Market Update by Solidecn.com

[Solid ECN]

US30


US indices launched this week's trading on the back foot and moved lower on Tuesday and Wednesday. However, tides turned yesterday as it became more and more likely that Fed will keep rates unchanged at June meeting (13-14 June, 2023). Comments from Fed Harker and Jefferson signaling that FOMC is in position to skip a rate hike at the June meeting led to a slump in rate hike bets on money markets. Currently, markets price in just a 25% chance of 25 basis point rate hike at June meeting while those odds were as high as 70% following release of JOLTS data on Wednesday. NFP report for May, which is scheduled to be released at 1:30 pm BST today, will be watched closely but it seems that Fed members have already made up their minds when it comes to the June decision and therefore jobs data may not have too much of an impact.





Taking a look at Dow Jones futures (US30) at D1 interval, we can see that the index made another test of the 32,900 pts support zone and has once again failed to break below. The aforementioned support zone is marked with previous price reactions, 200-session moving average (purple line), upward trendline and the 50% retracement of the downward move launched at the beginning of 2022. Positive demand-side reaction to this hurdle suggests that the index may be set for a bigger recovery move. The first resistance zone to watch should current gains extend can be found in the 33,700 pts area, marked with 61.8% retracement.

[Solid ECN]

Oil


Oil prices have made an almost complete U-turn, recovering the majority of losses made earlier today. While there was no specific news driving the rebound, Reuters survey based on secondary sources suggested that OPEC countries were over complying with pledged output cuts. While countries like Saudi Arabia, Kuwait and United Arab Emirates were mostly in-line with pledged cuts, there were a number of countries that have cut more than pledged. Iraq and Nigeria are of note here as they are significant oil producers and their compliance with pledged cuts stood at 151% and 448% respectively. Combined output of 13 OPEC countries was 460k bpd lower in May than in April. Moreover, output data for April was revised lower by 150k bpd.


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Taking a look at OIL.WTI chart at H1 interval, we can see that price plunged to $67.00 area earlier today, where early-May lows are located. However, buyers took over control afterwards and a strong upward move was launched. While OIL.WTI is still trading around 1% lower on the day, it has been dropping as much as 4% earlier. Continuation of the upward move will, however, depend on whether buyers manage to push the price above the $69.45-69.65 area, where the upper limit of a local market geometry can be found.

[Solid ECN]

Crude Oil

Brent crude is losing 4% today, which can be linked to several factors. The US media is talking about uncertainty regarding the debt ceiling agreement, as several Republicans have made it clear that they will not support the bill. In addition, there are increasing question marks over China and further demand growth.

Nonetheless, the key factor that is likely to support price declines at this point is the disagreement within the enlarged OPEC+ cartel. Recently, Saudi Arabia's oil minister warned contract sellers about the possibility of OPEC+ action, which could suggest another potential production cut. On the other hand, Russia's energy minister says Russia is happy with the current course of events and prices. However, there have been signs that Russia may also be producing and exporting more than the internal arrangements in the cartel. This threatens a potential 'break-up' of the entire agreement, which could lead to a return of supply of as much as 2 million barrels per day, although of course one has to bear in mind the limited capacity for such a rapid increase in production. Nevertheless, recently, Iraq or the UAE were said to have hinted that they would like to produce more.



Strong declines in Brent crude were triggered by uncertainty about the sustainability of the OPEC+ agreement and uncertainty about demand from China or globally if the US were to eventually go bankrupt. The nearest support is around USD 68 per barrel, where the 23.6 retracement is located.

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USDJPY

USDJPY quotes started the new week with a correction. Looking technically at the D1 interval, before the weekend the price reached the upper limit of the wide upward channel, where sellers appeared. For now it is far too early to think about a change in sentiment, nevertheless the last upward wave was made in one go, so there is a risk of a deeper downward correction. Should the discount actually gain momentum, the 137.30 - 137.90 zone should be regarded as key support. Resistance remains around the 141.00 level, which is the area of the upper limit of the aforementioned upward channel.



Looking at the lower time frame - H1, we can see the very strong uptrend. The key short-term support is the level of 139.60, which is derived from the lower limit of the 1:1 structure and the EMA100 average. According to the overbalance methodology, only a break of this support could lead to a deeper discount.

[Solid ECN]

Bitcoin

• US debt deal was reached during a weekend
• Beijing “Web3 Innovation and Development White Paper” introduction

Bitcoin experienced a price increase over the week, reaching above $28,000, attributed to various factors. One significant development was the announcement of a debt ceiling deal by the White House, which boosted market sentiment and led to a 4.9% increase in Bitcoin and a 4.9% increase in Ether. Additionally, a Chinese governmental agency released a white paper outlining suggestions for China's Web3 policy, signaling progress in a country that has been reevaluating its approach to cryptocurrencies.





