Archive June 2019

Top FX News Talking Points:

• Fed rate cut odds have moderated in the past few days, with the probability of two rate cuts in 2019 dropping from 86% chance at the end of last week to 83% today.
• Without a further build in Fed rate cut expectations, the US Dollar (via the DXY Index) has not seen significant follow through after breaking key technical levels last week, but that simply may just be a function of the calendar.
• The IG Client Sentiment Indexshows that retail traders are continuing to buy the US Dollar during its fall.

See our long-term forecasts for the US Dollar, Euro, Gold, Crude Oil, and more with the DailyFX Trading Guides.

After an exciting start to June, the second week of the month has been a lot less exciting. Case and point: the US Dollar (via the DXY Index) traded in a 1.04% range during the first three trading days of last week. Over the same period this week so far, the DXY Index has only traded in a 0.37% range. Volatility has calmed down, and in turn, price action across asset classes – US equities, US Treasuries, commodities, FX, etc. – has produced little meaningful movement over the past few days.

This trading environment may simply be a function of the calendar, however. Here’s why.

Fed Rate Cut Odds Have Stabilized in Recent Days…

After a speech last Tuesday in which Fed Chair Jerome Powellsaid that policymakers are now “closely monitoring” the impact of trade developments and that the Fed will “act as appropriate” to help sustain the expansion, market participants aggressively discounted dovish policy action by the FOMC by the end of this year.

By the end of last week, according to Fed funds futures contracts, rates markets were pricing in a 96% chance of a 25-bps rate cut in September and an 86% chance of two 25-bps rate cuts by the end of 2019.

Federal Reserve Rate Expectations (June 12, 2019) (Table 1)

This week, however, rates markets have not continued their aggressive Fed rate cut pricing. Following the weaker than expected May US inflation report, rates markets were pricing in a 94% chance of a 25-bps rate cut in September and an 83% chance of two 25-bps rate cuts by the end of 2019.

While these are only modest changes in pricing, it stands to reason that if rising Fed rate cut odds were driving the US Dollar lower last week, the fact that they haven’t risen any further is a relief for the beleaguered greenback.

…But That’s Due to the Fed Blackout Period Ahead of the June FOMC Meeting

It stands to reason that Fed Chair Powell was the motivating factor last week for rates market to kick into high gear and drag forward expectations for two rate cuts in 2019. But just because we haven’t seen a continuation of these efforts doesn’t mean that the prospect for fresh stimulus has dissipated. As mentioned earlier, the trading environment – which has been driven by Fed rate cut odds – may be a function of the calendar.

Now that we’re officially in the ‘blackout’ quiet period ahead of the June Fed meeting, neither Fed Chair Powell nor any Fed policymakers can issue commentary this week. Markets are currently deprived of the single most motivating factor for price action thus far in June.

As discussed in the weekly US Dollar forecast, it’s important to stage recent Fed commentary in the proper light: it’s been rather dovish, per shifting Fed funds futures, producing a weaker US Dollar, lower US yields, and a rally in US equities. Without the catalyst of dovish Fed officials, these recent market moves may simply be taking a breather ahead of the June Fed meeting – traders shouldn’t look too deep into the fact that we haven’t seen continuation from last week’s efforts.

DXY INDEX TECHNICAL ANALYSIS: DAILY PRICE CHART (JUNE 2018 TO JUNE 2019) (CHART 1)

In our US Dollar price forecast last week, we noted “longer-term major topping potential.” With the DXY Index breaking five-week range support near 97.15, as well the rising trendline from the February 2018, March 2018, and March 2019 lows, it appears that the early stages of a major top for the US Dollar are unfolding.

It still holds then that we’re still in “the start of a double top pattern pointing towards 95.97/96.00 in the near-term, but longer-term major topping potential in the form of a bearish rising wedge – which would ultimately call for the DXY Index to decline back towards its 2018 lows near 88.25 over the next 16-months.”

