Analytics

The US dollar turned slightly lower in recent trading after a modest advance early on Tuesday. The USD index briefly climbed above the 103.00 handle but failed to preserve gains as traders look cautious after last week’s rejection from the 103.50 local barrier.

In part, the buck struggles amid risk demand in global financial markets. As such, US stocks finished higher in a shortened session on Monday while Asian equities were mixed-to-higher on Tuesday after the RBA kept its key lending rate unchanged. In Europe, stocks opened cautiously higher today while trading largely unchanged amid a light data calendar and a US holiday. The US stock market will be closed today in observance of the Fourth of July holiday.

This week, the greenback could be affected by fresh economic data out of the US including the key jobs numbers due on Friday. Upbeat results could trigger a rally in the dollar amid rising Fed rate hike bets. Now, investors are focusing on the release of the FOMC minutes due on Wednesday. Next, the Eurozone retail sales data will release on Thursday. ECB President Christine Lagarde will be speaking on Friday.

103.00 in focus

The USD index keeps oscillating around the 103.00 figure, struggling to attract sustained demand as the dollar has been in a sideways price action this week as markets appear somewhat lackluster with the US out for a holiday. Traders appear to be waiting for the US to return from holiday, suggesting some volatility could pick up later in the week.

On the upside, the greenback needs to make a decisive break above the 103.20 intermediate barrier on a daily closing basis in order to see more vivid gains in the near term. Next, the focus would shift towards the 103.55 zone on the way towards the 103.75 area that capped the ascent in mid-June.

The price of bitcoin stays relatively resilient after a rejection from the 1.5-minth highs registered around $31,400 last week. The largest cryptocurrency by market capitalization has been mixed since then while also staying afloat, refraining from a major downside correction despite solid levels.

After peaking at mentioned highs, the BTCUSD pair has settled around the $30,000 psychological level, deciding on further direction. On Thursday, the coin regained the upside bias, challenging the $30,300 zone after yesterday’s brief plunge below $30,000 as Powell reiterated Fed consensus for further interest rate hikes this year. The central bank governor noted that there was majority support for at least two further rate hikes going forward. After Powell’s speech, bitcoin retraced the prior day’s gains instead of a renewed attack on $31,000.

BTC dominance at 26-month high

As market participants were focused on the Federal Reserve, news that MicroStrategy had purchased more than 12,000 BTC for its corporate treasury, failed to inspire potential buyers. The company had added 12,333 BTC (worth at the time $347 million) to its reserves, bringing its aggregate cost basis to $29,668 per BTC. As such, MicroStrategy now owns almost 0.7% of the entire potential bitcoin supply.

The largest cryptocurrency was recently trading at about $30,450, up 2.2% on the day. For the month, bitcoin has risen 11% amid the more upbeat news. At the same time, bitcoin dominance has increased to a 26-month high.

In the near term, the coin could make another attempt to overcome $31,000 and gain pace above this resistance. But first, the prices will need to make a decisive break above the $30,700 immediate resistance where yesterday’s highs arrive. On the downside, the nearest support now arrives at $29,900, followed by the $29,600 zone.

Gold saw more than three-month lows last week amid risks from the Federal Reserve's hawkish outlook. The bullion extended losses to the $1,909 area before bouncing marginally due to concerns surrounding the political turmoil in Russia where military appears to be destabilizing.

The precious metal gave up nearly 2% last week to derail the $1,910 mark for the first time since mid-March while the dollar rallied amid hawkish comments from Fed officials who signaled more rate hikes to tame inflation.

As the prices derailed the mentioned SMA along with the 100-DMA, the near-term technical outlook for the bullion has deteriorated further. Should the pressure reemerge any time soon, the prices could threaten fresh lows and the $1,900 psychological level last seen three months ago. As such, the momentum stays bearish after a rally to fresh more than one-year highs around $2,063 last month.

