Markets Consolidate Before Central Banks

After a good week-ending, global markets had a day of consolidation yesterday, albeit at elevated levels. As investors considered next week’s Fed announcement, the major US indices experienced a mixed day, with the Dow losing 0.59%, the S&P declining 0.2%, and the Nasdaq closing just over flat. The ISM Service PMI came out weaker than expected at 50.3 versus the predicted 52.6, which caused the dollar to take a slight dip following the first significant data release of the week from the US. Oil dropped back after its OPEC-inspired spike, and WTI returned to trading around the $72/barrel level. Gold bounced off the $1,940 mark once more.

Central Banks and Upcoming Data

As there were few macroeconomic data releases on the calendar yesterday, the financial markets had a little break. Today, however, there are a few significant events coming up. The Australian market, where the RBA will publish its most recent rate decision, will be the centre of attention throughout the Asian session. Investors are divided over their course of action. Major announcements are absent from the European session, but the US session is expected to shift attention to Canada when the Ivey PMI statistics are released as a preview of tomorrow’s Bank of Canada decision.

What happened in the Asian Session?

To combat higher-than-expected inflation, the RBA increased the Cash Rate from 3.85% to 4.10%, above the projected 3.85%. The Australian Dollar is strengthened by this rate increase. A bullish view for the AUD is provided by the RBA’s signal of potential future tightening based on inflation and economic developments. However, this can raise borrowing costs and influence economic expansion.

What does it mean for Europe & US Sessions?

As a result of the RBA surprise, the AUD/USD has touched its intermediate top at 0.6670. Persistent bulls are likely to push forward to the round figure barrier at 0.6700 if the retreat support level at 0.6640 is maintained.

The Australian Dollar (AUD)

Key news events today

Cash Rate

RBA Rate Statement

What can we expect from AUD today?

It is anticipated that the Cash Rate for AUD would stay at 3.85%. The impending rate announcement from the Reserve Bank of Australia will be critical for the AUD. It might make the AUD weaker if it makes any allusions to potential rate reduction or economic worries (dovish tone). However, if it expresses confidence in the economy or anticipates possible rate increases (a hawkish tone), the AUD may gain.

Central Bank Notes:

• The Official Cash Rate was increased by 25 basis points to 3.85%.
• Inflation in Australia has passed its peak but remains high at 7%, and it may take some time to return to the target range.
• GDP is forecast to increase by 1.25% this year and around 2% over the year to mid-2025.
• Next meeting on 6 June 2023

Next 24 Hours Bias

Mixed

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The expected increase in Japanese average cash earnings from 1.3% to 1.7% should help the JPY. However, it is anticipated that household spending will fall much further, from -1.9% to -2.2%, which could cause the JPY to weaken. The outcome of the 30-year Bond Auction, with the prior auction yielding 1.25% and a bid-to-cover ratio of 3.5, will also have an impact on the JPY’s position.

Central Bank Notes:

• The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2% 
• Japan’s economy is expected to recover gradually
• The bank will not hesitate to take additional easing measures if necessary
• Next meeting is on 15 June 2023 

Next 24 Hours Bias

Mixed

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

German factory orders for the current month are expected to increase by 2.7% (up from -10.7% in the previous month) and retail sales for the current month are expected to increase by 0.2% (up from -1.2% in the previous month). While negative news may hurt the euro, positive surprises in factory orders and retail sales may bolster it.

Central Bank Notes:

• The ECB has decided to raise the three key interest rates by 25 basis points as the inflation outlook continues to be too high for too long.
• The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
• Renewed financial market tensions and Russia’s war against Ukraine remain significant economic downside risks.
• The continued resilience of the labour market could lead to higher growth than anticipated.
• The next meeting is on 15 June 2023

Next 24 Hours Bias

Weak bullish

Global Markets:

Asian Stock Markets: Nikkei is up 0.90%, Shanghai Composite is down 1.15%, Hang Seng is down 0.17%, ASX is down 1.20%

European equities, the DAX futures down 0.05%, CAC 40 down 0.02%, and FTSE down 0.09%.

US Stock Market: Dow Jones down 0.59%, S&P 500 is down 0.20%, and Nasdaq 100 is down at 0.09%.   

Commodities: Gold at $1958.96 (-0.16%), Silver at $23.44 (-0.32%), Brent Oil at $75.51 (-1.54%), WTI Oil at $70.91 (-1.75%)

News & Data

• (AUD) RBA Interest Rate Decision (Jun) Actual 4.10%, Forecast 3.85%, Previous 3.85% at 10:00
• (CAD) Ivey PMI (May) Forecast 57.2, Previous 56.8 at 19:30
• (EUR) Retail Sales (MoM) (Apr) Forecast 0.2%, Previous –1.2% at 14:30
• (GBP) Construction PMI (May) Forecast 51.0, Previous 51.1 at 14:00
• (AUD) Current Account (Q1) Actual 12.3B, Forecast 6.5B, Previous 14.1B at 07:00

Technical Outlook

GBPUSD

The bullish momentum on the GBP/USD chart indicates an upward trend.

1.2377 is the initial support level, which is also known as overlap support. Price has already bounced off overlap support, showing that it is an important level where buyers may enter the market.

1.2306 is a swing low support and serves as the second level of support. During the most recent downward price movement, this price level served as support; it may do so once more.

