2024-05-07 09:42
The gap in interest rates between Japan and the US will likely continue for a while. The Federal Reserve is not yet confident enough to start cutting interest rates. The Bank of Japan is taking a cautious approach to rate hikes. The USD/JPY price analysis leans bullish as the yen slides against the dollar despite stern warnings from Japanese authorities. Although the recent dollar-selling intervention boosted the yen, market fundamentals still support a decline. The interest rate differentials between Japan and the US remain the most significant contributor to the yen’s weakness. Moreover, the outlook for interest rates in Japan and the US shows that the gap in interest rates will likely continue for a while. The Federal Reserve is not yet confident enough to start cutting interest rates. Meanwhile, the Bank of Japan is taking a cautious approach to rate hikes. Currently, the gap in interest rates between Japan and the US is 370 basis points. Consequently, the dollar will remain more appealing to investors than the yen. Meanwhile, on Tuesday, Japan’s Finance Minister Masato Kanda said that the government would continue taking the same strict approach to sharp yen declines. In other words, Japan might intervene again to support its currency. Elsewhere, the US jobs report failed to give the yen a boost as the dollar fell. Notably, employment fell more than expected in April, while the unemployment rate jumped. This was a positive sign for the Fed. However, it was not enough for policymakers to conclude that inflation would reach the 2% target. USD/JPY key events today Neither the US nor Japan will report high-impact news today. As a result, the pair might make small moves. USD/JPY technical price analysis: Channel resistance On the technical side, the USD/JPY price has broken above the 154.01 key resistance level to continue the recent recovery. At the same time, the RSI trades slightly above 50, indicating stronger bullish momentum. However, the bearish bias remains since the price sits below the 30-SMA. Moreover, it still trades within its bearish channel. Currently, the price is nearing a solid barrier comprising the 30-SMA and the channel resistance. Bears will emerge and target the 151.01 support level if the barrier holds firm. On the other hand, if it gives way, the bias will change to bullish, with the next target at 158.00. https://www.forexcrunch.com/blog/2024/05/07/usd-jpy-price-analysis-yen-falls-despite-stern-boj-warnings/
2024-05-07 08:31
Australia’s Q1 inflation figures came in stronger than expected. Investors had expected the RBA to return to its hawkish stance. RBA Governor Michele Bullock said interest rates were at the right level to lower inflation. The AUD/USD outlook took a bearish turn, with the Aussie plunging after the Reserve Bank of Australia withheld any hawkish signals. Given Australia’s recent upbeat data, investors expected a more hawkish tone at the meeting. They were, however, disappointed when the central bank maintained that inflation was declining. The Reserve Bank of Australia held interest rates on Tuesday, pushing back expectations for a rate hike. Australia’s Q1 inflation figures came in stronger than expected. Meanwhile, the labor market remains resilient. As a result, investors had expected the RBA to return to its hawkish stance and possibly signal a rate hike in the future. However, RBA governor Michele Bullock said interest rates were at the right level to lower inflation to the central bank’s target. This increased the chance that the next move from the RBA would be a rate cut. Furthermore, expectations for an RBA hike in September fell from 43% to 16%. However, it remains one of the few major central banks that might cut after the Federal Reserve. Therefore, there is a low risk for divergence that would weaken the Aussie as much as other major currencies like the Canadian dollar. The outlook for rate cuts in the US became clearer when last week’s jobs report revealed weakness in the labor market. Still, policymakers can only gain confidence that the labor market is easing if the trend continues. AUD/USD key events today Investors will keep absorbing the outcome of the RBA meeting since no key reports are coming from the US. AUD/USD technical outlook: Bearish momentum propelling to 0.6575 On the technical side, the AUD/USD price has pulled back sharply from its recent highs and is approaching the 0.6575 critical support level. However, the bias remains bullish because the price still trades above the 30-SMA. At the same time, the RSI supports bullish momentum above 50. However, the recent surge in bearish momentum could reverse this bullish bias. Bears will take charge if the price breaks below the 0.6575 key support level and the 30-SMA support line. If not, the price will bounce higher to continue the bullish trend by breaking above the 0.6650 key level. https://www.forexcrunch.com/blog/2024/05/07/aud-usd-outlook-rba-holds-back-on-hawkish-signals/
