreed Brexit terms for the Northern Ireland (NI) border.

On the other hand, local protests against Olympics in Japan and chatters over a snap election also weigh on the market sentiment, as well as on the GBP/JPY prices.

Above all, traders’ indecision ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting weighs on the mood.

Amid these plays, S&P 500 Futures print mild gains but the US 10-year Treasury yields snap two-day uptrend to drop 1.4 basis points to 1.487% by the press time.

Moving on, expected strong prints of the UK’s employment data could renew talks over the BOE’s tapering and may fill fresh life into the quote. However, uncertainty over the Fed’s next move could probe the short-term upside of the GBP/JPY prices.

Technical analysis

Although a descending resistance line from May 28 tests GBP/JPY buyers around 155.35-40, the pair sellers may not risk entries until the quote stay beyond a six-month-old upward sloping support line near 154.50-45.

 

GBP/USD bulls are in charge ahead of the RBA minutes. More to come... Hourly chart 15-min chart
  • GBP/AUD bulls are in charge ahead of the RBA minutes. 
  • GBP/AUD breaks hourly resistance in choppy 15-min price action. 

GBP/AUD is taking on the hourly resistance and the 1.83 level as traders get set for the Reserve Bank of Australia minutes.

Hourly chart

15-min chart

The 15-min chart shows that the price is rallying to try and print a fresh high into the event. 

Update

The bulls are well and truly testing the bearish commitments:

 

USD/CAD fades late Monday?s bounce off 1.2128 amid Tuesday?s sluggish Asian session. In doing so, the Loonie pair drops to the intraday low of 1.2137,
  • USD/CAD remains pressured, extends Friday’s pullback from monthly top.
  • Firmer RSI, two-week-old ascending support line keeps buyers hopeful.

USD/CAD fades late Monday’s bounce off 1.2128 amid Tuesday’s sluggish Asian session. In doing so, the Loonie pair drops to the intraday low of 1.2137, down 0.05%, during the two-day pullback from the monthly high, flashed on Friday.

It should, however, be noted that upbeat RSI conditions and the quote’s ability to keep Friday’s 200-SMA breakout back the USD/CAD until the quote stays beyond 1.2122.

Also up for challenging the pair sellers is an ascending support line from June 01, around 1.2090.

Hence, the quote’s latest pullback won’t be considered serious unless breaking 1.2090 support.

Though, USD/CAD bulls need a sustained break of 1.2150 to once aim for one-month-old horizontal resistance surrounding 1.2180.

In a case where the pair rises past-1.2180, the 1.2200 threshold and the mid-May high near 1.2205 may test the upside momentum before accelerating the run-up towards April’s low near 1.2265.

USD/CAD four-hour chart

Trend: Pullback expected

 

EUR/AUD is showing signs of a bullish tendency according to the hourly chart. The following illustrates the probable opportunity conditional on subseq
  • EUR/AUD bulls are seeking a breakout. 
  • 15-min resistance a stumbling block at this juncture. 

EUR/AUD is showing signs of a bullish tendency according to the hourly chart. The following illustrates the probable opportunity conditional on subsequent price action. 

EUR/AUD hourly chart

There has been a strong rally to the upside which could equate to a continuation to break hourly resistance following the correction to test the support structure. 

EUR/AUD 15-min chart

The 15-min time frame shows that the price is struggling to move higher. 

Once the bulls get above the 21-EMA, the price will be pressuring the 15-min resistance and break there may well encouraging more buyers to the table to take on the hourly chart's resistance. 

USD/JPY stays firmer around the weekly top near 110.10, recently struggling near 110.05, as markets in Tokyo open for Tuesday?s trading. The yen pair
  • USD/JPY wobbles near one-week high after two-day uptrend.
  • US Treasury yields snap two-day recovery moves, S&P 500 Futures print mild gains.
  • US Retail Sales, pre-Fed sentiment should be observed for fresh impulse.

USD/JPY stays firmer around the weekly top near 110.10, recently struggling near 110.05, as markets in Tokyo open for Tuesday’s trading. The yen pair rose notably during the last two days as the safe-haven buying put a bid under the US dollar. However, the latest cautious sentiment ahead of the US Retail Sales for May and Wednesday’s Federal Open Market Committee (FOMC) meeting probes the pair buyers.

Despite offering an indecisive closing the previous day, the US dollar index (DXY) stayed near the monthly top surrounding 90.60.

Behind the moves could be the mismatch of the recent pick-up in the US Treasury yields and a recovery in the inflation expectations that highlight tapering woes pre-Fed.

It’s worth noting that the fears of coronavirus (COVID-19) in Japan and a snap election joins broad cautious sentiment before this week’s key event, FOMC, to probe the pair’s buyers, due to its risk-barometer status.

Additionally, Japan’s final print of Industrial Production for April, 15.8% versus 15.4% initial estimation, also favored USD/JPY buyers.

Amid these plays, S&P 500 Futures stay mildly bid around the record top whereas the US 10-year Treasury yields ease one basis point (bp) to stop the previous two-day recovery around 1.49% by the press time.

Given the light calendar and cautious mood ahead of the key data/events, USD/JPY may remain sidelined before the US Retail Sales for May. However, the US dollar pick-up during the pre-Fed sessions could keep buyers hopeful.

