Long

EURUSD LONG while other majors weaker than Dollar

Updated

Euro and Swissi are currently the only majors against US Dollar that are strong.

EUR/USD climbs above 1.0820 after soft US PPI data
EUR/USD shoots to near 1.0820 as US PPI deflated wider than anticipated

UR/USD has jumped strongly to near 1.0820 as US PPI has softened significantly inspired by lower gasoline prices.
US monthly headline PPI has registered deflation while core PPI has maintained its pace at 0.2%.
The ECB is expected to raise interest rates by 25bps to 4% in order to sharpen its quantitative tools in the battle above 6% inflation.
The EUR/USD pair has accelerated dramatically to near 1.0820 after the United States Producer Price Index (PPI) data shows wider-than-expectations deflation. Monthly headline PPI contracted by 0.3% in May while the street was anticipating a 0.1% contraction. Investors should note that the economic data reported a pace of 0.2% in April. Annualized headline PPI has softened to 1.1% vs. the consensus of 1.5% and the prior release of 2.3%.

Contrary to that, US monthly core PPI has maintained its pace at 0.2% as expected by the market participants. The annualized core PPI has decelerated to 2.8% against the expectations of 2.9% and the former release of 3.1%.

The impact of weak oil prices is clearly visible in extremely soft PPI figures. Firms have passed on the impact of the sheer decline in gasoline prices to the end consumers as the street has not recognized any sign of a slowdown in the overall demand yet.

It looks like in the list of soft inflation, easing labor market conditions, and weak economic activities, decelerated PPI has been added, which would propel the need of skipping interest rate hikes by the Federal Reserve (Fed). The US Dollar Index (DXY) has attracted significant offers after softer-than-anticipated and has dropped below the crucial support of 103.00.

On the Eurozone front, investors are awaiting the interest rate decision by the European Central Bank (ECB). ECB President Christine Lagarde is expected to raise interest rates by 25 basis points (bps) to 4% in order to sharpen its quantitative tools in the battle above 6% inflation.

Economists at Danske Bank expect a pause by the Fed could pose near-term upside risks to EUR/USD, but we still maintain a bearish view on the cross towards the second half of CY2023.

The cautious optimism, however, continues as the US Federal Reserve (Fed) and the European Central Bank (ECB) will announce their decisions on monetary policy in the next 24 hours. In the upcoming American session, it will be the Fed’s turn, with the central bank also releasing the Summary of Economic Projections, the so-called dot plot- Additionally, the Federal Open Market Committee (FOMC) Chairman Jerome Powell will offer a press conference.

Big Picture

EUR BULLISH
Continued Eurozone growth over time, and much slower pace of rate cuts from the ECB relative to the Fed
Policy rates are unlikely to have peaked at 3.00%
Further ECB tightening supporting outlook for medium term strength
ECB will likely stay on the path possibly for a while longer
ECB may have another 150 bps of rates hikes to go to get to a terminal rate of 4%
Growth and monetary policy trends to support Euro
Declining inflation in the US ,reopening of China, and cheaper gas prices to avoid a significant economic slowdown
The rate hikes will continue and that’s positive for the Euro
An improving outlook for the eurozone economy and currency
Buying Euro on every ray of sunlight
Improving investor sentiment in Europe
Euro should show an increasingly solid recovery as the US outlook dims
ECB hawks are waking up

USD BEARISH
The hurdle for raising rates this month is higher, implying fresh US Dollar falls
Dollar weakness will pick up pace during 2024 as market attention turns toward Fed rate cuts
Fed feels more comfortable with receding inflation
US Dollar's position as the primary global reserve currency is being challenged
America on verge of losing petrodollar privilege
Other regions may need to continue their crusade for inflation, reducing spreads of debt securities yields
Combination of lower Fed rate expectations and improved risk sentiment is quintessentially negative
No more Fed hikes, potentially lethal to the US Dollar
US economy to slip into recession, Fed eventually cut rates quicker than peer institutions
Sticky inflation? What is sticky is the downtrend

