Market Update by Solidecn.com

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UK100


Britain's main benchmark UK100 is the weakest European index today, losing more than 1%. The upcoming - likely hawkish - decision by the Bank of England by no means signals the end of tightening in the British economy. While it is uncertain whether rates will rise by 25 or 50 bps, the market will almost certainly have to swallow a higher 50 bps BoE hike - today or in August. Yesterday's reading indicated that UK inflation in May appears to have stabilized at excessively high levels. Core CPI was unchanged at 8.7% y/y - the market had expected 8.4% y/y. Also, the core CPI , which was expected to remain unchanged at 6.8% y/y, accelerated to 7.1% y/y - the highest level in 30 years.


The difficult situation could prompt the Bank of England to an extremely restrictive cycle if the BoE prioritizes the fight against inflation. In such a situation, the baseline scenario seems to be economic damage, which is generally not good for the performance of firms and consequently the stock market. With inflation anchored too high and a period of below-trend growth, a stagflationary scenario is a sizable threat to the British economy. As long as the labor market remains relatively strong, the market has no reason to be overly concerned, however, macro uncertainty has been reflected in the quotations of British indices recently.





Looking at the chart of FTSE (UK100) contracts, however, we see that the upward trend line is maintained although the index has dropped below the SMA200 (red line) indicating a possible further weakening of momentum. In addition, looking at the index's quotations since February, this year, we can juxtapose them with the technical formation of a rising wedge from which a breakout usually takes place at the bottom. RSI indicators near oversold and MACD confirm considerable weakness in the bulls - further decline without an upward correction would therefore have to be outright 'capitulation'. The market's reaction to the BoE minutes and decision may prove crucial.

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EURUSD Confirms the Breach


EURUSD pair confirmed breaching 1.0966 after ending yesterday above it, starting today with more positivity to reach 1.1000 barrier, which supports the continuation of the expected bullish trend on the intraday and short term basis, and the way is open to achieve our next main target at 1.1072.





The positive effect of the inverted head and shoulders’ pattern still active, and supports the continuation of the bullish wave, which gets continuous support by the EMA 25 and EMA50, noting that the continuation of the bullish wave requires holding above 1.0940.

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USDJPY


The USDJPY is forming a double top pattern on the 1H chart, reacting to the resistance at 142.24. The pair couldn’t close above the aforementioned level.




By zooming out to the 4H chart, we see an "upper long wick" candle giving a signal with a risk of getting stopped above the last high and a 1 to 1 ratio reward around 141.27.

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US500

• Wall Street trades slightly lower on the opening
• Investors eagerly await the results of Powell's testimony
• FedEx declined due to lower-than-expected forecasts for the year 2024

Investors remained cautious after a pause in interest-rate hikes, as Federal Reserve Chair Jerome Powell's remarks indicated the expectation of higher interest rates to control inflation and reduce US growth. The second-quarter stock rally appeared to be fizzling out due to factors such as crowded bullish positioning, high valuations and a growth outlook.


Wall Street opened with losses as investors showed concern over signs of rampant inflation in major economies, indicating that central banks may not be close to winding down their tightening cycles. The S&P 500 and Nasdaq 100 both fell 0.4%, while the Dow Jones Industrial Average declined 0.5%.
A surge in US housing starts in May indicated strong demand outstripping supply, potentially fueling economic growth. Citigroup analysts believe core inflation is unlikely to return to target in such an environment.





The S&P 500 (US500), with the current price at 4,415 points, has experienced a 0.4% decline today. The price retraced from a resistance level of 4,500 points, which was approximately 6.5% below the all-time high. As the market undergoes a correction, the next level to monitor is at 4,400 points. If this level is broken, the subsequent support level to watch is at 4,300 points.


The recent strong gains in the market suggest that it may be overheated, as indicated by the Relative Strength Index (RSI) around 70. Therefore, a period of consolidation and correction is deemed reasonable under these circumstances.

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GBPCAD


Looking at the daily chart, the GBPCHF pair consequently dropped value from 1.6917. We have the "upper long wick" candle in the daily time frame suggesting possible decrease in the price with SL above the wick.





Zooming to the 4H time frame, the price reacted to 1.67992 - 1.67921 support area. The market for this instrument is considered bullish as long as this level is intact, and another rise to 1.6917 would be possible.





Trigger chart is the 1H time frame. Entry price is 1.6806 with the first target at 1.6847 followed by 1.6917.

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Bitcoin near 29,000



"Bulls" return to crypto. The market is reacting to more moves by financial institutions📈


The cryptocurrency market has had some really good days. Fear over the Binance exchange and regulations has given way to positive sentiment due to the recent actions of investment funds. It's thanks to them that the market is reassured that cryptocurrencies 'won't disappear' from Western financial markets, and Bitcoin can finally count on interest from institutions. As a result, the largest cryptocurrency is struggling to break through $29,000 today.

• Following news of a Bitcoin Trust ETF from BlackRock and a similar fund application from Fidelity Investments, investors were optimistic about Deutsche Bank's application to provide digital trust services.
  
