Equity markets in Asia keep the red amid escalating woes over the US Federal Reserve’s (Fed) monetary policy adjustments. The same joins down Treasury yields to weigh on the market sentiment during early Monday.
That said, MSCI’s index of Asia-Pacific shares ex-Japan drops 1.3% whereas Japan’s Nikkei 225 refreshes monthly low to become the biggest loser of the region, down 3.70% by the press time of the pre-European session.
Australia’s ASX 200 comes second in the list of bears as it drops around 1.9% following the downbeat prints of preliminary Retail Sales for May. Further, stocks from Taiwan, South Korea and New Zealand were losing anywhere between 1.5% to 1.0% whereas Chinese indicates were on the same line even as the People’s Bank of China (PBOC) kept monetary policy unchanged.
Indonesia’s IDX and India’s BSE Sensex were also on the back foot, losing around 0.80% by the time of the press, amid broad fears of a halt to the easy money policies.
It’s worth noting stock futures in the west are also on the back foot whereas the US Treasury yields refresh four-month low as the 30-year T-bond yields drop below 2.0% to flatten the curve further.
Other than the fears of the monetary policy normalization, a lack of progress over the US President Joe Biden’s infrastructure and spending plan as well as rising worries over the Delta variant of the covid also please the equity bears.
As the global markets jostle with the increased odds of the US monetary policy adjustments, further comments from the Fed policymakers become important. Hence, today’s speech from New York Fed President John C. Williams will be the key to follow for fresh impulse.Full Article
Copper has been pressured by the stronger dollar on the Fed’s shift from last week and news that China is prepared to use its stockpiles in copper to prevent inflation rising too fast for producers (and eventually risk that being passed on to consumers). Next support is at 4.000.
The Dollar Index has signalled a technical break of the descending trend line on the weekly chart.
In addition it has pushed above its 200DMA – a key bullish signal for the dollar index.
All this on a fundamental shift from the Fed means that going with USD strength is the path of least resistance.Full Article
Looking at the weekly chart we can see that prices have broken the 23.6% Fibonacci retracement and ascending trendline support. We could potentially see further bearish pressure this week to 1.16200, in-line with 38.2% Fibonacci retracement and 100% Fibonacci extension. RSI is also signaling a bearish momentum in-line with our weekly bearish outlook. On the daily chart, prices are finding support at 1.18244, in-line with 78.6% Fibonacci extension and 78.6% Fibonacci retracement. RSI is oversold and there could potentially be a short-term bounce.
On the H4 timeframe, prices broke down and found support at 1.18556, in-line with 100% Fibonacci extension and 61.8% Fibonacci retracement. We are potentially seeing a short-term bounce to 1.119057, in-line with 38.2% Fibonacci retracement and 161.8% Fibonacci extension. RSI is also over-sold, which also supports our view for a short-term bounce. The next level of resistance will be at 1.19257, in-line with 50% Fibonacci retracement and 200% Fibonacci extension
If price breaks current level, it could face further bearish pressure to 1.18032, in-line with -27.2% Fibonacci retracement and 100% Fibonacci extension. The next level of support will be at 1.17487, in-line with -61.8% Fibonacci retracement and 161.8% Fibonacci extension.
Areas of consideration:
Looking at the weekly chart, we can see that prices have broke 20EMA, ascending trendline and found support at 1.37981. We could potentially see further bearish pressure this week to 1.36780, in-line with 23.6% Fibonacci retracement and 78.6% Fibonacci extension. RSI is also signaling a bearish momentum in-line with our bearish weekly outlook. On the daily time frame prices have broken below 50MA and ascending trendline, indicating strong bearish pressure. However, RSI is oversold and we expect a short-term bounce before further bearish pressure to 1.36780, in-line with weekly 23.6% Fibonacci retracement and 78.6% Fibonacci extension.
