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The Dow Jones index is correcting in an uptrend at 33113.5. The American stock market continues to trade with serious volatility caused by increased activity of investors and their reaction to the fundamental background.

The day before, the Head of the White House, Joe Biden, held a meeting with US Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen, following which he stated that he did not intend to interfere in the regulatory process and fully supported the plan of the American financial authorities to combat record inflation. Investors took this statement as a clear "hawkish" signal, confirming the words of US Federal Reserve Board member Christopher Waller, who did not rule out a 50 basis point increase in interest rates at each of the subsequent meetings. Thus, the value by the end of the year may exceed 2.25%. The "hawkish" policy of the regulator is designed to fight inflation; however, the rapid pace of adjustment of monetary policy parameters may have a negative impact on corporate profits, which the American business may feel in the summer, when the second period of corporate reporting begins.

Quotes of the index are traded within a wide downward channel, being in the middle of the range. Technical indicators are holding a sell signal, which is rapidly weakening: the fluctuation range of the Alligator indicator EMAs has narrowed almost completely, and the histogram of the AO oscillator is forming new upward bars, being in the sell zone.

Support levels: 32550, 31217 | Resistance levels: 33290, 34950​

 

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The European currency shows mixed trading dynamics against the US dollar, consolidating near 1.0650 after two sessions of decline, which led to the renewal of local lows from May 23.

Pressure on the euro has intensified since Tuesday after the release of inflation data for May in the eurozone. The Harmonised Index of Consumer Prices accelerated from 3.5% to 3.8%, which turned out to be higher than the market's neutral forecasts, and the Core Consumer Price Index in May updated a record at 8.1%, while analysts had expected only 7.7%. In addition, disappointing Retail Sales data in Germany were published yesterday: in April, in annual terms, the indicator fell by 0.4% after falling by 1.7% a month earlier, although preliminary market estimates assumed a positive dynamics at the level of 4.0%, and on a monthly basis, sales fell by 5.4% after rising by 0.9% in March.

In turn, some support for the single currency is provided by the expectations that the European Central Bank (ECB) will launch a cycle of raising interest rates. So far, the members of the regulator's board have not agreed on any specific timing for the start of tightening monetary policy, but it is clear that with the current price pressure, this will happen soon.

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting appearance of multi-directional dynamics in the short term. MACD is reversing downwards forming a new sell signal (the histogram consolidated below the signal line). Stochastic is showing similar dynamics; however, the indicator line is rapidly approaching its lows, indicating the risks of EUR being oversold in the ultra-short term.

Resistance levels: 1.0700, 1.0747, 1.0800, 1.0850 | Support levels: 1.0640, 1.0600, 1.0500, 1.0459

 

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During the Asian session, the NZDUSD pair is consolidating near 0.6470 and local lows of May 27. Yesterday, the instrument attempted corrective growth but failed to consolidate on new highs and returned to the red zone closer to the close of the daily session.

On Wednesday, the asset was supported by positive data from China and Australia, where the slowdown in economic growth was slightly milder than analysts predicted: an increase in the Caixin Manufacturing PMI for May was recorded from 46 to 48.1 points, while the forecast for growth was only up to 47 points. Manufacturing activity will likely grow at a more robust pace going forward as factories in Shanghai resume operations from June 1 after a long lockdown.

In turn, pressure on the instrument yesterday was exerted by cautiously optimistic data from the US Manufacturing PMI, and the monthly economic review from the US Federal Reserve published closer to the close of the session. The regulator noted a moderate economic recovery in almost all twelve districts. However, some of them have slowed growth as economic conditions continue to deteriorate. Retail is facing rising food and energy prices, and housing markets react to rising interest rates.

New Zealand Prime Minister Jacinda Ardern intends to discuss with US President Joe Biden the issue of response to the conclusion of agreements in the field of trade, politics, and security by the Chinese authorities with representatives of the island states of the Indo-Pacific region. Some experts attribute the intensification of China's activities in the region to the possible consequences of the military conflict in Ukraine. Still, many believe that in this way, the PRC authorities are trying to dominate the region and then use these territories to deploy military bases, which creates significant concern for the New Zealand authorities and Australia.

