Dollar Calm on Neutral Powell’s Testimony

• Jerome Powell's first day of Testimony had a limited impact on both the dollar and Wall Street.
• Japanese Yen lost ground to the 161 mark against the dollar, raising concern by central Japanese banks.
• Oil slip as the Hurricane Beryl damage on U.S. oil-producing hubs is limited. 

Market Summary

The highly anticipated testimony of Jerome Powell commenced yesterday, but the market remained calm as the Fed's chief delivered a neutral statement. Powell acknowledged that inflationary pressure in the U.S. is showing signs of easing and raised concerns about potential risks to the labour market from persistent high borrowing costs. However, he refrained from providing a timeline for a Fed rate cut as the Fed is concerning cutting the rate too soon, and too much will have reverse progress on the inflation. Consequently, the dollar index (DXY) held near the $105 mark, while Wall Street traded sideways, awaiting more clues on the second day of the testimony.

In Japan, during the BoJ hearings, major banks urged the central bank to significantly cut its monthly bond purchases to bolster national bond yields and strengthen the Japanese Yen. As a result, the Yen traded above the 161.00 mark. Yen traders should remain cautious of potential market intervention from Japanese authorities.

In the commodity market, gold found support at its liquidity zone near the $2360 level as the dollar's strength eased yesterday. Meanwhile, oil prices continued to slide as the Texas oil-producing hub experienced less damage than initially expected from Hurricane Beryl.

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

Source: CME Fedwatch Tool

0 bps (95.3%) VS -25 bps (4.7%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index was rejected at its resistance level of 105.15, a potential pivotal point for its future direction. Powell's testimony last night neither catalysed nor pressured the dollar significantly. However, as the testimony continues today, traders should keep a close watch for further insights from the Fed's chief regarding the country's monetary policy moves.

The Dollar index was rejected at its key resistance level of 105.15 and had a doji candlestick, suggesting a potential retracement from such a level. The RSI remained at near 50 while the MACD edged higher from below the zero line, suggesting the bearish momentum is easing. 

Resistance level: 105.15, 105.50

Support level: 104.75, 104.40

XAU/USD, H4

Gold prices have shown signs of recovery from their previous downtrend, finding support near the $2360 liquidity zone. The dollar index remained stable in the last session, allowing gold to take a breather from its bearish trend. Recently, gold has been highly sensitive to the dollar’s strength.

Gold prices found support at the liquidity zone at near $2360, and the candlesticks' long, lower wicks near the liquidity zone suggest buying power is supporting at such a level. The RSI is flowing flat at near the 50 level, while the MACD continues to edge lower toward the zero line, suggesting that bearish momentum remains with gold. 

Resistance level: 2367.85, 2387.10

Support level: 2345.60, 2335.00

GBP/USD，H4

The GBP/USD pair eased slightly from its recent high level. With the Pound Sterling lacking a fresh catalyst, the pair is likely to be influenced by Jerome Powell's statement on his second day of testimony in front of the Senate. GBP/USD traders should also pay attention to tomorrow's UK GDP reading and the U.S. CPI reading to gauge the direction of the pair.

The GBP/USD pair continues to slide, as the lack of a catalyst suggests a bearish signal for the pair. The RSI has slipped out from the overbought zone, while the MACD has crossed, which suggests that bearish momentum is forming. 

Resistance level: 1.2850, 1.2940

Support level: 1.2760, 1.2660

EUR/USD，H4

The EUR/USD pair eased from its retracement at the support level of 1.0815, maintaining its uptrend trajectory. Political uncertainty in France persists, as no single party has secured a majority in the Lower House, and it may take weeks to resolve the issue. If the political uncertainty in France is settled, the euro may strengthen.

EUR/USD is currently trading in an asymmetric triangle pattern. A break from either side of the triangle will provide a signal for the pair. The RSI has slipped lower, while the MACD has crossed, suggesting that the bullish momentum is easing. 

Resistance level: 1.0853, 1.0900

Support level: 1.0767, 1.0735 

Nasdaq  (US100), H4

Wall Street is currently trading cautiously as traders position themselves for the second day of Powell’s testimony. Yesterday, the Fed Chair acknowledged that inflationary pressures in the U.S. have shown signs of easing and raised concerns about potential risks in the labour market, as the unemployment rate has climbed to 4.1%. However, Powell did not provide a timeline for rate cuts and suggested that cutting rates too soon or too much could reverse progress on inflation.

Nasdaq is poised at its all-time high level, awaiting a catalyst to break another high. The RSI has been hovering within the overbought zone, while the MACD continues to edge higher, suggesting that the bullish momentum remains intact with the index. 

Resistance level: 20560.00, 20700.00

Support level: 20330.00, 20150.00

NZD/USD, H4

The New Zealand Dollar has eased from just below its resistance level at 0.6145 and is now supported at its short-term support level of 0.6106. The Kiwi is currently awaiting the RBNZ’s interest rate decision and the accompanying statement from the New Zealand central bank, which will provide insight into the strength of the currency going forward.

The NZD/USD pair is currently traded in a wide sideways range between 0.6145 and 0.6016. A break from either side will provide a signal for the pair. The RSI has eased toward the 50 level from above, while the MACD has crossed above the zero line, suggesting the bullish momentum is vanishing. 

Resistance level: 0.6145, 0.6210

Support level: 0.6080, 0.6015 

USD/JPY, H4

The USD/JPY pair has formed an inverted head-and-shoulders price pattern, suggesting a bullish bias for the pair. As it climbs back to critical levels seen as intervention points for the BoJ, major banks in Japan have also urged the BoJ to cut its monthly bond purchases to eventually strengthen the Japanese Yen. Traders should be cautious of a potential market intervention from the BoJ.

The USD/JPY pair has formed an inverted Head-and-Shoulders price pattern and is currently traded firmly above the 161.00 level, suggesting a bullish signal for the pair. The RSI has climbed toward the overbought zone, while the MACD is edging higher, suggesting that bullish momentum is gaining. 

Resistance level: 162.00, 163.00

Support level: 160.45, 159.85 

CL OIL, H4

Oil prices slipped below their key support level at $82.15. The anticipated supply disruption from Hurricane Beryl is now seen as unlikely, as the storm caused less damage to the Texas oil-producing hub than initially feared. Meanwhile, the Chinese CPI data due today is expected to impact oil prices. A strong Chinese CPI reading could spur oil prices higher.

Oil prices slid below their key support level, suggesting a bearish bias for oil. The RSI has declined to near the oversold zone, while the MACD has broken below the zero line and is diverging, suggesting that bearish momentum is gaining. 

Resistance level: 82.15, 84.80

Support level: 80.05, 78.60