- After losing 210 pips on Monday GBP/JPY recouped most of its losses by Friday.
- GBP bulls have currently found support near the 148.50 level as they are eyeing the 147.15 supply level.
GBP/JPY 15-minute chart
Spot rate: 148.86
Relative change: 0.19%
Resistance 1: 146.65 current Friday’s high
Resistance 2: 147.15 supply level
Resistance 3: 148.10 June’s high
Support 1: 145.46 current Friday’s low
Support 2: 144.59 June 21 low
Support 3: 143.20, current 2018 low
- Dow Jones Industrial Average snaps 8-day losing streak.
- US Pres. Trump threatens 20% tariff on European car imports.
- Surging oil prices lift energy sector.
Major equity indexes in the United States started the day on a positive note on the back of an improved sentiment that was also reflected upon rising European indices but struggled to preserve their momentum after President Trump threatened the EU by suggesting a possible 20% tariff on European car imports.
"Caution is very important among investors when it comes to trade ... this choppy, erratic and volatile action on a day-to-day and intraday basis is going to be the norm till things settle down," Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey, told Reuters.
Meanwhile, a robust rally in energy shares helped the Dow Jones Industrial Average and the S&P 500 indexes hold on to their daily gains. At the first day of the OPEC summit in Vienna, producers decided to increase their output in order to bring the compliance back down to 100% from 146% and didn't provide any details on production allocations. Crude oil prices reacted positively and the barrel of West Texas Intermediate added more than $3 to settle at $68.58.
The S&P 500 Energy Index (SPNY) closed the day 2.2% higher to become the best performing sector of the day.
After recording losses for the last eight sessions, the Dow Jones Industrial Average added 114.16 points, or 0.47%, to end the week at 24,575.86 points. The broader S&P 500 closed 4.28 points, or 0.16%, higher at 2,754.04 points. Finally, the tech-heavy Nasdaq Composite lost 23.69 points, or 0.31%, to 7,689.27. On a weekly basis, these three major indexes were down 2%, 0.9%, and 0.7% respectively.
- After a steep 185-pip decline on Monday EUR/JPY has almost recouped all of its weekly losses by Friday.
- EUR/JPY is evolving in a bull channel and the last hurdle to higher prices is the current week’s high at 128.62. A bull breakout above the level can potentially open the gates to the 129.50 figure and supply level.
EUR/JPY 15-minute chart
Spot rate: 128.23
Relative change: 0.45%
Resistance 1: 128.62 current week’s high
Resistance 2: 129.50 figure/supply level
Resistance 3: 130.32 June’s high
Support 1: 127.52 June 22 low
Support 2: 126.99 June 21 low
Support 3: 126.64 June 19 low
According to analysts from Danske Bank, the key event in the Eurozone next week will be the European Council meeting. Regarding data, EZ June inflation is due, they expect the annual rate at 2.0%.
“In the euro area, the key event next week is the European Council meeting on 28-29 June. Several topics will be in focus: migration, Brexit, security and eurozone reforms are on the agenda. Migration will be one of the hottest topics, especially following the pressure on Merkel from her CSU coalition partner to find an EU-wide solution to migration problems.”
“We will also closely follow what stance the new Italian government will take on the topics.”
“On Friday, the June HICP figures are due for release. Headline inflation has surprised to the upside in May reaching 1.9% y/y driven by higher oil prices. This also has led the ECB to revise up its inflation forecast for 2018 to 1.7% (from 1.4%) in its new saff projections.”
“We expect the June figure at 2.0% y/y, but emphasise that headline inflation will only remain at this level for a few months before declining back to around 1.5-1.6% as the energy price base effects wear off. We expect core inflation to remain unchanged at 1.1%.”
- EUR/GBP tried to break above the 0.8800 level but bears are now selling EUR/GBP as it broke near weekly highs.
- If bears are successful traders should expect a rotation down towards 0.8761, the daily 50-period simple moving average.
