2024-06-08 10:11

The NFP report showed bigger-than-expected job growth in May. Traders scaled back rate cut expectations, leading to a rally in the dollar. Economists expect the headline CPI to hold steady at 3.4%. The USD/JPY weekly forecast shows renewed bullish momentum as the US labor market’s resilience clouds the outlook for Fed rate cuts. Ups and downs of USD/JPY USD/JPY closed well above its lows as the dollar rallied after better-than-expected economic data. This week, the yen was mainly at the mercy of the dollar, as Japan had no high-impact events. Meanwhile, the US released several reports at the start of the week that gave the impression that the economy was deteriorating amid high borrowing costs. Consequently, investors raised the chances of a Fed rate cut in September to 69%. However, this reversed on Friday when the NFP report showed bigger-than-expected job growth. The US added 272,000 jobs in May, well above expectations of 182,000. As a result, traders scaled back rate cut expectations, leading to a rally in the dollar. Next week’s key events for USD/JPY Next week will be packed with high-impact economic events from the US and Japan, which will likely cause a lot of volatility. The US will release consumer and wholesale inflation data, shaping the Fed’s rate-cut outlook. Economists expect the headline CPI to hold steady at 3.4%. A higher number would indicate persistent inflation and lower the chances of a rate cut in September. On the other hand, a lower number would strengthen the case for a rate cut. Moreover, investors will focus on the FOMC policy meeting for clues on whether policymakers are gaining confidence in the fight against inflation. The messaging during and after the meeting will carry much weight, especially after the CPI report. Meanwhile, the Bank of Japan will also hold its policy meeting, which will likely keep rates unchanged. USD/JPY weekly technical forecast: Price rebounds after solid support trendline On the technical side, the USD/JPY price is bouncing higher after retesting a solid support trendline. Moreover, it is on the verge of breaking back above the 22-SMA to confirm a bullish sentiment shift. Meanwhile, the RSI trades slightly above 50, supporting bullish momentum. Therefore, in the coming week, bulls will likely challenge the 158.01 key resistance level. A break above this level would confirm a continuation of the bullish trend, allowing the price to go beyond the 160.00 level to 162.51. https://www.forexcrunch.com/blog/2024/06/08/usd-jpy-weekly-forecast-fed-rate-cut-offset-by-strong-nfp/

2024-06-07 10:09

The European Central Bank cut interest rates for the first time since 2019. The ECB’s Lagarde refrained from committing to a rate-cutting path. There was caution ahead of the US nonfarm payrolls report. The EUR/USD price analysis leans bullish with the euro firm after the ECB failed to give clear guidance on the outlook for rate cuts. On the other hand, the dollar was near an 8-week low as investors geared up for the US nonfarm payrolls report. The European Central Bank cut interest rates for the first time since 2019, becoming the second major central bank to do so. The move came as policymakers gained confidence that inflation in the bloc was under control. The ECB has been fighting price increases since 2022 when inflation was 10%. Fortunately, the central bank has lowered this figure to just above the 2% target. However, they did not expect it to remain stubborn at this level. The last inflation report was hotter than expected, which was the main reason policymakers were cautious after the policy meeting. Investors had expected some guidance on the future. However, Lagarde refrained from committing to a rate-cutting path, noting that inflation and wage growth remained strong. Some analysts believe the ECB was too quick to commit to a rate cut before the last inflation report. Moreover, forecasts released by the central bank show inflation staying above the 2% target until late next year. After the meeting, markets were pricing in only one more rate cut this year, likely in September. Meanwhile, there was caution ahead of the US nonfarm payrolls report, which will give insight into the Fed’s policy path. Economists expect an increase of 182,000 jobs in May. Therefore, anything bigger or smaller could cause a lot of volatility in the market. EUR/USD key events today US nonfarm payrolls report EUR/USD technical price analysis: Choppy near 30-SMA On the technical side, the EUR/USD price has respected the 30-SMA support and trades above the 1.0880 key level. Moreover, the RSI has remained above 50 since the bulls took over, supporting solid momentum. However, the price remains close to the SMA, which could indicate hesitation among bulls to move higher. If this hesitation continues, the bears will likely return and take control with a break below the SMA. However, if it is only a pause, the price will soon climb to make higher highs beyond the 1.0925 level. https://www.forexcrunch.com/blog/2024/06/07/eur-usd-price-analysis-euro-firm-amid-ecbs-unclear-path/

