The EUR/USD posted its second consecutive weekly decline, extending its retreat after testing 1.1000 but managed to hold above 1.0900. The pair continues to trade within a familiar range, with a stronger US dollar keeping the upside limited, while positive risk sentiment and hawkish expectations about the outlook of the European Central Bank (ECB) are helping to limit the losses.
On Tuesday, the EUR/USD peaked at 1.0977 and then reversed its direction, following the ECB Sintra Forum and amid a stronger US dollar. The pair bottomed at 1.0835 on Thursday, the lowest level in two weeks. After the release of the US Core Personal Consumption Expenditure data on Friday, the pair moved higher, recovering above 1.0900 as the US Dollar pulled back.
The US Dollar was the top performer among majors during the week. The key driver has been US economic data and Federal Reserve Chair Jerome Powell’s repeated message. Powell did not surprise the market; he reiterated that FOMC members still see more interest rate hikes before year-end. Weeks ago, that outlook differed significantly from market expectations, which by July were speculating with a peak and pointing to several rate cuts before year-end.
The recession forecast by economists did not arrive and, on the contrary, the latest round of economic data from the US has been robust, adding more conviction to the Fed’s outlook and, at the same time, boosting bets of the central bank raising rates at the July meeting after June’s pause. Now the markets are starting to see the future more similarly to how the Fed sees it, which has led to higher US Treasury yields and a stronger US Dollar. Markets are beginning to price in a potential second interest rate hike.
The economic reports released this week showed that the US economy is still expanding, with GDP growing more than previously reported during the first quarter. Initial Jobless Claims improved last week. Even housing data has remained somewhat resilient despite the increases in interest rates. Overall, in terms of economic activity, no recession is seen on the horizon, and this set of data keeps the door open to more rate hikes.
The other critical indicator for the FOMC is inflation. The Core PCE on Friday came in slightly below market forecasts. The Fed’s preferred inflation measure fell from 4.7% to 4.6%, and the headline declined from 4.3% in April to 3.8% in May, below the expected 4.6%. The numbers alleviated Fed rate hike expectations and weighed on the US Dollar late on Friday. Inflation is still above the target, but the downtrend is still in place.
The rhetoric from the European Central Bank (ECB) did not change and remained the same after the Sintra Forum. Lagarde and company reiterated that a rate hike in July is practically a done deal, and they don’t know what will happen in September. The bias is and will remain hawkish after the July meeting, but the outcome, as policymakers keep saying, will be “data-dependent.” Markets largely believe this. So far, they see another hike in September, but that could be the final one.
Important inflation data was released during the week. It showed that inflation’s trend in the Eurozone remains on the downside, albeit not accelerating, and the Core rate shows “stickiness”. The German inflation rate rose slightly in June from 6.1% to 6.4%, and core inflation from 5.4% to 5.8%. The Eurozone annual headline inflation rate came in at 5.5% in May, down from 6.1% in April, while core inflation rose from 5.3% to 5.4%.
All in all, inflation remains above target, particularly the core. However, the trend is down. At the same time, European PMI indicators last week showed softening signs of the Eurozone economy. The balance remains toward more monetary policy tightening, and the ECB is making that clear. The hawkishness is not supporting the Euro as it used to do.
European stocks and Wall Street traded higher during the week. The positive risk sentiment did not affect the US Dollar significantly. Markets cheered positive data that pointed to economic expansion at a slower pace and inflation trending lower, which is positive for markets. But it is not clear if it will last. The good mood in the markets helped the pair remain in the current range.
Next week, economic reports from the Eurozone include the final reading of the PMIs (Monday for Manufacturing and Wednesday for Services), which should not bring any major surprises. Regarding inflation, the important number will be the Eurozone Producer Price Index (Wednesday). Eurozone Retail Sales and German Factory Orders are due on Thursday, and German Industrial Production on Friday.
Risk sentiment will continue to be important for the Euro. However, the dynamic regarding the US Dollar will also be crucial for EUR/USD. Although being a shortened week in the US, with markets closed on July 4 due to Independence Day, in terms of economic data, it will be an important week, with focus on activity and labor market numbers.
