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20.06.2019 Daily Bulletin
The US Fed kept its benchmark federal funds rate on hold after its meeting Wednesday. It, however, for the first time signaled a clear indication that it will begin cutting the rates as early as July, to battle global trade tensions, slowing economies and risks posed from within domestic economy such as weak inflation. Only one of nine board members, St. Louis Fed President James Bullard, dissented the decision to keep the rates on hold, arguing for a cut now.
Other Fed policymakers still agreed with a cut for the remainder of the year, pointing at at least a 50 basis point drop by its end. The Fed dropped the vow of 'patient' approach from its language.
"We are quite mindful of the risks to the outlook and are prepared to move and use our tools as needed," Fed chair Jay Powell told the media.
Iran shot down a US military spy drone in international airspace near the Strait of Hormuz, US officials said Thursday. Iranian state TV reported the IRGC downed the American drone when it violated the country's airspace. The latest development is a first amid rising tensions between the two countries as world markets worry over the security of global energy routes, prompting oil prices to jump up.
Iran-aligned Houthi militants in Yemen hit a power station in Saudi Arabia. The White House said US President Donald Trump has been briefed on the cruise missile attack.
New Zealand's GDP growth in the first quarter expanded by 0.6% according to data data released Thursday. The growth was larger than the 0.4% forecast by the central bank.
China's President Xi Jinping flew in to Pyongyang Thursday to meet with North Korea's dictator Kim Jong-un and boost economic ties and help rekindle the stalled negotiations between the NK and the US. Xi is set to sit down with Trump later this month at the G20 summit in Japan in hope of reaching a solution to end their trade war.
The Euro finished its corrective move that followed ECB President Mario Draghi's fresh stimulus comments and began to rally on US Fed's rather dovish policy stance. American policymakers' signaling of a rate cut as early as July pushed up the Euro well above the upper band of the long-running descending channel and into the orbit of 200-day SMA. Having broken all the resistance lines we provided yesterday the Euro is testing 1.1300. Once that one is exceeded, 1.1320 a little below the SMA line will be the new target. Further above stands 1.1340. However, a corrective move for the very current Fed-incited rise is possible, in which case 1.1260 and later 1.1240 should be followed.
Support: 1.1260 -1.1240
Resistance: 1.1320 -1.1340
The Pound received quite a boost following US Federal Reserve's eventual cowering to global and domestic economic risks yesterday signalling rate cuts as early as July. The rise helped the Sterling reverse what appeared to be a fourth month of losses into one of gains, pushing it back into the channel's upper layer well above 1.2700. With the BoE's own rate-setting meeting on the agenda today, a no-change stance will further hold up the Pound. Despite the current relief, the Brexit crisis does and will continue to weigh on the quid. The question of who will replace PM Theresa May keeps nagging the market mood, with Boris Johnson seeming to be on a victory path after yet another rival of his Rory Stewart was eliminated on Wednesday, leaving him racing against only three others. We will see if how the retail sales figures and US Philadelphia Fed Manufacturing Index will affect the pair. But the direction remains solid upward at least for the rest of the week, with the Pound targeting 1.2740 and later 1.2760 slightly above the upper band of the channel. 1.2800 will prove a formidable challenge, if the second resistance is broken. For a downward course of action, stop losses can be place at 1.2700 and 1.2670.
Support: 1.2700 -1.2670
Resistance: 1.2740 -1.2760-1.2800
Japanese yen hit six-months high against the Dollar after Fed left its “patient” approach and moved to more accommodative monetary stance. The question now is by how much the fed funds rates will be cut in the next meeting. Dollar lost more than 0.3% against the Yen. The BoJ on Thursday meeting held its monetary policy steady but pointed up on rising global uncertainties which could induce more easing in the future. However, there is little ammunition left to support the inflation and BoJ pledged to strengthen its forward guidance if Fed cut rates in July. Currency pair is supported on 107.30 with next level to watch on 107.00 and 106.60. On the other side, the resistance is held on 108.00, testing next on 108.40 and 108.80.
Gold price surged on Thursday rising around 1.8%, hitting a 5-year high, after US Federal Reserve opened the door for a rate cut in the next meetings. Fed claimed there is strong evidence for a rate cut but held its benchmark rates steady in June’s meeting. The dollar plunged, making gold cheaper for foreigners and half a percentage rate cut in July meeting could further underpin gold to $1400. On the trade front, USTR Lighthizer will hold talks with Chinese Vice President Liu He before the meeting of the US and Chinese Presidents in Osaka. The precious metal found new support at 1375, with next on 1370 and 1365 in sight. Resistance is set on 1385, but the next on 1390 and 1395 should also be considered.
Brent price surged around 3% supported by various factors. In the latest escalation in Mideast, Iran shot down a US drone, deepening a geopolitical crisis and risking it into a military one. Oil was also supported by an improving demand as EIA reported the US stockpiles fell by 3.1 million barrels after it hit a two-year high. Demand improved on signs of Sino-US trade spat resolution. Moreover, fresh stimulus injected by Fed rate cuts will further rise demand and underpin prices. The OPEC officially confirmed the date of the meeting. On July 1 the OPEC countries will discuss further supply cuts and on July 2 will hold a meeting with non-OPEC allies. Breaking previous resistance, new levels moved to 69.60 and the next on 70.00 and 70.40 which should be considered. On the other side, support is set on 68.80 and then 68.40 to be followed by 68.00.
Dax inched higher on Thursday after central banks globally took accommodative stance facing downgraded economic outlook. The focus today is on BoE and its interest rate decision. Dax posted losses in previous session dragged by falling Deutsche bank AG stocks after the New York Times reported that it will be under new anti-money laundering probe conducted by the US federal authorities. Meanwhile, Brussels showed wiliness to hold off on disciplinary fee over Italy’s budget. Hovering around month high, resistance is held on 12 450 with next on 12 550 level. The index is supported 12 300 testing next on 12 200.
Support 12 300-12 200
Resistance 12 450 12 550