Yen Continues to Slides on Soft Economy Performance

• The Dollar Strengthened as the Market perceives persistent inflation in the country if Donald Trump is elected as the next president.
• RBA's dovish monetary policy meeting minutes hammered the Aussie dollar's strength.
• Oil prices traded to their 2-month high as the demand outlook improved.

Market Summary

The U.S. dollar regained strength after a technical retracement earlier in the session. The recent presidential debate over the weekend had a spillover effect on the financial market, with sentiment shifting in favour of Donald Trump's re-election prospects. This political development, combined with Wall Street strategists advising clients to brace for persistent inflation and higher long-term bond yields, led to a selloff in U.S. treasuries, pushing yields higher.

In Australia, the Reserve Bank of Australia's (RBA) monetary policy meeting minutes were released during the Sydney session, revealing a dovish narrative. The minutes indicated that the RBA board prefers holding rates steady rather than hiking them, which weighed on the Australian dollar's strength.

Meanwhile, the Japanese yen continued to slide against its peers. Market strategists predict that the yen could climb above the 170 mark against the dollar if the Bank of Japan's (BoJ) upcoming monetary policy fails to boost the country's bond yields and strengthen the yen.

In the commodity market, gold prices traded sideways, remaining below the strong resistance level of $2335. Conversely, oil prices reached their highest level since April, driven by expectations of increased fuel demand during the summer travel season and potential economic growth from major central bank rate cuts.

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

Source: CME Fedwatch Tool

0 bps (89.7%) VS -25 bps (10.3%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which tracks the US dollar against a basket of six major currencies, received significant bullish momentum as higher-than-expected US Treasury yields prompted increased investment in the US dollar. Against this backdrop, most major currencies have weakened against the dollar, particularly the Euro, Japanese yen, and Swiss franc, as these developed economies tilt towards easing monetary policies and lower interest rates.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 54, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 106.05, 106.50

Support level: 105.50, 105.15 

XAU/USD, H4

Gold prices continue to hover around resistance levels, maintaining a bullish trend buoyed by rising geopolitical uncertainties globally, including political instability in the Eurozone and potential currency intervention by the Bank of Japan. Such instability has left investors struggling to find a clear market direction, leading some to shift into safe-haven gold while monitoring further market developments. Additionally, the upcoming release of the US Nonfarm Payrolls and the US Unemployment rate later this week is expected to add further market volatility.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 58, suggesting the commodity might extend its gains toward resistance level since the RSI stays above the midline. 

Resistance level: 2335.00, 2390.00

Support level: 2300.00, 2260.00 

GBP/USD，H4

The GBP/USD pair rebounded strongly from its recent low levels but was later hammered down by the strengthened U.S. dollar. The Pound Sterling was hindered by a market sentiment shift as the UK’s CPI has reached the 2% target rate, leading the market to bet on an August rate cut by the Bank of England (BoE). Additionally, the upcoming UK general election on Thursday has left the market in a "wait-and-see" mode regarding the Pound Sterling's direction. 

GBP/USD has formed a higher-high pattern following a bearish trend, suggesting a potential trend reversal for the pair. The MACD has bullish divergence, but the RSI remains in neutral status, suggesting the bearish momentum is vanishing. 

Resistance level: 1.2760, 1.2850

Support level: 1.2600, 1.2540

EUR/USD，H4

The Euro hit a two-week high after the first round of France's snap election put the National Rally party in a strong position, though the final outcome is uncertain. If Marine Le Pen’s party wins, aggressive fiscal policies could worsen France's budget deficit and strain the bond market. Short-term, France Treasury yields have spiked, indicating a potential yield premium. While rising Treasury yields typically boost the currency short-term, increasing national debt could harm long-term economic growth, adding uncertainty. Investors should adopt a wait-and-see approach due to expected volatility.

EUR/USD is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 55, suggesting the pair might extend its losses after breakout since the RSI retreated sharply from overbought territory. 

Resistance level: 1.0735, 1.0810

Support level: 1.0675, 1.0615

Nasdaq (US100), H4

The Nasdaq is lacking momentum and is currently trading in a wide sideways trend, awaiting clear direction. The index's strength has been dragged down by a shift in market sentiment, particularly following last weekend's presidential debate between Joe Biden and Donald Trump. Wall Street strategists believe Donald Trump has a better chance of being re-elected, which could result in more persistent inflation. The U.S. Treasury yield ticked higher yesterday, leading to a decrease in risk appetite in the market.

The Nasdaq has eased its bullish momentum and is potentially trading lower as the downside risk picks up. The RSI is flowing near the 50 level, while the MACD hovers closely near the zero line, suggesting the bearish momentum is stronger.  

Resistance level: 19880.00, 20010.00

Support level: 19470.00, 19240.00

AUD/USD, H4

The AUD/USD pair failed to break and stay above its liquidity zone at the 0.6670 level, suggesting a bearish bias. The newly released RBA monetary meeting minutes revealed a dovish narrative, which hindered the Aussie dollar's strength. The RBA board suggested maintaining the current interest rate rather than hiking it higher due to the uncertain broader economic conditions. Meanwhile, the U.S. dollar strengthened as the market perceived that inflation in the U.S. would be more persistent if Donald Trump was elected as the next president.

The pair remains in its sideways trend as it lacks a solid catalyst. The RSI remains flowing across the 50 levels, while the MACD sticks to the zero line, providing a neutral signal for the pair. 

Resistance level: 0.6673, 0.6730

Support level: 0.6611, 0.6550

USD/JPY, H4

The Japanese Yen continues to slide, with the USD/JPY pair edging higher to its highest levels in multiple decades. The dollar strengthened in the past session due to political uncertainty, which may lead to more persistent inflation in the country and boost treasury yields. Market strategists see the pair potentially hitting the 170 mark if the BoJ's monetary policy, due at the end of July, fails to catalyse the Yen.

The pair continue to edge higher with strong bullish momentum, suggesting a bullish bias for the pair. The RIS flowing closely toward the overbought zone while the MACD remains at the elevated level, suggesting the bullish momentum remains strong.

Resistance level: 162.00, 162.95

Support level: 161.20, 160.50

CL OIL, H4

Oil prices extended gains, buoyed by stronger-than-expected Chinese manufacturing data. The Caixin Manufacturing PMI for June rose to 51.8, surpassing expectations of 51.5 and the previous month's reading of 51.7. This positive reading overshadowed the government PMI data released earlier, which indicated a contraction in China’s manufacturing sector for the second consecutive month in June. A reading below 50 indicates contraction. Traders are also monitoring the potential impact of hurricanes on oil and gas production and consumption in the Americas, with the Atlantic hurricane season starting with Hurricane Beryl, affecting Barbados, St. Lucia, St. Vincent and the Grenadines, and Tobago.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 69, suggesting the commodity might enter overbought territory. 

Resistance level: 84.75, 85.85

Support level: 82.10, 80.05