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Bitcoin surged to $41330 earlier today, and rapidly dropped below $40000 within…

Bitcoin surged to $41330 earlier today, and rapidly dropped below $40000 within two hours


Market Focus

US stocks retreated from their peaks after the retail sales missed the expectations. Tech shares closed in the red, with the Nasdaq 100 dropped 0.71%, and Dow Jones declined 0.27%. Energy shares gained traction but still could not lift the S&P 500 index as Real Estates and Tech stocks dragging behind.

Investors remained calm ahead of Fed’s policy decision. The statement is set to include updated forecasts, and communication of any taper plans well in advance. “After nearly a year of anti-climactic FOMC meetings, tomorrow’s meeting has the potential to move markets because it will likely start the process of the Fed communicating tapering of this historic accommodation,” commented Tom Essaye former Merrill Lynch trader.

China called the US “very ill indeed,” after President Joe Biden formed an anti-China ally during his Europe trip. China Foreign Ministry spokesman Zhao criticized Biden’s efforts to counter China’s global economic expansion and told reporters “The G-7 had better take its pulse and come up with a prescription.” Tension continues to mount between the developed nations and the rising giant, though no actions are taken so far, such development worries investors.

Main Pairs Movement

The market turned cautious after the US depressing retail sales figures and the better-than-expected PPI. Investors focus on news about the Delta variant of COVID and uncertainty US infrastructure as the Fed’s decision approaches. Cryptos are struggling to cling gains.

The dollar index performed well heading into the US opening but turned sour after the release of the macros, closing the day mixed. The swiss and the fiber are unchanged against its American rival, as well as the Japanese Yen, while the loonie and the sterling declined significantly.

US 10-year Treasury yields have breached 1.50% after the US retail sales release, seemingly consolidating its previous gains. The UK and Canada CPI and industrial output also stand out on the economic calendar, along with the New Zealand GDP.

Oil price edged further north. WTI traded at $72.5, and Brent traded at $74.24, both recovering to the past-pandemic price level. Gold continues to fall, trading at $1858.82 as of writing.

Cryptos seems to experience a correction. Bitcoin surged to $41330 earlier today, and rapidly dropped below $40000 within two hours, and Ethereum slightly decreased toward its $2,500 support after it bounced off $2,600.

Technical Analysis

GBPUSD (Daily Chart)

GBPUSD has declined for three consecutive days, and the selling pressure seems still strong. The MACD histogram remains bearish, while the RSI indicator fell under 50. Sterling fell short for demand despite the goodish UK employment report as analysts are worried about the delay of the lockdown program forcing some struggling businesses to lay off. On the other hand, though Fed is supposed to remain monetary policy unchanged, a less dovish statement is still possible given the upbeat inflation figures, and this may further drag the pair down. The instant support for cable appears at 1.40, followed by the quarterly low, 1.367.

Resistance: 1.424, 1.438

Support: 1.40, 1.367

USDCAD (Daily Chart)

After three consecutive week’s consolidations, USDCAD finally broke through the 1.2 to 1.215 interval. Similar to other major pairs, the breakthrough of the loonie derived from the expectations of a slightly less dovish Fed after the US greater-than-expected inflation figures popped up. The MACD histogram appears bullish, while the RSI indicator has just consolidated in the buy-side territory.

However, pressure from the rising oil price is still a concern, adding that the policymakers’ attitude toward the higher inflation is still unclear, a solid rebound is still questionable. The FOMC press conference that takes place this Wednesday will provide further instructions from the officials. The best strategy is to stay positive but prudent before that.

Resistance: 1.225, 1.2367

Support: 1.215, 1.20, 1.192

AUDNZD (Daily Chart)

AUDNZD was rejected by the 1.081 resistance last Friday and slipped below 1.080 at the beginning of the week, traded 1.0794 as of writing. The Australian dollar got slightly weaker on the dovish RBA meeting minutes as the policymakers suggested no rush to taper, albeit emerging reflation.

However, due to the technicals, the bullish sentiment seems to resume a little more time, as the RSI indicator still hasn’t reached the overbought territory, and the MACD histogram remains positive. The strong 1.081 resistance level is the key. If breached, then, at least in the short term, the upside traction will still prevail.

