MARKET UPDATE:

Mixed Markets Before a Critical Vote

As investors get ready for the challenging procedure that US lawmakers must go through to get the debt deal past Congress, markets had a mixed day yesterday. Early optimism is beginning to fray as hardliners on both sides of the aisle raise some concerns. The Dow closed down 0.15%, the S&P remained unchanged, and the Nasdaq ended up 0.32%, but the major US indices were unable to provide any guidance to the Asian market after market favorite NVidias once again rose to reach the trillion-dollar club. Despite a choppy day for the dollar, it mostly traded within recent levels, while the bond markets stabilized.

To move markets, investors look for data and political updates.

Investors anticipate that volatility will rise even more today as the macroeconomic calendar picks up and the US receives regular updates on the debt ceiling agreement and its path toward becoming law. The Australian CPI data came in stronger than expected, and the Chinese PMI statistics came back with a weaker-than-expected result, giving traders mixed signals early in the Asian session. Since the most recent preliminary state CPI figures are due out and the ECB stability report is also scheduled to be revealed today, market participants will be paying close attention to Germany during the European session. The Canadian GDP statistics is scheduled to be released early in the North American session, with a 0.1% fall expected. The US Jolts Job Openings numbers will be released later that day.

What happened in the Asian Session?

A decline in industrial production (-0.4%) and a slower increase in retail sales (5.0% y/y) could put pressure on the Japanese Yen. Despite a minor increase in consumer confidence (36.0), a decline in housing starts (-11.9% y/y) adds to the negative picture.

Given a higher-than-expected Consumer Price Index (6.8% y/y), which points to growing inflation, the Australian Dollar may gain strength. Strong growth in completed construction work (1.8% q/q) and a sharp rise in private sector credit (0.6% m/m) point to potential economic growth.

What does it mean for Europe & US Sessions?

The DXY will probably retest recent highs around 104.50 if it rises above the tested support area of around 103.70. If the bulls prevail, a push for the round figure resistance at 105.00 is anticipated. Otherwise, if 103.70 were not maintained, the bears would be given a break to the psychological support at 103.00.

The Dollar Index (DXY)

Key news events today

JOLTS Job Openings

What can we expect from DXY today?

It is anticipated that the JOLTS Job Openings data for the USD will show a modest decline. 9.41 million job opportunities are predicted, down from the prior estimate of 9.59 million. This could have a negative effect on the USD because fewer job vacancies could make investors less confident in the country’s general economic health, which could lower the USD’s value relative to other currencies.

Central Bank Notes:

• The committee raised the target range for the federal funds rate to 5 to 5-1/4 percent. The U.S. banking system is sound and resilient.
• Tighter credit conditions for households and businesses may weigh on economic activity, hiring, and inflation.
• The committee is committed to returning inflation to its 2% objective
• The committee will adjust monetary policy as appropriate if risks emerge that could impede the attainment of goals
• The next meeting is on 14 June 2023

Next 24 Hours Bias

Weak bearish

The Australian Dollar (AUD)

Key news events today

CPI y/y

What can we expect from AUD today?

The predicted Australian CPI y/y result is 6.4%, which is a little increase over the previous reading of 6.3%. A higher-than-anticipated CPI might have a beneficial effect on the AUD and possibly raise interest rates.

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.
• The next meeting is on 6 June 2023

Next 24 Hours Bias

Weak bullish

The Canadian Dollar (CAD)

Key news events today

GDP m/m

What can we expect from CAD today?

The Canadian GDP m/m statistics that will soon be released is predicted to show a contraction of -0.1%, down from the previous month’s gain of 0.1%. As a result, investor confidence would decline, and the CAD might deteriorate. A slower GDP growth rate indicates less economic activity, which could affect foreign investments in Canada and depress market sentiment.

Central Bank Notes:

• Bank of Canada holds its target for the overnight rate at 4.5%
• Labor markets remain tight with persistent price pressures, especially for services
• Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
• Prepared to increase the policy rate further to return inflation to the 2% target.
• The next meeting is on 7 June 2023

Next 24 Hours Bias

Weak bearish

Global Markets:

Asian Stock Markets: Nikkei is down 1.41%, Shanghai Composite is down 0.61%, Hang Seng is down 2.41%, ASX is down 1.64%

European equities, the DAX futures down 0.69%, CAC 40 down 0.84%, and FTSE down 0.62%.

US Stock Market: Dow Jones is down 0.15%, S&P 500 is up at 0.00%, and the Nasdaq 100 is up by 0.32%.  

Commodities: Gold at $1957.46 (-0.04%), Silver at $23.27 (+0.44%), Brent Oil at $73.70 (-0.05%), WTI Oil at $69.44 (-0.03%)

News & Data

• (CNY) Manufacturing PMI (May) Actual 48.8, Forecast 51.4, Previous 49.2 at 07:00
• (EUR) German CPI (MoM) (May) Forecast 0.6%, Previous 0.4% at 17:30
• (USD) JOLTs Job Openings (Apr) Forecast 9.775M, Previous 9.590M at 19:30
• (CAD) GDP (MoM) (Mar) Forecast 0.2%, Previous 0.1% at 18:00

TECHNICAL OUTLOOK

GBPUSD

The GBP/USD pair is currently displaying bearish momentum, which is being aided by the price being below the Ichi Moku cloud’s bearish boundary. Possible bearish continuation of the price in the direction of the first support.

