Daily Market Analysis From Forexmart

Oil holds steady in positive territory for six straight months and extends its rally into summer

On Wednesday, global oil prices are steadily increasing after a short decline a day earlier. The fall in oil prices on Tuesday was caused by speculations that some producers want to suspend Russia's participation in the OPEC+ production deal, as well as by new sanctions against Russia.

At the moment of writing, August Brent oil futures have gained 0.36% and are now hovering near $116.02 per barrel. A day earlier, Brent lost 1.7% and declined to $115.60 per barrel.

WTI oil futures for July rose by 0.44% to $115.17 per barrel on Wednesday. Yesterday, the futures contracts fell by 0.35% to $114.67 per barrel.

So, on Tuesday, oil depreciated by about 2% after a report that some OPEC members are exploring the idea of suspending Russia's participation in the deal over the conflict in Ukraine. The key factors in this case are the Western sanctions imposed on Russia and the partial embargo on Russian crude imports. This step will notably limit Russia's ability to ramp up oil production. The next OPEC+ meeting will take place on June 2, 2022.

In 2021, Russia, one of the world's top three crude producers, made a deal with OPEC and 9 other non-OPEC members to gradually increase output every month. Yet, amid anti-Russian sanctions, analysts predict an 8% drop in oil production.

Oil quotes were steadily rising until the news about Russia's possible suspension appeared in the media. In the early trade on Tuesday, Brent futures for July jumped above $124 per barrel for the first time since March 9.

Experts suggest that if the cancellation of Russia's membership is confirmed, the price of oil may drop to $100.

Today, markets are focused on supply prospects amid a ban on Russian oil imports to the EU. On May 31, the EU members agreed on the sixth package of sanctions which includes a partial embargo on oil and petroleum products imported by sea.

The sanctions ban local companies from providing insurance to Russian oil tankers. This means that from now on, Russia is isolated from the largest export market.

Restrictions will deal a heavy blow to oil deliveries to Asia which may disrupt Russia's plan to refocus on exports to China and India.

This ban can seriously hit the economy of Russia as the majority of European companies will refuse to transport oil without insurance. The effectiveness of this restriction was previously tested on Iran and proved to be successful.

Many European countries involved in shipping have already expressed concern about the ban on insurance for Russian oil tankers. So, the EU decided to implement it gradually within the next six months.

The official statement about the new restrictive measures against Moscow is expected in the coming days.

 

Tips for beginner traders in EUR/USD and GBP/USD on June 2, 2022

Economic calendar for June 2

Today is a holiday in the UK, but this will not cause a decrease in volatility in financial markets. The focus will be on the ADP report on employment in the United States, which is predicted to grow by 295,000 in May. This is a positive signal for the labor market if the data is confirmed.

Almost simultaneously with the report, ADP will publish weekly data on jobless claims in the US, where they predict a reduction in their volume. This is a positive factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits may be reduced from 1.346 million to 1.308 million.

The volume of initial claims for benefits may remain at the level of 210,000.

Time targeting

ADP report - 12:15 UTC

US Jobless Claims - 12:30 UTC

Trading plan for EUR/USD on June 2

In order to confirm the signal to sell the euro, the quote needs to stay below the level of 1.0636 for at least a four-hour period. In this case, traders will have high chances of moving towards the values of 1.0570–1.0500.

Otherwise, the market may experience another stagnation with a local pullback relative to the pivot point.

Trading plan for GBP/USD on June 2

A stable holding of the price below the level of 1.2500 may lead to a subsequent decline towards the value of 1.2350. This move will indicate a gradual process of recovery of dollar positions relative to the recent correction.

 

Tips for beginner traders in EUR/USD and GBP/USD on June 3, 2022

Economic calendar for June 3

Retail sales data in the euro area is expected for publication today. Forecasts assumed growth in figures, which may provide local support for the euro before the American trading session.

