Analytics

The Australian currency snapped a two-day recovery on Tuesday to come under renewed selling pressure on Tuesday as the US dollar rallied to fresh multi-week highs. The Aussie has been on the defensive for the fourth month in a row already, struggling to attract demand.

Recently, the pressure intensified on expectations that the Federal Reserve will not halt policy-tightening next month and will continue hiking interest rates further to keep fighting stubborn US inflation. In Australia, fresh CPI data is due on Wednesday. Inflation is expected to rebound in April to 6.4% from 6.3% previously.

Next, the focus would shift towards the release of the United States employment data. The report will provide a base to Federal Reserve policymakers for designing June’s monetary policy stance. As such, Nonfarm Payrolls data will be extremely crucial on Friday. Should labor market conditions ease, the Fed could go to more neutral on interest rates after recent hawkish signals.

Copper adds to downbeat tone

AUDUSD briefly derailed the 0.6500 region late last week to notch fresh six-month lows. The pair has rebounded slightly since then, but came under pressure again today, as the 0.6560 zone acted as resistance. The pair is likely to stay on the defensive in the near term as the greenback stays strong and elevated across the board.

Adding to a downbeat tone surrounding the Australian currency, copper prices are back under pressure after a brief recovery attempt seen last week. The futures have been in a downtrend since February to notch late-November lows around $3545 last week.

Should the Fed deliver another rate hike next month, the AUDUSD pair may see even deeper losses in the weeks to come. As such, the prices could settle below 0.6500 to target the 0.6390 next bearish target if the bearish trend continues to persist next month.

Oil prices turned slightly lower on Thursday after three bullish sessions in a row. Brent crude extended gains towards the $78.65 zone before losing some upside momentum and retreating marginally. Oil futures have settled just below $78 since then, shedding more than 0.5% on the day.

Earlier, the ascent was due to a large unexpected drawdown in US crude inventories. The Energy Information Administration said that crude inventories posted a massive surprise weekly drawdown of 12.5 million barrels versus the expected 800,000-barrel rise, to show the highest rate of decline since November 2022. Furthermore, gasoline stocks dropped by 2.1 million barrels in the week, while distillate stockpiles fell by 600,000 barrels.

Elsewhere, Saudi Arabia's energy minister said that OPEC+ could consider further output cuts at a meeting on June 4. If the alliance does opt to cut crude oil output again, it will add tightness in the oil market and could lift oil prices higher. At the same time, the oil minister told market speculators to watch out, reiterating his warning that they could face pain ahead.

Further ascent in question

On the other hand, further gains in the oil market could be capped by a strong dollar and a more hawkish Fed than expected. The USD index has been rallying for the fourth session in a row to exceed the 104.00 mark for the first time since mid-March, also rising for the third consecutive week due to debt-related worries in combination with more hawkish expectations surrounding the Fed’s next policy steps.

Brent crude could retarget the $80 psychological level if the $78 mark turns into support in the near term. However, the US debt-ceiling issue could cap the bullish tone at this stage unless resolved by authorities. On the downside, the immediate support now arrives at $77.50.

Gold prices stay pressure this week amid a stronger dollar. The precious metal failed to attract safe-haven demand around $1,985 and has been trending lower since then. The overall tone surrounding the bullion has deteriorated after a break below the 20-DMA and the $2,000 psychological level earlier this month. In the process, XAUUSD dipped to a two-month low around $1,950 last week as Treasury yields have been supportive of the dollar, thus pressuring the metal.

In a wider picture, gold remains in an ascending trend channel since November. However, should the pressure continue to build, the pair may derail the ascending 100-DMA for the first time in six months. In this scenario, the technical picture would deteriorate further in the weeks to come.

The precious metal is driven lower by a stronger dollar. The USD index keeps trending north on Tuesday even as US President Biden and House Speaker McCarthy failed to offer a deal on the debt ceiling during the latest negotiations. Still, policymakers expressed optimism of reaching an agreement to avoid the US default.

Fed adds to bearishness

Also, the bullion struggles amid hawkish signals from the Federal Reserve. By the way, the odds favoring the Fed’s 0.25% rate hike in June rose recently, further underpinning the greenback’s ascent these days. In this context, bullish extension surrounding the US dollar suggests the gold price may witness further downside.

Technically, a failure to hold above $1,965 implies that the yellow metal could see deeper losses in the near term. Of note, XAUUSD is threatening the mentioned two-month lows on Tuesday, challenging the $1,955 zone as the dollar holds firmly above 103.00. If the XAUUSD pair fails to hold above $1,950, the next significant support could be expected around $1,930 where the 100-DMA lies.

The price of bitcoin has been struggling for clear direction these days, with modest bullish bias prevailing in a sideways trend. BTCUSD briefly peaked at $27,600 at the start of the week before retreating. After a dip towards $26,600, the leading cryptocurrency by market capitalization attracted some demand to regain the $27,000 figure that now represents the immediate support.