- If bulls can keep the market afloat the next target is likely located near the 0.8826-0.8840 area, the 200-day SMA and last week’s high.
EUR/GBP 15-minute chart
Spot rate: 0.8792
Relative change: 0.32%
Resistance 1: 0.8800 figure
Resistance 2: 0.8826-0.8840 area, 200-day SMA and last week’s high
Resistance 3: 0.8861 weekly 50-period SMA
Support 1: 0.8761 daily 50-period SMA
Support 2: 0.8720, June low
Support 3: 0.8700 figure
Support 4: 0.8620 April 17 swing low
- MXN among top performers across the globe over the week.
- USD/MXN lost 3% and dropped to 20.00 as Banxico rose rates and on US Dollar retreat.
The Mexican peso gained almost 3% over the week against the US Dollar, having the best week in 17 months. The improvement in risk appetite, a rate hike, a correction of the US Dollar and some technical factors contributed to benefit the peso.
USD/MXN traded on Monday above 20.70 but it was already in a bearish correction that started a week ago following a reversal from near 21.00. It fell every day of the week, and accelerated on Friday, after a rate hike in Mexico and a rally in crude oil prices.
Bank of Mexico increased the key rate by 25bp to 7.75%, the highest in a decade. The central bank reacted to the depreciation of the Mexican peso and after data singled that the slowdown in inflation eased.
Regarding crude oil, the WTI jumped 3.80% a barrel on Friday after the OPEC agreement, offering an extra support to the peso.
Near the end of the week, the pair was testing the 20.00 area, trading at the lowest since June 4, on it was to the sixth daily loss in-a-row. Despite the significant slide, it is still up for the month.
USD/MXN Levels to watch
To the downside, the immediate support is the 20.00 area. A break lower could clear the way to further losses. Supports are seen at 19.90, 19.70 and 19.45/50.
The pair is about to post the first close below the 20-day moving average since mid-April. If it holds above 20.00, some consolidation between 20.00 and 20.30 seems likely. Above 20.30, the next resistance could be seen at 20.45/50.
- USD/CAD most likely made a last desperate attempt to break above 1.3350 June 21, 2017 swing high as bears squashed bull’s expectations.
- USD/CAD bears will probably try to break below 1.3266 Wednesday’s low in order to drive Loonie towards the 1.3200 level in the coming sessions.
USD/CAD 15-minute chart
Spot rate: 1.3311
Relative change: -0.27%
Resistance 1: 1.3350 June 21, 2017 swing high
Resistance 2: 1.3383, current week's high
Resistance 3: 1.3543 June 9, 2017 swing high
Support 1: 1.3266 Wednesday’s low
Support 2: 1.3200 figure
Support 3: 1.3155 former supply/demand level
- AUD/USD stages a robust recovery on Friday.
- Commodities' upbeat performance provide a boost to the aussie.
- US Dollar Index looks to end the week on a weak note.
The AUD/USD pair started the week under pressure and closed the first three days with losses as the stronger USD and dismal data from Australia weighed. However, on the last day of the week, the pair gained traction and erased all of its weekly losses to turn flat near 0.7440. As of writing, the pair was up 64 pips, or 0.9%, at 0.7442.
The Reserve Bank of Australia published its meeting minutes on Tuesday and failed to help the AUD find demand as it didn't show any potential changes to the monetary policy that would be considered as being hawkish. Furthermore, Westpac Leading Index dropped to -0.2% in May from 0.2% in April to suggest that the economic activity was likely to slow down in the near-term.
On the other hand, the US Dollar Index, which started the week on a positive note as investors remained focused on the Fed's policy stance that suggested two more rate hikes in the remainder of the year, came under a broad-based selling pressure in the last two days. Revived concerns over the United States' trade policy and disappointing data dragged the DXY to a new weekly low of 94.09. As we approach the closing bell, the index is at 94.20, losing 0.4% on the day.
Meanwhile, crude oil prices rallied sharply on Friday amid OPEC's announcements and helped commodity-sensitive currencies stay strong against their peers.