DXY INDEX TECHNICAL ANALYSIS: DAILY PRICE CHART (JUNE 2018 TO JUNE 2019) (CHART 2)

In the near-term, traders may want to be patient with the DXY Index: losses may have extended too far, too fast (similar to how gold prices rallied too quickly to the upside, signaling exhaustion). Now that prices have cracked the April swing lows near 96.75, traders may wait for the daily 8-, 13-, and 21-EMA envelope to eliminate the gap with the daily closing price in order for the oversold conditions to be worked off, as trading is both a function of price and time.

Momentum is very negative at the moment, with both daily MACD and Slow Stochastics trending lower in bearish territory, with the latter holding in oversold condition. The DXY Index has closed below the daily 8-EMA every session since May 31, and until it does so, there is little reason to have anything other than a bearish bias looking to sell rallies given the starkly negative momentum picture.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

MARKET DEVELOPMENT – GBPUSD Eyes No-Deal Brexit Motion, USD Bounces Off 200DMA

DailyFX Q2 2019 FX Trading Forecasts

GBP: The Pound has been slightly firmer this morning, however, the currency failed to make a firm breach above 1.2750. While the Tory leadership campaigns get underway with Boris Johnson the latest MP to launch his campaign, focus is beginning to shift towards a potential motion that could prevent a no-deal Brexit taking place.

The cross-party motion would stop the future PM from shutting down parliament in order to go ahead with a no-deal Brexit against MPs wishes. Consequently, this continues to show that the deadlock facing the next PM will remain a difficult one to resolve. If the motion were to be passed, this would likely see a dialling back of no-deal Brexit concerns, thus providing marginal support for the Pound, given how short speculators are of GBP (Of note, only three Tory rebels are needed to get the motion passed). However, while concerns of a no-deal Brexit may well ease, the political chaos remains, which in turn could see initial gains somewhat limited.

USD: The US Dollar dropped following the release of the latest CPI report. The headline CPI rate fell to 1.8% below expectations of 1.9%, raising odds of a rate cut for July, which in turn could see the FOMC begin to signal an easing bias at next week’s meeting. However, the fall in the US Dollar has once again been curbed by the 200DMA at 96.54.

Crude Oil: Overnight, the latest API Crude Oil Inventory Report showed a surprise build of 4.9mln barrels, against an expected drawdown of 500k barrels. In turn, this has seen both Brent and WTI crude futures on the backfoot throughout the European session. Eyes now turn towards the DoE crude report scheduled for 1530BST for confirmation. Elsewhere, the expected boom in shale production continues to dampen sentiment in the energy complex following the EIA’s forecast, in which see US crude output growing faster than world oil demand growth this year.

Iron Ore: Dalian iron ore prices have continued to extend on its recent gains with the steel-making ingredient benefiting from recent reports that China will ease restrictions on local government’s borrowing for key infrastructure projects.

Source: DailyFX, Thomson Reuters

DailyFX Economic Calendar: – North American Releases

IG Client Sentiment

How to use IG Client Sentiment to Improve Your Trading

WHAT’S DRIVING MARKETS TODAY

1. “Bitcoin (BTC) Price – Bullish Momentum Slows, Support Strengthens” by Nick Cawley, Market Analyst
2. “Canadian Dollar Risks Larger Pullback from Crude Oil Price Reversal” by Justin McQueen, Market Analyst
3. “Gold Price and Silver Outlook Dented by Wall of Resistance” by Paul Robinson, Currency Strategist
4. “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

Crude Oil Price Talking Points:

• Sellers haven’t left the Crude Oil market after a brutal month of May. The latter-half of last week saw prices bounce from a key support zone, but sellers re-appeared this week after prices touched the resistance zone looked at in the early-month forecast for Crude Oil Prices.
• Crude Oil has pushed down to the 51.50 area that was looked at for an initial target, but might bears be aggressive enough to elicit a run down to the 50 psychological level?

