Japanese Yen Hammers by Soft CPI

• The BoE Governor's dovish tone hindered Pound Sterling's strength.
• The Japanese Yen continues to struggle after the National Core CPI failed to meet market expectations.
• Gold prices edge higher over geopolitical uncertainty and monetary policy uncertainty. 

Market Summary

The spotlight was on the Pound Sterling following the Bank of England's (BoE) interest rate decision announced yesterday. Despite the UK's Consumer Price Index (CPI) reaching the targeted rate of 2%, the BoE voted 7-2 to maintain its interest rate unchanged, providing buoyancy for the Pound Sterling. However, the BoE Governor emphasised a cautious stance, indicating that the UK will align its monetary policy with peers if inflation pressure eases significantly.

In contrast, the Japanese Yen has traded to its weakest level since April. The disappointing Japan National Core Inflation rate has further weakened the Yen, leaving the Bank of Japan (BoJ) in a dilemma regarding a potential monetary policy shift.

In the commodity market, the strength of the U.S. dollar was hindered by downbeat Initial Jobless Claims data, fueling upward momentum for both gold and oil. Gold prices rose by more than 1.3%, nearing their highest level in June, while oil prices also gained amid the weakened dollar.

Current rate hike bets on 31st July Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (91.7%) VS -25 bps (8.3%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which measures the greenback against a basket of six major currencies, received significant bullish momentum despite the recent string of disappointing U.S. economic data. Market participants are anticipating that some central banks might cut their interest rates earlier than the Federal Reserve, which has boosted demand for the Dollar. The recent move by the Swiss National Bank to lower interest rates to 1.25%, following a cut in March, while the Bank of England kept rates unchanged but committed to monitoring economic developments before making any easing decisions. This yield differential has favoured the Dollar, enhancing its attractiveness to investors.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 64, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 105.65, 106.35

Support level: 105.15, 104.45 

XAU/USD, H4

Gold prices extended their gains alongside the U.S. Dollar in an uncommon trend, driven by rising recession risks that prompted investors to seek safe-haven assets. The easing of monetary policies by several global central banks has diminished the appeal of other currencies, thereby boosting demand for gold. The concurrent rise of gold and the Dollar highlights investor concerns about economic stability and the preference for safe-haven investments amid uncertain market conditions.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 71, suggesting the commodity might enter overbought territory. 

Resistance level: 2360.00, 2410.00

Support level: 2335.00, 2300.00

GBP/USD，H4

The Pound Sterling slid by nearly 0.5% against the dollar, which strengthened to its recent high, putting pressure on the Sterling. As expected, the Bank of England (BoE) maintained its interest rate at 5.25%. Notably, the BoE Governor delivered a dovish narrative, stating that the UK central bank will act accordingly if inflationary pressure in the country shows signs of easing.

GBP/USD was rejected at its crucial liquidity zone at near 1.2730 level and later dropped below its key support level at 1.2660, suggesting a bearish bias for the pair. The RSI has slid to the oversold zone while the MACD failed to break above the zero line and edge lower, suggesting the pair is trading with bearish momentum.  

Resistance level: 1.2760, 1.2850

Support level: 1.2540, 1.2440

EUR/USD，H4

The EUR/USD pair has formed a divergence pattern in technical analysis and is currently attempting to break above the liquidity zone near the 1.0740 level. The prospect of higher and longer interest rates in the U.S. has fueled the strength of the dollar, and uncertainty over the monetary policies of other major central banks has also boosted demand for the dollar, putting pressure on the pair. Additionally, the euro is still hindered by political uncertainty in France, which is expected to be resolved at the end of June after the legislative vote.

The EUR/USD pair, despite being rejected at the liquidity zone, has formed a higher low, and the divergence pattern suggests a bullish signal for the pair. The RSI has been moving up, while the MACD is on the brink of breaking above the zero line, suggesting bullish momentum may be forming. 

Resistance level: 1.0700, 1.077

Support level: 1.0680, 1.0615 

USD/CHF，H4

The Swiss Franc extended its losses following the Swiss National Bank’s unexpected decision to cut interest rates by 0.25 percentage points to 1.25%. The central bank also lowered its average annual inflation forecast for 2024 from 1.4% to 1.3%. This unexpected rate cut led to a significant sell-off of the Swiss Franc as investors reacted to the SNB's dovish stance.

USD/CHF is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 61, suggesting the pair might extend its gains since the RSI stays above the midline. 

Resistance level: 0.8980, 0.9055

Support level: 0.8905, 0.8835 

USD/JPY, H4

The Japanese Yen has broken above its ascending triangle pattern, suggesting a bullish bias for the pair. The Yen continues to weaken and is heading towards the 160 mark as the recently released Japan National Core CPI failed to meet market expectations. The soft inflation rate casts a shadow on upcoming Bank of Japan (BoJ) monetary policy moves, with the market now expecting another rate hike in July.

USD/JPY broke above from its critical resistance level at 158.15 suggesting a bullish signal for the pair. The RSI has broken into the overbought zone while the MACD continues to edge higher and above the zero line, suggesting the bullish momentum remains strong. 

Resistance level: 160.15, 161.10

Support level: 158.45, 157.20

CL OIL, H4

Crude oil prices surged after the U.S. Energy Information Administration (EIA) reported a substantial drawdown in crude oil inventories. Inventories fell by 2.5 million barrels, significantly exceeding expectations. The easing monetary policies from several major central banks have further boosted oil prices, as lower interest rates are expected to stimulate economic activity and increase oil demand. The combined effect of reduced inventories and monetary easing has created a bullish outlook for crude oil.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 70, suggesting the commodity might enter overbought territory. 

Resistance level: 82.25, 84.75

Support level: 80.30, 78.95