On Monday, the US ISM Manufacturing is due, and on Thursday, the Service sector. On Thursday, ADP will release its private sector employment report and the Labor Department the weekly Jobless Claims. The most important report of the week will be on Friday with the June official jobs report. Nonfarm payrolls are seen rising by 200,000, showing that the labor market remains strong. These numbers will be relevant for the US Dollar and expectations about monetary policy.
Additionally, the Fed will release the minutes of its latest meeting on Wednesday. The document will show the considerations that led to the decision to keep rates unchanged. However, Chair Powell has delivered many messages since the meeting, leaving little room for surprises. The next FOMC meeting is on July 25-26. The odds of a rate hike are elevated, and the economic figures next week could change those expectations.
The EUR/USD continues to move in a familiar range without a clear direction. The recent readings on the weekly chart are mixed, showing no strong conviction. The pair remains above the 20-week Simple Moving Average (SMA) and also above a short-term uptrend line. The risks are still tilted to the upside, but the pair needs a weekly close above 1.1000 to unleash bullish potential. On the contrary, a close under the 20-SMA at 1.0810 would suggest more weakness ahead, exposing the 1.0700/20 area.
The comfort zone around 1.0900 prevails in the short term and could continue to be the case over the next sessions, considering that low volume may be expected amid the US holiday. However, volatility could jump later, boosted by economic reports. Such moves could challenge key levels in EUR/USD. On the upside, the first area is 1.0960/70, with a break above exposing 1.1000. Above that level, the critical resistance continues to be the 1.1100 mark.
On the daily chart, the rebound of the Euro was critical on Friday. It avoided a close under the 20-day SMA at 1.0860 that would have suggested a deeper correction ahead, toward 1.0780. Momentum on the daily chart is above its midline, but other indicators like the Relative Strength Index (RSI) have flattened, showing no clear bias.
The FXStreet Forecast Poll shows that market players expect the EUR/USD to advance over the next few months. In the short term, they have a neutral perspective, with the average forecast around the current level. On a quarterly perspective, they see the pair moving above 1.1000, with an average forecast of 1.1076. However, many experts see the EUR/USD rising above 1.1400.Full Article
I love it when a month and a quarter both end on a Friday. It’s a tidy finish that sets up a fresh start next week.
French stocks haven’t shown any aversion to the intense scenes of disruption overnight.
On the week:
In the quarter:
Pound Sterling extended its correction from 14-month highs against the United States Dollar (USD) into a second week as the USD continued to find support from hawkish US Federal Reserve (Fed) expectations. In the week ahead, the focus will shift toward the high-impact Nonfarm Payrolls (NFP) release alongside a slew of significant economic data from the United States.
Hawkish Federal Reserve outlook and strong economic data from the United States provided additional legs to the ongoing recovery in the US Dollar. In response, the GBP/USD pair succumbed below the 1.2600 threshold for the first time since mid-June.
Markets shrugged off geopolitical tensions in Russia after a dramatic weekend. The armed rebellion led by Yevgeny Prigozhin, leader of the Wagner group of mercenary fighters, attempted insurrection in Russia, threatening Vladimir Putin’s two-decade-long grip on power. Tensions eased after the armed rebellion was abruptly called off on Sunday.
At the start of the week, attention shifted toward the European Central Bank (ECB) annual forum on Central Banking in Sintra, where major global central banks heavyweights spoke in a policy panel. Nervousness ahead of the ECB event led to position adjustment in the US Dollar longs, which sent GBP/USD briefly above the 1.2750 level.
However, the US Dollar staged a solid rebound after upbeat US Durable Goods and housing data revived expectations that the Fed would maintain interest rates higher for longer. US Durable Goods Orders rose 1.7% MoM in May, the third such increase in a row, while Core orders, excluding transportation, rose 0.6%, beating estimates of a drop of 0.1% and improving from April’s 0.6% decline. Further, sales of newly-constructed homes were up 12.2% in May compared with April and up 20% compared with the same month a year ago, a joint report from the US Department of Housing and Urban Development and the US Census Bureau showed on Tuesday.
