2024-05-24 10:17

Japan’s core CPI rose 2.2%, a smaller increase than the 2.6% reported in March. The BoJ might not be ready to hike interest rates in June or July. The dollar surged on Thursday after data showed robust business activity in May. The USD/JPY price analysis shows more upside potential for the pair as Japan’s soft inflation figures lower the chances of a BoJ rate hike. Meanwhile, the dollar was heading for its most significant weekly gain in over two months after data showed strong business activity in May. Japan’s core inflation slowed further in April, challenging the Bank of Japan’s outlook for rate hikes. The core CPI rose by 2.2%, a smaller increase than the 2.6% reported in March. As a result, the BoJ might not be ready to hike interest rates in June or July. Policymakers have been waiting for more sustainable domestic consumption, with inflation well above the central bank’s target. However, most economic indicators point to weak consumption. Notably, Japan’s economy shrank by 2% in the first quarter due to poor demand. If consumption remains fragile, the BoJ will hesitate to hike interest rates, and the gap in rates between the US and Japan will remain wide. This could mean further weakness for the yen. Meanwhile, the dollar surged Thursday after data showed robust business activity in May, lowering Fed rate cut expectations. The US Composite PMI rose from 51.3 to 54.4 in May, indicating a resilient economy despite high interest rates. As a result, there was uncertainty about the outlook for rate cuts in the US. USD/JPY key events today Revised UoM Consumer Sentiment USD/JPY technical price analysis: Bulls weakening below 157.00 On the technical side, the USD/JPY price is trading in a thin range after breaking above the 156.50 key resistance level. Nevertheless, the bias is bullish because the price sits above the 30-SMA, and the RSI trades slightly below the overbought level. However, bulls are exhausted, as seen in the shallow slope of the current move. Moreover, the price is sticking close to the 30-SMA, a sign that bulls are not committing to significant swings. If this shallow trend continues, the price will retest the 158.01 resistance. However, if it reverses, the price will break below the SMA and the 156.50 level. https://www.forexcrunch.com/blog/2024/05/24/usd-jpy-price-analysis-soft-cpi-dims-boj-rate-hike-prospects/

2024-05-24 08:46

The flash US Composite Output Index jumped from 51.3 to 54.4. Canada’s inflation hit a three-year low of 2.7%. The prospect of higher rates for longer in the US weighed on oil. The USD/CAD outlook points northward as the pair holds near a two-week high on growing policy divergence between the US and Canada. At the same time, the Canadian dollar was weak due to a decline in oil prices. The divergence in policy outlooks between the Fed and the Bank of Canada was highlighted on Thursday when the US released upbeat PMI data. Business activity improved significantly in May. Notably, the flash US Composite Output Index jumped from 51.3 to 54.4, leading to a decline in Fed rate cut expectations. If the economy is doing so well, demand is still high, which might lead to further delay in rate cuts. The recent FOMC policy meeting minutes revealed that some policymakers were ready to hike interest rates if inflation remains stubborn. Therefore, any signs of strong demand that could drive inflation raises uncertainty regarding future policy moves. Meanwhile, the situation in Canada is different because inflation hit a three-year low of 2.7%, raising bets that the Bank of Canada will cut rates in June. Furthermore, experts have said there might be three cuts in Canada before the Fed starts its rate-cutting cycle. Therefore, the longer it takes for the Fed to start, the more the Canadian dollar will weaken. Elsewhere, oil prices fell, putting more downward pressure on the loonie. The prospect of higher rates for longer in the US is bearish for oil prices. Therefore, the positive PMI data also affected oil. USD/CAD key events today Revised University of Michigan consumer sentiment USD/CAD technical outlook: Bullish breakout On the technical side, the USD/CAD price has made a bold, bullish step by breaking above a solid resistance trendline. The bullish bias has strengthened as the price sits far above the 30-SMA, and the RSI is near the overbought region. The break above the trendline marks a solid shift in sentiment to bullish. However, the price must break above the 1.3750 resistance to confirm a new bullish trend to make a higher high. This would allow it to retest the 1.3800 level. However, the price might pull back to retest the recently broken trendline before rising higher. https://www.forexcrunch.com/blog/2024/05/24/usdcad-outlook-policy-outlook-divergence-weakens-loonie/

