US Dollar Index

The US Dollar Index closed at 105.69 yesterday, slightly lower than last Friday's 105.87. As the new quarter begins, the forex market is relatively calm, but the dollar's trading is not performing well. This week's focus is on Friday's non-farm payroll data. Weaker data should help soften the dollar. Nonetheless, the recent US presidential debate on June 28 reminded investors of the unpredictable risks of the US election, with current polls showing Trump leading Biden. Trump's better performance compared to Biden could further increase the dollar premium. Early this week, although the US June ISM Manufacturing PMI slightly disappointed the market, the dollar remained strong, and rising US Treasury yields pushed the dollar higher. The cautious stance of Federal Reserve officials may support the dollar in the short term. Since July last year, the Fed has kept the benchmark policy rate in the range of 5.25%-5.5%, with policymakers stating that it is not appropriate to cut rates until they are more confident that inflation is on a sustainable path toward the Fed's 2% target.

From a technical perspective, despite minor fluctuations, the US Dollar Index maintains a positive outlook, with technical indicators such as the 14-day Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) showing stable trends. The RSI continues to hold above 60 and is slightly flattening, while the MACD maintains green bar predictions, indicating bullish momentum. The US Dollar Index firmly trades above the 20, 100, and 200-day Simple Moving Averages, continuing to trade at highs since May, with a target range of 106.50 to 106.00. However, observers should closely monitor the 105.50 and 105.00 areas for potential downside risks.

Today, consider shorting the US Dollar Index around 105.80, with a stop loss at 105.95 and targets at 105.40 and 105.30.

WTI Spot Crude Oil:

WTI prices expanded gains due to increased expectations of US oil demand driven by the summer travel peak season. The American Automobile Association expects travel to increase by 5.2% this year, with car travel alone growing by 4.8%. Recent US inflation data raising the Fed's 2024 rate cut expectations could drive oil prices higher. On Tuesday, WTI crude traded around $83.40. Concerns about Middle Eastern geopolitical risks and expected summer fuel demand supported the rise in WTI prices. Market fears that tensions between Israel and the Iran-backed Hezbollah militia in Lebanon could spread and reduce global oil supplies prompted oil traders to increase long positions, potentially boosting oil prices in the short term. Additionally, strong summer driving demand may temporarily lift WTI prices. Last week, the US Energy Information Administration (EIA) reported that production and demand for major oil products in April reached a four-month high. Conversely, the prospect of the US maintaining higher interest rates for a longer period may drag WTI prices down, as this could slow economic growth and reduce oil demand.

At the start of the week, WTI US crude oil accelerated into higher levels, climbing $2 per barrel to kick off Monday's trading. WTI prices broke through the technical resistance level around $82.00 that had been a struggle at the end of last week, reaching a nine-week high near $83.00. WTI has risen nearly 15% from the early June low near $72.50, gaining $10 per barrel. WTI prices are on track for a fourth consecutive weekly gain, but with a long wait until Friday and the US Independence Day holiday this week, there is ample room for bulls to push prices to $84.14 (April 26 high) and the $85.00 level. If upward momentum wanes, WTI prices could revert to $82.56 per barrel (23.6% Fibonacci retracement level from $67.94 to $87.08), with a break targeting the $80.00 psychological level.

Today, consider going long on crude oil around $83.10, with a stop loss at $82.80 and targets at $84.00 and $84.20.

Spot Gold

Gold prices fell during the North American session as market participants digested Federal Reserve Chair Jerome Powell's remarks at the European Central Bank Forum in Portugal. Powell's stance was slightly dovish, but US Treasury yields remained firm. The dollar fluctuated but stayed within familiar levels, leading gold to trade at $2,329. In the Asian session on Tuesday, gold prices are likely to continue their previous upward momentum. Despite strong momentum, buyers seem to be struggling as the dollar recovered overnight losses amid a softening risk tone. The latest rally in gold prices can be attributed to a pullback in US Treasury yields, as traders took profits ahead of significant US event risks. The benchmark US 10-year Treasury yield retreated after facing resistance at the critical 4.50% level. Despite mixed US ISM Manufacturing PMI data, the dollar's surge also impacted gold prices. Short-covering by short-term traders and some dip-buying in the spot market further propelled gold prices upward.

