rally

Technical outlook: The US dollar index has hit the initial projected target at about 104.15 as seen on the 4H chart here. The Fibonacci 1.618 extension was exceeded as the bulls registered a high close to 104.23. The index reversed sharply from there, dragging the index lower through 103.00 before finding some near-term support. It is seen to be trading close to 103.70 at this point in writing.     The US dollar index seems to have more room on the upside to complete the rally, which had begun from the 100.34 lows. After witnessing a straight rally from 100.60 towards 104.23 levels, the price could consolidate ahead of 105.50 which looks like the next Fibonacci extension and target. Near-term support is seen just below 103.00.   The US dollar index should be targeting 105.50 and higher in the next few trading sessions. Please also note that 105.50 is the next price resistance and the bulls want to take that out to complete the larger-degree corrective pattern. After hitting 105.50, the US dollar index could begin a bearish reversal dragging the price much lower.   Trading idea: A potential rally through 105.50 remains possible in the near term.    

Technical outlook: EURUSD bounced off the 1.0640 lows last week and pushed higher towards 1.0779 on Friday as projected earlier. The bears were quick to take this opportunity and came back in control as the trajectory reversed towards 1.0700-10 to close the week. The single currency pair is seen to be trading close to 1.0700 at this point in writing as the bulls prepare to push towards 1.0760 at least in the near term.   EURUSD is unfolding an expanded flat corrective wave at a larger degree from the 1.1035 highs earlier.   The first wave lower terminated around 1.0520, while the second wave rallied through the 1.1095 highs before terminating. Since then, the last wave has been underway and is projected to terminate around 1.0500 in the next few trading sessions. EURUSD might have terminated a lower-degree corrective rally at 1.0779 on Friday or it could extend up to the 1.0820-30 area in the next 1-2 trading sessions.   The instrument could be trapped in a range for a few sessions before the bears are back in control to drag the price lower towards 1.0500. Watch out for intraday resistance around the 1.0820-30 zone.     Trading idea: A potential drop towards 1.0500 is possible in the near term.  

Oil lost more than 4% since the start of Monday, retesting the lower end of its range for the last three months. WTI briefly traded below $67.0 and Brent below $72.   On Tuesday, oil is enjoying buying at the lower end of the range, gaining more than 1.5% since the start of the day. However, there are big questions about whether the current rally can gain traction. Over the past three months, oil has repeatedly found itself close to current levels, from which it has bounced on technical factors (accumulated local oversold conditions) and several announcements of production cuts by OPEC+ members. More interestingly, the current sell-off in oil is going against the news. Prices peaked locally shortly after Saudi Arabia announced a voluntary production cut of 1m BPD and Russia's plans to cut production from next year. In addition, the US government announced at the end of last week that it would begin buying oil for the Strategic Petroleum Reserve. According to Baker Hughes data released on Friday, the number of active rigs (oil + gas) fell by a further 1 to 695.     More interestingly, the sharp fall in oil prices since mid-April has been accompanied by impressive demand for equities on the back of strong macro data. It is no coincidence that OPEC+ is so strongly defending current levels. The $65 area has acted as an important mode switch for oil. A break below triggered a bullish capitulation that halved the price before a steady move higher in 2008, 2014 and 2020. The ability to hold higher triggered a rally that doubled the price in 2007, 2010 and 2021.     The fact that the 200-week moving average is being fought over adds to the epochal nature of the current battle between the bulls and bears. And the persistent, repeated attempts to break below this line since February is more of a bearish signal. Graphically, it looks more like what we saw in 2008. And that is an argument for oil to head towards $30 now, although it would still be prudent to wait for consolidation below $60 to gain more confidence in a downside move.  

In our conversation with an FXPRO analyst about the current market situation, several key topics were discussed. Regarding the recent FOMC decision, it appears that markets are underestimating the Fed's hawkish rhetoric. Despite leaving the Fed Funds rate unchanged, the FOMC's published forecasts suggest two more rate hikes this year and an extended period without policy easing. However, investor confidence in Powell's economic assessment is at a record low. This disparity between market expectations and the Fed's projected scenario is evident in the bond market pricing, with the most likely FOMC scenario priced at a mere 8.4%.   Interestingly, this misplaced investor confidence in a less hawkish Fed is driving equity gains, reminiscent of a similar scenario in January when regional banking issues dashed market optimism. The market's detachment from reality is leading to a disregard for the Fed's rate guidance and the tightening measures already implemented.   FXMAG.COM: Could you please comment on the FOMC decision? FXPRO analyst: Markets continue to underestimate the Fed's hawkish rhetoric. After leaving the Fed Funds rate unchanged, the FOMC has published forecasts suggesting two more 25 basis point hikes this year and an extended period without policy easing. However, investors' confidence in Powell's economic assessment is at a record low (36% vs. 74% for Greenspan in 2001). The most likely FOMC scenario - two more rate hikes before the end of the year - is priced by the bond market at only 8.4%, according to the FedWatch tool. Indeed, this investor confidence that the Fed will be less hawkish than it promises is fueling equity gains. We saw something similar in January when regional banking problems dashed market optimism. Markets have become too detached from reality, ignoring both the Fed's direct rate guidance (which is within its power) and the economic logic and the policy tightening that has already occurred.     FXMAG.COM: Could you please comment on the ECB decision?  FXPRO analyst: Despite six months of economic contraction, the ECB is quite open about its intentions to fight inflation. We expect another 25-point hike on Thursday, and the tone supports at least a couple more. This is a more hawkish stance than that of the Fed. Moreover, we do not rule out hawkish surprises from the ECB today and in the coming weeks. It should not be forgotten that continental Europe is historically less inflation-tolerant than the US and the UK. This could be fuel for a stronger euro in the coming months.     FXMAG.COM: Could you give your point of view about how the gold prices would behave in the next weeks? Is there a chance that there will be new ATH? FXPRO analyst: Gold retreated to $1930, a level not seen since March when the US regional banking crisis triggered a rally in precious metals and major cryptocurrencies. A pullback on the shoulders of rising equities has forced gold to give back more than half the amplitude of the March-May rally. Despite the retreat, gold still has the potential to grow from current levels to $2100 by the end of the year. A central argument against this bullish scenario would be a break below $1920 in the coming days, a significant reversal area.  

EUR: Hawkish ECB and better risk environment helps the euro The trade-weighted euro pushed up around 0.2/0.3% yesterday on the hawkish ECB, but the better global growth environment and softer dollar generated a 1% rally in EUR/USD. As our readers hopefully know by now, we are bullish on EUR/USD in the second half, but we are not sure which month exactly the bull trend would take off. Could it be June? The hawkish ECB – especially the upward revision to the 2025 CPI forecast – adds weight to our core house view that the central bank will say hawkish for longer and cut rates later than the Fed. At the same time, it looks like investors are gearing up for another expression of faith in Chinese growth prospects. Expectations are now growing that some fiscal support measures can be announced over the coming weeks to back up the recent monetary easing. This week's important turn-around in USD/CNH looks like an encouraging sign for the pro-cyclical EUR/USD. For EUR/USD today, let us see whether the US data and Fed speakers make much of an impression. In addition, we have four ECB speakers from the more hawkish end of the spectrum. We prefer to back the bullish momentum here and can see EUR/USD pushing on to the 1.1000/1030 region today. Chris Turner   In Norway, Norges Bank (NB) reported the results of a regional survey yesterday: the main takeaway was that price pressures continue to grow. This will ultimately help the central bank build its case for pushing rates beyond 3.50%, even though a much more important input to the NB decision-making process is NOK weakness. The next policy meeting is on Thursday when rates are expected to be raised by 25bp to 3.50%, although at this stage we cannot exclude a surprise 50bp hike.   

In the ever-evolving landscape of financial markets, decisions made by major central banks have a significant impact on shaping trends. We recently had the opportunity to speak with Matthew Weller, an analyst at StoneX, to gain insights into the current state of affairs.   Read more   The European Central Bank (ECB) recently made headlines with its "Hawkish Hike," raising its key interest rate by 25 basis points to 3.5%. This move aims to combat the escalating inflation in the eurozone, marking the eighth consecutive rate hike since July 2022. The ECB's determination to bring inflation down from its current 6.1% to its target of 2% is evident. ECB President Christine Lagarde has hinted at the possibility of further rate hikes at the next meeting in July, emphasizing the need to tackle inflation head-on. Lagarde made it clear that the ECB has no plans to pause its rate hikes. While the ECB focuses on inflation control, other central banks, such as the US Federal Reserve, have taken a pause in their rate hikes to assess their impact on economic growth and employment. However, the Fed's projections indicate the potential for two more rate hikes this year. Similarly, central banks in Australia and Canada have resumed rate increases after a temporary pause, underscoring the global challenge of high inflation. The ECB's decision to raise rates comes at a time of economic uncertainty, influenced by factors such as the ongoing conflict between Russia and Ukraine and potential wage agreements that may further fuel inflationary pressures. The ECB acknowledges that short-term economic growth may remain subdued, but it expects improvements as inflation subsides and supply disruptions ease. While concerns persist regarding the potential negative impact of higher rates on the economy and the risk of a recession, the ECB remains committed to addressing inflation as a top priority   FXMAG.COM: Could you give as your point of view about how the gold prices would behave in next weeks? Is there a chance that there will be new ATH? Gold Consolidates Amid Hawkish Central Bank Actions   With major central banks continuing to tighten monetary policy and inflation still receding (if more gradually than before) gold prices are likely to remain on the back foot in the near term. As of writing, the yellow metal is trading in the mid-$1900s, where it has spent the last three weeks consolidating. Bulls will be looking for a break above the June high near $1990 to signal a potential retest of the record highs near $2075 as we move into July, whereas a confirmed break below $1930 could open the door for a retest of the 200-day EMA near $1900 next.