The main macroeconomic event of the outgoing week is considered to be the report of the United States Department of Labor, which predicts by no means bad indicators. The unemployment rate could drop from 3.6% to 3.5%, and 325,000 new jobs could be created outside of agriculture. We have a strong US labor market, which could support the US dollar.

Time targeting

EU retail sales - 09:00 UTC

US Department of Labor Report - 12:30 UTC

Trading plan for EUR/USD on June 3

Based on the recent price change, we can assume that the market has a local signal that the euro is overbought in the short term. This can lead to a slowdown in the upward cycle followed by a rebound. The price area of 1.0770/1.0800 is considered as resistance on the way of buyers.

The scenario of the prolongation of the corrective move will be considered by traders if the price stays above 1.0850 for at least a four-hour period.

Trading plan for GBP/USD on June 3

In this situation, traders consider two possible scenarios at once:

The first one comes from the preservation of rising interest in the market, where holding the price above 1.2600 can return the quote to the resistance area of 1.2670/1.2720.

The second scenario considers the possibility of completing a corrective move, where holding the price below 1.2530 will lead to another attempt to break through the support level of 1.2500. The largest increase in the volume of short positions will occur after the price holds below 1.2450, which will confirm the signal about the completion of the correction.

 

Most of the Asian indices gain 0.67–2.2%

Most of the Asian indices gained between 0.67 and 2.2%. Thus, the Chinese and Hong Kong indices showed the biggest increases. Shanghai Composite added 1.05%, Shenzhen Composite increased by 2.21%, and Hang Seng Index surged by 1.37%. Japan's Nikkei 225 gained 0.67% while Australia's S&P/ASX 200 lost 0.32%. South Korean stock exchanges are not working today. However, the Korean KOSPI ended last week in a positive area with an increase of 0.44%.

The main reason for investors' optimism was strong statistical data from China. Thus, the index of business activity in the service sector last month rose to 41.4 points from April's mark of 36.2 points. At the same time, the value of this indicator is still below the 50-point mark, indicating a decline in business activity.

The gradual lifting of restrictive measures in the capital and other major cities of China, caused by the new wave of COVID-19, is also encouraging.

Wuxi Biologics (Cayman) Inc. gained 9.7%, Meituan added 8.3%, and Anta Sports Products, Ltd. soared by 5.5%. Quotes of BYD Co., Ltd. rose slightly less by 5.2%, and Alibaba Group Holding, Ltd. climbed by 2%.

In Japan, the country's central bank reports the intention to continue the soft monetary policy. According to the management of the regulator, at this stage, the rise in prices in the country is caused by individual factors, such as an increase in the cost of energy. The authorities believe that stimulus measures will lead to an increase in wages, and inflation will become more stable.

Among the companies included in the Nikkei 225 indicator, the shares of Kawasaki Heavy Industries, Ltd. gained 6.4%, Hitachi Zosen Corp. grew by 5.5%, and Idemitsu Kosan Co, Ltd. soared by 5%. Slightly less growth was shown by Fast Retailing securities, which gained 2.5%.

At the same time, SoftBank Group stock decreased by 0.4%, and Sony dropped by 9%.

The capitalization of the largest Australian companies decreased. BHP lost 0.9%, and Rio Tinto dropped by 0.2%.

 

Hot forecast for GBP/USD on 07/06/2022

Even before the opening of the US trading session, the dollar began to steadily strengthen its positions, which is quite strange. After all, the macroeconomic calendar is completely empty. Basically, just like today. In addition, there was also nothing in the news background that could somehow affect the development of events. It turns out that what happened most likely lies in the plane of technical factors. Which in general is not surprising, since amid the absence of obvious fundamental factors, the market is switching to technical ones. Also, such a situation may hint at the lack of market participants' faith in the prospects of Europe as a whole. After all, representatives of the European Central Bank are already directly talking about the imminent increase in the refinancing rate, which should be the first since 2011, and which should contribute to the strengthening of the euro.