2024-06-07 08:54

Japan’s economy likely shrank less than expected in the March quarter. The dollar traded near an 8-week low due to increased rate cut expectations. Investors eagerly await the US monthly employment report. The USD/JPY outlook points south as the yen strengthens on prospects of a smaller-than-expected contraction of Japan’s economy in Q1. Meanwhile, the dollar was trading near an eight-week low as traders looked forward to the US monthly employment report. A Reuters poll on Friday revealed that Japan’s economy likely shrank less than expected in the March quarter. Moreover, economists expect a rebound in the second quarter due to pay hikes and tax cuts. Nevertheless, the outlook for the economy remains clouded, given the weak yen and high import costs, which are hurting consumption. Japan’s government and the Bank of Japan are concerned about the yen’s continuing weakness. Although the currency has rebounded recently, it remains near the 34-year lows that triggered interventions in April and May. Meanwhile, the greenback wallowed on Friday after poor economic reports raised the chances of a Fed cut in September to 69%. Moreover, investors are expecting at least two 25 basis-point cuts this year. However, this outlook might change with the upcoming nonfarm payrolls report. Private payrolls came in lower than expected. Therefore, there is a high chance that the NFP figures will miss forecasts. This would strengthen the case for a cut in September and further weaken the dollar. However, if the figures beat forecasts, the outlook for Fed cuts will become clouded. Investors are also preparing for policy meetings in Japan and the US next week. Both central banks will likely maintain rates, keeping the gap in interest rates wide. USD/JPY key events today US average hourly earnings m/m US non-farm employment change US unemployment rate USD/JPY technical outlook: Bears prepare to confirm a reversal On the technical side, the USD/JPY price almost confirms a reversal from bullish to bearish. The price trades below the 30-SMA with the RSI under 50, showing solid bearish momentum. It recently broke below its bullish trendline and pulled back to retest it. At the same time, it retested the 30-SMA as resistance before reversing lower. If bears keep control and the price lowers, it signals the start of a new downtrend. Consequently, USD/JPY will likely revisit the 154.02 support level. https://www.forexcrunch.com/blog/2024/06/07/usd-jpy-outlook-japans-q1-contraction-milder-than-expected/

2024-06-06 11:46

The Bank of Canada became the first G7 central bank to lower interest rates. Markets are expecting 77 basis points of rate cuts in Canada this year. The likelihood of a Fed rate cut in September rose to 69%. The USD/CAD outlook is optimistic as the loonie remains fragile after the Bank of Canada implemented its first rate cut in four years. The dollar was also weak after mixed US data but gained against the Canadian dollar. The Bank of Canada on Wednesday became the first G7 central bank to lower interest rates. The central bank cut rates by 25 basis points as expected, diverging from the Federal Reserve. This has created an interest rate differential that is weighing on the Canadian dollar. More rate cuts from the Bank of Canada will likely leave the currency more vulnerable. Markets are expecting 77 basis points of rate cuts in Canada this year. This is a more significant figure than the Fed’s 50 basis points. Moreover, the likelihood of a first Fed cut in September still fluctuates with incoming data. Therefore, there is no certainty when rates will start declining in the US. Elsewhere, data revealed growth in Canada’s service sector in May. The business activity index rose from 49.3 in April to 51.1. If Canada’s economy returns to growth, the BoC might become more cautious about future rate cuts. Meanwhile, data from the US was mixed. The service sector grew, while private employment revealed softness in the labor market. Still, the likelihood of a Fed rate cut in September rose to 69%. The market focus is now shifting to the upcoming nonfarm payrolls report. USD/CAD key events today US unemployment claims USD/CAD technical outlook: Bulls fail to complete a channel breakout On the technical side, the USD/CAD price trades above the 30-SMA with the RSI above 50, supporting a bullish bias. However, it still trades within a shallow, bearish channel. The price recently made a sharp bullish move that punctured the channel resistance and the 1.3720 level. However, the bulls were not strong enough to maintain the move and break out of the channel. Consequently, the price retreated to retest the 30-SMA support. Nevertheless, if the SMA holds firm as support, the price might make another attempt at breaking above the channel resistance. However, if it gives way, bears will revisit the channel support. https://www.forexcrunch.com/blog/2024/06/06/usd-cad-outlook-boc-rate-cut-leaves-loonie-vulnerable/

