2024-05-31 10:06

Investors are awaiting the US core PCE price index report for more clues on Fed policy. US GDP data came in lower than expected at 1.3% in Q1. Markets expect only 27 basis points of BoE rate cuts this year. The GBP/USD price analysis shows bears in the lead as the dollar strengthens ahead of crucial US inflation data. On the other hand, the pound was weak despite the recent drop in Bank of England rate cut expectations. The greenback recovered against the pound on Friday as investors awaited the US core PCE price index report for more clues on the Fed’s rate cut outlook. Forecasts show that the figure will hold at 0.3% from the previous month. However, there is a chance that it might surprise. It has been a wild ride for rate cut expectations in the US as data has mostly been mixed. Last week, the dollar was rallying as business activity data came in higher than expected. Additionally, this week, there was a spike in consumer sentiment, leading to a decline in expectations for rate cuts. Still, there have been signs that the robust economy is showing cracks that could prompt the Fed to cut rates this year. Notably, consumer inflation eased in April. Moreover, yesterday’s GDP data came in lower than expected at 1.3% in Q1 from a previous reading of 1.6%. Meanwhile, in the UK, Bank of England rate cut expectations have fallen since the release of better-than-expected growth and inflation figures. Markets now expect only 27 basis points of rate cuts this year, which means one cut in 2024. GBP/USD key events today US core PCE price index GBP/USD technical price analysis: Price breaks below 30-SMA On the technical side, the GBP/USD price has finally broken below and retested the 30-SMA, showing a new bearish sentiment. The decline came after the price found resistance at the 1.2800 key psychological level. Bears had already started showing signs of a looming reversal when the price made a bearish engulfing candle. However, it continued higher as bulls struggled to hold onto control. Meanwhile, the RSI showed weaker bullish momentum as it made a bearish divergence. Bears were finally strong enough to breach the 30-SMA support, retest it and are now looking to make a lower low. The bearish move will continue if the price breaks below the 1.2700 support level. https://www.forexcrunch.com/blog/2024/05/31/gbp-usd-price-analysis-dollar-rises-in-wake-of-inflation-data/

2024-05-31 09:30

The US economy grew at an annual rate of 1.3% in Q1, down from 1.6%. Investors are gearing up for the US core PCE price index. There was an increase in core consumer inflation in Tokyo. The USD/JPY outlook shows a slight bearish tilt as the dollar declines after weaker-than-expected GDP data and ahead of inflation figures. Meanwhile, Japan’s inflation numbers showed a mixed picture, complicating the outlook for Bank of Japan rate cuts. Data on Thursday revealed that the US economy grew at an annual rate of 1.3% in Q1, down from 1.6%. Weaker-than-expected economic growth shows the impact of high borrowing costs, which puts pressure on the Fed to start cutting interest rates. This renewed hopes for a Fed rate cut this year, with the likelihood of one in September rising from 51% to 55%. Investors are gearing up for this week’s most significant report: the core PCE price index. This index will give a clear picture of underlying inflation in the US and guide traders on whether the Fed will implement rate cuts this year and when. Economists expect the figure to hold steady at 0.3%. Another upbeat inflation report would lead to a rally in USD/JPY that would renew fears of an intervention. Elsewhere, data from Japan showed an increase in core consumer inflation in Tokyo. However, figures excluding fuel eased, raising uncertainty about the Bank of Japan’s rate hike cycle. At the same time, there was an unexpected decline in factory output in April, highlighting Japan’s weak economic recovery. A fragile economy complicates the BoJ’s plans to hike interest rates. Therefore, the interest rate differential between the US and Japan could remain wide, weakening the yen. USD/JPY key events today US core PCE price index m/m USD/JPY technical outlook: Decline pauses at 156.50 On the technical side, the USD/JPY price has broken below the 30-SMA, showing a shift in sentiment from bullish to bearish. However, the decline has paused at the 156.50 support level. Moreover, on a larger scale, the price remains in an uptrend, making higher highs and lows. Consequently, it might bounce off 156.50 to retest the 158.00 level. Even if it breaks below 156.50, the USD/JPY price would meet solid support at the bullish trendline. Only a break below this trendline would signal a reversal in the trend. Otherwise, bulls will likely remain in control. https://www.forexcrunch.com/blog/2024/05/31/usd-jpy-outlook-dollar-tumbles-following-downbeat-gdp/

