Daily Market Report
02 Jun 2023

The renewed (and intense) selling pressure in the greenback allowed EUR/USD to gather extra pace and leave behind Wednesday’s monthly lows in the 1.0630 region, managing to reclaim the 1.0700 hurdle and well above on Thursday.
 
Indeed, the daily pullback forced the USD Index (DXY) to convincingly break below the key support at 104.00 the figure along with the persevering decline in US yields across the curve. The optimism stemming from the debt ceiling front also seems to have benefited the risk complex and contributed to the pair’s upside.
 
On the latter, the House passed a bill suspending the $31.4 trillion debt ceiling late on Wednesday following support from both Democrats and Republicans, raising expectations that it would be endorsed by the Senate before the end of the week and signed by President Biden before the June 5 deadline.
 
From the ECB Accounts, members noted that more decisive action was warranted to move rates into sufficiently restrictive territory to ensure a timely return of inflation to target. In addition, there was a strong preference against returning to outright forward guidance, while there was now more solid evidence that monetary policy was being transmitted to financing and credit conditions. Participants also agreed that the core inflation trend is "broadly seen as worrisome".
 
Back at the ECB, President C. Lagarde reiterated that inflation remains elevated and that there is no clear evidence that underlying inflation has peaked, at the time when she acknowledged that the bank has more work to do regarding rates. Further comments in the same direction were made by Board members L. de Guindos, who argued that 25 bps rate hikes are "the new norm", and M. Kazaks, who suggested that it’s hard to say where rates will peak.
 
In the German money market, the 10-year bund yields retreated further and revisited the 2.25% region, or multi-day lows.
 
In the euro docket, flash inflation figures in the bloc see the headline inflation tracked by the CPI rising 6.1% in the year to May and 5.3% YoY from the Core CPI. Additionally, the jobless rate in the euro area eased to 6.5% in April and the final Manufacturing PMI came in at 44.8 in April. In Germany, Retail Sales rose 0.8% MoM in April and dropped 4.3% YoY, while the final Manufacturing PMI came in at 42.9.
 
Across the ocean, Challenger Job Cuts increased to 80.089K in May. Further data saw the ADP surpassing estimates after the US private sector added 278K jobs during last month.
 
In addition, Initial Claims increased by 232K in the week to May 27, the ISM Manufacturing PMI receded to 46.9 in May, the final S&P Global Manufacturing PMI weakened to 48.4 during last month and Construction Spending expanded at a monthly 1.2% in April.
  
If the EUR/USD falls below the May low at 1.0635 (May 31), it will then encounter the March low at 1.0516 (March 15) before reaching the 2023 low at 1.0481 (January 6). However, there is a positive aspect to note: the 100-day and 55-day SMAs at 1.0812 and 1.0884 respectively, are positioned below the psychological level of 1.1000, which acts as an intermediate barrier. Once this threshold is surpassed, there are no significant obstacles until the pair reaches the 2023 peak at 1.1095 (April 26), followed by the rounded value of 1.1100 and the weekly high of 1.1184 (March 31, 2022). The daily RSI jumped past the 43 yardstick.
 
Resistance levels: 1.0765 1.0801 1.0831 (4H chart)
 
Support levels: 1.0635 1.0516 1.0481 (4H chart)

On Thursday, fresh weakness in the greenback and the persevering downward bias in US yields across the curve caused USD/JPY to record losses for the fourth consecutive session, this time revisiting multi-day lows near 138.40.
 
In fact, spot extended further the rejection from 2023 tops in levels just shy of 141.00 the figure (May 30) following the U-turn in expectations surrounding another 25 bps rate hike by the Fed later in the month, while cautiousness remained high ahead of the release of US Nonfarm Payrolls on Friday.
   
In the Japanese docket, Capital Spending expanded 11% YoY in the January-March period and Foreign Bond Investment rose to ¥1028.8B in the week to May 27.
 
USD/JPY now faces a key support at the 200-day SMA of 137.26 before hitting the transitory 55-day and 100-day SMAs of 134.78 and 133.81, respectively. In a negative trend, the pair may retest the weekly low of 133.01 (April 26), minor support at 132.01 (April 13), and the April low of 130.62 (April 5). In the case of a larger retracement, the March low of 129.63 (March 24) and the February low of 128.08 (February 8) might become prominent. On the upside, the next target of note emerges at the 2023 high of 140.91 (May 29) ahead of the weekly tops of 142.25 (November 21, 2022) and 148.84 (October 31, 2022). The daily RSI dropped below the 59 level.
 