However, the general state of the European economy, along with the increasing risks of energy shortages, which are most acute in front of the eurozone, cause more and more concerns. What is the trip of Olaf Scholz to Africa worth, in order to find alternative sources of supply, after the European Union's decision to abandon Russian energy carriers. It is quite obvious that even if Europe can find a replacement for Russian oil and gas, it will cost much more. And this is despite the fact that inflation is not even slowing down, and fuel prices are higher than ever before. In such circumstances, it is difficult to feel a sense of optimism about the European economy.

Since the beginning of June, the GBPUSD currency pair has been stubbornly trying to change the trading interest from an upward cycle to a downward one. This is indicated by the price consistently reaching the support area of 1.2450/1.2500.

The RSI H4 technical instrument is moving to the lower area of the 30/50 indicator, which indicates traders' prevailing interest in short positions. RSI D1 is moving within the deviation of the 50 middle line, which indicates a slowdown in the corrective move.

The moving MA lines on the Alligator H4 are directed downwards. This is a signal to sell the pound. Alligator D1 has interlacing between the MA lines, which indicates a slowdown in the upward cycle.

On the trading chart of the daily period, there is a corrective move from the pivot point of 1.2155, which fits into the clock component of the downward trend. The resistance area of 1.2670/1.2720 is on the correction path as resistance.

Expectations and prospects

We can assume that the long absence of updating the local high indicates the completion of the corrective move. The main signal to sell the pound is when the price stands firm below 1.2450 for at least a four-hour period. In this case, we will see a gradual recovery of dollar positions.

A complex indicator analysis has a sell signal in the short-term and intraday periods due to the price movement within the support area. Indicators in the medium term have a variable signal due to the slowdown in the corrective move.

 

Tips for beginner traders in EUR/USD and GBP/USD on June 10, 2022

Details of the economic calendar from June 9

The European Central Bank (ECB) expectedly kept the base interest rate at the same level. The ECB also said that it intends to raise the rate in July. This became the main topic during the meeting as this will be the first time the regulator will raise the rate since 2011. It is expected that the regulator will raise the rate by 0.25%.

The market reaction to this announcement was not so rosy. Perhaps investors were expecting a stronger rate hike.

The main theses of the ECB:

The ECB, as expected, kept the base rate at zero, and the deposit rate at minus 0.5%.

The ECB will end the asset purchase programme (APP) on 1 July.

The ECB intends to raise its base rate by 0.25% in July.

The ECB forecasts eurozone GDP growth of 2.8% in 2022, 2.1% in 2023 and 2.1% in 2024.

The ECB intends to gradually raise the base rate after September.

The ECB forecasts eurozone inflation at 6.8% in 2022, 3.5% in 2023 and 2.1% in 2024.

The ECB plans a second rate hike in September, the pace of its rise will depend on inflation.

At the same time as the press conference, data on jobless claims in the United States was released which recorded an increase in the overall rate.

This is a negative factor for the US labor market, but in connection with the comments of the ECB that coincided at that time, the dollar did not react in any way to the negative on the applications.

Statistics details:

The volume of continuing claims for benefits decreased slightly from 1.309 million to 1.306 million.

The volume of initial claims for benefits increased from 202,000 to 229,000.

Analysis of trading charts from June 9

The EURUSD currency pair has covered more than 120 points during an intense downward momentum. This movement led to the breakdown of the lower border of the side channel 1.0636/1.0800. Based on the behavior of the price, we can state the fact of speculation in this period of time.

The GBPUSD currency pair rushed down through a positive correlation with the European currency. This led to another convergence of the price with the lower border of the side channel 1.2450/1.2500.

Economic calendar for June 10

Today, the focus will be on inflation data in the United States, where it is predicted that the consumer price index will remain at the same level—8.3%. In some ways, this is a positive signal that indicates a slowdown in the rate of inflation. The US dollar is likely to receive a local incentive to strengthen.