EUR/USD BEARISH THEMES
EUR BEARISH
Russia is going to get rid of the Euros in their wealth fund
European Commission expects the eurozone economy to decline in Q4 2022 and Q1 2023
Italy’s debt could be a worry for the Eurozone
Inflation risks are to the upside, while growth risks are on the downside
ECB is moving from fighting inflation to worrying about inflation
Europe is in a great stress
Bracing for a tough winter
Underwhelming Eurozone growth should see ECB lag well behind the Fed
Europe is the biggest loser in the Russian-Ukrainian war
Recession seems likely in Germany
Energy crunch could last years
The route of the energy plan could drive to a lengthy, messy and choppy period
The war is still a huge drag on the European economy

USD BULLISH
When the dust settles, the Fed is set to continue raising rates
US to have permanently higher rates than elsewhere
Re-acceleration of inflation and its win over the Fed will continue to catch the market by surprise
The Dollar is higher for longer, alongside the Fed’s narrative
Stagflation to take USD even higher
Hot CPI means the Fed pivot is well beyond the horizon
Ugly inflation promises further flight to safety
US at war means a stronger dollar
Outlook for Fed monetary policy now more hawkish
Powell projects pain, higher rates for longer set to keep the dollar bid

Note

The Dow finished more than 100 points below the flatline on Friday, the S&P 500 and the Nasdaq lost nearly 0.4% and 0.7%, respectively, as investors continued to assess the outlook of monetary policy for the Fed amid a massive options expiration at the second 2023’s quadruple witching date. Among stocks, Microsoft fell 1.7% and Micron Technology dropped 1.7%. Conversely, Virgin Galactic surged 16.3% on plans for commercial space tourism. Tesla added 1.8% after hitting a 37-week high during the session and Adobe gained 0.8% with positive earnings and guidance. On the week, the Dow Jones added 0.9%, marking a three-week winning streak despite the Fed's warning of future rate hikes. The S&P 500 gained 2.2%, its fifth consecutive weekly gain, the longest since November 2021, rising 2.2%. The Nasdaq was up 2.7% for an eighth straight positive week. Markets will be closed on Monday for the Juneteenth holiday.

Note

BTC Bears Target Sub-$26,000 on SEC v Binance and Ripple Battles

BTC was flat this morning, with regulatory uncertainty stemming from the SEC lawsuits against Ripple, Binance, and Coinbase testing buyer appetite.

The market structure and momentum of Bitcoin was bearish, but its bounce back above 26k gave bears some food for thought.

Bitcoin’s correlation with the S&P 500 turned negative over May. This meant that the index has an overall bullish outlook, but Bitcoin has trended in the opposite direction in recent weeks. The increasing hostility from regulatory bodies in the United States has played a part in BTC’s misfortunes on the price chart.

There was an argument to be made that Bitcoin showed some signs of recovery. Yet, an analysis of the price action showed that the bias remained in favor of the sellers. On the other hand, if Bitcoin climbs to 28k, it could signal an uptrend.

Can the bulls drive Bitcoin past 27.4k next?

The market structure of Bitcoin on the daily timeframe was bearish. The structure shifted on 21 April when BTC dipped below a recent higher low. Since then, the price has trended lower on the chart.

Moreover, the trading volume has been extremely low from April onward, compared to the volume seen in February and March. This was reflected on the OBV as well, which only went slightly lower in May in contrast to the rapid gains it posted in mid-March.

The Fibonacci levels based on the recent leg down show that Bitcoin was likely headed toward 24.8k. The 61.8% extension level at 23.3k was also a target it presented. The price action showed that the 24.2k-24.4k region could serve as strong support. Beneath that, the 22.4k and 21.5k levels were important.

To signal a bullish shift in the structure, Bitcoin prices must rise back above the recent lower high at 27.4k. Yet, an uptrend would not be established there, as BTC would need to form a higher low and continue higher. Cautious investors can wait for this turn of events before looking to buy.

On Saturday, BTC extended the winning streak to three sessions, gaining 0.67% to end the day at $26,535.
SEC v Binance news delivered a breakout morning session before profit-taking left BTC with modest gains.
The technical indicators turned bullish, signaling a return to $27,000.
On Saturday, bitcoin (BTC) gained 0.67%. Following a 2.92% rally on Friday, BTC ended the day at $26,535. Significantly, BTC enjoyed its first three-day winning streak since May.