The icing on the cake was Fed Chair Jerome Powell’s comments in Sintra as well as in Madrid on Wednesday and Thursday, respectively, which strengthened expectations of more tightening this year. Speaking at the 2023 ECB Forum on Central Banking on Wednesday, major central banks’ bosses, including Fed Chair Jerome Powell, European Central Bank (ECB) President Christine Lagarde, Bank of England (BoE) Governor Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda, collectively reaffirmed their resolve of fighting inflation by keeping up with interest-rates rises.
“A strong majority of Fed policymakers expect two or more rate hikes by year-end,” Powell said at the Fourth Conference on Financial Stability hosted by the Bank of Spain on Thursday.
The US Dollar turnaround gathered steam in the second half of the week, accentuated by signs of resilience in the US economy. The Greenback tracked the rally in the US Treasury bond yields after the US economy expanded at a 2% annualized rate in the first quarter of 2023, much stronger than the 1.3% rate previously estimated. Another report showed that fewer than expected workers applied for unemployment benefits last week, signaling a remarkably solid US labor market.
On the final day of the week, the US Dollar lost its recovery momentum against the Pound Sterling. GBP/USD reversed early losses despite the mixed UK Gross Domestic Product (GDP) revision and Current Account data. The UK economy grew 0.1% on the quarter in the first three months of 2023, the same rate as in Q4 2022, the final revision confirmed on Friday. The market had expected an expansion of 0.1% in the first quarter. Meanwhile, the UK Q1 Current Account deficit arrived at £10.757 billion, compared with an expected £8.5 billion deficit and the fourth quarter’s £2.483 billion deficit.
The pair rebounded firmly toward 1.2700 after the US Dollar came under renewed selling pressure after the release of the US PCE inflation data. Inflation in the United States, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, fell to 3.8% on an annual basis in May from 4.3% in April, the US Bureau of Economic Analysis reported on Friday. The market consensus expected a reading of 4.6%. The annual Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, edged lower to 4.6% from 4.7% in the reported period.
The end-of-the-quarter unwinding in the US Dollar positions also helped the GBP/USD pair to recover some ground.
Pound Sterling traders gear up for another data-light economic calendar from the United Kingdom in the upcoming week. All eyes will be on the United States statistics heading into Friday’s critical Nonfarm Payrolls release.
Monday will feature the final Manufacturing PMI reports from both sides of the Atlantic but the US ISM Manufacturing PMI and its sub-components will hold significance. China will also report the Caixin Manufacturing PMI, which could affect risk sentiment and higher-yielding currencies such as the British Pound.
Tuesday will be rather quiet as US markets will be closed on account of Independence Day, diverting GBP/USD’s attention toward Wednesday’s US Factory Orders and Minutes of the Fed’s June meeting. The final Services PMI from the UK will also be released, but it is unlikely to have any market impact.
A fresh batch of US economic data will be published on Thursday, including the ADP Employment Change, weekly Jobless Claims, JOLTS Job Openings and the ISM Services PMI. The data flow is likely to throw fresh light on the US economic performance, which could drive the sentiment around the US Dollar.
On Friday, the main focus will be on the US labor market report, with the headline NFP and wage inflation data likely to be closely examined for the Fed’s future policy path.
Apart from the macro data, speeches from the Fed and BoE policymakers will also keep Cable traders busy throughout the week.
GBP/USD has recaptured the upward-sloping critical 21-Daily Moving Average (DMA) at 1.2641 after yielding a daily close below the latter on Thursday.
A weekly close above the latter would call for a bearish reversal, fuelling a recovery toward the initial upside hurdle at the weekly high near 1.2750. The next critical resistance for the pair is seen at the 1.2850 neighborhood, from where the rates have pulled back twice in the last fortnight.
Pound Sterling bulls will then target the 1.2900 round figure on a sustained move higher.
