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US Dollar Holds the High Ground While Crude Oil Whips Around. Higher USD?

US Dollar, DXY Index, USD, OPEC+, WTI, Brent, Crude Oil, Debt Ceiling – Talking Points

The US Dollar held onto Friday’s gains to start the week on lofty Treasury yieldsOPEC+ cut production with Saudi Arabia playing a key role to hoist oil pricesWith the debt dilemma out of the way, perceptions of Fed rates could be the USD driver

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The US Dollar added modest gains to Friday’s rally on Monday as markets digest the OPEC+ production cut agenda that was announced over the weekend.

USD had been assisted by a mixed jobs report on Friday that was overall seen as more positive than negative. Currency markets have had a quiet start to the week so far.

339k jobs were added in May according to the non-farm payrolls data. This beat the 195k anticipated and there was also an upward revision to the April figure to 295k from 253k.

However, the unemployment rate ticked up to 3.7% from 3.4% previously and above the 3.5% anticipated.

APAC equity indices have generally had a positive day after Wall Street notched up decent gains in their cash session to end last week after the resolution of the debt ceiling deal lifted the mood. Futures are pointing toward a subdued start to Monday.

The mood was buoyed by China’s Caixin services PMI May reading of 57.1 instead of the 55.2 expected and 56.4 prior.

The OPEC+ announcement of a reduction in oil production output among the cartel saw Saudi Arabia bearing the brunt of cutbacks. They will be reducing their contribution to global supply by 1 million barrels per day.

The UAE received an increase in its production target while Russia’s remains unchanged.

Crude spiked higher on the open today but has since given up a chunk of the gains although prices are still above where they closed the Friday session.

The WTI futures contract is near US$ 72.50 bbl while the Brent contract is a touch below US$ 77 bbl. Live prices can be viewed here.

Treasury yields have remained elevated to start the week with the 1-year bond remaining near the 23-year high above 5.30%.

June 14th is the next Federal Open Market Committee (FOMC) meeting, and the blackout period began over the weekend. This means that committee members will not be making any public comments about policy until after the gathering.

Looking ahead, after the Swiss CPI and Eurozone PPI, the US will see factory and durable goods orders data. Tomorrow the RBA will decide on monetary policy followed by the Bank of Canada on Wednesday.

Check the calendar for more events.

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How to Trade EUR/USD

DXY (USD) INDEX TECHNICAL ANALYSIS

The DXY index appears to be in a short-term sideways pattern for now. Resistance might be in the 104.70 – 104.80 area where last week’s high was as well as the 76.4% Fibonacci Retracement.

On the downside, support may lie at the recent low of 103.38 or the breakpoint of 102.80.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCarthyFX on Twitter

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USD/INR Price News: Indian Rupee begins RBI week on a back foot near 82.50 as US NFP favors Fed hawks

USD/INR stays on the front foot after reversing from 13-day low on Friday.
Strong US NFP renews hawkish Fed concerns while softer India data allows RBI to defend status quo.
Risk-off mood, higher Oil price also weigh on Indian Rupee ahead of the key week.
Second-tier US data, risk catalysts may entertain intraday traders.

USD/INR extends recovery from 50-day EMA to around 82.50 heading into Monday’s European session. In doing so, the Indian Rupee (INR) pair cheers the US Dollar strength, as well as downbeat sentiment and the firmer Crude Oil price to propel the pair of late.

Adding strength to the USD/INR recovery could be the consolidation ahead of this week’s Reserve Bank of India (RBI) Monetary Policy Meeting, up for Thursday.

Above all, a monetary policy divergence between the Fed and the RBI, mainly due to the latest streams of the US and India data, allow the USD/INR pair to remain firmer. Adding strength to the USD/INR pair could be the latest strength of the WTI Crude Oil and the risk-off mood, led by the fears of the US-China tussle and the Russia-Ukraine war.

That said, Friday’s US NFP bolstered calls for the Fed’s 0.25% rate hike in June, as well as slashed the odds favoring the Fed rate cut in 2023. The same allowed the US Dollar Index (DXY) to remain firmer and favor the corrective bounce in the US Treasury bond yields.

