Fundamental Analysis Report With Charting Trends – 23 June 2023
23 Jun 2023
Dollar Strengthens Following Hawkish Powell Testimony
In a significant development, the US dollar has surged after Federal Reserve Chairman Jerome Powell’s recent testimony, which indicated the possibility of further interest rate hikes. This article delves into the impact of Powell’s statements on the dollar and treasury yields, as well as the reactions of various markets to central bank actions. Additionally, it explores the expectations for market volatility during the summer trading season and provides insights into the Asian session and key news events of the day.
The Impact of Powell’s Testimony
Powell’s testimony during the week has instilled confidence in the markets regarding additional interest rate increases by the Federal Reserve. As a result, both the US dollar and treasury yields experienced notable gains. The benchmark 10-year treasury yield surged by 7.6 basis points, reaching a high of 3.798%. Simultaneously, the dollar index rose by 0.4%. These developments indicate a growing expectation of tighter monetary policy, which has had a significant impact on market dynamics.
Market Reactions to Central Bank Actions
The Bank of England (BoE) surprised the markets by raising its Official Bank Rate by 0.5% earlier in the day. Additionally, the Swiss National Bank (SNB) increased rates by 25 basis points. In response to these actions, the British pound (GBP) and Swiss franc (CHF) exhibited relatively minimal losses against the US dollar compared to other currencies. The implications of these central bank decisions and their effects on the global economy are discussed further in this article.
Anticipated Market Volatility
As we enter the summer trading season in the Northern Hemisphere, market participants expect volatility to persist in the coming months. Traditionally, the summer holiday season is associated with a slight decrease in volatility as major financial centers in Europe and the US slow down. However, this year could deviate from the norm due to ongoing efforts by central banks to address the challenges of inflation and recession. Investors are increasingly concerned about potential rough landings in certain industries, despite recent positive market performance. Notably, the Bank of Canada, the Reserve Bank of Australia, and the Bank of England have all raised interest rates above expectations, raising apprehension about the impact of a similar move by the Federal Reserve on the US stock market and global economies.
Asian Session Highlights
During the Asian session, the Flash Manufacturing PMI inched up slightly to 48.6, while the Flash Services PMI declined to 50.7. The latter figure could exert negative pressure on the Australian dollar (AUD). Additionally, the GfK Consumer Confidence index for the UK improved to -24, which may offer support to the British pound (GBP).
Euro (EUR) Outlook
The Euro (EUR) faces several key news events today, including the release of Flash Manufacturing PMI and Flash Services PMI data for France and Germany. These reports provide valuable insights into the performance of the manufacturing and service sectors in these countries. Higher-than-expected results could strengthen the Euro, while lower-than-expected figures may lead to depreciation.
The Dollar Index (DXY)
Key News Events Today:
- Flash Manufacturing PMI
- Flash Services PMI
Expectations for DXY Today:
The actual Flash Manufacturing PMI data can significantly influence the currency’s strength. If the figure equals or exceeds the predicted value of 48.6, the currency is likely to strengthen. Conversely, a lower-than-expected actual value might weaken the currency. Similar dynamics apply to the real Flash Services PMI data. If it falls below the forecasted figure of 53.9, it could result in a decline in the value of the US dollar.
Central Bank Notes
The Federal Reserve’s keynotes are as follows:
- The federal funds rate target range will be 5 to 5-1/4 percent.
- The Committee is strongly committed to returning inflation to its 2% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labor market conditions, inflation pressures, inflation expectations, and international and financial developments.
- The next meeting is scheduled for 26 July 2023.
The Kiwi Dollar (NZD)
Key News Events Today:
No major news events.
Expectations for NZD Today:
As there are no significant news events today, recent economic data is expected to drive the New Zealand Dollar’s (NZD) price direction. The trade balance data indicates a smaller difference between the country’s export and import values, which could put pressure on the NZD to decline. However, credit card spending has seen an annual increase of 3.3%, which might support the NZD.
Central Bank Notes
The keynotes from the Monetary Policy Committee are as follows:
- The OCR has been raised from 5.25% to 5.50%.
- The Committee believes that maintaining interest rates at a restrictive level for a while will bring inflation back within the target range while supporting maximum sustainable employment.