Time targeting

Inflation in the USA - 12:30 UTC

Trading plan for EUR/USD on June 10

The technical pullback is still relevant in the market due to the local overheating of short positions in the euro. This movement can temporarily return the quote to the boundaries of the previously passed flat.

The next downward movement is expected in the market after holding the price below 1.0600. This move will lead to a gradual recovery of dollar positions relative to the recent corrective move.

Trading plan for GBP/USD on June 10

The price movement within the flat is still relevant in the market, so another price rebound from its lower border cannot be ruled out. As the main strategy, traders consider the tactics of breaking through one or another frame of the established range.

Trading recommendations are based on the breakdown tactics:

Buy positions on the currency pair are taken into account after holding the price above the value of 1.2600 in a four-hour period with the prospect of a move to 1.2660-1.2720.

Sell positions should be considered after holding the price below 1.2450 in a four-hour period with the prospect of a move to 1.2350-1.230.

 

Trading Signal for GOLD (XAU/USD) on June 14-15, 2022: buy above $1,812 (2/8 Murray - oversold)

XAU/USD came under bearish pressure after falling below the 200 EMA (1,849) and ended the American session reaching a low of 1808.93

In less than 24 hours from the high of 1878.74 to the low of 1808.93, gold fell by approximately $70. This is a sign that risk aversion is increasing and investors will continue to take refuge in the US dollar.

Investors are worried that the Fed may hike the interest rate by 0.75%. As a result, the stock markets declined along with gold and cryptocurrencies.

A technical rebound is expected in the next few hours as gold is in an oversold zone. However, as long as it fails to consolidate above the 200 EMA located at 1,849, it will only be a pullback to resume the downtrend correction.

In the early Asian session, XAU/USD is trading at 1,824 and after having found a strong bounce above 2/8 Murray. The technical bounce is likely to continue in the next few hours and may reach the 21 SMA around 1,838.

In case of a test of the level of 2/8 Murray, gold is likely to return to the zone of 1,812. We should wait for a consolidation above this level to buy with targets at 1,830, and 1,838. It could reach the 200 EMA at 1,849.

In the Asian session, the eagle indicator touched the oversold zone. It means that a technical rebound will occur in the next few hours. it may be an opportunity to buy above 1,812.

On the contrary, if gold resumes its downtrend and trades below 1,812 it could continue its downward movement and could reach the psychological level of 1,800 and the low of May 16 at 1786.70

Our trading plan for the next few hours is to buy gold at current price levels around 1,824 or in case of a bounce at 1,812 to buy with targets at 1,838 and 1,849.

 

Storm warning for USD/JPY

USD/JPY went on a rollercoaster ride yesterday after the US Federal Reserve raised rates by 75bp. Don't loosen your belts as more course turbulence is expected in the coming days

The US central bank's decision did not come as a surprise to the markets.

The latest jump in the US consumer price index to 8.6% made it clear that the Fed intends to tighten its grip.

As predicted, at Wednesday's meeting the central bank raised interest rates by 75 bp.

The fact that the Fed went for the biggest increase in the rate since 1994 sent the dollar skyrocketing in almost every direction.

However, a little later on the charts, the opposite situation was already observed. The greenback dipped just as steeply as investors weighed in on the US central bank's rate plans.

Politicians lowered inflation expectations for both the current year and 2023, and also hinted at the next rate hike by either 50 bp or 75 bp.

The Fed's rejection of the possibility of a 100 bp rate hike literally plunged the dollar. The USD/JPY fell to 133.75, after hitting a new 24-year high of 135.50 in previous deals.

This morning, the yen turned around again and took the already familiar downward route. The Japanese currency returned to the lowest level since 1998 at 135.

Meanwhile, currency strategists note that in the short term the dollar-yen pair will remain highly volatile, and warn of even greater exchange rate turbulence.

