Daily Market Lookup

• The U.S. dollar edged lower in early European trade Thursday, handing back some of the previous session’s gains but remained near a 20-year high as the Federal Reserve retained a hawkish tone. There are many factors driving the dollar’s gains, but prime among them is the aggressive monetary tightening by the U.S. central bank as it faces the worst inflation in decades. The minutes from the last Fed meeting, released on Wednesday, pointed to the possibility of an “even more restrictive” monetary policy to prevent long-lasting inflation, and now investors are pricing in another 75-basis point interest rate hike in July. At the same time this tightening, by the Fed and other central banks, risks throwing the global economy into a recession, which the United States is likely to weather better than most other countries. The European Central Bank will publish the minutes of its last meeting later Thursday, at which the policymakers decided that a rate hike of 50 basis points would be appropriate in July. Europe's inflation is running at record levels and surging energy prices suggest the upward pressure on consumer prices will remain substantial for a while longer. That said, German industrial production grew just 0.2% on the month in May, a dramatic slowdown from the revised higher 1.3% growth the previous month. One of the key departures from Johnson’s cabinet was Rishi Sunak, who quit his role as Chancellor, the second most important position in government, on Tuesday.
• The U.S. dollar will remain strong for at least the next three months as it basks in both expectations for aggressive Federal Reserve interest rate rises and safe-haven appeal stemming from global recession fears, a Reuters poll of FX analysts showed. The recent sell-off in risk assets and bond markets is also playing into a broad dollar rally against nearly every other currency, to levels not seen in two decades. Analysts say there is no good reason to expect it to stall yet. Already up a hefty 7% last year, the dollar has soared another 12% this year, consistently exceeding nearly every forecaster's expectations on how long its winning streak would last. A three-quarters majority of analysts, 37 of 48, in a separate question from the July 1-6 Reuters FX poll expect that trend to continue for at least another three months. Of those, 19 said three to six months, 10 said six to 12 months, four said at least a year and four said at least two years. Only 11 respondents said less than three months. Yet despite near-term strength, the median forecast from the latest poll of nearly 70 analysts doggedly clings to a long-held view that the dollar will weaken in the coming 12 months, despite the euro now trading at its weakest in two decade. While the lack of alternatives is likely to keep the dollar well-bid against nearly all currencies, the greenback's strength will be most acutely felt by the ones who have little to no interest rate backing them. Indeed, the euro, the Japanese yen and the British pound, whose central banks have either not hiked rates or failed to keep up with the Fed's aggressive policy tightening, have weakened by double-digit percentages this year. Minutes of June's policy meeting revealed concerns that worsening inflation would erase faith in the Fed's ability to control it. That has pushed the central bank to embark on the most aggressive tightening cycle in decades - knocking markets on recession fears. However, that 12-month view was the lowest median 12-month euro prediction in five years, and nine analysts expect it to reach or breach parity by mid-2023. The Japanese yen, the worst performer among majors, is down nearly 15% for the year and will likely remain weaker than 130 per dollar over the next six months on the gap between Japanese and U.S. benchmark yields and monetary policy. qSterling, down nearly 12% against the dollar since the start of this year, is expected to regain around half of its lost ground in 2022 over the next year as the Bank of England looks set to continue raising interest rates. Emerging market currencies will also struggle to stem losses against the greenback in the near-term as investors seek the safety of dollar denominated assets. While China's tightly controlled yuan, the Indian rupee and the Malaysian ringgit were predicted to trade around where they are now over the next three to six months, the Russian rouble and Turkey's lira were expected to fall.
• Oil was up on Thursday morning in Asia on supply concerns, after falling during the previous two sessions. Both benchmarks closed on Wednesday at their lowest since April 11. The declines follow a dramatic fall on Tuesday despite tight global supplies. Oil prices have slid alongside other commodities such as metals and palm oil as global central banks hiked interest rates, which spurred fears of a recession that could dampen demand for commodities. “It seems as though the market is starting to price in that scenario,” ING’s head of commodity research Warren Patterson told Reuters, referring to recession. or the supply side, investors are assessing possible oil supply disruption at the Caspian Pipeline Consortium (CPC), which has been told by a Russian court to suspend activity for 30 days. Exports at CPC, which handles about 1% of global oil supplies, were still flowing as of Wednesday morning. Crude supply data from the American Petroleum Institute, released on Wednesday, showed a draw of 3.825 million barrels. Investors now await U.S. crude supply data from the U.S. Energy Information Administration, which will be released later in the day.