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%.
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment.
- The next meeting is scheduled for 12 July 2023.
Key News Events Today:
- French Flash Manufacturing PMI
- French Flash Services PMI
- German Flash Manufacturing PMI
- German Flash Services PMI
Expectations for EUR Today:
The upcoming data releases for the Euro (EUR) include French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, and German Flash Services PMI. These reports provide valuable insights into the performance of the manufacturing and service sectors in France and Germany. Better-than-expected results can strengthen the Euro, while weaker-than-expected figures may lead to depreciation.
Central Bank Notes
The European Central Bank (ECB) has provided the following keynotes:
- The ECB has raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- The next meeting is scheduled for 27 July 2023.
Global Market Overview
Asian Stock Markets:
- Nikkei is down 1.45%
- Shanghai Composite is down 1.31%
- Hang Seng down 1.55%
- ASX down 1.34%
- DAX futures are down 0.71%
- CAC 40 is down 0.54%
- FTSE down 0.45%
US Stock Market:
- Dow Jones down 0.01%
- S&P 500 is up 0.37%
- Nasdaq 100 is up 0.95%
- Gold at $1918.15 (+0.25%)
- Silver at $22.33 (+0.55%)
- Brent Oil at $73.08 (-1.43%)
- WTI Oil at $68.39 (-1.61%)
News & Data
Today’s important news and data include:
- (GBP) Retail Sales (MoM) (May) Actual 0.3%, Forecast -0.2%, Previous 0.5% at 11:30
- (EUR) German Manufacturing PMI (Jun) Actual 41.0, Forecast 43.5, Previous 43.2 at 13:00
- (EUR) Manufacturing PMI (Jun) Actual 43.6, Forecast 44.8, Previous 44.8 at 13:30
- (JPY) National Core CPI (YoY) (May) Actual 3.2%, Forecast 3.1%, Previous 3.4% at 05:00
- (CAD) Wholesale Sales (MoM) Previous -1.4% at 18:00
- (USD) Service PMI (Jun) Forecast 54.0, Previous 54.9 at 19:15
GBPUSD: Possibility of Additional Higher Movement
In the realm of currency trading, the GBP/USD chart is currently displaying an intriguing pattern. The price of this currency pair is positioned above a significant ascending trend line as well as the bullish Ichi Moku cloud. Such a configuration indicates the potential for additional upward movement, catching the attention of traders.
Factors Pointing Towards a Bullish Bounce
Several factors contribute to the likelihood of a bullish bounce off the initial support level at 1.2698. Firstly, there is a Fibonacci confluence, which denotes the convergence of various Fibonacci levels. This confluence is further supported by overlap support, a 38.20% Fibonacci Retracement, and a 50% Fibonacci Retracement. Collectively, these elements present a strong case for a bullish scenario.
Journey Towards the First Barrier
Traders anticipate a possible surge in price towards the first barrier at 1.2726. This particular level holds significance as it is characterized by a multi-swing high resistance. When combined with the aforementioned circumstances, the presence of this barrier strengthens the overall outlook for a bullish trend.
Based on the analysis and observations made, a prudent trade suggestion for traders would be to consider buying at 1.2703. Establishing a take-profit level at 1.2725 and setting a stop-loss order at 1.2689 would be advisable in order to manage potential risks effectively.
EURUSD: Potential for Upward Growth
Within the EUR/USD chart, an interesting development can be observed. The price of this currency pair remains above the bullish Ichi Moku cloud and a significant ascending trend line, signifying the potential for further upward growth. This dynamic catches the attention of traders seeking opportunities in the market.
Breaking Through Support Levels
The possibility of breaking through the first support level at 1.0850 and rebounding off the second support level at 1.0825 contributes to sustaining the bullish trend. Traders recognize the significance of these support levels and their role in maintaining positive market sentiment.
Support from Resistance Levels
The existence of the first resistance level at 1.1890 adds weight to the potential bullish scenario. This level is characterized by a multiple-swing high resistance and a Fibonacci confluence involving the 78.60% Fibonacci Retracement and the 61.80% Fibonacci Projection. Furthermore, the second resistance level at 1.0927 acts as an additional swing high resistance, reinforcing the possibility of an upward price movement.
