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US shares rallied on Wednesday after the Fed raised the interest rates by 75 basis points, the largest increase since 1994. In the meantime, the Fed chairman, Jerome Powell signalled that the Fed could raise interest rates by a similar magnitude in July, promising to tackle the inflation. The markets were boosted and given confidence, thus three major US indices jumped at the end of the day on Wednesday; the Nasdaq Composite rallied 2.5% and the S&P 500 climbed 1.46% to 3789.99; the Dow Jones Industrial Average rose 1%, ending a five- day losing streak. Despite rising rates at such a rapid pace from the Fed had no surprise to the general, the market seemed to cheer for the confirmation of the Fed’s commitment to fighting the inflation battle.
The ECB announced that it plans to create a new tool to tackle the risk of eurozone fragmentation, attempting to calm the fears of a new debt crisis. The new decision came after the ECB surprised markets with an emergency meeting to address higher borrowing costs for several European governments compared to the benchmark German bonds. In response to the fragmentations, the ECB mentioned that it would reinvest redemptions from its emergency bond-purchasing program, the so-called PEPP. In the meantime, the ECB promised that it will accelerate the completion of the design of a new anti-bond fragmentation instrument.
Main Pairs Movement
NZD/USD traded 1.17% higher and closed at 0.62853 on Wednesday. The greenback lost ground after the FOMC interest rates decision as Fed Chairman Powell said the next hike could either be 50 or 75 basis points, causing the demand for the greenback goes down.
EUR/USD was up 0.24% and closed at 1.04403 at the end of the day. The greenback seemed to lose interest on Wednesday, the day that the US Fed was in the spotlight. Though the Fed raised the rates by 75 basis points, the highest since 1994, the greenback lost interest after the Fed dismissed the chances of 100 basis points.
The US dollar Index was on the backfoot, dropping 0.6%. The demand for the greenback declined after a dovish hawkish Fed following the comment from Fed Chairman Powell, denying the possibility of a 100 basis point hike in July. With the dovish move from a hawkish Fed, most of the G-10 currencies got boosted, and so did the precious metal, gold, edging 1.41% higher, to $1833.97 per ounce.
Technical Analysis
EURUSD (4-Hour Chart)
EURUSD rebounded throughout Thursday’s trading. The dollar fell sharply after the FOMC raised interest rates by 75 basis points. The broad-based Dollar weakness allowed the Euro to rebound from earlier losses during the Europan and Asia trading hours. This short-term rebound, however, might not be sustainable as the interest rate difference between the Fed and the ECB has now increased even further.
On the technical side, EURUSD has found fresh support around the 1.038 price region. Near-term resistance has formed near the 1.049 price region. RSI for the pair has recovered from the oversold territory and is currently indicating 43.6. On the four-hour chart, EURUSD trades below its 50, 100, and 200-day SMA.
Resistance: 1.049
Support: 1.03783
GBPUSD (4-Hour Chart)
GBPUSD gained 1.5% throughout Thursday’s trading. The FOMC has increased interest rate by the most significant margin in 40 years, in an attempt to control soaring inflation. Fed chair Jerome Powell has also indicated that either a 50 or 75 basis point interest rate hike is likely at the FOMC’s July meeting. The BoE is set to announce its interest rate policy and financial guidance during the European trading session.
On the technical side, GBPUSD has rebounded strongly from our previously estimated support level of 1.20824, the pair met fresh resistance around the 1.218 price region. RSI for Cable is currently sitting at 66.16. On the four-hour chart, GBPUSD is trading above its 50-day SMA, but below its 100 and 200-day SMA.
Resistance: 1.25944
Support: 1.20824
USDJPY (4-Hour Chart)
USDJPY fell 1.23% throughout Thursday’s trading. The 75 basis point increase in interest rates has weakened the Dollar as the U.S. 10-year Treasury yield retreats below the 3.3% level. The interest rate difference between the U.S. and Japan will further encourage carry trades as the interest rate differential increases. The BoJ’s insistence on an easy money policy shows a stark contrast between the two central banks.
On the technical side, USDJPY has met its fresh resistance at 135.6, while support levels at 133.5 and 132.5 remain firmly intact. RSI for USDJPY indicates 66.18, as of writing. On the four-hour chart, USDJPy currently trades above its 50, 100, and 200-day SMA.