Following today's upsurge, the RSI indicator on the daily chart rose toward the 50 mark, suggesting that the sellers are losing control of the price action. The immediate resistance for the pair aligns at 0.7500 (psychological level) ahead of 0.7350 (20-DMA/50-DMA) and 0.7580 (Jun. 14 high). On the downside, supports could be seen at 0.7345 (Jun. 21 low), 0.7285 (Jan. 6, 2017, low) and 0.7200 (psychological level).
Analysts at Danske
“The Italian bond market has calmed somewhat. Yield spreads have been rather lower throughout June and the pronounced fluctuations we saw in May have disappeared. The 10Y spread is hovering around 215bp, which is, nevertheless, 75-100bp higher than prior to the political crisis kicking off. We now see less of a risk that the situation could spiral into a full-blown debt crisis. We estimate that the crisis dynamic has peaked, as the Italian politicians have softened their rhetoric and, as already mentioned, Italian yields and yield spreads have
“Our yield forecast now assumes the market no longer pricing in the probability of
“Our 12M forecast for 10Y Bund yields is now 1.0%, down from 1.1% previously. Still, on a 12M
“We continue to expect a steeper 2Y10Y German yield curve. The ECB maintains a relatively tight grip on the short end of the curve, especially with the first ECB rate hike not expected until late in 2019 and due to the ECB’s forward guidance. However, we still expect the 10Y segment of the curve to be pushed higher by US yields in 2019 and by the market pricing ECB rate hikes in 2020. We continue to see 10Y US Treasury yields at 3.30% on a 12M horizon. Unlike the situation in the European markets, we expect the 2Y10Y US yield curve to flatten further over the next twelve months.”
- Oil extends rally after OPEC agreed to increase output but more modestly than expectations.
- WTI up by 5% on Friday, at 4-week high, rebounds more than 8% from Monday’s low.
Crude oil prices are rising sharply, extending weekly gains. WTI Futures reached $69.00, the highest level since May 25 and is up almost $5 over the week.
The rally accelerated after the OPEC agreed to increase output by around 600K barrels a day. “The aim of the deal is to return total compliance to the current output agreement to 100%. Compliance has been well above 100% this year since some countries, notably Venezuela, have seen a drop in production. OPEC is set to hold the next biannual meeting on 3 December”, wrote analysts at Danske Bank.
The increase is in order to maintain the current production agreement that will last until the end of 2018 and explains why prices moved higher.
Regarding data, the Baker Hughes Oil Rig Count report showed an increase in the US to 863 from 862 and decline in gas from 194 to 188.
WTI Levels to watch
The current rally was capped by the $69.00 area that has become the immediate resistance followed by $69.50 (Apr 19 high) and $70.20 (May 14 low). On the flip side, supports might now be located at $68.60 (May 30 low), $67.20 and $66.50.
"The deal reached overnight confirms a piecemeal approach to Greek debt relief. While concerns about the long-term sustainability of the country's debt look set to eventually resurface, the additional relief measures put in place and post-programme governance should be enough to keep Greek risk under control for some time," ING analysts note.
"By confirming that Greece has implemented all of the 88 prior actions under the fourth and final review, eurogroup chief Mario Centeno announced that Greece has successfully completed its ESM (Emergency Stability Mechanism) programme and that there will be no follow-up programme."
"The first batch of debt relief, a 10-year extension of the EFSF (European Financial Stability Facility) interest and amortisation, will be delivered upfront. This should help Greece to smoothly return to market financing all along the Greek curve. A second batch of debt relief measures will be agreed upon, with conditions attached. These include the abolition of the step-up interest rate margin related to the debt buy-back tranche of the second Greek programme and SMP profits (Securities Markets Programme) from the ESM segregated account as well as the transfer of ANFA (Agreement on Net Financial Assets) and SMP income."