On the daily chart, Bollinger bands are growing moderately: the price range is narrowing rather quickly, reacting to the appearance of a predominantly "bearish" dynamics in the market. The MACD indicator is falling, forming a new sell signal (the histogram is trying to consolidate below the signal line). Stochastic shows a much more confident decline, but at the moment, it is rapidly approaching its lows, indicating the risks of the New Zealand dollar being oversold in the nearest time intervals.

Resistance levels: 0.65, 0.6567, 0.66, 0.665 | Support levels: 0.645, 0.64, 0.63, 0.625

 

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Against the backdrop of the upward dynamics of the US dollar, the AUDUSD pair is correcting around 0.7190, despite the multidirectional reaction of investors to the incoming macroeconomic statistics.

Yesterday, Australia's Q1 GDP was published, and the indicator's growth slowed down to 0.8% from 3.6% QoQ but still was higher than the experts' forecast of 0.5%, which was taken into account by the participants trading in quotes. The value consolidates around 3.3% YoY, which is better than the preliminary market estimates of 2.9% but inferior to 4.4% in the previous quarter. Given the significant rise in fuel and food prices, we can say that the Australian economy is in a stable state. It is reflected in retail sales, which rose by 0.9%, in line with forecasts.

The American currency showed an active decline all last week, but now, the quotes have won back the losses and reached 102.500 in the USD Index against the backdrop of a positive report from the Institute of Supply Management (ISM), which said that Manufacturing PMI rose to 56.1 points from the April value of 55.4 points, surpassing analysts' expectations of 54.5 points. Meanwhile, according to JOLTS, the number of open vacancies in the labor market expectedly decreased and amounted to 11.400M for April, which is slightly inferior to 11.855M.

On the global chart, the asset moves within the Expanding formation pattern, rising within the fifth wave. Technical indicators reversed and gave a new buy signal: fast EMAs on the Alligator indicator crossed the signal line upwards, and the AO oscillator histogram formes upward bars in the buy zone.

Resistance levels: 0.7258, 0.7573 | Support levels: 0.7045, 0.6851​

 

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During the Asian session, the Australian dollar is slightly declining, correcting after a sharp rise the day before, which led to a renewal of local highs from April 22. The quotes of AUDUSD were supported by not the most confident macroeconomic statistics from the US, which were released the day before. In particular, a report from Automatic Data Processing (ADP) reflected weaker growth in private non-farm payrolls in May, rising by just 128K from a 202K increase a month earlier, with experts forecasting 300K, slightly lowering investor expectations for the May US labor market report, which will be published today.

This week, The Australian published information about the readiness of the Chinese authorities to postpone the conclusion of security pacts with a number of island states in the Indo-Pacific region. The document concerns the laying of submarine cables, the construction of berths, the development of shipbuilding, as well as other areas of cooperation, including China's investment in the development of these regions. Experts believe that the country, to which the island states will join, will eventually gain control over the entire Pacific Ocean, and the Chinese authorities probably will not give up trying to conclude these agreements.

Bollinger Bands on the daily chart show a steady increase. The price range is expanding from above but it fails to conform to the surge of "bullish" activity at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having approached its highs is reversing into a horizontal plane, indicating the overbought instrument in the ultra-short term.

Resistance levels: 0.7300, 0.7341, 0.7400, 0.7450 | Support levels: 0.7250, 0.7202, 0.7150, 0.7100

 

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The US dollar shows a slight decrease in Asian trading, holding near 131 and local highs from May 9, having received a moderate upward impetus after the publication of a rather strong report on the US labor market for May last Friday. At the same time, statistics on business activity were slightly worse than market forecasts, as well as indicators of Average Wages and overall Unemployment. The data allow investors to hope for a continuation of the US Fed's "hawkish" policy of raising interest rates by 50 basis points at least during the June and July meetings.