The 14-day Relative Strength Index (RSI) has edged higher above the midline, suggesting that the rebound in the GBP/USD pair could have some legs.
However, if Pound Sterling bulls give into the bearish pressures, then GBP/USD could find immediate support at the 21 DMA at 1.2641. A firm break below the latter will call for a test of the ascending 50 DMA at 1.2548.
The June 12 low of 1.2483 will be next on sellers’ radars, below which strong support is seen at the confluence of the early June lows and the bullish 100 DMA at around 1.2390.
A large number of experts polled by FXStreet expect GBP/USD to stretch lower next week. The one-month outlook paints a similar picture with the average target aligning at around 1.2630.Full Article
The Securities and Exchange Commission (SEC) took another shot at the crypto market on Friday, going after the recently hyped spot Bitcoin ETFs. The regulatory body already taking heat from the crypto market for its regulation by enforcement strategy might create some more adversaries.
According to a report from the Wall Street Journal, the SEC stated that the multiple applications filed for spot Bitcoin ETFs do not meet the agency’s standards. The regulatory body went on to add that the applications were also neither sufficiently clear nor comprehensive, making them inadequate for approval.
This means that these filings from BlackRock, Fidelity and others could be susceptible to rejection unless the SEC comes forwards and states the necessary changes. But given the history of the regulatory body, that is far more likely to happen than the ETFs being approved without any hiccup.
This would be a repeat of January 2022 when the SEC similarly rejected spot Bitcoin ETF filings from the likes of Fidelity.
Per the Commission, the filings did not meet the standards designed to prevent fraudulent and manipulative practices and protect investors and the public interest. These comments were shared by the SEC with the exchanges Nasdaq and Cboe Global Markets. All three entities are yet to make any official comment regarding the same.
The crypto market was quick to react even before assimilating the situation, which led to a sharp decline in Bitcoin price initially. The cryptocurrency fell below $30,000 before bouncing back to trade at $30,313 at the time of writing.
BTC/USD 1-hour chart
If the drawdown were to stick and extend further, the anticipated corrections would have been initiated. As is the sideways movement by some of the biggest cryptocurrencies in the market has raised concerns.
A decline at this time would have washed the bearish wave over the crypto market, leading to unprecedented losses for investors. However, as long as BTC stays above $30,000, the crypto market is unlikely to take a beating.Full Article
Gold price extended its downtrend this week and touched $1,893, its lowest level since March, before erasing a portion of its weekly losses on Friday. ISM PMI surveys and June jobs report from the US could drive XAU/USD’s action next week but the technical outlook suggests that the bearish bias is likely to stay intact in the near term.
In the absence of high-impact macroeconomic data releases, financial markets remained relatively quiet on Monday, allowing XAU/USD to consolidate the prior week’s losses.
During the Asian trading hours on Tuesday, Chinese Premier Li Qiang said that China was still on track to reach its annual growth target of around 5.0% for the year. “China will introduce more pragmatic measures to expand domestic demand and stimulate market vitality,” Li added, noting that the economy is expected to grow at a stronger pace in the second quarter than in the first one. Risk mood improved on these comments, but gold struggled to find demand as the 10-year US Treasury bond yield pushed higher after US data showed that consumer sentiment improved noticeably in June and New Home Sales rose at a much stronger pace than expected in May.
Federal Reserve Chairman Jerome Powell stuck to his hawkish rhetoric while speaking at the European Central Bank’s (ECB) annual Forum on Central Banking on Wednesday, prompting XAU/USD to continue to stretch lower. “We believe there’s more restriction coming, driven by the labor market,” Powell said. He added that a strong majority of policymakers forecasted two more interest-rate hikes in the dot plot. Meanwhile, results of the Fed’s Bank Stress Test showed that large US banks were “well-positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.”