2024-06-06 09:20

Markets are nearly sure that the European Central Bank will cut rates today. The Bank of Canada opened the door to more global rate cuts. Data from the US revealed a bigger-than-expected decline in private employment in May. The EUR/USD forecast leans slightly bullish as the euro remains steady ahead of the ECB policy meeting, where a rate cut is widely anticipated. Despite the looming rate cut, the euro has strengthened, primarily due to the dollar’s decline amid rising expectations of a Fed rate cut. Markets are nearly sure that the European Central Bank will cut rates today, becoming the second major central bank to do so. The Bank of Canada started its rate-cutting cycle in the previous session, opening the door to more global rate cuts. However, recent data from the Eurozone revealed hotter-than-expected inflation, which has raised uncertainty about the outlook after June. Therefore, investors will pay close attention to Christine Lagarde’s speech after the policy meeting. Meanwhile, data from the US revealed a bigger-than-expected decline in private employment in May. Jobs fell from 188K to 152K, indicating easing labor market conditions. This report followed the US job openings report, which showed a decline in vacancies. However, another report on Wednesday from the Institute for Supply Management showed a shift to expansion in the services sector that slightly complicated the outlook for Fed rate cuts. Nevertheless, by the end of the day, the likelihood of a rate cut in September had risen to 69% from 59%. Moreover, investors were betting on at least 50 basis points of Fed rate cuts in 2024, which weighed on the dollar. EUR/USD key events today ECB main refinancing rate ECB monetary policy statement US unemployment claims ECB press conference EUR/USD technical forecast: Price consolidates near 1.0880 key level On the technical side, the EUR/USD price trades in a sideways move near the 1.0880 key level. However, the bias is bullish because the price sits above the 30-SMA, and the RSI is slightly above 50. Bulls recently made a new high above 1.0880 but could not sustain a move higher. As a result, the price has pulled back to retest the 30-SMA. A break below the SMA would indicate solid bearish momentum, allowing EUR/USD to retest the 1.0800 support level. However, if the SMA holds firm as support, the price will likely seek higher highs, with the first target at 1.0925. https://www.forexcrunch.com/blog/2024/06/06/eur-usd-forecast-steady-ahead-of-pivotal-ecb-meeting/

2024-06-05 10:10

Recent data revealed weaker-than-expected growth in Canada. Markets are placing a 75% chance that the BoC will cut rates on Wednesday. Oil fell as traders worried about looming supply increases. The USD/CAD forecast paints a bullish picture with the Canadian dollar on the back foot ahead of the BoC policy meeting, where markets believe there will be a rate cut. Meanwhile, the dollar was weak after a series of poor data and ahead of crucial service sector numbers. After months of speculation, the time has come for the Bank of Canada to decide whether to cut rates or continue holding them. Since the year began, Canada’s economy has slowed down while inflation has neared the central bank’s target. As a result, there has been a lot of pressure on the BoC to cut interest rates. Notably, the most recent data revealed weaker-than-expected growth in Canada, raising the chances of a cut later in the day. Markets are placing a 75% chance that the central bank will cut rates. However, the focus will be on the outlook for rate cuts. Experts have said the BoC will be comfortable cutting rates at least three times before the Fed. Further downside pressure for the loonie came from a decline in oil prices. Oil fell as traders worried about looming supply increases when the OPEC ends its output cuts. At the same time, a rise in crude inventories hurt sentiment. Meanwhile, the dollar struggled in a weak position after data this week raised chances that the Fed will cut rates in September. A surprise drop in US job vacancies further showed weakness in the labor market. Markets are still pricing in a 59% chance that the Fed will cut rates in September. USD/CAD key events today US ADP non-farm employment change Bank of Canada policy meeting. US ISM services PMI USD/CAD technical forecast: Bulls target new peaks above the 30-SMA On the technical side, the USD/CAD price has broken above the 30-SMA, retested it and is now seeking new highs. Moreover, the RSI trades above the 50 level, showing strong bullish momentum. However, the price is still caught in a shallow, bearish channel. Therefore, the bullish move will meet a solid barrier at the channel resistance around the 1.3720 level. It will take a strong catalyst to push the price beyond the channel resistance. Such a breakout would allow bulls to retest the 1.3780 level. https://www.forexcrunch.com/blog/2024/06/05/usd-cad-forecast-loonie-slips-as-boc-rate-cut-looms/