Currency Pairs Market Analysis

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On the daily chart, the downward wave of the higher level C of (B) develops, within which the fifth wave v of (C) develops. Now, the third wave of the lower level (iii) of v of (C) has formed, and a local correction has developed as the fourth wave (iv) of v.

If the assumption is correct, the price will fall to the levels of 1.03 - 1.02. In this scenario, critical stop loss level is 1.0868.

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On the daily chart, the first wave of the higher level (1) develops, within which the third wave 3 of (1) formed, and a downward correction develops as the fourth wave 4 of (1). Now, the wave a of 4 is forming, within which the wave of the lower level (i) of a has formed, and a local correction is developing as the wave (ii) of a.

If the assumption is correct, the asset will fall to the levels of 124.4 – 122.38. In this scenario, critical stop loss level is 131.24.

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The Australian dollar shows an uncertain decline, correcting after two sessions of fairly active growth, as a result of which AUDUSD updated local highs from May 5. The US dollar is trying to recover its positions, but so far the further decline of the instrument is limited by restrained optimism from China.

Tomorrow restrictions on the work of enterprises will be lifted in Shanghai, which will mean the end of the quarantine caused by another wave of coronavirus, which had an extremely negative impact on the supply of a number of high-tech products to world markets. The Beijing authorities are also partially easing the restrictions and gradually allowing the operation of some public transport and retail facilities. Optimism about the Chinese economy was also confirmed by macroeconomic publications from China. Non-Manufacturing PMI in May rose from 41.9 to 47.8 points, which, however, turned out to be worse than optimistic forecasts of an increase to 50.7 points. NBS Manufacturing PMI strengthened in May from 47.4 to 49.6 points, which coincided with the average market forecasts. In addition, investors reacted positively to the growth in Private Sector Credit in Australia in April from 0.4% to 0.8%, as well as the increase in Company Gross Operating Profits from 2% to 10.2% in Q1 2022.

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Bollinger Bands on the daily chart show a steady increase. The price range is narrowed, being spacious enough for the current activity level in the market. MACD is growing, maintaining a strong buy signal (the histogram is above the signal line and is consolidating above the zero level). Stochastic reached its highs, which points to the risks of overbought Australian dollar in the ultra-short term.

Resistance levels: 0.7202, 0.725, 0.73, 0.7341 | Support levels: 0.715, 0.71, 0.705, 0.7

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The pound is trading with mixed dynamics during the morning session, consolidating near 1.2600. The day before, the British currency showed a moderate decline, retreating from its local highs of April 26, which was the market's reaction to the resumption of growth in the US dollar against the backdrop of fairly strong American macroeconomic statistics. In particular, investors drew attention to the increase in the S&P/Case-Shiller Home Price Indices in March from 20.3% to 21.2%, while the Chicago PMI rose from 56.4 to 60.3 points in May, with the analysts' forecast at the level of 55.0 points.

In turn, the macroeconomic background from the UK turned out to be mixed: the volume of Consumer Credit in April increased from 1.303 billion pounds to 1.399 billion pounds, with preliminary market estimates of a decline to 1.2 billion pounds. At the same time, the Mortgage Approvals over the same period decreased from 69.531 thousand to 65.974 thousand, which turned out to be noticeably worse than expected correction to 69.000 thousand.

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Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the ultra-short term. MACD is gradually reversing into a downward plane, being located near the zero level and keeping the previous buy signal (the histogram is above the signal line). Stochastic shows similar dynamics, rapidly retreating from its highs, which signal that the pound is overbought in the ultra-short term.

Resistance levels: 1.2600, 1.2674, 1.2800, 1.2900 | Support levels: 1.2500, 1.2400, 1.2250, 1.2163

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On the daily chart, the first wave of the higher level (1) of 5 forms, within which the wave 3 of (1) develops. Now, the third wave of the lower level iii of 3 is forming, within which the wave (i) of iii has formed, and a local correction has developed as the wave (ii) of iii.

If the assumption is correct, the price will grow to the levels of 1.32 – 1.341. In this scenario, critical stop loss level is 1.2575.

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Japan legalizes stablecoins
The US dollar shows a slight decrease in Asian trading, holding near 131 and local highs from May 9, having received a moderate upward impetus after the publication of a rather strong report on the US labor market for May last Friday. At the same time, statistics on business activity were slightly worse than market forecasts, as well as indicators of Average Wages and overall Unemployment. The data allow investors to hope for a continuation of the US Fed's "hawkish" policy of raising interest rates by 50 basis points at least during the June and July meetings.

