Gold considers a bounce from key support, USD/JPY taps 145

Asian Indices:

• Australia's ASX 200 index fell by -2.2 points (-0.03%) and currently trades at 7,192.70
• Japan's Nikkei 225 index has fallen by -149.91 points (-0.45%) and currently trades at 33,084.42
• Hong Kong's Hang Seng index has risen by 4.37 points (0.02%) and currently trades at 18,938.73
• China's A50 Index has risen by 85.8 points (0.69%) and currently trades at 12,534.26

 

UK and Europe:

• UK's FTSE 100 futures are currently up 15.5 points (0.21%), the cash market is currently estimated to open at 7,487.19
• Euro STOXX 50 futures are currently up 1 points (0.02%), the cash market is currently estimated to open at 4,355.69
• Germany's DAX futures are currently up 19 points (0.12%), the cash market is currently estimated to open at 15,965.72

 

US Futures:

• DJI futures are currently down -13 points (-0.04%)
• S&P 500 futures are currently up 1.75 points (0.04%)
• Nasdaq 100 futures are currently up 27.25 points (0.18%)

 

• EUR/USD eventually fell in line with our bearish bias although stopped above last Friday’s low. Prices are consolidating ahead of the open and we see the potential for a pop higher towards the 1.0900 handle before losses resume (and break to new lows if PCE inflation is hotter than liked)
• USD/JPY tapped 145 for the first time since November 10^th to close the
• GBP/USD is showing signs of stability above the 1.2600 handle, with Thursday’s bearish range being less than half of Wednesdays
• WTI crude oil is made a mediocre attempt to retest $70, but it looks vulnerable to another spike lower unless bullish momentum picks up soon. 68.95 is a key support level for bulls to defend, with next resistance levels sitting around 78.5 – 100 and 72.
• The FTSE 100 seems to be building a base above 7400, since a bullish pinbar respected the key level and prices are trying to break higher. If it can hold above the May 31^st low ~7446 today, perhaps it can muster up the strength for another leg higher
• The DAX has managed to rise form the cycle lows, but it upside has underwhelmed and a double top has formed around 16,000 to warn of a reluctance to push higher immediately. Happy to step aside for now, with a break beneath 15897 risking a move below 15800.

 

USD/JPY taps 145 despite risking risks of intervention

USD/JPY continued to rise overnight and taped 145 for the first time since November 2022. Toyo released softer inflation data ahead of the Tokyo which prompted the initial move higher, as it now seems likely that Japan’s nationwide inflation will lose steam in the July report.

It closed the liquidity gap we warned of a couple of weeks ago thanks to a combination of hawkish Fed comments, stronger US economic data, a dovish BOJ and lack of verbal intervention from Japan’s Ministry of Finance. But the higher this pair trades, the more likely it becomes that we’ll hear more comments form officials regarding yen volatility, in a bid to fend off speculators.

For now, it appears that bulls want another crack to break USD/JPY above 145.10, with bulls potentially seeking to buy dips around the 144.32 – 144.50 zone. But if ever this is a sign that some nervousness is appearing at these highs, it can be seen within the 25-day risk reversals, which shows put demand (downside protection) relative to call demand (upside bets) spiked as USD/JPY edged closer to 145.

 

Gold futures daily chart:

Traders remain net-long gold futures, although exposure has diminished alongside long exposure whilst prices have puled back from this year’s high. But it may be able to find some support around a volume cluster and bonce higher.

Whilst spot gold prices traded briefly below $1900 yesterday, the front-month gold futures contract did not. A bullish pinbar formed on the daily chart just above the big round $1900 level, and the day’s open-close range held above the volume cluster comprising of a weekly VPOC (volume point of control) and VPOC from the rally between 1813 – 2000.

 

Technically, I suspect gold it is due a bounce (even if only to be a correction against its bearish trend). Of course, what could help it treat 1900 like a springboard is if US PCE inflation data comes in much softer than expected later today, as traders would see it as less reason for the Fed to remain hawkish, to send short-term yields and US dollar lower.

But unless we see a strong rally from current level’s we would then seek evidence of a swing high below 1945 to see if it can eventually break beneath 1900. Whereas a direct break below 1900 invalidates the near-term bullish bias and brings 1867 into focus for bears.

 

 

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge