Financial markets changed trend’s direction for the second time in June, charting sharp reversals and doji stars on the weekly timeframe. Investors’ sentiment was mixed for global equities as major benchmarks were stuck in tight consolidation ranges this past week. For example, tech-heavy NASDAQ gained only 0.75%, Dow Jones Industrial Average added 0.41% to its value, while the S&P 500 finished the trading week with a modest result of +0.10%. Overseas benchmarks printed the same price action as Japanese Nikkei 225 gapped over the weekend (+1.11%) but remained at the same level at the end of the week, German DAX 30 slid 0.42%, while French CAC 40 failed to hold mid-week gains.
Commodities markets had multidirectional price action this past week. Gold tested the static horizontal level of $1350.00 per ounce for the third time this year, charting the highest rate since April 2018 ($1358.30), but reversed and bounced back to where started the week. The silver price declined 0.85%, failing to fix above $15.10 per ounce. In contrast, palladium prices soared +7.92%, finishing the week above $1465.00 per ounce. The oil market was vulnerable to further selling pressure despite some positiveness throughout the week. WTI Crude lost almost 3% of its price, while Brent Crude remained above $62.00 per barrel (-2%).
The foreign exchange market was much more volatile. The U.S. dollar index measuring greenback’s strength versus six major currencies recovered most of its losses from the previous week (+0.92%). The weakest currency was the New Zealand dollar as NZD/USD plunged -2.60% and closed the trading week below 65 cents for the first time since October 2018. The Australian dollar followed the closest neighbour, losing -1.85% versus the U.S. dollar. European currencies dropped as EUR/USD tested 1.1200 support again, USD/CHF jumped 1.11%, nearing the parity, while GBP/USD charted the lowest weekly close rate in six months. Chinese yuan and Japanese yen did not suffer from such high volatility, hovering around the same level as for the first week of June. The Canadian dollar failed to sustain the positive sentiment as USD/CAD gathered the bullish momentum, adding +1.09% to the exchange rate (1.3413).
It would be too early to conclude that the U.S. dollar is back to the uptrend as technical indicators are showing a mixed picture on the daily timeframe. On one side, the index bounced off the local bottom, which allowed us to draw the support trendline (green bold line, see the chart below). Relative Strength Index with a modified period of 21 days went back to the bullish value above 50%. On the other hand, the double resistance, which consists of two moving averages, still holds the rate from appreciation. DXY breached the 55-days exponential moving average from below but was stuck below the 34-days simple moving average. The round-figure resistance of 97.50 was also a tough nut to crack for the bulls. As a conclusion, we’d stay out of the market, having a wait-and-see position as both directions are possible for the greenback in the week ahead. Nearest pivot points are 97.5137 as resistance (SMA34) and 97.2976 as support (EMA55). Both levels should be monitored for reversal trading strategy on shorter timeframes.
The British pound is in danger of stalling. GBP/USD charted the lowest daily close since December 14 2018, just two pips shy of the latest bottom. The upside swing noticed in May this year was nothing but a technical retracement as the bears were gathering momentum before renewing the selling pressure on the pair. Two median lines (green dotted) divide the chart into three parts, while the range between them is the most likely price range for the nearest future. The nearest threshold for GBP/USD is the horizontal static support line (blue) at 1.24864, the lowest daily close noticed on December 11. The last time the pound was at such a low rate versus the greenback was in April 2017. If the last defensive barrier failed to hold the bears, Sterling traders would remove postponed buy orders to a lower range of 1.2050/2120 - the bottom is seen in Autumn 2016 right after the Brexit plunge. Technical indicators confirm that suggestion as MACD histogram is about to turn negative, while its lines are going to perform bearish crossover. Stochastic RSI has a lot of room to go south as oversold conditions were reloaded after the recent correction. We suppose that going short isn’t too late. However, traders should be ready to add more volume at around 1.2650 if the market got there. Stop-loss orders should be hidden above 1.2730, while target ranges are quite wide and depend on traders’ individual money management rules. Long positions are not even considered as standing against falling cable is a sort of suicide.
The Kiwi gave a perfect entry signal for short positions on June 7. NZD/USD retraced to breached support (now resistance of 89-days exponential moving average, while Williams %R oscillator charted a bearish reversal divergence in overbought zone (see the double-top formation in the indicator’s window on the daily chart below). The slide down to 0.6565 was widely expected, while Friday’s bearish acceleration was quite unexpected as the volatility was quite moderate before that. As a result, NZD/USD closed the day below the recent bottom, charting the sequence of lower lows. The pair is trading at 8-month low; Williams %R shows oversold conditions. Therefore, we expect the pair to bounce north where we’ll seek depth to re-enter the market, using the sell-highs trading strategy. The range of 0.6565/89 looks attractive for fresh short positions, targeting a breakthrough toward 0.6441.
From the technical analysis point of view, the price of gold tested the psychological round-figure static resistance of $1350.00 per ounce for the first time this year as recent peaks were noticed at $1346.75 on February 20 and $1348.21 on June 7. Last week’s rebound to $1320.03 was attractive enough for the buyers to step in with heavy-volume longs and the price soared to $1358.30 for the first time in 15 months. Despite the long shadow of the daily candlestick on Friday and negative body, we still think that gold should continue the uptrend in the nearest future. Speculators took partial profits on the bullish rally as the sharp price action triggered automatic sell-orders on Friday. A short-term consolidation is possible though as the bulls will need to gather more momentum before pushing the price of gold through the defensive barrier. However, the range between two Ichimoku lines should limit bearish action. The ADX indicator is extremely bullish as the main line is far below the threshold and edging up sharply, while the surplus between +DI and -DI lines is positive and enlarging. Ichimoku Base Line should be monitored for possible ling positions, counting on a breakthrough of $1350 from a second attempt this upcoming week.