The Bank of Japan, in turn, maintains a wait-and-see attitude, although issues of growing inflationary pressure are already affecting the national economy. An extensive block of macroeconomic statistics will be released this week, and the updated quarterly GDP statistics, which will be published on Wednesday, will take center stage in publications. The previous estimate indicates a contraction of the country's economy in Q1 2022 by 0.2% QoQ and 1.0% YoY.

Meanwhile, the Japanese government is stepping up regulation of the national crypto asset market. Last week, Parliament approved a bill according to which stablecoins can officially be considered digital money as early as 2023. Only licensed financial institutions and payment system operators, as well as trust companies, will be able to issue them. The tokens will be backed by the yen or other national currencies, at a ratio of 1:1, since their holders must have the right to redeem at face value. In addition, lawmakers plan to publish rules for stablecoin issuers in the near future. Thus, Japan became the first country to develop a phased legal framework for the circulation of digital assets, designed to protect crypto investors and maintain market stability.

Bollinger Bands in D1 chart show moderate growth. The price range is expanding but it fails to conform to the surge of "bullish" activity at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having approached its highs, is also trying to reverse into a descending plane, indicating the risks of overbought USD in the ultra-short term.

Resistance levels: 131, 132, 133, 134 | Support levels: 130, 129.39, 128.62, 128

 

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The pound is traded mixed against the US dollar during the morning session, holding near 1.2500. Market activity remains subdued as many European markets are closed at the start of the new week for national holidays. At the same time, investors continue to evaluate the already released macroeconomic statistics for further analysis of price movements.

The report on the US labor market, published last Friday, turned out to be quite optimistic and pointed to the persistence of certain tension in the market, which is necessary to continue the "hawkish" policy of the US Federal Reserve. In May, the US economy created 390K new jobs outside the agricultural sector. In April, Non-Farm Payrolls were 436K, while analysts expected 325K in May. At the same time, the Unemployment Rate remained at the same level of 3.6% (it was expected to decrease to 3.5%). The Average Hourly Earnings increased by 0.3% MoM and by 5.2% YoY, which turned out to be slightly worse than the average market forecasts.

At the end of last week, representatives of the UK and the EU agreed to a ban on insurance of ships transporting oil from the Russian Federation as part of the sixth package of sanctions imposed against the backdrop of the military conflict in Ukraine. The government's decision will block the ability of Russian carriers to use the services and market opportunities of Lloyd's of London, which is considered the largest association of individual insurers and brokers in the field of shipping, and will significantly limit the ability to export resources. It is noted that following the British authorities, representatives of the G7 states may also introduce a similar ban.

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On the D1 chart, Bollinger Bands are gradually reversing horizontally. The price range is actively narrowing, reflecting ambiguous nature of trading in the short term. MACD indicator tries to reverse downwards and to form a new sell signal (the histogram is about to consolidate below the signal line). Stochastic approaching the level of "20" is trying to reverse into a horizontal plane, reacting to the attempts of the "bulls" to show a weak corrective growth at the beginning of the week.

To open new trading positions, it is necessary to wait for the signals from technical indicators to be clarified.

Resistance levels: 1.2600, 1.2665, 1.2750, 1.28 | Support levels: 1.2500, 1.2400, 1.2328, 1.225

 

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The American currency is losing ground again

The NZDUSD pair is correcting upwards of around 0.6523 due to the stable Q1 New Zealand macroeconomic indicators.

According to data provided by the National Statistical Office (Stats NZ), total imports of services increased by 35.0% to 1.4B New Zealand dollars compared to March 2021, while exports of services added 12.0% to 376M New Zealand dollars. Imports of transport services showed the largest increase, up 82.0% to 1.5B New Zealand dollars, a quarterly record on record. The main reason for the positive dynamics was removing border restrictions introduced due to the coronavirus pandemic. The country's external economic activity will continue to recover, strengthening the position of the national currency.