2024-05-23 10:38

The UK manufacturing sector jumped from contraction to expansion. Business activity in the UK services sector fell from 55.0 to 52.9. Prime Minister Rishi Sunak announced an election for July 4th. The GBP/USD outlook remains bullish as the pound shrugs off mixed PMI data. The pair is recovering after dropping in the previous session due to a stronger dollar. Meanwhile, investors mostly ignored the news of a British election in July. PMI data from the UK on Thursday revealed that the manufacturing and services sectors both expanded in the previous month. However, the manufacturing sector jumped from contraction to expansion, rising from 49.1 to 51.3. Meanwhile, activity in the services sector fell from 55.0 to 52.9, although it remained expanding. The mixed report barely had an impact on the pound. Another key event that traders mostly ignored was the news of a national election in the UK. Prime Minister Rishi Sunak announced an election for July 4th. The pound maintained its position near highs hit after a hotter-than-expected inflation report. Moreover, services inflation remained sticky, eroding some bets on a June BoE rate cut. Meanwhile, investors were still absorbing hawkish sentiments in the Fed meeting minutes that strengthened the dollar in the previous session. The minutes showed that policymakers had faith that inflation would continue easing. However, some were ready to hike interest rates if price pressures remained stubborn. However, the risk of a rate hike fell significantly after the latest inflation report. Investors are now hoping that the downtrend seen last year will resume. GBP/USD key events today US unemployment claims US flash manufacturing PMI US flash services PMI GBP/USD technical outlook: Signs of a bearish reversal On the technical side, the GBP/USD price trades slightly above the 30-SMA with the RSI above 50, supporting a bullish bias. However, the slope of the bullish trend has become shallow, showing bulls are not making big swings above the SMA. This indicates weaker bullish momentum. At the same time, the RSI has made a bearish divergence with the price, indicating exhaustion in the uptrend. Bulls have failed to push beyond the 1.2750 and 1.618 Fib extension levels, allowing bears to make a bearish engulfing candle that could lead to a reversal. Bears will take over when the price breaks below the 30-SMA. Otherwise, bulls will continue the uptrend with a break above 1.2750. https://www.forexcrunch.com/blog/2024/05/23/gbp-usd-outlook-pound-unmoved-by-mixed-pmi-data/

2024-05-23 08:38

The data showed better-than-expected PMI figures for Germany. ECB President Lagarde is very confident inflation is under control. Fed meeting minutes revealed some hawkish sentiments among policymakers. The EUR/USD forecast shows a slight bullish tilt as the euro rebounds on positive Eurozone PMI data. However, the overall bearish trend persists due to the dollar’s strength following hawkish FOMC meeting minutes. Data on Thursday from the Eurozone showed better-than-expected PMI figures for Germany, which strengthened the euro slightly. The manufacturing PMI rose from 42.5 to 45.4. Meanwhile, the services PMI rose from 53.2 to 53.9. These figures show that business activity in the bloc is improving despite high interest rates. Therefore, there is less pressure on the ECB to start cutting rates. Nonetheless, ECB policymakers are increasingly confident that they have tamed inflation. The last inflation report showed a drop from 2.6% to 2.4%. Moreover, ECB president Christine Lagarde said on Tuesday that she is very confident inflation is under control. Consequently, markets are more confident that the central bank will cut rates in June. Meanwhile, Fed meeting minutes released on Wednesday revealed some hawkish sentiments among policymakers, which boosted the dollar. Inflation in the US has remained stubborn since the beginning of the year. Consequently, most policymakers called for the Fed to maintain high rates. However, some went as far as suggesting rate hikes to tame inflation. Still, since the meeting came before the latest downbeat inflation report, the chances of a rate hike remain low. In the meantime, policymakers are maintaining a cautious tone as they await more evidence that inflation will continue to lower. EUR/USD key events today US unemployment claims US flash manufacturing PMI US flash services PMI EUR/USD technical forecast: Bullish channel gives way to bears On the technical side, the EUR/USD price has broken out of its bullish channel to the downside, showing a bearish reversal. The bullish trend got as high as the 1.0900 level, where the price reversed. Bears have now confirmed the reversal by breaking below the 30-SMA and the channel support line. Currently, the price is pulling back to retest the 30-SMA and the channel line before either trending lower or returning inside the channel. If the price trends lower, it will likely break below the 1.0800 level to retest the 1.0725 support level. Otherwise, it will retest the 1.0900 level. https://www.forexcrunch.com/blog/2024/05/23/eur-usd-forecast-euro-rebounds-on-strong-german-pmi-data/