Ahead and after the 2-day meeting of the Bank of Japan, which will be held on June 16-17, the range of fluctuations of the USD/JPY pair may be at least 7 points.

According to experts, during this period, the yen will trade from 131.05 to 138.08 per dollar. Thus, its weekly volatility will approach the highest level since 2020.

The jumps in the rate will be due to the ambiguous expectations of the market regarding the further policy of the Japanese central bank. As you know, BOJ stands out among its colleagues with its ardent commitment to a soft monetary rate.

BOJ Governor Haruhiko Kuroda continues to insist that it is too early to cut stimulus and raise rates, because inflation in the country remains relatively moderate.

In April, consumer prices in Japan exceeded the BOJ target of 2% for the first time in seven years and reached 2.1% year on year.

Nevertheless, in the future, Kuroda does not expect a significant increase in inflation. And until recently, this confidence has helped him stick to a dovish line, despite the global tightening trend.

However, can the head of the BOJ continue in the same vein amid the ongoing depreciation of the yen?

The decline in the Japanese currency has already significantly worsened the position of the world's third largest economy and overshadowed its prospects.

This morning, the Japanese government announced that in May the country faced the largest increase in the trade deficit in eight years.

Imports rose 48.9% year-on-year last month, outpacing exports by 15.8%, according to Japan's Ministry of Finance data. This resulted in a trade deficit of 2.385 trillion yen ($17.80 billion).

The trade balance with a negative balance testifies to the widespread consumption of foreign goods, the value of which continues to rise steadily.

This exacerbates the already sad situation of Japanese consumers, suffering from rising energy and food prices. Therefore, it is possible that Kuroda may change his mind dramatically and throw out a surprise tomorrow.

Given his behavior in the past, this is quite likely. As a reminder, before settling on the current policy, which is known as yield curve control, in 2016 the official shocked the markets with an unexpected move to negative interest rates.

Some analysts do not rule out the BOJ's surrender in the near future. If Kuroda gives even the slightest hint that he intends to reduce his asset purchases or raise rates, this will further increase the volatility of the market.

In this case, we should expect a big sale of Japanese bonds, a sharp increase in their yield and, as a result, an increase in demand for the yen.

According to experts, a change in the yield curve control policy could lead to a fall in the USD/JPY pair by 3-4% from the current level.

And if Kuroda declares on Friday that he remains true to his position, we will be able to see the continuation of the rally of this currency pair.

Analysts at Credit Suisse expect the greenback to rise to 142 against the yen.

 

The steep rise of the franc and the crushing fall of the yen

Yesterday, Switzerland made a knight's move, unexpectedly raising rates by 50 bps. Against this background, expectations of the Bank of Japan's capitulation sharply increased. But the BOJ still decided to stand on its own.

In the outgoing week, two major central banks, whose monetary policy remained super-soft in the face of total tightening, decided to go their separate ways.

On Thursday, the Swiss National Bank made a shocking decision to raise interest rates. And this morning, the BOJ finally dispelled rumors about a possible rise in the indicator.

Franc rejoices: SNB takes a hawkish a path
Yesterday's decision by the Swiss central bank on interest rates produced a bombshell effect on the markets.

Of course, many expected that the SNB could decide to increase the indicator in conditions of increased inflation. But did anyone think that it could literally turn from a quiet dove into an aggressive hawk overnight?

The Swiss bank immediately raised the rate by half a percentage point, to 0.25%. The central bank has tightened its monetary policy for the first time in 15 years, hoping to contain inflation, which threatens to get out of control.

Currently, inflation in the country is 2.4% and, according to SNB forecasts, may reach 2.8% by the end of the year. This is significantly higher than the agency's target range of 2%.

The shocking rise in the rate by 50 bps provoked the sharpest growth of the franc in the last seven years. The Swiss currency has risen by almost 3% against the dollar.