Resistance: 1.081, 1.0945, 1.1045

Support: 1.060, 1.054, 1.042

Pack Up

US consumer’s expectation for inflation rose to 3.6% over the medium term,…

US consumer’s expectation for inflation rose to 3.6% over the medium term, according to the Federal Reserve Bank of New York survey


Market Focus

US stocks market was mixed as investors were adjusting positions to Thursday’s Federal Reserve meeting. Tech shares were gaining traction, with the Nasdaq 100 up nearly 1%, they also helped the S&P 500 to close in the green. Meanwhile, Financials dropped as JPMorgan Chase CEO Jamie Dimon suggested Wall Street’s trading prosperity in the pandemic era may fade away.

US President Joe Biden entered his first international summit looking for a breakthrough on vaccine pledges for developing countries, and a unity action to counter China’s economic might. US officials said the G-7 group is now a united ally to fight against China on issues such as forced labor and human rights abuses and to stand up to an alternative to China’s Belt and Road plan to counter Chinese influence abroad.

US consumer’s expectation for inflation rose to 3.6% over the medium term, refreshed an eight-year high in May, according to the Federal Reserve Bank of New York survey. “Notably, medium-term inflation expectations have increased at a slower pace than short-term inflation expectations over the past few months, and the difference between one- and three-year-ahead median inflation expectations marks a series high,” officials from New York Fed said in a press release.

Main Pairs Movement

Gold plunged as much as 1.7% during the first day of the week. Money managers are paring their long positions in the futures market ahead of Thursday’s FOMC meeting. Judging from market reaction to last week’s CPI figures, investors seemed to believe the current inflation spike is temporary and will ease over the second half of 2021. Of course, the Fed will factor in market reaction when considering how they should play the script. With market participants are more in line with the central bank proposed transitory inflation theory, we are unlikely to see any big surprise on Thursday. That being said, the Fed would still be guiding the market to where they desired by giving out little hints in the FOMC statement or adjusting their portfolio holdings (small enough to not cause any ripples across stocks and bond market while sending a signal).

Cable is on the back against US greenback amid lockdown extensions, dipped 0.05%. British Prime Minister Boris Johnson announced on Monday that reopening will be postponed to July 19th. Though the negative headline is much expected, it still keeps the pressure on the Sterling compared to other G-7 currencies.

Technical Analysis

EURUSD (Daily Chart)

EURUSD exits from consolidation mode and enters a bearish trend. Price failed to reclaim 1.22 last week, we have seen five rejections from 1.22 before it turns south. The market is perhaps pricing in a more dovish ECB than its US counterpart given Christine Lagarde’s speech on EU’s forthcoming larger spending. We do not rule out potential price recoveries or sideway trading before Thursday’s FOMC meeting. If the Fed’s message is affirmative then the bears should not have too many troubles at taking out 1.21 horizontal support, which would open doors to 1.2 and 1.195.

Resistance: 1.22, 1.235

Support: 1.21, 1.204, 1.195

XAUUSD (Daily Chart)

XAUUSD finally made a decisive breakout, and it was in favor of the sellers this time. Price penetrated the 2-month ascending trendline, along with its DMA20 support line. However, it quickly bounced off upon touching the 38.2% Fibonacci level at $1846. Today’s move indicates bearish reversal, which makes sense when considering investors are gradually buying into the Fed’s rhetoric of transitory inflation. With the market expecting the Fed to maintain easy monetary policies and not initial the taper talk during June’s meeting or even during the whole summer, Gold is likely to suffer until another impetus shows up. On the downside, $1815 will be the next key level to watch for.

Resistance: 1894, 1959, 2000

Support: 1846, 1822, 1790

USDJPY (Daily Chart)

USDJPY is building on last Friday’s goodish rebound, climbed 0.35% on Monday. This pair is well fitted within its ascending channel and managed to regain 110 handles. Now there is a solid breakout to the upside, the buying bias will be here to stay until meeting the yearly high of 110.8. On a larger timeframe, USDJPY stills show a bullish trend after April’s pullback is proved to be temporary. Further in the north, stern resistance sits around 112 and 113.8.

Resistance: 110.8, 112, 113.8

Support: 108.7, 107.9, 106.7

Pack Up

The European Central Bank maintains the dovish position and the three key…

The European Central Bank maintains the dovish position and the three key interest rates remain unchanged


Market Focus

US stocks climbed to a record high as investors are shifting to believe Federal Reserve will maintain accommodative policies in upcoming months. The Nasdaq 100 Index gained more than 1%, while the Dow Jones Industrial Average index was up only 0.06%. S&P 500 closed 0.47% higher with Health Care shares led the gains, and Financials were underperforming.

