Daily Market Report
05 Jun 2023
The reversal in the optimism surrounding the risk complex in the wake of the publication of US Nonfarm Payrolls forced EUR/USD to leave behind initial gains and slip back to the 1.0700 neighbourhood at the end of the week.
Looking at the weekly chart, price action remained inconclusive, as Thursday’s intense recovery was not enough to halt the negative streak.
The greenback, on the other side of the coin, made a U-turn after the crucial Nonfarm Payrolls showed the US economy added 339K jobs in May (vs. 190K expected) and the Unemployment Rate ticked higher to 3.7% (from 3.4%). Additional results saw Average Hourly Earnings – a measure of inflation via wages – rise 0.3% MoM and 4.3% YoY and the Participation Rate rise held steady at 62.6%.
The daily downtick in the pair was also accompanied by rising yields on both sides of the Atlantic, which managed to leave behind part of the recent marked weakness across the curve.
Also propping up the sentiment around the buck, the US debt ceiling issue has been resolved after the US Senate approved the bill late on Thursday. Markets are now expecting President Biden to sign it before the June 5 deadline.
Some initial support for the European currency came after hawkish comments from Board member Vasle, who reiterated that inflation remains high and that the central bank needs to hike rates further to bring inflation down to the 2.0% target. His colleague Panetta, instead, argued that this is not the time to go too fast on rates and suggested that the bank is not far from its final destination. These comments fell in line with those from President Lagarde and members Simkus and Müller earlier in the week.
Data-wise in the euro region, Industrial Production in France came above expectations and expanded 0.8% MoM in April, while the Unemployment Change in Spain shrank by 49.3K in May.
Further upside in EUR/USD should now target the 100-day and 55-day SMAs at 1.0811 and 1.0885 respectively, prior to the psychological level of 1.1000. Once this threshold is surpassed, there are no significant obstacles until the 2023 peak at 1.1095 (April 26) seconded by the rounded value of 1.1100 and the weekly high of 1.1184 (March 31, 2022). On the downside, the immediate contention emerges at the May low at 1.0635 (May 31) ahead of the March low at 1.0516 (March 15) and the 2023 low at 1.0481 (January 6). The daily RSI dropped below the 39 level.
Resistance levels: 1.0779 1.0801 1.0831 (4H chart)
Support levels: 1.0635 1.0516 1.0481 (4H chart)
USD/JPY finally saw some relief from its recent weakness and staged a decent rebound north of the key 140.00 the figure on Friday.
In fact, the daily uptick came on the back of the strong NFP-led bounce in the greenback, while extra selling pressure hurt the yen after the US Senate approved the debt ceiling bill on Thursday, which alleviated the demand for the safe haven space.
Also propping up the pair’s strong daily advance, US yields rebounded markedly vs. the broad-based lack of traction of the JGB 10-year reference yields, which extended their consolidative mood above 0.40%.
There were no data releases or events in the Land of the Rising Sun.
In case USD/JPY clears the weekly low at 138.42 (June 1) it should then face the next support at the key 200-day SMA of 137.27 before hitting the temporary 55-day and 100-day SMAs of 134.91 and 133.92, respectively. If the pair continues to fall, it 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). The March low of 129.63 (March 24) and the February low of 128.08 (February 8) may become prominent in the event of a greater retracement. On the upside, the next significant objective is the 2023 high of 140.91 (May 29), followed by weekly highs of 142.25 (November 21, 2022) and 148.84 (October 31, 2022). The daily RSI improved sharply and rose above 64.
Resistance levels: 140.07 140.41 140.93 (4H chart)
Support levels: 138.42 138.24 137.42 (4H chart)
GBP/USD moved further up and flirted with the 1.2550 region, or 2-week tops, before coming all the way down to the mid-1.2400s in response to the abrupt change of course in the US dollar on Friday.
Indeed, the upside pressure in the buck gained extra impulse in the wake of the release of May’s Nonfarm Payrolls (+339K), encouraging the USD Index (DXY) to return to the 104.00 region after bottoming out near 103.40 earlier in the session.