The rally of USD/JPY has reached 142.25/142.50 key medium-term resistance ex-post BoJ monetary policy decision last Friday. Latest Commitments of Traders report on JPY futures on net large speculators’ open bearish positioning has reached close to a 3-year extreme. The next key related event will be the release of Japan’s nationwide inflation data for May on this Friday, 23 June.   This is a follow-up analysis from our earlier publication dated 15 June 2023, “USD/JPY Technical: Bullish breakout from 4-week range ahead of BOJ” (click here for a recap). The USD/JPY has shaped the expected positive follow-through in price actions reinforced by the latest Bank of Japan (BoJ)’s dovish jawboning last Friday, 16 June to maintain its ultra-dovish monetary policy due to an expectation that inflation in Japan faces a risk of a slowdown in the second half of the current fiscal year. The last 3 days of up move in the USD/JPY has led it to hit a 142.25/50 key resistance with bullish exhaustion elements at this juncture ahead of the next key related economic data release, the Japan nationwide inflation for May out on this Friday, 23 June.     Fig 1: USD/JPY medium-term trend as of 20 Jun 2023 (Source: TradingView, click to enlarge chart   Fig 2: USD/JPY short-term minor trend as of 20 Jun 2023 (Source: TradingView, click to enlarge chart) JPY futures’ bearish net open positioning of large speculators has reached close to a 3-year extreme   Fig 3:  JPY futures net open positioning trend of large speculators as of 12 Jun 2023 (Source: MacroMicro, click to enlarge chart) Traders’ sentiment from the Commitments of Traders report can be measured by the difference between the net open positions of large non-commercials (speculators) and the large commercials (hedgers/dealers) in the futures market. A positive number represents net long positions on JPY and a negative number represents net short on JPY.   Based on the latest weekly Commitments of Traders report as of 12 June 2023 compiled by the Commodity Futures Trading Commission (CFTC) on US exchange-listed FX futures market on the JPY futures contract (take note that JPY is quoted as the base currency & USD as the variable currency, i.e. JPY/USD), it has indeed shown that traders’ sentiment is skewed towards a more significant increase bearish positioning on JPY versus three months ago.   The latest weekly reported net open positions on the JPY futures market have indicated a jump of net shorts positions on JPY to -222,157 contracts which is close to a 3-year extreme with -243,729 contracts reported on 11 April 2022.   Interestingly, the current reported -222, 157 contracts on net short JPY futures open positions have surpassed the -220,700 contracts reported on 24 October 2022 and thereafter saw the JPY strengthen by +15% against the USD in the following three months.   That’s a form of contrarian opinion analysis where positioning has reached a relatively extreme level and the risk of a reversal in price actions is likely to be easily triggered if related news or events fail to meet the expectations of an “overconfident and exuberance” mindset of participants due to the overcrowding effect.     142.25/142.50 key medium-term resistance of USD/JPY is defined by a confluence of elements There are three different elements that allow 142.25/142.50 on the USD/JPY to be classified as potential key resistance (see daily chart). Firstly, it is the prior swing highs area of 11 and 22 November 2022 that led to a significant decline in price actions thereafter. Secondly, it is the upper boundary of a medium-term ascending channel that price actions have oscillated within it since the 16 January 2023 low of 127.72. Thirdly, it’s the 61.8% Fibonacci retracement of the prior medium-term decline from the 21 October 2022 high to the 16 January 2023 low. Thus, such confluence of elements on the 142.25/142.50 resistance level may suggest that the USD/JPY medium-term uptrend from 16 January 2023 is at risk of hitting a terminal juncture where a potential corrective decline may occur next.     Upside momentum has started to wane The daily RSI oscillator has flashed a bearish divergence signal at its overbought region and the shorter-term 1-hour RSI has broken below a corresponding support at the 52% level. Below the 141.15 minor support exposes the next intermediate support at 140.30 (also the 20-day moving average) in the first step. However, a clearance above 142.50 key medium-term pivotal resistance invalidates the bearish tone for the next resistance to come in at 143.45.      

Bitcoin is slightly higher as the cryptoverse embraces BlackRock’s ETF filing and as EDX crypto exchange goes live. ​ Given the risk-off start to the trading week, Bitcoin’s slight gain is a positive sign. ​   Bitcoin still seems poised to consolidate here but it could start to muster up a rally if gold remains under pressure and if investors grow cautious with the potential headwinds for the stock market. ​ ​    

Crypto Industry News: Over the past week, BTC miners have been sending their Bitcoins to exchanges en masse. It is worth adding that according to the Glassnode analytical platform, this is the largest BTC transfer to trading platforms in the last 5 years.   The cryptocurrency community is watching the actions of the SEC and sees the impact on the market. The miners' actions may be a preventive sale of their BTC, for fear of further declines. The first cryptocurrency established by Satoshi Nakamoto is still going strong. Miners are constantly mining more Bitcoins, and the value of this cryptocurrency is currently around $26,000 for one BTC.   Bitcoin is currently more than 60% away from its ATH. The outflow of BTC to trading platforms is very clearly visible and it is the largest transfer in the last 5 years. Nevertheless, the miners of the first cryptocurrency still hold 1.829 million BTC, which is worth about $50 billion in total. The BTC transfer was most visible after the actions of the American SEC regarding the Coinbase and Binance exchanges.   On June 11, experts from Glassnode reported a significant BTC transfer by miners in just a week. USD 70.8 million worth of Bitcoins entered the exchanges.   This is the third record BTC inflow, but lower by USD 30.2 million from the record USD 101 million recorded during the 2021 bull market.   Technical Market Outlook: The BTC/USD pair has been seen rallying over 17% from the low made at the level of $24,753, so the last local high made at the time of writing the analysis was located at $28,996. The bulls had broken above the technical resistance located at $28,446 and now this level will work as the technical support. The market conditions are extremely overbought on the H4 time frame chart, but the next target for bulls is still seen at the level of $32,350.    

Agriculture: Weather concerns boost grains Weather concerns in both the US and Europe saw grain markets rally significantly yesterday. CBOT corn and wheat both closed more than 5% up on the day. Dry weather in the US has seen the condition of the corn crop deteriorate, whilst there also appears to be further downside to the upcoming Russian wheat crop. In addition, Ukraine has voiced its concerns over the Black Sea Grain Initiative and highlighted the risk that the deal may not be extended. The deal is set to expire in mid-July, and as we have seen numerous times over the course of the initiative, Russia has threatened to pull out of the deal.

Nike has entered into an agreement with the Chinese company AntChain to use its solutions based on blockchain. They are to be used to track shoes (and their users) that Nike equips with chips embedded in the sole For some time, however, some varieties of Nike shoes have been distinguished by chips in the sole, the purpose of which is to trace the origin of the shoes in order to be able to recognize and eliminate counterfeits at any time. It does not stop there.   Last Sunday, June 18, Nike announced a partnership with AntChain, a company belonging to the Alibaba group. The partnership is to use blockchain-based AntChain solutions to track Nike shoes. What's more, the chips in the soles are also supposed to contain dynamically encrypted NFC chips, so that tracking can be done remotely. Interestingly, Nike has its own blockchain solutions, but concentrates their use in other areas. AntChain, on the other hand, offers its blockchain in a spine-chilling formula called Traceability as a Service (TaaS). Given the state of privacy protection in the Middle Kingdom, it is not surprising that this company can be considered an expert in the field of tracking.         Technical Market Outlook: The ETH/USD pair hit the key technical resistance located at the level of $1,930 after a 19% rally from the last swing low. The intraday technical support is seen at the level of $1,777. The market conditions are extremely overbought on the H4 time frame chart, so please keep an eye on this level as the pull-back can haapen any time now.  

Bitcoin's over 24% increase in just 6 days is due to several significant events. Deutsche Bank's search for a crypto-license and the race to create a Bitcoin ETF fund are the main reasons why BTC began to climb again towards 30,000. USD. On June 15, BlackRock filed a Bitcoin Spot ETF application with the SEC, the United States Securities and Exchange Commission. Yes, to the same SEC that is pursuing cryptocurrency exchanges such as Binance or Coinbase.   It is worth noting that the SEC has definitively rejected such applications in the past, however, the latest attempt was made by the largest player in the asset management market. In reaction to these events, Invesco applied for the creation of such a fund many times in the past. The third applicant turned out to be WisdomTree, which also intends to apply for the creation of a cryptocurrency exchange fund ETF in the United States. An interesting event in the context of the increase in the value of Bitcoin is also WallStreet's support for new digital asset platforms - EDX Markets. Although there is still a long way to ATH, interest in the oldest cryptocurrency is still very high. The actions of the SEC did not scare off investors, which could have been suggested by the record transfer of BTC from crypto-miners.   Technical Market Outlook: The BTC/USD pair has been seen rallying over 24% from the low made at the level of $24,753, so the last local high made at the level of $30,777. The bulls had broken above the technical resistance located at $28,446 and now this level will work as the technical support. The market conditions are extremely overbought on the H4 time frame chart and on a Daily time frame chart. The next target for bulls is still seen at the level of $32,350.  

Bitcoin Bitcoin momentum remains intact as Fidelity joins the quest for the elusive bitcoin etf with BlackRock, Invesco, WisdomTree, and Invesco. It has been about five years of steady denials of every crypto ETF filing, but now optimism is here that one of these financial giants will get one done before summer’s end. In addition to fresh ETF filings, the crypto market is focused on Grayscale‘s lawsuit against the SEC over, trying to convert its GBTC to a bitcoin ETF. Optimism is growing that Grayscale might have a chance to win this legal battle before the end of summer. Bitcoin trades above the 30,000 level investors are waiting to see if the rally can continue. Initial resistance comes from the 34,000 level and if we do see a bitcoin ETF approval institutional momentum could take the rally as high as the $40,000 level. Any major setbacks with a BlackRock ETF rejection and a Grayscale defeat could temporarily kill the rally, but optimism will still remain that and the ETF will eventually get done.