On the daily chart, technical indicators show the 14-day Relative Strength Index (RSI) at 48.70, and the early week close above the 75-day Simple Moving Average (SMA) at $2,321.50 suggests a return of gold bulls. However, they need to aim for a daily close above the 60-day SMA at $2,341.50 and the 23.6% Fibonacci retracement level of $2,347.50 (from $2,016 to $2,450) to resume the recovery from the monthly low of $2,287. The next relevant upside barrier is at the psychological $2,350.00 level, above which gold prices may challenge the two-week high of $2,368.70. On the other hand, the 75-day SMA resistance-turned-support at $2,321.50 could provide a short-term cushion. Sustained breaks below this level would test last Friday's low of $2,319.20. Further declines could threaten the $2,300 threshold, with support at $2,292.00 (the 89-day SMA region) coming into play if breached.

Today, consider going long on gold around $2,325.00, with a stop loss at $2,322.00 and targets at $2,338.00 and $2,342.00.

AUDUSD

AUD/USD remained unstable on Tuesday, reversing some of Monday's pullbacks, with its upward potential limited by the 0.6700 region ahead of key US data releases on Wednesday. Early in the week, the AUD/USD exchange rate experienced a slight decline. Due to persistently high inflation in Australia and some signs of weakness in the US, the Federal Reserve's meeting minutes will be closely watched this week. US labor market data for June will also be released. The Australian economy is showing some signs of weakness. The RBA's June monetary policy meeting minutes released on Tuesday indicated that "the case to hold rates steady was stronger than the case to raise them." Inflation risks remain a concern, with data showing upward pressure on inflation in May. The uncertain economic situation makes it difficult to determine or rule out future policy changes. Recent data is insufficient to alter the outlook for inflation to return to target by 2026. After the release of the RBA minutes, AUD/USD recovered some of its intraday losses and rose to retest 0.6650.

Technically, AUD/USD has been consolidating in a horizontal channel between 0.6575 and 0.6705 since mid-May. Both sides are struggling to dominate the direction, and AUD/USD indicators show signs of recovery, with the 14-day Relative Strength Index (RSI) holding near 51 and the Moving Average Convergence Divergence (MACD) presenting new green bars. The indicators remain temporarily stable. The 50-day Simple Moving Average (SMA) at 0.6622 is a strong support level, with further support at 0.6600 (psychological level). Descriptive resistance is at 0.6688 (Monday's high), with the next level at 0.6700 (round number) and 0.6705 (upper line of the horizontal channel). Further resistance appears at the highest level since January, 0.6714, and directly targets 0.6760 (January 4 high).

Today, consider going long on AUD around 0.6650, with a stop loss at 0.6635 and targets at 0.6685 and 0.6695.

GBPUSD

As investors assess the European Central Bank forum and US data releases, the volatile price action of the dollar has allowed GBP/USD to extend its daily rebound and approach the critical 1.2700 level. During the Asian session on Tuesday, GBP/USD continued its range-bound movement and remained confined within the oscillation range of the past two weeks. Currently, GBP/USD is trading around the 1.2640-1.2635 level. Meanwhile, the Bank of England's dovish stance in June (increasing bets on a rate cut at the August monetary policy meeting) continues to weigh on the pound. On the other hand, the dollar's continued rise, building on its overnight rebound from multi-day lows, appears to be further resistance for GBP/USD. Early in the week, the 10-year US Treasury yield surged to a one-month high due to market concerns that the Trump administration's aggressive tariffs could exacerbate inflation and trigger high-interest rates. An increasing number of investors believe the Federal Reserve will start a rate cut cycle in September, limiting further rises in US bond yields. Therefore, the FOMC minutes on Wednesday will remain a focal point for the market. Additionally, the US non-farm payroll report due on Friday will also be key for the recent dollar price action.

