RBA remains on hold as expected

The RBA during today’s Asian session, remained on hold, as was widely expected by market participants. The bank in its accompanying statement stressed that “the process of returning inflation to target is unlikely to be smooth”. Furthermore, RBA policymakers stated that “the persistence of services price inflation is a key uncertainty”, which may have been perceived as a willingness by the bank to maintain the current interest rate levels for a prolonged period of time. Therefore, the comments may have provided support for the Aussie. Over in Europe, political uncertainty continues to rise with the first round of the early legislative elections set to occur in France nearing. However, the silver lining may be a recent comment by the opposition party’s leader Le Pen, who according to POLITICO stated that she would not seek Macron’s resignation. Nonetheless, the political turbulence may impact the common currency, as the election date nears. On another political note, a recent poll by YouGov showed Labour in the lead at 37%, yet the ruling Conservative party appears to be neck and neck with the Reform UK party at 18%. The political instability in the UK, could potentially weigh on the pound in the coming week. The US retail sales rate for May, is set to be released later on today. Should the rate come in as expected or higher, it could provide support for the greenback and vice versa.

EUR/USD appears to be moving in a downwards fashion, despite the pair currently testing resistance at the 1.0735 (R1) resistance line. We maintain a bearish outlook for the pair and supporting our case are the Bollinger bands which currently appear to be tilted to the downside, implying bearish market tendencies. However, the RSI indicator below our chart is currently near the figure of 50, implying a neutral market sentiment. Nonetheless, for our bearish outlook to continue, we would require a break below the 1.0670 (S1) support line with the next possible target for the bears being the 1.0600 (S2) support base. On the flip side for a bullish outlook, we would require a clear break above the 1.0735 (R1) resistance line with the next possible target for the bulls being the 1.0795 (R2) resistance level. Lastly, for a sideways bias we would require the pair to remain confined within the sideways moving channel defined by the 1.0670 (S1) support line and the 1.0735 (R1) resistance level.

WTICash appears to be moving in a sideways fashion. We opt for a neutral outlook for the commodity and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to continue, we would require the commodity to remain confined within the sideways moving channel defined by the 76.55 (S1) support level and the 81.80 (R1) resistance line. On the other hand, for a bullish outlook we would require a clear break above the 81.80 (R1) resistance line, with the next possible target for the bulls being the 85.85 (R2) resistance ceiling. Lastly, for a bearish outlook, we would require a clear break below the 76.55 (S1) support line with the next possible target for the bears being the 72.70 (S2) support line.

Other highlights for the day:

Today we note the release of Eurozone’s final HICP rate for May, Germany’s ZEW indicators for June and from the US, Mays’ retail sales and industrial production, while oil traders may be more interested in the release of API’s weekly crude oil inventories figure. On the monetary front we note that ECB Vice President De Gindos and a number of Fed policymakers are scheduled to speak. During tomorrow’s Asian session, we note the release of Japan’s trade balance for May and New Zealand’s current account balance for Q1, while on a monetary level, we note that RBNZ’s Chief Economist Conway is scheduled to speak while BoJ releases the minutes of April meeting.

EUR/USD H4 Chart

• Support: 1.0670 (S1), 1.0600 (S2), 1.0530 (S3)
• Resistance: 1.0735 (R1), 1.0795 (R2), 1.0845 (R3)

WTICash Daily Chart

• Support: 76.55 (S1), 72.20 (S2), 68.10 (S3)
• Resistance: 81.80 (R1), 85.85 (R2), 89.60 (R3)

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