Read: US May Retail Sales Preview: Analyzing major pairs' reaction to previous releases

Technical analysis

Although the monthly top surrounding 110.30-35 acts as a tough nut to crack for the USD/JPY bulls, the pair sellers may not risk entries until the quote stay beyond a seven-week-old support line, around 109.45.

 

GBP/USD remains sidelined above 1.4100, recently taking offers around the intraday low of 1.4105 by the press time of the early Asian session on Tuesd
  • GBP/USD struggles to keep the bounce off monthly low.
  • EU warns over UK’s reputation, France signals retaliation if London breaks Brexit deal.
  • UK PM Johnson officially announced four-week delay to earlier June 21 unlock deadline.
  • UK jobs report for May, US Retail Sales and pre-Fed sentiment will be the key.

GBP/USD remains sidelined above 1.4100, recently taking offers around the intraday low of 1.4105 by the press time of the early Asian session on Tuesday. The cable dropped to the lowest since mid-May before bouncing off 1.4070 the previous day. Even so, Brexit woes join the pre-data cautious sentiment to test the pair’s corrective pullback.

Despite gaining no major support from US President Joe Biden’s meddling into the Northern Ireland (NI) protocol issue, the European Union (EU) keeps warning the UK to rethink before scrapping the previously agreed terms over the key border issue. French Minister of State for European Affairs Clement Beaune went a step ahead and signaled “retaliatory measures” should Britain fails to respect Brexit terms. On the same line were comments from the EU’s former Chief Brexit Negotiator Michel Barnier as he pushed UK PM Boris Johnson to “respect his signature” on the deal.

Contrary to the EU-UK Brexit tussles, Britain-Australia trade relations are going to be upbeat as they brace for a free trade deal, expected to unveil on Tuesday.

Meanwhile, fears of the Delta variants of the covid and the available vaccines’ inability to tame the virus strain with one dose recently pushed UK PM Johnson to announce a four-week delay to the much-awaited unlock. “By July 19, we do think we will have built up a considerable wall of immunity. On that basis, we should be able to go forward with the full opening,” said Johnson on Monday.

On the other hand, growing uncertainty over the Fed’s next moves and cautious sentiment ahead of today’s UK jobs report for May, as well as the US Retail Sales for the stated month, also weigh on the GBP/USD prices of late.

Against this backdrop, S&P 500 Futures struggle for a clear direction around the record top whereas US 10-year Treasury yields pause the two-day recovery moves around 1.49%.

Given the expected decline in the three-month Unemployment Rate to April, as well as likely recovery in earnings, GBP/USD may remain in the consolidation mode. However, challenges from the US Retail Sales and Wednesday’s Federal Open Market Committee (FOMC) meeting can’t be ruled out.

Technical analysis

Given the escalating bearish bias of MACD, coupled with the sustained trading below 21-day SMA, GBP/USD remains stays on the sellers’ radar.

 

Bloomberg?s latest analytics on China?s oil demand cites cars as the key catalysts, suggesting an opaque market going forward. ?Gasoline demand in May

Bloomberg’s latest analytics on China’s oil demand cites cars as the key catalysts, suggesting an opaque market going forward.

“Gasoline demand in May was 5% higher than the same period in 2019, according to the median of five estimates from the nation’s top oil companies including China Petroleum & Chemical Corp., better known as Sinopec, and China National Petroleum Corp, as well as industry analysts. Diesel use wasn’t as robust, with most respondents seeing flat consumption last month,” said Bloomberg.

Further, BloombergNEF estimates diesel demand as 10.04 million tons in April while 11.98 million tons of gasoline was demand during the stated month.

The report also cites the reduction in spending on large-scale government and private sector projects to highlight the rise in export of industrial fuel and regional market’s less dependency on oil from abroad. The same signals challenges for oil’s further run-up.

Read: WTI holds in bullish territory

EUR/USD seesaws in a 10-pips trading range surrounding 1.2120 amid Tuesday?s subdued Asian session. In doing so, the currency major pair struggles to
  • EUR/USD attacks upper end of immediate trading range following Monday’s corrective bounce.
  • Previous resistance line, bearish MACD signals test the recovery moves.
  • Three-week-old resistance line adds to the upside filters.

EUR/USD seesaws in a 10-pips trading range surrounding 1.2120 amid Tuesday’s subdued Asian session. In doing so, the currency major pair struggles to extend the previous day’s recovery moves while keeping the last week’s breakdown of the key support lines, now resistance, amid bearish MACD.

Hence, the corrective pullback needs to cross the nearby resistance lines around 1.2125 and 1.2140 to stay in the recovery mode and aim for the 1.2200 threshold.

However, a downward sloping trend line from May 25, around 1.2205, could challenge the EUR/USD run-up afterward.

Meanwhile, bearish MACD and sustained trading below previous supports keep sellers hopeful to revisit the 50-day SMA (DMA) level of 1.2100, not to forget the monthly bottom near 1.2090.

During the quote’s further weakness past 1.2090, May 13 low of 1.2051 and the 1.2000 round figure, quickly followed by May’s bottom close to 1.1985, will be the key levels to watch.

Overall, EUR/USD needs to cross immediate hurdles to defy the bearish bias.

