XtreamForex Morning Market Briefing

AUD/JPY turns positive near 83.25, session tops

The rebound in AUD/JPY is gaining extra traction last hours, as yen loses ground across the board amid a recovery in risk sentiment.

AUD/JPY looking to regain 10-DMA at 83.40

The cross recovered in tandem with the risk sentiment and now gathers pace for further upside, as risk-aversion, fuelled by terror attacks in Manchester overnight, appears to have eased in mid-Asia.

Ongoing recovery mode seen in USD/JPY from below 111 handle helps lift the cross in AUD/JPY beyond 83 handle. Further, renewed gains in the Aussie amid broad based USD weakness also collaborates to the uptick in the cross.

The release of the Budget by the White House earlier today failed to impress the USD bulls, triggering fresh selling pressure behind the buck against its main competitors.

Next of note for the cross remains the US macro updates alongside Fedspeaks due later on Tuesday.

Technical Levels

Higher side: 83.40/46 (10 & 50-DMA), 84.47/50 (Apr 5 high/ psychological levels), 8.98/85 (100-DMA/ round number)

Lower side: 83 (round figure), 82.84 (5-DMA/ daily pivot), 82.53 (May 22 low)

Gold clocks three-day high, nears key fib hurdle

The Manchester explosion and the resulting risk-off pushed gold to a three-day high of $1263.46 levels.

The session high almost coincides with the critical 61.8% fib retracement of the April low and the March high – $1264. 50.

The Greater Manchester Policy is treating the explosion as a terrorist incident until they know otherwise. UK PM May has condemned the blast and said they are working to establish the full details of the incident.

Meanwhile, Trump administration has proposed major cuts to social spending program and massive tax cuts that will boost the economic growth. However, the plan is likely to be rejected by Congress. Hence, the proposal has not had any impact on the yellow metal. Furthermore, the CME FedWatch’s June rate hike probability stands unchanged at 78.5%.

The metal may remain well bid and could jump above $1264.50 (61.8% Fib R) if the European stock markets react negatively to Manchester incident.

Gold Technical Levels

The metal was last seen trading around $1262/Oz. A break above $1264.50 (61.8% Fib R of Apr low – May high) would open doors for $1274.07 (Apr 19 low) and $1278.11 (78.6% Fib R of Apr low – May high). On the downside, break below $1259.50 (session low) could yield a pull back to $1252.53 (50-DMA) and $1243.65 (100-DMA).

Trump proposes selling off 50% of the US Strategic Oil Reserve

Trump administration plans to raise $500 million in fiscal year 2018 by draining 50% of the Strategic Oil Reserve over the next decade. The US has about 687.7 million barrels of crude.

The Bloomberg report says, “The proposal also seeks to boost government revenues by allowing oil drilling in the Alaska National Wildlife Refuge, ending the practice of sharing oil royalties with states along the Gulf of Mexico and selling off the electricity transmission lines in the West.”

Fed’s Brainard: Have seen a bit of stalling out on core inflation

Reuters reported comments from Lael Brainard, a member of the Fed’s Board of Governors, delivered earlier on the day, as he responded to the Q&A session following his speech.

During her speech, she made no remarks on the economic outlook or monetary policy.

Key Headlines:

Reality is labor market strength has outstripped what most researchers see as steady state

Have seen a bit of stalling out on core inflation

It is a question if US is at full employment yet

Credit is flowing and it has been for some time