Resistance levels: 140.41 140.93 141.61 (4H chart)
 
Support levels: 138.42 138.22 137.42 (4H chart)

GBP/USD extended its solid upside momentum and climbed to fresh 2-week highs north of the 1.2500 barrier on Thursday.
 
The marked pullback in the greenback in response to investors’ repricing of an impasse at the Fed’s meeting in June lent much-needed oxygen to the British pound and the rest of the risk complex, sponsoring at the same time the fifth consecutive daily advance in Cable.
 
Also collaborating with the upbeat mood in the quid, speculation of extra rate hikes by the BoE in the next few months remained steady and pointed to the policy rate peaking around 5.50% (from the current 4.5%).
 
In the UK, Nationwide Housing Prices contracted 3.4% YoY in May. Additional results showed Mortgage Approvals recede to 48.69K in April, Mortgage Lending contract by £1.384B and the final Manufacturing PMI deflate to 47.1 during last month.
   
Extra recovery in GBP/USD could now revisit the 2023 peak of 1.2679 (May 10) prior to the 200-week SMA at 1.2865, and the psychological level of 1.3000. Having said that, the May low of 1.2308 (May 25) is the immediate downside target for Cable, followed by the temporary 100-day SMA at 1.2296 and the April low of 1.2274 (April 3). If the pair continues to decline, it could aim for the 200-day SMA at 1.1988, which is located ahead of the 2023 low of 1.1802 (March 8). The daily RSI improved further and trespassed the 58 mark.
 
Resistance levels: 1.2539 1.2546 1.2679 (4H chart)
                                                                  
Support levels: 1.2396 1.2308 1.2274 (4H chart)

The marked knee-jerk in the greenback lent legs to the risk-linked galaxy and helped AUD/USD reverse part of the recent weakness and retest the 0.6580 region on Thursday, or multi-session tops.
 
Extra wings for the Aussie dollar came from the commodity complex and the modest recovery in copper prices and iron ore, while the better-than-estimated print from the Chinese Caixin Manufacturing PMI (50.9) also contributed to the daily uptick. The Caixin PMI is generally regarded as a survey that includes a larger proportion of export-oriented respondents, with relatively smaller businesses.
 
In Oz, the final Judo Bank Manufacturing PMI ticked a tad higher to 48.4 in May.
 
If the AUD /USD falls below the 2023 low of 0.6458 (May 31), it could drop to 0.6386 (November 10, 2022) and 0.6272 (November 3). In contrast, the 55-day and 200-day SMAs at 0.6665 and 0.6694, respectively, are immediate resistance levels, followed by the May high of 0.6818 (May 10) and the psychological milestone of 0.7000. The next resistance levels above this area are the weekly high of 0.7029 (Feb 14) and the 2023 high of 0.7157 (Feb 2). The RSI on the daily chart advanced past the 65 hurdle.
 
Resistance levels: 0.6554 0.6650 0.6675 (4H chart)
 
Support levels: 0.6458 0.6386 0.6272 (4H chart)

Gold prices added to Wednesday’s modest uptick and rose markedly to print multi-day highs past the $1980 mark per ounce troy on Thursday.
 
The strong retracement in the greenback coupled with the continuation of the selling pressure in US yields across the curve contributed to the weekly rebound in the yellow metal, which now refocused its attention to the key $2000 threshold.
 
In the meantime, bullion should face some increasing volatility as markets get closer to the publication of the US jobs report on Friday.
      
Gold continues to pick up pace following lows recorded earlier in the week. That said, preliminary opposition emerges at the 55-day SMA at $1989 before revisiting the major milestone of $2000. There are no notable resistance levels until the 2023 top of $2067 (May 4), which is supported by the 2022 high of $2070 (March 8) and the all-time peak of $2075 (August 7 2020). On the contrary, If bullion goes below the May low of $1932 (May 30), which appears to have some support from the temporary 100-day SMA, it is projected to fall lower towards the 200-day SMA at $1834, far before hitting the 2021 low of $1804 (February 28).
 
Resistance levels: $1983 $1991 $2022 (4H chart)
 
Support levels: $1932 $1885 $1809 (4H chart)

On Thursday, the ounce of industrial metal gained further and flirted with the important $24.00 barrier, setting fresh 2-week highs after registering gains for the third session in a row.
 
The firmer tone in silver came on the back of the important decline in the greenback following markets’ repricing of a potential pause by the Federal Reserve at the June meeting.
 
