IC Markets Asia Fundamental Forecast | 23 June 2022

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What happened in the US session?

The US Dollar tested lower again, driven down by a dovish statement from Fed Chair Powell. In his monetary policy report testimony, key points highlighted ‘Fed rate hikes could cause a recession’ and ‘Fed rate hikes won’t bring down gas or food prices’. As a result of the dovish sentiment of the statement, the DXY weakened and the S&P 500 closed slightly lower with market participants casting further concern on a pending recession.

What does it mean for the Asia Session?

Expect markets to be hesitant as it digests Fed Chair Powell’s comments. Look for continuation of the current dovish sentiment through the Asia session. 

The Dollar Index (DXY)

Key news events today

USD Manufacturing PMI

USD Services Pmi

Fed Chair Powell Testifies

What can we expect from DXY today?

The DXY broke below 104 due to dovish Federal Reserve testimony. Look for the DXY to retrace and test the 104 resistance before heading lower. US Manufacturing and Services Purchasing Managers Index (PMI) data is set to be released today with forecasted data indicating that significant changes in the PMI data is not expected. Into the US session, look for further volatility as Fed Chair Powell continues his Monetary Policy Report testimony.

Central Bank Notes:

  • Next meeting on 26 July 2022
  • The committee hiked rates by 75bps, targeting inflation risk.
  • Balance Sheet reduction plan to continue at $60b (treasuries) and $35b (MBS) over a three-month timeframe

 

Next 24 Hours Bias

Weak-to-Medium Bearish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

As the DXY took a turn towards the downside, Gold rose towards the 1845 level. Currently retracing from that upward move, look for Gold to continue being an attractive alternative to investors, and for prices to rebound back and above 1850.

Next 24 Hours Bias

Weak-to-Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

AUD Manufacturing and Services PMI data released 55.8 and 52.6 respectively. The data still shows continual growth in the industries but as recession concerns persist together with commodity prices continue to drop, these apply downward pressures to the AUD. Look for further downside on the AUD as concerns of the global economy weighs on a possible AUD recovery.

Central Bank Notes:

  • Next meeting on 5 July 2022

Next 24 Hours Bias

Medium-to-Strong Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events. 

What can we expect from NZD today?

The NZD moves in correlation to the AUD. Look for the NZD to continue its move to the downside into the weekly support levels. Without any news scheduled, the move lower for the NZD is likely also due to global recessionary concerns.

Central Bank Notes:

  • Next meeting on 13 July 2022

Next 24 Hours Bias

Weak-to-Medium Bearish

The Japanese Yen (JPY)

Key news events today

BoJ Monetary Policy Meeting Minutes

What can we expect from JPY today?

Volatility in the JPY was unusually low overnight, as a weaker DXY offset the weakness in the Yen. Current price on the USDJPY is just below the 136 level. Look for price to consolidate at this level before a potential breakout towards the upside.

Central Bank Notes:

  • Kept all policy settings unchanged at their June meeting
  • Reiterated that rates will stay low for the foreseeable future and won’t hesitate to add stimulus if the economy needs it
  • Next meeting on 21 July 2022

Next 24 Hours Bias

Weak-to-Medium Bearish