Considering the observations and analysis made, a suitable trade suggestion for traders is to contemplate buying at 1.0856. Establishing a take-profit level at 1.0890 and setting a stop-loss order at 1.0831 would be a prudent approach to managing potential risks effectively.
AUDUSD: Bearish Momentum Indicates Potential Downward Trend
Analyzing the AUD/USD chart reveals a prevailing bearish momentum that hints at a likely continuation of the downward trend. Traders take note of this development as it presents potential opportunities for profit in the market.
Advantageous Support Level
Traders observe a favorable situation where the bearish momentum is likely to lead the price toward the first support level at 0.6685. This support level possesses advantageous properties, including overlap support, a 61.80% Fibonacci Retracement, and a 78.60% Fibonacci Projection. The convergence of these factors strengthens the importance of this level in the market.
Noteworthy Resistance Levels
On the other side of the spectrum, the initial resistance level at 0.6710 holds significance due to its nature as an overlap resistance. Additionally, it acts as a swing with high resistance and falls within the range of a 127.20% Fibonacci Extension. The second resistance level at 0.6731 is also notable for its role as another swing-high resistance.
Considering the analysis conducted, a trade suggestion for traders would be to consider selling at 0.6685. Establishing a take-profit level at 0.6670 and setting a stop-loss order at 0.6699 would be a prudent approach to managing potential risks effectively.
USDJPY: Bullish Momentum Indicates Upward Market Trend
Analyzing the USD/JPY chart reveals a prevailing bullish momentum, which points to an upward market trend. Traders keenly observe this dynamic, seeking potential opportunities for profit in the market.
Short-term Gains and Support Levels
In the short term, traders anticipate potential gains that may lead the price toward the first resistance level at 143.00. However, a reversal is expected, causing the price to fall toward the first support level at 141.29. The first support level holds significance as it serves as overlap support, while the second support level at 140.23 acts as retreat support.
Noteworthy Resistance Levels
On the upside, the presence of the 61.80% Fibonacci Retracement level and the first resistance level at 142.39 is noteworthy. Additionally, the intermediate resistance at 141.92 acts as a swing-high resistance.
Based on the analysis conducted, a suitable trade suggestion for traders is to consider buying at 143.13. Establishing a take-profit level at 144.05 and setting a stop-loss order at 142.55 would be a prudent approach to managing potential risks effectively.
DOW JONES: Weak Bullish Momentum in DJ30 Chart
Analyzing the DJ30 chart reveals a weak bullish momentum with minimal conviction. Traders closely monitor this situation, evaluating the potential for profit in the market.
Bullish Comeback and Resistance Levels
Traders anticipate a potential bullish comeback starting from the first support level at 34136.98. This resurgence may lead to an upward movement toward the first resistance level at 34450.65. The first support level gains significance due to its association with the 38.20% and 61.80% Fibonacci Retracement levels, acting as overlap support. The second support level at 33707.62 benefits from the support of the 61.80% Fibonacci Retracement and the 145.00% Fibonacci Extension, establishing itself as a pullback support.
Overlap Resistance and Swing High Resistance
On the upward journey, the first resistance level at 34450.65 stands as an overlap resistance, while the second resistance level at 34879.95 presents itself as a swing-high resistance. These resistance levels play a crucial role in studying the overall sluggish bullish trend observed in the DJ30 chart.
Considering the analysis conducted, a trade suggestion for traders would be to consider buying at 33986.07. Establishing a take-profit level at 34120.86 and setting a stop-loss order at 33894.31 would be a prudent approach to managing potential risks effectively.
WTI CRUDE OIL: Bearish Momentum Indicates Downward Movement
Analyzing the WTI chart reveals a bearish momentum as the price remains below a significant falling trend line. This observation suggests the possibility of more downward movement, prompting traders to monitor the market closely.
Negative Continuation and Support Levels
Traders anticipate a potential negative continuation, leading the price toward the first support level at 67.99. This support level aligns with the 78.60% Fibonacci projection and acts as a multiple-swing low support, making it highly notable. Additionally, the second support level at 63.94 functions as another multi-swing low support, further reinforcing the support zone.