EUR/USD daily chart

Trend: Pullback expected

 

New Zealand Food Price Index (MoM) declined to 0.4% in May from previous 1.1%
US equities begin the week on mixed footing but ended up print mild gains except for Dow Jones Industrial Average (DJI), on Monday. Market fears ahead
  • Wall Street benchmarks closed mixed despite last hour run-up.
  • Mixed signals from inflation expectations battle US Treasury yields recovery ahead of FOMC.
  • Tech gains, Lordstown slumps and pharmacy companies traded haywire.

US equities begin the week on mixed footing but ended up print mild gains except for Dow Jones Industrial Average (DJI), on Monday. Market fears ahead of Wednesday’s Federal Open Market Committee (FOMC) contrast Treasury yields amid a light calendar but investors booked intraday profits.

With the recovery in US inflation expectations, per data from NY Fed and St. Louis Fed, jitters over the Fed’s tapering during Wednesday’s FOMC gain momentum. However, an uptick in the 10-year Treasury yields back the buyers during a quiet start to the week.

The strongest run in the US Treasury yields in over a month backed tech-shares and hence Nasdaq turned out to the day’s winner with 0.74% gains, or 104.72 points, to 14,174.14. S&P 500 Futures came in second with 7.71 points of upside, or 0.18%, to 4,25.15. However, DJI bucked the trend by closing 85.85 points lower, or 0.25% down, to 34,393.75.

Among technology shares, Tesla gained an additional advantage from comments of owner Elon Musk suggesting the re-acceptance of Bitcoin. However, Lordstown Motors Corporation slumped over 16% as Chief Executive Steve Burns and Chief Financial Officer Julio Rodriguez resigned following the firm’s warning to not have enough cash for next year.

Shares of Novavax and Moderna dropped despite conveying positive developments while shares of GlaxoSmithKline and iTeos Therapeutics benefited from the news of their collaboration. Furthermore, Rapt Therapeutics skyrocketed on news of success over the moderate-to-severe atopic dermatitis, or eczema, drug trials.

Looking forward, US Retail Sales for May month can offer short-term direction to the markets but major attention is given to the FOMC's signal for future moves, as no actual action is expected during Wednesday’s meeting.

Read: US May Retail Sales Preview: Analyzing major pairs' reaction to previous releases

The price of silver is trading flat in early Asia following a semi bearish close on Wall Street. XAG/USD was lower by some 0.27% by the close of the U
  • Silver is holding in bullish territory but is vulnerable.
  • All attention is on the Fed for the days ahead.

The price of silver is trading flat in early Asia following a semi bearish close on Wall Street. XAG/USD was lower by some 0.27% by the close of the US session but performing better than gold. The gold to silver ratio was down by 0.36%.

Traders are now looking ahead to the Federal Open Market Committee that will meet on Tuesday. A statement followed by the Fed’s Chair, Jerome Powell, speaking in a presser will be what to watch for. 

The Fed Powell will be expected to say that the most likely course is that inflation decelerates over the coming months, settling back at more normal levels later this year. Therefore, the transitory mantra should keep a lid on the US dollar and help to underpin a recovery in precious metal prices.  On the other hand, if there are upward revisions for PCE inflation in 2021 then this could be feeding through to a more sustained rise in inflation over the medium term. This would be more hawkish than what the markets are priced for.

Silver technical analysis

A spike in the greenback will expose the vulnerability of the 27 figure and prior daily lows that meet the bullish 10-day moving average. 

Early Tuesday morning in Asia, Sky News came out with the headlines suggesting the key announcement of the UK-Australia post-Brexit trade deal on earl

Early Tuesday morning in Asia, Sky News came out with the headlines suggesting the key announcement of the UK-Australia post-Brexit trade deal on early Tuesday, per London time.

“Boris Johnson and Australian Prime Minister Scott Morrison agreed the broad terms of the agreement over dinner in No 10 on Monday evening,” the news quotes an anonymous source. “The deal is intended to increase the volume of trade between the two countries above the current £20 billion,” added Sky News.

FX implications

Market players pay little heed to the news as the UK farmers don’t like such a move that poses threats to their income. Also, a trade deal with the EU is more important than Australia and is looming. Furthermore, pre-Fed caution is the key catalyst that restricts investor sentiment of late.

That said, GBP/USD remains pressured around 1.4100 by the press time.

Read: GBP/USD Price Analysis: Bears testing bullish commitments at key support

NZD/USD picks up bids to 0.7145, inside a short-term trading range, amid the early Asian session trading on Tuesday. The kiwi pair posted mild gains t
  • NZD/USD consolidates Friday’s losses in a 20-pips range.
  • Market sentiment dwindles amid cautious mood ahead of Fed, NZ GDP.
  • Upbeat NZIER forecasts joined USD pullback to portray the latest bounce.
  • Full markets, Aussie catalysts eyed ahead of US Retail Sales, risk catalysts are the key.

NZD/USD picks up bids to 0.7145, inside a short-term trading range, amid the early Asian session trading on Tuesday. The kiwi pair posted mild gains the previous day as the US dollar buyers took a breather and economic forecasts from the New Zealand Institute of Economic Research (NZIER) printed rosy scenario. Though, tapering fears and a return of Aussie, as well as Chinese, traders after a long weekend could test the recovery moves.