"As expected, the IMF decided not to enter a stand-by arrangement but will remain involved in the post-programme surveillance framework with the eurozone institutions. The divergence on debt sustainability between the IMF and other lenders was apparently not bridged by the debt relief package approved yesterday. IMF managing director Christine Lagarde said the measures should ensure medium-term sustainability but reaffirmed that the IMF has reservations over the long term."
- Gold is trading sideways on Friday as the market is consolidating the bull reversal attempt from Thursday.
- Gold bulls need to break strongly above the current daily high at $1271.21 a troy ounce in order to claim higher prices towards 1,275.00, the weekly 100-period simple moving average.
Gold 15-minute chart
Spot rate: 1,267.10
Relative change: 0.11%
Trend: Neutral to bullish
Resistance 1: 1,271.21, current Friday’s high
Resistance 2: 1,275.00, 100-period SMA (weekly)
Resistance 3: 1,281.70 May 21 low
Resistance 4: 1,291.30 supply/demand level
Support 1: 1,266.47 100-period SMA 15-min
Support 2: 1,260.97 current 2018 low
Support 3: 1,250.00 figure
- Upbeat data from the euro area helps the shared currency gather strength.
- Manufacturing sector in the U.S. loses momentum.
- US Dollar Index remains on track record weekly losses.
After closing the previous day with a 30-pip gain, the EUR/USD pair extended its upside on the last day of the week and is now looking to close the week in the positive territory. The pair, which touched a fresh 8-day high at 1.1675 earlier in the European session, was last seen trading at 1.1650, adding 0.4% on the day.
Today's data from the euro area showed that the business activity in the service sector expanded at a faster-than-expected pace in June with the preliminary PMI data released by Markit rising to 54.8. On the other hand, the manufacturing PMI eased to 55 from 55.5 to match the market estimates.
Later in the day, Markit announced that at 54.6, manufacturing PMI in the United States showed the slowest improvement since November 2017 to fall short of the experts' expectation of 56.4. With investors focusing on the disappointing data, the US Dollar Index struggled to pull away from the daily lows and went into a consolidation phase below mid-94s. At the moment, the index is down 0.3% at 94.25.
The pair's weekly recovery seems to be a product of the broad-based selling pressure the USD face in the second half of the week. However, the shared currency could have a difficult time preserve its strength against its counterparts with the political woes in Italy resurfacing after the assignment of anti-euro economists to important parliamentary committees. Namely, Claudio Borghi will become president of the Budget Committee, and Alberto Bagnai, who published two books advocating the dismantling of the European monetary union, will become president of the Finance Committee in the Senate.
"In the daily chart, the 20 DMA capped the upside this Friday, while the 100 DMA nears to cross below the 200 DMA, both in the 1.2050 region. The Momentum indicator in the mentioned chart maintains its bearish slope within negative territory, while the RSI barely recovered within bearish levels, a sign that bulls are still hesitating," writes Valeria Bednarik, American Chief Analyst at FXStreet.
"Chances of further recoveries are quite limited, particularly if the mentioned 1.1720 level remains untouched. A weekly close below the 1.1600 figure should favor fresh lows for the upcoming one, with 1.1510 and 1.1420 as the next strong support levels."
- USD/JPY bulls failed to regain the ground lost on Thursday.
- USD/JPY is losing momentum as it is trading below its daily 200-period simple moving average.
- If bears can keep USD/JPY below the 110.00 figure in the coming days, bulls can give up potentially opening the gates to further losses.
USD/JPY 15-minute chart
Spot rate: 109.94
Relative change: -0.04%
Trend: Neutral to bearish
Resistance 1: 110.23-110.27 area, weekly 50-period SMA, daily 200-period SMA
Resistance 2: 110.56 supply zone
Resistance 3: 110.92-111.00 last week’s high and figure
Resistance 4: 111.41 May 21 high
Support 1: 109.84-110.00 area, daily 20-period SMA and figure
Support 2: 109.55 June 19 low
Support 3: 109.19 June 8 low
- NZD/USD gained almost 100 pips since Thursday after Kiwi reached a new 2018 low.