Still bearish in a wider picture

On the weekly timeframes, the technical picture looks bearish, especially as the metal holds below the 20-SMA that had been capping losses since February. On the upside, the immediate target now arrives at $1,930, followed by $1,943 zone where the 100-DMA lies.

In the immediate term, gold needs to regain the $1,930 zone in order to retarget the mentioned 100-DMA, followed by the descending 20-DMA, currently at $1,947. However, should the USD index attract renewed demand around the 102.50 support zone, the XAUUSD pair could stay below the key moving averages, lacking demand at this stage.

The dollar itself has been sliding for the third session in a row on Tuesday, retreating after a rally witnessed last week. After a brief break above the 102.00 figure, the buck has settled in negative territory, showing a decisive upside momentum even as risk-off tone dominates global financial markets. During the sell-off, the dollar derived support from the 102.50 zone in recent trading and could threaten fresh local lows if the pressure persists in the near term.

After a short-lived bearish consolidation, oil prices rallied due to a weaker dollar and prospects of tight supply. Brent crude jumped back above $77 a barrel to turn positive on the weekly charts. Of note, oil prices failed to retain a bullish bias on Thursday as risk sentiment remains downbeat in the global financial markets.

Equities came under more intense selling pressure after Powell endorsed the market pricing, saying that decisions will be made meeting by meeting. At the same time, the Fed governor highlighted that nearly all FOMC participants expect to hike 'somewhat further' by year end.

The US dollar stays on the defensive after yesterday’s plunge witnessed despite Powell’s hawkishness. The USD index derailed the 102.00 support zone for the first time since mid-May, threatening fresh local lows as Powell suggested that the central bank is nearing its policy destination. A cheaper greenback makes dollar-denominated oil more attractive for investors holding other currencies.

Stockpiles decline

In industry news, the API data showed on Wednesday that crude oil inventories in the United States decreased last week by 1.246 million barrels while analysts were expecting a smaller 433,000-barrel draw in stockpiles. Distillate inventories fell by 301,000 barrels after rising nearly 1.4 million barrels in the week prior. On the negative side, gasoline inventories rose 2.935 million barrels after adding 2.075 million barrels previously. Still, the release added to positive tone in the oil market ahead of the official report from the EIA due later in the day.

Brent crude peaked around $77.25 before retreating back below $77 as some traders opted to take profit following the recent rally. As such, the futures lacked the momentum to challenge the $80 psychological level for the first time since early May. On the downside, the immediate support now arrives around $76. A failure to hold above this level would pave the way towards this week’s lows in the $74.50 area.

The cable looks relatively steady after a rally towards fresh April 2022 highs late last week. GBPUSD peaked around 1.2850 before retreating partially amid profit-taking in combination with dollar’s strength. On Tuesday, the pair has settled around 1.2800, struggling for direction amid a cautious tone among traders.

On the negative side, the overall market sentiment looks downbeat, thus fueling demand for the safe-haven dollar. Global stocks are trading in negative territory even as the People’s Bank of China cut two more key lending rates for the first time in ten months. Investors worried that China's latest rate cut was not enough to prop up economic growth and awaited a wider stimulus package by Beijing. The central bank trimmed its benchmark loan prime rate by 10 basis points across the board, highlighting a slowing economic rebound in China.

Focus shifts to BoE

By the way, the Bank of England is to announce its monetary policy decision on Thursday. As economic data since the last meeting have indicated strong underlying inflationary pressures, the central bank is expected to prolong its tightening cycle and lift interest rates again.

Of note, May’s consumer price index figure will be published on Wednesday. Both the release and the Bank of England’s meeting will affect the pound later in the week. A hawkish tone could push the pair to fresh long-term highs.

On the other hand, GBPUSD looks overbought at current levels, suggesting the prices could see a solid retreat if the bank fails to lift interest rates to a higher level than previously anticipated. On the downside, the nearest support now arrives around 1.2760, followed by the 1.2700 mark. Should the buying pressure reemerges, the pair may challenge the 1.2900 mark for the first time since April 2022.