Current impulsive up move of CHF/JPY has cleared above major resistances of 157.98 & 158.45. Short-term momentum remains bullish. 159.90 is the key short-term support to watch.   The CHF/JPY cross has continued to its relentless rally as it broke above key resistance levels; 157.98 (the high obtained right during the EUR/CHF unpegged shock in January 2015) and 158.45 (Oct 1979 major swing high).   Broke above Oct 1979 major swing high of 158.45     Fig 1: CHF/JPY long-term secular trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The next key medium-tern resistance zone stands at 163.20/166.70 defined by a cluster of Fibonacci extension levels (see 3-month chart). The key medium-term support rests at 146.60 defined by the 200-day moving average and the former swing highs of July/October 2022.   The short-term uptrend remains intact     Fig 2: CHF/JPY minor short-term trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The price actions of CHF/JPY have continued to evolve within a minor ascending channel in place since the 13 June 2023 low of 153.37 and traded above the upward-sloping 5-day moving average (see 1-hour chart). The hourly RSI has just staged a bullish breakout which indicates that short-term momentum remains positive. Watch the 159.90 key short-term pivotal support with the next resistances coming in at 162.00 (psychological level) and 163.20 (the intersection between the upper boundaries of both the medium-term and minor ascending channels). However, a break below 159.90 negates the bullish tone to expose the next minor supports at 158.70 and 157.20.

EUR: Sintra's effect may not last too long President Christine Lagarde and other European Central Bank officials continued to signal more tightening ahead at the Sintra symposium yesterday. Markets received some more detailed inputs from other Governing Council members aside from Lagarde herself. For example, Belgian central bank chief Pierre Wunsch said the next three inflation readings will need to “give a clear signal that core is indeed going down” to convince the ECB to pause. Latvian hawk Martins Kazaks said earlier that the slowdown in the eurozone economy is not enough to bring inflation down and also explicitly pushed back against rate cut expectations before mid-2024.   A newswire report this morning suggested that some hawkish members are considering a faster reduction of the Bank’s bond portfolio, shifting to a phase of active bond sales of assets. The euro’s reaction to the news was limited: we’ll see whether this has any impact on peripheral spreads when European markets open.     On the dovish front, Fabio Panetta is set to move from the ECB Executive Board to the Governing Council as he replaces Ignazio Visco as Bank of Italy governor. Panetta has stood out as an even more dovish voice than Visco (Italian members have generally swung on the dovish side), although that hardly changes the balance at all within the GC at this particular point in time.   Today, we’ll see Italy release June CPI numbers, ahead of other member countries’ and eurozone-wide figures tomorrow. Lagarde is set to deliver another speech in Sintra, and markets will keep an eye on more side-line comments by other officials. The euro has been on the strong foot, but a sustainable rally above 1.10 may be premature considering markets are already fully pricing in two hikes by the ECB and the risks of an upside correction in the dollar are non-negligible.

Dollar weakens as inflation cools Apple reaches historic $3 trillion market cap Fed rate hike bets eye a peak at 5.410%   US stocks are rallying after the Fed’s favorite inflation gauge showed the disinflation process remains intact and the consumer is showing signs of weakness. A hot inflation report and Fed swaps might have been convinced that a second-rate hike by year end was likely.  Treasury yields edged lower after the PCE report was a little dovish. US Data The core personal consumption expenditure index, a key reading followed by the Fed rose 0.3% in May, matching the consensus estimate.  On annual basis, the PCE reading dropped from 4.7% to 4.6%.  Personal spending came in softer at 0.1%, while the prior reading was revised lower from 0.8% to 0.6%.  The consumer is starting to look a lot weaker and that should support inflation to drop even further over the coming months.   Apple Apple is attempting to become the first $3 trillion company as Wall Street remains all-in on mega-cap tech stocks.  Last month, Apple’s capitalization became more valuable than the entire Russell 2000 and it seems like that could widen further.  Apple got a boost after Citi raised their price target to a Street-high price of $240.  Apple’s outlook remains solid given their balance sheet and future revenue projects, but these latest gains might be more of a defensive switch for traders who see a US economy that is recession bound.    

We may be seeing a bit of a trading lull at the start of the week with tomorrow’s US bank holiday tempting many into an extended weekend. The economic calendar looks busy but with a large portion being PMI revisions, that doesn’t necessarily equate to an abundance of trading activity. The revisions are often small and don’t really move the needle in terms of expectations for the economy and, at this moment, interest rates. And then there’s the fact that manufacturing being deep in contraction territory is nothing new and what revisions we did see doesn’t really change that. Even as far as prices are concerned, central banks at this stage are far more concerned with what’s happening in services than manufacturing so even that providing welcome disinflationary pressure won’t be enough.   Is the bitcoin consolidation a bullish signal? Bitcoin is continuing to fluctuate largely between $30,000-$31,000 in a manner that may feel encouraging to the crypto community after such a powerful rally a couple of weeks ago. While it hasn’t managed to capitalize any further, that it hasn’t given back a portion of those gains gives the impression that traders think there’s more to come and that this is merely a period of consolidation amid a bigger move. Time will tell whether that turns out to be the case and news flow may have a big part to play in the outcome but what we’ve seen so far is encouraging.  

AUD/USD rallied by 97 pips from last Thursday, 29 June low of 0.6593. Staged a minor bullish breakout ahead of RBA’s monetary policy decision today. Watch 0.6630 key short-term support to maintain the current bullish tone. Since its 0.6593 minor low printed last Thursday, 29 June, the AUD/USD has managed to stage a rebound of 97 pips to print an intraday high of 0.6692 yesterday, 3 July ahead of Australia central bank, RBA’s monetary policy decision out later today at 0430 GMT. The interest rates futures market has implied a reduction in the odds of a 25 basis points (bps) hike due to the recent softer-than-expected annualized monthly CPI data for May; 5.6% from 6.8% in April and below expectations of 6.1%. As of 3 July 2023, the ASX 30-day interbank cash rate futures has priced in a 16% chance of a 25 bps hike on the cash rate, down from a 53% chance that was priced two weeks ago on 16 June.     Fig 1: AUD/USD short-term trend as of 4 Jul 2023 (Source: TradingView, click to enlarge chart) Minor bullish breakout The AUD/USD has managed to exit from the upper limit of a minor descending channel that was in place since its 16 June 2023 high of 0.6900 now acting as a pull-back support at 0.6630. This latest set of price actions has indicated that the minor downtrend phase from the 16 June 2023 high of 0.6900 to the 29 June 2023 low of 0.6593 is likely to have ended.     Short-term positive momentum has resurfaced The hourly RSI oscillator has just broken above a corresponding resistance at the 47 level after it exited from its oversold region last Thursday 29 June. Watch the 0.6690 short-term pivotal support (the pull-back of the former minor descending channel resistance & former minor swing high area of 29/30 June 2023) and clearance above 0.6790 (20-day moving average) sees the next resistance coming in at 0.6790. However, failure to hold above 0.6630 negates the bullish tone to expose the 0.6580/6550 key medium-term pivotal support zone.    

Can oil break above its two-month range after Saudi and Russian cuts? Oil prices are higher again today but still remain within their two-month range. The rally has been aided by the cuts announced by Saudi Arabia and Russia this week but ultimately, another failure to break above the range will suggest traders have largely shrugged it off. The previous high in Brent two weeks ago came just above $77 and a failure to hit that will represent yet another lower peak over the last month or so and may, therefore, merely confirm that we remain in a very gradual consolidation. We do appear to have seen a slight uptick in momentum over the last couple of days though so perhaps we’re going to see a real test of the previous peak, a break of which could be quite bullish.  

CEE: Recovery after last week's sell-off This week, we're looking at a lighter calendar. Today we will see the June state budget result in Hungary, which shows the risks of additional bond issuance in the first five months. Wednesday will see the release of labour market data in Romania. On Thursday, June inflation in the rest of the region will be published. In the Czech Republic, we expect a fall from 11.1% to 9.6% year-on-year, slightly below market expectations. In Romania, a further fall from 10.6% to 10.2% YoY is expected. Final inflation numbers will be released on Friday in Poland and current account numbers will also be published in Poland and the Czech Republic. We saw a significant sell-off in the FX market in the region last week. In our view, the driver was the global story and repricing as local factors remain rather positive. If the global story calms down as indicated by the morning open, we could see fresh gains and a rally in the region this week. Last week's sell-off has eased the steam from overcrowded market positioning in CEE FX, which should facilitate a recovery. We believe that the massive carry will attract buyers again, which should benefit the Hungarian forint the most. We see the next level below 380 EUR/HUF, which should confirm the recovery in FX and attract further inflows. Nevertheless, we're remaining optimistic for the whole region for this week.

Oil continues higher despite setbacks this week Could we finally be about to see a breakout in oil prices after two months of consolidation? The rally over the last week or so from the range lows has been quite strong and backed by momentum – as well as fresh cuts from Saudi Arabia and Russia – and despite being pushed back from the recent highs over the last couple of days, it’s continued to drive higher in a way that could see the upper boundary buckle. Yesterday’s ADP number appeared to wipe out any momentum that had built up but a rally late in the day saw it end the session in the green and come within a whisker of 21 June peak. A failure to overcome that could further confirm the continuation of the gradual consolidation we’ve seen over the last couple of months, whereas a break above could be a very bullish signal.   Can gold hold onto $1,900 after the US jobs report? Gold came under pressure in the aftermath of yesterday’s ADP report but managed to hold above $1,900 and even recoup some of its losses. It’s trading marginally higher today but whether it will be able to hold onto those gains, and remain above $1,900, will probably depend on what kind of jobs report we get. Can it cling on if we get another red-hot report? Another strong report is looking increasingly likely on the back of yesterday’s ADP number, although as we’ve seen in the past it isn’t always that reliable a barometer. A cooler report could propel it higher given expectations have now undoubtedly risen. It’s still almost 8% from its highs and a cooler report could offer the opportunity for a corrective move which we’ve barely seen so far.  