On the H4 timeframe, prices found support on our second support level at 1.38029, in-line with 161.8% & 127.2% Fibonacci extension. The price is below 20 EMA confirming a bearish momentum. However, the RSI is oversold and there could potentially be a short-term bounce. The first level of resistance is 1.38700, in-line with 23.6% and 38.2% Fibonacci retracement. The next level of resistance will be 1.39165, in-line with 38.2% and 61.8% Fibonacci retracement.
If prices break from the current level, we could see the first price facing further bearish pressure to 1.3740, in-line with 100% and 127.2% Fibonacci extension. The next level of support will be at 1.36780, in-line with -27.2% Fibonacci retracement & 161.8% Fibonacci extension.
Areas of consideration:
From the Weekly timeframe, we see price breaking beneath 0.76073, in line with previous swing low, where we may see a continuation of push down towards 0.74063, in line with 61.8% fibonacci retracement, 100% fibonacci extension and horizontal graphical overlap. From the daily timeframe, we see a similar action where price is pushing down towards the 0.74362 level, in line with Weekly support, -27% and 127% fibonacci retracement.
On the H4 timeframe, we see price breaking beneath and retested 0.75397, in line with Horizontal swing low support and 88.6% fibonacci extension level. Where price is pushing down towards 0.74382, in line with Daily and weekly support.
Areas of consideration:
From the weekly timeframe, prices are facing resistance from horizontal swing high resistance which coincides with 50% Fibonacci retracement and 78.6% Fibonacci extension. Prices seem to be more bullish and might break through the resistance. If price breaks out, next target on the weekly would be the 114.665 level in line with 127.2% Fibonacci retracement. On the daily time frame, prices are holding nicely above the 21 period EMA. Prices are approaching resistance at 110.978 in line with the weekly level. A reversal from that level could mean prices would take support on 108.425 level. A continued push up could mean next target is weekly resistance of 114.665 in line with 100% Fibonacci extension level.
On the H4 timeframe, prices are showing the same picture. Prices are approaching the daily/weekly resistance level of 110.978. A break above the level could see prices pushing up towards 112.148, a short term resistance in line with 161.8% Fibonacci extension. Prices are pulling back to take support on 109.786 which is in line with ascending trendline support, 61.8% Fibonacci retracement and 100% Fibonacci extension. 34 Period EMA is also below prices, showing a bullish pressure for prices.
Areas of consideration:
From the Weekly timeframe, we saw a testing of the descending trendline resistance turned support drawn from 23rd March 2020, and 61.8% fibonacci retracement is being tested, we may see a push down from here. On the daily timeframe, we are seeing a similar move, where price is trending under the daily descending trendline resistance where a reversal may occur.
The H4 timeframe shows price pulling back towards major level 1.2400, in line with weekly support and 50% fibonacci retracement.
Areas of consideration:
USD/CHF has shown a strong bounce from the weekly 0.89500 support, in line with 61.8% Fibonacci retracement and 78.6% Fibonacci extension. The daily chart shows that price is now approaching the key daily 0.92300 support-turned-resistance and ascending trendline support-turned-resistance. We could see a reversal at 0.92300 resistance.
On the H4 chart, we can see that price has shown a strong bounce from the key weekly 0.89500 support level, in line with 61.8% and 127.2% Fibonacci extension, and has pushed much higher to retest the 0.92300 resistance level. The 0.92300 weekly resistance is a key level to watch, in line with our 61.8% Fibonacci retracement. We could see a reversal from the weekly 0.92300 resistance level. However, should price break and close above this level, we could see price push higher to retest the next weekly resistances.
Areas of consideration:
On the weekly chart, price traded lower, spooked by inflation fears and the Federal Reserve looking to raise interest rates as early as 2023. With price approaching 32765 support, we might see bullish pressure above this level. On the daily chart, price dipped lower testing weekly support at 32765. Buyers may look to add their longs to push price higher towards possible target at 35090 resistance. Stochastic is testing support as well where price bounced in the past.