The question now is where is bitcoin’s next target as the price could choose any direction at this stage. Technically, there is scope for a retreat below $26,000 where the $25,800 support zone remains the key barrier for sellers. As a reminder, this region capped the downside pressure last week to trigger the subsequent bounce.

On the upside, a break above $27,600 would pave the way to the $28,100 zone, followed by the $28,300 area last seen more than one week ago, while a more significant bullish target arrives at the $30,000 psychological level.

Correlation eases further

From the fundamental point of view, the digital currency continues to take cues from the traditional financial markets, but the correlation has eased somehow, as cryptocurrency prices are now less affected by macroeconomic factors than prices of stocks and other traditional assets.

At the moment, it’s clear that some bitcoin traders reduced exposure over the past couple of weeks amid uncertainty caused by the risk of a technical default in the United States as the debt ceiling approaches. The White House and congressional leaders stay divided over raising the debt ceiling, so the US could run out of money to pay its bills as soon as June 1. However, the lawmakers are likely to raise the debt limit eventually, so the price of BTC and other cryptocurrencies could see some rally once the issue is resolved.

The cable is back under pressure after a brief relief at the start of the week. GBPUSD keeps oscillating around the ascending 20-DMA these days, struggling to attract demand after rejection from more than one-year highs registered around 1.2680 last week. The pair is trying to hold above 1.2500 following a dip towards the 1.2440 figure that represents the immediate support zone for the time being.

Still, the pound managed to trim early losses in recent trading. Earlier in the day, GBPUSD was pressured by mixed economic data out of the UK. The unemployment rate increased 0.1% in the first quarter to 3.9% while vacancies fell on the quarter for the 10th consecutive period. UK claimant count change jumped by 46,700 in April versus -10,800 expected and 26,500 prior.

Now, the sluggish US dollar puts a floor under the GBP/USD price. The USD index has been trending lower for the third session in a row on Tuesday. The greenback extended losses to the 102.35 zone, struggling to attract renewed demand after the recent rally towards 102.75.

100-week SMA in focus

Volatility in the currency markets could pick up in the near term, with debt-related news coupled with fresh economic data out of the United States setting further direction for the greenback. A failure to regain the 102.50 region in the near term could push the buck towards the 102.00 handle that turned into support last week.

The GBPUSD pair needs to bounce off the mentioned 20-DMA in order to retarget long-term highs in the coming days/weeks. Otherwise, a deeper retreat could be expected before attracting renewed demand at lower levels. The overall trend remains bullish at this stage, and the cable may climb towards the descending 100-week SMA that scared GBP bulls earlier this month.

The US dollar fell on Wednesday after headline CPI printed at 4.9% year-on-year in April instead of the 5.0% estimated and prior. Core CPI was in line with expectations, coming in at 5.6%. After the release, markets became more convinced that the Federal Reserve will proceed to cutting interest rates in September. As market expectations shifted towards more dovish policy stance, the greenback gave up previous gains across the board to find support around 101.20.

However, the USD index regained the upside momentum to notch weekly highs on Thursday due to safe-haven demand as risk sentiment deteriorated after Chinese CPI and PPI data missed estimates during the Asian session, sending the Chinese yuan to a two-month low. China's consumer prices rose at the slowest pace in more than two years in April, while the deflationary impulse in producer prices persisted.

102.00 back in focus

As buyers reemerged after a dip, the USD index rallied to the 101.90 zone, thus shifting market focus back to the 102.00 psychological level that has been capping gains for more than a month already. However, a decisive break above this barrier still looks unlikely as the greenback stays vulnerable to dovish signals from the Fed officials. Besides, the euro could derive support from the ECB, thus providing a floor for USD.

Also, the dollar won’t be able to stage a more decisive and robust recovery at this stage due to the uncertainty surrounding the debt issue. Should the DXY challenge the 102.00 mark in the near term, sellers are likely to reemerge to send the prices down again. Otherwise, the dollar may retarget the 102.40 region that triggered a short-lived but deep bearish correction earlier this month. On the downside, the nearest support arrives at 101.60, followed by the 101.20 zone.

After deriving support from the $2,000 figure late last week, gold prices have been trending higher, challenging the $2,030 intermediate resistance on the way towards more than one-year highs seen last week around $2,063.

Interestingly, the yellow metal retains bullish bias despite the rising dollar. The USD index has been advancing north for the third session in a row on Tuesday, enjoying support from Friday’s US jobs report. As a reminder, the data showed that US unemployment rate fell to 3.4%, matching a five-decade low. Against this backdrop, traders reassessed their Fed rate expectations.

Now, the market focus shifts towards the US inflation report due this week. The release should give traders some clarity on price pressures in the United States and thus may affect gold prices through the dollar’s reaction to the data.

All-time highs in focus

As such, after bouncing off support around the $2,000 psychological level, the bullion has retargeted all-time highs. During the recent slide, XAUUSD derived support from the ascending 20-DMA, today at $1,833. Should the pressure reemerge any time soon, this moving average may once again prevent gold from a deeper sell-off.

