IC Markets Asia Fundamental Forecast | 24 June 2022

IC Markets No Comments

What happened in the US session?

Fed Chair Powell continued with day 2 of his testimony on the monetary policy report, but this time resulting with less volatility to the US dollar. During the testimony he indicated that the Federal Reserve has an ‘unconditional commitment to fighting inflation’, the labour market was unsustainably hot, and that bringing down inflation could impact on the labour market. 

Leading up to the event, US PMI data were released with manufacturing and services industries showing that growth was slowing down. In addition to Chair Powell’s testimony, which was not as dovish as anticipated, the DXY hovered around the 104 level before recovering again. 

 

What does it mean for the Asia Session?

Markets are likely to gain some confidence from the less than dovish testimony from Fed Chair Powell. Look for the US Dollar to gain a foothold on recovery through the trading session.  

 

The Dollar Index (DXY)

Key news events today

US Consumer Sentiment

What can we expect from DXY today?

Overnight the US Manufacturing and Services Purchasing Managers Index (PMI) data were 52.4 and 51.6 respectively, these indicated that industries were still in the expansionary phase but slowing down, due to a downturn in demand. 

Look for the DXY to continue trading around or above the 104 level with limited downside, which could indicate the support level as a good base for the DXY recovery. 

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

Medium-to-Strong Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Although there was less volatility in the DXY over the US session, gold price spike to 1845 before retracing back down towards 1830. If the DXY does signal a recovery, look for gold to stay around the 1820 to 2830 level.

Next 24 Hours Bias

Weak-to-Medium Bearish 

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

RBA Gov Lowe spoke at an event outlining his path to avoid a recession in Australia, highlighting that inflation could peak at 7% and several more rate hikes to come from the RBA. This took the AUD higher leading into the US session, before a stronger dollar brought the AUDUSD trading below 0.69. 

With the global recessionary pressure weighing the AUD down, look for the AUD to trade towards the weekly support of 0.6827. Below that, the AUD could find a strong support at 0.6750. 

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

Bank Holiday. 

What can we expect from NZD today?

The NZD attempted to stage a recovery, bouncing from the 0.6235 support level, but eventually retraced on the back of the DXY strength. With NZ on a bank holiday and as the week closes, strong price movements in the NZD is unlikely. Potential moves would be likely to be driven due to the correlation with the AUD. 

Central Bank Notes:

  • Next meeting on 13 July 2022

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

BoJ Monetary Policy Meeting Minutes

What can we expect from JPY today?

Yen strengthened overnight with the USDJPY trading down to support level of 134.50. This could be due to recent comments from the Japanese Vice Finance Minister for International Affairs, stating that the current weak Yen is detrimental to the Japanese economy. 

However, recent Boj meeting minutes indicated that board members held the view that monetary easing had to continue and that they were ready to take additional easing steps if required. 

Look for Yen to weaken again, with the USDJPY rebounding from the current 134.50 support level.

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

Medium-to-Strong Bearish