Crude Oil Collapse Continues After Resistance Inflection

Crude Oil prices experienced a stark change-of-pace in the month of May. While Oil prices had previously tracked the return of the risk trade fairly-well, bottoming out around Christmas and running-higher through Q1 and into April; sellers showed up in May, with aggression, to erase a large portion of that move. In short order, Crude Oil prices had cut through a number of support levels, making a hard-charge down to fresh four-month-lows.

In the Crude Oil Technical Forecast to start this month, I had looked at a series of levels that remain in-play. The resistance zone investigated that runs from 54.49-55.57 has now caught two different resistance reactions. The support level around 51.50 that was looked at for initial targets has now caught two separate inflections; the first of which was a mere speed bump on the way-lower while the second is helping to hold the lows right now.

WTI Crude Oil Four-Hour Price Chart: From Resistance to Support – Now What?

Chart prepared by James Stanley

Crude Oil Prices: More Room to Fall or Ready to Retrace?

At this point, the big question is whether the short-side move has anymore juice left to squeeze, and it may. But at this point, initiating fresh bearish exposure could be of a challenge considering how far away prices have fallen from the recent swing-high.

This can then present a few differing scenarios:

With current prices showing support at a confluent area on the chart, and with sellers thus far showing an unwillingness to test last week’s lows, and the door may be opening for a retracement move given this current higher-low to go along with last week’s higher-high. This bounce may run up to the 52.50 psychological level or perhaps even the 53.00 level which provided a bit of swing support on Monday. These levels can function as near-term targets on reversal/retracement plays or, alternatively, can be integrated by sellers as areas to look for lower-high resistance potential.

WTI Crude Oil Price Two-Hour Chart

Chart prepared by James Stanley

On the short side of the move, the current quandary would be one of chart position. With resistance almost a full $3 away, the risk would simply be difficult to justify given price action’s proximity to support. If sellers are able to break to fresh lows, the 50 psychological level awaits; and incorporating a simple one-to-one risk-reward would necessitate a push down towards 48.50, which could be difficult to target given the number of events that would likely need to happen to elicit a clean cut through all of that support.

Instead, sellers can look for a bounce up to one of the aforementioned resistance levels or, alternatively, look for downside breakout strategies in order to capitalize on a ‘fear’ theme that hasn’t yet left Crude Oil markets. A break-below this week’s low at the 51.47 Fibonacci level opens the door for a test of last week’s low; after which the 50 level comes into play for short-side target potential.

WTI Crude Oil Eight-Hour Price Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

U.S. indices are set up for near-term weakness, pay attention to how it develops. The DAX is moving lower off an underside trend-line test, outlook is questionable. Crude oil remains quite weak and with a little more selling it will soon be at recent lows or worse.

Technical Highlights:

• Crude oil very weak, recent lows at risk
• Dow Jones set up to pullback
• DAX turning lower off underside t-line

Make more informed decisions by checking out our trading forecasts and educational resources on the DailyFX Trading Guides page.

Crude oil very weak, recent lows at risk

Crude oil has failed to gain much of a bid recently and while last week’s reversal candle suggested some upside could be in store this week that has not been the case. The trend-line noted in the oil weekly forecast running down from three weeks ago indeed proved to be enough to cap an advance.

This has the recent lows at 50.54 in focus and at risk of breaking. Ideally, if support is to break we see at least one small bounce off of it to further it along as a notable level. A break will have further weakness towards trend support from the Feb 2016 low coming into focus down around the 45/46-area.

WTI Crude Oil Daily Chart (watch 50.54)

Check out the Q2 Crude Oil Forecast for the intermediate-term fundamental and technical outlook.

Brent crude oil of course has a very similar look to WTI, with the 60.47 low in focus as near-term support. A hold of support and eventual drop through should continue weakness.