Gold moved sideways during the European trading hours on Thursday, but came under heavy bearish pressure on upbeat US macroeconomic data. The US Bureau of Economic Analysis (BEA) announced that it revised the annualized Gross Domestic Product (GDP) growth for the first quarter higher to 2% from the previous estimate of 1.3%. Additionally, the number of first-time applications for unemployment benefits declined by 26,000 to 239,000 in the week ending June 24. The 10-year US yield surged past 3.8% on hawkish Fed bets after these data, dragging XAU/USD below $1,900 for the first time in over three months. Later in the session, the National Association of Realtors reported a 2.7% decline in Pending Home Sales in May, which limited the USD’s gains. In turn, XAU/USD managed to return back above $1,900. However, this rebound could also be a sign of stop losses getting triggered below $1,900.
The BEA reported on Friday that the Personal Consumption Expenditures (PCE) Price Index declined to 3.8% on a yearly basis in May from 4.3%. The Core PCE Price Index, the Fed’s preferred gauge of inflation, edged lower to 4.6% from 4.7% in the same period. These readings made it difficult for the USD to hold its ground and allowed XAU/USD to edge higher ahead of the weekend.
The ISM will release the Manufacturing PMI report for June on Monday. In case the headline recovers into the expansion territory above 50, the USD is likely to continue to stay resilient against its rivals. Investors will also pay attention to the employment component of the survey. An unexpected decline below 50 in this index could limit the USD’s gains even if the report signals growth in the sector’s overall business activity. Ahead of the July 4 holiday on Tuesday, however, trading conditions could thin out on Monday, paving the way for a quiet American session.
On Wednesday, the Fed will release the minutes of the June policy meeting. At this point, it should not be surprising if the publication shows that some policymakers didn’t rule out a return to rate hikes as early as July. An optimistic tone regarding the inflation outlook could hurt the USD but investors are likely to hesitate to take large positions ahead of the key employment data later in the week.
Private sector employment report published by Automatic Data Processing (ADP) and ISM Services PMI will be featured in the US economic docket on Thursday. On Friday, the US Bureau of Labor Statistics (BLS) will release the June jobs report, which is forecast to show an increase of 200,000 in Nonfarm Payrolls. This consensus forecast is subject to change once the data release comes closer.
Fed policymakers acknowledged recently that there is some softening in the labor market. Powell, however, noted at the ECB event that there are still around 1.7 job openings for every unemployed person in the US, highlighting a persisting imbalance between labor supply and demand.
The CME Group FedWatch Tool shows that markets have already nearly fully priced in another 25 bps rate hike in July. Hence, investors will try to figure out whether the jobs data will be good enough to open the door for one more rate hike later in the year. Currently, the probability of the Fed raising its policy rate by a total of 50 bps before year-end stands at around 40%. Market positioning suggests that the USD has more room on the upside in case NFP increase more than expected. A stronger-than-foreacast employment increase could help the Fed convince investors about its willingness to lift the policy rate to the 5.5%-5.75% range from the current 5%-5.25%. On the other hand, a disappointing jobs report, with a NFP print close to 100,000, could revive expectations for a less aggressive Fed tightening and cause US yields to turn south. In that scenario, XAU/USD could gather recovery momentum.
In summary, Gold’s valuation next week will likely be impacted by the market pricing of the Fed’s rate outlook. Although XAU/USD could rebound in case US data go against the Fed view of two more rate hikes, the pair’s upside is likely to remain capped, with investors refraining from betting on a Fed policy pivot before seeing inflation and jobs data in the third quarter of the year.
Despite Friday’s rebound, the Relative Strength Index (RSI) indicator on the daily chart stays well below 50. Additionally, the 20-day Simple Moving Average (SMA) completed a bearish cross with the 100-day SMA, highlighting the bearish bias.
Thursday’s volatile action confirmed $1,900 (Fibonacci 38.2% retracement of the latest uptrend, psychological level) as strong support for XAU/USD. In case the pair falls below that level and starts using it as resistance, $1,860 (200-day SMA) and $1,845 (Fibonacci 50% retracement) could be seen as next targets on the downside.
$1,940 (descending trend line, 100-day SMA) aligns as stiff resistance before. A daily close above that level could attract buyers and open the door for another leg higher toward $1,960 (Fibonacci 23.6% retracement) and $1,970 (50-day SMA).