The US currency is near 102 in the USD Index against the backdrop of the active publication of macroeconomic data, which investors perceive inconsistently. Thus, the unemployment rate in the US in May amounted to 3.6%, which coincided with the April value but was worse than the 3.5% expected by analysts. One of the reasons that prevented a more significant correction was another outflow of workers from the US non-farm sector: the value increased by 390K, below 436K a month earlier, while private non-farm employment decreased to 333K from 405K a month previously. Multidirectional statistics act as a catalyst for pressure on the US dollar.

The instrument moves within the global downward channel, approaching the resistance line. Technical indicators reversed and gave a buy signal: fast EMAs on the Alligator indicator crossed the signal line upwards, and the AO oscillator histogram forms bars above the zero level.

Resistance levels: 0.6557, 0.6746 | Support levels: 0.6432, 0.6212​

 

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During the Asian session, the USDCAD pair resumed its decline and is approaching its local lows of April 21. On Monday, no important macroeconomic publications are expected, so the attention of investors is drawn to the report on the US labor market, which was ambiguous. At the end of May, in the non-agricultural sector, the US economy added 390K new jobs, while the unemployment rate remained around 3.6%, while analysts expected an increase of only 325K new jobs but at the same time expected a moderate decrease in the unemployment rate up to 3.5%. Thus, the released report on the US labor market allows us to expect that the current monetary policy of the US Federal Reserve will be continued. According to current expectations, the department will raise the rate by 50 basis points at the next two meetings in June and July, after which a pause will be taken to assess the effectiveness of the measures taken.

On Friday, Canada limited itself to the publication of labor productivity, which fell by 0.5% in the first quarter, significantly better than analysts' expectations of a decline of 1.2%. Recall that inflation in April consolidated at the maximum value for 31 years, 6.8%, significantly exceeding the regulator's goal of 2.0%, gas prices added more than 35%, and food products – increased by about 10%. The reason for the negative dynamics of the authorities is the escalation of the military conflict in Ukraine, which caused a rise in the price of wheat, most of which is grown in this territory, as well as increasing disruptions in supply chains, leading to an increase in tariffs for the transportation of goods. Bank of Canada Deputy Governor Paul Beaudry notes the risks of a rapid increase in inflation and predicts the continuation of the policy of tightening monetary policy parameters by the country's financial authorities with interest rate adjustment to the upper limit of the neutral range or above it.

On the daily chart, Bollinger Bands are steadily declining: the price range changes slightly but remains quite spacious for the current level of activity in the market. The MACD indicator is falling, keeping a strong sell signal (the histogram is below the signal line). Stochastic has been near its lows for a long time, indicating that USD may become oversold in the ultra-short term.

Resistance levels: 1.2600, 1.2650, 1.2700, 1.2750 | Support levels: 1.2549, 1.2500, 1.2450, 1.2400

 

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Australian dollar remains under pressure​

During the Asian session, the AUDUSD pair shows ambiguous trading dynamics, consolidating near the level of 0.7200.

On Tuesday, investors are focused on the decision of the Reserve Bank of Australia (RBA) on interest rates, which added activity to a fairly calm market. The regulator decided to increase the value by 50 basis points, contrary to the expected growth of only 25, from 0.35% to 0.85%. The accompanying statement noted that inflation in the country increased significantly, although it remained on average lower than in other advanced economies. Officials predictably identified the consequences of the COVID-19 pandemic and the development of the military conflict in Ukraine as external factors. Negative dynamics within the country were also noted, particularly a reduction in production capacity and a poor labor market. RBA forecasts suggest that inflationary risks will continue to grow but will be adjusted to 2–3% target levels next year.

Macroeconomic statistics from Australia exert little pressure on the positions of the instrument. Thus, the service sector's activity index from AiG in May fell sharply from 57.8 to 49.2 points, which was worse than the average analysts' forecasts.