US markets were mixed on Tuesday as investors continued to brace for further rate hikes from the Fed and wait for the tier-1 economic data on Wednesday. The S&P 500 fell for a fifth day, dropping 0.38%. The Nasdaq Composite slightly rose 0.18% to close with 10,828.35 while the Dow Jones Industrial Averages declined 0.5%, settling at 30,364.83 at the end of the day. The downside in equities came as rates surged again in anticipation of more aggressive tightening monetary policies from the Fed. Major sell-off would possibly not stop until the rates are settled.
Moving on to cryptocurrency markets, two of the biggest cryptocurrencies, Bitcoin and Ethereum, sank more than 17% in a week. Investors worried about another possible crypto winter and collapse, bringing down other key players, like crypto lending firm Celsius. Celsius recently moved to pause all withdrawals due to the liquidity crisis, sparking fears that Celsius might confront some financial problems. In the meantime, Coinbase has announced that it will cut 18% of its full-time jobs as its executives are preparing for recession and cryptocurrency winter.
Main Pairs Movement
The 10- year benchmark Treasury yield hit its highest level, 3.475%, in 11 years as investors continued to assess the prospect of the Fed, imposing more aggressive interest rate hikes. At the same time, the 2- year Treasury yield jumped to 3.437%, the highest since 2007.
GBP/USD declined 1.11% and finished at 1.19958 at the end of the day. The cable plunged following the disappointing figures from the UK unemployment rate and the Claimant Count Change; the UK unemployment edged higher to 3.8%, higher than expected, while the Claimant Count change figure was worse than the estimate.
Gold fell for a two-consecutive day, holding slight above $1,800 ahead of the FOMC meeting. Gold remained downside and under pressure following the rumours that the Fed might consider hiking rates by 75 basis points in response to the inflationary pressure, thus giving the bullion a downside look.
EUR/USD flirted with 1.0400 ahead of the FOMC meeting. However, further price movement might start reacting before Thursday’s meeting, as the US will publish the tier-1 data, and retail sales figure on Wednesday.
Technical Analysis
EURUSD (4-Hour Chart)
EURUSD has temporarily rebounded after a three-day losing streak. Market sentiment, however, continues to look bearish for the Euro as market participants are now pricing in a possible 75 basis point interest rate hike by the Fed. The Federal Reserve is set to convene tomorrow and provide forward guidance on the U.S. economy. Important retail sales figures are also due tomorrow during the American trading session.
On the technical side, EURUSD has found support near the 1.04038 price region. The secondary support level sits at 1.03783. RSI for the pair has dropped to 35.5, as of writing. On the four-hour chart, EURUSD is trading below its 50, 100, and 200-day SMA.
Resistance: 1.07454
Support: 1.04038, 1.03783
GBPUSD (4-Hour Chart)
GBPUSD extends its losing streak as market participants continue to sell off the British Pound. The National Statistics of the U.K. reported a higher unemployment rate for May, thus exerting more pressure on the U.K.’s economic outlook. While the Federal Reserve is set to announce its interest rate policy tomorrow, the BoE continues to find itself in a hard place, facing soaring inflation while the economy is contracting. Risk-averse market sentiment further supports the U.S. Greenback in the short term. The U.S. 10-year Treasury yield has marched past 3.44%.
On the technical side, GBPUSD has reached its lowest point in two years. The short-term support level at 1.20824 seems weak, but the next level support level sits close at 1.19189. RSI for the pair sits at an oversold territory of 15.52, as of writing. On the four-hour chart, Cable trades well below its 50, 100, and 200-day SMA.
Resistance: 1.25944
Support: 1.20824
USDJPY (4-Hour Chart)
The U.S. Greenback continue to gain appeal as global market sentiment continues to sour. Global equities have retreated significantly since the start of the month. Red hot U.S. PPI has market participants pricing in a 75 basis point hike by the Fed. As of writing, the U.S. 10-year Treasury yield has soared past 3.45%. The further interest rate differential between the U.S. and Japan will continue to provide upward momentum for the USDJPY pair.
On the technical side, USDJPY has found a near-term support level around the 134.1 price region. The short-term resistance level at around 135 seems weak as the Fed is due to announce monumental monetary policy statements tomorrow. RSI for the pair sits at 62.5, as of writing. On the four-hour chart, USDJPY trades above its 50, 100, and 200-day SMA.
