As EU Preps Debut Recovery Bond, a Reality Check for ‘Safe Asset’ Hopes

Agreed in July as the pandemic raged, the deal sparked hopes among investors that Europe would finally have a large and liquid “safe” asset to rival U.S. Treasuries, in turn burnishing the euro‘s attraction as a reserve currency.

In short, some predicted, it would do for Europe what Treasury Secretary Alexander Hamilton did in 1790 for the newly formed United States — create a fiscal union.

Such optimism seemed exaggerated even then. A year on, as the European Commission prepares to sell bonds to finance the 800 billion euro fund, excitement has been tempered by doubts about the fund’s potential to become permanent.

Without that, according to Chris Iggo, chief investment officer for core investments at AXA Investment Managers, the issuance is destined to be “a historical anomaly and the bonds will just get tucked away in insurance company portfolios”.

“This has to be an ongoing thing, there has to be ongoing centralised borrowing capability … otherwise it becomes a one-off thing that’s not very interesting in the long run,” said Iggo, who helps manage 869 billion euros.

“They won’t trade and they won’t be liquid.”

As it stands, recovery fund borrowing will end in 2026. The debt pile will then shrink until the last bonds mature in 2058.

EU budget commissioner Johannes Hahn repeated this week that the bonds were a reaction to a one-off event. The fund was “a strong signal of solidarity” following the pandemic rather than a Hamiltonian moment, he said.

German government bonds are Europe’s fixed-income instrument of reference but at 1.5 trillion euros, the market is a fraction of the $20 trillion outstanding in U.S. Treasuries.

Some had hoped the recovery fund debt would form the basis of an issuance programme to eventually create a risk-free asset which, alongside Bunds, would eventually rival Treasuries.

BLUEPRINT

EU Commission Vice President Valdis Dombrovskis did recently hint that a successful recovery fund offered scope to develop a permanent instrument. Germany’s Green Party, which is likely to join the next government, also wants to make the fund permanent.

And the EU has done the groundwork, creating a debt office and a network of primary dealers banks to manage the programme and run debt auctions. Some 90 billion euros in bonds it has sold since October to back its SURE employment scheme already trade more like sovereign securities, enjoying robust liquidity.

But wealthier EU states are likely to oppose any bid to make the fund permanent, and even the current borrowing plan took national parliaments six months to approve.

A more immediate risk is lower-than-anticipated issuance volumes, with banks predicting as little as around 600 billion euros — 25% below the top amount.

That’s because governments show little interest in taking loans from the fund, which is set up to make grants as well as to lend. Of larger member states, only Italy so far has plans to use the 386 billion euro loan facility, according to Rabobank, although demand is likely to increase with time.

INTEGRATION

And old existential risks remain — without a fiscal union with common budget and tax-raising policies, the EU will remain a supranational, rather than sovereign borrower.

Moreover, the recovery fund lacks a “joint and several guarantee”, meaning that in event of default, each member state will be liable for only a part of, not the entire debt.

Future crises may induce the EU to top up the fund, leading eventually to permanency, said Nicola Mai, a member of the European portfolio committee at PIMCO, one of the world’s largest asset managers.

“If, over time you have a joint and several guarantee and more permanence, you can call it more strictly a sovereign-type issuer,” Mai said.

Until then, investors will demand a premium over Germany’s Bunds to compensate for the slightest risk of a euro break-up, further hampering EU bonds’ safe asset potential.

Currently, the EU pays 24 basis points more for 10-year debt than Germany.

Mike Riddell, who helps run almost 600 billion euros at Allianz Global Investors, sees EU debt becoming the risk-free benchmark “only in an environment where you have complete fiscal integration”.

“Germany is ultimately going to be the risk-free rate for the euro zone for the foreseeable future,” he said.

(Reporting by Yoruk Bahceli; Additional reporting by Dhara Ranasinghe; Editing by Sujata Rao and Catherine Evans)

 

GBP/USD Daily Forecast – British Pound Attempts To Gain More Ground Ahead Of The Weekend

British Pound Is Mostly Flat Against U.S. Dollar

GBP/USD is currently trying to settle above the resistance at 1.4180 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index continues its attempts to settle below the support at 90. If the U.S. Dollar Index manages to settle below this level, it will head towards the next support at 89.75 which will be bullish for GBP/USD.

UK has just reported that Industrial Production declined by 1.3% month-over-month in April compared to analyst consensus which called for gorwth of 1.2%. On a year-over-year basis, Industrial Production grew by 27.5% as it was under huge pressure in April 2020. Meanwhile, Manufacturing Production decreased by 0.3% compared to analyst consensus which called for growth of 1.5%.

Foreign exchange market traders will continue to monitor the developments in U.S. government bond markets as Treasury yields remain under pressure after the release of U.S. inflation data. While U.S. Inflation Rate exceeded analyst expectations, traders remain confident that inflation is temporary, which is bullish for bonds and bearish for the American currency.

Technical Analysis

gbp usd june 11 2021

GBP/USD managed to settle above the 20 EMA at 1.4145 and is testing the resistance at 1.4180. In case this test is successful, GBP/USD will head towards the next resistance level at 1.4200.

A move above the resistance at 1.4200 will push GBP/USD towards the next resistance at 1.4240. In case GBP/USD settles above this level, it will head towards the resistance at 1.4280.

A successful test of the resistance at 1.4280 will open the way to the test of the next resistance at 1.4345. I’d note that GBP/USD has not visited this territory for several years so it remains to be seen whether previous levels will be relevant for today’s trading.

On the support side, the previous resistance at the 20 EMA at 1.4145 will serve as the first support level for GBP/USD. In case GBP/USD declines below this level, it will head towards the major support level which is located at 1.4100.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Weakens Under 109.223, Strengthens Over 109.634

The Dollar/Yen is inching higher early Friday as investors continue to digest yesterday’s U.S. consumer inflation report while looking ahead to next week’s two-day Federal Reserve monetary policy meeting.

The U.S. Consumer Price Index (CPI) rose 5% in May on a year-over-year basis, its highest level since the summer of 2008, but the surge in inflation looks to be temporary and should not push the Federal Reserve to tighten policy for now.

This assessment helped drive down U.S. Treasury yields, tightening the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a less-attractive asset.

At 05:56 GMT, the USD/JPY is trading 109.421, up 0.098 or +0.09%.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.192 will signal a resumption of the downtrend. A move through 110.329 will change the main trend to up.

A move through 109.192 will also turn 109.796 into a new secondary lower top. This will be a sign of increasing selling pressure.

The intermediate range is 110.966 to 107.479. The USD/JPY is currently trading inside its retracement zone at 109.223 to 109.634. Inside this range is a minor pivot at 109.445.

The short-term range is 107.479 to 110.329. If the downtrend continues then look for the selling to extend into its retracement zone at 108.904 to 108.568.

The long-term range is 108.230 to 107.154.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Friday is likely to be determined by trader reaction to the pivot at 109.445.

Bearish Scenario

A sustained move under 109.445 will indicate the presence of sellers. This could lead to a labored break with potential downside targets coming in at 109.223 and 109.192.

If 109.192 fails as support then look for the selling to possibly extend into the short-term retracement zone at 108.904 to 108.568.

Bullish Scenario

A sustained move over 109.445 will signal the presence of buyers. The first upside target is the Fibonacci level at 109.634. Since the main trend is down, sellers could come in on a test of this level.

Overcoming 109.634 could trigger a rally into Thursday’s high at 109.796. Taking out this level could extend the rally into the recent main top at 110.329.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Testing Lower Level of Key Retracement Zone at .7204 – .7266

The New Zealand Dollar is trading higher on Friday after investors dismissed a high reading on U.S. inflation as fleeting and no threat to super-accommodative monetary policy, weakening the U.S. Dollar.

At 04:32 GMT, the NZD/USD is trading .7195, up 0.0001 or +0.01%.

The U.S. consumer price index rose 5% in May on a year-over-year basis, the highest since the summer of 2008, when oil prices were skyrocketing. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992. Economists said that rising prices could be temporary since they are centered in areas impacted by the pandemic.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, yesterday’s closing price reversal bottom could be a sign that momentum is getting ready to shift to the upside.

A trade through .7126 will signal a resumption of the downtrend. A move through .7316 will change the main trend to up.

The minor trend is also down. A trade through .7243 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .7465 to .6943. Its retracement zone at .7204 to .7266 is resistance and a potential trigger point for an acceleration to the upside. The NZD/USD is currently testing the lower or 50% level at .7204.

The short-term range is .6943 to .7316. Its retracement zone at .7129 to .7085 is support. It’s also a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to the main 50% level at .7204.

Bullish Scenario

A sustained move over .7204 will indicate the presence of buyers. If this move triggers enough upside momentum then look for a test of the minor top at .7243, followed by the main Fibonacci level at .7266.

Bearish Scenario

A sustained move under .7204 will signal the presence of sellers. This could trigger an intraday break into yesterday’s low at .7165. If this fails as support then look for the selling to possibly extend into .7129 to .7126.

For a look at all of today’s economic events, check out our economic calendar.

June 11th 2021: DXY off Session Peaks After US Inflation Data; Eyes 90.00 Support

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, support at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close. May also extended recovery gains, trading higher by 1.7 percent. June, however, is off to a mildly rocky start, down 0.4 percent as of current trade.

April upside—alongside May’s optimism—throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price breached major trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Thursday, as you can see, wrapped up in the shape of a doji indecision candle. In light of the candle’s location on the chart (established within a mild range), this portrays a measure of caution in the market.

In terms of where we stand on the chart’s framework, Quasimodo resistance at 1.2278 remains in the light, while, as stated in recent writing, navigating deeper water from current price underlines dynamic support around 1.1985: the 200-day simple moving average.

Activity out of the RSI demonstrates the value attempting to hold on to support from 51.36, action following a deterioration from peaks fashioned just south of overbought status.

H4 timeframe:

In what was a somewhat choppy session—oscillating between gains and losses—EUR/USD ended the day mostly unchanged as the market digested upbeat US inflation data and ECB commentary.