The release of the white paper in Beijing coincided with new digital asset regulations in Hong Kong, sparking further interest in China's stance toward the crypto industry. The document, titled "Web3 Innovation and Development White Paper," recognizes Web3 technology as an essential aspect of future Internet industry development. Beijing's municipal government aims to establish the city as a prominent global innovation hub for the digital economy, allocating a minimum of 100 million yuan annually until 2025 for this purpose. As a reminder, retail investors in Hong Kong are allowed to trade cryptocurrencies starting from the 1st of June.

[Solid ECN]

EURUSD


Flash PMI indices for May from France and Germany were released at 8:15 am BST and 8:30 am BST, respectively. Data was expected to show a small improvement in the manufacturing sector as well as deterioration in the services sector.


Indeed, it was the case with French data with manufacturing index climbing in-line with expectations and services index dropping more than expected. However, things looked different in case of German data as manufacturing index there disappointed and dropped instead of improving while services gauge unexpectedly jumped. In both countries manufacturing sector remained below 50 points threshold, indicating a recession, while services sector remain above 50 points threshold, indicating an expansion.





EUR and European indices dropped in a knee-jerk move after the French release, with EURUSD dropping deeper below 1.08 mark. While equity indices managed to recover from those losses later on, they faced another wave of selling following German data. Meanwhile, EUR attempted to recover after German data and moved back towards the 1.08 mark.

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EURUSD

The EURUSD pair has been under pressure over the past few weeks; however, last Friday, bulls showed signs of strength once again.




EURUSD - 4 hours time frame chart

However, on the 4-hour chart, we can see that buyers regained control of the price near an important support zone marked by 1.0757. Currently, the price is approaching a significant obstacle - the downtrend line. If buyers manage to break above this zone, the upward movement may resume.




On the 4 hours time chart of the US Dollar Index, we can also see signs that the bearish scenario for the USD may indeed manifest. From a technical standpoint, we observe that sellers managed to break below the lower boundary of the rising wedge pattern, which could bring new selling pressures to the price.

[Solid ECN]

Oil


WTI (OIL.WTI) launched a new week's trade lower as failure to make progress on the US debt ceiling over the weekend brings us closer to the US default. On top of that, the Chinese decision to ban Micron chips is also risking reigniting tensions between the US and China.

[Solid ECN]

DE 30


German DAX rallied over the past two days, adding almost 2% over Wednesday and Thursday combined. The upward move was being continued on the futures market during the Asian session today as optimism over possible agreement on US debt ceiling drove equities higher. As a result, DAX futures (DE30) briefly traded above 16,300 pts mark at fresh all-time highs.


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Taking a look at DE30 chart at H1 interval, we can see that the upward move on the German index accelerated after breaking above the 15,810-16,085 pts range. While the index pulled back a bit after reaching a fresh ATH, there is still some room for gains from a technical point of view. A textbook range of the upside breakout from the aforementioned 15,810-16,085 pts trading range suggests a possibility of the upward move to as high as 16,355 pts - or around 0.6% higher from current market price.

[Solid ECN]

USDJPY

• Wall Street indices rallied for another day. S&P 500 gained 0.94%, Dow Jones gained 0.34% and Nasdaq surged 1.51%. Russell 2000 added 0.58%
• US President Biden said that negotiator teams are making a steady progress on debt ceiling
• Meanwhile, US Vice President Harriss and White House economic adviser Brainard warned that US debt default could trigger a recession
• Indices from Asia-Pacific traded mixed today - Nikkei and Kospi gained 0.8%, S&P/ASX 200 moved 0.6% higher, Nifty 50 dropped 0.2% and indices from China traded mostly lower
• European index futures point to a higher opening of the European cash session today
• DAX futures (DE30) briefly traded above 16,300 pts and painted fresh record highs earlier today
• G7 leaders will discuss new sanctions on Russian diamond trade as well as on countries that help Russia circumvent sanctions
• Reuters reports that Chinese state banks have intervened on the market to support falling yuan
• Japanese CPI inflation accelerated from 3.2 to 3.5% YoY in April (exp. 3.5% YoY). Core CPI inflation (ex-food) accelerated from 3.1 to 3.4% YoY (exp. 3.4%). So-called core-core CPI inflation (ex-food and energy) accelerated from 3.8 to 4.1% YoY (exp. 3.4% YoY)
• New Zealand's trade balance for April reached NZ$427 million (exp. -NZ$235 million)
• Cryptocurrencies are trading mixed - Bitcoin drops 0.3%, Dogecoin trades 0.1% lower, Ripple adds 0.4% and Litecoin rallies 1.5%
• Energy commodities trade mixed - oil gains 0.7-0.8% while US natural gas prices drop 0.6%
• Precious metals trade higher - gold gains 0.2%, platinum adds 0.3% while silver and palladium gain 0.6% each
• AUD and JPY are the best performing major currencies while EUR and GBP lag the most

Japanese yen is one of the best performing G10 currencies today following a beat in CPI data for April. USDJPY is pulling back and looking towards a test of a recently-broken resistance zone at 138.00.