Pullback Resistance and Multi-Swing High Resistance
On the upside, the pullback resistance at the 1st barrier level of 72.44 may impede higher price movement. Furthermore, the second resistance level at 76.30, which represents a multi-swing high resistance, holds significance in preventing future development.
Considering the analysis conducted, a suitable trade suggestion for traders is to consider selling at 68.22. Establishing a take-profit level at 66.74 and setting a stop-loss order at 69.58 would be a prudent approach to managing potential risks effectively.
GOLD: Bearish Trend Continues on XAU/USD Chart
Analyzing the XAU/USD chart reveals a continuation of the earlier bearish trend as the price breaks through the lower channel line. Traders pay close attention to this development, assessing potential opportunities in the market.
Potential Price Movement and Support Levels
In the near term, the price may experience a rise towards the first resistance at 1953.20 before reversing course and falling towards the first support at 1911.62. The first support level gains significance as an overlap support within the 61.80% Fibonacci Retracement range. Another overlap support is provided by the second support level at 1856.67.
Overlap Resistance and Swing High Resistance
On the upside, the 50% Fibonacci Retracement and the first resistance level at 1938.90 act as overlap resistance. Additionally, the second resistance level at 1987.35 overlaps the first resistance, further reinforcing its significance.
Minor Resistance Level
A minor resistance level at 1920.65 may potentially impact price changes, adding an additional factor for traders to consider.
Based on the analysis conducted, a suitable trade suggestion for traders is to consider selling at 1913.28. Establishing a take-profit level at 1900.27 and setting a stop-loss order at 1924.63 would be a prudent approach to managing potential risks effectively.
ETHEREUM: Potential Bullish Bounce off Support Level
Analyzing the ETH/USD chart reveals a potential bullish bounce off the first support level, indicating a potential upward movement. Traders closely observe this development, seeking opportunities in the market.
Support Levels and Fibonacci Retracement
The first support level at 1862.6 serves as a pullback support level and a 23.60% Fibonacci Retracement, making it a favorable level to consider. Similarly, the second support level at 1825.5 functions as a pullback support and coincides with a 38.20% Fibonacci Retracement, adding to its advantage.
Noteworthy Resistance Levels
On the resistance side, the first resistance level at 1920.7 represents a multi-swing high resistance. Similarly, the second resistance level at 2015.8 serves as a swing-high resistance and corresponds with a 127.20% Fibonacci Extension, making it a significant level to monitor.
Considering the analysis conducted, a trade suggestion for traders would be to consider buying at 1887.7. Establishing a take-profit level at 1933.0 and setting a stop-loss order at 1858.0 would be a prudent approach to managing potential risks effectively.
The US dollar and treasury yields increased following Jerome Powell’s hawkish testimony. Market volatility is expected to continue as we enter the summer trading season. Investors anticipate significant moves in the global markets due to central banks’ efforts to combat inflation and recession. The performance of the Asian session, including Flash Manufacturing PMI and Flash Services PMI, can impact the AUD and GBP. Furthermore, the DXY’s next target is around 102.37, and the upcoming economic data for the Eurozone can influence the EUR. Overall, it will be crucial to monitor central bank decisions and key economic indicators to navigate the current market conditions.
Frequently Asked Questions (FAQs)
Q: What is the current state of the US markets?
A: As of the latest update, the US markets experienced a mixed day with the Nasdaq seeing a 0.5% increase, the S&P rising by 0.02%, and the Dow closing with a 0.42% gain.
Q: What is the outlook for the US debt ceiling crisis?
A: Speaker of the House Kevin McCarthy expressed confidence in ongoing negotiations, stating they are “on the right path.” However, specific details were not provided to appease investors, and the situation remains uncertain.
Q: How did the Asian markets perform during the recent session?
A: The Asian markets showed mixed performance. Australia’s Manufacturing PMI matched expectations, but the Services PMI missed forecasts. The JPY Manufacturing PMI surpassed expectations, indicating strength in the Japanese yen.
Q: What key news events are expected today?
A: Today, key news events include the release of Flash Manufacturing PMI and Flash Services PMI for the US. These reports are expected to provide insights into the performance of the manufacturing and services sectors.