In its latest economic outlook, published the previous day, NZIER said, “Beyond the weaker starting point for GDP growth, the near-term growth outlook has been revised up. On average, annual average growth in GDP is expected to reach 5 percent in March 2022.” The key New Zealand forecaster also said, “Although the longer-term employment growth outlook has been revised lower, the unemployment rate has also been revised lower over the projection reflecting the tighter labor market. Inflation forecasts have been revised higher across the projection.”

While the upward revision to the NZ economic forecasts favored the kiwi pair, a pause in the US dollar index (DXY) rally and cautious mood in the market restricted the moves. Additionally, off in Australia and China offered extra barriers to the NZD/USD momentum.

It’s worth noting that the early signals of the US inflation, per St. Louis Fed and New York Fed, have been in the recovery mode and warrant the traders’ caution ahead of Wednesday’s Federal Open Market Committee (FOMC).

Amid these plays, US 10-year Treasury yields remained on the recovery mode towards 1.50% whereas Wall Street benchmarks closed mixed on Monday.

Moving on, NZD/USD traders will pay attention to how its largest trading partners, namely Australia and China, react to the latest developments. However, fears of the key FOMC and NZ GDP release may restrict the pair’s immediate performance ahead of today’s US Retail Sales for May.

Read: US May Retail Sales Preview: Analyzing major pairs' reaction to previous releases

Technical analysis

Unless breaking a confluence of a three-week-old falling trend line and 50-day SMA, around 0.7190-95, NZD/USD buyers aren’t likely to take the risk. On the contrary, the kiwi pair’s short-term downside is restricted by the recent double-bottom around 0.7115.

 

Oil prices have been mixed at the start of the week. WTI spot printed a low of $70.17 before recovering into positive territory at $71.17 ending 0.5%
  • WTI bears lurking in bullish territory as price backs away from weekly highs. 
  • There are lingering negotiations with Iran and a cautious OPEC+.

Oil prices have been mixed at the start of the week. WTI spot printed a low of $70.17 before recovering into positive territory at $71.17 ending 0.5% higher on the day but still below the highest levels in more than two years.

US crude production is on the rise and Britain's delayed COVID-19 reopening has dampened expectations for fuel demand growth and tighter supplies.

''A Summer Breakout continues to play out in energy markets, as a global vaccination rollout is set to drive mobility sharply higher this summer, while OPEC's cautious plan to raise output should tighten the market with considerable deficits expected in the coming months,'' analysts at TD Securities argued.

Elsewhere, the US Energy Information Administration (EIA) forecast that shale oil output, which accounts for more than two-thirds of US production, was expected to rise by about 38,000 barrels per day (bpd) in July to about 7.8 million bpd.

"We started off strong on expectations that the demand situation was building momentum as COVID vaccinations were high," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "Then the EIA report took the winds out of the sail."

The analysts at TD Securities explained that market conditions could prompt OPEC+ to ramp up the pace on the unwind of their deal.

''And, while Headline Havoc sparked some volatility late last week, as participants believed that the US was set to imminently lift sanctions on Iranian oil, the Administration's move does suggest that negotiations continue to progress towards an agreement for the Iran Nuclear Deal.

In this sense, the breakout north of $70/bbl may not be sustainable, but a Summer Breakout can continue to play out in the near-term.''

 

AUD/USD seesaws around 0.7710-15, following a sluggish daily performance, at the start of Tuesday?s Asian session. The Aussie pair struggled to find t
  • AUD/USD hangs in balance around 0.7700 after a negative week.
  • Off in Australia, China and a light calendar elsewhere joined pre-Fed caution to offer dull markets.
  • New York Fed Inflation Expectations portray strong price pressure, St. Louis Fed’s gauge off two-month low.
  • Full markets, RBA minutes will battle tense conditions, gold prices should be tracked as well.

AUD/USD seesaws around 0.7710-15, following a sluggish daily performance, at the start of Tuesday’s Asian session. The Aussie pair struggled to find the direction the previous day amid an off in the key markets and mixed sentiment ahead of Wednesday’s Federal Open Market Committee (FOMC), not to forget a light calendar. However, the returns of full markets and RBA minutes, followed by the US Retail Sales, could offer an interesting Tuesday.

Bears stay hopeful on Inflation jitters, gold’s drop…

Despite posting a dormant day, AUD/USD sellers don’t give up controls amid early signals of peaking inflation in the US and doubts over macros elsewhere, coupled with gold’s drop. The same creates confusion in the markets and puts a safe-haven bid under the US dollar. That said, the US dollar index (DXY) edges higher around the weekly top teased on Friday.

US data has been fuelling reflation fears and more fiscal aides are in the pipeline. However, the Federal Reserve (Fed) policymakers consider these challenges as short-term and battle tapering woes.

Of late, initial signals of the US inflation expectations portray the escalating price pressure and keep traders on the edge ahead of the key Fed meeting. Recently, New York Fed’s one-year inflation expectations jumped to a record high whereas the same for three years rose to an eight-year peak. On the other hand, St. Louis Fed’s inflation indicator for 10-years took a U-turn from a two-month low flashed on Friday.

Read: Federal Reserve Preview: First up, then down? Playbook for trading the Fed

In addition to the inflation worries, chatters surrounding the Group of Seven (G7) members push for covid origin inquiry and dislike for China’s performance in Xinjiang and Hong Kong also weigh on the mood. Furthermore, fears of Delta variant of the covid and challenges for the RBA, as portrayed by Bob Gregory, a veteran economist who once sat on the Reserve Bank’s board. The economist recently said, per Bloomberg, “The tension between what’s best in the short run and what’s best in the long run hasn’t ever been as sharp as it is now.”