On the H4, price gapped lower and technical indicators on the short term are showing room for further bearish downside. As long as price is holding below 33555 resistance, it will continue to see bearish pressure with 32765 weekly support as a possible downside target. Otherwise, failure to hold below 33555 resistance will see price swing towards recent swing high at 35090 resistance.
Areas of consideration:
On the weekly timeframe, pulled back lower and is testing key trendline pullback support at 1764. On the daily, price pulled back lower, and is testing 1764 weekly support. While 1764 support looks fragile, as long as we do not have a daily close below this support, we may see price bounce towards 1855 resistance. Otherwise, breaking below 1764 support, price could drop lower towards 1677 support next.
On the H4, price dropped lower and broke below previous supports. Price is now testing weekly support at 1764. With stochastics approaching support where price bounced in the past as well, we see a low probability bullish scenario where buyers may look to add to their longs with a possible upside target at 1808 resistance. Otherwise, failure to hold above 1764 support could see price swing towards the next support at 1725.
Areas of consideration:
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USD/INR bulls keep reins around 74.25, up 0.16% intraday, amid the initial Indian trading session on Monday. The Indian rupee (INR) pay stepped back from a two-month top the previous day amid market consolidation and improving covid conditions in India. However, fears of the Fed’s monetary policy adjustments keep the pair buyers hopeful.
Following the US Federal Reserve’s (Fed) hawkish performance the last Wednesday, St. Louis Fed President James Bullard became the first independent US banker to back the rate hike views on Friday. The non-voting member of the Federal Open Market Committee (FOMC) forecasted Core PCE at 3.0% for 2021 and 2.5% for 2022 while backing the tapering to start next year.
Even so, the US dollar index (DXY) marked the heaviest weekly jump in three months, currently around 92.30.
Although the fears of the Fed’s action propel the greenback bulls, the recent slump in the US Treasury yields probes the DXY upside. The US 10-year Treasury yield drops six basis points (bps) to 1.389%, the lowest in four months whereas the 30-year bond yield extends the previous two-day south-run to the mid-February lows, near 1.96% by the press time.
Also challenging the USD/INR bulls could be the recent recovery in India’s coronavirus (COVID-19) conditions. As per the latest numbers from the Health Minister, conveyed by Bloomberg, “India reports 53,256 daily rises in coronavirus infections, lowest since March 24, taking total to 29.94 million.”
On the same line could be the Reserve Bank of India’s (RBI) rush to escalate the foreign exchange reserve to favor international trade. As per the latest monthly bulletin of RBI, India became the world’s fifth-largest reserve holding currency with $600 billion forex reserves, which further rose to $608.08 billion on June 11. While conveying the news, RBI also signaled, indirectly, of its move to escalate the reserve as saying, “This (forex reserves) will still cover less than 15 months of projected imports, against Switzerland’s 39 months, Japan’s 22 months, Russia’s 20 months, and China’s 16 months.
Given the lack of major data and mixed catalysts, USD/INR may remain mildly bid around 74.30-25 ahead of the Chicago Fed National Activity Index for May, prior 0.24, as well as a speech from New York Fed President John C. Williams. Also in the pipeline is India’s Trade Deficit and Balance of Payment (BOP) data for Q1 2021.
USD/INR bulls need a clear break of 74.30 to keep the recent upside momentum, else a pullback towards the 74.00 and then to 50-day SMA near 73.68 can’t be ruled out.Full Article
Gold price (XAU/USD) extended its six-day losing streak on Friday and reached the lowest levels in two months at $1761, recording a 6% loss on a weekly basis. Gold bulls faced rejection below the $1800 mark in the first half of the day, resuming the downtrend. The Fed’s hawkish turn smashed gold while lifting the US dollar to two-month highs across the board. Hopes for sooner-than-expected Fed rate hikes dented gold’s appeal, as it considered a non-interest-bearing investment asset. However, weaker US Treasury yields helped gold price stage a modest recovery heading into the weekly closing. Meanwhile, investors digested the conflicting comments from the Fed policymakers.