The Bank of Japan, in turn, maintains a wait-and-see attitude, although issues of growing inflationary pressure are already affecting the national economy. An extensive block of macroeconomic statistics will be released this week, and the updated quarterly GDP statistics, which will be published on Wednesday, will take center stage in publications. The previous estimate indicates a contraction of the country's economy in Q1 2022 by 0.2% QoQ and 1.0% YoY.

Meanwhile, the Japanese government is stepping up regulation of the national crypto asset market. Last week, Parliament approved a bill according to which stablecoins can officially be considered digital money as early as 2023. Only licensed financial institutions and payment system operators, as well as trust companies, will be able to issue them. The tokens will be backed by the yen or other national currencies, at a ratio of 1:1, since their holders must have the right to redeem at face value. In addition, lawmakers plan to publish rules for stablecoin issuers in the near future. Thus, Japan became the first country to develop a phased legal framework for the circulation of digital assets, designed to protect crypto investors and maintain market stability.

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Bollinger Bands in D1 chart show moderate growth. The price range is expanding but it fails to conform to the surge of "bullish" activity at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having approached its highs, is also trying to reverse into a descending plane, indicating the risks of overbought USD in the ultra-short term.

Resistance levels: 131, 132, 133, 134 | Support levels: 130, 129.39, 128.62, 128

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The pound is traded mixed against the US dollar during the morning session, holding near 1.2500. Market activity remains subdued as many European markets are closed at the start of the new week for national holidays. At the same time, investors continue to evaluate the already released macroeconomic statistics for further analysis of price movements.

The report on the US labor market, published last Friday, turned out to be quite optimistic and pointed to the persistence of certain tension in the market, which is necessary to continue the "hawkish" policy of the US Federal Reserve. In May, the US economy created 390K new jobs outside the agricultural sector. In April, Non-Farm Payrolls were 436K, while analysts expected 325K in May. At the same time, the Unemployment Rate remained at the same level of 3.6% (it was expected to decrease to 3.5%). The Average Hourly Earnings increased by 0.3% MoM and by 5.2% YoY, which turned out to be slightly worse than the average market forecasts.

At the end of last week, representatives of the UK and the EU agreed to a ban on insurance of ships transporting oil from the Russian Federation as part of the sixth package of sanctions imposed against the backdrop of the military conflict in Ukraine. The government's decision will block the ability of Russian carriers to use the services and market opportunities of Lloyd's of London, which is considered the largest association of individual insurers and brokers in the field of shipping, and will significantly limit the ability to export resources. It is noted that following the British authorities, representatives of the G7 states may also introduce a similar ban.

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On the D1 chart, Bollinger Bands are gradually reversing horizontally. The price range is actively narrowing, reflecting ambiguous nature of trading in the short term. MACD indicator tries to reverse downwards and to form a new sell signal (the histogram is about to consolidate below the signal line). Stochastic approaching the level of "20" is trying to reverse into a horizontal plane, reacting to the attempts of the "bulls" to show a weak corrective growth at the beginning of the week.

To open new trading positions, it is necessary to wait for the signals from technical indicators to be clarified.

Resistance levels: 1.2600, 1.2665, 1.2750, 1.28 | Support levels: 1.2500, 1.2400, 1.2328, 1.225

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Consolidation pending the results of the ECB meeting​

The European currency shows a slight decrease against the US dollar during the Asian session, consolidating near 1.0680. Activity on the market remains quite low, as the news background changes slightly.

Yesterday investors were focused on the statistics on Factory Orders in Germany: in April, the figure showed a decrease of 2.7% after falling by 4.2% a month earlier, although analysts had expected a growth of 0.5%. In annual terms, the negative dynamics increased from –2.9% to –8.9%, which also turned out to be worse than the average market forecasts. Slight support for the instrument was provided only by data on Sentix Investor Confidence in the euro area, which rose from –22.6 to –15.8 points in June, while analysts expected an increase to only –20.0 points. Today, investors are waiting for the publication of updated statistics on the dynamics of the Eurozone GDP for Q1 2022. Previous estimates suggested growth of the region's economy by 0.3% QoQ and 5.1% YoY. Also during the day, Employment Change statistics for Q1 2022 will be released.

The eurozone economy is under unprecedented pressure, forcing the European Central Bank (ECB) to tighten monetary policy at its June 9 meeting. Currently, most experts are in favor of two 50 basis points rate hikes in July and September. More "hawkish" rhetoric is unlikely, so a depreciation of the euro can be expected.