Medium-term uptrend of USD/JPY in place since 16 January 2023 at risk of breakdown. Steep decline from last Thursday, 6 July 2023 has reached oversold condition. Minor bounce cannot be ruled out at this juncture above 140.60 support. Watch the 142.50/142.80 intermediate resistance zone. This is a follow-up on our prior analysis “USD/JPY surged to a 7-month high, but fundamentals diverge” published on 23 June 2023. We have highlighted the risks of the overextended rally exhibited in the USD/JPY seen in the past six weeks as it approached a key resistance zone of 145.50/146.10 (click here for a recap). The price actions of the USD/JPY have indeed staged a retreat right below 145.50 (the lower limit of the key resistance zone) as it printed an intraday high of 145.07 on 30 June 2023 and dropped by 379 pips to hit a low of 141.28 in yesterday, 10 July US session.   Medium-term uptrend from 16 January 2023 is at risk of breakdown   Fig 1:  US/JPY medium-term trend as of 11 Jul 2023 (Source: TradingView, click to enlarge chart) Two key observations have emerged that indicated that the ongoing medium-term uptrend phase of the USD/JPY in place since the 16 January 2023 low of 127.22 may have reached its terminal point on 30 June 2023 which in turn may see the start of a multi-week corrective down move. Firstly, price actions have reintegrated below 142.50 (the pull-back support of the upper boundary of the medium-term ascending channel where price actions pierced above it on 22 June 2023) which suggests that the prior bullish breakout is likely a failure. Secondly, the daily RSI has broken below a key parallel ascending trendline support at the 48 level, indicating that medium-term upside momentum has waned.     A minor bounce cannot be ruled out as the decline reached short-term oversold condition   Fig 2:  US/JPY minor short-term trend as of 11 Jul 2023 (Source: TradingView, click to enlarge chart) In the realm of technical analysis, price actions of tradable financial instruments do not evolve in a vertical fashion but oscillate within a trend. As seen on the 1-hour chart of the USD/JPY, the steep decline since last Thursday, 6 July 2023 minor high of 144.65 has led the hourly RSI to reach an oversold condition (below the 30 level) and flashed out a bullish divergence observation (higher low in RSI but lower low in parallel price actions). These current observations have emerged as the decline in price actions is coming close to 140.60 key intermediate support (see daily chart). Hence if the 140.60 intermediate support manages to hold, a minor bounce may unfold with intermediate resistances coming in at 142.50 and 142.80 (20-day moving average). The key short-term pivotal resistance will be at 143.70 to maintain the ongoing short-term downtrend phase in place since the 30 June 2023 high of 145.07. On the other hand, a break below 140.60 exposes the next supports at 139.95 and 138.70.

UK employment falls but wage growth remains high BoE Governor Bailey says inflation will fall but more rate hikes needed The British pound has edged upward on Tuesday. In the European session, GBP/USD is trading at 1.2898, up 0.28%. The pound has put on an impressive rally, rising close to 200 pips against the dollar since Thursday.   UK employment softens, wages rise The UK delivered a mixed employment report for June. The economy created 102,000 jobs, far less than the 250,000 in May and shy of the consensus of 125,000. The unemployment rate rose from 3.8% to 4% and unemployment claims rose by 25,700, after a decline of 22,500 in May. However, wage growth excluding bonuses remained at 7.3% in the three months to May, above the consensus estimate of 7.1%. For Bank of England policymakers, the employment report is a good news/bad news release. The central bank needs the labour market to cool as it struggles to bring inflation down. To put it mildly, that battle has not gone as planned, with the OECD giving the UK the ignominious distinction of being the only major economy where inflation is rising. The June employment and unemployment numbers showed some cracks in the tight labour market, but wage growth, a key driver of inflation, remains stubbornly high. The takeaway from the jobs report is that the labour market is a bit less tight but wage growth remains inconsistent with the 2% inflation target and the BoE will have to continue to tighten policy. The cash rate is currently at 5.0% but the money markets have priced in a peak rate of 6.5%, which means that more pain is coming for businesses and households in the form of higher interest rates. BoE Governor Bailey is doing his best to put a brave face on a difficult situation. On Monday, Bailey said that inflation would fall “markedly” due to falling energy and food prices, but more rate hikes would be needed to bring inflation down from the current 8.7% to the 2% target.   GBP/USD Technical GBP/USD tested support at 1.2782 earlier today. The next support level is 1.2716 There is resistance at 1.2906 and 1.2972  

The Commodities Feed: Key US CPI release The oil market rallied more than 2% yesterday, leaving it at the top end of its recent trading range. US CPI data later today will be key for price direction in the immediate term.   Energy: Oil looking to breakout Oil prices pushed higher yesterday with ICE Brent trading to its highest level since early May and leaving it within striking distance of US$80/bbl. A break above US$80/bbl would see the market finally breaking out of the US$70-80/bbl range that it has been stuck in for more than two months. The market appears to be finally starting to reflect the tighter fundamentals that we see over the second half of 2023. Obviously, additional cuts announced by Saudi Arabia last week will be helping, while hopes of support measures for China’s economy will be offering some further optimism. However, macro developments are still likely to be key for the market in the near term. And today there will be plenty of focus on US CPI numbers. Expectations are for a print of 3.1% year-on-year for June, down from 4% in the previous month. We will need to see the number come in well below consensus to see any significant change to current expectations for the Federal Reserve to hike at its next meeting. API numbers released overnight were more bearish than expected, with US crude oil inventories increasing by 3MMbbls, while gasoline and distillate stocks also increased by 1MMbbls and 2.91MMbbls, respectively. The market had been expecting some small draws across crude and products. The more widely followed EIA inventory report will be released later today, but obviously, it is likely to be overshadowed by the US CPI release. Bloomberg ship tracking data shows that Russian seaborne crude oil exports fell by a little more than 1MMbbls/d WoW to 2.86MMbbls/d for the week ending 9 July. This also drags the four-week rolling average down to a little over 3.2MMbbls/d, which is the lowest level seen since January. The market will be watching Russian exports closely, as up until now there have been doubts over whether Russia is actually making the full supply cuts it announced earlier in the year. Yesterday, the EIA released its latest Short Term Energy Outlook, in which it forecasts 2023 US crude oil production to grow by 680Mbbls/d YoY to average a record 12.56MMbbls/d. Meanwhile, for 2024, supply growth is expected to slow to a little over 280Mbbls/d YoY, which would see output averaging 12.85MMbbls/d. This ties in with the slowdown in drilling activity that we have seen for much of this year. The number of active oil rigs in the US has fallen from a year-to-date high of 623 in January to 540 last week.

FX Daily: Underdogs make a comeback ahead of US CPI It has been a good week for the underdogs in the G10 FX world. The Japanese yen, Norwegian krone, Swedish krona and Swiss franc led the gains against the dollar over the last week. This may well be a position adjustment against the risk of a benign US CPI print today and a tweak in Bank of Japan policy at the end of the month. Today's CPI reading will therefore be key.   USD: Benign CPI could unlock a leg lower lower in the dollar Another European morning follows another Asian session where USD/JPY has led the dollar lower. The Japanese yen has now appreciated 3.6% against the dollar over the last week, closely followed by NOK (+3.4%), SEK (+2.7%) and CHF (+2.4%). We discussed some of the push-pull factors driving the dollar in yesterday's update, but the outperformance of these underdog currencies clearly points to some position adjustment at work. The broad-based nature of the rally in these currencies suggests investors may be anticipating a more benign US price environment like the one we saw in November last year when the US started to print core inflation at 0.3% month-on-month after a string of 0.6% releases. That nicely brings us to today's main event, which is the June CPI release at 14:30CET. Expectations are for a more benign 0.3% MoM core reading - the lowest since last November - and base effects bringing the headline CPI down to just 3.1% YoY - the lowest since March 2021. Assuming no nasty upside surprises here, this may be enough to firm up a view that a 25bp Fed hike may well be the last in the cycle. If so, DXY could make a run at the year's lows near 100.80. A quick word on the yen. Developments in USD/JPY - especially the sell-off in early Asia - seem to be led by selling in the JGB bond market. Here, 30-year JGB yields are rising - spreads between 30-year US and Japanese government bonds have narrowed 12bp over the last week - and the Nikkei equity index is underperforming. This has all the hallmarks of position adjustment before the 28 July Bank of Japan (BoJ) policy meeting, where expectations are growing that the BoJ could switch to targeting the five-year part of the JGB yield curve - another small step to policy normalisation. In short, then, this USD/JPY move looks driven by the private not public sector (i.e. no intervention) and something like 138.25 looks like a near-term target for USD/JPY assuming today's US CPI data does not surprise on the upside    

GBP: 1.30 will be tough for cable Sterling and UK interest rate markets did eventually respond to the higher wage data yesterday. Today, the Bank of England has just released its Financial Policy Summary and Record. Headlines suggest large banks have passed stress tests while smaller lenders and shadow banks remain a concern though UK households with high debt will remain below their peak of 2007. At first glance, there seems nothing here to urgently constrain the BoE's monetary tightening plans. US CPI will determine whether GBP/USD dramatically trades through 1.3000 - there is an outside risk to 1.33 should we see a November 22-style move in the dollar. But it is probably better to stay cautious here and after a good rally so far this month, 1.30 could be difficult to break. EUR/GBP has broken to a new low - but again 0.8500 might provide some psychological support.