From a technical standpoint, the currency pair remains languishing south of the 61.8% Fib retracement at 1.2206, which made an entrance on Wednesday.

For those who read previous analysis you may note that the aforesaid Fib represents a second take-profit target derived from the recently completed AB=CD formation off the 100% Fib projection at 1.2123 (arranged just south of a 61.8% Fib retracement at 1.2094).

Recent reports also highlighted additional areas to be watchful of on this timeframe: resistance at 1.2244 and demand coming in at 1.2044-1.2071, an area sharing chart space with a 1.618% Fib expansion at 1.2049.

H1 timeframe:

The bulk of yesterday’s movement occurred around the 100-period simple moving average at 1.2176.

This leaves resistance between 1.2211 and 1.22 on the table today (note the area houses the H4 timeframe’s 61.8% [AB=CD] Fib level at 1.2206), with a break perhaps unmasking two Quasimodo resistances at 1.2257 and 1.2241. Moves lower, on the other hand, throw light on 1.2132 support, followed by the psychological figure 1.21.

With regards to the RSI indicator, we are seeing the value explore space under the 50.00 centreline after flirting with peaks around 60.00ish.

Observed levels:

On the basis of short-term charts—H4 and H1—this market continues to echo a downward bias, largely as a result of the recent rejection from H1 and H4 resistances between 1.2211, 1.2206 and 1.22. As aired in Thursday’s technical briefing, this could mean a H1 close south of the 100-period simple moving average around 1.2176, with downside to perhaps hone in H1 support at 1.2132 and, with some oomph, maybe the 100% Fib projection at 1.2123 on the H4 and then the 1.21 figure.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 low) and supply from 0.8303-0.8082. Should a bearish scenario unfold, support at 0.7394 is featured to the downside, with additional downside pressure targeting demand at 0.7029-0.6664 (prior supply).

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

The daily chart’s technical scenery is tedious.

Since April 20th—despite a fleeting whipsaw to a low of 0.7645—resistance at 0.7816 and support from 0.7699 continues to outline a defined range (yellow).

Support at 0.7563 remains in view as a potential objective should sellers take the wheel, deriving additional (dynamic) support from the 200-day simple moving average circling 0.7538. Above 0.7816, supply falls in around 0.8045-0.7985.

With respect to trend, we have been higher since the early months of 2020. However, we must take into account the currency pair has been mostly directionless since the beginning of 2021.

The RSI shows the value engaging the 50.00 centreline, following last week slicing to 40.00s. North of here, we have trendline resistance, drawn from the peak 79.74.

H4 timeframe:

The US dollar index (ticker: DXY) finished off best levels as recent US inflation data and ECB action failed to spark movement.

Technically, however, AUD/USD derived modest support from 0.7726—Monday’s session low. In the event the market maintains a bid, Quasimodo resistance from 0.7782 is in the offing. Space under 0.7726, on the other hand, could guide price action as far south as 0.7632-0.7653 demand.

H1 timeframe:

For those who read Thursday’s technical briefing you may recall the following (italics):

Made up of a 38.2% Fib retracement at 0.7720, a 1.272% Fib expansion at 0.7723, a 100% Fib projection at 0.7728 and the 100-period simple moving average around 0.7727, the 0.7720-0.7728 area welcomed price movement in recent hours and stirred a bullish vibe (note the hammer formation).

As you can see, the unit held its bid-on-dip scenario from 0.7720-0.7728 support on Thursday, scaling to a high of 0.7763 and highlighting supply at 0.7783-0.7771 (holds H4 Quasimodo resistance within at 0.7782, and is situated under 0.78 [H1]). Territory south of noted Fib structure draws attention to 0.77, a psychological base in the company of a 61.8% Fib retracement at 0.7692.

As for the RSI indicator, overbought space is plotted nearby, possessing obvious resistance from 72.21.

Observed levels:

Prime focus is on H1 supply at 0.7783-0.7771. Recognising the area shares space with H4 Quasimodo resistance at 0.7782, bearish activity could develop from this neighbourhood.

Bearish interest, however, may also want to consider the 0.78 figure. Not only is this a widely watched level, daily resistance is located nearby at 0.7816.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May (+0.2 percent) held the breached descending resistance, echoing potential support for the month of June, currently trading higher by 0.2 percent.

Daily timeframe:

Technical structure largely unchanged from previous analysis.

Long-term resistance at 110.94-110.29 (posted under supply at 111.73-111.19) remains centre of attention on the daily timeframe, with downside flow targeting 108.60ish lows (green oval), followed by supply-turned demand at 107.58-106.85.

Trend studies, nevertheless, reveal the pair has been trending higher since the beginning of April. Subsequent months has witnessed a sizeable retracement, followed by an attempt to recapture higher levels.

The RSI is stationed under resistance at 57.00, yet currently challenging the 50.00 centreline. Should a break lower materialise, oversold might be in store, eyeing support at 28.19.

H4 timeframe:

Although demand at 109.02-109.20 motivated bullish activity at the beginning of the week, USD/JPY came under renewed pressure Thursday and has price loitering within a stone’s throw of the noted demand base. The key point to be mindful of is should we shake hands with this demand once more, trendline support, drawn from the low 107.48 intersects with the upper side of the demand and may trigger another bullish attempt.