2024-05-30 12:14

The dollar rose with Treasury yields. The Canadian dollar fell with oil prices. There is a 60% chance that the BoC will cut rates on Wednesday next week. The USD/CAD outlook shows a surge in bullish momentum as the dollar rallies with rising Treasury yields due to expectations that the Fed will keep high rates for longer. Meanwhile, the Canadian dollar fell with oil prices as investors worried about the impact of high interest rates on fuel demand. It was a green day for the dollar, which benefited from safe-haven inflows as investors scrambled for safety due to the spike in Treasury yields. As a result, most major peers, such as the Canadian dollar, fell. The rise in yields started when the US released better-than-expected economic data last week. As a result, rate cut expectations fell. However, the move escalated, with yields reaching a four-week peak after a weak debt auction in the US. The next major catalyst for the dollar will be the Friday inflation report. This will give market participants more insight into the Fed’s policy path. Meanwhile, the Canadian dollar was on the back foot as oil prices declined in response to fears of further delays in Fed rate cuts. High borrowing costs hurt economic activity, which in turn lowers demand for oil. Canada, a major oil exporter, suffers losses when demand goes down, which weighs on the country’s currency. Investors are awaiting GDP data from Canada on Friday, which might show an annual growth rate of 2.2% in Q1. This will give traders clues on the outlook for Bank of Canada rate cuts. Currently, there is a 60% chance that the BoC will cut rates on Wednesday next week. USD/CAD key events today US preliminary GDP US jobless claims US pending home sales USD/CAD technical outlook: 1.3730 resistance retested On the technical side, the USD/CAD price has risen to retest the 1.3730 resistance level after finding support at the 1.3625 level. Although the price sits well above the 30-SMA, there is no clear direction since it has mostly chopped through the SMA line. Still, the current bias is bullish, with the RSI well above 50, which supports solid momentum. Therefore, a pause or pullback to retest the SMA might occur before the uptrend continues. A break above 1.3730 would clear the path for bulls to retest the 1.3775 resistance level. https://www.forexcrunch.com/blog/2024/05/30/usd-cad-outlook-greenback-soars-amid-feds-policy-outlook/

2024-05-30 08:23

Treasury yields have risen this week due to better-than-expected US data A recent auction in the US revealed lower demand for the country’s debt. Data from the Eurozone showed a bigger-than-expected increase in German inflation. The EUR/USD forecast points South as the dollar trades near a two-week high amid a rally in Treasury yields. Meanwhile, the euro remains weaker as markets prepare for an ECB rate cut next week. A rally in US yields spooked investors, leading to a scramble for the dollar’s safety. Treasury yields have risen this week due to better-than-expected US data, raising doubts about a Fed cut in September. At the same time, a recent auction in the US revealed lower demand for the country’s debt. Investors are now looking forward to US GDP and unemployment figures. However, the focus is on the core PCE price index, which comes on Friday. This report will show whether inflation is easing or remains stubborn. Consequently, it will significantly impact the outlook for rate cuts in the US. Elsewhere, data from the Eurozone showed a bigger-than-expected increase in German inflation by 2.8% in May. This was slightly bigger than the forecast of 2.7% and came after a rise of 2.4% in the previous month. However, economists had expected this spike. Therefore, it had little impact on expectations for an ECB rate cut next week. A Reuters poll revealed that all economists expect the European Central Bank to implement its first cut in June. Moreover, economists expect another cut in September and December. This is a more dovish outlook as markets forecast only two cuts in 2024. EUR/USD key events today US preliminary GDP q/q US unemployment claims US pending home sales m/m EUR/USD technical forecast: New low confirms a bearish reversal On the technical side, the EUR/USD price has broken below the 1.0800 critical support level after a sharp bearish move. This comes after the price broke out of its bullish channel. The initial breakout paused when bulls tried to take back control. However, bears overpowered them and broke below 30-SMA and 1.0800 to make a lower low. This confirms the start of a downtrend with lower highs and lows. Furthermore, the RSI shows solid bearish momentum as it prepares to dip into the oversold region. Given the strong bearish bias, the price will likely fall to retest the 1.0725 support level. https://www.forexcrunch.com/blog/2024/05/30/eur-usd-forecast-us-yields-rally-leads-dollar-to-2-week-top/