GBP/USD GBP/USD (4-hour chat) has been in a general rally for the past two days, but that could be coming to an end if a bearish butterfly pattern forms. The headlines have been mostly bullish for the pound, but that could be reaching an inflection point. Inflation is forcing the BOE to be extremely hawkish and that could soon lead to a significant economic downturn.  Many traders are focusing on today’s UK wage growth, as it posted the biggest rise outside the pandemic period, but jumps in jobless claims suggest the labor market is cooling. If the pound-dollar bullish trend respects the psychological 1.3000 resistance, some bullish bets might get taken down.  The four-hour GBP/USD is displaying a potential bearish butterfly pattern.  If this technical reversal pattern holds, a moderate decline could see downward momentum target the 1.2800 region. If a dramatic move triggers a rally above the 1.3000 level, the bearish reversal pattern could be invalidated.  Further upside targets include the 1.3250 region.  

China Big Tech is leading the current momentum-driven rally in China stock market. Supported by a weaker USD/CNH that broke below key near-term support of 7.2160. Further hints from China’s top policymakers that the prior 3-year of stringent regulatory crackdowns on China’s leading technology companies have ended. Current momentum-driven rally of China Big Tech may still see a bumpy ride due to a weak external demand environment. Prior to yesterday’s release of the key US consumer inflation data for June that came out cooler than expected, China’s proxies stock indices have crept up higher since the start of this week; from Monday, 10 July to Wednesday, 12 July, the Hang Seng Index recorded a gain of 2.06%, Hang Seng Tech Index (+3.45%), Hang Seng China Enterprises Index (+2.3%). A higher positive momentum intensity is being seen in the Hang Seng TECH Index which comprises China’s Big Tech firms that reintegrated back above its 50 and 200-day moving averages. Also, a significant price action development in terms of relative momentum has taken shape on China’s Big Tech equities listed in the US stock exchanges (the ADRs) that have continued their outperformance over its peers, the US Big Tech since last week.   Relative positive momentum seen in China Big Tech The KraneShares CSI China Internet exchange-traded fund (ETF) has recorded an accumulated gain of 8% since the week of 3 July 2023 till yesterday, 12 July over a return of +0.86% seen in the Nasdaq 100 over the same period.       Fig 1:  Relative momentum trends of KraneShares CSI China Internet ETF & other China equities ETFs as of 12 Jul 2023 (Source: TradingView, click to enlarge chart) Also, positive relative momentum can also be seen against global equities, the ratio of the KranShares CSI China Internet ETF over the MSCI All Country World Index ETF has notched up four consecutive sessions of positive momentum readings based on a five-day rolling basis. Inter-market and sentiment are likely the factors that are the key catalysts for the ongoing short-term outperformance since in China Big Tech that is driving the momentum-induced rally in the Hang Seng benchmark stock indices.     USD/CNH broke below 7.2160 support triggering a positive feedback loop into China equities   Fig 2:  USD/CNH short & medium-term trends as of 13 Jul 2023 (Source: TradingView, click to enlarge chart)     Fig 3:  USD/CNH correlation with HSCEI & HSCTECH as of 13 Jul 2023 (Source: TradingView, click to enlarge chart) The USD/CNH (offshore yuan) foreign exchange rate has a high degree of inverse correlation with the Hang Seng benchmark stock indices and China Big Tech theme play ETF; a rise in the USD/CNH (a weaker yuan) tends to see a fall the above-mentioned indices and ETF, and vice versa. In the past five days, the USD/CNH has inched lower since its seven-month high of 7.2745 printed on 6 July and broke below key near-term support of 7.2160 (also the 20-day moving average that price actions have traded above it since 19 April 2023) on the onset of yesterday’s US CPI data release. Also, reinforced by the narrowing of the premium of the US Treasury 2-year yield over China’s 2-year sovereign bond yield. These observations suggest a potential short-term downtrend phase is in progress for USD/CNH which triggers a positive feedback loop into the Hang Seng bench stock indices and China Big Tech equities.    

The prospect of a soft landing lifts oil prices Rally builds on efforts by Russia and Saudi Arabia to boost prices A break of $80 could be another big step Oil prices have been understandably lifted by the US inflation release today as it could be seen to increase the possibility of a soft landing. Brent was already trending higher though and is now at its highest point since April, having already broken out of the range it traded within for the last couple of months. ​ The next level for Brent to overcome is $80, which would be a big psychological leap. That may also see WTI break above its June high following the spike on the 5th. The move higher also suggests the latest efforts of Saudi Arabia and Russia are working in tightening the markets and boosting prices after multiple failed efforts.   A bullish breakout in Brent? Not only would a significant break of $80 be a big psychological move, but it would also come on the back of a break above the 55/89-day simple moving average band and the descending channel it traded mostly within over the last couple of years.     The next major resistance zone above here could come around $83-$84.50 where the price could come into contact with the 200/233-day SMA band. As far as support is concerned, the mid-May and June highs around $78.70-$78.80 could be interesting, as could the 55/89-day SMA band which coincides roughly with the peak a few weeks ago. A rebound off either of these could be viewed as bullish confirmation of the initial breakout.    

The recent US Consumer Price Index (CPI) reading has caused some ripples in the market, prompting discussions on its implications for future monetary policy by the Federal Reserve. We reached out to Marco Turatti, an expert in the field, to shed light on the matter. According to Turatti, the CPI numbers came as a downside surprise, with both the headline and core components showing a decline on both monthly and annual bases. This decline in prices has been even faster than the previous rise, with the Producer Price Index (PPI) leading the way. Despite the rally in equities and bonds, Turatti notes that there has been minimal change in rate expectations. The likelihood of a 25 basis points hike this month remains unchanged at 92%, and the terminal rate is only down by 3 basis points to an expected level of 5.37% by November.     FXMAG.COM: Please comment on the US CPI reading. What does it mean in terms of further Fed monetary policy?   Marco Turatti:  The CPI number yesterday was a downside ''surprise'' in both its headline and core components, both on a monthly and annual basis. The decline in prices is even faster than the previous rise, with the PPI leading the way. Despite the equity and bond rally, very little has changed in terms of rate expectations: the chance of a 25 bps hike this month is unchanged at 92%, as is the terminal rate, down only 3 bps to the 5.37% level expected for November (meaning a second hike is not yet priced in). Prices are going down but wages (and second hike effects) may worry: their real growth is now at the highest since March 2021 (1.2%).

Has the US turned a corner on inflation? Earnings may determine whether rally can be sustained Dow testing major resistance level   It’s shaping up to be quite a relaxed end to the week, one in which we’ve seen stellar gains on the back of some very encouraging inflation data from the US. While there have been occasions when stock markets have performed well this year despite not appearing to reflect the fundamental reality of rapid economy-threatening rate hikes, the inability to really turn a corner on inflation has held them back. But perhaps that corner is now being turned. Inflation was already well off its highs but there was something about this report that was different. Not only did it beat on the headline and core level but both of the monthly readings were also incredibly positive. Now it’s just a question of whether that can be sustained. The light at the end of the tightening tunnel is getting brighter and investors are increasingly confident of emerging after one more hike in two weeks. At which point the focus will turn to the economy and whether a soft landing can still be achieved before the discussion pivots to rate cuts. The next risk comes from earnings season which gets underway today, with JP Morgan, Wells Fargo, and Citigroup all reporting on the second quarter.   Can the Dow break a more than one-year resistance level? The Dow is back trading around its highest levels in more than a year on the back of this week’s strong performance. It’s tested these levels a couple of times over the last month and many more over the last year, each time being pushed back, but could this time be different?   US30 Daily   The fundamentals look more attractive which could be enough to give it that extra bump. But I’m not convinced by the momentum indicators, on this chart being the stochastic and MACD. They look a little underwhelming and the same is true on the 4-hour chart. That’s certainly not definitive and a breakout could provide that momentum that there doesn’t appear to currently be but they aren’t particularly supportive at this point. As far as further resistance above is concerned, 35,000 stands out as the next test, with 36,000 above that then key. We could see some resistance around 35,500 as well as price has responded to it in the past  

  US inflation data takes Brent above $80 Chinese trade data disappoints again Momentum appearing to wane Oil prices are a little higher again in early trade, seemingly still buoyed by yesterday’s US inflation report, and are continuing to push for a convincing break above $80 in Brent crude. It is trading a little above $80 this morning and did at times yesterday, but rather than generating fresh momentum, it seems to instead be running into some difficulty. That would be understandable. After all, it’s rallied around 12% in two weeks, primarily on the back of the extension to the Saudi one million barrel cut to the end of August, alongside Russia’s 500,000 barrel export reduction. Some profit-taking at these levels wouldn’t be hugely surprising and may have come sooner if not for the US CPI data. What’s more, trade data from China overnight wasn’t exactly inspiring which may have dampened the rally a little. Chinese imports and exports slumped at a faster pace than expected in June in another sign of weakening global trade. We’ve seen this trend all year and clearly, conditions are not improving, quite the opposite. This will maintain pressure on the economy with domestic demand also disappointing, as seen by the weaker import numbers. Targeted stimulus may be needed sooner rather than later or the country’s once seemingly modest 5% growth target may be at risk of being missed. The breakout in Brent crude above the descending channel and above the 55/89-day simple moving average band was quite strong and it appeared to be building some momentum but there are signs that this is slipping today. The daily candle itself isn’t complete so I’m hesitant to comment on it but a close around where it currently lies is in theory bearish, being a shooting star candle.   Brent Crude Daily     The stochastic and MACD look ok at the moment on the daily chart, there aren’t any real red flags as far as they’re concerned. That’s less the case on the 4-hour and even the 1-hour charts which may point to a potentially corrective move in the short-term.   Brent Crude 4-Hour   Brent Crude 1-Hour   Either way, longer term this looks like a very bullish move. Breaking out of a two-month range on the back of supply cuts, weaker inflation readings, and the potential for softer landings for the economy. The China data is a concern but some stimulus could change people’s views on that front.        

