The 75 bps rate hike showed how inflation is affecting the US economy. However, the early market sentiment was bearish as investors wondered how the Fed would react to the higher inflation. Finally, a less hawkish sentiment appeared by the Fed with no positive sign for other currencies.
In the UK, the latest CPI inflation was seen to hit the 9% level in April due to gas and electricity prices. As a result, the Pound lost its value by 14% against the US Dollar in the last 12 months. On the other hand, the Japanese Yen declined by 14% due to the BoJ’s neglect of higher inflation. Moreover, Japan is a net importer of crude oil and other commodities, which might push the economy to face further pressure in the coming weeks.
Forex Technical Outlook for 20 June 2022 to 24 June 2022
The week will start with the RBA Monetary Policy Meeting Minutes, where no surprise may come. However, the main investors will be in the Canadian and UK CPI, where both countries would show higher results. The German Flash Manufacturing PMI may come in line, above the 50.00 satisfactory level, but the rising inflation would be the main concern where investors have no hope except for the US Dollar.
The US Dollar Index (DXY) moved down last week from the FOMC sentiment, where a less hawkish Fed pushed investors to shift their attention from the US Dollar. As a result, the DXy daily chart pushed lower but failed to hold the daily candle below the dynamic 20 EMA. The price rebounded immediately on the next day but closed the week with an inside bar. Therefore, the broader outlook for this instrument would remain bullish, even if a minor correction is pending. In that case, as long as bulls hold the price above the 103.35 level, it may grow higher towards the 105.79 swing high.
The less hawkish FOMC put pressure on EUR/USD as the existing selling pressure failed to break below the 1.0345 support level. However, the weekly candle closed with an indecision bar, followed by a strong bearish candle. In that case, the higher timeframe price action is still on the sellers’ side although a minor bullish correction is pending.
The above technical analysis shows the daily chart of EURUSD where multiple bullish candles are visible from 1.0379 to 1.0345 zone. However, the buying pressure from the demand zone is not sufficient to call it a counter-impulsive momentum. Moreover, the Relative Strength Index shifted its direction to sellers’ side without reaching the neutral 50 level.
Based on the daily structure, investors should closely monitor the intraday price action where further buying pressure from 1.0379 to 1.0345 area would indicate the primary sign of a bullish trend. However, any bullish pressure after breaking above the dynamic 20 EMA is potent to consider it as a long-term buy. On the other hand, the current price is trading below the dynamic 20 EMA where any bearish daily candle below the 1.0345 would be a bearish opportunity.
The existing selling pressure in the GBP/USD pair is questioned from the recent exhaustion in the weekly chart. The price moved below June 2019 and grabbed the sell-side liquidity before returning above the existing 1.2152 support level. As a result, the weekly RSI shifted the direction from the oversold area, indicating further upside pressure in the coming weeks.
This technical analysis shows the GBPUSD chart where the daily candle formed a divergence with RSI, indicating that the new swing low below the 1.2152 level was not solid. However, the post-FOMC bullish pressure failed to take the price above the dynamic 20 EMA and closed the week with a bearish candle.
As the existing long-term trend in the GBPUSD pair is bearish, any selling opportunity from the dynamic 20 DMA area has a higher possibility of taking the price down towards the 1.200 area. On the other hand, the price is trading lower from the bearish trendline started from February 2022 high. In that case, a recovery of the price above the dynamic 20 EMA would increase the possibility of grabbing retail liquidity from the trendline breakout.
From the last two month’s daily chart, we can see that the AUD/USD descending channel breakout left the 0.6873 to 0.6830 zone untested. However, last week the pre-FOMC movement reached the untested zone and formed a strong bullish daily candle. Therefore, the buyers' presence from the 0.6830 support level seems strong and that may raise the price in the coming days.
This technical analysis shows how the daily chart of AUDUSD moved higher from the 0.6870 to 0.6830 demand zone. However, the buying pressure failed to breach the dynamic 20 EMA and static 0.7086 event-level, and ended the week with a bearish daily candle.
Therefore, investors may experience a corrective bearish pressure in the AUDUSD price at the weekly birth period where any bullish sign from 0.6900 to 0.6830 would increase the price towards the 0.7200 area. On the other hand, the break below the 0.6830 level would extend the selling pressure towards the 0.6680 level.
The USD/JPY showed a decent correction last week but the selling pressure was not enough to say it was a trend reversal. A massive bullish daily candle appears on Friday but the real question is whether bulls can continue the momentum or not.
The above technical analysis indicates how the daily price showed buyers' interest in the dynamic 20 EMA support. A bullish engulfing candle within the existing bullish trend is a sign of a trend continuation. Moreover, the RSI failed to reach the neutral 50 level and shifted the direction toward the 70 level.
Based on the current price structure, the long-term bullish trend may extend above the 135.15 resistance level in the coming days. On the other hand, any selling pressure from the 135.15 area would increase the volatility and it will be the first of a trend reversal.
XAU/USD remained corrective throughout the week but the break below the 1828.85 support level and immediate rebound is the primary sign of a possible bullish pressure in the coming days.
This technical analysis shows how the volatility in the XAU/USD price has extended in the recent trading days. The almost flat dynamic 20 EMA and RSI at the 50 level are signs of a corrective market structure that needs a strong breakout before showing a trending movement.
Based on the daily chart, the primary aim of the XAU/USD price is bearish as it formed a bearish two-bar rejection from the dynamic 20 EMA. On the other hand, the safe-haven demand for Gold is still potent but it needs a stable price above the 1870.00 area.
Bitcoin along with other cryptocurrencies may trade sideways or lower as the US central Bank confirmed more rate hikes to bring the inflation down. The past few trading weeks were negative for crypto bulls due to the uncertainty of the global financial system. Now investors should focus on how the US Job report is coming, where stable job growth and expandable household income would influence people to invest in cryptocurrencies.
Moreover, the monthly US inflation should come down with an expandable household income to signal a long-term bullish trend in the cryptocurrency market.
As per the recent price action, Bitcoin failed to hold the 26698.00 swing low, indicating no interest of bulls nor a liquidity grab and rebound. Instead, the price sharply moved below the 24000.00 level before showing a minor bullish sign from the 20,000.00 level.
Based on the BTC/USD daily chart, a minor bullish correction toward the dynamic 20 EMA is still pending where the long-term market trend is bearish. In that case, as long as the price trades below the 24,000.00 psychological level further bearish pressure toward the 16,000.00 would appear in the coming days.
The broader market sentiment indicates that investors have no hope except for the US Dollar. Therefore, if this week’s inflation report for Canada and the UK comes with no development, it might work as a bullish factor for the US Dollar.