Major sell-off intensified on Monday, turning US indices into bear market territory as recession fears grew ahead of the key FOMC meeting this week. The S&P 500 tumbled nearly 4% to 3749.83, the lowest level since 2021; the S&P 500 is now down 21% from its high, closing in the bear market territory. In the meantime, the Nasdaq Composite shed 4.68% while the Dow Jones Industrial Averages dropped 2.79%; the Nasdaq and the Dow were down 33% and 17%, respectively from their high.
The markets continued to digest a higher-than-expected inflation report from last week, thus beginning to anticipate an even faster pace of interest rate hikes; some Fed policymakers are now coming up with the idea of a 75 basis point rate increase this week. Meanwhile, the market closely monitored the spread between the US 2- year Treasury yield and the US 10- year Treasury yield. The US two-year yield now exceeds the 10- year for the first time since early April, a potential recession.
Bitcoin, Ethereum, and other cryptocurrencies plunged on Monday, making two of the world’s biggest cryptocurrency platform-restricted activities. Bitcoin and Ethereum were both down more than 15% intraday. Crypto-investors seemed to dump intensify their crypto-assets amid a broader sell-off in risk assets as the rampant inflation continued and the Fed’s upcoming interest rates decision.
Main Pairs Movement
AUD/USD dropped 1.72%, to 0.69204 on Monday following a collapse in the US and the global stock market. Investors bet on the greenback as the Fed will impose even more tightening monetary policy, boosting the greenback.
WTI had little change and remained well supported near 120 despite the risk-off conditions as China lockdown worries. According to Bloomberg, China is somehow walking back some of its Covid loosening measures as the officials see some potential outbreaks.
Gold plunged more than 2% and closed at 1819.39 on Monday as the greenback soared to fresh cycle highs. Despite the inflationary pressure giving some support to the bullion, the potential 75 basis points interest rate hikes by the Fed has caused angst in the financial markets, hurting the precious metal, gold.
EUR/USD was down for the third- consecutive trading day, closed at 1.0406 on a bloody Monday. Risk aversion dominated the financial and forex markets as the greenback demand spurred, sending most of the G-10 currency pairs to the lowest, including EUR/USD.
Technical Analysis
EURUSD (4-Hour Chart)
EURUSD continued to plunge on the first trading day of the week. The EURUSD is now on its third consecutive losing day. The Euro has slid more than 2% after the ECB conference held on last Thursday. Inflation and worries over an impending recession have boosted demand for haven assets such as the U.S. Greenback. The U.S. Dollar remains in strong demand as the benchmark 10-year Treasury yield rises past 3.35%.
On the technical side, EURUSD has broken well below our previously estimated support level of 1.064. As of writing, EURUSD is heading towards its lowest level of 2022 and the support level of 1.03783. RSI for EURUSD currently sits at 35.95. On the four-hour chart, EURUSD is trading below its 50, 100, and 200-day SMA.
Resistance: 1.07454
Support: 1.03783
GBPUSD (4-Hour Chart)
GBPUSD has continued to slide on the first trading day of the week. The British GDP contracted 0.3%, month over month, marking a larger contraction than the previous monthly figure of negative 0.1%. The slowing economy in Britain has agitated market participants as the ECB now faces the possibility of stagflation. The broad-based risk-averse market sentiment has only added fuel to the recent rally of the U.S. Greenback.
On the technical side, GBPUSD has dropped below its May low of 1.21996 and is heading towards two-year-long support at 1.20824. RSI for Cable has dropped to 33.42, as of writing. On the four-hour chart, GBPUSD is currently trading below its 50, 100 and 200-day SMA.
Resistance: 1.25944
Support: 1.20824
USDJPY (4-Hour Chart)
USDJPY continued to be traded at extremely elevated levels. The Dollar’s strength has been aided by the soaring U.S. 10-year treasury yield and a broad-based risk-averse environment. BoJ chief Haruhiko Kuroda recently expressed concerns over the sharp drop of the Japanese Yen, however, the Japanese Yen will continue to fare worse against the Dollar as market participants are now pricing in a possible 75 basis point interest rate hike by the Federal Reserve.
On the technical side, USDJPY seems to have hit its near-term resistance level at the 135 price region. A near-term support level at 133.382 has formed, while the lower level of support remains firm. RSI for USDJPY has reached overbought territory and is indicating 74.12, as of writing. On the four-hour chart, USDJPY currently trades above its 50, 100, and 200-day SMA.
