Market’s hawkish expectations for the Fed intensify

US CPI rates accelerate as expected, PPI rates coming up

The USD remained relatively stable against its counterparts yesterday. May’s US CPI rates showed that inflationary pressures intensified, yet did not surpass forecasts, failing thus to provide support for the USD. Today, we note the release of the US PPI rates could regenerate market interest as it presents inflationary pressures at a producer’s level for the past month.  

ECB expected to hike rates, yet will it signal more to come?

The ECB is expected to hike rates today. Inflationary pressures in the Euro Zone, are practically forcing the bank to tighten its monetary policy. Yet the market is expecting the bank to continue hiking rates once in September and another time in December. Should the bank in its forward guidance sound hawkish, verifying the market’s expectations, we may see the EUR getting some support, while a dovish tone could weigh on the EUR. Also, keep an eye out for ECB President Christine Lagarde’s press conference half an hour later, as she is well known to be able to sway the market’s mood, thus prolonging volatility for EUR pairs. 

US equities on the retreat

US equities continued to be on the retreat yesterday as all major US stock market indexes, Dow Jones, S&P 500 and Nasdaq ended the session lower. In the specifics, we note the worries for Oracle’s increasing debt which could weigh on its share price. Furthermore, we also note that analyst’s worries for a possible overvaluation of SpaceX are being maintained as the company is considered overvalued even should it reach its “moonshot” targets. Yet, demand seems to remain high for SpaceX.

Gold in the reds

Gold fell over 4% to a level not seen since November last year yesterday before correcting a bit higher in today’s Asian session. The precious metal’s price is following a wider market sell off and is under pressure by the market’s intensifying expectations for the Fed to hike rates and FFF seems to be pricing in a ​68% chance of ⁠a Fed rate hike in December. Should we see the market’s hawkish expectations being maintained we may see gold’s price losing further ground.

Other highlights for today

Today we get Sweden’s CPI rates for May, while from Turkey we get CBRT’s interest rate decision, from the US the weekly initial jobless claims figure and May’s PPI rates and from Canada April’s Building approvals. In tomorrow’s Asian session, we get New Zealand’s manufacturing PMI figure for May.

Charts to keep an eye out

EUR/USD remained relatively stable just below the 1.1575 (R1) resistance line. The bearish market sentiment tends to remain and we intend to maintain our bearish outlook for the pair as long as the downward trendline guiding it remains intact. Should the bears remain in charge, EUR/USD may drop nearing if not breaching the 1.1410 (S1) support line. Should the bulls take over, EUR/USD may break the 1.1575 (R1) resistance line continue to break also the prementioned upward trendline and open the gates for the 1.4145 (R2) level.

XAU/USD dropped yesterday clearly breaking clearly the 4250 (R1) support line, now turned to resistance. We maintain a bearish outlook for gold’s price yet note that RSI indicator has dropped below the reading of 30, signaling that the precious metal’s price is at oversold levels and may be ripe for a correction higher. We also get similar signals from the price action dropping below the lower Bollinger band. Should the bears maintain control as expected, we may see gold’s price reaching if not breaching the 3890 (S1) support line. For a bullish outlook which we consider as a remote scenario at the current stage, we would require gold’s price to break the 4500 (R2) resistance level, paving the way for the 4850 (R3) hurdle.

Calendar follows

EUR/USD daily chart

• Support: 1.1410 (S1), 1.1265 (S2), 1.1065 (S3).
• Resistance: 1.1575 (R1), 1.1685 (R2), 1.1825 (R3). 

XAU/USD daily chart

• Support: 3890 (S1), 3600 (S2), 3250 (S3).
• Resistance: 4250 (R1), 4500 (R2), 4850 (R3).