Last week, most price movements were results of the Fed’s decision to hike interest rates by 75bps. The activities caused high volatility against the USD and several major instruments.
(All data taken from MT4 VT Markets)
(Picture taken from forexfactory.com)
US Federal Reserve Chairman Jerome Powell will be in the spotlight again this week as he testifies before Congress following Wednesday’s rate hike, its largest since 1994.
Powell’s comments, along with those of several other Fed officials, will be closely watched as markets try to gauge the size of yet another expected rate increment at the upcoming July meeting.
The Fed increased rates by 75 basis points last week and flagged a faster pace of future rate hikes. Powell said the Fed is unable to control all the factors contributing to higher inflation, such as the war in Ukraine, which has pushed up energy prices.
The Reserve Bank of Australia raised cash rate by 50 bps to 0.85% during its June meeting, in its first back-to-back rate hike in 12 years. The board said monetary support is no longer needed amid the economy’s strength and current inflationary pressures, and emphasised that it was committed to necessary actions for inflation to return to target level.
On Wednesday, Canada will release its monthly CPI data and UK will announce its annual CPI data. As a key indicator of inflation, CPI will show the rate of increase in the price of goods and services. The higher the inflation rate, the higher the potential for central banks to raise interest rates.
Canada is likely to increase retail sales data by 0.8% on-month in April, according to preliminary estimates.
Germany’s manufacturing PMI data remains below the previous year’s levels amid a sustained softening of demand for German-made goods. Heightened economic uncertainty, swelling prices, and COVID-related lockdowns in China have led to a further decline in new orders. Meanwhile, services PMI showed its slowest growth in the sector in 4 months as the post-lockdown rebound started to fade and rising prices strained demand.
The USD index (USDX) rose with broad volatility last week due to interest rate decisions and market reactions to comments from US Federal Reserve Chair Jerome Powell.
USDX tried to break our support and resistance levels but eventually closed between both levels.
This week, we believe that these levels will be able to hold the USDX movement.
On the weekly timeframe, our support levels are at 103.20 and 102.68, while our resistance levels are at 104.65 and 105.04.
Meanwhile, on the 4-hour timeframe, the resistance level will be at 104.88, and the support level is at 103.20 and 102.81.
Resistance: 104.65, 104.88, 105.04
Support: 103.20, 102.81, 102.68
Last week, a positive note from the FOMC meeting caused Gold to move lower. Gold tried to break our support but closed above the support level of $1832, while our resistance kept intact at $1877.
This week, it is possible for Gold to move slightly higher, with the next resistance level at $1916 on the weekly timeframe and the support level at $1832.
Meanwhile, on the 4-hour timeframe, the closest support will be at $1828 and $1815, with the resistance levels at $1856 and $1874.
Resistance: $1856, $1874
Support: area $1832, $1828, $1815