Market Insight for the Week Ending 9 June
Friday welcomed the latest US employment situation report. Once more, US non-farm employment change defied market consensus; the US economy added an eye-popping 339,000 new payrolls in May, almost double the median consensus (190,000) and marks a 14th consecutive month of exceeding expectations. However, while employment change depicts a resilient labour market, which forms part of the establishment survey (there are two surveys to the US jobs report), the household survey revealed that unemployment rose 0.3 percentage points to 3.7% in May (expectations called for a 3.5% print).
A key observation here is that since early 2022, the unemployment rate has fluctuated between 3.7% and 3.4%. Therefore, we are now testing the mettle of the upper limit of this range. Average hourly earnings (MoM) was another key metric released on Friday (part of the establishment survey), which marginally cooled to 0.3%. Following the release, markets still favour a rate pause at this month’s Fed meeting. Remember that the Fed’s blackout period begins now and runs between now and 15 June.
With May in the rear-view mirror, investors enter the first full week of June, which almost feels like the calm before the storm with US inflation data and the rate decision due the following week.
US ISM services data for May will be released on Monday, and markets are expecting ISM services to increase further into expansionary territory, which underscores the driver of economic activity.
Regarding central banks this week, the Reserve Bank of Australia (RBA) steals the spotlight early in the week. Following the pause in April at 3.6%, the central bank surprised markets in May and increased the Official Cash Rate (OCR) by 25 basis points to 3.85%. Markets are currently pricing in a near-40.0% chance of another 25 basis-point increase on Tuesday, which would pull the OCR to 4.1%. This is considerably different from a little over a week ago. Another major central bank in the spotlight this week is the Bank of Canada (BoC). Markets have largely priced in another pause (60.0% probability) for the Official Overnight Rate over a 40.0% chance of a 25 basis-point hike.
Technical View: Markets to Watch for the Week Ahead
Dollar Dip-Buying This Week?
The US dollar (Dollar Index) wrapped up the week pencilling in a moderate loss (-0.2%), snapping a three-week winning streak. Despite this, the month of May finished 2.5% higher.
Technically speaking, the monthly and daily timeframes are now both trending higher. The daily timeframe (trending higher since mid-April) formed a high of 104.70 (a near-three-month peak) last week and staged a modest correction back to support at 103.56, which held firm into the close. This will likely entice dip-buyers into the market this week, targeting resistance between 105.82 and 105.36 (houses the 200-day simple moving average at 105.58).
The concern for me on the monthly scale, however, is that although we have climbed higher since early 2008, we have left neighbouring support unchallenged at 99.67 after forming a floor (some may even define this as a possible trough in the overall trend) around 101.00. This means a dip lower to the 100.00 region could still be on the table (note that beneath the support, two nearby Fibonacci retracement ratios reside around the 98.70ish neighbourhood).
Both monthly and daily timeframes remain in positive territory (> 50.00) in terms of the Relative Strength Index (RSI), which supports the trend. Nevertheless, I still see room to bump lower on the monthly towards the 50.00 centreline, sharing space with an indicator trendline resistance-turned-support taken from the high of 79.96. While on the daily scale, the indicator pulled away from just south of overbought territory in recent trading and discovered support around 56.80.
Regarding technical structure, support on the daily timeframe made its way into the frame on Friday at 103.56 and held into the close, as highlighted above. Continued defence of the aforementioned level to target daily resistance at 105.82-105.36 would not raise too many eyebrows, given the uptrend on both timeframes. A lack of bullish intent from this region this week, however, unlocks the door for a deeper retracement (and potential short-term bearish scenarios), targeting the 50-day simple moving average at 102.38.
Silver (XAG/USD): Support at $23.52?
The technical landscape for spot silver ($ terms) reveals price discovered a ceiling at around $25.86 in April. Despite attempts to consume weekly resistance, the unit ultimately withdrew and touched gloves with a long-term trendline resistance-turned support level (drawn from the high of $30.14). In addition to this market trending higher, the descending support, coupled with neighbouring (horizontal) weekly support at $22.42, is certainly an area worthy of the watchlist this week.