Brent Crude Oil Daily Chart (60.47 support)

Dow Jones set up to pullback

The Dow Jones has become extended in recent sessions, setting itself up for some weakness. How much weakness is hard to say, conviction in equities in the near-term is lacking in either direction from where I sit.

Taking a wait-and-see approach to see how a decline unfolds to determine whether a consolidation pattern wants to materialize or sellers show up in earnest. The head-and-shoulders scenario is still on the table, but will require a turn down and eventual break of the neckline some distance lower before it becomes a scenario worth getting excited over.

Dow Jones Daily Chart (watch price action on pullback)

Check out the Q2 Equities Forecast for the intermediate-term fundamental and technical outlook.

DAX turning lower off underside t-line

The DAX is turning lower off the underside of the December trend-line. Again, as is the case with U.S. equities the outlook isn’t clear here. The market may be posting a lower high from the May 16 swing-high in an ongoing bearish sequence since the peak at the beginning of last month. To the contrary, a gradual decline could be met with buying and a run towards 12400+ could be in store soon. Risk/reward does seem to be too appealing at this time for either side of the tape.

DAX Daily Chart (falling from December t-line)

Resources for Index & Commodity Traders

Whether you are a new or an experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, and trading guides to help you improve trading performance.

We also have a series of guides for those looking to trade specific markets, such as the S&P 500, Dow, DAX, gold, silver, crude oil, and copper.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

USD/CHF Price Outlook, Charts and Analysis

• US Dollar looking ahead to CPI numbers today, and CHF for SNB interest rate decision tomorrow.
• USD/CHF Bearish Momentum on Hold.

Find out more about USD price outlook through mid-year, download for freeQ2 major currencies forecasts

USD/CHF – Bears Hesitation

On Jun 5, USD/CHF declined to its lowest level in nearly five months. The price rallied after closing with a long legged Doji, showing bears hesitation in pushing the price lower. Since then the pair has remained in the current trading zone (0.9860 – 1.0008).

The Relative Strength Index (RSI) tested the oversold territory on Jun 6 however, abandoned it on the following day highlighting the bearish momentum weakness.

Just getting started?See our Beginners’ Guide for FX traders

USD/CHF Daily Price Chart (Oct 15, 2018 – June 6, 2019) Zoomed in

USD/CHF Daily Price Chart (NOV 1, 2016 – June 12, 2019) Zoomed Out

Looking at the Daily chart, we notice USD/CHF eying to rally to the current trading zone high end at 1.0008after failing twice last week to close below the low end at 0.9860. However, any rally to the high end needs to consider the weekly resistance levels at 0.9950 and 0.9982.

On the flipside, if the bears retake the initiative then a close below 0.9860 may send the price lower towards 0.9786. However, the weekly support levels at 0.9823 and 0.9808 need to be watched along the way.

Having trouble with your trading strategy?Here’s the #1 Mistake That Traders Make

USD/CHF Four-HOUR PRICE CHART (May 16 –30, 2019)

Looking at the four-hour Chart, we notice that today USD/CHF broke below the uptrend line originated from the Jun 7 low at 0.9859 reflecting the bears intention to send the price lower.

If the pair breaks below the June 11 trough (weekly low) at 0.9895 it might point towards the Jun 5 low at 0.9854 and towards 0.9824 after. Although, the support level at 0.9859 (the Jun 7 low) need to be kept in focus.

Any rally above the Jun 11 peak (weekly high) at 0.9936 could press towards 0.9961 and towards 0.9982 after. However, the resistance level at 0.9950 (the Jun 7 high) need to be considered.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

CAD and Oil Price Analysis and News

• Canadian Dollar Slips on Softer Oil Prices
• API Surprise Build and Rising US Oil Supply
• Hedge Funds Remain Sellers on Oil

Canadian Dollar Slips on Softer Oil Prices

The Canadian Dollar is slightly softer this morning following the 2% drop in oil prices. In turn, USDCAD is edging back towards the 1.3300 handle having found support from the 200DMA. Consequently, an extension of the losses in the oil complex puts CAD at risk of a larger pullback.