On the other hand, the market’s sour sentiment due to the geopolitical concerns about China, Russia, Ukraine and the US join the concerns about the RBI’s likely monetary policy inaction, mainly due to the Indian economics suggesting easy inflation and softer growth, to propel the USD/INR price.

Against this backdrop, the US 10-year and two-year Treasury bond yields recover after snapping a three-week uptrend by the end of the last Friday. That said, the S&P500 Futures also portray the risk-off mood by mild losses as it retreats from the highest levels since August 2022. The same underpins the US Dollar Index (DXY) strength ahead of the US Factory Orders and ISM Services PMI for May.

Moving on, US Factory Orders and ISM Services PMI for May will entertain intraday traders whereas Thursday’s RBI Interest Rate Decision becomes the key event for the USD/INR pair watchers.

Technical analysis

A clear rebound from the 50-day Exponential Moving Average (EMA), around 82.30 by the press time, allows USD/INR bulls to aim for a one-week-old descending resistance line of near 82.65.

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OPEC+ Preview: Crude Oil Prices Linger Ahead of Production Guidance

BRENT CRUDE OIL ANALYSIS & TALKING POINTS

Russia finding it tough to cut production the rest of OPEC+ seeks higher prices.Light economic week ahead gives places more emphasis on OPEC+.Weekly Brent crude chart may point to higher prices.

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Get Your Free Oil Forecast

BRENT CRUDE OIL FUNDAMENTAL BACKDROP

For crude oil prices (WTI and Brent), the OPEC+ meeting on June 4th, 2023 will be a critical juncture for oil markets. Of recent, friction between two of the most influential nation within the cartel, Russia and Saudi Arabia; have been growing. The problem stems from OPEC+’s pledge to limit supply while Russia continues to flood the market with cheap Russian oil. In summary, Russia has been contradicting the efforts by Saudi Arabia to elevate the price of crude oil.

From a Russian perspective, demand for their oil by major nations such as India have been keeping the cash strapped Russia afloat in an environment where international sanctions have left Russia with no choice but to extend this important economic lifeline.

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Commodities Trading

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Another worrying sign for OPEC+ is the lack of optimism around the Chinese economy with last week’s NBS manufacturing PMI remaining in contractionary territory reaching yearly lows at 48.8. If this trend continues OPEC+ will likely further production cuts in future meetings. The uncertainty around today’s makes for a heightened sense of anticipation. Many are expecting another cut but OPEC+ may use this meeting to signal to markets that they have the capacity to disrupt supply/demand dynamics should they need to but adopt a wait and see approach. This may be the most likely scenario considering the U.S. dollar’s recent rally may be fading after dovish Fed speak alongside a higher unemployment rate and clarity around the US debt ceiling. Although the recent Non-Farm Payroll (NFP) headline figure exceeded estimates, a decline in average earnings may help support crude oil prices as upside pressure in inflation may be declining.

The economic calendar (see below) is rather light this week barring the OPEC+ meeting but both the weekly API and EIA crude oil stock change figures will be in focus as recent numbers have shown a growing crude inventory build.

U.S. ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

Introduction to Technical Analysis

Candlestick Patterns

Recommended by Warren Venketas

BRENT CRUDE OIL PRICE CHART (WEEKLY)

Chart prepared by Warren Venketas, IG

Weekly Brent crude oil price action shows rejection of the 200-day moving average (blue) with the recent candlestick forming a lower long wick. Traditionally, this points to impending upside to come but will ultimately be decided by OPEC+ guidance.

BRENT CRUDE OIL PRICE CHART (DAILY)

Chart prepared by Warren Venketas, IG

The short-term term daily chart above reflects the hesitancy in oil markets as the Relative Strength Index (RSI) hovers around the midpoint level indicating markets favoring neither bullish nor bearish momentum.

Key resistance levels:

80.0050-day MA (yellow)77.23

Key support levels:

IG CLIENT SENTIMENT: MIXED

IGCS shows retail traders are NET LONG on crude oil, with 81% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we arrive at a short-term cautious disposition.

