US Dollar Index

The US dollar index continued to trade below 98.00 on Wednesday, falling for two consecutive trading days as safe-haven demand weakened amid easing geopolitical risks in the Middle East. The US-brokered ceasefire between Israel and Iran appears to remain in force, despite minor localized clashes, and oil prices have retreated sharply from recent highs. However, geopolitical uncertainty remains as intelligence reports show that US missile strikes have only partially damaged Iran's key nuclear facilities, merely slowing Tehran's nuclear program. Meanwhile, investors digested the latest speech from Federal Reserve Chairman Powell, who reiterated the Fed's commitment to controlling inflation. Powell said that interest rates are likely to remain unchanged until the impact of tariffs on prices becomes clearer. Despite this, the market is still pricing in almost a 20% probability of a rate cut in July.

The US dollar index has given up most of its gains in the past two weeks, retreating nearly 1.4% from Monday's high. Price action is close to a two-week low of 97.70, and the current attempt to rise is still limited below 98.00{round mark}. The US dollar index is trading below the psychological mark of 98.00, and is currently forming immediate resistance at this level. A sustained break below the 97.61 {June 12 low} would expose the index to further declines, targeting 97.22 {March 22, 2022 low}, with the next level being the next psychological level of 97.00 which I have not tested since February 2022. The 14-day relative strength index (RSI) on the daily chart is approaching oversold territory, with a current reading close to 38.0, suggesting that short-term momentum may be stretched. An upward correction would require a break above 98.00 {round number} and 98.55 {14-day simple moving average} to shift the short-term bias back to neutral.

Consider shorting the US dollar index around 97.85 today, stop loss: 98.00, target: 97.35, 97.25

WTI spot crude oil

WTI crude oil fell below $65 a barrel on Wednesday, falling for the third consecutive day, as investors weigh the durability of the Iran-Israel ceasefire. A preliminary U.S. intelligence report showed that the recent U.S. strikes on three Iranian nuclear facilities only delayed Tehran's nuclear program by a few months, raising concerns about the resumption of regional conflict. The U.S.-brokered ceasefire also appears fragile, with both sides accused of launching attacks soon after the ceasefire came into effect. Meanwhile, industry data showed that U.S. crude oil inventories fell by 4.28 million barrels last week, far exceeding the expected 600,000 barrel drop. This marked the fourth consecutive week and the sixth decline in eight weeks, indicating that supply is tightening. However, the International Energy Agency maintains an emergency reserve of 1.2 billion barrels, some OPEC+ members are increasing production, and there is spare capacity to be used if needed.

In Asian trading on Wednesday, U.S. oil traded slightly below $65.00 per barrel. Oil prices fell more than 3% on Tuesday, as low as below $64 per barrel, hitting a two-week low, as the ceasefire between Israel and Iran reduced the market's expectations of the risk of oil supply disruptions in the Middle East. At the same time, an unexpected decline in U.S. consumer confidence also dragged down oil prices. Although oil prices have retreated in the short term due to geopolitical easing, market uncertainty remains. The uneven global economic recovery, the acceleration of energy transformation, and the volatile geopolitics may all pose new challenges to oil prices. Therefore, oil prices may retest the 200-day simple moving average of $68.34 in the short term, and then the psychological level of $70.00. On the downside, you can focus on the $63.63 {40-day simple moving average}, and the $63.72 {Tuesday's low} area, and further point to the $63.00 round mark.

Today, you can consider going long on WTI crude oil around 64.30, stop loss: 64.10, target: 66.00, 66.30

Spot gold

Gold prices rose during the Wednesday session, trying to continue to rise to around $3.330 on the basis of a small rebound from below $3,300 the previous day, the latter being the lowest point in two weeks. On the other hand, the decline in U.S. Treasury yields has brought the dollar close to a one-week low and provided some support for non-yielding gold. Gold prices appear to have ended a two-day losing streak for now, though gains lack bullish confidence as optimism over the Israel-Iran ceasefire has acted as headwind for traditional safe-haven assets. However, Israel’s attack on Tehran and Iran’s missile strikes cast doubt on the durability of the ceasefire. This leaves geopolitical risks still alive, which, coupled with a supportive fundamental backdrop, supports the prospect of further gains in gold prices.

From a technical perspective, the overnight decline confirmed the breakout of a short-term ascending channel, favouring bearish traders. Moreover, oscillators on the daily chart have started to gain negative momentum, suggesting that the path of least resistance for gold prices is to the downside. Therefore, any subsequent gains may be seen as selling opportunities and capped near $3,360 {14-day simple moving average}. However, a sustained strong breakout could see gold prices challenge recent highs around $3.397 {Monday’s high}, and $3,400 {round-figure mark}. On the other hand, bearish traders may now wait for confirmation of gold prices below the psychological $3,300 level before making new bets and prepare for a decline towards the $3,271.70 {May 30 low}, and the $3,245 area.

Consider going long gold around $3,328 today, stop loss: 3,324, target: 3,355, 3,360

AUD/USD

The Australian dollar extended its third session of gains on Wednesday. AUD/USD remained strong following the release of Australia’s monthly Consumer Price Index (CPI), which rose 2.1% year-on-year in May. The inflation data was lower than the market’s expectations of 2.3% and the previous value of 2.4%, slowing down after three consecutive months of consistency. Australia’s softer inflation data, along with the recent lower-than-expected GDP data, reinforced market expectations for a rate cut by the Reserve Bank of Australia (RBA) in July. The Australian dollar was also supported by improved risk appetite due to easing tensions in the Middle East. However, the market remains cautious due to concerns about the durability of the ceasefire. Traders may focus on the potential revival of nuclear talks and the fate of Iran's enriched uranium.

