“Too early to declare victory in the battle against inflation,” said Reserve Bank of Australia (RBA) Governor Philip Lowe while speaking at the Morgan Stanley Australia Summit early Wednesday in Asia.

Additional comments

AUD/USD remains firmer

Despite showing little reaction to the news, AUD/USD stays firmer at the highest levels in three weeks by keeping the post-RBA rally during a five-day uptrend.

• Despite technical indicators predicting further upside, GBP/JPY sees consecutive negative sessions; it currently trades at 173.44.
• Potential pullback looms, with immediate support at the Tenkan-Sen line of 173.43 and further at 173.00.
• For bullish continuation, GBP/JPY needs to claim the 174.00 mark.

GBP/JPY registers back-to-back negative sessions, sponsored by risk aversion; though technical indicators suggest further upside, price action means the rally is losing steam. As the Asian session begins, the GBP/JPY trades at 173.44, up a minuscule 0.01%.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY is upward biased thought; it could be subject to a pullback, as the GBP/JPY is forming a rising wedge. On the downside, prices remain capped by the Tenkan-Sen line at 173.43, which would act as immediate support, but with a decisive break below the latter, the GBP/JPY could dive towards the 173.00 figure. The following support would be the May 2 high at 172.33, followed by the Kijun-Sen line at 171.26.

The GBP/JPY must claim the 174.00 mark for a bullish continuation. A breach of the latter will expose the YTD high at 174.68, with buyers eyeing 2016 high at 177.37.

GBP/JPY Price Action – Daily chart

• GBP/USD stays defensive after three-day losing streak, rebounds of late.
• Pound Sterling’s recovery from fortnight-old support line, improving oscillators lure buyers.
• 200-SMA, one-month-long horizontal resistance area challenge Cable bulls.

GBP/USD licks its wounds near 1.2425 during early Wednesday morning in Asia, after declining in the last three consecutive days. In doing so, the Cable pair rebounds from a two-week-old ascending support line to consolidate the weekly loss, after snapping a three-week downtrend in the last.

That said, the steady RSI (14) line joins the receding bearish bias of the MACD signals to back the latest run-up in the Pound Sterling price.

However, the 200-bar SMA level of 1.2475 by the press time challenges GBP/USD bulls.

Even if the quote manages to remain firmer past the key SMA, a horizontal area comprising multiple tops marked since early May, close to 1.2540-45, quickly followed by the 1.2550 psychological level, will act as an extra filter towards the north.

Should the GBP/USD buyers manage to cross the 1.2550 hurdle, the 1.2600 round figure and the previous monthly high of 1.2680 can lure them.

Meanwhile, the GBP/USD pair sellers need validation from the aforementioned support line, close to 1.2400 at the latest. Following that, a quick fall to May’s bottom of 1.2308 can’t be ruled out.

Though, multiple levels marked during February and March highlight 1.2300-2270 as a tough nut to crack for the Pound Sterling sellers to break afterward.

Overall, GBP/USD is likely to recover but the upside room appears limited.

GBP/USD: Four-hour chart

Trend: Limited upside expected

• The NZD/AUD pair sets a fifth consecutive day of gains and stands in the overbought area.
• RBA surprised the markets by announcing a 25 bps hike to the 4.10% level.
• Australian bond yields give traction to the Australian Dollar.

The NZD/AUD gained more than 60 pips closing at 1.0975 on Tuesday following the Reserve Bank of Australia (RBA) decision which exceeded economist expectations. In that sense, the main reason for the Aussie’s upward trend is the rise in Australian bond yields. For Wednesday’s session, eyes will be on RBA Governor Lowe's speech and Q1 GDP data from Australia.

A hawkish stance from the RBA gives the Aussie traction

Following a pause in April’s meeting, the Reserve Bank of Australia (RBA) has recently announced consecutive unexpected moves towards a more hawkish stance with a 25 basis point (bps) hike. According to the bank, this decision comes in light of the persistently tight labour market conditions and elevated levels of inflationary pressures and hinted that ongoing rate hikes might be necessary.

As a reaction, the 2-year Australian bond yield surged to its highest level since 2012, giving further traction to the Aussie. 

On the Kiwi’s hand, investors will eye Chinese economic data on Wednesday. As China is one of the main trading partners of New Zealand, the outcome of the data may have a further impact on the NZD price dynamics.

Levels to watch

According to the daily chart, the AUD/NZD holds a bullish outlook for the short term as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest that the buyers are in control while the pair trades above its the 20,100 and 200-day Simple Moving Averages (SMA). However, the RSI standing in overbought conditions, suggest that the pair is poised for a downward technical correction.