EUR: Rally looks a bit stretched EUR/USD is trading at the highest levels since early 2022, and CFTC data showed that pre-CPI positioning on EUR/USD was already quite stretched on the long side (+19% of open interest). We also estimate there is currently a 2% short-term risk premium built into EUR/USD, based on our financial fair value model which includes rates and equity factors. This short-term overvaluation gap of EUR/USD could be closed either by a correction or by some EUR/USD-positive factors rising without triggering a climb in the pair. The week is rather quiet data-wise in the eurozone, but we’ll hear from European Central Bank President Christine Lagarde and other ECB speakers today at a conference organised by the Bank. This is one of the last occasions that could influence market expectations ahead of next week's policy meeting, even though a July hike is likely a done deal and the debate appears already entered about September. We see some moderate risks of a correction in EUR/USD this week, possibly to the 1.1100/1.1150 area. A continuation of last week’s rally may start to face increasing resistance at the 1.1300/1.1350 area.  

GBP: Strong June retail sales provide a brief lift Sterling is rallying this morning on the back of strong UK retail sales data for June. Unseasonably warm weather for the UK last month was seen to be behind the bounce. The data will also feed into the Bank of England's narrative that the consumer can handle higher interest rates. The release has triggered a 20 pip drop in EUR/GBP. However, we think EUR/GBP probably put in an important low near 0.8500 earlier this month and that corporates will now use any EUR/GBP dip below 0.8600 to increase hedges on sterling receivables.  As an aside, reports are suggesting that Prime Minister Rishi Sunak will be opting for a UK general election in November 2024, i.e. as late as possible to allow more chance for the UK economy to recover.

Meta Platforms Q2 23 – 26/07   having seen some chunky share price losses in 2022, this year has seen a face-ripping rally in the share price, with the shares up over 140% year to date. The rebound came in two parts with its Q1 numbers prompting further gains, after strong Q1 numbers and an upgrade to guidance for Q2. Q1 revenues came in at $28.1bn, a rise of 3% and easily beating expectations of $26.76bn, while profits came in at $2.20c a share, or $5.71bn, a fall of 24% but also above expectations. Costs and expenses rose by 10% to $21.4bn. Q2 revenue guidance was adjusted higher to between $29.5bn to $32bn, while full year operating expenses are now expected to come in between $86-$90bn, a decline of $5bn, and a sum that includes $3bn to $5bn in restructuring costs. Profits for Q2 are expected to come in at $2.90c a share.   The Reality Labs segment or Metaverse continued to bleed cash, losing just shy of $4bn as revenues fell to $339m. The launch of "Threads" a competitor to Twitter has also seen lots of headlines and helped to drive the share price higher, adding millions of users, however, there has been little sign thus far that it has driven traffic away from Twitter in a sustainable fashion

Oil Crude prices are tentatively breaking out as expectations remain for the oil market to remain tight despite all global weakness that is emerging.  The rally in crude oil is impressive as it occurs as Europe is looking very weak right now, the US is slowing down, and China’s Politburo isn’t expected to unveil major stimulus this week. Oil is also getting a boost from Wall Street as optimism grows the end of the Fed’s rate hiking campaign appears it could be here.  With Europe lagging by a couple months, we could start seeing all the major economies eyeing easing as the next move. Market positioning probably has the oil trade look a lot more attractive than US stocks, so if bullish momentum takes WTI crude to $80, it could have decent momentum behind that move.  

EUR: Soggy The ECB's euro trade-weighted index has fallen 1.3% so far this week. That is quite a sharp move. It seems investors have been unnerved by both the soft July PMI data and the ECB bank lending survey. The latter showed much tighter lending standards and a sharp decline in loans, particularly among businesses. There is not much European data today and instead, it looks as though EUR/USD will continue to trade on the soggy side through the session – especially since some of the China stimulus-powered rally in related asset classes (e.g., China mainland equities) looks to be petering out.  In our Fed preview published last week, we had targeted EUR/USD at 1.1050 on a slightly hawkish Fed meeting today. Softer European data has already brought us to that level. That suggests risk in EUR/USD towards 1.1000 on the back of the Fed at 20CET today – assuming the FX options market is correctly pricing a 60 pip range for EUR/USD over the next 24 hours. Elsewhere, the softer euro has seen EUR/CHF dip to 0.9550. Swiss National Bank (SNB) sight deposit data released on Monday suggested the SNB was still selling FX reserves last week to get the trade-weighted Swiss franc stronger to fight inflation. The SNB does seem to like complete control over this currency pair and while the direction of travel may be 0.9500 or even last September's low near 0.9415, expect the moves to be very gradual.

China increased gold holdings for a ninth straight month in July Oil unfazed as Ukraine sea attack Russian oil tanker didn’t lead to a major disruption Dollar supported amidst bond supply concerns; 10-year Treasury yield rises 3.8bps to 4.074%   Oil Crude prices are lower following a surge in the US dollar and as Saudi Arabia anticipates a bumpy road for the crude demand.  The Saudis are raising prices across most of Asia and Europe, with the Arab light crude only being boosted by 30 cents, which was less than the 50-cent rise expected by traders. The initial rally from news that a Russian oil tanker was damaged  only provided a brief rally on Sunday night.  Unless we see a meaningful disruption to crude supplies, prices will remain  Also dragging oil prices down is the rising expectations that the US will see a recession by the end of 2024.  A Bloomberg investor poll showed two-thirds of 410 respondents expect a recession by the end of next year and 20% see one by the end of this year.    Gold Gold prices are struggling here on a strong dollar and as global bond yields rise and after an early round of Fed speak are still supporting the case for one more hike by the Fed. Wall Street is playing close attention to fixed income at the start of the trading week, which saw the bond market selloff cool at the end of last week after a mixed nonfarm payrolls report. If Treasury yields rally above last week’s high, that could trigger some technical buying and that could be very negative for gold prices.  For many traders, this week is all about inflation data and any hot surprises could prove to be short-term bearish for gold.  As earnings season wraps up, stocks have mostly posted better-than-expected results (excluding Apple) and that has hurt the gold’s safe-haven appeal.  At some point over the next few weeks, if the stock market rally can’t recapture the summer highs, a decent pullback could help trigger a big move back into gold.     

Norges Bank hikes rates and signals a final move in September Norway's central bank is poised for one final rate hike in September, and with other major central banks either at or close to the peak for policy rates, the impetus to raise rates further is fading. The domestic backdrop continues to improve for the krone.   Norges Bank hikes to 4% Norway’s central bank has hiked rates by 25 basis points to 4%, and is continuing to signal that it has one final move left in the tank for September. None of this will come as a huge surprise, given that since Norges Bank’s (NB) larger 50bp hike in June, the krone has appreciated and is currently running 1.5% stronger on a trade-weighted basis than NB had assumed in its most recent projections. Inflation has also come in broadly in line with its expectations, and importantly has tentatively begun to come down from the 7% peak reached by underlying inflation in June. The latest statement points to an increasingly neutral bias for rates, with policymakers hinting at additional hikes if krone weakness returns, or earlier/steeper rate cuts if the economy starts to creak. While we don’t get a new rate projection this month, the last set of forecasts saw the policy rate peaking at 4.25% later this year and there’s little reason to doubt that. With other central banks likely to have either finished hiking already (Federal Reserve) or getting close (ECB), the impetus to keep hiking beyond September is likely to fade.   More good news for the krone NOK is moderately stronger after the Norges Bank announcement, largely due to markets having underpriced the chances of more rate hikes beyond August. External factors are set to remain dominant for the illiquid NOK, but a period of stabilisation in risk sentiment can make domestic drivers emerge and dramatically increase the attractiveness of the krone. We remain constructive about a broad-based rally in the undervalued NOK before the end of the year and in early 2024, and the commitment to more tightening by Norges Bank likely limits the scope of any large corrections. We expect the 11.00 level in EUR/NOK to be tested before the end of the year.

Technical outlook: EUR/USD has carved a fresh low at 1.0845 last week remaining just shy of initial support around 1.0830. The single currency pair has pulled back since then and is seen to be trading above 1.0880 at this point in writing. The bulls are likely to push prices towards the 1.1000-50 area before the next leg resumes lower. EUR/USD has broken its one-year trend line support as seen on the daily chart here. The probability remains for a push through the backside of the support-turned-resistance zone, which is seen around the 1.1000-50 zone before turning lower towards the 1.0500 Fibonacci target. Also, note that the entire rally between 0.9535 and 1.1275 could be retraced with prices reaching 1.0200. EUR/USD seems to have also carved a lower-degree downswing between 1.1275 and 1.0845 which could be retraced in the next few trading sessions. The Fibonacci 0.618 retracement is seen passing through 1.1150 which could be tested before the next leg resumes lower again. A push through 1.0920 will confirm that a corrective rally is underway.       Trading idea: A potential rally towards 1.1150 in the near term remains possible.  

Expect the US dollar rally to extend    The US dollar broadly weakened across the board, helping majors to take some breather. The dollar index fell back towards its 200-DMA, the EURUSD settles above the 1.09 mark this morning, while Cable bulls eye a further rise toward the 50-DMA, which stands a touch below the 1.28 level. But looking at the US dollar and the real yields, the end of last year's dollar really coincides with a peak in 10-year real yield. Both started retreating in Q3 of last year. The dollar retreated relatively faster. And now that the real yields are on the rise again, there is little reason to keep the USD on a bearish trend for the months ahead.   The dollar rally which started by mid-July should further develop, and there is significant room for further correction before we could technically call the end of the dollar's bearish trend. In numbers, the dollar index will still be in a bearish trend below the 105.40 mark. Until that level is reached, investors don't have much to lose for jumping on the back of a bull.  