API Surprise Build and Rising US Oil Supply

Overnight, the latest API Crude Oil Inventory Report showed a surprise build of 4.9mln barrels, against an expected drawdown of 500k barrels. In turn, this has seen both Brent and WTI crude futures on the backfoot throughout the European session. Eyes now turn towards the DoE crude report scheduled for 1530BST for confirmation. Elsewhere, the expected boom in shale production continues to dampen sentiment in the energy complex following the EIA’s forecast, in which see US crude output growing faster than world oil demand growth this year. As such, this places pressure for OPEC to rollover current production cuts.

EIA Forecasts

2019 World Oil Demand Growth: 1.22mbpd

2019 US Crude Output: 1.36mbpd

Hedge Funds Remain Sellers on Oil

COT: Further liquidation in gross longs, declining by 50.8k lots, which in turn sees net contracts at 304,327 lots (Prev. 352,736 lots). Consequently, the ratio of long/short positioning has continued to decline, now at 7.45:1 as traders grow cautious over the outlook for oil prices. (Full Analysis)

US CPI In Focus

Another focus for USDCAD will be the US CPI, whereby a softer reading could provide support for the Canadian Dollar as this would further stoke Fed rate cut bets and thus easing the drag on the currency stemming from the losses in oil prices.

USDCAD Price Chart: Daily Time Frame(Dec 2018 – Jun 2019)

Brent Crude Price Chart: Daily Time Frame (Aug 2018 – Jun 2019)

Oil Impact on FX

Net Oil Importers: These countries tend to be worse off when the price of oil rises. This includes, KRW, ZAR, INR, TRY, EUR, CNY, IDR, JPY

Net Oil Exporters: These counties tend to benefit when the price of oil rises. This includes RUB, CAD, MXN, NOK.

Recommended Reading

What Traders Need to Know When Trading the Oil Market

Important Difference Between WTI and Brent

Crude oil facts

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

Sterling (GBP) Price, Chart and Analysis

• GBPUSD may break back above 1.2800 in the short-term.
• The US dollar short-term price action predicated on upcoming US CPI data.

Q2 2019 GBP and USD Forecasts andTop Trading Opportunities

GBPUSD Riding US Dollar Weakness

Sterling is currently trading around 1.2730 against the US dollar and nearing highs seen around three-weeks ago. Sterling as a currency remains flat-to-weak, while the US dollar strength continues to fade as US interest rate cuts become priced into the market. Over the year, US interest rate expectations have changed course sharply from the market pricing in two/three 0.25% rate hikes to now pricing in at least two 0.25% rate cuts. The latest look at US price pressures this afternoon will dictate the next short-term move in the greenback with CPI expected to edge 0.1% lower to 1.9% in May.

The US dollar basket (DXY) has now broken, and closed, below the 200-day moving average, a further negative sign for the greenback. Short-term bearish momentum may be contained as DXY remains in oversold territory.

US Dollar Basket (DXY) Daily Price Chart (October 2018 – June 12, 2019)

Sterling remains weak and is fully expected to remain that way as the process of choosing a new Conservative leader/Prime Minister continues. Brexit remains the candidates main battle ground with Remain candidates attacking PM favorite Boris Johnson over his plans to elave the EU on October 31, whatever the state of negotiations. The opposition Labour Party, and Conservative rebels, this afternoon are expected to launch an attempt to block a No-Deal Brexit by giving MP’s control of the process.

Sterling Weekly Forecast: GBPUSD Price Rallies to a 2-Week High.

IG Client Sentiment data paints a negative picture for the pair with 75.3% of traders long GBPUSD, a bearish contrarian bias signal. However, recent daily and weekly positional changes suggest that GBPUSD may soon reverse higher.