Failure to hold the current demand, technical attention shifts to another layer of proven demand printed at 108.20-108.43.

H1 timeframe:

Following an earlier bull trap—movement in which price spiked to highs of 109.79 and deceived breakout bulls north of the previous higher high at 109.67—the technical pendulum swung in favour of sellers, with price toying with space a touch north of demand at 109.07-109.19 (set within H4 demand at 109.02-109.20), which is positioned within striking range of the 109 figure.

Information derived from the RSI informs traders that momentum is on the verge of entering oversold space, a zone between 0 and 30.00 which indicates extreme levels (gone too far in a particular direction according to the indicator) and a place where a reversal could emerge.

Observed levels:

The combination of the 109 figure, H1 demand at 109.07-109.19, H4 demand at 109.02-109.20, and H4 trendline support, extended from the low 107.48, could provide enough technical evidence to encourage a bullish reaction should the aforementioned area be tested today.

What’s also interesting is the H1 and H4 zones are supported by monthly action balancing off descending resistance-turned support.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum moved in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent).

May, despite diminished volatility during March and April, traded firmly on the front foot, up by 2.8 percent. June, however, is somewhat depressed (down 0.2 percent), albeit recording fresh YTD peaks at 1.4250.

Despite the trendline breach (which could serve as support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Versus the US dollar, sterling ended Thursday on the front foot, following upbeat inflation data out of the US and recent ECB commentary.

Quasimodo resistance at 1.4250 and support at 1.4003 remain pivotal barriers on the daily chart.

Demand at 1.3857-1.3940—an important technical area where a decision was made to break above 1.4003 resistance—is also perhaps on the radar.

Interestingly, trend in this market has remained to the upside since March 2020.

Trendline support, taken from the low 36.14 on the RSI, gave up position last week with recent action cruising within range of the 50.00 centreline.

H4 timeframe:

Technical structure unchanged from previous analysis.

Since mid-May, the H4 chart has been busy carving out a consolidation between 1.4096 and 1.4219. In spite of a handful of whipsaws (fakeouts beyond range extremes are common), the range remains intact. As evident from the chart, Thursday, although whipsawing the lower side of the aforesaid range, produced an almost one-sided recovery to a high of 1.4178.

Technical structure above the consolidation has daily Quasimodo resistance from 1.4250 in place; below the range, the chart points to trendline support, drawn from the low 1.3668, and support priced in at 1.4007.

H1 timeframe:

Support from 1.4078 welcomed price movement on Thursday, following a rapid push through 1.41 bids. Subsequent action witnessed GBP/USD reclaim 1.41+ status and dethrone the 100-period simple moving average around 1.4148.

Despite mild selling, as we write, resistance could potentially form at 1.42, with a break uncovering additional resistance coming in at 1.4246.

The picture from the RSI shows the value nearing the oversold range, in particular resistance at 71.00ish.

Observed levels:

The 1.42 figure based on the H1, dovetailing closely with the upper side of the H4 range at 1.4219, forms potential resistance. The caveat, of course, is a possible whipsaw forming to test daily Quasimodo resistance at 1.4250.

With scope to pilot higher levels, an alternative short-term scenario to be mindful of is H1 retesting the 100-period simple moving average around 1.4148 and driving moves to 1.42.

DISCLAIMER:

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AUD/USD Forex Technical Analysis – Needs Stronger Volume to Trigger Breakout Over .7774

The Australian Dollar is trading higher against the U.S. Dollar late in the session on Thursday as a drop in U.S. Treasury yields made the greenback a less-attractive investment. Although U.S. consumer prices jumped more than expected in May, the surge in inflation looks to be temporary and should not push the Federal Reserve to tighten policy for now.

At 18:55 GMT, the AUD/USD is trading .7755, up 0.0023 or +0.30%.

On Thursday, the U.S. government reported the consumer price index rose 5% in May on a year-over-year basis, the highest since the summer of 2008, when oil prices were skyrocketing. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7774 will change the main trend to up. A move through .7646 will signal a resumption of the downtrend.

The minor trend is also down. A trade through .7766 will change the minor trend to up and shift momentum to the upside. A new minor bottom has formed at .7718.

The short-term range is .7532 to .7891. Its retracement zone at .7711 to .7669 is support.

The main range is .8007 to .7532. Its retracement zone at .7770 to .7826 is resistance.

Both areas have been holding the AUD/USD in a range for nearly two months.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Thursday is likely to be determined by trader reaction to the main 50% level at .7770.

Bullish Scenario

A sustained move over .7770 will indicate the presence of buyers. Taking out the main top at .7774 will change the main trend to up and could drive the market into the next main top at .7796. Taking out this level will reaffirm the uptrend with .7814 the next target.

Bearish Scenario

A sustained move under .7769 will signal the presence of sellers. If this move creates enough upside momentum then look for the selling pressure to possibly extend into the short-term retracement zone at .7711 to .7769.

