U.S. Treasuries and equities drive the market.
Global investors were focusing on updates by the Federal Reserve in terms of possible rate cuts as early as in July. U.S. 10-year yields had finished the 2-weeks bullish retracement, and continued the downtrend, signalling strong demand for safe-haven assets on the back of concerns about enormous liquidity. As a result, major stock indices were vulnerable to bearish retracements after equity investors failed to continue rewriting all-time highs. For Instance, the S&P 500 benchmark dropped -1.15% to 2974.9 points, tech-heavy NASDAQ plunged -1.74% to 7796.7 points, while the Dow Jones Industrial Average slid -0.58% to 27140.5 points. Another reason for investors and traders to sell stocks was related to earnings season started this past week as most of the reports were disappointing. Most of the overseas stock indices, including German DAX 30, French CAC 40 and Japanese Nikkei 225 followed the global economic leader.
U.S. dollar index failed to sustain mid-week recovery.
The greenback started the trading week on a positive tone versus the volume-weighted basket of six major currencies. However, the price action reversed the sentiment on Wednesday, and DXY dropped to 96.68 points from the weekly peak of 97.45. Despite Friday's rebound, the technical sentiment remains bearish for the world’s reserve currency.
The DXY’s weekly gain of +0.45% was not uniform though. The New Zealand dollar was the strongest currency among majors as NZD/USD appreciated +1.05%. The Australian dollar (AUD/USD +0.32%), Swiss Franc (USD/CHF -0.25%) and Japanese yen (USD/JPY -0.17%) were also performing bullish action throughout the week. Euro (-0.44%), British Pound (-0.57) and Canadian dollar (-0.24%) were the only drivers for the overall appreciation of the U.S. dollar index.
Commodities traded with a mixed bias.
The price of gold rose another 0.7% weekly, renewing the local peak at $1452.40 per ounce. The last time such a high price of the yellow metal was noticed in August 2013, almost six years ago. Silver printed highs above $16.50 per ounce for the first time in 12 months, gaining impressive 6.4% this past week. In contrast, WTI and Brent Crude oil prices dropped to $55.72 per barrel (-7.60%) and $62.81 per barrel (-6.06%) respectively.
EUR/USD weekly forecast: Neutral.
The test of 1.1280 resistance was unsuccessful on Monday, and EUR/USD dropped to 1.1200 support after that. Euro bulls did not let the rate to drop beyond that level, and EUR/USD bounced up to 1.1280 again, drawing lower highs sequence on the intraday four-hourly chart. Another test of the bottom of the weekly range followed, and EUR/USD finished the trading week at 1.1220, losing 50 pips or 0.44% in five trading days. As a result, two-week tight range of 80-100 pips remains in play without clear direction for the near future.
The screenshot below shows the 4H chart with a clear sideways consolidation range between 1.11988 (support) and 1.12842 (resistance). EUR/USD bounced off both levels 8 times recently. In such a technical environment, the most effective indicator is Bollinger Bands with an extended period of 25 bars. Currently, the pair remains below the BB middle line, suggesting short-term bearish sentiment. Additional oscillators confirm the previous assumption as 21-bars Relative Strength Index dropped below the 50% level, and 13-bars Williams %R oscillator is heading towards the oversold territory. On the other hand, the bulls managed to chart three consecutive higher lows, showing their intention to fight for the defensive barrier of the round-figure handle of 1.1200.
The most effective trading strategy was buying lows and selling highs recently. The most probable scenario for the upcoming week is to remain in the same sideways range. Therefore, intraday traders should monitor the Bollinger Bands indicator in terms of possible tests of its bottom and top lines. Another test of the support is likely, where it would be reasonable to seek reversal signals from oscillators and go long if the defensive barrier held. Targets would stay the same as the resistance of 1.1284 looks strong so far. Otherwise, a breakthrough strategy would be applicable with sell-stop orders below 1.1180, targeting 1.1100 support.
WTI Crude weekly forecast: Bearish.
WTI Crude oil price charted two Doji candlesticks on the daily timeframe (see the chart below) on July 7 and 8. Although the bulls breached the psychological round-figure resistance of $60.00 per barrel, they failed to continue the upward action, peaking at $60.91 per barrel. The lack of bullish continuation was comprehended as weakness and the bears stepped in with heavy-volume sell-orders. As a result of the four-day bearish rally, WTI Crude price lost almost $5 per barrel (-8.0%), falling to $54.76 (weekly bottom). Friday’s Doji candlestick suggests that a local bottom has been found, and the bearish momentum was exhausted.
Daily Ichimoku Cloud trend indicator did not perform the bullish reversal pattern, despite the recent breakout above the cloud’s upper range. The span did not perform a bullish cross and remained negative. Both Conversion and Base Lines did not come out of the uncertain zone in the cloud, confirming that the breakthrough above $60.00 was false. Simple Moving Average with 280-days period held the bulls from further upside action. On the other hand, the bottom of the Ichimoku Cloud range limited the bears, as WTI Crude Price failed to close a day below it (green arrow on the chart), even though the rate closed below Ichimoku Base Line support. As long as the price remains inside the cloud, the technical sentiment will remain uncertain with a bearish bias.
Conservative traders should use the sell-highs trading strategy in the week ahead. A bullish retracement toward Ichimoku Conversion Line at $57.83 and a daily close below it would give a strong sell-signal to renew short positions. On the other side of the equation, the bottom of the range at $54.90 looks solid, and profits should be taken there. An aggressive approach suggests a bearish breakthrough of the support level with acceleration toward the lowest daily close rate of $51.07 printed on June 12. A breakthrough trading strategy would be reasonable in case if the bears managed to close a day below $54.90.