The first support, overlap support, is located around 1.2376 and is a key level in the market structure. The second support, which is located at 1.2305 and serves as a swing low support, can draw buyers to the market.

The initial resistance level, however, is located at 1.2470. This level acts as a multi-swing high resistance and may present difficulties for any possible price increase. Similar to the first resistance, the second barrier is located at 1.2536 and acts as a multi-swing high resistance, possibly limiting further price growth.

A strong barrier to price increases may also exist at the intermediate resistance level at 1.2425, which is another multi-swing high resistance.

EURUSD

The EUR/USD pair is currently displaying bearish momentum, which is being aided by the price being below the Ichi Moku cloud’s bearish boundary. Price may make a bearish break off the first support and fall in the direction of the second support.

The first support, which is overlap support and is located at 1.0694, is regarded favorably. The second support is overlap support at 1.0623, making it an important level to watch.

On the other hand, the initial resistance level, which serves as an overlap resistance, is at 1.0747. This might make it difficult for prices to rise upward in the future. Similar to the first resistance, the second resistance is located around 1.0793 and is an overlap resistance that may serve to limit future price gains.

AUDUSD

The price is currently below a significant declining trend line on the AUD/USD chart, and the bearish Ichi Moku cloud is present, signaling that the bearish trend may continue.

The first support level, which is located around 0.6497 and is known as multi-swing low support, may serve as a floor for price fluctuations. The alignment of the 161.80% Fibonacci extension with the second support level, or swing low support, at 0.6403, is significant for its potential as a support level.

A bearish break off the first support might lead to a decline towards the second level. If a reversal occurs, the pullback resistance level at 0.6578, which corresponds with the 50% Fibonacci retracement, should be taken into account. The 61.80% Fibonacci retracement coincides with the overlap resistance at 0.6607, further strengthening its capacity to restrict upward advances.

USDJPY

The USD/JPY pair is currently showing bullish momentum, and the fact that the price is above the bullish Ichi Moku cloud suggests that additional bullish momentum may be on the horizon.

The price may decline further soon towards the first support level at 138.79. By acting as an overlap support, this position may draw buyers into the market, halting further price decline and possibly triggering a positive comeback.

The second line of support is at 137.71 if the price drops below this level. This level is also overlapped support and can be a good place to buy to stop the price from falling any lower.

On the upside, the initial resistance level, which serves as a pullback resistance, is located at 140.89. Further upward movement might be anticipated if the bullish momentum persists, and the price is able to rebound off the support and break over this barrier.

At 142.26, there is a second resistance that acts as a swing high. Given that sellers previously considered this level to be enticing enough to trigger a price reversal, this resistance may be substantial.

DAX 40

The DAX 40 chart is currently displaying a bearish momentum, suggesting that the downward trend may continue.

As the 61.80% Fibonacci retracement level, the first support level at 15812.0 acts as a strong area of pullback support. This level is significant historically and could act as a floor for price swings.

Another indication of the second support level’s potential as a crucial support region is the fact that it is multi-swing low support at 15691.8.

The price may move in the direction of these support levels in the case of a negative continuation.

The initial resistance level, which is at 16064.3, is a multi-swing high resistance on the resistance side. This might serve as a short-term ceiling on price changes, potentially pausing or reversing the bearish trend.

Its potential as a resistance level is further supported by the fact that the second resistance level, at 16352.7, is an overlap resistance and coincides with the 78.60% Fibonacci retracement.

WTI CRUDE OIL

The WTI chart is currently trending downward.

The first level of support, known as overlap support, is located at 69.01.

At 66.43, there is a second support level that is also known as overlap support.

The first resistance level on the resistance side is 71.35 and is known as a pullback resistance. The bearish trend may temporarily stall or retrace as a result of this level acting as a barrier to any market advances upward.

The second resistance level, known as an overlap resistance, is located at 73.94. It has been demonstrated in the past that this level is significant as a price level when selling pressure has developed.

The general trend points to the indicated support levels as a likely continuation of the bearish trend.

GOLD

The XAU/USD chart is now trending downward.

The initial support level, known as overlap support, is located at 1931.95.

The second support level, commonly known as overlap support, is located at 1905.973.

On the resistance side, the 1982.94 level is the initial resistance level and is considered a multi-swing high resistance. This level could operate as a short-term barrier to any price increases, possibly leading to a pause or pullback in the bearish trend.

The second resistance level, known as an overlap resistance, is located at 2000.42 It has been demonstrated in the past that this level is significant as a price level when selling pressure has developed.

A swing high resistance level, or intermediate resistance level, is located at 1969.68.

ETHEREUM

The current bearish momentum on the ETH/USD chart suggests that the downward trend may continue.

The initial support level, known as overlap support, is located at 1863.35.

The second support level, commonly known as overlap support, is located at 1823.63. Due to its alignment with the 50% Fibonacci retracement, this level has added significance and is a crucial support level.

The initial resistance level, known as a multi-swing high resistance, is at 1924.75 on the resistance side.

At 1986.14, there is a second resistance level that is referred to as a swing high resistance. If the bearish trend changes, this level might offer more resistance to price increases.

The general trend points to the indicated support levels as a likely continuation of the bearish trend.