Side Notes

The AUD/USD appears to be forming an upside bias, but traders could continue to hold it in a range until after the Federal Reserve makes its policy announcements on June 16.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 90.070 Sets Tone into Close

The U.S. Dollar is inching lower against a basket of major currencies at the mid-session on Thursday after posting a choppy, two-sided trade with investors showing a mixed reaction to another rise in U.S. consumer inflation data and commentary from the European Central Bank.

At 17:16 GMT, June U.S. Dollar Index futures are trading 90.080, down 0.041 or -0.05%.

Consumer prices for May accelerated at their fastest pace since the summer of 2008 amid the economic recovery from the pandemic-triggered recession, the Labor Department reported Thursday.

The consumer price index, which represents a basket including food, energy, groceries and prices across a spectrum of goods, rose 5% from a year ago. Economists surveyed by Dow Jones had been expecting a gain of 4.7%.

A separate report released Thursday showed that jobless claims for the week ended June 5 came in at 376,000, versus a Dow Jones estimate of 370,000. The total still marked the lowest of the pandemic era.

The Euro is trading nearly flat after the European Central Bank (ECB) decided to keep interest rates unchanged as market players look for clues on whether the central bank will soon lift its massive pandemic-era stimulus.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on June 4.

A trade through 90.625 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 89.650.

The minor trend is also up. A trade through 89.830 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 89.515 to 90.625. The index is currently straddling its 50% level at 90.070.

The short-term range is 91.435 to 89.515. Its retracement zone at 90.475 to 90.700 is resistance and a potential trigger point for an acceleration to the upside.

Daily Swing Chart Technical Forecast

The direction of the June U.S. Dollar Index into the close is likely to be determined by trader reaction to the pivot at 90.070.

Bullish Scenario

A sustained move over 90.070 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term resistance at 90.475 to 90.700. The last main top at 90.625 is trading inside this retracement zone, making it a valid upside target.

Bearish Scenario

A sustained move under 90.070 will signal the presence of sellers. The first downside target is the minor bottom at 89.830. Taking out this level will shift momentum to the downside with 89.650 the next target.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Daily Forecast – Canadian Dollar Continues To Trade In A Tight Range

USD/CAD Video 10.06.21.

U.S. Dollar Is Mostly Flat Against Canadian Dollar

USD/CAD is still trading near the 20 EMA at 1.2100 while the U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to settle below the support at the 90 level but failed to develop sufficient downside momentum and rebounded back above this level. As a result, the U.S. Dollar Index remains stuck between 90 and the resistance at the 20 EMA at 90.20. If the U.S. Dollar Index gets above the 20 EMA, it will move towards 90.50 which will be bullish for USD/CAD.

Today, the U.S. reported that Inflation Rate increased by 5% year-over-year in May compared to analyst consensus which called for an increase of 4.7%. On a month-over-month basis, Inflation Rate grew by 0.6% compared to analyst consensus of 0.4%. Core Inflation Rate was also higher than expected as it grew by 3.8% year-over-year compared to analyst consensus of 3.4%.

The reports indicated that inflation continued to gain ground but the reaction of foreign exchange market traders was muted. The reaction of the bond market was even more strange as Treasury yields moved to multi-week lows. At this point, it looks that Fed officials managed to calm traders who remain confident that high inflation numbers are temporary.

Technical Analysis

usd cad june 10 2021

USD to CAD is currently trying to stay above the 20 EMA at 1.2100. In case USD to CAD manages to stay above this level, it will head towards the resistance at 1.2130.

If USD to CAD gets above 1.2130, it will move towards the next resistance level which is located at 1.2170. A successful test of the resistance at 1.2170 will push USD to CAD towards the resistance at 1.2200.

On the support side, a move below the 20 EMA will push USD to CAD towards the support at 1.2080. If USD to CAD gets below this level, it will move towards the support at 1.2065. A successful test of the support at 1.2065 will open the way to the test of the next support at 1.2040.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Continues to Chop

The US dollar has gone back and forth against the Japanese yen, as we continue to see strength in general. That being the case, the market is likely to continue the overall up trending channel, as we have been chopping to the upside for a little bit now. With that being the case, I think we are going to go looking towards the ¥110 level, followed by the ¥110.50 level, and then the ¥111 level. Furthermore, the 50 day EMA underneath should also offer support as it has, almost acting like a bit of a trendline for this channel.

USD/JPY Video 11.06.21

Keep in mind that this pair does tend to move right along with interest rate differential between the two countries and of course risk appetite around the world. The Japanese yen is considered to be a major “safety currency”, so therefore it gets sold off in times of “risk on attitudes.” Obviously, the exact opposite is true, so if there is a lot of concern out there, then this pair does tend to roll over and go looking towards the downside. At this point, I look at the “bottom of the trend” at the ¥107.50 level where we have bounced from, and of course we have the 38.2% Fibonacci retracement level.