Meanwhile, the European authorities are trying to replace the volumes of Russian oil, which now cannot be delivered to the region due to economic sanctions. This week it became known that the US State Department lifted the ban on the supply of Venezuelan "black gold" to Europe by Eni S.p.A. and Repsol S.A. It is noted that deliveries will begin as early as next month and initially will be able to replace Russian energy only partially, having an insignificant impact on prices, but experts agree that this is only the first step to open the Venezuelan oil market.

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On the D1 chart Bollinger Bands are trying to reverse horisontally. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the ultra-short term. MACD is going down, keeping a fairly stable sell signal (located below the signal line). Stochastic is showing similar dynamics being located in the middle of its area.

Resistance levels: 1.0700, 1.0747, 1.0800, 1.0850 | Support levels: 1.0640, 1.0600, 1.0500, 1.0459

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Economic indicators disappoint investors​

Against the background of the stabilization of the US currency, the GBPUSD pair is correcting within the local trend, trading around the level of 1.2545.

The expected outcome of the vote in the House of Commons, as a result of which the current Prime Minister, Boris Johnson, retained his post for at least another year, supported the pound quotes. Investors took this event as a sign of stability, and confidence in the national currency increased, but now, this momentum has leveled off, and economic issues are coming to the fore. As yesterday's statistics showed, the business activity of the main sectors is declining: according to the May report, the composite PMI fell to 53.1 points from 58.2 points in April, for the third time in a row. Service PMI fell to 53.4 points from 58.9 points in April, and this is also the third period of negative dynamics of the index. Today, Construction PMI will be published, but there, too, analysts have already predicted a drop in value from 58.2 points to 56.6 points.

The USD Index is trading at the beginning of yesterday at 102.5, almost without reacting to the speech of US Treasury Secretary Janet Yellen. Contrary to expectations, the main part of the official's speech was devoted to the situation in the oil market and the unprecedented rise in energy prices caused by the development of the military conflict in Ukraine. Commenting on the situation in the United States, Yellen noted that the current president's administration had done everything possible to mitigate the consequences of the energy crisis for the country, and without these actions, fuel prices would have been much higher. She said the 1.9T dollars stimulus package passed by the head of the White House in 2021 eliminated economic risks, leading to one of the lowest unemployment rates in post-war history.

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The asset tries to test the recently passed global downlink support line. Technical indicators almost canceled the sell signal, preparing for a reversal: indicator Alligator's EMA oscillation range has narrowed as much as possible, and the AO oscillator histogram is forming new upward bars.

Resistance levels: 1.2634, 1.3000 | Support levels: 1.2452, 1.2164​
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Consolidation near record highs​

The US dollar shows mixed trading dynamics, consolidating near new record highs and the level of 134 and continuing the development of the general uptrend since May 30.

The pressure on the positions of the yen is exerted by the prospect of maintaining the current soft monetary policy of the Bank of Japan. While virtually all major financial regulators have moved on to sharply raise interest rates (the European Central Bank (ECB) is expected to launch the program in July), the Japanese authorities are pushing for continued stimulus. Such statements were made by the Deputy Governor of the regulator Masazumi Wakatabe, who also admitted the possibility of introducing new incentives if the economic situation so requires.

Macroeconomic statistics released yesterday in Japan did not provide any noticeable support to the yen. Revised data on the dynamics of gross domestic product for Q1 2022 were revised upward from –0.2% to –0.1% in quarterly terms and from –1.0% to –0.5% in annual terms, and the Eco Watchers Survey on Current Situation in May rose from 50.4 to 54.0 points, while the forecast was for a decline to 49.2 points.

Meanwhile, the Japanese authorities announced the continuation of work in the Russian oil and gas projects Sakhalin-1 and Sakhalin-2. The decision is contained in the national Energy White Paper. It is emphasized that in the current high energy prices, the country needs stable supplies of liquefied gas, and long-term contracts can reduce the negative effect on energy security. Mitsui & Co., Ltd. and Mitsubishi Corp. own 12.5% and 10% shares of the Sakhalin-2 project, and most of the gas produced here is supplied to Japan.

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Bollinger Bands in D1 chart show quite active growth. The price range is expanding, but still does not keep pace with the development of "bullish" sentiment in the market. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic has been near its highs for a long time, indicating high risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 134.54, 135.55, 136 | Support levels: 133.7, 133, 132, 131

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Correction ahead of the ECB meeting​

The European currency continues the local upward movement, which began yesterday after the publication of positive data on the state of the EU economy. Now the EURUSD pair is holding around the 1.0700 mark.