After a short-lived consolidation, the bitcoin price faced renewed selling pressure to derail the $25,000 figure for the first time in three months. BTCUSD extended losses to the $24,850 zone before rebounding slightly towards $25,000. Following yesterday’s sell-off, the coin stays on the defensive on Thursday and could threaten fresh multi-month lows if the pressure persists in the near term.

The largest cryptocurrency by market capitalization was pressured by Federal Reserve’s hawkish hold. The central bank held rates on hold, as expected, and expressed a more aggressive tone on the outlook for its monetary policy.

The decision to leave rates unchanged was expected by investors, given the macroeconomic conditions. At the same time, the central bank indicated that this pause is likely not going to last. This, coupled with a more hawkish dot plot sent stocks lower along with cryptos. By the way, the dots pushed the median expectation to a funds rate of 5.6% by the end of 2023 as the Fed focuses on cutting inflation to its longstanding target.

Volatility could ebb

In the near term, volatility in the cryptocurrency market could ebb again, with the $25,000 handle staying in focus. Should risk demand reemerge any time soon, bitcoin could attract demand along with stocks to pare recent losses. On the upside, the nearest resistance now arrives at $25,200, followed by the $25,500 intermediate barrier on the way towards the $26,000 figure.

In a wider picture, the coin has been struggling in recent weeks, lacking demand amid a cautious tone among investors. A decisive break above $30,000 is needed for a more decisive ascent in the weeks and months ahead. For now, the BTCUSD pair needs to stay around $25,000 in order to refrain from a deeper retreat that could send the prices to the $24,500 zone first.

Oil prices extended the decline at the start of the week to find support around $71.60 a barrel before bouncing slightly on Tuesday. Brent crude stays on the defensive at this stage, with selling pressure reemerging on rallies, suggesting uncertainty persists in the market.

Oil futures opened above $72 today to encounter local resistance in the $72.65 zone earlier in the day. The upside potential remains limited for the time being even as the dollar struggles to attract demand amid upbeat risk sentiment across the financial markets.

Rising global supplies and concerns about demand growth keep pressuring oil prices ahead of US Federal Reserve meeting later this week. The central bank is expected to leave interest rates unchanged. However, market participants are concerned that tightening is likely to resume next month.

China disappoints

Adding to a downbeat tone in the oil market, demand recovery has been muted in China. Of note, Goldman Sachs has slashed its forecast for oil prices by nearly 10%, citing weak demand in China and a glut of supply from sanctioned countries, including Russia. The bank now thinks Brent crude will cost $86 a barrel in December, compared with its previous estimate of $95.

Since late May, Brent has fallen more than 7% to $72 amid dismal economic data from China. Factory activity in China has slumped in May to its weakest level since the country ended its zero-Covid policy in December, suggesting its economic recovery continues to lose steam.

In the near term, Brent crude could come under renewed selling pressure if industry events disappoint. In particular, the OPEC and the International Energy Agency will each release their monthly market updates later in the day. Also, traders will focus on US CPI data that could affect oil prices through the dollar’s reaction to the release.

On the downside, the immediate significant support now arrives at $71.60, followed by the $71.40 region that capped the plunge in late May.

The price of gold dropped sharply on Wednesday to derail the $1,940 zone after another failure to overcome the descending 20-DMA. The sell-off was mostly amid a recovery in hawkish Fed bets as US Treasury Secretary Janet Yellen noted that robust consumer spending has kept the US economy resilient. Meanwhile, former Richmond Fed President Lacker said current interest rates should rise to 6% in order to bring down a still elevated inflation.

Adding to hawkish expectations surrounding the Fed, the Bank of Canada hiked its overnight rate to a 22-year high of 4.75% amid an overheating economy and stubbornly high inflation. The central bank had been on hold since January. Now, money markets see more than a 60% chance of another rate hike next month.

A day earlier, the Reserve Bank has lifted interest rates for a 12th time in just over a year, citing the risk of inflation staying too high for too long. The decision to hike by another 25 basis points brought the cash rate to 4.1%, its highest level in 11 years.