Amid these plays, US 10-year Treasury yields rose 3.5 basis points to 1.49% whereas Wall Street benchmarks closed mixed.

Given the struggling times and a cautious week, AUD/USD traders may prefer staying inside the immediate trading range. However, today’s RBA minutes and return of the Aussie traders from the long weekend could offer intermediate moves, mostly downside, ahead of the US session report of Retail Sales for May, expected -0.8% versus +0.0% prior.

Read: US May Retail Sales Preview: Analyzing major pairs' reaction to previous releases

Technical analysis

AUD/USD seesaws between 100-day SMA and a seven-month-old support line with gradually firming bearish bias. Hence, sellers aim for a clear downside break of 0.7690 trend line support to aim for another support line, near 0.7655. It should, however, be noted that an upside break of 100-day SMA, around 0.7730, should aim for the 0.7800 threshold.

 

Gold has been quite a show on Monday falling from a high of $1,878.08 to a low of $1,844.63, or by 1.8%, or by over 33 dollars. Relatively speaking, t
  • Gold bulls have stepped in at the lows of the day pushing gold back to $1,860s.
  • All eyes will turn to the Fed as the US dollar stays firm. 
  • US dollar in focus ahead of the FOMC.
  • Gold Weekly Forecast: XAU/USD tests key trend line ahead of FOMC meeting

Update: Gold (XAU/USD) fades corrective pullback from a two-month low, around $1,867, during the early Asian session on Tuesday. Gold prices broke an ascending support line from March 31 on Friday and extended the south-run towards the lowest since mid-April the previous day. However, pick-up in the US dollar’s failures to track the pick-up in the US Treasury yields triggered the quote’s bounce off 200-day SMA (DMA) towards $1,870.

The recovery moves not only remain below the previous support line but also struggle with a horizontal area established during early June on the four-hour play amid a lack of fresh catalysts. Also contributing to gold’s lack of upside momentum could be the cautious market sentiment ahead of today’s US Retail Sales and Wednesday’s Federal Open Market Committee (FOMC) meeting.

Given the likely barriers to trading and the US dollar’s refrain from backing down, not to forget sustained trading below previous supports, gold prices may attack 200-DMA support on fresh declines.

 

Gold has been quite a show on Monday falling from a high of $1,878.08 to a low of $1,844.63, or by 1.8%, or by over 33 dollars. 

Relatively speaking, the greenback has hardly moved. As measured by the DXY, the index is flat and has stuck to a 90.4120 and 90.6010 range.

The dollar is in consolidation following Friday's move that was showing its strongest weekly gain since early May as investors likely positioned for the Federal Reserve meeting this week.

  • Chart of the Week: US dollar in focus at demand area, forex hoping for spike in volume

Investors have been covering short positions and searching for carry in a low volatility forex environment. 

All eyes on the Fed

The Federal Reserve's assertion that high inflation would be temporary has been weighing on the greenback for many weeks as US stocks reached record highs and US yields chugged along the bottom of their sideways range since April. 

The Fed meets for its 2-day June meeting tomorrow, with the policy decision and updated projections due on Wednesday.

The markets are on the lookout for the Fed to eventually announce a strategy for reducing its massive bond-buying program.

In turn, this has been supporting the greenback to some extent.

However, while the magnitude of price rises in both April and May has been unsettling, caution should prevail this week because there is little chance of there being new taper hints so soon.

The members at the Fed believe that the current inflation reflects the historically exceptional circumstances only.

With that being said, the risk on Wednesday is if inflation expectations are higher, ultimately feeding through to a more sustained rise in inflation over the medium term.

This would be more hawkish than what the markets are priced for and would most probably be marginally positive for the US dollar. 

''We expect that this week’s FOMC meeting is likely to bring upward revisions for PCE inflation in 2021,'' analysts at Rabobank said.

''As long as further out inflation forecasts remain anchored the market should absorb this well.''

On the other hand, ABN Amro wrote in a note, ''the most likely course is that inflation decelerates over the coming months, settling back at more normal levels later this year. It is even possible we could get one or two weak readings in the months ahead, as some price rises look unsustainable and vulnerable to payback (particularly in used cars, a category driving 1/3 of the overshoot in April/May).'' 

''As such, although we expect a significant upward revision to the Fed’s current 2.4% forecast for PCE inflation in 2021 – perhaps a rise of more than a percentage point – we expect the FOMC statement to continue to describe the current inflation overshoot as transitory, and Chair Powell is likely to mount a vigorous defence of this thinking in the press conference.''

Bill Diviney at ABN Amro further explained, ''at the same time, while Chair Powell might acknowledge that the Committee is now ‘talking about talking about' a tapering of its asset purchases, we do not expect any concrete hints on this at the press conference. We continue to think a formal taper announcement could come by the September meeting – perhaps telegraphed at the Jackson Hole Symposium. This would pave the way for tapering to start in Q4.''

Implications for gold

Meanwhile, analysts at TD Securities explained that considering that gold was set-up for a pullback like a speed bump on the racetrack, they see risks for further weakness in prices as the talk of taper talk saps interest in the yellow metal at a time when flows are not particularly supportive. 