1.2467 is the initial resistance level. The 50% Fibonacci retracement level and an overlap resistance level both indicate this level.

1.2536 is the second resistance level. As an overlap resistance level that is also at the 61.8% Fibonacci retracement level, this level is further strengthened. Resistance and a significant Fibonacci level together frequently signal a firm price ceiling.

EURUSD

The bullish momentum on the EUR/USD chart is now weak, indicating that although the overall trend is up, it is not very strong and is not entirely clear.

1.0692 is the initial support level, which is also known as overlap support. Price has already bounced off overlap support, indicating that it is an important level where buyers may enter the market.

Another overlap support level, the second support level is located at 1.0536. Another price level where the market previously found support and may do so again is this one.

An overlap resistance level at 1.0760 serves as the first resistance level.

At 1.0822, there is a second resistance level. This level is an overlapping barrier as well, but the 38.2% Fibonacci retracement level gives it even more support. Resistance and a crucial Fibonacci level together can serve as a significant price floor.

AUDUSD

The positive momentum on the AUD/USD chart is now very sluggish. The price is above a significant ascending trend line, signalling further positive momentum despite the low level of confidence.

At 0.6579, there is a first support level. Given that it is overlap support, which indicates that buyers may have previously entered the market there, a rebound may be feasible.

At 0.6545, there is a second support level. This level is noteworthy for potential buyers as it is overlap support and also corresponds to the 50% Fibonacci retracement level.

At 0.6640, there comes the first resistance level. This overlap resistance level frequently serves as a price floor. Additionally, it is at the 50% Fibonacci retracement level, which can make sellers take notice of it.

At 0.6706, there is a second resistance level. This level is also an overlap resistance, which suggests that it can serve as a barrier to further price growth.

USDJPY

Positive momentum is currently seen on the USD/JPY chart. 

Based on this momentum, it’s possible that the price will keep rising in the direction of the first resistance level.

The 50% Fibonacci retracement level and the overlap support level are both present at the first support level, which is situated at 137.65.

The second support level is marked as multi-swing low support and is situated at 134.31 should the price drop below this level. Additionally, this level might draw buyers, halting the price’s further decline.

In contrast, the initial resistance level is marked as overlap resistance at 142.11 and coincides with the 61.80% Fibonacci retracement level. Any possible price increases may face resistance at this level.

The second resistance level, which is designated as a pullback resistance, is located at 144.99. This level might also serve as a check against future price hikes.

DOW JONES

Given the current neutral momentum on the DJ30 (Dow Jones Industrial Average) chart, it is possible for the price to oscillate between the first resistance and first support levels. 

33344.36 is the first support level. As an overlap support, which denotes a place where buyers have previously entered the market, this sector is perhaps open to a bounce.

33113.20 is the second support level. Another overlap support, again indicating a potential purchasing interest region.

33856.23 is the initial resistance level. This level is important for potential sellers since it is an overlap resistance level that frequently serves as a price ceiling.

34269.02 is the second resistance level. This resistance also overlaps, suggesting that it can serve as a barrier to further price ascent.

WTI CRUDE OIL

The current momentum on the WTI (West Texas Intermediate) chart is neutral. This means that neither buyers nor sellers have a clear advantage in the market, which is undecided.

At 70.28, there is the first support level. This level, known as overlap support, has traditionally seen a lot of purchasing interest. The 50% Fibonacci Retracement level, which frequently serves as a strong support or resistance level in the financial markets, also makes it significant.

At 67.11, there is a second support level. Indicating a price level where buyers have previously entered the market, this level also serves as an overlap support.

At 74.56, there is the first resistance level. This level is an overlap resistance, which implies that historically, sellers have entered the market at this level. It’s interesting to note that this level also touches the 50% Fibonacci Retracement level, which would strengthen its case for being a resistance level.

At 76.90, there is a second resistance level. Another overlap resistance, this one pointing to a possible price level where selling interest might rise. Additionally, it coincides with the 61.80% Fibonacci Retracement level, giving this resistance even more power.

SILVER

The price is currently above a significant ascending trend line on the Silver chart, displaying bullish momentum.

The price may likely continue to rise in this bullish environment towards the first barrier level.

23.23 is the first support level. Known as multi-swing low support, this level.

22.43 is the second support level. The 78.60% Fibonacci retracement level and this support level for the downturn are both present.

23.98 is the initial resistance level, which is also known as an overlap resistance. The fact that sellers have already entered the market in this location could serve as a barrier to additional price hikes.

The second resistance level, which is marked as a multi-swing high resistance, is located at 24.63. Another big impediment to future price upward momentum could exist at this level.

BITCOIN

The BTC/USD chart is now trending downward. This suggests that sellers are in control of the market and that a price increase is less likely than a price decrease.

25256.88 is the initial support level. This level is an overlap support, which suggests that buyers have previously expressed interest there.

23951.35 is the second support level. This overlap support represents another price level where buyers have previously entered the market and is another overlap support.

26287.56 is the initial resistance level. This level is an overlap resistance, which means that historically, sellers have entered the market at this level. Its potential as a resistance level is further increased by the fact that it coincides with the 23.60% Fibonacci Retracement level.

At 27386.96, there is a second resistance level. Another overlap resistance is there here, and since it is also located around the 38.20% Fibonacci Retracement level, sellers may decide to intervene at this level.