A mixed start to the day saw BTC fall to an early afternoon low of $26,202. Steering clear of the First Major Support Level (S1) at $25,523, BTC rose to a late morning high of $26,857. However, falling short of the First Major Resistance Level (R1) at $26,882, BTC eased back to sub-$26,500 and a range-bound afternoon session.

SEC v Binance News Delivered Brief Relief
On Saturday, news of Binance striking a deal to address the SEC’s motion to freeze Binance US assets supported a breakout morning.

Binance, Binance US, and the SEC agreed on a deal restricting access to customer funds to Binance US employees. The agreement prevents Binance Holdings staff from having access to private keys for US wallets.

The SEC filed a motion to freeze the assets of Binance US shortly after filing charges against Binance, Binance US, and Binance CEO CZ.

On Saturday, the US Court signed off on the deal, which allows Binance to repatriate all US customer funds and private keys onshore to nullify the motion to freeze.

While the news was positive, Binance US and Binance face charges that could drag on and further impact the US digital asset space.

Uncertainty toward the SEC v Ripple case remains another headwind, with optimism of a Ripple win fading after the release of the Hinman speech-related docs.

The Day Ahead
It is a quiet Sunday session, with no US economic indicators to provide direction. The lack of external market forces will leave BTC in the hands of the crypto market news wires.

SEC activity remains the focal point, with SEC v Ripple, Binance, and Coinbase (COIN)-related news likely to move the dial.

We also expect market sensitivity to lawmaker chatter. US lawmakers have remained silent on the William Hinman speech-related documents and the SEC charges against Binance and Coinbase.

Bitcoin (BTC) Price Action
This morning, BTC was down 0.05% to $26,523. A mixed start to the day saw BTC rise to an early high of $26,551 before falling to a low of $26,410.

BTC Technical Indicators
Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs sent bullish signals. BTC sat above the 100-day EMA ($26,269). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, sending bullish signals.

A move through the 200-day EMA ($26,654) would support a breakout from R1 ($26,861) to target R2 ($27,186). However, a fall through the 100-day EMA ($26,269) and S1 ($26,206) would bring the 50-day EMA ($26,059) into view. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

R1 – $ 26,861 S1 – $ 26,206
R2 – $ 27,186 S2 – $ 25,876
R3 – $ 27,841 S3 – $ 25,221
BTC needs to move through the $26,531 pivot to target the First Major Resistance Level (R1) at $26,861 and $27,500. A move through the Saturday high of $26,857 would signal an extended bullish session. The crypto news wires should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $27,186 and resistance at $27,500. The Third Major Resistance Level (R3) sits at $27,841.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,206 in play. However, barring a risk-off-fueled sell-off, BTC should avoid sub-$26,000 and the Second Major Support Level (S2) at $25,876. The Third Major Support Level (S3) sits at $25,221.

Bitcoin 34min. short Daily Signal is long

Note

Wall Street Extends Gain Ahead of CPI Data
US stocks closed higher on Tuesday, extending gains for the second session, as investors looked forward to the key inflation report due tomorrow. The Dow Jones finished over 316 points higher, as Salesforce rose 3.9% after the company announced it will be increasing list prices an average of 9% in August. 3M and Boeing were also among the top performers and advanced by 4.8% and 2.6%, respectively. The S&P 500 gained nearly 0.7%, led by the energy sector as APA (+6.3%), Halliburton (+4.2%) and Schlumberger (+4.5%) outperformed. Meanwhile, the Nasdaq added 0.5%. Traders were also digesting comments from several Fed officials which continued to point to the need of further tightening this year. The odds for a 25bps increase in the fed funds rate this year currently stand at 95%, but investors remain divided about another rate hike. The economic calendar is soft today and the earnings season kicks off later in the week.

Note

The greenback is approaching a make-or-break moment — at least as far as a closely watched technical indicator is concerned.

The Bloomberg Dollar Index has now surrendered more than 61.8% of its gains since May 2021, bringing it to one of the Fibonacci retracement levels popular among chart watchers. They tend to keep a close eye on these indicators to determine whether or not trends will extend or reverse.

What happens next is therefore crucial.

If the index remains below this point over the coming sessions, it would be a strong signal to traders that the currency’s losses are the beginning of a new longer-term downtrend, and not just an aberration.