FXStreet Forecast Poll shows that experts expect XAU/USD to either edge lower or remain neutral next week, with the average target aligning at $1,905. The one-month and one-quarter outlooks both remain bullish.Full Article
It’s been a great week for US GDP. Q1 was revised far higher in a surprise move and now Q2 indications are looking stronger.
The Atlanta Fed has upped its Q2 tracker to 2.2% from 1.8%:
“After recent releases from the US Census Bureau and the US Bureau of
Economic Analysis, the nowcast of second-quarter real personal
consumption expenditures growth and second-quarter real gross private
domestic investment growth increased from 0.9 percent and 8.6 percent,
respectively, to 1.1 percent and 10.4 percent, while the nowcast of the
contribution of the change in real net exports to second-quarter real
GDP growth decreased from -0.71 percentage points to -0.75 percentage
Natural Gas price recovers on Friday after the release of US inflation data shows an unexpected fall in prices which weighs on the US Dollar. The lower inflation data reduces the chances of the Federal Reserve (Fed) hiking interest rates at its next meeting which is negative for USD. Natural Gas, which is mainly priced and traded in US Dollars, rose on the news.
The commodity had been trading slightly lower prior to the release on the back of easing supply concerns, after data from S&P Global showed European stockpiles at 77% capacity, reassuring traders that storage tanks will be full in time for the winter demand glut. This undid the gains made on Thursday after US data showed a surprise fall in inventories last week.
XNG/USD is trading in the $2.700s/MMBtu during the US session.
The Fed’s prefered guage of inflation, the Core Personal Consumption Expenditure Price Index undershoots expectations in May, coming out at 0.3% month-on-month, instead of 0.4% forecast. Year-on-year it shows a 4.6% result versus the 4.7% expected, according to data from the Bureau of Economic Analysis.
The result reduces the likelihood of the Fed hiking interest rates at the next meeting in July. This weakens the US Dollar since higher interest rates tend to attract greater inflows of foriegn capital. The weaker USD has the effect of raising Natural Gas prices which are priced in USD.
European storage levels of Natural Gas – built up in preparation for the winter – are substantially higher than in previous years, easing supply concerns and putting a lid on prices.
Natural Gas storage capacity in Europe has reached 77%, according to the latest data from S&P Global, which compares to 58% in 2022 for the same time of year and 48% in 2021.
S&P Global’s article suggests demand may still rise in Q3 (2023), however, because of low prices.
Its infographic for Q3 (see below) forecasts an increase of 2.4% in Natural Gas demand in the quarter to 680 million cubic meters of Gas per day (mcm/d).
S&P Global says that the higher Natural Gas stocks and boom in solar energy will “ease pressure on supply”.
The current relatively low Natural Gas prices are themselves a result of an overall lower level of demand so far in 2023, according to Irina Slav, a reporter for Oilprice.com.
Reduced consumption has become the norm in Europe after energy bills skyrocketed in 2022, and pressure from some governments to lower consumption have combined to force consumers to be more prudent, says Slav.
The 2022-2023 winter was also relatively mild in both the US and Europe, reducing demand for Natural Gas and leaving stockpiles high from last year. This means less is required to top them up in 2023, Slav writes.
“The reason for the lower prices is, as could be expected, lower demand. It is true that Europe is buying liquefied natural gas. But it is buying a lot less than last year: because its storage caverns are not infinite, and there is still quite a lot of gas left in them from last year,” reports Slav on Friday.
Natural Gas has also fallen after the return of geopolitical stability to Russia, which is still a major producer. When the Wagner mutiny began, prices rose on fears supply would be disrupted by a civil war. However, now that the mutiny is over, they have fallen back.
Norwegian supply concerns, after outages at the Hammerfest LNG export terminal and the processing plants at Nyhamna and Kollsnes, continue to underpin prices. However, the high storage levels witnessed in Europe mean that the outages in Norway are now less of a concern.