- NZD/USD is consolidating its advance above the 100 and 200-period simple moving average on the 15-minute chart.
- NZD/USD broke out above a wedge formation suggesting Kiwi is set to run higher in the coming sessions.
NZD/USD 15-minute chart
Spot rate: 0.6900
Relative change: 0.51%
Resistance 1: 0.6900-0.6923 area figure and supply/demand level
Resistance 2: 0.6960, June 1 low
Resistance 3 0.7000 figure
Support 1: 0.6870, 200-period SMA (15m)
Support 2: 0.6854, former 2018 low
Support 3: 0.6816 December 1, 2017 low
"The New York Fed Staff Nowcast stands at 2.9% for 2018:Q2 and 2.6% for 2018:Q3," the Federal Reserve Bank of New York said in its latest Nowcasting report. Below are key takeaways from the official publication.
- News from this week's data releases decreased the nowcast for 2018:Q2 by 0.1 percentage point and decreased the nowcast for 2018:Q3 by 0.2 percentage point.
- Negative surprises from building permits data and the Philadelphia Fed Manufacturing survey accounted for the decrease.
Today’s data in Canada showed an increase of only 0.1% in the CPI in May, below expectations. Matthieu Arseneau,
“Canada’s consumer price index rose 0.1% (m/m) in May in seasonally adjusted terms causing the year-on-year inflation rate to remain unchanged at 2.2%. This was well below consensus expectations calling for a 2.6% annual rate.”
“Headline inflation was significantly below expectations in May. The rise in gasoline prices was offset by weaknesses elsewhere as shown by CPI excluding food and energy being down in the month, a first since 2012. True, some specific weaknesses could be highlighted for example car prices which registered their sharpest May drop on record. But other components also contributed to May’s weakness.”
“We expect this lack of inflation to be temporary as tight
"Uncertainty appears to be one of the few certain elements of the Brexit process. In light of the sheer degree of political risk it is surprising that volatility in the pound has not been higher in recent weeks," note Rabobank analysts.
"Although we see a strong chance of an August rate hike from the BoE, against the backdrop of a firm USD we still see risk of cable retreating below the 1.30 level by the end of the year. We continue to expect a moderate softening of the pound vs. the EUR towards EUR/GBP0.89 into year-end, but we have raised our 12 mth forecast to 0.87 from 0.84."
"The MPC will be hoping that forthcoming UK economic data are sufficiently strong to allow it to pull the rate hike trigger this year and proceed along the path of policy normalisation. That said, the June guidance was not strong enough to reinvigorate comparisons of Governor Carney to an unreliable boyfriend if the Bank were to hold rates steady through the summer."
"While we are optimistic on the outlook for the greenback, we are less so on the EUR. Not only is the ECB dovish but the issue of immigration has brought far right populism and a threat to the status quo to a variety of EU countries. Within EMU, the new Italian government could yet be a disruptive influence when it publishes its budget proposal. Consequently, we expect GBP to slip relatively moderately vs. the EUR. We maintain a forecast of EUR/GBP0.89 on a 3 month view."
According to a recently published document by the Office of the Press Secretary of the White House, President Donald Trump announced that the 'national emergency' related to North Korea's nuclear weapons program was renewed and extended for another year.
This publication means that the United States' sanctions and restrictions against North Korea will remain in place at least until June 2019.
- WTI rises above $68 on Friday amid OPEC headlines.
- Dismal CPI and retail sales data from Canada hurt the loonie.
- On a weekly basis, USD/CAD gains nearly 150 pips.
After erasing yesterday's gains and dropping to a fresh two-day low at 1.3260, the USD/CAD pair reversed its course and spiked to its highest level in more than a year at 1.3380 following the disappointing macroeconomic data releases from the United States. However, crude oil's strong performance forced the pair to retrace a portion of its daily gains in the last hours. As of writing, the pair was trading at 1.3330, adding 0.11% on the day.