With that being said, I do think that it is more likely that we continue to see a “buy on the dip” attitude going forward, as the markets continue to see reasons to celebrate and by assets, perhaps in the simple fear of inflation eroding well. Ultimately, this is a market that I think is one that will simply continue the same action for the rest of the summer.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Price Forecast – British Pound Bounces From Bottom of Range

The British pound has initially pulled back during the trading session on Thursday as we continue to see a lot of buying pressure underneath. Ultimately, the 50 day EMA comes into the picture as well, showing signs of stability and support. The market has been picking away at the 1.42 level above, an area that is significant resistance. If we can clear that area and the highs of last week, then it is very likely that we could continue to go much higher, perhaps reaching towards the 1.45 handle.

GBP/USD Video 11.06.21

On the other hand, if we break down below the lows of the trading session on Thursday then it is possible that we could go as low as 1.40 handle, which is an area that of course will attract a lot of attention from a psychological standpoint in that area where we have seen a lot of resistance in the past, so it all comes together with “market memory.” We are in an uptrend, and that is the most important thing to pay attention to.

Because of this, I think that there are plenty of people looking to get involved every time it dips based upon value and of course the fact that the trend has been so reliable. Quite frankly, I think we are to simply trying to find some type of a catalyst to take off to the upside. We have not really have it yet, but it is worth noting that we have not bothered to sell off either. All things been equal, this is a scenario that will probably put people to sleep for the most part, but at the end of the day is still bullish.

For a look at all of today’s economic events, check out our economic calendar.

GBP/JPY Price Forecast – British Pound Turned Around to Show Signs of Resiliency

The British pound initially fell during trading on Thursday but turned around to show signs of resiliency as we have recaptured the ¥155 level. That of course is a good sign, and it does suggest that we are going to continue the overall uptrend, allowing this market to perhaps go looking towards the ¥157.50 level, and then after that potentially even as high as the ¥160 level.

GBP/JPY Video 11.06.21

To the downside, I believe that the ¥153.50 level should offer support, as we continue to see the overall uptrend continue, and therefore push this market much higher. All things been equal, I do not have any interest in shorting this market as it is so strong, and we of course are in an uptrend. This does not necessarily mean that we go straight up in the air forever, but it does suggest that the buyers continue to be very strong, so therefore it is worth paying close attention to it. With this being the case, it looks like it is “risk on” in general, and therefore I think what we have got here is a “buy on the dips” type of situation as well as a “buy-and-hold” situation.

Keep in mind that the pair is sensitive to risk appetite, so pay close attention to other markets as well, because as they arise in value, that typically will help this pair in general. After that, you also have to keep an eye on the British reopening which seems to be ready to go, sending the value of the British pair higher in general. Longer-term, we probably have quite a while before the trend changes.

For a look at all of today’s economic events, check out our economic calendar.

USD/INR: Rupee Skids for Third Straight Day, Nearing a Key Resistance Level 73.30

The Indian rupee depreciated by nearly 15 paise against the U.S. dollar for the third straight day on Thursday despite strength in domestic equity markets, but a rise in U.S. inflation would put further pressure on the battered Asian currency.

The USD/INR breached the 73-mark, rinsing to an intraday high of 73.124 against the U.S. currency from Wednesday’s close of 72.98. The domestic currency has lost 26 paise in the last three trading sessions.

The rupee June futures has support at 72.70 and breaking of the same will open for 72.40 while on the higher side 73.30 remains the resistance.

USD/INR will likely stay in a descending triangle in the weeks ahead, considering uncertainties surrounding the Fed’s future monetary policy path. Meanwhile, we are keeping a close eye on market conditions, and will sell USD/INR spot with a target of 70.5 and a stop of 73.2 if the pair firmly falls below the 72.3 horizontal trend line of the triangle,” noted Qi Gao, Asia FX strategist at Scotiabank.

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, rose to a high of 90.282. The index will rise further after the relatively impressive US consumer price index data, which rose by 5% year-on-year – the highest since 2008.

The Indian equity market witnessed a strong influx of retail investors, pushing the benchmark BSE Sensex index up 358.83 points or 0.69% higher at 52,300.47, while the broader NSE Nifty rose 102.40 points or 0.65% to 15,737.75.

On the other hand, global oil benchmark Brent futures rose 0.8% to $72.79 per barrel. Foreign institutional investors were net buyers in the capital market on Thursday as they purchased shares worth Rs 1,329.7 crore, as per exchange data.

The Indian rupee was one of Asia’s best performers, having risen 2.3% in May, but lost ground last week, its biggest decline in six weeks. The USD/INR is expected to rise about 2% to INR 74.00 against the U.S. dollar rate over the coming year.

EUR/USD Price Forecast – Euro Gives Up Early Gains

The Euro initially rallied during the trading session on Thursday as we continue to see a lot of noisy trading in this market. That being said, the 50 day EMA underneath is more than likely going to offer support again, as this pair is certainly in an uptrend. However, that does not necessarily mean that it is going to be easy to break out to the upside. In fact, I think what we have here is a scenario where we simply chop back and forth, but that is essentially with the Euro tends to do. With this being the case, the market is likely to continue to say stuck in this overall range, as the 1.20 level underneath offers plenty of support, and therefore I think that is essentially where the “floor the market” currently resides.