The solid performance of silver was also underpinned by the broad-based improvement in the commodity space, which was exacerbated by the downside pressure in the buck and the positive reading from the Chinese Caixin PMI.
 
Meanwhile, the Gold/Silver Ratio retreated further and recorded multi-session lows in the sub-83.00 region, breaching at the same time the key 200-day SMA (83.23).
 
Silver has potential for further upward movement, with the next target being the temporary 55-day SMA at $24.29 before reaching the 2023 high at $26.12 (May 5). Following that, there is the April 2022 top at $26.21 (April 18), and subsequently the weekly peak of $26.94 (March 8), just before the key round level of $27.00. By contrast, if the May low at $22.68 (May 26) is breached, silver could retest the 200-day SMA at $22.11 before reaching the significant round number of $20.00, and ultimately reaching the 2023 low at $19.90 (March 10).
 
Resistance levels: $23.92 $24.20 $24.45 (4H chart)
 
Support levels: $22.90 $22.66 $22.12 (4H chart)

Prices of WTI rallied more than 4% and reclaimed the area just above the $71.00 mark per barrel on Thursday, abruptly reversing weekly lows near the $67.00 region (May 31) and ending two consecutive days with losses.
 
The reason behind the sharp advance in the commodity can be found in traders’ hopes of another oil output reduction that might be announced by Saudi Arabia at the OPEC+ meeting this weekend.
 
On the latter, it is worth recalling last week’s warning from the Saudi Energy Minister against those who bet on further weakness in prices of crude oil, which hinted at the possibility of a potential cut in oil production.
 
The softer tone in the US dollar also propped up the strong session in crude oil, which also managed to set aside the unexpected weekly build of US crude oil inventories.
 
On this, the EIA reported that US crude oil inventories unexpectedly increased by 4.488M barrels in the week to May 26, while supplies at Cushing rose by 1.628M barrels, Weekly Distillate Stocks went up by 0.985M barrels, and gasoline stockpiles went down less than estimated by 0.207M barrels.
 
WTI has experienced a significant decline this week and faces immediate contention at the weekly low of $67.08 (May 31) prior to the 2023 low of $63.61(May 4). This level is further reinforced by the December 2021 low of $62.46 (December 2), before reaching the key $60.00 mark per barrel. On the flip side, the interim 55-day SMA at $74.05 precedes the weekly top of $74.69 (May 24) and the provisional 100-day SMA at $75.73. Moving northward, the weekly peak at $79.14 (April 24) is supported by the key 200-day SMA at $79.59 just ahead of the important $80.00 zone. If the rebound strengthens further, the 2023 high of $83.49 (April 12) and the November 2022 top of $93.73 (November 7) are the next targets.
 
Resistance levels: $71.02 $73.44 $74.69 (4H chart)

Support levels: $67.08 $63.61 $62.42 (4H chart)

Finally, there was some respite for US stocks measured by the Dow Jones, as the index rose markedly and flirted with 3-day peaks around the 33100 region on Thursday.
 
Optimism ran high among investors in response to positive news from the US political area, where lawmakers passed the debt ceiling bill late on Wednesday, and rising expectations of an impasse by the Fed at its upcoming monthly gathering.
 
Further strength for risk-associated assets came in the form of a much weaker dollar and the persevering decline in US yields across the curve.
 
All in all, the Dow Jones gained 0.56% to 33093, the S&P500 advanced 0.90% to 4218, and the tech-benchmark Nasdaq Composite rose 1.16% to 13085.
 
Further recovery in the Dow Jones is expected to target transitory hurdles at the 55-day and 100-day SMAs at 33232 and 33335, respectively, ahead of the weekly top of 33652 (May 19). Once the latter is cleared, the index may then encounter resistance at the May high of 34257 (May 1), the 2023 peak of 34342 (January 13), and the December 2022 peak of 34712 (December 13). If the index can rise beyond this level, it might hit the April 2022 top of 35492 (April 21). Conversely, immediate support aligns at the May low of 32586 (May 25) before the 2023 low of 31429 (March 15) and the 2022 low of 28660 (October 13). The day-to-day RSI leapt past 46.
 
Top Performers: American Express, UnitedHealth, Caterpillar

Worst Performers: Salesforce Inc, Amgen, Goldman Sachs

Resistance levels: 33162 33328 33652 (4H chart)

Support levels: 32586 31805 31429 (4H chart)