Contact and followWarrenon Twitter:@WVenketas

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GBP/JPY Price Analysis: Hits YTD highs on risk-on sentiment, retraces as a rising wedge forms

GBP/JPY surges to year’s high, up by 0.18%, amid positive market sentiment.
Expectations of a dovish Fed and resolution of the US debt-ceiling imbue strength to high beta currencies.
Despite the overall upward bias, the technical outlook suggests potential downside pressure on GBP/JPY.

GBP/JPY climbed to fresh year-to-date (YTD) highs at 174.68 before a pullback that dragged the exchange rate toward the 174.10s area. A risk-on impulse caused expectations for a dovish US Federal Reserve (Fed) amongst geopolitical issues like the US debt-ceiling resolution underpinned high beta currencies. Therefore, safe-haven peers persisted pressured, as the GBP/JPY traded at 174.12, up 0.18%.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY is still upward biased, confirmed by price action widening its distance from the Tenkan-Sen and Kijun-Sen lines below the exchange rate. In addition, price action is another bullish signal above the Ichimoku cloud.

Nevertheless, an upslope resistance trendline from the May 2 highs cushioned the GBP/JPY rally; while a support trendline, drawn from the April and May lows, indicates a rising wedge forming. That means further downside pressure is expected.

If GBP/JPY falls below the 174.00 figure, the next support would be the Tenkan-Sen at 172.95. A breach of the latter will expose the 2022 high turned support at 172.13 before testing April 28 daily high at 171.16. Conversely, the uptrend would continue above the YTD high at 174.68 once cleared, and the GBP/JPY could rally to the 175.00 mark, followed by the 2016 high at 177.37.

GBP/JPY Price Action – Daily chart

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British Pound Week Ahead: GBP/USD, EUR/GBP and GBP/JPY Outlooks

GBP/USD Prices, Charts, and Analysis

Little domestic economic data or events next to guide Sterling.GBP/USD clients have turned net short.

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How to Trade GBP/USD

The British Pound has had a strong week, making multi-week gains against a range of other currencies. The British Pound is up over 2 big figures against the US dollar on the week, over one big figure against the Euro, and by around one-and-a-half big figures against the Japanese Yen. The recent UK inflation report, showing price pressures easing but at a slow rate, has increased expectations that the Bank of England will have to continue hiking interest rates in the short term to help bring inflation back to target. Against this, current market thinking is that the Federal Reserve will likely pause its recent rate hike program this month and that the ECB may temper is program after recent Euro Area data showed inflation easing at a better-than-expected pace. In Japan, the new BoJ governor recently said that monetary policy conditions will remain loose until inflation meets the central bank’s target on a sustainable basis.

Next week’s economic calendar is light of any domestic, market-moving economic data or events, while the global calendar is also relatively thin of high-impact events.

For all market-moving events and data releases see the real-time DailyFX Calendar

Cable is back above 1.2500 after briefly flirting with 1.2300 at the end of last week and the technical setup looks positive. While this week’s rally has pushed the pair into overbought territory, GBP/USD is currently above all three simple moving averages for the first time since mid-May. The overbought signal may slow down any move higher, but a pushback through 1.2547 may see cable testing May’s multi-month high in the coming weeks.

GBP/USD Daily Price Chart – June 2, 2023

The move lower in EUR/GBP is slightly more striking than cable’s move with the recent sell-off showing an unbroken series of red candles. The pair trade below all three simple moving averages with both the 20- and 50-dmas crossing below the longer-dated 200-dma. Support may come into play shortly at 0.8549.

EUR/GBP Daily Price Chart – June 2, 2023

GBP/JPY has been in a fairly unbroken uptrend since late March and today traded at its highest level since February 2016. With the Bank of Japan continuing to keep monetary policy loose, further gains in the pair may be seen in the weeks ahead. The chart is positive with 175 and 177 attainable levels. Care should be taken over commentary from the BoJ as they have a track record of verbal intervention when the Yen weakens excessively.

GBP/JPY Daily Price Chart – June 2, 2023

All Charts via TradingView

of clients are net long.

of clients are net short.

Change in

Longs

Shorts

Daily
14%
-25%
-9%

Weekly
-11%
12%
-1%

GBP/USD Retail Traders are Now Net-Short

Retail trader data show 41.24% of traders are net-long with the ratio of traders short to long at 1.42 to 1.The number of traders net-long is 15.91% lower than yesterday and 27.59% lower from last week, while the number of traders net-short is 23.13% higher than yesterday and 41.47% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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XAUUSD: Elliott wave analysis and forecast for 02.06.23 – 09.06.23

2023.06.02 2023.06.02
XAUUSD: Elliott wave analysis and forecast for 02.06.23 – 09.06.23Alex Geutahttps://www.litefinance.org/blog/authors/alex-geuta/

Main scenario: consider long positions from corrections above the level of 1931.38 with a target of 2060.00 – 2100.00

Alternative scenario: breakout and consolidation below the level of 1931.38 will allow the pair to continue declining to the levels of 1903.23 – 1865.33.

Analysis: on the daily chart, a downside correction presumably finished developing as the fourth wave of larger degree (4), and the fifth wave (5) is forming. Apparently, the third wave of smaller degree 3 of (5) is formed on the H4 chart, and a local correction is completed as the fourth wave 4 of (5). Apparently, the fifth wave 5 of (5) started developing on the H1 chart. If this assumption is correct, the pair will continue to rise to 2060.00 – 2100.00. The level of 1931.38 is critical in this scenario as its breakout will enable the pair to continue declining to the levels of 1903.23 – 1865.33.

Price chart of XAUUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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USD/CAD drops as CAD flexes strength, despite stellar US NFP report

US adds 339K jobs, beating estimates, but USD/CAD stays tepid.
CAD gains momentum on a 1.70% surge in WTI Crude Oil prices.
Uncertain Fed rate hike in July overshadows USD’s future trajectory.

USD/CAD registers modest losses after an outstanding jobs report in the United States (US) would likely keep the US Federal Reserve (Fed) hitting the economy’s brakes, despite recent dovish comments supporting a pause. Nevertheless, the US Dollar (USD) continued to weaken while the Loonie (CAD) strengthened. At the time of writing, the USD/CAD is trading at 1.3428, down 0.16%.

Strong job growth figures unable to buoy USD; WTI Crude Oil surge lifts CAD, sparking a USD/CAD shake-up

The USD/CAD stopped its fall at around the 200-day Exponential Moving Average (EMA) at 1.3417 on the release of May’s US Nonfarm Payrolls report, revealed by the US Department of Labor. The US economy created 339K jobs in the economy, crushing estimates of 190K, though the Unemployment Rate ticked higher to 3.7% from 3.4%, a 53-year low level.

Although the data supported a stronger US Dollar, the USD/CAD treads water after printing a daily low of 1.3406 ahead of the Nonfarm Payrolls release.

Given the backdrop, crude oil prices were another factor that boosted the CAD, with Western Texas Intermediate (WTI), the US crude oil benchmark, recovering ground gaining 1.70%, at $71.33 per barrel, along with a risk-on impulse, that keeps the greenback pressured through pairing some losses.

The US Dollar Index (DXY), a measure that tracks the buck’s value vs. six currencies, edges up 0.31%, at 103.888, underpinned by increased bets for a July rate hike by the Fed. According to the recent update from the CME FedWatch Tool, the Federal Reserve will likely maintain the current interest rates steady for the month. However, the forecast for July is considerably less definitive, with the likelihood of a rate change teetering at approximately 50.7%.

Source: CME Fed Watch Tool

An absent Canadian economic docket left USD/CAD traders leaning on the dynamics of the US Dollar. But recent data showing strong growth in the Canadian economy puts pressure on the Bank of Canada (BoC) to further tighten the economy, at the threat of elevated inflationary pressures.

