The dollar moved higher against the other major currencies on Tuesday, following comments by Federal Reserve Chair Janet Yellen, although investors remained cautious ahead Thursday’s British referendum on a potential exit from the European Union, or Brexit.
In prepared testimony before the Senate Banking Committee on Tuesday, Yellen outlined how the central bank was thrown off course within weeks of raising rates last December, by a slowdown in domestic growth and international events. Some of those clouds remain, Yellen said in comments that seemed to signal no pressing need for the Fed to raise rates. The Fed president also said the Brexit referendum on Thursday is considered a possible flashpoint for the global economy if Britain decides to cut its ties with the EU.
Investors remained cautious as the most recent poll on the U.K.’s June 23 referendum on membership in the EU showed both camps running neck and neck. Survation’s latest and final poll before the vote showed that 45% of British citizens preferred to remain in the EU, with 44% opting for a Brexit and 11% undecided.
Today Canada is to publish data on retail sales, Fed Chair Janet Yellen is to testify on monetary policy before the House Financial Services Committee, in Washington, and the U.S. is to report on existing home sales.
The euro fell to fresh three week lows against the pound on Tuesday, despite data showing that German economic sentiment improved this month, amid growing expectations for a U.K. vote to remain in the European Union on Thursday.
Data showed that the ZEW index of German economic sentiment rose by 12.8 points to a reading of 19.2 in June, while economists had expected the index to decline to 4.7.
But the single currency came under pressure after European Central Bank President Mario Draghi said euro zone growth is gaining momentum but uncertainty remains high, partly due to the June 23 Brexit vote. Draghi added that the ECB stands ready to act with all instruments if necessary.
Today investors’ focus will be on Fed Chair Janet Yellen’ speech on monetary policy before the House Financial Services Committee, in Washington, and on U.S. report on existing home sales, to gain more information on the strength of the greenback.
Pivot: 1.1325Support: 1.1215 1.1185 1.116Resistance: 1.1325 1.135 1.1385Scenario 1: short positions below 1.1325 with targets @ 1.1215 & 1.1185 in extension.Scenario 2: above 1.1325 look for further upside with 1.1350 & 1.1385 as targets.Comment: even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.
Gold
Gold fell sharply on Tuesday, amid a stronger dollar, as Federal Reserve chair Janet Yellen reiterated that the U.S. central bank would maintain a cautious approach with future interest rate adjustments, producing little reaction from global equity, currency and bond markets.
In testimony before the U.S. Senate Banking Committee on Tuesday, Yellen indicated that the FOMC remains hesitant to raise interest rates for the foreseeable future, amid slow economic and financial developments in China and the euro area, subdued household formation, and meager productivity growth. Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed.
Pivot: 1278Support: 1256.5 1249 1242Resistance: 1278 1294 1300Scenario 1: short positions below 1278.00 with targets @ 1256.50 & 1249.00 in extension.Scenario 2: above 1278.00 look for further upside with 1294.00 & 1300.00 as targets.Comment: the RSI is capped by a declining trend line.
WTI Oil
U.S. crude futures halted a three-day winning streak on Tuesday, amid a broadly stronger dollar, as Brexit concerns remained in focus and energy traders await the American Petroleum Institute's weekly inventory report after the close of trading.
But crude held gains in Asia on Wednesday, as industry data showed a drop in U.S. stockpiles, underpinning sentiment ahead of the U.K. vote to remain or leave the European Union. The American Petroleum Institute reported that U.S. crude supplies dropped by 5.2 million barrels for the week ended June 17, according to sources.
Today investors’ focus will be on the U.S. weekly report on oil and gasoline stockpiles released by the Energy Information Administration.
Pivot: 49.25Support: 49.25 48.85 48.34Resistance: 50.8 51.4 51.92Scenario 1: long positions above 49.25 with targets @ 50.80 & 51.40 in extension.Scenario 2: below 49.25 look for further downside with 48.85 & 48.34 as targets.Comment: the RSI broke above a declining trend line.
US 500
U.S. stocks rose on Tuesday, led by gains in technology shares, as Federal Reserve Chair Janet Yellen was optimistic about the economy and played down the risk of a recession, while concern over the upcoming British referendum remained subdued.
The Dow Jones industrial average rose 0.14%, the S&P 500 gained 0.27% and the Nasdaq Composite added 0.14%.
Today investors’ focus will be on Fed Chair Janet Yellen’ speech on monetary policy before the House Financial Services Committee, in Washington, and on U.S. report on existing home sales, to gain more information on the strength of the American economy.
Pivot: 2025 Support: 2025 1970 1950 Resistance: 2130 2190 2250 Scenario 1: long positions above 2025.00 with targets @ 2130.00 & 2190.00 in extension. Scenario 2: below 2025.00 look for further downside with 1970.00 & 1950.00 as targets. Comment: the RSI is mixed to bullish. A bullish reversal candlestick took shape on Thursday.