Markets reconsidering their direction

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.Emas’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.

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) 

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