GBPUSD is eyeing 1.2765, a near one-month high, with little resistance in the way of the move. After here, the May 21 spike high at 1.2815 comes into play, ahead of the 23.6% Fibonacci retracement level at 1.2894 and the 200-day moving average at 1.2920. The CCI indicator is suggesting that the recent short-term move higher may be getting overstretched.

GBPUSD Daily Price Chart (October 2018 – June 12, 2019)

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

Asian Stocks Talking Points:

• Equity indexes were mixed with Chinese bourses heavy
• Japan and Australia managed modest gains
• Inflation ticked up as expected in China but still gave investors pause

Find out what retail foreign exchange investors make of your favorite currency’s chances right now at the DailyFX Sentiment Page

Asia Pacific stocks were mostly lower Wednesday with news that China’s inflation had hit 15-month peaks weighing on indexes there.

Consumer Prices’ rise was not unexpected but worries that Beijing will withdraw stimulus if prices they continue to gain is a well-worn worry. The data weighed on markets already slipping thanks to Wednesday’s Wall Street session which saw winning streaks snapped for Dow and Nasdaq.

The Nikkei 225 was down by 0.6%, with the Hang Seng off by 1.7%. Protests in Hong Kong against the application of Chinese extradition laws were ongoing. The Nikkei 225 managed very marginal gains despite falls for heavyweight soft bank. The ASX 200 added 0.2%, with rises in iron ore prices helping the mining sector.

Australia’s equity benchmark remains well within the uptrend channel which has dominated trade since February, however, and is still attempting to test the upper boundary on its daily chart.

The index is not very far from a retest of its record peaks but in the current atmosphere of volatile risk appetite the climb may be a more arduous affair than its bare 300 points or so might suggest.

The US Dollar was barely moved against a basket of its major traded peers although market suspicions that lower US interest rates could be coming very soon continue to cap the market. The Chicago Mercantile Exchange’s ‘Fedwatch’ measure puts the chance of a rate cut in July close to 70%. The remainder of Wednesday’s session will bring official US Consumer Price Index figures which are expected to show a modest deceleration in pricing power for May.

The Australian Dollar slipped a little too. Domestic consumer confidence was found to have wilted this month with optimists only now outnumbering pessimists by a whisker in Westpac’s regular survey.

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

TALKING POINTS – EURUSD FORECAST, MARIO DRAGHI, US CPI, FED MONETARY POLICY

• Euro braces for ECB President Mario Draghi’s speech in Frankfurt, Germany
• US Dollar braces for CPI data – a weak reading may boost Fed rate cut bets
• EURUSD continues to trade above descending resistance – But for how long?

See our free guide to learn how to use economic news in your trading strategy!

The Euro and US Dollar will be in for a tense 24 hours ahead as ECB President Mario Draghi prepares to speak in Frankfurt, Germany and global investors brace for the publication of US CPI data. The meeting in Europe will also include ECB Vice President Luis de Guindos and IMF Managing Director Christine Lagarde. US price growth data will be closely watched because of the impact it may have on Fed monetary policy.

At the last FOMC meeting, Chairman Jerome Powell said that the temporary lull in inflation was “transitory”. Meaning, if price growth data shows sufficient strength, it could further give impetus for the central bank to raise rates. However, in light of recent economic data, market participants are already betting that the Fed’s neutrality has been compromised, with expectations of a 78 percent probability of a cut by the July meeting.

Across the Atlantic, political risks in Europe continue to brew, namely Brexit and the ongoing budget dispute with Italy. The former continues to be a headline – and headache – risk that has the potential to disrupt regional and global financial markets. The latter situation continues to escalate, with Euro Area Finance Ministers meeting this week to discuss how to handle Rome’s budgetary ambitions and discussing the dreaded EDP.

Amid broader US Dollar weakness from increasing bets on a Fed rate cut, EURUSD has jumped and broken through an 18-month descending resistance channel. Since May 31, the pair has climbed almost two percent. However, as risks in Europe continue to mount against the backdrop of slowing economic growth, a premium may be put on liquidity, and capital flow into the US Dollar may push EURUSD below its previous ceiling.