Today's data from Canada showed that retail sales contracted by 1.2% in April to fall short of the market expectation of 0%. Furthermore, the core-CPI data released by the Bank of Canada dropped to 1.3% on a yearly basis in May from 1.5% in April.
On the other hand, following the meeting in Vienna today, OPEC announced its decision to increase output by 1 million barrels per day effective from 1 July with the intention to bring the total compliance to the current output agreement to down 100% from 146%.
“It remains unclear what OPEC will do when the current deal expires at the end of the year. A decision on this will likely be made on 3 December. The deal today does not affect our current forecast for Brent to average USD72/bbl in H2 and USD73/bbl in 2019,” Danske Bank analysts wrote in a recently published report. Meanwhile, the barrel of West Texas Intermediate was last seen trading at $68.11, adding nearly 4% on the day.
Technical levels to consider
The pair could encounter the first technical resistance at 1.3380 (daily/yearly high) ahead of 1.3400 (psychological level) and 1.3470 (Jun. 12, 2017, high). On the downside, supports are located at 1.3300 (psychological level), 1.3260 (daily low) and 1.3200 (Jun. 19 low/psychological level).
- AUD/USD gained almost 100 pips after reaching a new 2018 low at 0.7345 on Thursday. It is currently consolidating the recent advance trading near the 50-period simple moving average on the 15-minute chart.
- AUD/USD is currently supported close to 0.7410, near Wednesday’s high. A breakout above 0.7444 could lead to a breakout towards 0.7500-0.7514 area, figure and last week’s low.
AUD/USD 15-minute chart
Spot rate: 0.7427
Relative change: 0.66%
Trend: Bullish above 0.7345
Resistance 1: 0.7444 current Friday's high
Resistance 2: 0.7476 May 29 low
Resistance 3: 0.7500-0.7514 area, figure and last week’s low
Support 1: 0.7410 Wednesday’s high
Support 2: 0.7345 current 2018 low
Support 3: 0.7327 May 9, 2017 low
Cable trimmedgains during US session and spiked lower after Trump’s comments.
- US President warned about imposing tariffs on European cars.
The GBP/USD pair peaked earlier today at 1.3314, the highest level since June 14. Then it lost strength and pulled back. Recently dropped to 1.3248 but quickly rebounded to the 1.3260/70 area, where it was trading.
Cable is still up for the day and most import, is it holding to yesterday’s strong gains that followed the Bank of England meeting. The 6-3 vote at the MPC triggered a rally in the pound.
Recently GBP/USD bottomed following a message from US President Trump warning about tariffs to European cars. Trump tweeted: “Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European
The pair is still moving with a bearish tone on a wide perspective but in the short-term, the picture could change. On a weekly basis, the pair is unchanged and far from the lows, a “
GBP/USD needs to hold on top of 1.3220/40 in order to keep a bullish tone. While a consolidating on top of 1.3300 (20-day moving average) could open the doors to more gains.
The OPEC today agreed to increase output by 1mb/d to reduce ‘
“The Organisation of Petroleum Exporting Countries (OPEC) today agreed to lift output by 1mb/d effective from 1 July. The aim of the deal is to return total compliance to the current output agreement to 100%. Compliance has been well above 100% this year since some
countries, notably Venezuela, have seen a drop in production. OPEC is set to hold the next biannual meeting on 3 December.”
“Since November 2016, OPEC has kept production lower to support a tighter oil market balance, reduce global oil inventories and support higher oil prices. This year oil prices have rallied to the highest level since 2014 in part because OPEC has become ‘over compliant’ with the production cuts, due notably to falling production in Venezuela at a
time when demand has been on the rise on the back of higher global economic activity.”
“This development paved the way for a deal to return supply to the market and reduce ‘
“It remains unclear what OPEC will do when the current deal expires at the end of the year. A decision on this will likely be made on 3 December. The deal today does not affect our current forecast for Brent to average USD72/bbl in H2 and USD73/bbl in 2019.”
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