Soft PMI Reading Hammers Dollar Lower

• U.S. Dollar continued to slide as the PMI readings came short.
• Seeking today’s JOLTs job opening data to gauge the dollar's strength.
• Gold traded within its sideways range despite the dollar having been weakening.

Market Summary

The U.S. dollar remained on a downward trajectory following the release of yesterday's PMI readings, which fell short of market expectations. Persistent lacklustre performance in the U.S. economy has increased speculation of a Fed rate cut this year, causing U.S. Treasury yields to rise and placing pressure on the dollar's strength. In addition to monitoring the U.S. dollar, traders are closely watching tomorrow's release of Australian GDP data and the Bank of Canada's interest rate decision. A strong Australian GDP figure could pave the way for a more hawkish monetary policy stance by the Reserve Bank of Australia (RBA). Conversely, Canada's CPI reading came in below 2%, leading the market to anticipate a 25-basis-point interest rate reduction by the Bank of Canada (BoC) tomorrow. In the commodity market, gold prices have remained relatively flat due to a lack of catalysts, while oil prices have continued to decline in response to the unfavourable outcome of the recent OPEC+ meeting.

Current rate hike bets on 12nd June Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (99.9%) VS -25 bps (0.1%) 

Market Movements

DOLLAR_INDX, H4

The U.S. dollar continues to be pressured by soft economic indicators, with yesterday’s PMI readings failing to meet market expectations, bolstering bets on a Fed rate cut this year. Traders may eye today’s JOLTs Job Opening data, which could serve as a preview of the highly anticipated Nonfarm Payroll report due this Friday.

The Dollar Index has declined to its lowest level in nearly two months, suggesting a bearish signal for the dollar. The RSI is on the brink of breaking into the oversold zone, while the MACD has crossed below the zero line, suggesting strong bearish momentum. 

Resistance level: 105.25, 105.75

Support level: 104.00, 103.20 

XAU/USD, H4

Gold prices have been trading sideways for over a week. However, in the last session, gold recorded nearly a 1% jump, marking its biggest daily gain in a week. Today’s U.S. job data could be the catalyst for gold to break out of its consolidation range, potentially providing gold traders with a clearer direction.

Gold prices recorded the biggest jump in a week but remain trading within its sideway range. The RSI remains below the 50 level while the MACD is on the brink of breaking above the zero line suggesting a neutral signal for the gold. 

Resistance level: 2390.00, 2450.00

Support level: 2297.00, 2670.00 

GBP/USD，H4

The GBP/USD pair surpassed its psychological resistance level at 1.2800, buoyed by a softer dollar. Despite PMI readings coming in below market expectations, the overwhelming speculation of a Fed monetary policy pivot has allowed the pair to continue its upward surge. Sterling traders should keep an eye on tomorrow's UK Composite PMI reading to gauge the strength of the Sterling.

GBP/USD edge higher and broken its psychological resistance level suggest a bullish bias for the pair. The RSI has broken above 50 while the MACD has rebounded above the zero line suggesting a bullish momentum may be forming. 

Resistance level: 1.2850, 1.2940

Support level: 1.2760, 1.2660 

EUR/USD，H4

The Euro surged for the third consecutive session, recording a gain of 0.5% in the last session. The pair was bolstered by the lacklustre performance of the dollar, allowing it to climb to its highest level since March. Euro traders should remain cautious as the ECB interest rate decision, due on Thursday, is expected to have a direct impact on the euro.

The EUR/USD broke above its short-term resistance level at 1.0855 level, suggesting a bullish bias for the pair. The RSI is climbing toward the overbought zone while the MACD has broken above the zero line, suggesting the bullish momentum is gaining. 

Resistance level: 1.0925, 1.1000

Support level: 1.0865, 1.0800

AUD/USD，H4

The AUD/USD pair edged higher ahead of the Australian Retail Sales reading due later today and tomorrow's GDP report. The market perceives that the RBA will be one of the last major central banks to shift its monetary policy, as the Australian CPI remains well above 4%. This potential divergence between the monetary policies of the RBA and the Fed suggests the pair faces upside risk.

The break above its short-term resistance level suggests a bullish bias for the pair. The bullish momentum is seemingly gaining as the RSI continues to climb while the MACD edged higher after breaking above the zero line. 

Resistance level: 0.6730, 0.6800

Support level: 0.6640, 0.6590 

U.S. 10-YR T-Note, H4

The U.S. financial market has recently shifted its attention towards the bond market, anticipating potential upside risks in bond prices. This sentiment is largely driven by a series of underwhelming U.S. economic indicators, which have fueled expectations that the Federal Reserve might soon commence interest rate cuts to avert an economic recession. Should the Fed begin to reduce interest rates from their current decade-high levels, bond prices are likely to rise, presenting significant potential for gains.

The U.S. 10-year treasury note has broken above its downtrend channel and is heading to the 100-market psychological level. The RSI has surged sharply into the overbought zone, while the MACD has broken above the zero line, suggesting strong bullish momentum. 

Resistance level: 101” 16, 103”13

Support level: 99”13, , 97”16

CL OIL, H4

Oil prices continue to slide as the market reacts unfavourably to the OPEC+ meeting outcome from last weekend. The softening of the dollar has not provided buoyancy for oil prices. Meanwhile, the API weekly crude data is due today, and oil traders will be watching this release closely to gauge the direction of oil prices.

Oil prices declined by nearly 4% from their peak at near the $80 mark, suggesting strong bearish momentum. The RSI is close to the oversold zone, while the MACD has broken below the zero line, suggesting overwhelming bearish momentum. 

Resistance level: 78.35, 79.95

Support level: 76.90, 75.55