EUR/USD Video 11.06.21

Looking at this chart, the 1.23 level is crucial resistance, and I think will be difficult to break above. If we can break above there, then it is likely that we could see this market go looking towards 1.25 handle which is my longer-term target going forward. I believe that it is only a matter of time before we reach towards that area, but I think that is probably a scenario that we will see in late summer, perhaps early fall. Between now and then, I think it still remains a little bit of a short-term “buy on the dips” type of market, so if you trade shorter-term charts then you start looking for supportive places like 1.21, the 50 day EMA, etc. I have no interest in shorting this market until we get well below the 1.20 handle.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Continues to Sit at The 50 day EMA After CPI

The Australian dollar has done very little during the trading session, but it has held the 50 day EMA as support. Ultimately, we are still very much in a range, but now that the Consumer Price Index has been at least in the United States, traders are starting to focus on the longer-term outlook again. If that is going to be the case, then it makes quite a bit of sense that this pair probably creeps to the upside, perhaps towards the 0.7850 level. That being said, I do not necessarily think that it is going to be easy for massive gains to be the outcome. However, it certainly looks as if there is quite a bit of buying pressure underneath. With that in mind, buying short-term dips may continue to work out quite well.

AUD/USD Video 11.06.21

To the downside, even if we do break down a little bit it is very likely that we will continue to see support near the 0.7650 level, possibly even the 0.76 handle. With that being the case, I think that if we do pull back there will be plenty of buyers looking for “value” down there, but I would not look for some type of major breakout in the short term. If we did break down below the 0.75 handle, that could in the entire uptrend, but I just do not see an argument for that right now as inflation seems to be taking hold, and that could continue to push the price of commodities higher, helping the Australian dollar in general.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Mid-Session Technical Analysis for June 10, 2021

The Euro is trading slightly lower on Thursday after the European Central Bank (ECB) decided to keep interest rates unchanged as market players look for clues on whether the central bank will soon lift its massive pandemic-era stimulus.

The move was widely expected so there was little reaction by traders, who are primarily focused on the upcoming U.S. consumer inflation report, due to be released at 12:30 GMT.

At 11:57 GMT, the EUR/USD is trading 1.2175, down 0.0004 or -0.03%.

“The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics,” the bank said in a statement.

In other news, economists are expecting the U.S. May CPI to rise 4.7% from a year earlier, according to Dow Jones. In April, the CPI increased 4.2% on an annual basis, the fastest rise since 2008.

“There is a sense in the market that the Fed got the market under control saying that the inflation is transitory, so that’s the whole focus right now, whether that can be achieved or not,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.2254 will change the main trend to down. A move through 1.2104 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 1.2218 will change the minor trend to up. This will also shift momentum to the upside.

On the upside, the resistance is a 50% level at 1.2185. On the downside, potential targets are a pair of 50% levels at 1.2159 and 1.2125.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Thursday is likely to be determined by trader reaction to 1.2185 and 1.2159.

Bullish Scenario

A sustained move over 1.2185 will indicate the presence of buyers. If this creates enough upside momentum then look for a potential surge into 1.2218. Taking out this level could trigger an acceleration into 1.2254.

Bearish Scenario

A sustained move under 1.2159 will signal the presence of sellers. This could trigger a sharp break into 1.2125. Watch for a technical bounce on a test of this level. If it fails then look for the selling to possibly extend into the main bottom at 1.2104. This level is a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

Main Events of the Week!

Transitory versus sustained?

Headline and core prices are expected to jump to 4.7% and 3.5% respectively in the US CPI numbers with base effects being the primary reason for the surge higher. This should be the peak for US prices with the trend starting to come down in June, although some economists still believe they will remain elevated and above target through the rest of the year. But the Fed is in no rush to respond as it is happy to look through the spike in rising prices, especially as the latest US job figures provide a further excuse for its patient stance.

We’ve seen bond markets move already with yields falling steadily all week with the widely-watched US 10-year Treasury now trading below 1.5%, the first time since March. A bumper headline number to the topside of estimates is surely needed to arrest this fall, but bond markets are known to generally lead markets so it will be fascinating to see who is right later today.

USD/JPY has been tracking sideways this week in a narrow range around 109.50. A bumper CPI print would push the pair higher and challenge last week’s highs at 110.32/33 while support rests at the 50-day SMA at 109.10 near this week’s lows.

ECB meeting and taper talk

ECB officials have recently been talking down any mention of tapering bond buys in the emergency ECB programme but there are some expectations that there may be a small change in guidance. This would come in the statement with a shift from “significantly” to “moderately” higher than at the start of the year and see buying cut to €70bn/month versus the current rate of €80bn/month. If President Lagarde does not repeat this “taper on hold” message or there is a communication error, then the risks are skewed to a higher euro as market expectations are generally currently cautious.

EUR/USD has been treading water this week either side of 1.22. Any bullish talk from Lagarde will see the pair push higher towards end of May highs at 1.2266 with the January peak at 1.2349. Last Friday’s low at 1.2103 is support if the ECB gets out its very patient and vigilant card.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

GBP/JPY is Setting up for a Long

If we see a bounce that would be a good intraday position. The zone comes exactly at 154.00-25 and W L5 camarilla. A bounce will target 154.93, 155.97 all the way up to 156.47. However, the price need to stay above 153.45 to remain bullish as it is now. Watch for buying the dips.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

Gold Buyers Adopt a Wait-and-See Attitude

The greenback known for normally moving inversely against the precious metal inched up by 0.15%, still gold bears run seem to be capped by falling 10-year U.S. Treasury yields which plunged below 1.50% for the first time since May 7.