Meanwhile, investors are watching the rhetoric of the Chinese authorities regarding the development of relations with Australia. Thus, Chinese Foreign Minister Wang Yi, as part of a tour of eight countries in the Asia-Pacific region, announced the need to restart them. It is worth noting that the activity of Chinese representatives in the region is of concern to official Canberra since the Chinese authorities have already managed to sign more than fifty agreements with island states on trade and security, while another ten countries are still considering such a possibility. Experts believe that the state to which the island regions will join will eventually gain control over the entire Pacific Ocean, and the Chinese authorities will probably not give up trying to conclude these agreements.

On the daily chart, Bollinger Bands are actively growing: the price range is narrowing, indicating the emergence of multidirectional trading dynamics in the short term. The MACD indicator is trying to reverse into a downward plane, forming a new sell signal (the histogram is trying to settle below the signal line). Stochastic remains confidently down but is rapidly approaching its lows, indicating that the Australian dollar may become oversold in the ultra-short term.

Resistance levels: 0.7202, 0.7250, 0.7300, 0.7350 | Support levels: 0.7150, 0.7100, 0.7050, 0.7000.

 

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The rise in oil prices contributes to the strengthening of the pair
As a result of rising energy prices, the Canadian dollar is strengthening, which negatively affects the dynamics of the USDCAD pair, pushing it to the lows of April 2022.

Thus, the quotes of WTI Crude Oil have updated the maximum on March 24 in the area of 118, and at the moment they are trading under the level of 120, developing a "bullish" momentum. The increasing oil price strengthens the position of the Canadian dollar, as revenues to the national budget are growing, and the country can direct additional revenues from oil and gas profits to the development of its economy, which will make it more attractive to investors.

Another factor supporting the strengthening of the Canadian currency is the tightening of monetary policy by the Bank of Canada. Last week, the regulator raised the interest rate by 0.50% to 1.50%. This trend is likely to continue in the future, therefore, in the current conditions, a decline in the USDCAD pair seems more likely.

The long-term trend, however, remains upward. Last week, the trading participants broke down the support level of 1.2660, which suggests a further decline in the asset to the key support area of the trend of 1.2460–1.2430, however, if it is held, the growth will continue with a target at the May maximum.

The mid-term trend is downward. This week, the target zone 1.2640–1.2619 was broken down. The next target of the decline is the 1.2432–1.2412 zone. The key resistance of the trend is shifting to the level of 1.2766–1.2745. From the area of key resistance, new sales for the USDCAD pair can be considered.

Resistance levels: 1.2675, 1.2885, 1.2950 | Support levels: 1.2460, 1.2430, 1.2295

 

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Consolidation pending the results of the ECB meeting​

The European currency shows a slight decrease against the US dollar during the Asian session, consolidating near 1.0680. Activity on the market remains quite low, as the news background changes slightly.

Yesterday investors were focused on the statistics on Factory Orders in Germany: in April, the figure showed a decrease of 2.7% after falling by 4.2% a month earlier, although analysts had expected a growth of 0.5%. In annual terms, the negative dynamics increased from –2.9% to –8.9%, which also turned out to be worse than the average market forecasts. Slight support for the instrument was provided only by data on Sentix Investor Confidence in the euro area, which rose from –22.6 to –15.8 points in June, while analysts expected an increase to only –20.0 points. Today, investors are waiting for the publication of updated statistics on the dynamics of the Eurozone GDP for Q1 2022. Previous estimates suggested growth of the region's economy by 0.3% QoQ and 5.1% YoY. Also during the day, Employment Change statistics for Q1 2022 will be released.

The eurozone economy is under unprecedented pressure, forcing the European Central Bank (ECB) to tighten monetary policy at its June 9 meeting. Currently, most experts are in favor of two 50 basis points rate hikes in July and September. More "hawkish" rhetoric is unlikely, so a depreciation of the euro can be expected.

Meanwhile, the European authorities are trying to replace the volumes of Russian oil, which now cannot be delivered to the region due to economic sanctions. This week it became known that the US State Department lifted the ban on the supply of Venezuelan "black gold" to Europe by Eni S.p.A. and Repsol S.A. It is noted that deliveries will begin as early as next month and initially will be able to replace Russian energy only partially, having an insignificant impact on prices, but experts agree that this is only the first step to open the Venezuelan oil market.