$1,950 in focus

Against this backdrop, gold prices plunged dramatically to derive support from the 100-DMA that helped to cap losses last month. The XAUUSD pair bounced from the $1,939 zone to settle around $1,945 since then. Still, the precious metal lacks demand to reverse yesterday’s losses despite a cautious tone in the global financial markets. The bullion needs to regain the $1,950 region in the near term in order to stay afloat.

As central banks remain in focus, the metal is hardly affected by the dollar’s dynamics for the time being. The USD index extended its consolidation around the 104.00 figure, looking directional at this stage as traders have been in wait-and-see mode these days, awaiting the Federal Reserve meeting due next week.

The US dollar retreated at the start of the week, weighed by soft US data and lower Treasury bond yields. US ISM Services PMI declined to 50.3 for May versus 51.5 expected and 51.9 prior. Meanwhile, factory orders grew just by 0.4% versus 0.5% market forecasts and 0.9% previous readings. After the data, the market’s bets on the Fed’s June rate hike dropped further, pressuring the greenback.

As such, the USD index slipped from the 104.40 intraday high to finish at 104.00. The dollar struggles for direction on Tuesday even as risk appetite looks subdued in the global financial markets. Wall Street stocks failed to preserve early gains and finished slightly lower on Monday, while European stocks opened in negative territory today, mirroring the lack of appetite in US futures as well.

The buck looks steady now as volatility in stock markets keeps abating while Treasury yields have barely moved so far today. In the near term, the DXY is unlikely to stage any sustained rally as the latest economic data appears to have given investors further hope for a pause at FOMC meeting next week.

ECB adds to pressure

Meanwhile, further tightening remains well in place for the ECB at the June and July meetings. Expectations for further rate hikes from the ECB in June were cemented by hawkish comments from central bank’s Lagarde and Nagel. Against this backdrop, the US currency could face extra pressure through the euro’s potential rise. So far, however, the shared currency struggles to attract sustained demand, holding around 1.0700, just slightly above mid-March lows seen last week around 1.0635.

In the immediate term, the safe-haven dollar could see some pickup in demand if risk sentiment deteriorates further. However, dovish expectations surrounding the upcoming Fed meeting will likely cap the potential ascent and attract profit-taking. If the USD fails to hold above the 103.80 intermediate support, the technical picture would deteriorate further.

The bitcoin price has been losing ground for the fourth session in a row on Thursday to reverse recent gains that brought the coin above $28,000. The rally was capped by the $28,500 zone, now pressuring the BTCUSD pair below the $27,000 figure. The largest cryptocurrency by market capitalization extended losses to the $26,600 area earlier in the day before steadying somehow around $26,800.

As such, BTC started a fresh decline after rejection from the mentioned local tops, suggesting the digital currency continues to attract selling interest on rallies due to persisting uncertainty both in the industry and in the traditional financial markets. Overnight, the bill to raise the US debt ceiling was passed in the House of Representatives, advancing it to the Senate.

Elsewhere, Federal Reserve Bank of Cleveland President Loretta Mester reiterated her concerns about jobs data and inflation. She also pushed back against the notion that further evidence is needed from economic data before hiking. The USD index briefly climbed to fresh mid-March highs in the 104.70 zone before retreating from peaks amid profit-taking on Wednesday. Today, the dollar regained the upside bias, continuing to cap demand for BTC.

Near-term outlook bearish

It looks like the coin could see even deeper losses in the near term, especially as the greenback stays bullish across the board. Of note, BTC struggles despite some improvement in risk sentiment, suggesting the correlation between the digital currency and stocks keeps waning.

In a wider picture, bitcoin remains on the defensive despite a solid recovery at the start of the year. Following a bounce from $16,500 in January, BTCUSD briefly climbed to the $31,000 mark in April but has been drifting lower since then to finish May in negative territory. Now, the coin needs to hold above $25,00 in order to avoid a deeper retreat in the coming weeks.