''Golds failure to break $1900/oz despite the surprise non-farm payrolls and CPI inflation prints highlights a lack of speculative interest for the yellow metal, at a time when the technical break in inflation breakevens signals slowing inflation-hedging appetite.''

Gold technical analysis

The daily chart has completed an M formation and a retest of the old lows would be expected at this juncture.

A 38.2% Fibonacci has a confluence with 4-hour structure as follows: 

What you need to know on Tuesday, June 15: The dollar edged lower, mainly against high-yielding rivals, but surged against safe-haven CHF and JPY. Act

What you need to know on Tuesday, June 15:

The dollar edged lower, mainly against high-yielding rivals, but surged against safe-haven CHF and JPY. Activity across the FX board was limited amid holidays in Asia and a scarce macroeconomic calendar elsewhere.

US Treasury yields advanced, with that on the 10-year note hitting 1.50%. Wall Street closed mixed, with only the Nasdaq able to end in the green. Investors are looking for the US Federal Reserve’s monetary policy decision later this week.

The EUR/USD pair settled just above the 1.2100 level, while GBP/USD closed around 1.4100, unchanged on a daily basis. The USD/JPY pair was the most interesting for a change, advancing above 110.00 and nearing its monthly high at 110.32.

Gold fell to $1,844.34 a troy ounce, its lowest in two months. Crude oil prices also retreated, with WTI ending the day around $ 71.00 a barrel.

The UK delayed lifting the latest lockdown measures from June 21 to July 19 as expected, to speed up immunization. According to UK’s Public Health officials, the Pfizer and AstraZeneca vaccines are only 33% effective against the Delta variant after a single shot. However, the effectiveness of both vaccines improves to above 90% after two doses.

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GBP/USD has been pressured in recent trade and is now testing the critical short term support and psychological 1.41 level. However, the prospects of
  • GBP/USD bears take on the critical support area.
  • Bulls could be encouraged by the development of the hourly H&S.

GBP/USD has been pressured in recent trade and is now testing the critical short term support and psychological 1.41 level. 

However, the prospects of a near term downside continuation are limited by the potential reverse head and shoulders in the making on the hourly chart. 

The price is trading between a weekly 38.2% Fib support area and the resistance of the daily highs and sideways channel. 

Overall, there are probabilities of a deeper retracement of the weekly bullish impulse, however, this may take some time before playing out. 

As per the start of the week's analysis, USD/JPY Price Analysis: Bulls targeting 110.00, the bulls have finally met the target ahead of the Federal Op
  • USD/JPY take son the 110 area again ahead of the FOMC this week.
  • US dollar is in focus as US yields climbed.

As per the start of the week's analysis, USD/JPY Price Analysis: Bulls targeting 110.00, the bulls have finally met the target ahead of the Federal Open Market Committee on Wednesday. 

Prior analysis

''USD/JPY is on the way to the 110 area as the US dollar continues to firm following Friday's bullish performance. 

The -61.8% Fibonacci of the hourly correction comes in at 109.99.''

Hourly chart

Live market

The markets have been in a volatility lull for many weeks and short of the US dollar. 

With the anticipation of the Fed this week, short covering in the days counting down to the event is a probable cause for the recent strength in the greenback which is in a phase of accumulation.

More on this here:

US dollar in focus ahead of the FOMC

Meanwhile, US yields are getting some love on Monday, with the ten-year rising 2.9% from a low of 1.4480% to a high of 1.5010% which is helping to boost USD/JPY higher in a low volatility marketplace looking for carry. 

FOMC upside risks for the US dollar are anchored

The Fed meets for its 2-day June meeting tomorrow, with the policy decision and updated projections due on Wednesday.

There is little chance of there being new taper hints considering the members believe that the current inflation we are witnessing reflects the historically exceptional circumstances and that inflation future prospects are transitory.

With that being said, the magnitude of price rises in both April and May has been unsettling, so there is a slight chance of a hawkish outcome that could be marginally positive for the US dollar. 

The risk is that this pushes inflation expectations higher, ultimately feeding through to a more sustained rise in inflation over the medium term.

''We expect that this week’s FOMC meeting is likely to bring upward revisions for PCE inflation in 2021,'' analysts at Rabobank said.

''As long as further out inflation forecasts remain anchored the market should absorb this well.''

''As Philip Marey notes “, it takes only two more participants (in the FOMC) to shift toward a hike in 2023, to make it a split 9-9 committee on whether to hike or not in 2023”.  This is too far away to create too many waves in the market, but such a shift would be marginally USD positive,'' the analysts added further.

On the other hand, ABN Amro wrote in a note, ''the most likely course is that inflation decelerates over the coming months, settling back at more normal levels later this year. It is even possible we could get one or two weak readings in the months ahead, as some price rises look unsustainable and vulnerable to payback (particularly in used cars, a category driving 1/3 of the overshoot in April/May).'' 

''As such, although we expect a significant upward revision to the Fed’s current 2.4% forecast for PCE inflation in 2021 – perhaps a rise of more than a percentage point – we expect the FOMC statement to continue to describe the current inflation overshoot as transitory, and Chair Powell is likely to mount a vigorous defence of this thinking in the press conference.''