The latest bout of weakness comes as the market now sees an end to a tightening spree that Federal Reserve officials begun communicating more than two years ago. The prospect is narrowing interest-rate differentials with other major currencies and weighing on the dollar.

This week, it dropped to the weakest level against euro and pound since early 2022. It’s even falling out of favor against the yen — where rates are still negative — with the cross falling to a two-month low.

The bearish signal seen in the chart of the Bloomberg Dollar Index could be soon validated elsewhere too. The ICE Dollar Index — a popular alternative to the BBDXY — stands just 0.6% higher than the 61.8% Fibonacci retracement of a rally that kicked off in January 2021.

To be sure, options paint a more mixed picture. While long-term bets are supportive of the US currency’s prospects, sentiment over a one-month sentiment has reached its least bullish level since September 2020.

Note

Bond Yields Continue to Fall
Government bond yields around the world fell for a third day on Wednesday, with the US 10-year Treasury note yield retreating to 3.74%, a fresh low since late June. Investors are getting increasingly convinced that major central banks, and specially the Fed will soon end their tightening campaign. Bets for a 25bps hike in the fed funds rate next week currently stand at 97% but investors remain divided on the need of further increases, with chances for a September increase currently standing at 12% and for November at 23%. Meanwhile, the ECB is also set to raise rates by 25bps again next week while there is just a 70% chance of a further rate rise in September. In the UK, another increase in borrowing costs is seen as certain next month, but a smaller-than-expected inflation reading for June lowered bets on further BOE rate hikes. On the other hand, traders are increasingly speculating the Bank of Japan could adjust its ultra loose monetary policy next week.

European Markets Head for Higher Open
European equity markets were headed for a higher open on Wednesday as investors reacted to data showing the annual consumer inflation in the UK stood at 7.9% in June, the lowest reading since March 2022 and below forecasts of 8.2%. Investors also await final euro zone inflation figures later on Wednesday to guide the economic and monetary policy outlook in the region. Moreover, markets look ahead to the latest earnings report from Dutch chip industry giant ASML, as well as from major US firms such as Tesla, Netflix and Goldman Sachs. DAX and Stoxx 600 futures rose 0.2% in premarket trade, while FTSE 100 futures jumped 0.8%.

Note

This trade is stil open and active

relevant market wraps
European Markets Head for Muted Open

European equity markets were headed for a muted open on Thursday as investors braced for the start of the earnings season in the region. Major European firms slated to report earnings today include SAP, EasyJet, Volvo Car, Publicis, ABB and Nokia. Investors also turned cautious after shares of key technology names in the US dropped in post-market trade on disappointing quarterly results. DAX, Stoxx 600 and FTSE 100 futures all fluctuated around the flatline in premarket trade.
Gold Hits 2-Month High on Fed Pause Bets
Japan 10-Year Yield Steadies Around 0.46%
Japan’s 10-year government bond yield steadied around 0.46% as a dovish outlook on Bank of Japan monetary policy kept the benchmark yield below the upper limit of the target range. BOJ Governor Kazuo Ueda recently stated that there was still some distance to sustainably and stably achieve the central bank’s 2% inflation target, indicating the BOJ’s commitment to ultra-easy monetary policy. Last month, the central bank held its short-term interest rate target at -0.1% and that of 10-year bond yields at around 0% by a unanimous vote, in line with expectations. Falling bond yields in other major economies also reduced upward pressure on JGB yields, as easing inflationary pressures raised hopes that the end of the current monetary policy tightening cycle is close.

Japan Raises This Year’s Price View to 2.6% Ahead of BOJ Meet
The Japanese government raised its overall inflation forecast to 2.6% for the current fiscal year ahead of the central bank’s policy decision meeting next week, the Cabinet Office said Thursday. The upward revision from the previous forecast of 1.7% shows stronger-than-expected inflationary pressure. Japan saw that trend holding up even after accounting for government price-relief measures, which the Cabinet Office says shaves 0.5 percentage points off this year’s price reading. For fiscal 2024, the government expects overall inflation to slow to 1.9%.

Note

trade is open

Note

Trade is open

DaveBrascoFX

youtube.com/@DavyBrasco-Official-Channel/videos

Also on:

Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.