The financial markets and monetary policymakers were extremely active during the past week. Inflation and output growth, according to economic data, decelerated gradually rather than suddenly.
Although the Chinese economy initially demonstrated strong performance in the first quarter after Zero-COVID measures were lifted, the momentum has not been sustained, and growth prospects are rapidly diminishing.
The European Central Bank increased interest rates by 25 basis points, bringing them to their greatest level since the early 2000s. President of the European Central Bank (ECB) Lagarde emphasized the persistently high inflation and the need for additional actions to return it to the intended target.
As expected, the Federal Open Market Committee (FOMC) decided not to raise interest rates at last week's policy meeting. This is the first occasion in 11 meetings that the Federal Funds Rate has remained unchanged. Indicators from the FOMC, however, suggest that they are not done tightening policy measures.
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Forex Technical Outlook for 19 June 2023 to 23 June 2023
Let’s see the list of events to look at this week:
- GBP CPI y/y on Wednesday
- Fed Chair Powell Testifies on Wednesday
- SNB Policy Rate & Monetary Policy Assessment on Thursday
- GBP Official Bank Rate on Thursday
- US Unemployment Claims on Thursday
- French & German PMIs on Friday
- US Manufacturing and Services PMIs on Friday
Let’s see the market outlook from the weekly forecast:
Bulls regained momentum in this pair, creating a stable buying trend after a strong consolidation. Investors should wait for a sufficient downside correction on the intraday price before aiming for a bullish trend continuation.
This technical analysis of EUR/USD shows a strong bullish trend, increasing the possibility of reaching the yearly high at the 1.1483 level.
As per the weekly price of EUR/USD, the bullish trend might extend above 20 and 100 SMA levels. However, the 200-day SMA is still directionless at the 1.1180 level, which could be the target level for this week.
In the daily chart, the current price trades above all moving average levels, where the 100-day SMA support is at the 1.0806 level. Moreover, the 200-day SMA extended the bullish slope, while the 20 EMA is the near-term resistance.
As per the current bullish outlook, the 1.100 psychological level is the strong barrier to recovery before aiming for the 1.1180 level.
On the other hand, a downside correction may lower the price toward the 1.0900 level. Below this level, the next target level is at 1.0745, which is the 61.8% Fibo retracement level of the 2022 swing.
As per the last week’s outlook, GBP/USD bulls maintained momentum and extended the price above the 1.2800 target level. This week, close attention is needed to find any trend continuation opportunity.
As per the current market behavior, the bullish opportunity is potent for the GBP/USD price. The latest symmetrical triangle breakout within a long bull run helped the price to remain above the 1.2800 psychological level.
By doing this, GBP/USD bulls cleared all major resistance levels, which could be a strong buy signal. However, investors should closely monitor how the price reacts after the weekly opening, where sufficient correction is needed before forming any trend continuation opportunity.
Adding to the bullish possibility, the 20-day Exponential Moving Average shows a bullish crossover at the 50 SMA line, which is a strong bull cross.
On the downside, any selling pressure in the GBP/USD price could extend could lower the price towards the 1.2545 level. However, any bullish rejection from 20 DMA or 50 DMA could increase the possibility of buying pressure towards the 1.3000 area.
As per the previous weekly outlook, AUD/USD reached the 0.6800 critical resistance level and showed a strong position above it. Investors may experience a corrective price action, where any downside correction would be a long opportunity.
The current daily price of AUD/USD validated the bullish trend by forming multiple bullish daily candles above the 100-day Simple Moving Average line. Moreover, the 20-day EMA is below the current price aiming toward the 100 SMA line.
The extreme bullish pressure from the 0.6458 level came with 400+ pips gains, where a downside correction is pending. The 14-period RSI already reached the overbought 70.00 line, which signals a pending downside correction.
Based on the current market scenario, downward pressure may come in this pair, where a bearish D1 candle below the 100-day SMA could initiate a broader correction in the market.
On the upside, any bullish trend continuation opportunity needs confirmation from the intraday price, which mainly aims to test the 0.7000 key level.
The Bank of Japan (BoJ) kept its policy settings unchanged at its June meeting concerning inflation but is unlikely to tighten rates anytime soon. On the other hand, the Federal Reserve (Fed) took a "hawkish hold," signaling that it plans two more rate increases this year.
Overall, the BoJ and the Fed are taking different approaches to inflation. The BoJ is focused on supporting economic growth, while the Fed is focused on controlling inflation, which may work as a bullish factor for USD/JPY.
The daily price of USD/JPY shows a strong bullish trend continuation opportunity from the bullish pennant pattern breakout.
The price is stable above the 100-day SMA support, while the 20 DMA is the immediate support, from where a strong bullish breakout appeared.
The current 14-day RSI is just below the 70.00 overbought zone, which signals a strong bullish trend.
On the bullish side, a minor correction from the weekly opening might open a long opportunity in this pair. The ultimate target of the bull run is to test the 145.18 level, from where a price inefficiency appeared on 10 November 2022.
On the bearish side, the 138.47 level would be the last hope for bulls, as breaking below this critical support could increase the volatility in the market due to not having a clear trend.
As per last week’s commentary, XAU/USD bearish pressure was extended by moving below the 30 May low. However, bulls regained momentum immediately, gaining all losses, which might result in a bullish trend continuation possibility.
The XAU/USD came with a strong sell-side liquidity sweep, collecting all orders from the 29 May 2023 low.
On the daily chart, the 100-day Simple Moving Average level was stable at the 1942.00 level. As the latest daily candle closes above this crucial support level, we may expect the upward pressure to extend this week.
Although the price chart shows a bullish possibility, the 14-period RSI is still below the 50.00 line, showing a corrective momentum.
If we draw the trendline at the latest consolidation zone, we will find an emerging falling wedge pattern to form. Any downward correction could extend the wedge pattern this week before forming a bullish continuation.
For the bearish case, a strong daily candle formation below the 1940.00 level might lower the price toward the static 1925.00 support level before reaching the 1900.00 level.
On the bullish side, a stable price above the 1950.00 level, with a trendline breakout, is needed to open the room for testing the 2000.00 key psychological level.
The crypto market's capitalization has decreased by more than $1 trillion following the recent collapse. Since its previous low point in March, the S&P 500 index has risen by more than 15%. However, Bitcoin (BTC) is still susceptible to a potential decline.
Bitcoin has been experiencing a downward trend for weeks, whereas the stock market has been experiencing growth. This is a reversal from earlier this year when the banking crisis in the United States caused the S&P 500 to depreciate while BTC performed well.
Since then, the stock market has developed a negative correlation with the cryptocurrency market, with the correlation reaching its lowest level since December 2022. This indicates that the cryptocurrency market falls when the stock market rises, and vice versa.
The negative correlation between the stock market and the cryptocurrency market is likely the result of a number of factors, such as the recent regulatory crackdown on cryptocurrencies and increasing interest rate concerns.
In general, the future of the cryptocurrency market is dubious. Nonetheless, there is potential for a recovery if the market stabilizes and the regulatory environment improves.
BTC may decline even further if the adverse sentiment on the cryptocurrency market does not abate. This is because the momentum indicator Relative Strength Index (RSI) is still well above the oversold region.
If BTC can ascend above the neutral line at 50.0, it would be a sign of strength and could spark a rally. Nevertheless, given the current market conditions, a decline in the oversold region is more likely.
On the bullish side, a channel breakout and a daily close above the 26.423.91 level could bring buyers hope, increasing the possibility of testing the 28,427.77 resistance level.
The week may start with a momentum reversal due to the absence of high-impact releases, but investors should find a stable trend after PMI releases.