Market Focus

US shares rose for the third day in a row, as investors parsed economic data hinting at slower growth, which also prompted some to brush off the hawkish stance reiterated by the Fed in its June meeting minutes.

Officials “agreed” last month that interest rates may need to keep rising to combat entrenched inflation. However, data released Wednesday showed that US job openings dipped slightly in May but still remained near a record, while the growth in the US services sector also eased in June to a two-year low. This has convinced some traders that the Fed’s stance has little to do with the actual market situation.

Both S&P500 and Nasdaq 100 rose on Wednesday although the Fed reiterated its hawkish stance in its June meeting minutes. The S&P 500 was up 0.36% on a daily basis and the Nasdaq 100 also advanced with a 0.6% gain for the day. In addition, eight of the eleven sectors stayed in positive territory with the utilities and info tech sectors the best-performing among all groups, gaining 1.01% and 0.88% respectively. It is worth noting that the energy sector remained downbeat on Wednesday, losing 1.74%. The Dow Jones Industrial Average, meanwhile, increased 0.2% and MSCI world index declined 0.5%.

Main Pairs Movement:

The US dollar continued its rise for the third straight day, the DXY index surged and clung to  its 20-year high of 107.05 after the hawkish stance reiterated by the Fed, signalling that the market is still in fear of a global recession.

EUR/USD remained bearish as the pair fell to a new 20-year low of 1.0161 at the last hour of Wednesday. Besides the Fed’s hawkish attitude toward US high inflation, the broad pessimism surrounding economic growth, central bankers’ aggregation, and energy crisis created downside pressure.

GBP/USD was also in bearish momentum despite a bounce-off on the late Wednesday from a two-year low around 1.1925. Cable is still suffering from Brexit woes and broad recession fears. However, the market anxiety ahead of the Fed’s stance and softer US economic data seems to have poked the bears of late.

Gold has turned into a consolidation phase after a sheer downside move to $1,732 in the NY session. As the Fed’s aggressive attitude infused fresh blood into the US dollar, the precious metal suffered heavy downside pressure.

Technical Analysis:

USDJPY (4-Hour Chart)

USDJPY edged slightly lower, but continued above the 135.00 level ahead of the FOMC meeting. From the technical perspective, the outlook maintains its bullish trend on the four- hour chart as the pair continues to trade within the ascending line. On the downside, falling below the support of 134.89 would bring the pair to the downside in the near- term. On the upside, the divergent monetary policies between the Fed and the BOJ would capitalise on USD’s gain and undermine the Japanese Yen. As the RSI remains on the midline, further price action eyes the FOMC meeting.

Resistance:  135.7, 137

Support: 134.89, 134.24, 133.59

GBPUSD (4-Hour Chart)

GBPUSD is holding above the support level of 1.1876 at the time of writing ahead of the FOMC meeting. The US dollar remained strong and outperformed the British Pound on the back of better-than-expected ISM Service PMI economic data. On the technical side, the outlook of GBPUSD remains bearish on the four-hour chart as the pair has fallen within and below the descending channel, suggesting that GBP lacks attractiveness. In the meantime, a bearish MACD continues to lend support to bears while the RSI is on the edge of 30. The pivot support of 1.1876 would be viewed as a defending cross-line, regaining the buyers’ confidence. If the support cannot sustain, then it is expected to see the currency pair extend further south.

Resistance: 1.2063, 1.2178, 1.2272

Support: 1.1876

Gold (4-Hour Chart)

Gold extended its slump below $1740, a fresh 10-month low ahead of the FOMC Minutes. The Dollar Index and the benchmark  10-year US Treasury yield continue to soar, putting additional weight on gold. From the technical perspective, the intraday outlook remains on the downside as the pivotal support from yesterday failed to defend and is now attracting more follow-through sellers. In the meantime, a bearish MACD signal also hints at gold’s further downside toward the next support of $1736.20. However, an oversold RSI might possibly give the selling pressure a break. Some dip buyers might start buying at this stage before the FOMC Minutes.

Resistance: 1768.69, 1789.66, 1806.60

Support: 1734.80