Daily market analysis

June 22, 2022

US shares jumped on Tuesday following a brutal week as investors assessed a more aggressive Federal Reserve and digested rising chances of a possible recession. The technology-heavy weighted Index, the Nasdaq Composite led the rally, popping 2.51% on Tuesday. The S&P 500 climbed 2.45%, and the Dow Jones Industrial Averages edged 2.15% higher, coming back from the worst weekly loss in two years. The bounce of the US shares seems to be a reaction that many investors fear that the equities might be oversold after more accurately pricing under inflationary pressures. More market sentiments eye on the testimony from the Fed Chairman Jerome Powell on Wednesday.

Reserve Bank of Australia Governor Philip Lowe mentioned on Tuesday that the RBA is likely to rise the interest rates by 50 basis points in July, prompting markets by denying the possibility of rising 75 basis points. However, some economists think that the RBA remains behind the curve compared to the Fed and other central banks, and such a move might bring the Australian economy into recession. In response to the doubt, Lowe passed on these forecasts, instead highlighting Australian household consumption and its unemployment rates, being near a 50- year low.

Main Pairs Movement

AUD/USD edged higher for a two-consecutive day, up 0.27% at the end of the day. The US dollar failed to extend as the market sentiment improved after the RBA minutes with the governor Philips Lowe added strength to the Aussie.

The precious metal, gold, continued to test the water and was down 0.29% on Tuesday. Gold is heading to test the $1,830 level ahead of the testimony from Jerome Powell. After the market reaction from last week, the second-tier US economic data and the Fed’s expectation this week could provide more price actions in gold.

Crude oil prices edged higher on Tuesday amid high summer fuel demand while the supplies remained tight. West Texas Intermediate price was up 0.39% to 109.192. Most economists expect oil demand to increase and improve further, benefitting from the reopening of China and the incoming summer vacation. Thus, oil prices are expected to climb north else.

USD/JPY continued to move further north as the Bank of Japan extended its ultra-loose monetary policy. The BOJ executed a record of $81 billion bond purchasing last week to calm the market and drag benchmark yields back below its closely watched ceiling. USD/JPY was up 1.15 % and closed at 116.596 at the end of the day.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded mostly sideways on the 21st. U.S. equities popped after the Juneteenth holiday; on the other hand, the U.S. Greenback presented some weakness as the Dollar index closed 0.06% lower. Market participants will now turn their focus on Fed chair Jerome Powell’s testimony that is scheduled during the American trading session. On the horizon, ECB’s council member Ollie Rehn hinted at a possible further interest rate hike for July.

On the technical side, EURUSD has been on a slow upward trend but resistance sits near at around the 1.05483 price level. RSI for the pair sits at 46.07, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.05483, 1.07691

Support: 1.04036, 1.03783

GBPUSD (4-Hour Chart)

GBPUSD traded higher for the second straight day as the U.S. Greenback loses steam. Risk sentiment shift as global equities rallied has buoyed the British Pound as market participants rotate out of safe-haven assets, such as the U.S. Dollar. U.S. housing market showed weaker signs as existing home sales declined 3.4%, the lowest level since June of 2020. Existing home sales have fallen for the 4th consecutive month.

On the technical side, GBPUSD remains supported by our previously estimated support level at the 1.2173 price region. Near-term resistance at 1.239 remains unchallenged. RSI for the pair sits at 44.47, as of writing. On the four-hour chart, GBPUSD is currently trading below its 50, 100, and 200-day SMA.

Resistance: 1.25944, 1.239

Support: 1.2173, 1.20824

USDJPY (4-Hour Chart)

USDJPY charged higher into historical territory on the 21st. Despite the weakness shown by the Dollar Index, the Japanese Yen has continued to fall against the U.S. Dollar. The widening interest rate differential between the U.S. and Japan continues to present carry trade opportunities in the near term. The BoJ has reiterated its dovish stance and will continue to purchase government bonds at a fixed rate for the foreseeable future.

On the technical side, USDJPY remains firmly supported by the support level at 132.1 and does not see any firm resistance in the near term. RSI for the pair sits at 70.14, as of writing. On the four-hour chart, USDJPY currently trades above its 50, 100, and 200-day SMA.

Resistance: 135.56

Support: 133.5, 132.5

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPCPI (May)14:009.1%
CADCore CPI (May)20:300.4%
USDFed Chair Jerome Powell Testifies21:30