The franc also strengthened significantly against the euro. The single currency dropped to 1.0131, showing the strongest drop since June 2016. Recall that the results of the Brexit referendum were published then.

Now analysts expect a further rise of the Swiss currency against the dollar and the franc reaching parity with the euro, as the SNB said that further tightening may be required to combat inflation.

The yen is stormy: BOJ chooses a dovish route
Interestingly, the rise in rates in Switzerland not only triggered the franc rally, but also gave a short-term boost to the yen.

Yesterday, the Japanese currency rose more than 1% against the dollar and reached a 2-week high. The increased threat of a global recession partially contributed to the strengthening of the protective asset.

Investors fear that a series of rate hikes, which this week has been remembered for, will provoke a slowdown in global economic growth.

Recall that on Wednesday the Fed raised rates by 75 bps, and on Thursday the Bank of England (by 25 bps) and the SNB (by 50 bps) reported an increase in the indicator.

The most unexpected, as we have already noted above, was the decision of the Swiss central bank. After the surprise it presented, speculation increased significantly that the BOJ would go the same way.

However, this did not happen. On Friday morning, the BOJ announced that it continues easing monetary policy and keeps interest rate targets unchanged.

This choice left the BOJ completely alone. While other major central banks are tightening their policies to curb rising inflation, the Japanese central bank decides to focus on supporting the economy affected by the COVID-19 pandemic.

The market's reaction to the BOJ's dovish tactics is absolutely logical. Today, the yen is falling as rapidly as it rose yesterday.

At the time of preparation of the material, the yen plunged by almost 1% against the dollar and was trading again at a 24-year low of 134.

Experts predict that in the near future we will see a further depreciation of the yen, which may cause even more damage to the economy, which is heavily dependent on imports of fuel and raw materials.The fact that uncertainty about the Japanese economy is extremely high is also stated in today's BOJ statement. Therefore, it would not be surprising if the regulator decides to turn off the beaten track at its next meeting...

 

AUD skyrockets post-RBA Minutes

Two weeks ago, the Reserve Bank of Australia unexpectedly lifted interest rates by 50 basis points. AUD/USD soared after the announcement. No wonder, the Minutes of the meeting triggered a similar reaction.

The Aussie dollar went up even before the release of the RBA Minutes. Yesterday, the currency strengthened by 0.3% to 0.69675 versus the US dollar on hawkish expectations.

According to the June report published on Tuesday, the central bank considered a 0.25% or 0.5% rate hike. RBA policymakers voted in favor of the latter one to curb inflation faster.

AUD/USD extended gains following RBA Governor Philip Lowe's hawkish comments.

The RBA chief saw inflation at 7% by the end of the year, well above the long-term target rate. He reaffirmed further monetary tightening due to growing inflationary pressure.

"As we chart our way back to 2% to 3% inflation, Australians should be prepared for more interest rate increases," warned Lowe in a speech. "The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation."

At the same time, the official made it clear that the RBA would not follow the Fed's suit. Last week, the US central bank lifted rates by 0.75% for the first time since 1994.

"At the moment, the decision we will take is either 25 or 50 again at the next meeting," Mr. Lowe said.

By the end of July, the Australian regulator will see the release of Q2 inflation. Therefore, the RBA may well stay hawkish in August.

The bank will also update the economic growth forecast by the August meeting.

Some analysts say these data could affect the pace of rate increases needed to tame inflation.

The interest rate is now seen at around 3.7% by the end of the year. To reach the target, the central bank should go for the most dramatic monetary tightening in its modern history.

Such a scenario would hit consumer spending hard and even lead to a slowdown in economic growth, thus harming the Australian dollar.

In addition, global recession risks are growing as the world's biggest central banks are hiking rakes.

A slowdown in global economic growth could be a serious obstacle to the commodity currency in the long term.

"We forecast AUD/USD will spend most of the next twelve months in a 0.60-0.70 range," the Commonwealth Bank Of Australia said in a note.