Metal traders have their minds focused on the Consumer Price Index report, known for measuring changes in inflation and purchasing trends including jobless claims data, due later in the day, to get further insights on the world’s largest economic growth and direction of the U.S Apex Bank’s monetary strategy.

Consequently, Market watchers further disclose a surprise upside in inflation could tilt the U.S Federal Reserve Bank in taking emergency discussions on tapering its asset purchases sooner than later, despite the prevailing narration that shows most U.S monetary officials would still be looking for substantial progress toward maximum employment before considering tapering.

Gold bugs will however be banking on the European Central Bank scheduled to postulates its Interest rate decision in a few hours time, with European monetary officials having all the evidence they need to keep in place their ultra-loose monetary stimulus program intact, suggests gold bulls will find strong support around the $1,850 per ounce price band.

Recent price actions further reveal gold buyers have adopted a wait-and-see attitude, leaving gold prices increasingly vulnerable to a near-term pullback as demand for gold futures contracts are now slowing alongside physical flows, amid India’s ongoing battle against its worst viral crisis in history.

EUR/USD Daily Forecast – Euro Declines Ahead Of ECB Interest Rate Decision

EUR/USD Video 10.06.21.

Euro Is Losing Ground Against U.S. Dollar

EUR/USD managed to get below the 20 EMA at 1.2175 and is slowly moving towards the support at 1.2155 while the U.S. dollar is gaining some ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle above the resistance at the 20 EMA at 90.20. A move above this level will push the U.S. Dollar Index towards the resistance at 90.50 which will be bearish for EUR/USD.

Today, foreign exchange market traders will focus on two key events. The U.S. will release inflation data for May while the European Central Bank will announce its Interest Rate Decision.

ECB is expected to leave the interest rate unchanged, so traders will focus on the Bank’s commentary which may have a material impact on currency dynamics.

In the U.S., the key question is whether Inflation Rate moved above the 5% level in May (the current analyst consensus is 4.7%).

Traders will also have a chance to take a look at the latest job market data from the U.S. Initial Jobless Claims are expected to decline from 385,000 to 370,000 while Continuing Jobless Claims are projected to decrease from 3.77 million to 3.6 million.

Technical Analysis

eur usd june 10 2021

EUR/USD is currently trying to get to the test of the support level at 1.2155. RSI is in the moderate territory, and there is plenty of room to gain downside momentum in case the right catalysts emerge.

If EUR/USD manages to settle below 1.2155, it will head towards the next support level at 1.2130. The 50 EMA is located in the nearby so EUR/USD may get strong support near 1.2130. A move below the 50 EMA will lead to the test of the support at 1.2115.

On the upside, a move above the 20 EMA at 1.2175 will open the way to the test of the resistance at 1.2200. If EUR/USD gets above this level, it will head towards the next resistance at 1.2220. In case EUR/USD manages to settle above the resistance at 1.2220, it will head towards the resistance at 1.2250.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – U.S. Dollar Tries To Move Higher Ahead Of Inflation Data

GBP/USD Video 10.06.21.

British Pound Is Mostly Flat Against U.S. Dollar

GBP/USD is currently trying to settle below the support at 1.4100 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is testing the resistance at the 20 EMA at 90.20. In case this test is successful, the U.S. Dollar Index will head towards the next material resistance level at 90.50 which will be bearish for GBP/USD.

Today, foreign exchange market traders will focus on U.S. inflation data. Analysts expect that Inflation Rate increased by 4.7% year-over-year in May. On a month-over-month basis, Inflation Rate is projected to increase by 0.4%. Core Inflation Rate is expected to grow by 3.4% year-over-year.

These inflation reports are the main event of the week for the American currency. Treasury yields have recently moved lower, indicating that bond traders were ready to ignore inflation risks.

However, the situation may change quickly if the reports show that U.S. Inflation Rate moved above the 5% level in May. In this case, the Fed may be forced to cut its support sooner than expected, which will be bullish for the U.S. dollar and bearish for riskier assets.

Technical Analysis

GBP/USD managed to settle below the 20 EMA at 1.4135 and is testing the support at 1.4100. In case this test is successful, GBP/USD will move towards the next support level at 1.4080.

A move below the support at 1.4080 will open the way to the test of the next support level which is located at the 50 EMA at 1.4055. In case GBP/USD declines below the 50 EMA, it will head towards the support at 1.4020.

On the upside, the previous support at the 20 EMA at 1.4135 will serve as the first resistance level for GBP/USD. If GBP/USD gets above this level, it will move towards the next resistance at 1.4150. A successful test of the resistance at 1.4150 will push GBP/USD towards the resistance level which is located at 1.4180.

For a look at all of today’s economic events, check out our economic calendar.