2024-05-29 10:11

There was a sharp improvement in US consumer confidence from 97.5 to 102.0 in May. US yields rose, leading to a decline in the yen. BoJ’s Seiji Adachi said the central bank could hike rates due to the weak yen. The USD/JPY forecast is bullish despite fluctuations amid rising US yields and hawkish Bank of Japan comments. The pair initially reached a 4-week high as the dollar and US yields rose. However, it pulled back after a BoJ policymaker signaled the chance of a rate hike in the near future. Data on Tuesday revealed a sharp improvement in US consumer confidence from 97.5 to 102.0 in May. This led to a rally in the dollar due to a drop in Fed rate cut expectations. At the same time, yields rose, leading to a decline in the yen. A robust economy means the Fed will hold on to high interest rates for longer. This, in turn, will widen the interest rate gap between Japan and the US. However, the yen strengthened slightly after BoJ board member Seiji Adachi said the central bank could hike rates if a weak yen led to higher inflation and inflation expectations. Notably, Japan’s currency has lost over 10% of its value this year despite the first BoJ rate hike in March. This decline has come from interest rate differentials between Japan and the US. Even interventions by the Bank of Japan have only temporarily impacted the yen. Analysts expect another BoJ hike in July. Meanwhile, a survey showed poorer consumer sentiment in Japan in May. The Bank of Japan’s plans to hike rates continue to face challenges as data shows weak economic demand. USD/JPY key events today Neither the US nor Japan will release high-impact events today. Therefore, investors will keep absorbing recent data. USD/JPY technical forecast: Bulls remain weak above 156.50 On the technical side, the USD/JPY price trades between the 156.50 support and the 158.01 resistance levels. Moreover, it has maintained its position above the 30-SMA, supporting a bullish bias. However, momentum has remained weak, with the price staying close to the SMA and the RSI failing to reach overbought levels. If this shallow trend continues, the price will reach the 158.01 resistance. On the other hand, if bulls give up control, it will break below the SMA and the 156.50 support level. https://www.forexcrunch.com/blog/2024/05/29/usd-jpy-forecast-retracement-amid-hawkish-boj/

2024-05-29 09:06

Australia’s consumer inflation rose by 3.6% in April. Expectations for a rate hike by the RBA in September rose from 12% to 20%. The US CB consumer confidence report revealed a jump from 97.5 to 102.0 in May. The AUD/USD price analysis shows mild bullish sentiment as investors absorb news of higher-than-expected inflation in Australia. However, the dollar was also strong after upbeat US data, putting a lid on price increases for the AUD/USD pair. Data on Wednesday revealed that Australia’s consumer inflation rose by 3.6% in April, beating forecasts of 3.4%. Moreover, this was an increase from 3.5% in March. The report led to a decline in RBA rate cut expectations, but the impact on the AUD/USD price was small. Meanwhile, expectations for a rate hike by the Reserve Bank of Australia in September rose from 12% to 20%. At the same time, investors pushed back the timing for the first rate cut to August next year. This puts the RBA well behind most major central banks. However, economists still expect the central bank to implement its first rate cut in Q4. The reaction to the jump in inflation would have been more significant if the dollar had been weaker. However, the dollar was also strong after data in the previous session showed a jump in US consumer sentiment. The CB consumer confidence report revealed an increase from 97.5 to 102.0 in May, giving investors more reason to doubt a Fed rate cut in September. Markets are now pricing in a bigger chance of the Fed cutting rates in November or December. AUD/USD key events today Investors will keep absorbing Australia’s inflation report as no key events come from the US. AUD/USD technical price analysis: Price bounces higher after 30-SMA retest On the technical side, the AUD/USD price has retested the 30-SMA support and is bouncing higher, a sign that bulls are in the lead. At the same time, the RSI is moving deeper into bullish territory after retesting the 50 level. Although the price broke below its previous bullish trendline, it has not yet confirmed a new bearish trend. To do this, bears must break below the 0.6600 level to make a lower low. However, at the moment, the price is eying the 0.6700 resistance level. A break above this level would continue the previous bullish trend. https://www.forexcrunch.com/blog/2024/05/29/aud-usd-price-analysis-australias-inflation-report-surprises/