Thus, the gross domestic product for the first quarter increased by 0.6%, ahead of analysts' forecasts of 0.3% and the previous value of 0.2%. Thus, the growth was 5.4% YoY compared to 4.7% in the previous period. Today, investors will follow the course of the meeting of the European Central Bank (ECB). Traders expect to hear specific dates for the start of tightening monetary policy, as recently, the head of the department, Christine Lagarde, has already stated the need to raise rates and curtail the asset purchase program. Analysts believe that if the increase occurs, then not today since the ECB is not yet ready for "hawkish" steps.

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The instrument moves within a wide downwards channel, approaching the resistance line. Technical indicators maintain a stable buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram forms upward bars.

Resistance levels: 1.0778, 1.1131 | Support levels: 1.0630, 1.0351​
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On the daily chart, the downward wave of the higher level C of (B) develops, within which the fifth wave v of (C) develops. Now, the third wave of the lower level (iii) of v of (C) has formed, a local correction has developed as the fourth wave (iv) of v, and the fifth wave (v) of v is forming, within which the wave iii of (v) is developing.

If the assumption is correct, the EURUSD pair will fall to the levels of 1.0300 - 1.0200. In this scenario, critical stop loss level is 1.0790.

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The pound is correcting after yesterday's negative dynamics caused by the publication of disappointing macroeconomic data, and now the GBP USD pair is trading around the level of 1.2172.

According to data for April, the UK economy slowed down by 0.3%, which led to a decrease in the growth rate to 0.2% QoQ. The negative dynamics harmed the annual GDP, which fell to 3.4% YoY from 6.4% earlier. Despite the upward correction, today's macroeconomic data did not reassure investors: the unemployment rate rose to 3.8% from 3.7% in March, and the Claimant Count Change decreased by only 19.7K instead of the expected 49 .4K against the background of correction of the average level of wages to 6.8% from 7.0% a month earlier.

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Yesterday, the instrument renewed the year's low at 1.2170 and is now trying to consolidate below it. The technical indicators reversed rather quickly and gave a new sell signal: indicator Alligator's EMA oscillation range expands downwards, and the histogram of the AO oscillator forms downward bars.

Resistance levels: 1.2317, 1.2629 | Support levels: 1.2107, 1.1952​
 
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EUR USD, the market is waiting for the decision of the US Federal Reserve on the interest rate​

Today data on inflation in France will be published. According to analysts' forecasts, the consumer price index for May will rise by 0.6%, which will increase the rate by 5.2% YoY after 4.8% a month earlier. Yesterday, it became known that the same indicator in Germany reached a record 7.9%, adding 1.1% over the month. Sharp inflation is putting pressure on key sectors, and today's EU industrial output data will likely reflect continued negative momentum. According to experts' expectations, the value will decrease by 2.0% for April and by 1.1% YoY, which will increase pressure on the European currency.

Quotes of the American currency have consolidated after reaching the year's high, around 105.000 in the USD Index, and the market is waiting for the evening decision of the US Federal Reserve on interest rates. The consensus forecast of analysts suggests an increase in the indicator by the already familiar 50 basis points but after inflation in the United States rose to 8.6%, some experts spoke out for a sharper increase in the value by 75 basis points, which may be a completely justified action by the regulator to convince investors of the seriousness of their intentions. Also, to determine the rate for the current period, the agency will publish a monetary policy forecast for the near future.

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The trading instrument moves within a narrow downward channel, approaching the support line. Technical indicators strengthen the sell signal: indicator Alligator's fast EMA oscillation range expands downwards, and the AO oscillator histogram formed a down bar after entering the sell zone.

Resistance levels: 1.0498, 1.0776 | Support levels: 1.0353, 1.01​
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USD CAD - May high update​

The US dollar continues to strengthen due to the policy of the US Federal Reserve aimed at tightening the parameters of the national monetary policy, and USD CAD is trading around 1.2995.

Last week, the regulator decided to raise the interest rate by 75 basis points to 1.75%, as a result of which the US dollar strengthened against the Canadian currency and updated the May high at 1.3065. US Federal Reserve Chairman Jerome Powell confirmed the authorities' readiness to fight the highest inflation in the last 40 years and said that the changes made will increase the attractiveness of the national currency and increase the number of transactions nominated in it. Also, the authorities will continue to monitor the global economic situation, and, if necessary, will again adjust the rate upward at the next meeting at the end of July.