US equity markets lost ground on Friday following the inflation indicator, CPI, which rose 8.6% in May, the highest level since 1981. The Dow Jones Industrial Averages slid 2.73% while the S&P 500 shed 2.91%, to 3900.85. The Nasdaq Composite dropped 3.56%, to 11832.82. The inflation accelerated further in May. The CPI rose 8.6% from a year ago, and the core CPI was up 6%, also higher than the expected, 5.9%. Markets reacted negatively and confronted selling pressures to the reports as investors worried about acting more aggressively from the Fed; some economists even predicted the Fed might hike rates by as much as 3 basis points, 0.75% next week.
In the bond market, markets were closely monitoring and fearful of a recession; investors were watching the bond market. the short-term bond, 2-year Treasury yield reached 3.06%, and the long-term bond, 10-year Treasury yield, reached 3.159. The spread between the two bonds was only 10 basis points. If the 2- year Treasury bond yield moved above the 10- year, then the inverted yield happened again, a recession signal.
Main Pairs Movement
Gold, recovered from the multi-week low and reached 1871.61 on a volatile Friday. Fundamentally, gold is still confronted with sizeable losses as investors continued to seek refuge in the safe-haven greenback amid the soaring inflation and a more aggressive monetary policy from the Fed. Further price actions eye on the FOMC meeting.
EUR/USD lost ground on Friday, sliding 0.92% to 1.05170. The safe-haven greenback dominated the markets after the US CPI report and consumer confidence data from the US, signalling a solid move to the greenback as the Fed might be more aggressive on its policy.
USD/JPY continued to head north, finishing with 134.317, breaking its 20- year peak. The BOJ’s dovish isolation, keeping its YCC measures and ultra-loose policy, continued to give pressure on the Japanese Yen.
AUD/USD dropped to a fresh two-week low, back below the 0.7100 level in reaction to higher than expected US CPI. The Aussie faced aggressive selling as investors sought a refuge, thus the demand for the safe-haven greenback increased.
Technical Analysis
EURUSD (4-Hour Chart)
EURUSD continued to head lower on the last trading day of the week. The rallying Dollar exerted intense selling pressure on the Euro. The highly anticipated U.S. CPI report came in red hot at 8.6%, year over year. The benchmark U.S. 10-year Treasury yield shot above 3.1% as market participants priced in a possibility of a further interest rate hike by the Fed. The ECB’s Thursday meeting did not add confidence to the Euro as the central bank is only committed to a 25 basis point interest rate increase and lowered economic guidance for the rest of the year.
On the technical side, EURUSD has dropped below our previously estimated support level of 1.06477 and is heading towards 3-year lows. Support levels for EURUSD now sit at near the 1.05031 price region, which is a 2017 low. RSI for the pair sits at 39.93, entering oversold territory. On the four-hour chart, EURUSD is trading below its 50, 100, and 200-day SMA.
Resistance: 1.07691
Support: 1.06477
GBPUSD (4-Hour Chart)
GBPUSD fell sharply on the last trading day of the week as the dollar rallied. The red hot U.S. CPI report propelled the U.S. 10-year Treasury yield above the 3.1% level. On Thursday, British Prime Minister Boris Johnson announced a proposed tax cut for households in an attempt to boost the British economy; however, the British Pound failed to gain traction. Next week’s FOMC meeting will be closely watched by market participants.
On the technical side, GBPUSD has dropped below our estimated support level at 1.24539 and is pounding towards the following near-term support level at 1.21996. RSI for Cable sits at 38.26, as of writing. On the four-hour chart, GBPUSD currently trades well below its 50, 100, and 200-day SMA.
Resistance: 1.25944
Support: 1.21695
USDJPY (4-Hour Chart)
USDJPY rose on the last day of the trading week as the Dollar index rallied past the 104 level. The U.S. CPI data came in at 8.6%, year over year. With inflation continuing to run high, market participants are pricing in possibly more aggressive interest rate hikes by the Fed. Next week’s FOMC should guide the interest rate trajectory for the rest of the year.
On the technical side, USDJPY has risen near our estimated resistance level at 134.56. RSI for the pair has risen to 67.05 and once again entered the overbought territory. On the four-hour chart, USDJPY is trading above its 50, 100, and 200-day SMA.
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