• In the evening, the market also reacted to news of the opening in the US of a new crypto exchange EDX Markets. For the moment, however, the entity will specialize in serving institutions and cannot be compared to Binance or Coinbase
  
• EDX is backed by Citadel Securities and Virtu Financial, among others, some of the largest market makers in the world, as well as Charles Schwab , Fidelity Investments fund and other Wall Street institutions.
  
• Today's reports from the US indicate that another institution, Invesco, has once again applied to the SEC for approval of a spot Bitcoin ETF
  
• A Nomura survey indicated that 96% of professional institutional investors managing nearly $5 trillion (303 institutions) are willing to invest in cryptocurrencies, and 82% had a positive view of the long-term prospects of Bitcoin and Ethereum
  
• As a result of Bitcoin's sudden rise in the market, the largest wave of short position liquidations since May 28 took place (Approx. $40 million liquidation in the last 24 h according to CoinGlass)

On-Chain data shows the fastest increase in Bitcoin flows to institutions with very little or even zero trading history in more than 6 months. This behavior of the network may indicate an accumulation trend on the part of long-term investors.





Bitcoin (BITCOIN) stock chart, W1 interval. The largest cryptocurrency has rebounded from the lower limit of the uptrend sustained since the beginning of this year and is currently heading towards the upper resistance barrier, set by the zone of local peaks from April this year.

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USDCHF Technical Analysis



USDCHF pair is currently rising and is expected to breach the 0.8996 (50 SMA in Yellow) level and attack 0.9093. However, caution is advised for upcoming trading as breaching the last level will cancel the negative effect of the double top pattern and lead the price to start a new bullish wave. The targets for this wave begin at 0.9032.





Therefore, due to the contradiction between the technical indicators, it is recommended to stay aside until the price confirms breaching 0.8996 resistance or breaking 0.8956 (25 SMA in Blue) support. It should be noted that breaking this support will push the price to resume the bearish trend and head towards 0.89071 followed by 0.88869 areas mainly.




Price action signal

• Sell with SL above the LUW (long upper wich) candle at 0.9007
  
• TP 1: 0.8956
  
• TP 2: 0.8901

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Silver


USD strengthening and ETF outflows pressure silver prices


Silver is trading over 2% lower today, with the move being driven by significant strengthening of the US dollar triggered by better-than-expected US housing market data for May. Solid data makes the market think that another rate hike may be looming in July, given recent hawkishness of the Federal Reserve.


Apart from the strong US dollar and high US yields, we are also observing ETFs selling out their gold holdings. Silver ETFs sold more than 650 thousand ounces of silver yesterday while gold ETFs sold almost 30 thousand gold ounces, what was the fifteenth consecutive day of ETF sales. ETF sold almost 1% of their total silver holdings since the beginning of the year.





From a technical point of view, we can see that silver price has been pulling back since June 9, 2023 when price tested 50% retracement and 50-session moving average. Local lows from June 5 and June 15, which can be found slightly below 23.6% retracement, are being tested today. Next important supports in-line can be found in the $22.60 area, or local lows from May 25, 2023, as well as in $22.20 area, marked with 200-session moving average. Divergence with EURUSD points to silver being excessively oversold but it should be said that silver tends to be an underperformer at times precious metals struggle.

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AUDUSD


The Reserve Bank of Australia (RBA) considered its last interest rate hike as a finely balanced decision.
There is increasing frustration due to the lack of stimulus in China.


The Australian dollar (AUD) has become more volatile following the release of RBA minutes and the People's Bank of China (PBoC) interest rate decision. The RBA's minutes revealed a balanced stance in votes regarding interest rates, which dampened expectations of further tightening in the near future. However, the RBA remains committed to achieving its target range for inflation. Furthermore, the AUD's performance has been influenced by concerns about the Chinese economy's recovery after the COVID-19 pandemic. As investors worry about China's economic outlook, the Australian dollar, often seen as a liquid proxy for the Chinese yuan, has declined. The absence of new policy stimulus from Beijing has led to frustration in the markets, affecting the AUD's performance alongside a drop in the Chinese yuan.





From the technical perspective, AUDUSD price is 0.6% lower at 0.6810. The price attempted to break above a resistance level at 0.6887 but faced rejection, resulting in a retracement towards the support zone around 0.6793. Currently, the price consolidates and if it fails to hold above this 0.6793 level, the next support zone can be found around 0.6707. On the other hand, if the price manages to bounce back, it can potentially come back towards 0.6887.

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Will ECB end rate hikes in July?



EURUSD is pulling back today, following a steep rally that took place last week. Last week's advance was driven by ECB rate hike on Thursday. ECB President said at a post-meeting press conference that further tightening will likely be needed.


According to Gediminas Simkus, chief of Lithuanian central bank and ECB member, a rate hike in July should be delivered and it is not a matter of discussion. However, Simkus also said that ECB is nearing rate peak and it is too early to declare what decision will the Bank make at a meeting in September.





Money markets are almost fully pricing-in a July rate hike and an over-60% chance of a similar move in September.





EURUSD is pulling back noticeably today and is looking towards an important support zone, marked with 61.8% retracement of the last major downward impulse. This area was tested on Friday already but bears failed to break below. Moreover, a lower limit of the Overbalance structure can be found slightly below and further strengthens a support in the area.