Minneapolis Fed President Neel Kashkari said he wants to keep the benchmark short-term interest rate near zero at least through the end of 2023. On the other hand, St. Louis Fed President James Bullard said that he sees a Fed lift-off in late 2022 while adding that the central bank has begun discussing tapering asset purchases.
The bearish trend in gold price is seen reversing starting out a fresh week on Monday, as it draws support from the falling Treasury yields across the curve. The Fed’s hawkishness has poured cold water over the reflation trades, negatively impact the global stocks and yields. The benchmark 30-year Treasury yields have fallen below the key 2% level, four-month lows, suggesting flattening of the yield curve and receding reflation bets. However, the US dollar continues to hold higher ground, which could likely limit the recovery in the gold price. Additionally, gold bulls could turn cautious ahead of a slew of speeches lined up from the Fed policymakers. Tuesday’s Fed Chair Jerome Powell’s testimony will be also closely followed.
Gold: Four-hour chart
Gold’s four-hour chart shows that the price is pausing its recovery momentum just below the falling trendline resistance at $1778.
Note that gold price is trending within a falling wedge formation on the said time frame, with a break above the latter likely to validate the bullish reversal pattern.
The next target for the bulls will then be seen at the bearish 21-Simple Moving Average (SMA) at $1801.
The further upside will then open up towards the June 17 highs of $1825.
The Relative Strength Index (RSI) has rebounded from the oversold territory, suggesting that there is extra scope for a rebound in prices.
On the flip side, a retest of the monthly lows could be on the cards if gold price faces rejection at the wedge resistance.
Further south, the falling trendline support at $1755 will be the line in the sand for the bullish traders.Full Article
All eyes on the USD as we start this week and the hawkish dot plot shift from the Fed and neutral Bullard added fuel to the USD bull’s to close last week. Global indices took a hit, so will that theme continue into the start of this week with the Nikkei currently down around 3.75% ouch! No sign of ETF buying yet from the BoJ.
Quite often a down day on Friday is a down day for Monday too in equities, so that is what I would expect in the normal run of things. Index Futures markets are all weak, so watch out for accelerating stock weakness into the cash open.
In terms of data ahead it is very quiet with only some Swiss data due, so risk tone will be the driver for this morning,
0800 BST Swiss money supply
0900 BST Swiss Total Sight Deposits
This is the report that helps show the level of SNB intervention. We know that they still regard the CHF as highly valued and keep up with regularly buying euros and dollars to try and weaken the CHF.
European Central Bank (ECB) executive Fabio Panetta believes that the digital euro will help to protect consumer privacy and that cryptocurrencies such as Bitcoin are “very dangerous animals.”
Fabio Panetta, an executive board member at the European Central Bank, stated that the digital euro would protect the eurozone from the “threat” of other cryptocurrencies that would undermine the block’s monetary sovereignty.
He added that the aim of the digital currency project from the central bank was to combat the spread of other digital assets created by other countries and companies. He said:
“If the central bank gets involved in digital payments, privacy is going to be better protected because we are not like private companies. We have no commercial interest in storing, managing or monetizing the data of users.”
Pointing to stablecoin Diem, created by Facebook that would allow users to send money as quickly as text messages, Panetta believes that it could be a potential threat if the central bank does not offer users a digital means of payment.
The European Central Bank’s recent consultation on the digital euro concluded that the main concern around the digital currency was that it would erode their privacy. Panetta explained that the ECB had tested ways of separating user identities from their payment details. He added:
“The payment will go through, but nobody in the payment chain would have access to all the information.”
According to the Bank for International Settlements, nearly two-thirds of the world’s central banks are exploring the potential launch of digital currencies by running practical experiments.
Panetta concluded that a digital euro would lead to a fundamental change in the way payments and the financial system would function, highlighting the possibility of being “programmable” and allow for payment automation similar to smart contracts that already exist in the crypto industry.
By the end of the year, Panetta said that the central bank would complete its new oversight framework for private digital assets and cryptocurrency providers.
