2024-05-09 08:26
Next week’s US inflation report will shape the outlook for Fed rate cuts. Tokyo has spent approximately $60 billion to try and support its weak currency. BoJ policymakers were increasingly hawkish at the April meeting. The USD/JPY forecast leans bullish as the dollar strengthens ahead of next week’s US inflation data. Markets believe the economy is still robust, which could mean another upbeat inflation report. Meanwhile, hawkish sentiments from BoJ policymakers at their last meeting helped briefly support the yen. Market participants are getting ready for the US inflation report, which will shape the outlook for Fed rate cuts. The last report led to a significant rally in the dollar that weighed on the yen and had Japanese authorities concerned. Another report could return the pair to the $160.00 level and trigger another intervention. In the last week, Tokyo has spent approximately $60 billion to try and support its weak currency. If inflation remains persistent, there is a high chance that investors will push back the timing for the first Fed rate cut. On the other hand, a surprise decline would be a big relief for the Fed, especially after the recent jobs report. It would solidify bets that the central bank will cut interest rates in September. Elsewhere, minutes from the Bank of Japan’s last meeting in April revealed that policymakers were increasingly hawkish. As a result, experts believe the next rate hike could come in June or July. Although this strengthened the yen, it was only brief as it quickly resumed its decline against the dollar. USD/JPY key events today US unemployment claims US 30-y Bond auction USD/JPY technical forecast: Channel breakout confirms bullish reversal On the technical side, the USD/JPY price has broken out of its bearish channel and is quickly approaching the 156.00 key resistance level. The breakout shows that bulls have taken control. At the same time, the price trades above the 30-SMA with the RSI above 50, supporting the new bullish bias. Bulls gained confidence when the price broke above the channel resistance. However, after such a strong rally, the price might pause at the 156.00 key resistance. This would allow it to pull back and retest the 30-SMA as support before continuing higher. Given the new bullish bias, the price might break above the 156.00 level to retest the 158.00 key resistance level. https://www.forexcrunch.com/blog/2024/05/09/usd-jpy-forecast-dollar-firms-as-investors-prepare-for-us-cpi/
2024-05-08 11:02
BoE policymakers have grown comfortable with the view that inflation in the UK is falling towards the central bank’s target. The US economy remains far more robust than other major economies. The recent US employment report raised expectations for a Fed rate cut in September. The GBP/USD forecast paints a bearish picture as investors gain confidence that the Bank of England will implement two rate cuts this year. At the same time, the dollar regained momentum as the effects of the downbeat jobs report wore off. The Bank of England will meet on Thursday, and economists expect policymakers to maintain interest rates. However, the focus will be on clues for future policy moves. BoE policymakers have grown comfortable with the view that inflation in the UK is falling towards the central bank’s target. As a result, investors are fully pricing in two 25-basis-point rate cuts this year. Moreover, analysts expect the first cut as early as June. This would put the pound in a weaker position against the dollar since the Fed might implement its first rate cut in September. Although the recent US employment report raised expectations for Fed rate cuts, the US economy remains far more robust than other major economies. The employment figures gave the Fed a moment’s relief. However, after the news settled in, it became clear that policymakers would need more than one downbeat report to settle on the timing for the first rate cut. Consequently, the dollar regained strength, rallying against most major currencies on Wednesday. GBP/USD key events today No high-impact reports are coming from the UK or the US today. As a result, investors will keep speculating ahead of the BoE meeting. GBP/USD technical forecast: Decline pauses at key Fib retracement level On the technical side, the GBP/USD price is on a sharp decline that has paused at the 0.5 Fib retracement level. The bias shifted from bullish to bearish when the price broke below its support trendline and the 30-SMA. At the same time, the RSI dipped below 50 into bearish territory. If bearish momentum remains strong, the price will soon break below the Fib level and aim for the 1.2301 support. On the other hand, if the Fib level holds firm, the price will bounce higher to retest the recently broken SMA before resuming the decline. https://www.forexcrunch.com/blog/2024/05/08/gbp-usd-forecast-boe-to-implement-two-rate-cuts-in-2024/
2024-05-08 09:38
The Canadian dollar fell on interest rate differentials and lower oil prices. The Ivey PMI revealed that economic activity in Canada expanded faster in April. American Petroleum Institute data revealed a jump in US crude inventories last week. The USD/CAD price analysis shows a soaring bullish sentiment as the Canadian dollar slides on interest rate differentials and lower oil prices. This week, the currency has weakened significantly, with economists warning that policy outlook divergence will continue to weigh on the loonie. The Canadian dollar fell despite data on Tuesday showing an improvement in economic activity in April. The Ivey PMI revealed that economic activity in Canada expanded faster in April, with the index rising to 63.0 from 57.5 in March. However, this was not enough to lift the loonie since markets are confident that the Bank of Canada will cut rates at its June 5 meeting. Meanwhile, the Federal Reserve will start much later in September or November. This makes the dollar more appealing for investors as US rates will remain high for longer. At the same time, the Canadian dollar fell with oil prices. The decline in oil came after American Petroleum Institute data revealed a jump in US crude inventories last week. This is a sign of weak demand in the US. A drop in oil negatively impacts the Canadian dollar since Canada is a significant oil exporter. Investors are now awaiting Canada’s employment figures to get more clues on the rate cut outlook. More economic deterioration would solidify bets for June’s cut as it would pressure the Bank of Canada to lower borrowing costs. USD/CAD key events today Market participants are not expecting any key economic releases from Canada or the US. Therefore, the pair might continue in its current move. USD/CAD technical price analysis: Bulls take the lead after a false breakout On the technical side, the USD/CAD price has broken back above its trendline, and the 30-SMA shows bulls have taken the lead. This also indicates that the recent move below the trendline was a false breakout. Bulls showed their intention to take control when the price made a bullish, engulfing candle at the 1.3650 key level. The price now sits well above the SMA, with the RSI near the overbought region, indicating a bullish bias. Bulls are targeting the 1.3800 critical resistance level. A break above this level would make a higher high, strengthening the bullish bias. https://www.forexcrunch.com/blog/2024/05/08/usd-cad-price-analysis-policy-divergence-weighs-on-loonie/
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/