On the downside, immediate support for AUD/NZD is seen at the 1.0939 level, followed by the 1.0900 zone and the 200-day SMA at 1.0882. On the upside, the resistances lineup at the daily high at 1.0992 followed by the 1.1020 area and the 1.1050 zone.

• EUR/USD stays depressed despite latest corrective bounce, remains sidelined overall.
• Downbeat German data, easing inflation expectations prod ECB hawks.
• Fed policymakers observe pre-FOMC silence period, light calendar adds to the market’s indecision.
• Receding hawkish bets on FOMC fails to inspire Euro bears despite downbeat EU signals.

EUR/USD licks its wounds around 1.0700 as bulls and bears jostle during a sluggish week comprising unimpressive data and the Fed blackout. That said, the Euro price pared intraday losses during late Tuesday but remains sidelined as the early Asian session morning restricts the market’s moves.

That said, the quote dropped the previous day amid downbeat EU data and receding hawkish concerns from the European Central Bank (ECB). However, a lack of inspiration for the US Dollar bulls put a floor under the EUR/USD price.

On Tuesday, Germany’s Factory Orders slumped to -9.9% YoY in April versus -8.9% expected and -11.2% (revised). Elsewhere, Eurozone Retail Sales for April improved on YoY to -2.6% from -3.3% (revised) prior and -3.0% expected but marked an unimpressive monthly figure of 0.0% compared to 0.2% market forecasts and -0.4% previous readings (revised).

Furthermore, results of the European Central Bank’s (ECB) monthly survey of consumer expectations for inflation unveils that inflation expectations among Eurozone consumers decreased significantly in April, to 4.1% for the next 12 months from 5.0% expected in March. However, the growth expectations improved to -0.8% versus -1.0% expected in March.

It should be noted that European Central Bank (ECB) policymaker Klaas Knot said on Tuesday, “We will keep tightening policy until we see inflation returning to 2% but this must be done step by step.”

On a different page, the US Dollar Index (DXY) rose 0.13% on a day to 104.12 by the end of Tuesday as a resolution to the United States default fears propelled bond offerings from the government but marked a mixed response on the yields as the 10-year coupons remain sluggish at around 3.69% whereas the two-year counterparts rose a bit to 4.50%. However, downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout, restrict the US Dollar moves.

Amid these pays, the technology stocks remained firmer but the manufacturing ones weighed on the sentiment and pared Wall Street’s gains. Even so, the US equities closed with minor gains.

Looking ahead, German Industrial Production and the US foreign trade numbers decorate today’s economic calendar but major attention should be given to the risk catalysts for clear directions.

Technical analysis

Despite the latest inaction, the EUR/USD pair remains above the previous resistance line stretched from early May, as well as the 200-day Exponential Moving Average (EMA), respectively near 1.0650 and 1.0690, which in turn keeps the Euro buyers hopeful.

• AUD/JPY sees a sharp rally, buoyed by RBA’s surprise rate hike to 4.10%; the pair trades flat above 93.00.
• The technical analysis projects a bullish bias, with key resistance at the December 19 high of 93.35.
• Risk aversion could trigger pullback, with initial support found at the May 19 high of 92.35.

AUD/JPY rallied sharply on Tuesday after the Reserve Bank of Australia (RBA) surprisingly raised rates by 25 bps, lifting the cash rate to 4.10%. Therefore, the AUD/JPY jumped from 92.30, toward 93.14, before retracing some of those gains, but buyers moving in, lifted the AUD/JPY toward the current spot price. At the time of writing, the AUD/JPY is trading at 93.14, flat as the Asian session begins.

AUD/JPY Price Analysis: Technical outlook

After rallying sharply, the AUD/JPY remains upward biased, as it sits above the Ichimoku Cloud and the Chikou Span. Additionally, the Tenkan-Sen line is above the Kijun-Sen line, each at 91.76 and 91.21, respectively, another bullish signal. Nevertheless, the nature of the cross-currency pair indicates that its subject-to-market sentiment swings, which could shift the pair’s direction.

The Relative Strength Index (RSI) indicator and the 3-day Rate of Change (RoC) further cement the bias, as the RSI sits in bullish territory, while the RoC indicates buyers remain in charge.

Therefore, the AUD/JPY first resistance would be the December 19 high at 93.35. A breach of the latter will expose a top-trendline of an ascending channel at around 93.70/85 before challenging the 94.00 figure.

In the event of risk aversion, the AUD/JPY pair may be subject to a pullback, and the first support would be the May 19 high at 92.35 before diving to the 92.00 figure. Once cleared, the next support would be the Tenkan-Sen line at 91.76, ahead of sliding toward the Kijun-Sen line at 91.21.