On the D1 chart Bollinger Bands are trying to reverse horisontally. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the ultra-short term. MACD is going down, keeping a fairly stable sell signal (located below the signal line). Stochastic is showing similar dynamics being located in the middle of its area.

Resistance levels: 1.0700, 1.0747, 1.0800, 1.0850 | Support levels: 1.0640, 1.0600, 1.0500, 1.0459

 

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Economic indicators disappoint investors​

Against the background of the stabilization of the US currency, the GBPUSD pair is correcting within the local trend, trading around the level of 1.2545.

The expected outcome of the vote in the House of Commons, as a result of which the current Prime Minister, Boris Johnson, retained his post for at least another year, supported the pound quotes. Investors took this event as a sign of stability, and confidence in the national currency increased, but now, this momentum has leveled off, and economic issues are coming to the fore. As yesterday's statistics showed, the business activity of the main sectors is declining: according to the May report, the composite PMI fell to 53.1 points from 58.2 points in April, for the third time in a row. Service PMI fell to 53.4 points from 58.9 points in April, and this is also the third period of negative dynamics of the index. Today, Construction PMI will be published, but there, too, analysts have already predicted a drop in value from 58.2 points to 56.6 points.

The USD Index is trading at the beginning of yesterday at 102.5, almost without reacting to the speech of US Treasury Secretary Janet Yellen. Contrary to expectations, the main part of the official's speech was devoted to the situation in the oil market and the unprecedented rise in energy prices caused by the development of the military conflict in Ukraine. Commenting on the situation in the United States, Yellen noted that the current president's administration had done everything possible to mitigate the consequences of the energy crisis for the country, and without these actions, fuel prices would have been much higher. She said the 1.9T dollars stimulus package passed by the head of the White House in 2021 eliminated economic risks, leading to one of the lowest unemployment rates in post-war history.

The asset tries to test the recently passed global downlink support line. Technical indicators almost canceled the sell signal, preparing for a reversal: indicator Alligator's EMA oscillation range has narrowed as much as possible, and the AO oscillator histogram is forming new upward bars.

Resistance levels: 1.2634, 1.3000 | Support levels: 1.2452, 1.2164​

 

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The sharp tightening of the RBA monetary policy surprised investors​

The AUDUSD pair is correcting against the background of the stabilization of the USD, trading at 0.7177.

Yesterday, the Reserve Bank of Australia (RBA) decided to raise the interest rate by 50 basis points at once — from 0.35% to 0.85%, which came as a surprise to analysts who assumed a correction to 0.60%. In an accompanying statement, the head of the regulator, Philip Lowe, said that the sharp tightening of the current monetary policy parameters was a response to rapidly rising inflation and problems with the housing market, which, according to yesterday's statistics, fell into negative territory. Thus, the number of construction permits issued decreased by 2.4% after an increase of 19.2% a month earlier, and the number of permits issued for the construction of private houses increased by 0.5% after a decrease of 3.0% in the previous month. Thus, in case of a correction in the USD, the growth of the AUD/USD pair will continue.

The US currency, in turn, is held above the 102.500 mark in the USD Index against the backdrop of an ambiguous market reaction to the speech of US Treasury Secretary Janet Yellen, during which special attention was paid to the situation on the oil market. The official noted that the increase in gasoline prices in the country could have been much higher if the Joe Biden administration had not decided to release part of the reserves from the strategic reserve. It is worth noting that Yellen's rhetoric disappointed investors who were hoping to hear about concrete steps by the financial authorities to combat inflation, which has reached the highest values in the USA in 40 years.

On the global chart of the asset, the price is trading within the Expanding Formation pattern, rising in the 5th wave. Technical indicators keep a stable buy signal, strengthening it: fast EMAS on the alligator indicator are significantly above the signal line, and the histogram of the AO oscillator forms ascending bars while in the buy zone.