AUD/USD traded around 0.6500 on Wednesday. Daily technical analysis shows a continued bullish bias as the pair has broken above the 34-day simple moving average of 0.6465, indicating that short-term price momentum is strengthening. The 14-day relative strength index (RSI) of the daily chart is slightly above 50. In addition, on the upside, AUD/USD may explore the area around the seven-month high of 0.6552 set on June 16, followed by the upper line of the ascending channel around 0.6570. A break below this level further points to the 0.6600 round number mark. Immediate support appears at 0.6465 of the 34-day simple moving average. A break below this level will weaken short-term price momentum and exert downward pressure on AUD/USD to test the lower line of the ascending channel at 0.6450, which is consistent with the 50-day simple moving average at 0.6447.

Consider going long on AUD near 0.6500 today, Stop Loss: 0.6490, Target: 0.6550, 0.6560

GBP/USD

The British pound extended its three-day rally this week, driven by positive market sentiment regarding a ceasefire in the conflict between Israel and Iran. However, the ceasefire remains fragile as both sides attack each other near or after the deadline proposed by Washington. GBP/USD is now trading above 1.3660 after falling below 1.3600 earlier, Data showed that US new home sales fell 13.7% in May to 623,000 units from 722,000 units in April. In the UK, the dovish stance of Bank of England Governor Andrew Bailey limited the gains of GBP/USD, as he said that interest rates may be cautiously lowered due to the weak job market. In the week, the UK economic calendar will include the release of the BoE speaker and growth data. In the US, durable goods orders, Fed speech, GDP and inflation data are likely to set the tone for the GBP/USD pair.

GBP/USD is trading close to the year-high of 1.3660, which may open the door for further gains. However, it is worth noting that a daily close below 1.3600 may trigger a correction. Nevertheless, the 14-day relative strength index (RSI) of the technical indicator on the daily chart suggests that the pair may consolidate after turning flat. Upward resistance for GBP/USD is located at the 1.3700 round number mark, followed by 1.3750. A break above the latter will expose it to the 1.3800 mark. Conversely, if the pair falls below 1.3600, sellers may test the 20-day simple moving average of 1.3532. If it breaks, the next target will be the 1.3500 round number mark.

Consider going long GBP around 1.3650 today, stop loss: 1.3635, target: 1.3680, 1.3700

USD/JPY

The yen edged lower against the dollar during Wednesday's Asian session as optimism over an Israel-Iran ceasefire continued to weigh on traditional safe-haven assets. In addition, a summary of the Bank of Japan's June meeting showed that some policymakers called for a temporary hold on interest rates due to uncertainty over the impact of US tariffs on the Japanese economy. This became another factor that further weakened the yen. However, any meaningful yen depreciation still seems elusive as the market increasingly accepts the view that the Bank of Japan will raise interest rates again. This bet was supported by Japan's service producer price index (PPI), which rose for the third consecutive month and remained above the 3% annual rate in May. This was a notable divergence from market expectations that the Federal Reserve will further reduce borrowing costs, which kept the dollar suppressed and should benefit the yen.

From a technical perspective, USD/JPY’s decline below the 145.35-145.25 resistance-turned-support zone and acceptance below the 200 hourly simple moving average are seen as key triggers for USD/JPY bears. Moreover, oscillators on the daily chart have just started to gain negative momentum, validating the pair’s short-term negative outlook. A follow-up sell-off below the mid-144.00s or overnight lows could pave the way for a slide towards the 144.00 round-number mark and, in turn, a move towards the 143.70-143.65 area, with the ultimate goal of testing levels below 143.00. On the other hand, any attempted bounce could be capped around the static resistance of 145.25-145.35. A sustained strong break above the latter could trigger a short-term covering rally that could allow USD/JPY to recapture the 146.00 mark. While the momentum could extend further, the risk of a quick fade around the 146.65-146.70 area remains.

Consider shorting the dollar around 145.50 today, stop loss: 145.70, target: 144.40, 144.20

EUR/USD

EUR/USD rose to its highest level since October 2021 on Wednesday, reaching 1.1665, benefiting from risk appetite triggered by the easing of the Iran-Israel conflict and general weakness in the dollar. Growing speculation among investors that the Federal Reserve will cut interest rates has pushed the dollar lower, ready to test yearly lows. The pair traded at 1.1660. Geopolitics and central bank speeches attracted much attention at the beginning of the week. Federal Reserve Chairman Jerome Powell appeared at a hearing in the U.S. Senate, reiterated that monetary policy is appropriate, and said that the central bank is working to determine the impact of tariffs on inflation. Regarding geopolitics in the Middle East, U.S. President Donald Trump revealed that the United States will hold a meeting with Iran next week. He warned that the United States will attack Iran again if the Iranian regime starts to build nuclear weapons.

EUR/USD remains bullish, refreshing to 1.1665 after breaking through the previous yearly high of 1.1642, and further gains are expected in the short term. The 14-day relative strength index (RSI) of the daily chart is now at a recent high of 67.50, indicating that buyers are gaining momentum. In other words, the next immediate resistance level for EUR/USD is 1.1700. Once it is strongly broken by the bulls, the next areas of focus will be 1.1800 {market psychological level}, and 1.1810 {September 11, 2021 high}. On the other hand, a daily close below $1.1600 may pave the way for a test of 1.1560 {9-day simple moving average}.

Today, consider going long on the euro near 1.1645, stop loss: 1.1635, target: 1.1680, 1.1700

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