Meanwhile, the Canadian dollar is declining following oil prices: WTI Crude Oil lost 7.7% last week and it looks like the negative dynamics will only intensify. Today, the General Administration of Customs of the People's Republic of China presented a report that notes a record increase in imports of "black gold" from the Russian Federation: the figure reached 8.42 million tons, exceeding the April value by 25%, while the volume of supplied liquefied gas amounted to 400 thousand tons, which is 56% higher than in May last year. Analysts believe that the displacement of Saudi Arabia from the list of leaders among energy suppliers became possible against the backdrop of the implementation of the Russian authorities' discount policy in the sale of oil.

The tightening of monetary conditions by the US Federal Reserve acts as a catalyst for the upward movement of the US dollar, as a result of which USD/CAD may rush to 1.3360 after the breakdown of the resistance level of 1.3065. Thus, there is a high probability that the trading instrument will continue to strengthen in the long term.

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The long-term trend is upward. Last week, the May high was updated at 1.3065 and if the price fixes above it, the next buy target will be at 1.3157. Strong levels, from which new long positions can be considered, formed in the area of 1.2950 and 1.2860.

The mid-term trend changed to an uptrend last week, when the target zone 1 (1.2766 – 1.2745) was broken out and the target zone 2 (1.2985 – 1.2963) was reached, above which the traders will try to consolidate this week. If successful, the growth of the trading instrument will continue with the target in the area of the target zone 3 (1.3212 - 1.3189). The key trend support is shifting to the levels of 1.2856 – 1.2835.

Resistance levels: 1.3065, 1.3157, 1.336 | Support levels: 1.2950, 1.2860, 1.2525

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AUD USD - Technical analysis​

H4
On the four-hour chart above the level of 0.6901 there is a "bullish" Engulfing Pattern, which signals a price reversal at the bottom, as well as a Bullish Belt Hold pattern, explaining that the buyers attempted to counterattack, but the "bears" seized the initiative, which became a driver for the decline in instrument quotes. At the moment, the most likely scenario is with an uptrend from the support level of 0.6841 to the resistance area of 0.7048, overcoming which will allow the "bulls" to move higher into the range of 0.7270–0.7581. An alternative scenario may be relevant if the buyers fail to hold the support level of 0.6841: then the price may fall down to the level of 0.6539.

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D1
On the daily chart, there is a formation of a Double Bottom price pattern. An additional signal for a reversal may be the formation of a large Bullish Candle above the support level of 0.6841, which is also a Bullish Belt Hold pattern. Next is the formation of another Bullish Belt Hold pattern, which is similar to the Piercing Pattern of the reversal at the bottom. In the current situation, it is possible to retest the level of 0.6841, from where the instrument may bounce to the resistance level of 0.7048, with its subsequent overcoming and the price recovering to the zone of 0.7270–0.7581.

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Support levels: 0.6841, 0.6693, 0.6539 | Resistance levels: 0.7048, 0.7270, 0.7581​
 
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AUD USD - the instrument is consolidating around 0.69
The Australian dollar shows corrective growth, winning back the losses of the previous two "bearish" sessions. The instrument is again testing the level of 0.6900 for a breakout, receiving support from the growth of corrective moods in the US currency. Investors are in a hurry to fix their profits, and also react to the publication of rather weak macroeconomic statistics from the US.

The data released the day before by S&P Global pointed to a drop in the index of business activity in the US Services sector from 53.4 to 51.6 points, while analysts had expected growth to 53.5 points. The Manufacturing PMI fell sharply from 57.0 to 52.4 points, which also turned out to be significantly worse than the market's expectations of a reduction to 56.0 points. The Composite PMI in June corrected from 53.6 to 51.2 points, while the forecast was at the level of 53.7 points.

Additional pressure on the markets yesterday was exerted by the speech of US Federal Reserve Chairman Jerome Powell in the US Senate, where the official again noted significant risks of expanding inflationary pressure within the country, recognizing the possibility of a recession due to the regulator's "hawkish" position. At the same time, the Fed intends to further tighten monetary policy, trying to return the Consumer Price Index to the target level of 2%.

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In Australia, against the background of a lack of energy obtained with the help of solar panels and wind generators, a fuel crisis is rapidly developing. Last week, the Australian Energy Market Operator (AEMO) announced it was suspending market and capping wholesale electricity prices until June 23 due to the impossibility of uninterrupted supplies to consumers. Due to the existing deficit, local companies had to buy oil and gas in the spot markets, which contributed to a sharp increase in costs. The government is ready to return to coal-fired infrastructure, as Australian Resources Minister Madeleine King said earlier, noting that the resumption of such enterprises will provide an additional 30% of energy capacity and improve the situation with the energy supply on the east coast.

Resistance levels: 0.695, 0.7, 0.705, 0.71 | Support levels: 0.69, 0.6849, 0.68, 0.675​
 
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