2024-05-06 10:21
The dollar plummeted on Friday after a downbeat jobs report. Investors are betting on two rate cuts in 2024, totaling 45 basis points. A Reuters poll trimmed bets for a stronger Canadian dollar this year. The USD/CAD outlook is looking slightly up as the US dollar stages a recovery following Friday’s jobs-driven decline. At the same time, the Canadian dollar was weak after a Reuters poll revealed that the currency will weaken more than expected this year. The dollar plummeted on Friday after a downbeat jobs report that increased Fed rate cut expectations. The US Labor Department revealed a smaller-than-expected 175,000 increase in employment in April. Furthermore, the unemployment rate beat forecasts of 3.8% and increased to 3.9%. The report indicated a drop in demand in the labor market that might allow the Fed to cut rates this year. Consequently, investors were betting on two rate cuts in 2024, totaling 45 basis points. However, this remains far less than the expectations for BoC rate cuts. Notably, a Reuters poll on Friday trimmed bets for a stronger Canadian dollar this year because the Bank of Canada will likely cut rates well before the Fed. Moreover, the BoC will cut by more than the Fed in 2024. BoC governor Tiff Macklem said last week that they were getting closer to cutting interest rates as policymakers are confident in the downtrend in inflation. Consequently, there is a 60% chance that the central bank will cut rates in March. Moreover, investors expect 60 basis points of cuts this year, more significant than the Fed’s 45 basis points. USD/CAD key events today There won’t be any critical economic reports from Canada or the US today. Therefore, the pair will likely move sideways. USD/CAD technical outlook: Bullish engulfing candle signals a possible reversal On the technical side, the USD/CAD price has pulled back sharply after breaking below a support trendline and the 1.3650 critical support level. Although the bias is bearish, bulls have made an engulfing candle that could lead to a reversal. Still, currently, the price sits below the 30-SMA, and the RSI is in bearish territory. For bulls to take charge, the price must break above the SMA. This would clear the path for bulls to retest the 1.3800 key resistance level. Otherwise, bears will continue the downtrend by breaking below 1.3650 to target the 1.3551 support. https://www.forexcrunch.com/blog/2024/05/06/usd-cad-outlook-greenback-recovers-following-nfp-losses/
2024-05-06 08:28
The US economy added a smaller 175,000 jobs last month. The US unemployment rate increased to 3.9% in April. The yen gained 3.5% last week, ending its best week since December 2022. The USD/JPY forecast shows a temporary pause in a downward trend as the dollar recovered on Monday. Still, a recent decline in US employment has fueled expectations for Fed rate cuts in 2024. Meanwhile, the yen maintains its strength after a suspected intervention by the Bank of Japan last week. The US economy added 175,000 jobs last month, compared to estimates for 243,000. Meanwhile, the unemployment rate increased to 3.9% when economists had expected it to hold at 3.8%. This was the first downbeat NFP report in a while and came as a relief to Fed policymakers. As a result, the Fed might cut rates at least twice this year. After the report, markets are pricing in 45 bps of cuts in 2024. However, analysts believe policymakers need more evidence that the downtrend in the labor market will continue. However, if the following employment report is robust, policymakers will remain cautious about rate cuts. Meanwhile, they will cheer any signs of weakness in the labor market as it will mean less inflationary pressure. Elsewhere, the yen remained strong despite a pullback on Monday. Notably, the currency gained 3.5% last week, ending its best week since December 2022. The gains came after two suspected interventions by Japanese authorities on Monday and Wednesday. This has given them some time to reduce the economic effects of a weak currency. USD/JPY key events today There are no critical reports from the US today. Meanwhile, Japan is observing a holiday, which will keep investors on alert for any intervention. USD/JPY technical forecast: Pullback within the bullish flag On the technical side, the USD/JPY price has retested the 154.01 critical level after making a new low. The bias is bearish because the price trades well below the 30-SMA, while the RSI sits below 50 in bearish territory. Moreover, the price trades in a flag pattern, respecting its support and resistance. If the 154.01 key level holds as resistance, the price will bounce lower and likely reach the 151.01 support level. However, if the resistance gives way, it will retest its channel resistance and the 30-SMA before declining. https://www.forexcrunch.com/blog/2024/05/06/usd-jpy-forecast-fed-rate-cut-bets-surge-after-dismal-nfp/