AUD/JPY Price Action – Daily chart

• Gold Price approaches top of three-week-old trading range during sluggish markets.
• XAU/USD price improves amid dicey Federal Reserve concerns on mixed United States data, market bets.
• Upbeat headlines surrounding China, cautious optimism puts a floor under the Gold Price.
• Risk catalysts are the key for short-term directions amid light calendar, pre-Fed blackout.

Gold Price (XAU/USD) seesaws around $1,963 amid the early hours of Wednesday’s Asian session, after a two-day rebound within a short-term trading range. In doing so, the XAU/USD pays little heed to the US Dollar’s slightly positive performance as sluggish markets and lack of major data/events direct traders towards the Gold as a safe investment. Also, looming uncertainty about the Federal Reserve’s (Fed) next move joins risk-positive headlines from China adding strength to the Gold Price.

Gold Price remains sturdy amid sluggish markets, US Dollar

Gold Price rose in the last two consecutive days while bouncing off a three-week-old trading range’s bottom even as the global markets remain sluggish. The reason could be linked to the downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout. That said, the US Purchasing Managers’ Indexes (PMIs) for May came in softer than expected and raised concerns that the US central bank has lesser scope to extend the rate hike trajectory.

Furthermore, upbeat headlines surrounding China, one of the world’s biggest Gold consumers, also favor the XAU/USD Price. After witnessing disappointment from the activity data in the last week, Beijing reported an upbeat Caixin Services PMI for May. Also positive was the news suggesting China’s measures to enable major banks in the nation to unleash more lending capacity. Additionally, concerns that the diplomatic talks between the US and Chinese policymakers were positive in the last round also underpin the Gold Price rebound.

Elsewhere, the US Dollar prints mild gains amid sluggish markets with no major data/events and an absence of the Federal Open Market Committee (FOMC) members’ speeches due to the pre-Fed blackout period. With this, the US Dollar Index (DXY) rose 0.13% on a day to 104.12 by the end of Tuesday.

A resolution to the United States default fears propelled bond offerings from the government but marked a mixed response on the yields as the 10-year coupons remain sluggish at around 3.69% whereas the two-year counterparts rose a bit to 4.50%. On the same line, the technology stocks remained firmer but the manufacturing ones weighed on the sentiment and pared Wall Street’s gains. Even so, the US equities closed with minor gains. With this, the market’s indecision drives traders towards the Gold buying.

Looking forward, a light calendar can keep the Gold traders troubled but today’s China and US trade numbers, as well as developments surrounding the Federal Reserve (Fed) bets, currently suggest a 24% chance of a 25 bps rate hike in June, can direct the XAU/USD price.

Gold Price Technical Analysis

Gold Price fades bounce off a three-month-old horizontal support area, recently sidelined, while staying within a trading range established since mid-May.

That said, the precious metal’s weakness takes clues from the near-50 level of the steady Relative Strength Index (RSI) line, placed at 14. However, the looming bull cross on the Moving Average Convergence and Divergence (MACD) indicator challenges the XAU/USD bears.

Hence, the bullion’s downside appears limited to the previously mentioned broad support region surrounding $1,937-33.

Following that, the 61.8% Fibonacci retracement of the metal’s March-May upside, near $1,912, can act as the last defense before dragging the Gold Price to the $1,900 round figure.

Meanwhile, recovery moves have a comparatively bumpier road to travel as the stated three-week-old trading range’s peak joins the 200-SMA to highlight $1,990 as a tough nut to crack for the XAU/USD bulls.

In a case where the Gold Price crosses the $1,990 hurdle, the $2,000 round figure may act as an extra check towards the north.

Gold Price: Four-hour chart

Trend: Limited downside expected

• NZD/USD bulls are in riding the AUD´s coattails. 
• Focus will turn domestic with NZ GDP coming up. 

NZD/USD has been range bound in the prior day following the Reserve Bank of Australia´s surprise hawkish hike. NZD/USD is steady in early Asia, sitting near 0.6075.

´´The Kiwi is little changed this morning and most crosses, with the exception of NZD/AUD, are likewise following a fairly muted night on global FX markets,´´ analysts at ANZ Bank explained. 

The analysts explained with the RBA behind us and the AU market now pricing in a follow-up hike, the focus returns to local data and events.

In this regard, markets will be looking to New Zealand's first quarter Gross Domestic Product partials, the analysts said, like manufacturing (tomorrow) out and the Fed in blackout ahead of its meeting next week.

´´We continue to think about carry but are beginning to ask if NZ’s external position might suddenly become a sticking point when current account data is published next week.´´