The debt ceiling baton is now handed over to the Senate

In yesterday’s American session, the US House of Representatives voted in favour of passing the debt ceiling bill, with an overwhelming majority of 314-117, with broad bi-partisan support as the US rushes to avoid a potential default. The key takeaway, however, was the fact that the House Democrats outvoted the House Republics in favour of the bill despite House Speaker McCarthy’s efforts, as such this could signal that in the future the speaker may be facing stauncher opposition from within his own party. Nonetheless, the bill will now be passed to the Senate which is expected to vote either today or tomorrow, in order to avoid a US default on the 5^th of June ,which has been touted by Treasury Secretary Yellen as the revised “X-Date”. Furthermore, the release of the US JOLTS job openings figure for April, came in above the $10 million mark, halting a 4-month decline which may have provided support for the greenback, however following statements by Philadelphia Fed President Harker, that he was inclined to “skip” the next FOMC meeting in June ,with the FFF now anticipating a pause in the banks June meeting. As a result, the greenback’s gains from the JOLTS figure may have been halted in its tracks, as traders now await the US ISM Manufacturing PMI figure for May. Across the pond, we highlight BoE’s Mann’s comments yesterday in which she highlighted that the inflationary pressures in the UK are greater than that of the Eurozone or the US, implying that there may be a need for further rate hikes by the bank in the future. Lastly, during today’s Asian session, China’s Caixing Manufacturing PMI figure indicated that the manufacturing industry was expanding whereas the NBS figure indicated that the industry was contracting, thus sending mixed signals to Aussie traders.

EUR/USD continued its downward trajectory, as the dollar strengthened and is currently re-testing the 1.0675 (S1) support line. We maintain our bearish outlook for the pair as long as the downward trendline remains intact, in addition to the RSI indicator remaining below 50. For our bearish outlook to continue, we would like to see EUR/USD making another clear break below the 1.0675 (S1) support line and move to test potential support at 1.0575 (S2) level. On the other hand, for a bullish outlook, we would like to see the pair make a clear break above the 1.0740 (R1) level which would coincide with the breaking of the prementioned downwards trendline, with the next possible target for the bulls being the 1.0820 (R2) resistance ceiling. 

XAU/USD, appears to be moving in a sideways motion after having broken above support at 1955 (S1) and has re-entered the bounds of a previously indicated sideways moving channel between 1955 (S1) and 1980 (R1). For our neutral outlook to continue, we would like to see the precious remaining within the aforementioned 1955 (S1) and 1980 (R1) bounds. For a bearish outlook, we would like to see a clear break below support at 1955 (S1) with the next possible target for the bears being the 1930 (S2) support base. On the other hand, for a bullish outlook, we would like to see a clear break above the 1980 (R1) resistance level, with the move towards resistance at 2005 (R2).

Other highlights for the day:

In today’s European session, we note the release of UK’s nationwide house prices for May, Germany’s and the UK’s final manufacturing PMI for May, Eurozone’s preliminary HICP rates for the same month and Turkey FX reserves for the past week. On the monetary front ECB President Christine Lagarde is scheduled to speak and the bank is also to release the account of its last monetary policy meeting. In the American session, we get from the US the ADP national employment figure and the ISM manufacturing PMI figure, both for May as well as the weekly initial jobless claims reading, while oil traders may be more interested in the release of the weekly EIA crude oil inventories figure. On the monetary front we note that ECB’s Enria and Philadelphia Fed President Harker are scheduled to speak. In a rather quiet Asian session tomorrow, no major financial releases are expected. 

EUR/USD H4 Chart

Support: 1.0675 (S1), 1.0575 (S2), 1.0495 (S3)

Resistance: 1.0740 (R1), 1.0830 (R2), 1.0890(R3)

XAU/USD H4 Chart

Support: 1955 (S1), 1930 (S2), 1905 (S3)

Resistance: 1980 (R1), 2005 (R2), 2035 (R3)

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