CHART OF THE DAY: EURUSD BREAKS ABOVE DESCENDING RESISTANCE – HOW LONG WILL IT LAST?

APAC RECAP

In Asia trading hours, Chinese CPI failed to significantly move markets after data fell in-line with forecasts. However, after the benchmark CSI 300 Index opened, the New Zealand and Australian Dollars found themselves in a sea red. This was compounded by fears that US President Donald Trump’s unpredictability could jeopardize a trade deal with China against the backdrop of souring relations with Europe.

NORDICS: SWEDISH CPI, RIKSBANK

In Sweden, the publication of the Prospera inflation expectations survey and speech by Riksbank Deputy Governor Martin Floden will be key event risks Krona traders will be monitoring. Swedish policymakers are growing increasingly frustrated with fading inflationary pressure while systematic risks from rising household debt are continuing to grow.

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

CRUDE OIL & GOLD TALKING POINTS:

• Crude oil prices fall as US President Trump stokes trade war worries
• Gold prices might be carving out a double top below $1400/oz figure
• US CPI and EIA inventory flow statistics might inspire risk aversion

Crude oil prices fell alongside stocks as US President Donald Trump stoked trade war fears, weighing on market-wide risk appetite. The self-styled “tariff man” said the Euro is devalued against the US Dollar, once again hinting that tensions with the currency bloc may be on the horizon.

Mr Trump also claimed that there is more to his agreement on immigration with Mexico than has been publicly revealed, which the government there has forcefully denied. The White House aborted a tariff hike on Mexican imports planned for earlier this week, citing a would-be breakthrough.

Finally, the President revealed that he is the impediment to US-China trade agreement. “Its me…holding up the deal [and] we’re either going to do a great deal with China or we’re not going to do a deal at all,” he said. In all, the comments were understandably worrying for already shell-shocked investors.

Gold prices were on the defensive courtesy of a rise in bond yields ahead of Mr Trump’s comments, but the subsequent risk-off pivot capped the move lower. The metal launched higher as borrowing costs drifted downward and the US Dollar softened as Fed rate cut speculation perked up anew.

US CPI, EIA INVENTORY FLOW MIGHT HURT CRUDE OIL PRICES

From here, US CPI data is expected to show that headline inflation cooled a bit in May, ticking down from 2.0 to 1.9 percent. A soft result may nominally amplify Fed rate cut bets, but the markets’ already dramatically dovish stance seems to leave relatively little room for the outlook to shift in that direction further.

With that in mind, a soft result might have greater market-moving potential as a risk-off catalyst, speaking to slowing global growth. That might weigh on sentiment-geared crude oil prices and boost haven demand for the US Dollar, keeping gold from capitalizing as bond yields fall further.

EIA inventory data might compound oil’s troubles. Expectations envision a narrow drawdown, but leading API data called for a 4.85-million-barrel rise yesterday. The EIA cut its 2019 oil price forecast even as it downgraded output estimates in a report published yesterday, citing weaker demand prospects

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices put in a bearish Evening Star candlestick pattern on a test of resistance marked by February’s swing highat 1346.75, hinting that a double to may be in the works. Breaking below support in the 1323.40-26.30 area on a daily closing basis targets the 1303.70-09.12 zone next. Alternatively, a rebound through 1346.75 opens the door for a test of trend-defining resistance in the 1357.50-66.06 region.

CRUDE OIL TECHNICAL ANALYSIS

An expected bounce in crude oil prices ran out of steam on a test of resistance at 55.75. Downside follow-through that leads below near-term support in the 50.31-51.33 area sets the stage to challenge the bottom in place from September 2016 in the 42.05-43.00 zone. Alternatively, a turn up through resistance exposes the 57.24-88 region next.

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter