Daily market analysis

June 1, 2022

U.S. equities markets resumed trading on the last day of May and closed slightly lower following last week’s positive mood shift. The Dow Jones Industrial Average dropped 0.67% to close at 32990.12. The S&P 500 lost 0.63% to close at 4132.15. The Nasdaq Composite slipped 0.41% to close at 12081.39. The energy sector fared worse throughout yesterday’s trading. The EU has agreed to ban most crude imports from Russia, thus sending oil prices surging; however, oil prices soon dropped as OPEC has also agreed on suspending Russia from its oil production deal.

The benchmark U.S. 10-year Treasury yield climbed to 2.862%.

On the economic docket, Australia’s GBP will be released and PMI figures from China, Germany, Britain, and the U.S. will also be released. Later in the American trading session, the Bank of Canida is set to release its interest rate decision.

Main Pairs Movement

The Dollar index rose 0.41% throughout yesterday’s trading. The rise ended the Dollar index’s three-day losing streak. Rising bond yields and uncertainty among equity markets helped buoy the U.S. Greenback against other major foreign currencies.

EURUSD lost 0.41% throughout yesterday’s trading. Soaring inflation in the Eurozone and a weak economic outlook both add pressure to the ECB’s easy money policy. Despite recent hawkish tones from the ECB, it remains to be seen on how the central bank will react with monetary tightening possibly adding further downward pressure on the economic recovery.

GBPUSD dropped 0.39% throughout yesterday’s trading. Broad-based Dollar demand ended Cable’s four-day winning streak. Market participants will be focusing on today’s PMI figures from both the U.K. and the U.S.

USDCAD lost 0.07% throughout yesterday’s trading. Despite a stronger dollar, the Canadian Loonie still came out ahead as oil prices surged due to the EU’s newly agreed sanctions on Russian oil exports.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair declined on Tuesday, failing to extend its previous rally, and continued to trade deep in negative territory below the 1.075 mark area amid risk-off market sentiment. The pair were surrounded by heavy bearish momentum and dropped daily low below 1.069 level in the late European session, then rebounded back to recover some of its daily losses. The pair is now trading at 1.0732, posting a 0.40% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as rising US bond yields helped the greenback to find demand when US market participants return from a long weekend. Moreover, the release of the US Consumer Confidence also underpinned the dollar, as it came in at 106.4 in May and better than the 103.9 expected. For the Euro, the ECB tightening expectations should help limit the losses for EUR/USD pair, as the latest inflation figures were above expected and Eurozone money markets now expect a 115 bps hike from the ECB before year-end.

For the technical aspect, the RSI indicator is 52 figures as of writing, suggesting that the upside has regained strength as the RSI keeps heading north. As for the Bollinger Bands, the price rebounded from the lower band and rose toward the moving average, therefore a continuation of the upside trend could be expected. In conclusion, we think the market will be bullish as the pair might head to re-test the 1.0786 resistance. The rising RSI also reflects bull signals.

Resistance: 1.0786, 1.0846, 1.0921

Support: 1.0651, 1.0594, 1.0549

GBPUSD (4-Hour Chart)

The pair GBP/USD edged lower on Tuesday, retreating from a monthly high and weakening further below the 1.2600 mark amid a downbeat market mood. The pair witnessed heavy selling at the start of the day and dropped to a daily low below 1.256 level heading into the US session, then regained upside traction to erase some of its intra-day losses. At the time of writing, the cable stays in negative territory with a 0.30% loss for the day. The overnight hawkish comments by Fed Governor Christopher Waller lend strong support to the US Treasury bond yields and lifted the greenback higher, as he backed a 50 bps rate hike for several meetings until inflation eases back toward the central bank’s goal. For the British pound, the worries about the cost of living crisis and a possible UK recession later in 2022 continued to exert bearish pressure on the GBP/USD pair. Investors now expect that a jumbo rate hike by the BoE would take its toll on the UK economy, which makes it difficult for the cable to gather bullish momentum.

For the technical aspect, the RSI indicator is 52 figures as of writing, suggesting that the upside is losing strength as the RSI stays flat near the mid-line. For the Bollinger Bands, the price failed to cross above the moving average and retreated slightly, indicating that some downside trend could be expected. In conclusion, we think the market will be bearish as long as the 1.2652 resistance line holds. But a break above that level could be seen as a bull signal and open the door for additional gains toward 1.2761.

Resistance: 1.2652, 1.2761, 1.2865

Support: 1.2501, 1.2341, 1.2180

USDCAD (4-Hour Chart)

As the Bank of Canada is expected to announce a 50 bp rate hike on Wednesday, the pair USD/CAD preserved its bearish momentum and tumbled to fresh one-month lows near the 1.263 mark on Tuesday. The pair flirted with the 1.266~1.268 area during the first half of the day, then started to see fresh selling and erased all of its daily gains heading into the US session. USD/CAD is trading at 1.2642 at the time of writing, losing 0.10% daily. The recovery witnessed in the US dollar failed to support the USD/CAD pair as the loonie rose across the board ahead of the BoC meeting. On top of that, the falling crude oil prices also failed to undermine the commodity-linked loonie and pushed the USD/CAD pair higher despite WTI having retreated to the $114 per barrel area after nearly hitting the $120 mark earlier in the session. The news reported that EU 27 leaders have agreed on a Russian oil embargo to lend support to oil prices, as the EU agreed to phase out 90% of Russian oil imports by the year’s end.

For the technical aspect, the RSI indicator is 32 figures as of writing, suggesting that the pair is facing heavy bearish pressure as the RSI stays near the oversold zone. For the Bollinger Bands, the price remained under pressure around the lower band, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair is testing the 1.2634 support. Further losses could be expected if the pair break below the aforementioned support.

Resistance: 1.2679, 1.2721, 1.2859

Support: 1.2634, 1.2580, 1.2541

 
Economic Data