USD/CAD Price Analysis: Technical outlook

From a technical perspective, USD/CAD faced solid support at the 200-day EMA, with buyers piling in, driving the price 30 pips up. Nevertheless, the Relative Strength Index (RSI) indicator and the 3-day Rate of Change (RoC) in bearish territory suggest downside action in the near term. Therefore, the USD/CAD could be pressured, with support back at the 200-day EMA at 1.3417, before testing 1.3400. Break below will expose May’s low of 1.3314. Conversely, the USD/CAD first resistance would be the 1.3500 figure, followed by the 100-day EMA at 1.3510.

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Crude Oil Price Jumps on Optimism Ahead of OPEC+ Meeting. Where to for WTI?

Crude Oil, OPEC+, WTI, US Dollar, Economic Data, Treasury Yields – Talking Points

Crude oil found firmer footing going into the Friday session after dippingThe June OPEC+ meeting could see some action with conflicting views among membersThe technical picture might be saying something. Will WTI resume rallying?

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How to Trade Oil

The crude oil price went to a three-week low yesterday before staging a solid recovery with markets taking onboard some positive economic news and the US Dollar facing some headwinds. The market is now focusing on the OPEC+ meeting that kicks off this weekend.

China’s better-than-expected Caixin PMI got the ball rolling, compensating for Wednesday’s weak official PMI reading. Japan’s private capital expenditure was a beat, as was the US ADP jobs data. Eurozone CPI eased as well, further buoying the mood.

Not every piece of data was rosy, and all the statistics can be found on the economic calendar here. Markets also appear to be optimistic that the US debt ceiling deal will pass through the Senate late Friday.

It seems that Treasury yields slid lower on the prospect of a resolution and might continue to do so should the vote pass without incident. The benchmark 2-year note is around 30 basis points lower from the peak seen at this time last week of 4.64%.

The US Dollar weakness was broad-based with the global growth-orientated Australian Dollar seen as the largest beneficiary. Industrial metals have also notched up notable gains in the last 24 hours.

For the oil market, the focus will be on the OPEC+ meeting that will begin this Sunday in Vienna. A number of top officials from the oil-producing nations have been making ructions around production targets.

Of intrigue is the lack of coherency between the commentary and this places significant focus on this gathering. The cut to production announced by the cartel in early April saw a price gap higher in oil.

Headlines emanating from this assembly may trigger volatility to start next week.

Updated crude oil prices can be found here.

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Understanding the Core Fundamentals of Oil Trading

WTI CRUDE OIL TECHNICAL ANALYSIS

The WTI crude oil front month futures contract made a low at 67.03 yesterday which was just above a breakpoint at 66.82. These levels may provide support, as well as the breakpoints and prior lows of 66.12, 64.36, 63.64, 62,43, 61,74 and 61.56.

After making that low, it rallied and the price action has now created a Bullish Engulfing Candlestick formation and could indicate that a bullish reversal could unfold.

On the topside, resistance might be at the previous peaks at 74.73, 76.92 and 79.18 ahead of the cluster zone in the 82.50 – 83.50 area.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCarthyFX on Twitter

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Making Sense of Japanese Yen’s Recent Slide: Is it the Start of a Renewed Leg Lower?

US Dollar, Japanese Yen, USD/JPY – Price Action:

Earlier this month, USD/JPY rose above the key 138.00 resistance.However, it might be premature to assume the start of renewed period of USD/JPY strength.What is the outlook for USD/JPY and what are the signposts to watch?

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How to Trade USD/JPY

There are a couple of things that stand out on the charts of the Japanese yen against the US dollar and the closely correlated US Treasury yields recently that could have implications for the trend in the coming weeks.

On the monthly charts of USD/JPY, despite the near 10% rally from February, there is hardly any noticeable improvement in momentum (14-month Relative Strength Index). The last time a similar development took place, the spot subsequently went sideways for months. Such conditions typically signify an ‘unwinding’ of bullish conditions, instead of a renewed leg higher. Eventually, momentum normalized to a level that created the foundations in 2021 for a big rally.