According to the executive board member, crypto assets like Bitcoin are “very dangerous animals” and are “largely used for criminal activities,” which consume large amounts of energy.
While there is no responsible legal entity, regulating decentralized cryptocurrencies is extremely difficult.Full Article
Gold prices might finally stablise following the drop from last week.
The following illustrates the potential for a reversal from a longer-term point of view and a healthy correction from a nearer-term outlook.
The monthly reverse head and shoulders is a bullish chart pattern that could be in the makings if the price continues higher next month.
GBP/USD continues to trade lower on Monday while trailing the previous seven session’s downside movement. The pair trades in a very narrow trade band before slipping below the 1.3800 mark.
At the time of writing, GBP/USD is trading at 1.3790, down 0.12% for the day.
The US treasury yields continue to retreat after investors digested the Fed hawkish inflation and interest rates outlook. The yield curve flattens as the short term bond yields are rising more than the benchmark 10-year bond yields. The short term bond yields are more sensitive to the rate changes.
The US Dollar Index (DXY) stands strong, however it experiences minor pullback following the fall in US treasury yields. The US dollar also gains as the risk sentiment deteriorates with falling equities and commodity prices.
It is worth noting that S&P 500 Futures were trading at 4,129, down 0.58%.
Market participants ditched sterling after the extended lockdown in the UK as the country failed to hold on to the existing plan of full economic reopening on June 21 due to rising corona cases.
Meanwhile, the UK Retail Sales fell unexpectedly in May. The headline inflation rate rose more than expected in May to the highest level since July 2019 and above the Bank of England (BOE) target of 2.0%.
Brexit could unleash havoc on the UK steel industry as warned by Tories. The cheap foreign imports in the name of a free trade agreement between the UK and EU under Brexit protocol could harm the domestic steel manufacturers. This, in turn, soured the sentiment surrounding the sterling.
In the absence of a strong macroeconomic catalyst, the dynamics around the US dollar continue to influence the pair’s performance in the near future.
S&P 500 Futures remain offered around 4,128, down 0.60% intraday, amid early Monday. The risk barometer bears the burden of downbeat US Treasury yields, as well as the inflation expectations, amid a quiet start to the week.
Both the key Treasury yield benchmarks of the US, namely 10-year and 30-year bonds, extend the early Asian south-run to a fresh low since February, suggesting a further flattening of the yield curve. That said, The US 10-year Treasury yield drops six basis points (bps) to 1.389%, the lowest in four months whereas the 30-year bond yield extends the previous two-day south-run to the mid-February lows, near 1.96% by the press time.
It’s worth noting that the US inflation expectations, per the 10-year breakeven inflation rate data from the St. Louis Federal Reserve (FRED), dropped to the lowest since early March, around 2.24%, by the end of Friday’s closing.
Weigh on the Treasury yields and market sentiment could be comments from the St. Louis Fed President James Bullard, published Friday, as he was the first US banker to cross the wires after the hawkish Federal Open Market Committee (FOMC). The non-voting member of the Fed forecasts Core PCE at 3.0% for 2021 and 2.5% for 2022 while backing the tapering to start next year.
On a different page, a lack of progress over the US President Joe Biden’s infrastructure and spending package, as well as fears of the covid’s Delta variant resurgence, also weigh on the market sentiment.
The same risk-off mood also drowns Asia-Pacific equities with Nikkei 225 leading the losses by 3.30% intraday loss.
Moving on, a lack of major data/events could keep markets directed towards the central bankers’ comments for fresh impulse. Hence, today’s speeches from ECB President Christine Lagarde and New York Fed President John C. Williams will be the key to follow.Full Article
And they still have but they have dropped back in the last half hour or so. EUR, GBP, CAD are all also losing ground. Yen is strongly outperforming now, with USD/JPY on approach to its session lows towards 109.80.
Japanese equity indexes have reopened after their lunch break and are back on the slide. Nikkei is -4% on the day.
UST Yields continue to drop also.
There is no fresh news crossing.