The 10-year benchmark Treasury yield hit its highest level

15 June 2022, 01:51

Market Focus

US markets were mixed on Tuesday as investors continued to brace for further rate hikes from the Fed while waiting for the tier-1 economic data on Wednesday. The S&P 500 fell for a fifth day, dropping 0.38%. The Nasdaq Composite rose slightly by 0.18% to close at 10,828.35 while the Dow Jones Industrial Averages declined 0.5% and settled at 30,364.83 at the end of the day. The downside in equities came as rates surged again in anticipation of more aggressive tightening of monetary policies from the Fed. Major sell-offs would probably not stop until the rates are settled.

Moving on to the cryptocurrency markets, two of the biggest cryptocurrencies, Bitcoin and Ethereum, sank more than 17% in a week. Investors are worried about another possible crypto winter and collapse bringing down other key players like crypto lending firm Celsius. Celsius recently moved to pause all withdrawals due to the liquidity crisis, sparking fears that Celsius might be facing some financial problem. In the meantime, Coinbase has announced that it will cut 18% of its full-time jobs as its executives are preparing for recession and cryptocurrency winter.

Main Pairs Movement

The 10- year benchmark Treasury yield hit its highest level, 3.475%, in 11 years as investors continued to assess the prospect of the Fed imposing more aggressive interest rate hikes. At the same time, the 2-year Treasury yield jumped to 3.437%, the highest since 2007.

GBP/USD declined 1.11%, finished with 1.19958 at the end of the day. Cable plunged following the disappointing figures from the UK unemployment rate and the Claimant Count Change. UK unemployment edged higher to 3.8%, higher than expected, while the Claimant Count change figure was worse than the estimate.

Gold fell for a second consecutive day, holding slightly above $1,800 ahead of the FOMC meeting. Gold remained downside and under pressure following the rumors that the Fed might consider hiking rates by 75 basis points in response to inflationary pressures, thus giving the bullion a downside outlook.

EUR/USD flirted with 1.0400 ahead of the FOMC meeting. However, further price movement might start reacting before Thursday’s meeting, as the US will publish its Retail Sales figure on Wednesday.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD has temporarily rebounded after a three day losing streak. Market sentiment, however, continues to look bearish for the Euro as market participants are now pricing in a possible 75 basis point interest rate hike by the Fed. The Federal Reserve is set to convene tomorrow and provide forward guidance on the US economy. Important retail sales figures are also due tomorrow during the American trading session.

On the technical side, EURUSD has found support near the 1.04038 price region. The secondary support level sits at 1.03783. RSI for the pair has dropped to 35.5, as of writing. On the four hour chart, EURUSD is trading below its 50, 100, and 200-day SMAs.

Resistance:  1.07454

Support: 1.04038, 1.03783

GBPUSD (4-Hour Chart)

GBPUSD extends its losing streak as market participants continue to sell off the British pound. The National Statistics of the UK reported a higher unemployment rate for the month of May, thus exerting more pressure on the UK’s economic outlook. While the Federal Reserve is set to announce its interest rate policy tomorrow, the BoE continues to find itself in a hard place, facing soaring inflation while the economy is contracting. Risk averse market sentiment further supports the US greenback in the short term. The US 10-year Treasury yield has marched past 3.44%.

On the technical side, GBPUSD has reached its lowest point in two years. Short term support level at 1.20824 seems weak, but the next support level sits close at 1.19189. RSI for the pair sits at oversold territory of 15.52, as of writing. On the four hour chart, Cable trades well below its 50, 100, and 200-day SMAs.

Resistance: 1.25944

Support: 1.20824

USDJPY (4-Hour Chart)

The US Greenback continues to gain appeal as global market sentiment continues to sour. Global equities have retreated significantly since the start of the month. Red hot US PPI has market participants pricing in a 75 basis point hike by the Fed. As of writing, the US 10 year treasury yield has soared past 3.45%. Further interest rate differential between the US and Japan will continue to provide upward momentum for the USDJPY pair.

On the technical side, USDJPY has found a near term support level around the 134.1 price region. Short term resistance level at around 135 seems weak as the Fed is due to announce monumental monetary policy statements tomorrow. RSI for the pair sits at 62.5, as of writing. On the four hour chart, USDJPY trades above its 50, 100, and 200-day SMAs.

Resistance: 134.56

Support: 133.5, 132.5