Support levels: 0.7158, 0.6987 | Resistance levels: 0.7264, 0.7571​

 

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Weak statistics put pressure on the stock market​

DAX 30 is correcting upwards trading at 14592 ahead of what could be the most productive European Central Bank's (ECB) meeting in 8 years.

High annual inflation, recorded in April at around 7.5%, is forcing officials to move to tighten monetary policy, the first step towards which can be taken tomorrow. According to preliminary statements by the President of the regulator, Christine Lagarde, a complete cessation of the asset purchase program may be announced, and the question of raising the interest rate from –0.50% to a positive value may also be raised. The indicator was last updated in July 2011. According to Lagarde, these measures are necessary to curb the rapid growth in consumer prices, which could exceed the 9% barrier as early as June.

In turn, macroeconomic statistics remain negative, putting pressure on the stock market. According to data for April, the volume of Factory Orders in Germany decreased by 2.7% against an expected increase of 0.3%, and the Construction PMI fell to 45.4 points from 46.0 points a month earlier.

On the global chart of the asset, the price continues to implement the local Flag pattern, gradually moving away from the resistance line. Technical indicators maintain a steady buy signal: fast EMAs on the Alligator indicator are actively moving away from the signal line, expanding the range of fluctuations, and the AO oscillator histogram, having moved into the buy zone, forms ascending bars.

Support levels: 14350, 13540 | Resistance levels: 14836, 15710​

 

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Consolidation near record highs​

The US dollar shows mixed trading dynamics, consolidating near new record highs and the level of 134 and continuing the development of the general uptrend since May 30.

The pressure on the positions of the yen is exerted by the prospect of maintaining the current soft monetary policy of the Bank of Japan. While virtually all major financial regulators have moved on to sharply raise interest rates (the European Central Bank (ECB) is expected to launch the program in July), the Japanese authorities are pushing for continued stimulus. Such statements were made by the Deputy Governor of the regulator Masazumi Wakatabe, who also admitted the possibility of introducing new incentives if the economic situation so requires.

Macroeconomic statistics released yesterday in Japan did not provide any noticeable support to the yen. Revised data on the dynamics of gross domestic product for Q1 2022 were revised upward from –0.2% to –0.1% in quarterly terms and from –1.0% to –0.5% in annual terms, and the Eco Watchers Survey on Current Situation in May rose from 50.4 to 54.0 points, while the forecast was for a decline to 49.2 points.

Meanwhile, the Japanese authorities announced the continuation of work in the Russian oil and gas projects Sakhalin-1 and Sakhalin-2. The decision is contained in the national Energy White Paper. It is emphasized that in the current high energy prices, the country needs stable supplies of liquefied gas, and long-term contracts can reduce the negative effect on energy security. Mitsui & Co., Ltd. and Mitsubishi Corp. own 12.5% and 10% shares of the Sakhalin-2 project, and most of the gas produced here is supplied to Japan.

Bollinger Bands in D1 chart show quite active growth. The price range is expanding, but still does not keep pace with the development of "bullish" sentiment in the market. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic has been near its highs for a long time, indicating high risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 134.54, 135.55, 136 | Support levels: 133.7, 133, 132, 131

 

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Correction ahead of the ECB meeting​

The European currency continues the local upward movement, which began yesterday after the publication of positive data on the state of the EU economy. Now the EURUSD pair is holding around the 1.0700 mark.

Thus, the gross domestic product for the first quarter increased by 0.6%, ahead of analysts' forecasts of 0.3% and the previous value of 0.2%. Thus, the growth was 5.4% YoY compared to 4.7% in the previous period. Today, investors will follow the course of the meeting of the European Central Bank (ECB). Traders expect to hear specific dates for the start of tightening monetary policy, as recently, the head of the department, Christine Lagarde, has already stated the need to raise rates and curtail the asset purchase program. Analysts believe that if the increase occurs, then not today since the ECB is not yet ready for "hawkish" steps.