Technical indicators on the daily chart show the 14-day Relative Strength Index (RSI) falling to 44.20, reflecting an increase in bearish momentum. On the downside, the first support target is at 1.2600 (psychological level), with the next area aiming at 1.2579 (50.0% Fibonacci retracement from 1.2299 to 1.2860) and 1.2570 (lower wedge line on the daily chart). The 1.2500 level (psychological barrier) will be the next line of defense for pound buyers. On the upside, 1.2700 (round number) is the first resistance level. A break above this level to 1.2727 (23.6% Fibonacci retracement) could attract buyers. If the latter is breached, it will open the door to test the static resistance level at 1.2800.

Today, consider going long on GBP around 1.2670, with a stop loss at 1.2650 and targets at 1.2720 and 1.2730.

USDJPY

On Tuesday, the USD/JPY exchange rate reached a new high of 161.75, the highest since 1986. A Reuters survey indicated that the Bank of Japan might cut its monthly bond purchases by about $100 billion in the first year. Due to increased expectations of a Fed rate cut in 2024, rising yields, and a stronger dollar, USD/JPY continued to strengthen to around 161.50 during early Asian trading on Tuesday. The dollar's slight recovery provided some support for USD/JPY. However, market expectations are that Japanese authorities might soon intervene in the forex market to prevent yen depreciation. USD/JPY continues to trade near recent highs, close to the highest level since 1986. Investors expect Japanese authorities might soon intervene. While the yen's level is a consideration, officials will also focus on the pace of depreciation, as the purpose of intervention is to curb excessive volatility. That said, actual intervention is likely if actual volatility starts to pick up or if USD/JPY quickly rises towards 164-165 from the current price.

USD/JPY continues to trade near recent highs. Currently, the path of least resistance for USD/JPY is likely still upward. USD/JPY was last reported near 161.50, having touched a 38-year high of 161.72 earlier in the week. The daily chart shows bullish momentum intact, with the 14-day Relative Strength Index (RSI) above 75, indicating overbought conditions. The key for the future momentum of this currency pair will be holding above the April 29 high of 160.20 and the psychological level of 160.00. The next resistance levels are at 161.72 (early week high), followed by 162.17 (123.6% Fibonacci retracement from 160.20 to 151.85), and 164.37 (150.0% Fibonacci retracement level). Support levels to watch are the April 29 high of 160.20 and the psychological level of 160.00. The next level points to 159.40 (a support line extending from the May 2 low of 153.08).

Today, consider going long on USD around 161.20, with a stop loss at 161.00 and targets at 162.00 and 162.20.

EURUSD

In the context of flat price action for the dollar and most risk-related assets, EUR/USD managed to continue its subdued upward trend over several trading days, all ahead of important U.S. news releases on Wednesday. EUR/USD rose to a multi-week high above 1.0770 early in the week but was forced to retreat due to a general reversal in market investor sentiment. The bullish momentum came to a halt after U.S. economic activity data signaled worsening recession warnings. Investors will continue to await key economic data from both the Eurozone and the U.S. this week, culminating in the release of the new U.S. non-farm payroll (NFP) data on Friday. On the other hand, preliminary poll forecasts from polling companies show that the far-right National Rally party (RN) is expected to win 33% to 34.2% of the vote, the left-wing coalition 28.5% to 29.6%, and Macron's centrist coalition 21.5% to 22.4%. The euro might face new pressure as the market is watching whether Marine Le Pen's far-right party can secure an absolute majority in the National Assembly, which would make it easier to pass legislation. This scenario could have a more negative impact on the euro than a hung parliament result.

EUR/USD was last reported at the 1.0740 level. On the daily chart, bearish momentum shows signs of weakening, with the 14-day Relative Strength Index (RSI) near the negative territory at 48.50. However, the risk is skewed to the upside. Initial resistance is at 1.0776 (Monday's high) and 1.0777 (50-day moving average). A break above these levels would target 1.0795 (38.2% Fibonacci retracement from 1.0601 to 1.0916) and 1.0800 (psychological level). Support levels to consider are 1.0700 (round number), followed by 1.0668 (78.6% Fibonacci retracement level) and 1.0666 (June 26 low).

Today, consider going long on EUR around 1.0730, with a stop loss at 1.0715 and targets at 1.0780 and 1.0790.

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