Markets reconsidering their direction

Peter Iosif, ACA, MBA IronFX

USD Bulls take a break

USD bulls took a break yesterday as the PCE rates for May came in as expected. The combination of the data with the falling oil prices, tended to ease market worries for the US inflation outlook and hawkishness of the Fed. NY Fed President Williams sounded dovish yesterday as he stated that rate policy is well positioned to lower price pressures, yet Chicago Fed President Goolsbee insists that core inflation is too high and is moving to the wrong direction. It should be noted that even the acceleration of the final GDP rate for Q1 failed to excite traders. It’s expected to be an easy going Friday, with only few high impact US financial releases in the calendar, hence we expect fundamentals to lead the markets. In any case we consider the Fed’s intentions to be still the main fundamental issue for the USD and any hawkish signals could support the greenback.

Oil prices halt their drop

Oil prices halted their drop yesterday as doubts were raised for the peace process in the Middle East given also that a projectile hit a ship off the coast of Oman. We still view the halting as temporary and given the resumption of oil shipments through the Straits of Hormuz, we expect bearish tendencies to be renewed on oil prices on a fundamental level.

US tech shares drag equities lower

US tech shares continued to lose ground with Nasdaq ending the reds. S&P 500 also dropped while Dow Jones tended to remain relatively stable yesterday. We also highlight that Apple’s share price suffered losses yesterday as it announced price hikes, on MacBooks and iPads, blaming the increasing cost of chips. Despite the price rises not affecting the company’s main cash cow, the iPhone, at least not yet, investors are worried for a possible adverse effect on the company’s revenue figure.

Gold’s price stabilises for now

Gold’s price tended to stabilise yesterday as the USD edged lower in the FX market. The market’s reaction on gold’s price is another indication that the negative correlation of the gold with the USD is still active. Should we see market’s worries for the Fed’s hawkish intentions be renewed, we may see gold’s price losing ground once again and vice versa.

Other highlights for today

Today we get the US final UoM Consumer Sentiment for June, while the Fed’s Minneapolis Kashkari speaks. In Monday’s Asian session, RBA Assistant Governor Kent and BoE Chief Economist Pill speak.

Charts to keep an eye out

USD/JPY stabilised and despite a weakening USD, failed to materially drop remaining above the 160.50 (S1) support line marking 40 year highs. We maintain a bullish outlook for the pair and intend to keep it as long as the upward trendline guiding it remains intact. Yet the RSI indicator is above the reading of 70, implying that the pair is in overbought levels and could correct lower. Also the possibility of a market intervention by BoJ to the Yen’s rescue should not be underestimated. Should the bulls continue to lead the pair we may see USD/JPY aiming if not reaching the 76.60 (R1) resistance level. Should the bears take over we may see the pair breaking initially the upward trendline guiding it in a first signal that the upward trendline has been interrupted, continue lower to break 160.50 (S1) line and start aiming for the 157.50 (S2) support level.

Gold’s price action tended to stabilise yesterday forcing us to readjust the first support line at 3960 (S1). Despite the stabilisation we remain bearish for the gold’s price and consider the stabilisation as temporary. We note that the RSI indicator remains near 30, implying a strong bearish market sentiment, which could drag gold’s price lower. Should the bears remain in control, gold’s may break the 3960 (S1) support line. Clearly and start aiming for the 2600 (S2) support level. Should the bulls take over, we may see gold’s price reversing course, aiming for the 4380 (R1) resistance line.

Calendar follows

USD/JPY daily chart

Support: 160.50 (S1), 157.50 (S2), 155.00 (S3).
Resistance: 164.40 (R1), 168.00 (R2), 171.60 (R3).

XAU/USD daily chart

Support: 3960 (S1), 3600 (S2), 3250 (S3).
Resistance: 4380 (R1), 4770 (R2), 5245 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

GBP/USD stabilizes near 1.3200 following latest rebound

GBP/USD holds steady at around 1.3200 in the European session on Friday after closing in positive territory on Thursday. Still, the cautious market mood makes it difficult for the pair to gather bullish momentum as investors remain focused on US-Iran conflict and the volaility surrounding global technology shares.

EUR/USD rebounds to 1.1400 as USD corrects lower

EUR/USD gains traction in the European session on Friday and rises to the 1.1400 area. The US Dollar (USD) struggles to find demand and helps the pair edge higher as investors keep a close eye on headlines coming out of the Middle East and the action in global technology stocks.

Gold holds above $4,000 but Fed hike bets cap the upside

Gold moves sideways in a tight channel above $4,000 after posting modest gains on Thursday. Nevertheless, the precious metal finds it difficult to gather bullish momentum as markets grow increasingly concerned about a hawkish Federal Reserve policy outlook.

Ripple price clings to $1 as long liquidations deepen bearish trend

Ripple (XRP) trades near the key psychological support level of $1 after losing more than 8% so far this week. CoinGlass liquidation data shows that over 97% XRP long positions were wiped out over the past 24 hours. In addition, derivatives metrics continue to favor the bears.

Asian stock markets plummet as Apple price hike raises inflation concerns, KOSPI dives over 8%

Asian equity markets on Friday are significantly down as price hikes announced by Apple Inc. due to memory chip shortages have prompted fears of high inflation globally and concerns on earning projections of various companies that rely on these sophisticated chips for their final products.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.