The instrument moves within a wide downwards channel, approaching the resistance line. Technical indicators maintain a stable buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram forms upward bars.

Resistance levels: 1.0778, 1.1131 | Support levels: 1.0630, 1.0351​

 

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The Nasdaq 100 index shows a lateral trend, trading at 12590.​

US stock indices continue to experience significant pressure from the growth of bond yields, but are kept in the sideways amid investors' expectations regarding tomorrow's publication of data on consumer prices. Inflation in May could reach 0.7% after rising by 0.3%, while the annual rate, according to preliminary estimates, could remain at 8.3% in April, which, however, is unlikely given the monthly increase in fuel prices by almost 12% and the growth of oil prices above 122 dollars per barrel. In any case, until the actual data is published, new large transactions should not be expected.

Yesterday's auction for placement of 10-year Treasury notes ended with the expected growth of yield up to 3.030% against 2.943% at the previous placement. Today, auctions will be held for the placement of short-term treasury bills from 3 to 8 weeks, as well as global 30-year treasury bonds, the rate of return on which is now 3.183% against 2.997% before.

Index quotes form a global downward channel, being in the middle of the range. Technical indicators are in a state of uncertainty: the range of EMA fluctuations on the Alligator indicator is narrowing actively and the AO oscillator histogram is near the transition level.

Support levels: 12200, 11470 | Resistance levels: 12895, 14200​

 

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The market is waiting for the US inflation data​

USDCAD is correcting upwards, trading around 1.269. The Canadian currency has been actively increasing in value against the US dollar for almost the entire week; however, in the end, it lost all the gained positions, which was caused by two main factors.

First of all, the Bank of Canada released a report on financial stability, which reflected the main points of vulnerability of the national economic system. The regulator noted the negative dynamics of housing prices, which have grown by more than 50% since the beginning of the coronavirus pandemic and until now. In addition, the country has recorded an increase in the number of heavily indebted households, which in the near future may face an even greater burden due to rising interest rates on loans.

The second reason for the growth of USDCAD is the strengthening of the US dollar, which reached 103 in the USD Index. In turn, market participants almost did not react to another increase in the number of Initial Jobless Claims, which amounted to 229K against 202K a week earlier. Key expectations of investors are related to today's data on consumer inflation in the US, which may increase by 0.7% over the month and remain at 8.3% in annual terms.

On the global chart of the asset, the price continues to trade within a wide ascending channel with dynamic boundaries of 1.2450–1.3100, having reached the support line the day before. The fluctuation range of the Alligator indicator EMAs began to actively narrow, and the histogram of the AO oscillator is forming new ascending bars, actively rising in the sell zone.

Support levels: 1.2630, 1.2463 | Resistance levels: 1.2730, 1.2890​

 

[SOLIDECN]

ECB expects high inflation to continue​

The European currency reversed and continued to decline after the European Central Bank published its decision on monetary policy. Thus, the interest rate was kept at 0.00%, and the Board of Governors announced the end of the Asset Purchase Program (APP) from July 1, 2022, to make it possible to increase the key rate by 25 basis points already at the July meeting. The regulator will not change the existing values for margin credit and deposit lines, leaving them around 0.25% and -0.50%, respectively. However, European officials do not rule out another increase in September, which will depend entirely on the inflation rate, which, according to forecasts, will remain high for a long time. According to forecasts, the consumer price index will be at 6.8% during 2022, and only in the middle of 2023 is it possible to adjust to 3.5% and 2.1% in 2024. The dynamics of the gross domestic product will also slow down – from 3.7% to 2.8%.

The asset moves within a wide downward channel, approaching the resistance line. Technical indicators have sharply changed their readings and are turning in the direction of selling: fast EMAs on the Alligator indicator are actively approaching the signal line, and the AO oscillator histogram has formed the first downward bar.

Resistance levels: 1.0774, 1.1075 | Support levels: 1.0547, 1.0351​