Commerce ministers from China and the US agreed to push forward trade and investment links. While the two nations are slowly resuming official contact after Joe Biden took office, it is still unclear what the US plans to do with the so-called ‘Phase One’ deal signed last year. “It’s positive in the sense that both countries are stepping up economic and trade communication, but no game-changing decisions or announcements have come out yet, I won’t be overly excited,” commented Alvin Tan, head of Asia currency strategy at RBC Capital Markets LLC.

The Basel Committee on Banking Supervision is putting the strictest capital requirement for holding crypto assets on banks’ balance sheets. The panel proposed that a 1,250% risk weight be applied to a bank’s exposure, meaning banks need to hold a dollar in capital for each dollar worth of crypto-asset under the current 8% minimum capital requirement. The Committee is deeply concerned that the growth in these volatile assets could jeopardize global financial stability, thus the required capital will need to be sufficient to absorb a full write-off without exposing depositors and other senior creditors of the banks to a loss.

ECB kept the policy rate unchanged, and here are Bloomberg’s key takeaways from its policy statement:

  • Pandemic purchases will continue at a significantly higher pace than early this year.
  • New economic forecasts still put inflation in 2023 at 1.4%, well below the ECB’s goal.
  • There was a debate on the pace of purchase and some divergent views in the Governing Council.

Main Pairs Movement

EURUSD was on the back foot against the dollar greenback despite the dollar negative mood. The Euro weakness could come from the ECB’s announcement of larger monetary spending. Meanwhile, US CPI (MoM) in May climbed 0.6%, the second-largest advance in more than a decade. The inflation gauge showed steady growth in the costs of used vehicles, houses, airfares, and apparel. According to the Labor Department, the rapid rise in used car prices accounts for 1/3 of the total monthly advance in CPI. The Core CPI which excludes volatile food and energy rose 3.8% on a year-over-year basis, the highest number since 1992. Better-than-expected inflation should press Federal Reserve to start tapering sooner, which bolsters the US dollar. But since we saw quite the opposite reaction in the market, it rather implies investors are buying into Fed’s transitory inflation narrative and dollar bearish bias could resume from here.

Cable temporarily put behind some of its concerns and ride with dollar weakness gained 0.4% on Thursday. Aside from the EU’s disagreement over the implementation of the Northern Irish protocol, UK is also facing a possible delay in its reopening. The Delta variant is finding its way to spread around the unvaccinated, the highly anticipated ‘Freedom Day’ will likely be postponed from June 21st to early July.

Technical Analysis

NZDJPY (Daily Chart)

NZDJPY is still supported by a 78.6% Fibonacci level around 78.7. Most of the gains from the RBNZ hawkish shock have been erased by choppy trading sessions in the past two weeks. Price is retesting an upward trendline started from last November, and will likely cling to it given current uninspired market sentiment. A strong deviation to the upside is needed to keep the bullish bias alive. In the north, the nearest resistance sits around 80.1, next to 81.1.

Resistance: 80.1, 81.1, 82.2

Support: 78.7, 76.84, 75.5

USDCHF (Daily Chart)

USDCHF failed to extend beyond 0.899 as SMA20 remains to be a solid cap on this pair. There was a false breakout on SMA20 and it went straight to contest soft resistance at 0.904, but upward momentum quickly faded amid a lack of follow-up demand. With the bears are back in the driver’s seat, USDCHF looks to close the day with a lower-low, which could provide an exit to the recent consolidation phase. To the south, the immediate support lies around 0.885, followed by a six-years low of 0.878.

Resistance: 0.904, 0.908, 0.916

Support: 0.885, 0.878

XAUUSD (Daily Chart)

Gold briefly touched $1870 after the US CPI release, then quickly reversed back above $1890. We witnessed yet another strong defense from gold buyers, price did not even have a chance to pass the ascending trendline. Worth mentioning SMA20 is still a valid dynamic support line for the yellow metal. However, we are somewhat cautious on the direction of Gold in the near term given today’s positive correlated move in stocks and gold. Investors should be prudent to wait for a clear breakout, which could be provided by next week’s FOMC meeting.

Resistance: 1922, 1956, 2000

Support: 1870, 1890, 1847

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