- USD falls amid an improved market mood
- Fed Chair Powell testifies before the Senate
- GBP/USD re-enters the rising channel
GBP/USD rebounds after Trump announced an Israel-Iran ceasefire. DAX leads gains as NATO increases defence spending & Iran-Israel ceasefire lifts risk appetite.
GBP/USD has rebounded higher, recovering from yesterday’s monthly low. The USD is falling amid an improved market mood.
The US dollar has fallen against its major peers after President Trump announced a ceasefire between Israel and Iran, sparking a risk rally and a sharp drop in oil prices. Trump announced a complete truce between the two Middle Eastern countries after 12 days of conflict.
The US dollar is also under pressure after dovish comments from Federal Reserve policymaker Michelle Bowman, who said the central bank could consider cutting interest rates again soon. Her comments come after Federal Reserve Chairman Christopher Waller noted last week that he would also consider a rate cut in the July meeting. The markets have increased the chance of a July rate cut to 23%, up from 14.5% a day ago
Attention will turn to Federal Reserve Chair Jerome Powell, who is due to testify before Congress in a biannual event. The market is watching for any clues on the outlook for US interest rates. Last week, Powell warned of inflationary pressures from Trump’s trade tariffs.
The pound is benefiting from the risk-on mood in the market, recovering from yesterday’s losses. The UK economic calendar is quiet today. Attention will be on Bank of England speakers, including David Ramsden, who surprised the market by voting to cut interest rates by 25 basis points in the June meeting, a meeting where rates were left unchanged.
GBP/USD Forecast – Technical Analysis
After a brief spike to test the 50 SMA, GBP/USD has recovered, re-entering the multi-month rising channel. A rise above the 20 SMA, combined with the RSI above 50, keeps buyers hopeful of further upside.
Buyers will need to rise above 1.36 resistance to extend gains towards 1.37 and 1.3750, a level that was last seen in 2022.
Support can be seen at 1.3450, the April high, and below, where the 50 SMA at 1.34 comes into play. The price has traded above this dynamic support since mid-February. A break below here creates a lower low.
DAX Leads Gains as NATO Increases Defence Spending & Iran-Israel Ceasefire Lifts Risk Appetite
- Trump announced a complete ceasefire between Israel and Iran
- NATO has agreed to lift defence spending to 5% of GDP
- DAX recovers from 23k support to test 20 SMA
The German DAX has jumped 1.8% on the open, outperforming its European peers amid easing geopolitical tensions after Trump announced an Iran-Israel ceasefire. As a result, oil prices have fallen as worries over the blockade of the Strait of Hormuz have eased. Germany is particularly sensitive to changes in energy prices.
Meanwhile, investors are closely watching the NATO summit, which begins today in The Hague. Global leaders will discuss key security priorities and rising international tensions. The UK and NATO allies have agreed to boost spending on defence and related areas to 5% of GDP by 2035, benefiting defence stocks across Europe.
On the data front, the German Ifo business climate index rose to 88.4 in June, up from 87.5 in May. The data came in a tad higher than expectations of 88.2. The survey also showed an uptick in expectations, 290.7, well ahead of the 90 expected, suggesting a more optimistic view on the German economy as tariff fears continued to be brushed aside, at least for now.
DAX Forecast – Technical Analysis
The DAX fell away from its record high of 24,490, before finding support at 23k. The price has rebounded higher from the 23k support and is testing the 20 SMA resistance at 23,800.
Buyers, supported by the receding bearish bias on the MACD, will look to rise above here and the 24k round number to bring 24,490 and fresh record highs into play.
On the downside, support is seen around the 23,400 zone. A break below here opens the door to 23k. Sellers will need to take out 23k to create a lower low.
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