GBP: Broadbent speaks tomorrow at Jackson Hole Ben Broadbent is the only Bank of England member speaking at Jackson Hole, but his remarks are scheduled for tomorrow, so we’ll need to wait for Monday to see any impact on sterling. The recent volatility in the BoE peak rate expectations on the back of data releases (wages, inflation, retail sales, PMIs) means the return of some BoE comments after a long period of silence can definitely move the market. It’s worth noting, however, that UK markets are closed on Monday for a national holiday so volumes will be thinner. For today, the pound will be moved by Powell and Lagarde. We think Cable should find good support around 1.2500 in the event of more USD strength, while EUR/GBP can extend its rally beyond 0.8600 if we are right about Lagarde sounding hawkish today.

06:00BST Wednesday 30th August 2023 US ADP set to slow in August   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     We've seen a strong start to the week for European markets with the FTSE100 outperforming yesterday due to playing catch-up as result of the gains in the rest of Europe on the Monday Bank Holiday. US markets also saw a strong session, led by the Nasdaq 100 as yields retreated on the back of a sharp slowdown in US consumer confidence in August, and a fall in the number of vacancies from 9165k to 8827k in July, and the lowest level since March 2021.     The sharp drop in the number of available vacancies in the US helps to increase the probability that the Federal Reserve will be comfortable keeping rates unchanged next month, if as they claim, they are data dependent, and that rates are now close to restrictive territory.   This belief was reflected in a sharp fall in bond yields, as well as a slide in the US dollar, however one should also remember that the number of vacancies is still well above pre-pandemic levels, so while the US labour market is slowing, it still has some way to go before we can expect to see a significant move higher in the unemployment rate. Today's ADP jobs report is likely to reflect this resilience, ahead of Friday's non-farm payrolls report. The ADP report has been the much more resilient report of the two in recent months, adding 324k in July on top of the 455k in June. This resilience is also coming against a backdrop of sticky wages, which in the private sector are over double headline CPI.   Nonetheless the direction of travel when it comes to the labour market does suggest that jobs growth is slowing, with expectations for that jobs growth will slow to 195k in August. We also have the latest iteration of US Q2 GDP which is expected to underline the outperformance of the US economy in the second quarter with a modest improvement to 2.5% from 2.4%, despite a slowdown in personal consumption from 4.2% in Q1 to 1.6%.     More importantly the core PCE price index saw quarterly prices slow from 4.9% in Q1 to 3.8%. The resilience in the Q2 numbers was driven by a rebuilding of inventory levels which declined in Q1. Private domestic investment also rose 5.7%, while an increase in defence spending saw a rise of 2.5%.     Before the release of today's US numbers, we also have some important numbers out of the UK, with respect to consumer credit and mortgage approvals for July, and Germany flash inflation for August. Mortgage approvals in June saw a surprise pickup to 54.7k, which may well have been down to a rush to lock in fixed rates before they went higher. July may well see a modest slowdown to about 51k.   Net consumer credit was also resilient in June, jumping to £1.7bn and a 5 year high, raising concerns that consumers were going further into debt to fund lifestyles more suited to a low interest rate environment. This level of credit is unlikely to be sustained and is expected to slow to £1.4bn.     As long as unemployment remains close to historically low levels this probably won't be too much of a concern, however if it starts to edge higher, or rates stay higher for an extended period of time, we could start to see slowdown in both, as previous interest rate increases start to bite in earnest.     In comments made at the weekend deputy governor of the Bank of England Ben Broadbent said he that interest rates will need to be higher for longer despite recent declines oil and gas prices as well as producer prices. These comments prompted a sharp rise in UK 2 year and 5-year gilt yields yesterday, even as US yields went in the opposite direction. This rise came against a welcome slowdown in the pace of UK shop price inflation which slowed to 6.9% in August.     Headline inflation in Germany is expected to slow to 6.3% from 6.5% in July, however whether that will be enough for Bundesbank head Joachim Nagel to resile from his recent hawkishness is debatable. As we look towards European session, the continued follow through in the US looks set us up for another positive start for markets in Europe later this morning.     EUR/USD – rebounded off trend line support from the March lows at 1.0780 yesterday. Still feels range bound with resistance at the 1.1030 area, and a break below 1.0750 looking for a move towards the May lows at 1.0630.     GBP/USD – has rebounded from the 1.2545 area, but the rally feels a little half-hearted. We need to push back through the 1.2800 area to diminish downside risk and a move towards 1.2400.         EUR/GBP – the rebound off last week's 11-month low at 0.8490 has seen a retest and break of the 0.8600 area, however we need to push through resistance at the 0.8620/30 area to signal further gains, towards the 50-day SMA resistance.     USD/JPY – wasn't able to push through resistance at 147.50 and has slipped back. This remains the key barrier for a move towards 150.00. Support comes in at last week's lows at 144.50/60.   FTSE100 is expected to open 28 points higher at 7,493     DAX is expected to open 49 points higher at 15,980     CAC40 is expected to open 21 points higher at 7,394

EUR: Spain and Germany release inflation figures The first round of inflation figures out of the eurozone will see the release of Spanish and German CPI this morning. In Spain, headline inflation should rebound marginally from low levels (2.3%), but all eyes will be on core inflation, which remains elevated. The consensus is for a slowdown from 6.2% to 6.0%. German’s figures will likely have the largest market impact: consensus is also centred for a deceleration from 6.2% to 6.0%. It is a crucial juncture for the euro. Markets approach the key risk event pricing in just slightly below 50% implied probability of another rate hike in September and 15bp in total. The EUR curve appears to largely agree with our view that if the ECB skips the September meeting, it will find it increasingly hard to raise rates again at all given the deterioration in the eurozone economic outlook. We expect markets to be very sensitive to even the smallest deviations from consensus, especially in Germany’s figures and the eurozone-wide numbers released tomorrow. We admit it’s a very close call, but our economists expect this week’s inflation reports to signal that core inflation remains too high for comfort and lead the ECB to one last rate hike in September. In our base case scenario, we see EUR/USD rally into the 1.0900-1.0950 area into the US payrolls on Friday.

Germany to release CPI on Wednesday, Eurozone on Thursday US consumer confidence and jobs data disappoint   The euro’s mini-rally has run out of steam. EUR/USD climbed 0.80% over the past two days but is trading in negative territory on Wednesday. In the European session, the euro is trading at 1.0867, down 0.11%. The markets will be keeping a close eye on European inflation releases today and Thursday. Germany releases the July CPI report later today, with a consensus estimate of 6.0%, compared to 6.2% in July. The once-formidable German juggernaut is in trouble and inflation remains high. The eurozone releases July CPI on Thursday, which is expected to drop from 5.3% to 5.1%. The ECB meets next on September 14th and ECB President Lagarde may have signalled that another rate hike is coming. Lagarde attended the Jackson Hole summit last week and said that interest rates would remain high “as long as necessary” in order to bring inflation back to the ECB’s 2% target. Lagarde’s hawkish remarks were more hawkish than her comments at the July meeting, where she said that ECB policy makers had an “open mind” about the September decision.   There’s no arguing that eurozone inflation remains too high, but the argument against raising rates even higher is that the eurozone economy is not in great shape, and nine straight rate hikes from the ECB have cooled economic growth. Further hikes could tip the economy into a recession, which means that the ECB has its work cut out in deciding whether to raise rates again or take a pause in September. The Federal Reserve is widely expected to hold rates at next week’s meeting, and disappointing data on Tuesday may have cemented a pause. The Conference Board Consumer Confidence Index fell sharply to 106.1 in July, compared to 116.0 in August, marking a two-year low. As well, JOLTS Job Openings slowed to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, a sign that the resilient US labour market is showing cracks.   EUR/USD Technical EUR/USD is putting strong pressure on resistance at 1.0896. The next resistance line is 1.0996 1.0831 and 1.0731 are providing support    

Early in the European session, gold is trading around 1,936.52, below the high reached at 1,938.13, and below 4/8 Murray. Yesterday, the US consumer confidence data showed a worsening of sentiment. This survey displayed concerns among consumers about the prices of groceries and gasoline in particular. This negative data for the US dollar affected Treasury yields which caused a strong rally in gold, breaking the 200 EMA located at 1,925.     According to the 4-hour chart, we can see that gold is trading within an uptrend channel. It is expected to continue moving there until it reaches the daily resistance zone located at 1,943. According to the 4-hour chart, we can see that the Eagle indicator reached the 95-point area which signals an imminent technical correction. It is likely to happen in the next few hours if XAU/USD falls below 4/8 Murray. The metal could reach the 200 EMA located at 1,925 and could even drop as low as 3/8 Murray at 1,921.   Given that the trend remains bullish, we could expect a rally in the next few hours and gold could continue its rise. In case of a break above 1,945, gold could reach 5/8 Murray located at 1,953. This level could serve as a strong rejection. Up to that level, the instrument is considered overbought which could also be seen as a clear signal to sell. On the other hand, if gold falls below 1,937 (4/8 Murray), we could see a clear signal to sell which will give us an opportunity to take profits around the bottom of the uptrend channel located at 1,917. The daily pivot point is located at 1,930.   If gold trades around this price level of 1,930, we could expect an accumulation or consolidation in the next few hours. Below 1,930, we could see a clear signal to sell. Conversely, above this level, a technical bounce could be triggered. Our trading plan for the next few hours is to sell gold below 1,937. In case there is a pullback around 1,943, we could sell with the target at 1,920. The Eagle indicator is in an overbought zone which supports our bearish strategy.  