In a wider picture, Fed’s less hawkish policy actions should keep a lid on any significant upside for the greenback and US Treasury yields, which should benefit the non-yielding precious metal later in the year. Of note, despite the latest upbeat jobs report, the markets have been pricing in potential rate cuts during the second half of this year, suggesting gold could refresh all-time highs due to a weaker dollar.

In the immediate term, the bullion needs to hold above $2,000 in order to extend the ascent. A failure to overcome the $2,030 barrier could trigger a short-term downside correction if the dollar attracts demand following US inflation data.

The price of bitcoin has been in recovery mode for the third session in a row after a solid slide witnessed at the start of the week, when the coin plunged to $27,700. After a bounce, BTCUSD has settled slightly above $29,000, holding slightly positive on Thursday. The immediate upside barrier now arrives in the $29,300-29,350 zone.

The largest cryptocurrency by market capitalization rose amid a sell-off surrounding the US dollar in the aftermath of the Federal Reserve decision. The central bank raised rates by 25 basis points, as was widely expected. Interestingly, BTC rose even as US equities declined as investor sentiment was dented as Powell ruled out cutting interest rates because he did not expect inflation to come down quickly enough.

On the other hand, the bank has softened its language by dropping a line from the March statement that said, “the Committee anticipates that some additional policy firming may be appropriate.” Sentument in the traditional financial markets looks mixed today as investors await the upcoming meeting of the European Central Bank, which is expected to deliver another rate increase.

What’s next?

Technically, bitcoin’s price has been consolidating in a range between the 50-day moving average and the $30,000 resistance area that remains in bulls’ focus. For the time being, it seems likely to break out of this range to continue the uptrend from the low of $19,500 seen in March.

On the other hand, the digital currency has been trading in a head and shoulders pattern for nearly two months already, which is typically viewed as a negative signal, indicating a decline in prices. Should the coin manage to hold above $29,000 in the immediate term, buyers may challenge the $30,000 mark for the first time in more than a week.

On the downside, the nearest support arrives around $28,500, followed by the $27,900-27,700 region where this week’s lows arrive. Now, investors are in wait-and-see mode as the price of bitcoin consolidates around the $29,000 level.

Oil prices have steadies on Tuesday after a volatile start to the week. Brent crude briefly peaked slightly above the $80 psychological level but failed to preserve gains and came under renewed pressure after a two-day recovery. As such, the futures are back below $80, albeit refraining from a deeper retreat at this stage in thin trading.

Oil traders look indecisive ahead of FOMC two-day meeting that kick off today. The central bank is widely expected to raise rates by another 25 basis points on Wednesday. Should the Fed express a hawkish tone in the accompanying statement, the dollar will rally across the board, thus pressuring oil. In other words, downside risks prevent traders from buying oil at this stage.

As such, expectations of another US interest rate hike in combination with weak economic data out of China outweigh support from OPEC+ supply cuts. The data showed over the weekend that China's manufacturing activity unexpectedly fell last month, the first contraction since December. The report suggests oil demand growth may falter in the world’s largest importer.

Brent needs a catalyst

On the positive side, Brent derived some support from US manufacturing activity data. The the ISM said its manufacturing PMI rose last month from March, pulling off a three-year low as new orders and employment improved.

In industry news, the American Petroleum Institute is reporting weekly inventory data later today, followed by the Energy Information Administration tomorrow. Should the data disappoint by rising inventories, oil prices may see a deeper retreat from $80 a barrel in the days to come.

Technically, Brent needs a solid industry catalyst in combination with a weaker dollar in order to regain $80 and target the $83 barrier that capped the ascent last week. On the monthly timeframes, the futures stay on the defensive after six bearish months in a row despite the recent support from OPEC+ exporters.

EURUSD is back on the offensive after a brief slide earlier in the week. The pair registered fresh one-year highs around 1.1075 before correcting slightly lower amid overbought conditions. The pair stays bullish at this stage and could attract renewed demand in the near term. However, to do this, the euro may need to see a local downside correction first.

The recent strength surrounding the shares currency is due to a weaker dollar. The greenback came under renewed selling pressure at the start of the week after another failure to regain the 102.00 key level. The USD index struggles to bounce since then, lacking the momentum to retest the psychological level. The greenback is trading on the defensive after a bounce from one-year lows around 100.80 earlier in this month.

All eyes on US data and the USD

Euro bulls expect the buck to keep bleeding in the days to come, with focus shifting towards fresh economic data out of the United States that could set the tone for the pair. The GDP report for the first quarter is expected to show an expansion of the US economy at an annualized rate of 2.0%, after the 2.6% growth recorded in the report for the fourth quarter of 2022.

Meanwhile, the recent European data showed that German GfK consumer confidence edged higher for the seventh consecutive month, indicating consumer optimism around future income expectations. The release added to a more upbeat tone surrounding the euro.

Still, the overall market sentiment remains mixed-to-bearish, playing into dollar’s hands. After a late retreat in Wall Street, European equities opened lower today, albeit tech shares remained buoyed since yesterday. Should risk-off tone continue to dominate global stock markets, EURUSD may struggle to see another rally in the immediate term.