2024-05-22 09:57

Canadian inflation data met forecasts of 2.7%, easing from the previous month. There is a 55% chance the BoC will cut rates in June. Fed policymakers have remained cautious despite easing inflation. The USD/CAD forecast looks bullish, driven by a weakening Canadian dollar following inflation figures that matched expectations. Simultaneously, the US dollar was steady after Fed policymakers dampened hopes for rate cuts. On Tuesday, Canadian inflation data met forecasts of 2.7%, easing from the previous month. Similarly, core measures declined, giving investors more confidence that the Bank of Canada will cut rates at its June meeting. Before the report, there was a 40% likelihood of a cut in June. However, after the inflation figures, it rose to 56%. Consequently, the Canadian dollar plunged. The Bank of Canada is getting closer to its rate-cutting cycle as Canada’s economy slows down and prices ease. Analysts believe the central bank is ready to cut at least three times before the Fed. However, after three cuts, the outlook becomes unclear since a weaker currency could increase inflationary pressure. Meanwhile, despite a decline in inflation in April, policymakers have remained cautious in the US. This has led to a drop in Fed rate-cut expectations and boosted the dollar. Fed officials are finding it had to make such a sudden shift from hawkish to dovish. There is still little confidence that the lower inflation will continue. Therefore, they might wait for more evidence before taking a more dovish stance. Still, the divergence in policy outlooks will likely keep the Canadian dollar weak. This weakness will increase when the Bank of Canada starts cutting interest rates. USD/CAD key events today Fed policy meeting minutes. USD/CAD technical forecast: Bulls take charge but face solid resistance above On the technical side, the USD/CAD price attempts to stay above the 1.3650 resistance level after respecting the 30-SMA support. Bulls recently triggered a shift in sentiment when the price respected the 1.3600 key psychological level. The price confirmed the change when it broke above and retested the 30-SMA. At the same time, the RSI broke above 50 and now trades in bullish territory. Bulls must now make a higher high to confirm a new bullish trend. However, the new trend might not go far because of the strong resistance trendline above. This trendline has caused reversals before and could do it again. https://www.forexcrunch.com/blog/2024/05/22/usd-cad-forecast-canadian-dollar-tumbles-on-cooling-inflation/

2024-05-22 08:27

UK inflation fell from 3.2% to 2.3% in April. There is a 50% chance the BoE will cut rates in June. Investors await the FOMC meeting minutes. The GBP/USD price analysis shows increased bullish momentum as the pound soars on a smaller-than-expected decline in inflation. Meanwhile, investors eagerly awaited the FOMC policy meeting minutes. On Wednesday, data from the UK revealed a sharp decline in headline inflation from 3.2% to 2.3% due to decreased household energy prices. However, economists had expected a more significant drop to 2.1%, just slightly above the Bank of England’s target. Therefore, there was a slight drop in rate cut expectations. Previously, markets were pricing in a 55% chance that the BoE would implement the first rate cut in June. After the report, this figure fell to 50%, and the pound rallied. Furthermore, a closer look at the inflation report revealed a bigger-than-expected increase in services inflation, complicating the outlook for BoE rate cuts. Meanwhile, the dollar held steady as policymakers pushed back expectations for Fed rate cuts. The recent drop in inflation has caused a lot of excitement in the market about US interest rates. However, calm has returned as policymakers have maintained a cautious tone. Most have warned that it is too early to conclude that the downtrend in price increases is back. Nevertheless, there is more confidence now that the Fed’s next move will be a rate cut. The only uncertainty is the timing of the first cut. The FOMC meeting minutes later today might give more clues on this outlook. GBP/USD key events today FOMC Meeting Minutes GBP/USD technical price analysis: Price gets overbought below 1.2750 On the technical side, the GBP/USD price has made a sharp, bullish move to the 1.2750 resistance level. At the same time, the price hit the 1.618 Fib extension level, showing the bullish bias is strong. Currently, it sits above the 30-SMA with the RSI in the overbought region, showing bulls have pushed the price to the limit. Therefore, the uptrend might pause because of the strong resistance above. Moreover, the RSI is showing some weakness in the recent surge as it has made a slight bearish divergence. If it plays out, the price will pull back to retest the 30-SMA or the 1.2601 support. On the other hand, if bulls regain momentum, GBP/USD might breach the 1.2750 barrier. https://www.forexcrunch.com/blog/2024/05/22/gbp-usd-price-analysis-above-forecast-cpi-boosts-pound/