2024-05-05 07:44
Powell confirmed that the Fed’s next policy move would be a rate cut. Data on Friday revealed a bigger-than-expected dip in US employment. Investors will focus on the Bank of England interest rate decision on Thursday. The GBP/USD weekly forecast indicates a bullish trend as poor US employment data strengthens expectations for a Fed rate cut, putting pressure on the dollar. Ups and downs of GBP/USD The pound had a bullish week as the dollar fell due to Powell’s remarks and downbeat data from the US. When the week began, data from the US revealed a bigger-than-expected increase in labor cost growth. This gave the dollar a small lift. However, it gave up all its gains when Powell confirmed that the Fed’s next policy move would be a rate cut. Furthermore, data on Friday revealed a bigger-than-expected dip in US employment. At the same time, the unemployment rate increased, showing a slowdown in the labor market. This relieved the Fed, which is keeping a close eye on the labor market. At the same time, business activity in the service sector fell significantly, pointing to easing inflationary pressures. Next week’s key events for GBP/USD Next week, the UK will release data on manufacturing production and economic growth. However, investors will focus more on the Bank of England interest rate decision on Thursday. The central bank will likely hold rates to give clues on the future of interest rates in the UK. Notably, investors have pushed back the timing for BoE rate cuts. This is because the UK economy has recovered from its shallow recession. At the same time, BoE policymakers are keeping an eye on the Fed, which has said it will delay rate cuts. GBP/USD weekly technical forecast: Bullish momentum pushes past solid trendline On the technical side, the GBP/USD price has broken above a solid resistance trendline and is testing the 1.2550 key resistance level. This indicates a surge in bullish momentum. At the same time, it has broken above the 22-SMA, confirming a shift in sentiment to bullish. However, bears are putting pressure on the move, leading to a big wick. It is clear that the tides are about to change for the pound, and this will become clearer with the next candle. There is a high chance that the new bias will continue next week. The price will likely retest the 1.2802 resistance level in such a case. https://www.forexcrunch.com/blog/2024/05/05/gbp-usd-weekly-forecast-dismal-nfp-boosts-pound-eyes-on-boe/
2024-05-04 08:44
The dollar had its worst week in over two months. Poor employment figures from the US increased the likelihood that the Fed will cut rates in September. The Reserve Bank of Australia will make its rate decision on Tuesday. The AUD/USD weekly forecast leans bullish as the likelihood of a Fed rate cut in September increases due to weaker US data. Ups and downs of AUD/USD The Aussie ended the week up due to dollar weakness. With no key economic reports from Australia, the Australian dollar was at the mercy of the US dollar. Meanwhile, the dollar had its worst week in over two months. Dollar bears returned to the market after Powell maintained that the Fed would eventually cut rates. Moreover, poor employment figures from the US increased the likelihood that the Fed will cut rates in September. Additionally, the ISM released dismal US services PMI figures, further supporting bets for a September cut. Next week’s key events for AUD/USD Investors will only focus on one major event next week. The Reserve Bank of Australia will make its rate decision on Tuesday. According to a Reuters poll of economists, the central bank will keep rates unchanged as it works to lower inflation. However, investors will look for rate-cut clues from policymakers’ statements after the meeting. Moreover, economists changed their outlook for rate cuts and now only expect one from the previous two in 2024. This change follows recent data showing a smaller drop in inflation in Q1 than expected. AUD/USD weekly technical forecast: Bulls make another attempt at breaking key resistance zone On the technical side, the AUD/USD price has returned to the resistance zone comprising the 0.6600 key psychological level and the 0.5 Fib level. Bulls have struggled to break above this zone for a long time but have failed. Consequently, the price has mostly moved sideways. A recent surge in bullish momentum at the 0.6400 support level has pushed the price to retest this resistance zone. The bullish bias is strong, with the price well above the 22-SMA and the RSI heading for the overbought region. However, bulls must close well above this zone and make another bullish candle to confirm a break above the zone. Otherwise, the price will fall back below the SMA. If bulls succeed in breaching the resistance, the price will likely retest the 0.6851 level. https://www.forexcrunch.com/blog/2024/05/04/aud-usd-weekly-forecast-odds-of-fed-rate-cut-in-sep/