Against the backdrop of weekly flow, price action on the daily timeframe rebounded from an area of support at $22.56-$22.96 in late May, joined by a 38.2% Fibonacci retracement ratio at $22.86. Resistance at $24.29 warrants attention overhead this week, accompanied closely by another layer of resistance at $24.74. As a result of this price structure, and a clear uptrend visible on both weekly and daily timeframes, along with weekly trendline support, a push to test the aforesaid resistances is not out of the question this week.
Across the page, the H1 timeframe depicts space to drop in on support from $23.52, a short-term local base that shares chart space with a descending resistance-turned-support drawn from the high of $23.62. The blend of these two H1 technical structures—together with the weekly timeframe crossing swords with trendline support and the daily timeframe exhibiting scope to take aim at resistance from $24.29—may deliver a technical floor to work with in early trading this week if tested. Another key observation is that should continuation selling unfold into the aforementioned H1 supports, this will pull the Relative Strength Index (RSI) into oversold territory and (technically) add weight for a bullish retaliation around $23.52.
Tesla (TSLA) Breakout?
From a long-term technical perspective, the monthly timeframe shows June making its way north of channel resistance drawn from the high of $384.29 after discovering dynamic support off the 50-month simple moving average at $178.18. This implies additional outperformance for TSLA and shines the technical spotlight on potentially completing a monthly AB=CD resistance between the 200% extension ratio and the 100% projection ratio at $286.18 and $267.35, respectively.
Drilling down to the daily timeframe, the stock is nearing the $217.65 high (16 Feb) and resistance at $221.40, situated near another resistance at $234.22 (joined by a 61.8% Fibonacci retracement ratio at $233.14). This follows the break of the 200-day simple moving average at $198.34 (bullish trend signal) and resistance from $200.71 earlier last week. Concerning the Relative Strength Index (RSI), you will note that the indicator is overbought and on the verge of touching levels not seen since February (77.42).
Aside from potential resistance from the $217.65 high mentioned on the daily scale, the $221.40 daily resistance is also visible on the H1. For H1 support, the area between $206.30 and $209.63 is in view. Regarding the RSI on the H1 timeframe, there are early signs of negative divergence, with countertrend sellers perhaps waiting for a decisive departure from overbought space before looking to commit.
Overall, though, technical studies suggest that this remains a buyers’ market.
As a result, aided by the monthly and daily timeframes showing room to run for at least daily resistance at $221.40, H1 price action could drop in and respond from the support between $206.30 and $209.63 this week.
BTC/USD: Drop Below $27,000?
Since connecting with weekly resistance at $30,664 in April, upside momentum slowed considerably for the major cryptocurrency and moderately corrected to just ahead of weekly support at $25,381. Technically, weekly price is in the early stages of an uptrend; thus, dropping in on the aforesaid support is not out of the question.
Out of the daily timeframe, price responded to the AB=CD support structure at $25,984 in May (denoted by a 100% projection and a 1.272% Fibonacci extension from $26,095). This was noted structure in previous analysis and has since seen the unit test the underside of the 38.2% Fibonacci retracement ratio at $27,810 (derived from legs A-D) and the 50-day simple moving average at $27,909. The test of the aforementioned structure would have seen some AB=CD longs likely reduce risk to breakeven and liquidate partial profits.
Ultimately, this, in addition to the daily timeframe showing early signs of a downtrend, could imply a downside push beyond $25,984 to test the mettle of weekly support mentioned above at $25,381. Should buyers change gears, however, this may see price zero in on the 61.8% Fibonacci retracement ratio (also derived from legs A-D) as the final profit objective at $29,037 (common for AB=CD traders to target both 38.2% and 61.8% Fibonacci retracement ratios).
Shorter term, resistance is active at $27,287 following a break of trendline resistance from the high of $28,473. To the downside, $27,000 calls for attention as a possible support structure which merges with the above-noted trendline, marked as a possible support. South of here, attention shifts to support at $26,658, while venturing above $27,287 this week opens the door to H1 resistance at $27,560.
In light of the current analysis, weekly support at $25,381 will likely remain a key watch for many going forward, particularly as the AB=CD pattern on the daily chart saw the price rebound and reach the initial take-profit target. That, along with the daily chart depicting an early downtrend, could see H1 drop below $27,000, targeting support from $26,658.
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