''At the same time, while Chair Powell might acknowledge that the Committee is now ‘talking about talking about' a tapering of its asset purchases, we do not expect any concrete hints on this at the press conference. We continue to think a formal taper announcement could come by the September meeting – perhaps telegraphed at the Jackson Hole Symposium. This would pave the way for tapering to start in Q4,'' Bill Diviney at ABN Amro said.

British Prime Minister Boris Johnson announced on Monday that they will be delaying the coronavirus lockdown easing by a month to July 19 amid rising

British Prime Minister Boris Johnson announced on Monday that they will be delaying the coronavirus lockdown easing by a month to July 19 amid rising cases of the more infectious Delta variant, as reported by Reuters.

Additional takeaways

"At a certain stage, we will have to learn to live with the virus."

"The delay is designed to reduce the current surge in infections."

"By July 19, we do think we will have built up a considerable wall of immunity."

"On that basis, we should be able to go forward with the full opening."

"I think we will be able to deliver step for on July 19."

Market reaction

These comments don't seem to be having a noticeable impact on the British pound's performance against its rivals. As of writing, the GBP/USD pair was virtually unchanged on the day at 1.4110.

The AUD/USD pair reached a daily high of 0.7726 during the American trading hours but struggled to preserve its bullish momentum. As of writing, the p
  • AUD/USD loses traction after edging higher in early American session.
  • US Dollar Index extends sideways grind around 90.50.
  • Reserve Bank of Australia will release June Meeting Minutes on Tuesday.

The AUD/USD pair reached a daily high of 0.7726 during the American trading hours but struggled to preserve its bullish momentum. As of writing, the pair was up 0.03% on a daily basis at 0.7710.

Eyes on RBA Minutes

In the absence of significant fundamental drivers and macroeconomic data releases, AUD/USD is having a difficult time making a significant move in either direction on Monday. Reflecting the subdued market action, the US Dollar Index remains on track to close little changed around 90.50.

Meanwhile, Wall Street's main indexes are trading mixed at the start of the week, not providing a clue regarding the risk perception. Currently, the S&P 500 is down 0.3% while the Nasdaq Composite is rising 0.4%.

In the early Asian session on Tuesday, the Reserve Bank of Australia (RBA) Meeting Minutes will be looked upon for fresh impetus. 

In a recently published report, analysts at Bank of America Global Research argued that the RBA will update its policy guidance at its next meeting on July 6. 

"Considerable stimulus will likely remain in place," analysts further added. "A more open-ended third round to QE is more likely to commence at the current pace of AUD5bn per week where RBA purchases would reach AUD60bn after 3 months. An extension of QE would help to keep net ACGB supply negative in the new fiscal year and help to temper 10yr swap spread tightening."

Technical levels to watch for

 

The EUR/USD reached a fresh daily high during the American session at 1.2130. The euro is among the top performers on Monday and is holding onto daily
  • US dollar corrects lower against the euro on Monday.
  • EUR/USD back above 1.2100 but still shows risks tilted to the downside ahead of the Fed.

The EUR/USD reached a fresh daily high during the American session at 1.2130. The euro is among the top performers on Monday and is holding onto daily gains versus the US dollar, recovering from weekly lows under 1.2100.

The US Dollar lost strength amid mixed equity prices in Wall Street and despite higher US yields. The Dow Jones drops by 0.65%, and the Nasdaq gains 0.44%. The 10-year yield stands at daily highs at 1.495%.

Investors await the Federal Reserve’s monetary policy decision, due on Wednesday. The two-day meeting starts on Tuesday. No change is expected in monetary policy and market participants will look for clues about the asset purchase program. Before the Fed, on Tuesday, retail sales and the PPI index will be important reports.

“Although we expect a significant upward revision to the Fed’s current 2.4% forecast for PCE inflation in 2021 – perhaps a rise of more than a percentage point – we expect the FOMC statement to continue to describe the current inflation overshoot as transitory, and Chair Powell is likely to mount a vigorous defense of this thinking in the press conference”, says Bill Diviney, Senior Economist at ABN Amro.

Back above 1.2100

The EUR/USD pair is back above the 1.2100, but the daily and four-hour charts are still biased to the downside. A recovery above 1.2200 would send the pair above the 20-day moving average and also above a downtrend line from May’s top, changing the bias in favor of the euro.

On the flip side, a decline back under 1.2100 would add bearish pressure. The next support is seen at 1.2055/60.

Technical levels

 

Data released on Monday showed a larger-than-expected decline in April in manufacturing sales in Canada. Stephen Brown, Senior Economist at Capital Ec

Data released on Monday showed a larger-than-expected decline in April in manufacturing sales in Canada. Stephen Brown, Senior Economist at Capital Economics points out the manufacturing sector is struggling due to supply shortages.

Key Quotes:

“Manufacturing sales volumes slumped 3.3% m/m in April, as the disruption from the global semiconductor shortage intensified. While sales volumes should gradually rise again from May, it will be some time before overall manufacturing activity returns to its pre-pandemic level.”

“The 2.1% m/m fall in manufacturing sales values in April was twice as bad as the preliminary estimate. The weakness was primarily due to the disruption from the global semiconductor shortage, with sales of motor vehicles plunging by 36% m/m and sales of parts falling by 19%. The shortages also help to explain the smaller declines in computer & electronic product and electrical equipment & appliance sales.”