In the meantime, speculation of extra tightening by the BoE in the next few months has also contributed to the strong rebound in the pair from last week’s lows in the 1.2300 neighbourhood. It is worth noting that investors now see a potential peak of the BoE’s hiking cycle at 5.50%.
The UK docket was empty on Friday.
GBP/USD may possibly revisit the 2023 top of 1.2679 (May 10) before reaching the 200-week SMA at 1.2865 and the psychological milestone of 1.3000. On the contrary, Cable's immediate downside objective is the May low of 1.2308 (May 25), followed by the temporary 100-day SMA at 1.2299 and the April low of 1.2274 (April 3). If the pair continues to fall, it might target the 200-day SMA at 1.1992, which is placed ahead of the 2023 low of 1.1802 (March 8). The daily RSI below the 51 mark.
Resistance levels: 1.2544 1.2679 1.2772 (4H chart)
Support levels: 1.2441 1.2400 1.2347 (4H chart)
The Aussie dollar saw its upside accelerate markedly, which motivated AUD/USD to reclaim the 0.6600 barrier and beyond on Friday.
Spot clinched new multi-session highs despite the strong rebound in the greenback, particularly exacerbated following the firmer-than-expected Payrolls in May, which somehow managed to mitigate the bout of weakness sparked by comments from Fed’s Harker and Jefferson on Wednesday.
In addition, another positive session in the commodity complex underpinned further the upbeat sentiment around AUD, with both copper prices and iron ore extending the recent bounce.
Meanwhile, in Australia, Home Loans contracted at a monthly 3.8% in April and Investment Lending for Homes dropped 0.9% in the same period.
If the recovery picks up pace, then AUD/USD should revisit the interim 55-day SMA at 0.6664 ahead of the more relevant 200-day SMAs at 0.669. Further north emerges the May high of 0.6818 (May 10) prior to the psychological mark of 0.7000 seconded by the weekly top of 0.7029 (Feb 14) and the 2023 peak of 0.7157 (Feb 2). By contrast, if the pair drops below the 2023 low of 0.6458 (May 31), it could accelerate losses to the weekly low at 0.6386 (November 10) before the November 2022 low of 0.6272 (November 3). The everyday RSI leapt to the boundaries of the 49 yardstick.
Resistance levels: 0.6638 0.6675 0.6709 (4H chart)
Support levels: 0.6550 0.6458 0.6386 (4H chart)
Prices of gold saw their 2-day recovery suddenly halted on Friday. Indeed, the yellow metal faltered once again above the $1980 mark per ounce troy and triggered a corrective move to the vicinity of $1950 at the end of Friday’s session.
The daily pullback in the precious metal came in response to the sharp bounce in the greenback, helped by the equally solid rebound in US yields across the curve, which saw their recent strong weakness somewhat alleviated after US Nonfarm Payrolls surprised to the upside in May.
Moving forward, bullion is expected to keep monitoring expectations around the Fed’s interest rate decision later in the month, with consensus now favouring a pause in the current normalization of monetary conditions.
Gold's upward momentum now appears somewhat dented. However, it faces initial resistance at the 55-day SMA around $1990 before potentially reaching the significant milestone of $2000. Notably, there are no prominent levels of resistance until it reaches the 2023 top at $2067 (May 4) ahead of the 2022 peak of $2070 (March 8) and the all-time high of $2075 (August 7, 2020). On the other hand, there is initial support at the May low of $1932 (May 30), which appears reinforced by the proximity of the interim 100-day SMA. Further decline could see the 200-day SMA at $1835 revisited well before reaching the 2023 low of $1804 (February 28).
Resistance levels: $1983 $1990 $2022 (4H chart)
Support levels: $1948 $1932 $1885 (4H chart)
The late bounce in the greenback forced silver to abandon the area of weekly highs just beyond $24.00 per ounce and eventually retreat to the $23.60 zone at the end of the week.
Despite the daily pullback, the grey metal managed well to close the week with gains after three consecutive declines.
The better tone in the buck following another solid print from the US jobs report in combination with the bounce in US yields all undermined the initial strength in silver in spite of the broad-based improvement in the commodity complex.