Gold – XAU

Gold on Wednesday made its intraday high of US$1772.79/oz and low of US$1732.15/oz. Gold down 1.416% at US$1739.02/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above zero line and histograms are a2lso increasing trend and it will bring upward stance in the upcoming sessions. RSI is in overbought region and more upside is expected before it gets stretched. Stochastic Oscillator is in neutral territory and giving negative crossover to bearish stance for intraday trade.

Trading Strategy: Sell on Strength

Sell below 1750-1787 keeping stop loss closing above 1787, targeting 1741-1732-1720 and 1707-1700. Buy in between 1741-1700 with risk below 1700, targeting 1750-1759-1779 and 1787-1798.

Silver - XAG

Silver on Tuesday made its intraday high of US$19.83/oz and low of US$18.91/oz settled down by 0.197% at US$19.18/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (26.62), breakage above will lead to 27.60. MACD is below zero line and histograms are decreasing trend and it will bring bearish stance in the upcoming sessions. RSI is approaching neutral region, indicating buy signal for now. The Stochastic Oscillator is in oversold region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 19.05-16.90, targeting 19.50-19.80-20.45 and 20.70-21.20- 21.80 with stop loss should be place on the breakage below 19.50. Sell in between 20.45-23.75 with stop loss above 23.75; targeting 19.80-19.50-19.05 and 18.40-17.90.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US100.13/bbl, intraday low of US$93.16/bbl and settled down by 2.995% to close at US$95.71/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above zero line and histograms are in increasing mode 0will bring bullish stance in the upcoming sessions. The Stochastic Oscillator is in neutral region and giving positive crossover for confirmation of bullish stance; while the RSI is in neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 96.90-102.50 with stop loss at 102.50; targeting 96.00-94.65-93.20 and 92.40-91.50. Buy above 96.00-91.50 with risk daily closing below 91.50 and targeting 96.90-98.00-98.90 and 99.90-101.05-102.40.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.0161/EUR, high of US$1.0276/EUR and settled the day down by 0.841% to close at US$1.0180/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.0736), which become immediate support, break below will target 1.0647. MACD is above zero line and histograms are increasing mode which will bring bullish view. Stochastic is in overbought territory and giving positive crossovers to signal for bullish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Sell

Sell below 1.0200-1.0430, targeting 1.0150-1.0100-1.0010 and 0.9950-0.9860 with stop-loss at daily closing above 1.0795. Buy above 1.0150-1.0986 with risk below 1.0986, targeting 1.0200-1.0250-1.0290 and 1.0335-1.0390-1.0550.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.1875/GBP, high of US$1.1989/GBP and settled the day down by 0.0259% to close at US$1.1921/GBP.

Technicals in Focus:

On daily charts, prices are sustaining below 20DMA (1.2834) is become immediate resistance level. 14-D RSI is currently in oversold region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and giving positive crossover to confirm bullish stance. MACD is above zero line but histograms are increasing lead to upward movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.2100-1.2010 with target 1.2200-1.2310-1.2420 and 1.2490-1.2575-1.2650 with stop loss closing below 1.2010. Sell in between 1.2200-1.2630 with targets at 1.2190-1.2150-1.2100 and 1.2075-1.2050 with stop loss should be 1.2630.

USD/JPY

USD/JPY on Wednesday made intra‐day low of JPY134.95/USD and made an intraday high of JPY136.00/USD and settled the day up 0.190% at JPY135.91/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 136.00-139.70 with risk above 139.70 targeting 135.20-134.60-134.00 and 133.50-132.90-132.00. Long positions above 135.20-130.60 with targets of 136.50-137.40 and 137.90-138.50 with stop below 124.30.