Asia Markets Outlook: Dollar Strength and Commodities in Focus

Asia markets outlook: Dollar index climbs, impacting major currencies and commodities, key events, and central bank updates.

What Happened in the U.S. Session?

The flash estimate for Composite PMI by S&P Global showed a slight increase in PMI activity from 54.5 to 54.6 in June. Output growth reached a 26-month high, marking the 17th consecutive month of expansion, with significant improvements in May and June, driven mainly by the service sector. The dollar index (DXY) closed at 105.83 last Friday, marking a third consecutive week of strong gains.

What Does It Mean for the Asia Session?

As markets re-opened this morning, the DXY edged closer to the 106 threshold. Gold spot prices found support around $2,315/oz, potentially staging a minor rebound throughout the day. Meanwhile, crude oil prices pulled back slightly, with WTI hovering around $81 per barrel, indicating potential selling pressures as the new trading week begins.

The Dollar Index (DXY)

Key News Events Today

• FOMC Member Waller Speaks (7:00 am GMT)

What Can We Expect from DXY Today?

Market participants will closely watch Federal Reserve Governor Christopher Waller’s opening remarks at the Rome International Journal of Central Banking Annual Research Conference. Any hawkish rhetoric could elevate the dollar, pushing the DXY closer to 106.

Central Bank Notes:

• The Federal Funds Rate target range remains at 5.25%-5.50%.
• The Committee aims for maximum employment and 2% inflation over the long run, with risks to these goals becoming more balanced.
• Despite easing inflation over the past year, it remains elevated, with modest progress toward the 2% target.
• Economic activity continues to expand steadily, with strong job gains and low unemployment.
• The Committee will carefully assess incoming data and does not expect to reduce the target range until it is confident that inflation is moving sustainably toward 2%.
• The next meeting is on 30-31 July 2024.

Next 24 Hours Bias: Weak, Bullish

Asia Markets Outlook: Dollar Strength and Commodities in Focus

Gold (XAU)

Key News Events Today

• FOMC Member Waller Speaks (7:00 am GMT)

What Can We Expect from Gold Today?

Governor Waller’s remarks at the conference could impact gold prices. Hawkish comments will likely keep the dollar strong, exerting downward pressure on gold.

Next 24 Hours Bias: Weak Bearish

The Australian Dollar (AUD)

Key News Events Today

• No major news events

What Can We Expect from AUD Today?

The AUD is falling towards 0.6620 due to more robust demand for the USD. Key support and resistance levels are:

• Support: 0.6600
• Resistance: 0.6670

Central Bank Notes:

• The RBA’s cash rate target remains at 4.35%.
• Inflation is easing but remains high, with expectations for it to return to the 2-3% target range by the second half of 2025.
• The next meeting is on 6 August 2024.

Next 24 Hours Bias: Weak Bearish

The Kiwi Dollar (NZD)

Key News Events Today

• No major news events

What Can We Expect from NZD Today?

The NZD is under pressure, trading around 0.6110 at the start of the Asia session. Key support and resistance levels are:

• Support: 0.6100
• Resistance: 0.6150

Central Bank Notes:

• The OCR remains at 5.50%, and restrictive monetary policy ensures inflation returns to the 1-3% target range.
• GDP has been weak, with high interest rates reducing household spending and investment.
• The next meeting is on 10 July 2024.

Next 24 Hours Bias: Weak Bearish

The Japanese Yen (JPY)

Key News Events Today

• No major news events

What Can We Expect from JPY Today?

Strong demand for the USD has kept USD/JPY elevated, reaching 159.90 before pulling back to around 159.65. Key support and resistance levels are:

• Support: 158.00
• Resistance: 160.30

Central Bank Notes:

• The BoJ continues its QQE with Yield Curve Control and a negative interest rate policy.
• CPI inflation could gradually increase, with moderate service prices and wage increases.
• The next meeting is on 31 July 2024.

Next 24 Hours Bias: Weak, Bullish

The Euro (EUR)

Key News Events Today

• German Ifo Business Climate (8:00 am GMT)

What Can We Expect from EUR Today?

The German Ifo Business Climate index estimate of 89.4 for June could boost the Euro as the manufacturing, trade, and construction sectors recover.

Central Bank Notes:

• The ECB lowered key interest rates by 25 basis points.
• Inflation has fallen significantly since September 2023, but domestic price pressures remain intense.
• The ECB projects inflation averaging 2.5% in 2024.
• The next meeting is on 18 July 2024.

Next 24 Hours Bias: Weak Bearish

The Swiss Franc (CHF)

Key News Events Today

• No major news events

What Can We Expect from CHF Today?

USD/CHF remains elevated due to strong USD demand, approaching 0.8950. Key support and resistance levels are:

• Support: 0.8835
• Resistance: 0.8990

Central Bank Notes:

• The SNB lowered its key policy rate to 1.25%.
• Inflation forecast averages 1.3% for 2024.
• GDP growth is moderate, with an expectation of around 1% for 2024.
• The next meeting is on 26 September 2024.

Next 24 Hours Bias: Weak, Bullish

The Pound (GBP)

Key News Events Today

• No major news events

What Can We Expect from GBP Today?

Stronger USD demand has pushed Cable lower. Key support and resistance levels are:

• Support: 1.2600
• Resistance: 1.2730

Central Bank Notes:

• The BoE’s MPC maintains the Official Bank Rate at 5.25%.
• UK GDP growth was stronger than expected in the first half of 2024.
• The next meeting is on 1 August 2024.

Next 24 Hours Bias: Weak Bearish

The Canadian Dollar (CAD)

Key News Events Today

• No major news events

What Can We Expect from CAD Today?

The Loonie is under pressure, causing USD/CAD to rise above 1.3700. Key support and resistance levels are:

• Support: 1.3680
• Resistance: 1.3750

Central Bank Notes:

• The BoC reduced its target for the overnight rate to 4.75%.
• Economic growth resumed in Q1 2024, with solid consumption growth.
• The next meeting is on 24 July 2024.

Next 24 Hours Bias: Medium Bullish

Oil

Key News Events Today

• No major news events

What Can We Expect from Oil Today?

Crude prices have gained enormously over the last few weeks, with WTI reaching $82 per barrel. Prices pulled back slightly today, indicating potential selling pressures.

Next 24 Hours Bias: Weak Bearish

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