2023 June Outlook For G7 Currencies

2023 June Outlook for G7 Currencies

July 4, 2023

2023 June Outlook for G7 Currencies

Dollar

Fundamental perspective:

The dollar index closed at 103 in June after retracing from a 2-month high of 104.5. The Fed paused its tightening campaign after 15 months, leaving the rate at 5.25%. However, the median Fed official is expecting two more rate hikes, while not committed to any timeline for implementing them. If the Fed is truly data-dependent, then the recent GDP outperformance and rising consumer confidence would support the likelihood of another rate hike in July, keeping the dollar supported. .

Technical perspective (XAU/USD):

Currently, there is bearish order flow, with lower highs and lower lows being formed on the daily timeframe. A break below downside confirmation at 1887, followed by a pullback to the support-turned-resistance zone at 1922, could provide the bearish acceleration towards the key support zone at 1813, which coincides with the 127.2% Fibonacci extension level. Price is hovering below Ichimoku cloud and 20 EMA, supporting our bearish bias.

S1	S2	R1	R2
1887	1813	1922	1980

Euro

Fundamental perspective:

The euro retraced to a high of $1.10 against the dollar, as the ECB persists with its tightening cycle. Even though the euro area fell into a technical recession in Q1 2023, the ECB maintained its inflation-fighting course, raising rates by 25bps in June and signalling another equal hike in July. ECB President Lagarde and her colleague de Guindos both indicated July’s hike was a done-deal. Uncertainty remains for September’s rate decision, with inflation easing in multiple euro-area countries.

Technical perspective:

Price has rejected a key resistance zone at 1.100 on the daily timeframe. A pullback to the resistance zone at 1.0950, which coincides with the 78.6% Fibonacci retracement, coupled with a break of downside confirmation at 1.0850, could provide the bearish acceleration towards the key support zone at 1.0750, which is in line with the 141.4% Fibonacci extension.

S1	S2	R1	R2
1.0750	–	1.0950	1.1000

Loonie

Fundamental perspective:

The loonie strengthened against the dollar, with USD/CAD ending June at $1.32. The BOC caught markets by surprise when it resumed rate hikes after pausing for the previous 5 months. However, inflation continues to fall and the latest GDP figures for April remained unchanged, showing signs of weakness in the Canadian economy. One silver lining would be retail sales data coming in higher than expected.

Technical perspective:

Price just bounced off a key resistance-turned-support zone at 1.3150 on the daily timeframe. A break above upside confirmation at 1.3380, followed by a throwback to the support zone at 1.3220, could provide the bullish acceleration towards the next resistance zone at 1.3600, which is in line with the 227.2% Fibonacci extension.