“The upshot is that manufacturing activity is likely to remain somewhat depressed. Manufacturing sales volumes were 6.6% below their pre-pandemic level in April, although sales values have at least been supported by the strong gains in commodity prices this year. In any case, with activity elsewhere in the economy set to recover strongly in the coming months as the coronavirus restrictions are eased, we continue to expect overall GDP to return to its pre-pandemic level by August or September.” 

The GBP/USD rebound further during the American session and reached a fresh daily high at 1.4123. It is hovering around 1.4110/15, marginally above Fr
  • US dollar extends losses during the American session.
  • GBP/USD rejected again from under 1.4100, keeps the strong support.

The GBP/USD rebound further during the American session and reached a fresh daily high at 1.4123. It is hovering around 1.4110/15, marginally above Friday’s close.

The key move in cable was the rebound back above 1.4100 after falling to 1.4069, the lowest intraday level since May 14. A daily close clearly under 1.4100 would suggest a deterioration in the technical outlook for the pound.

On Monday, the pair rebounded amid a decline of the US dollar gains most currencies, excluding the yen. The DXY dropped under 90.50 even as US yields moved to the upside and equity prices turned negative.

Between the Fed and the reopening

The week has started with some calm in major pairs with a pullback of the US dollar and sharp moves in yen’s crosses and metals. However, volatility is likely to dominate all markets ahead of the two-day meeting of the Federal Resave that will start on Tuesday. “We expect a hawkish hold stemming from a shift in the Dot Plots, upgraded economic forecasts, and potential tapering talk.  With risks to U.S. yields weighted to the upside, the dollar is likely to benefit from any bond market repricing of the Fed and inflation outlooks”, wrote experts at BBH. 

Regarding the UK, analysts at ING consider the economic reopening and fast vaccination stories are fully priced in. “While the spread in the Indian variant makes it likely that the 21 June restriction easing will be postponed, the impact on the economy should be very limited (with the delay likely being a matter of weeks)”. They see GBP/USD at 1.44 in a one-month period and at 1.46 in six months.

Technical levels

 

Commerzbank expects inflation concerns to lift the gold price up to $2,000/oz by the end of the year, as reported by Reuters. Commerzbank also sees si

Commerzbank expects inflation concerns to lift the gold price up to $2,000/oz by the end of the year, as reported by Reuters.

Commerzbank also sees silver price rising to $30 per troy ounce end-2021 and forecasts palladium at $2,800 per troy ounce.

Related articles

Gold Price Analysis: XAU/USD slides below $1,850 level, fresh one-month lows.

"Gold continued losing ground through the mid-European session and dropped to fresh one-month lows, below the $1,850 level in the last hour," notes FXStreet reported Anil Panchal. "This marked the second consecutive day of heavy selling and was dragged the XAU/USD further away from the near five-month tops touched on May 1."

Silver Price Analysis: XAG/USD flirts with two-day lows, around $27.75-70 area.

"Silver extended the previous day's retracement slide from one-and-half-week tops and witnessed some follow-through selling on the first day of a new trading week," says FXStreet analyst Haresh Menghani. "This marked the second consecutive day of a negative move and dragged the commodity to two-day lows, around the $27.70 region during the early European session."

After rising to a fresh daily high of 1.2171 on Monday, the USD/CAD pair lost its traction during the American trading hours and was last seen losing
  • USD/CAD pair is edging lower in the early American session.
  • US Dollar Index continues to move sideways near 90.50.
  • Rising crude oil prices help CAD find demand.

After rising to a fresh daily high of 1.2171 on Monday, the USD/CAD pair lost its traction during the American trading hours and was last seen losing 0.15% on the day at 1.2135.

WTI extends rally to fresh multi-year highs

Earlier in the day, the USD's resilience allowed USD/CAD to stay in the positive territory. The US Dollar Index, which gained 0.42% last week, continues to move sideways around 90.50 in the absence of significant fundamental drivers.

However, rising crude oil prices provided a boost to the commodity-related CAD in the second half of the day and forced USD/CAD to turn south. Currently, the barrel of West Texas Intermediate (WTI) is trading at its highest level since October 2018 at $71.70, gaining 1.3% on a daily basis.

Meanwhile, the data from Canada showed that Manufacturing Sales in April contracted by 2.1% on a monthly basis. Although this reading came in worse than the market expectation for a decrease of 1%, it doesn't seem to be having a negative impact on the CAD's market valuation.

On Tuesday, the US Census Bureau will release May Retail Sales data. More importantly, the FOMC will announce its policy decisions and publish the updated Summary of Economic Projections on Wednesday.

Technical levels to watch for

 

David Frost, the British minister responsible for implementing the Brexit deal, and European Commission Vice President of Interinstitutional Relations

David Frost, the British minister responsible for implementing the Brexit deal, and European Commission Vice President of Interinstitutional Relations and Foresight Maroš Šef?ovi? will meet later this week to try to break the Brexit deadlock over Northern Ireland, The Guardian reported on Monday, per Reuters.

Earlier in the day, "I think that most people around the table understand the vital importance of a country looking after the territorial integrity of that country," British Prime Minister Boris Johnson told reporters ahead of the NATO summit in Brussels.

Market reaction

The GBP/USD pair largely ignored this headline and was last seen posting small daily gains at 1.4114.

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