Volatility from traders shuffling positions ahead of the expiration date for front-month Futures and Options contracts might be impacting prices as the month of June comes to an end, according to Natural Gas Intelligence (NGI).
Moving to the US, the Natural Gas price gapped higher on Thursday after EIA data showed a lower-than-forecast change in US Storage data in the week ending June 23.
The sudden recovery came after an almost 10% decline in price from the June highs.
Demand for Natural Gas to power air conditioning may be about to moderate following reports that temperatures in the US are set to return to average ranges for this time of year next week.
Natural Gas: S&P Global Infographic
Natural Gas price is trading just below a key trend-determination level on longer-term charts. Although the commodity remains in a long-term downtrend since turning lower at the August 2022 peak, bearish momentum has tapered off considerably.
The Relative Strength Index (RSI) momentum indicator is converging bullishly with price on the weekly chart, something that occurs when price makes new lows but RSI does not.
A break above the last lower high of the long-term downtrend at $3.079 MMBtu would indicate a reversal in the broader downtrend.
Natural Gas: Weekly Chart
Given this level has not been breached yet, however, the downtrend remains intact, and a break below the $2.110 year-to-date lows would provide a confirmation of a continuation down to a target at $1.546. This target is the 61.8% Fibonacci extension of the height of the roughly sideways consolidation range that has been unfolding during 2023 (marked 161.8% on charts).
On the daily chart, price has been climbing within a roughly sideways market, although it has broken above both the 50 and the 100-day Simple Moving Averages (SMA).
Natural Gas: Daily Chart
Nevertheless, a break above the last lower high of the long-term downtrend at $3.079 MMBtu would be required to indicate a reversal in the broader trend.
Such a move might then see prices rally higher to the next key resistance level at the 200-week SMA, situated at $3.813.
Until that happens, however, price will probably continue to consolidate within its range.
Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.
The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.
The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.
Gold prices are having their best day in weeks on Friday, boosted by a decline in the US dollar across the board. XAU/USD jumped from near $1,905 to $1,920 following the release of the US Core Personal Consumption Expenditure Price Index.
The consumption inflation figures showed a decline slightly higher than expected and triggered a retreat in US yields and boosted equity and commodity prices. The US Core PCE fell in May to 4.6% on an annual basis from 4.7%, while the headline dropped from 4.6% to 3.8%.
These figures softened Federal Reserve rate hike expectations for the next meeting. The focus now turns to next week’s US labor market data, which includes the ADP, Jobless Claims (Thursday), and the Nonfarm Payrolls report (Friday).
XAU/USD is hovering around $1,915, up less than $10 but enough to make it the best day in weeks. The recovery took place after reaching a low on Thursday at $1,892, the lowest level in three months.
On the upside, XAU/USD is breaking a short-term downtrend line. The next resistance area is $1,920. On the downside, a decline below $1,905 would weaken the short-term outlook for the yellow metal.
The US Supreme Court struck down a $430 billion program to forgive student loans held by 40 million Americans in a 6-3 decision that was generally expected.
The majority decision said that the executive has some power to alter terms of student-loan programs, the total forgiveness was an overreach.
I wrote about the possible headwinds for consumers, with payments now set to resume in August.Full Article
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MXN has been Credit Suisse’s favourite EM currency throughout H123. The bank remains constructive on the Peso.
Soft CPI data surprises have driven markets to expect Banxico to cut rates ahead of the Fed, starting in Q4. This would be at odds with the previous history of Banxico waiting for the Fed to cut rates before initiating its own easing cycle.
Given the bank’s focus on FX stability under the Rodriguez leadership, we are skeptical these expectations will realize and remain therefore constructive on the Peso.
A US activity slowdown would pose a bigger threat to MXN’s strength.
Economists at TD Securities analyze the Yuan outlook.
The slowdown in China’s recovery and widening rate differentials will add pressure on the Yuan and we think USD/CNY could revisit the high last year around 7.30.
However, we expect authorities to show their discomfort with the pace of depreciation via the daily fixings to slow the pace of the USD/CNY climb.