At the same time, the Gold/Silver Ratio charted an inconclusive session and kept the trade just below the 83.00 yardstick.
Silver has the potential to continue moving upwards, with its next target being the provisional 55-day SMA at $24.31 once the June high at $24.01 is cleared. Further up emerges the 2023 high at $26.12 (May 5) ahead of the April 2022 top at $26.21 (April 18), and the weekly peak of $26.94 (March 8), all before the key round level of $27.00. On the other side, if silver falls below its May 26 low of $22.68, it may test the 200-day SMA at $22.13 before reaching the significant round number of $20.00, and ultimately hitting the low of 2023 at $19.90 (March 10).
Resistance levels: $24.01 $24.41 $25.91 (4H chart)
Support levels: $23.32 $22.90 $22.66 (4H chart)
WTI prices rose for the second session in a row, regaining ground lost in the first part of the week and briefly exceeding the critical $72.00 per barrel threshold on Friday.
Further optimism among traders resurfaced after the US Senate passed the debt ceiling bill late on Thursday, which now waits for President Biden’s firm to avert a historical default.
In addition, expectations of the Fed’s pause in its hiking cycle at its upcoming meeting on June 14 also supported the positive performance of the commodity in the second half of the week.
Extra support for crude oil came from rising expectations that OPEC+ could announce another reduction in oil output at its meeting on June 4.
Closing the weekly docket for crude oil, the US oil rig count tracked by driller Baker Hughes dropped by 15 in the week to June 2 to 555 total active oil rigs.
Despite the strong bounce in the last couple of sessions, WTI closed the week with modest losses. That said, the weekly low of $67.08 (May 31) turns up as the immediate contention ahead of the 2023 low of $63.61 (May 4). This level is supported further by the December 2021 low of $62.46 (December 2) prior to the critical $60.00 per barrel threshold. On the other side, the initial hurdle comes at the temporary 55-day SMA of $74.09 before the weekly high of $74.69 (May 24) and the transitory 100-day SMA of $75.66. Further north appears the weekly peak at $79.14 (April 24) and the crucial 200-day SMA at $79.39, just ahead of the significant $80.00 zone. If the comeback continues, the next goals are the 2023 high of $83.49 (April 12) and the November 2022 high of $93.73 (November 7).
Resistance levels: $72.14 $73.51 $74.69 (4H chart)
Support levels: $67.08 $63.61 $62.42 (4H chart)
Equities tracked by the Dow Jones rose markedly and clocked new 4-week highs past the 33800 level at the end of the week, adding to Thursday’s decent gains at the same time.
Stocks navigated in a context of rising optimism after the federal government averted a default following the Senate’s approval of the debt ceiling bill late on Thursday. The so-called Fiscal Responsibility Act of 2023 is now ready to be signed by President Biden before X-date (June 5).
Also boosting the upside bias emerged further cracks in the US labour market after a measure of wage inflation (Average Hourly Earnings) slowed the pace in May despite the strong job creation (+339K jobs).
Maybe something markets could start mulling over is: In an interview late on Friday, former Treasury Secretary Lawrence Summers believes the Fed should be willing to raise interest rates by a half percentage point in July if it decides not to tighten lending this month.
On the whole, the Dow Jones rose 2.13% to 33764, the S&P500 gained 1.48% to 4283, and the tech-heavy Nasdaq Composite advanced 1.07% to 13240.
In light of the recent strong advance, the Dow Jones is expected to focus on the May high of 34257 (May 1) followed by the 2023 top of 34342 ( January 13) and the December 2022 peak of 34712 (December 13). If the index manages to surpass the latter, it may reach the April 2022 high of 35492 (April 21). Just the opposite, immediate support is found at the May low of 32586 (May 25) prior to the 2023 low of 31429 (March 15), and the 2022 low of 28660 (October 13). The day-to-day RSI jumped past the 48 mark.
Top Performers: 3M, Caterpillar, Dow
Worst Performers: Verizon, Salesforce Inc, Apple
Resistance levels: 33805 34257 34712 (4H chart)
Support levels: 32586 31805 31429 (4H chart)