Strong run continues Chinese data doesn’t hinder the rally Momentum may be key as price approaches August highs   Oil prices are nudging higher again today, technically on course for a fifth day of gains in six in Brent – six in a row in WTI – although broadly speaking they’re just a little above the middle of what appears to be a newly established range. Brent peaked near $88 a few weeks ago and bottomed around $82 last week as we await more direction on the economy and therefore demand. Data this week has been on the weaker side, although it’s the jobs report tomorrow we’re most interested in. The Chinese PMIs overnight had something for everyone. Manufacturing was unexpectedly improved but still contracting at 49.7 while services were quite the opposite, expanding but at a slower pace than anticipated. All in all, it continues to paint the picture of a sluggish economy that’s showing few signs of bouncing back stronger.   Head and shoulders not meant to be The head and shoulders that formed over the last month appears to have failed before it even completed, with the recent rally taking the price above the peak of the right shoulder.     BCOUSD Daily   While these formations are never perfect, as per the textbook, and it could be argued that a decline from here could still potentially qualify as a second right shoulder, that may be clutching at this point. It’s peaked a dollar above, even if it only looks relatively minor on the chart which suggests to me the previous formation – which is only complete with a break of the neckline – is now null and void. Perhaps I can be persuaded otherwise if the price heads south from here. The question now is how bullish a signal this actually is? Are we going to see a run at this month’s highs? A break above $90? I’m not convinced at this stage. Recent momentum looks quite healthy but which could be a promising sign. But that will only be put to the test as we near the previous highs around $88. If the MACD and stochastic keep making higher highs as the price approaches $88 then that would certainly look more promising.  

Brent rally cools after another strong week Tight market continues to support price No sign of technical divergence near $90 in Brent Oil prices are a little flat today after rallying another 5% last week. Brent hit a new high for 2023 in the process and, despite paring earlier gains today, there still appears to be plenty of momentum in the rally. That there is still plenty of momentum so close to $90 a barrel may suggest we could see a strong push to break above which would represent a big shift in the market dynamic in quite a short period of time. Saudi Arabia and Russia have been managing additional voluntary cuts on a monthly basis and could withdraw them at any point but I can’t imagine they’ll be in any rush and risk sending the price tumbling again.   Can Brent break $90? From a technical perspective, the most striking thing is the MACD and stochastic, both of which are continuing to trend higher alongside price.   Source – OANDA on Trading View When approaching areas of resistance, divergences between price and these momentum indicators can indicate the trend is weakening but so far that isn’t clear. Even on a lower timeframe chart, like the 4-hour, the last rally was matched with higher highs. So despite trading at the highest level this year and near $90, there is still plenty of momentum that could aid a powerful push against this resistance zone.   BCOUSD 4-Hour    

GBP: BoE dovish comments hit the pound EUR/GBP has experienced a good rally in the past two sessions, now trading at around 0.8580 on the back of dovish comments by Bank of England members. Yesterday, BoE Governor Andrew Bailey stressed the downside potential of UK inflation and said that rates were likely near the top of the cycle. He was joined by two other MPC members at the Parliament testimony, Jon Cunliffe and Swati Dhingra, who also stressed inflation is at a turning point and gave few reasons to suggest multiple more hikes are on their way. It appears that the BoE may be transitioning to a higher-for-longer narrative. Markets are now for the first time starting to cast some doubts about whether the BoE will hike rates at all at the 21 September meeting, with pricing having dropped below 20bp after yesterday’s Parliament testimony. For now, our base case is that they will go ahead with a hike but that it will be the last one, meaning markets will have to price out the additional hike still priced for later this year. EUR/GBP upside potential remains decent in our view. Today, keep an eye on the BoE decision-making panel survey and on any evidence of abating inflationary pressure.

Are commodities on the verge of becoming the hottest topic in finance again, or will AI remain in focus? A year-long commodity sector correction showing signs of reversing The commodity sector looks set to start the third quarter on a firmer footing after months of weakness saw a partial reversal during June. Multiple developments, some based on expectations and some on actual developments, have all contributed to the strong gains, the most important being renewed dollar weakness as interest rate gaps narrow, OPEC’s active management of oil production and prices, the not-yet-realised prospect for the Chinese government stepping up its support for the economy and, not least, the risk of higher food prices into the autumn, as several key growing regions battle with hot and dry weather conditions.  Despite continued demand worries led by recession concerns in the US and Europe, the energy sector is holding up – supported by Saudi Arabia’s unilateral production cut, rising refinery margins into the peak summer demand season and speculative traders’ and investors’ belief in higher prices being near the weakest in more than ten years, thereby reducing the risk of additional aggressive macroeconomic-related selling. Elsewhere, we are seeing hot and dry weather raising concerns across the agriculture sector, while also raising demand for natural gas around the world from power generators towards cooling. The precious metal rally ran out of steam during the second quarter, as surging stock markets reduced the need for alternative investments while central banks continued to hike rates in order get inflation under control. Inflation may fall further but we increasingly see the risk of long-term inflation staying well above the 2% to 2.5% target area, and together with a growing bubble risk in stocks, continued strong demand from central banks, and the eventual peak in short-term rates as the FOMC shifts its focus, we see further upside for precious metals into the second half of the year. From the recent price performance across the different sectors, we could be seeing the first signs of markets bottoming out, with current levels already pricing in some of the worst-case growth scenarios. Data on the US economy is still showing economic activity below trend growth but is also not showing recession dynamics, and earnings estimates have increased substantially, especially in Europe, since the Q1 earnings season started in mid-April. The potential for additional gains from here, however, will primarily depend on whether China can deliver additional stimulus, thereby supporting demand for key commodities from crude oil to copper and iron ore. Weather developments across the coming weeks across the Northern Hemisphere and their impact on crop production will also be key. Gold pausing but a fresh record high remains the target Following a strong run-up in prices since November, gold spent most of the second quarter consolidating after briefly reaching a fresh record high. Sentiment is currently challenged by the recent stock market rally and the prospect for additional US rate hikes, thereby delaying the timing of a gold supportive peak in rates. So while the short-term outlook points to further consolidation below 2,000 dollars per ounce as we await incoming economic data, we keep an overall bullish outlook for gold and silver, driven among others by: continued dollar weakness; an economic slowdown, making current stock market gains untenable, leading to fresh safe-haven demand for precious metals; continued central bank demand providing a floor under the market; sticky US inflation struggling to reach the 2.5% long-term target set out by the US Federal Reserve (and if realised, it will likely to trigger a gold-supportive repricing of real yields lower), and a multipolar world raising the geopolitical temperature. In addition, silver may benefit from additional industrial metal strength, which could see it outperform gold. Overall, and based on the expectations and assumptions mentioned, we see the potential for gold reaching a fresh record high above $2100 before year-end.  

EUR/USD: Yesterday, the euro experienced a slight correction and took a breather after rallying on Tuesday. The price did not drop below the support level of 1.0834, and this morning it is trying to rise above the price channel line (1.0850). If it consolidates above it, the next target will be 1.0937/46 with an intermediate level of 1.0905. One notable aspect of the substantial rally on Tuesday is that it occurred on average volumes. This implies that the stop-losses of major sellers were not closed; they are even higher. Two possible scenarios could unfold: a deep correction might occur either from the accumulation of these stop-losses or after their closure, leading to another powerful upward movement. In any case, we expect the price to reach the target level of 1.1096. The signal line of the Marlin oscillator has turned downward from the upper band of its own ascending channel. Here, too, there could be two scenarios: the line is working on the lower band of the channel, which can affect the price in expanding the consolidation, potentially down to the Fibonacci retracement lower ray (1.0777), or the line from the current levels turns upwards with a retest of the upper band of the channel, or it breaks above into the overbought territory (likely testing 1.0937/46).   On the 4-hour chart, it appears as if the upward movement will persist since there were only candle shadows in the support range. The Marlin oscillator has already fallen low enough, releasing tension; it is ready to rise further. We will find out whether the price consolidates above resistance or below support.

Eurozone, German Service PMI ease in December Euro snaps four-day rally The euro has snapped a four-day winning streak on Friday. In the European session, EUR/USD is trading at 1.0949, down 0.38%. The euro has enjoyed a strong week, with gains of 1.77%. Soft Eurozone, German services PMIs weigh on euro Eurozone Services PMI eased in December, indicating that the economy continues to struggle. The PMI fell from 48.7 to 48.1 and missed the consensus estimate of 49.0. This marked a fifth straight month of contraction in the services sector, with 50 separating contraction from expansion. Germany, the largest economy in the eurozone, also reported a decline, with the PMI falling to 48.4, down from 49.6 in November and short of the consensus estimate of 49.8. Euro soars after ECB pause The European Central Bank held the benchmark rate at 4.0% for a second straight time on Thursday. This move was expected, but the central bank pushed back against market expectations for interest rate cuts next year, sending the euro soaring 1.09% against the US dollar after the announcement. ECB President Christine Lagarde reaffirmed that the Bank would continue its “higher for longer” stance, saying that the Bank was not about to let down its guard and lower rates. Lagarde sounded hawkish even though the ECB lowered its inflation forecast at the meeting. Inflation has fallen to 2.4% in the eurozone, within striking distance of the 2% target. Lagarde acknowledged that inflation was easing but said that domestic inflation was “not budging”, largely due to wage growth.   There is a deep disconnect between the markets and the ECB with regard to rate policy. ECB President Lagarde poured cold water on expectations for rate cuts, arguing that inflation had not been beaten. The markets are marching to a very different tune and have priced in at least in around six rate cuts in 2024 and are confident that Lagarde will have to change her stance, with inflation falling and the eurozone economy likely in recession. . EUR/USD Technical EUR/USD is testing support at 1.0957. Below, there is support at 1.0905 1.1044 and 1.1096 are the next resistance lines