2024-07-12 10:34

The US CPI report showed the first decline in inflation since 2020. In June, inflation fell by 0.1% when economists had expected it to increase by 0.1%. The ECB might lower borrowing costs again in September and December. The EUR/USD price analysis shows strong bullish momentum as the dollar falls amid a surge in expectations for a September Fed cut. Meanwhile, economists expect the European Central Bank to cut rates twice more this year. It was a dark day for the dollar on Thursday when the US CPI report showed the first decline in inflation since 2020. In June, inflation fell by 0.1% when economists had expected it to increase by 0.1%. At the same time, the annual figure increased by a smaller-than-expected 3.0%. This was a welcome surprise for the Fed which has remained cautious despite the recent downtrend. Powell insisted that policymakers need more evidence inflation will reach the 2% target. Thursday’s report opens the door for a rate cut. As a result, the likelihood of a cut in September rose from 73% to 93%. Furthermore, if policymakers assume a dovish outlook, there will be more declines for the dollar. Additionally, a dovish Fed would allow other major central banks like the BoC and the ECB to continue cutting interest rates. A Reuters poll on Thursday revealed that the ECB will lower borrowing costs again in September and December. However, there is a higher risk that the central bank will implement just one rate cut since services inflation in the Eurozone remains a big headache. As a result, policymakers have said there is no hurry to cut interest rates. Eurozone inflation eased to 2.5% from 2.6% in May. Meanwhile, services inflation was at 4.1% in June. EUR/USD key events today US Core PPI m/m US PPI m/m Preliminary UoM consumer sentiment EUR/USD technical price analysis: Bullish trend continues with a higher high On the technical side, the EUR/USD price has broken above the 1.0850 key resistance level to make a higher high. This indicates that the bullish trend remains intact. Moreover, the bullish bias is strong because the price trades well above the 30-SMA with the RSI near the overbought region. The uptrend paused after reaching the 1.0900 key psychological level. The price might retreat to retest the recently broken 1.0850 level before challenging 1.0900 for a new high. https://www.forexcrunch.com/blog/2024/07/12/eur-usd-price-analysis-fed-rate-cut-expectations-surge/

2024-07-12 08:53

The yen surged nearly 3% on Thursday after a downbeat US inflation report. There is speculation in the market that Japan intervened on Thursday. The US Consumer Price Index fell by 0.1% in June. The USD/JPY outlook leans mildly bullish as the yen pulls back following its surge in the previous session. Nevertheless, the overall trend remains downward after the dollar declined due to lower-than-anticipated inflation figures. The yen surged nearly 3% on Thursday after a downbeat US inflation report. However, there was speculation in the market that Japan had also intervened to strengthen the currency. Some news outlets like Asahi reported that officials had intervened in the market. On Friday, top currency diplomat Masato Kanda failed to comment on the possible intervention. However, he reminded traders that Japan will take necessary action in the FX market. Meanwhile, the dollar fell sharply after inflation dropped for the first time in 4 years. This was a big boost for Fed rate cut expectations. Moreover, it came after Powell said that policymakers needed more evidence inflation was on a downtrend. Notably, the Consumer Price Index fell by 0.1% in June. Meanwhile, the annual figure increased by 3.0%, a decline from the previous month’s 3.3% increase. Price pressures eased as gasoline became cheaper. This report should give Fed officials more confidence that inflation is on a downward path and will eventually reach the 2% target. As a result, market participants raised the likelihood of a Fed cut in September from 73% to 93%. Traders are almost certain the US central bank will start lowering borrowing costs in September. As a result, the dollar lost its appeal, allowing the yen to recover. USD/JPY key events today US core PPI m/m US PPI m/m Prelim UoM consumer sentiment USD/JPY technical outlook: Sentiment shifts after sharp spike in bearish momentum On the technical side, the USD/JPY price is bouncing higher after reaching the 158.01 key support level. The price recently made a sharp bearish move that led to a shift in sentiment to bearish. The pair fell below the 30-SMA and the RSI dipped into the oversold region, supporting a bearish bias. However, after such a steep move, the price is pulling back before continuing lower. The pullback could retest the 158.01 level and the 30-SMA. If bears hold on to control, the price will breach 158.01 to revisit the 156.01 support. https://www.forexcrunch.com/blog/2024/07/12/usd-jpy-outlook-yen-retreats-following-solid-rally/

2024-07-11 10:17

The UK GDP rose by 0.4% in May, above estimates of 0.2%. Services inflation and wage growth in the UK remain high. Investors are waiting to see the US consumer inflation report for June. The GBP/USD outlook points North as the pound rallies after data revealed a bigger-than-expected expansion in the UK economy in May. At the same time, investors were eagerly awaiting the US inflation report. The pound hit a four-month high on Thursday after the UK GDP report showed the economy expanded more quickly than economists forecast in May. The GDP rose by 0.4% in May, above estimates of 0.2%. Consequently, the likelihood of a BoE rate cut in August fell. If demand is rising again, it could drive inflation higher. Therefore, policymakers will hesitate to start lowering borrowing costs. At the same time, services inflation and wage growth in the UK remain high. Although inflation has reached 2%, the underlying price pressure might continue challenging the BoE rate cut outlook. At the moment, there is a 50% chance the UK central bank will cut rates in August. Furthermore, the rate cut outlook will continue changing depending on what the Fed does. Recent comments from Powell indicate caution despite softer inflation and a slowdown in the economy. However, policymakers have noted the weaker demand in the labor market that could pave the way for rate cuts. Investors are waiting to see the consumer inflation report for June. If there is further easing, it could give policymakers the confidence they need to start cutting interest rates. A more dovish Fed will allow other major central banks to assume similar stances. GBP/USD key events today US Consumer Price Index report US initial jobless claims GBP/USD technical outlook: Bullish momentum surges beyond 1.2850 On the technical side, the GBP/USD price is climbing after breaking above the 1.2850 key resistance level. The bullish bias is strong because the price has respected the 30-SMA as support and has made a higher high. At the same time, the RSI trades in the overbought region, supporting solid momentum. The new high is a sign that bulls are ready to continue the uptrend. Therefore, the price might soon revisit the 1.2900 key psychological level. The bullish trend will continue as long as the price trades above the 30-SMA and the RSI stays above 50. https://www.forexcrunch.com/blog/2024/07/11/gbp-usd-outlook-pound-soars-on-upbeat-uk-gdp/

2024-07-11 08:30

USD/JPY forecast is bullish after Powell spoke cautiously. Analysts expect further easing in price pressures from 3.4% to 3.1% in June. Japan’s wholesale inflation increased in June. The USD/JPY forecast is bullish as the dollar firms ahead of US inflation figures. Meanwhile, the yen remained frail despite data showing a surge in Japan’s wholesale inflation in June. On Tuesday and Wednesday, Powell spoke cautiously, saying the Fed needed more evidence that inflation would fall to the 2% target. As a result, the dollar got a boost, which weighed on the yen. At the same time, the likelihood of a rate cut in September slipped from 76% to 73%. As long as the Fed keeps delaying rate cuts, the 5% rate gap between Japan and the US will remain. Therefore, the yen will likely continue dropping. However, the upcoming US inflation report could change this outlook. Analysts expect further easing in price pressures from 3.4% to 3.1% in June. This would bring consumer inflation closer to the Fed’s 2% target. Consequently, it would give policymakers more confidence to cut rates. Moreover, softer inflation would pressure the dollar, relieving the yen. The yen can only strengthen when the rate gap between Japan and the US shrinks. This can only happen with BoJ hikes and Fed rate cuts. However, both central banks have been delaying these moves. The Bank of Japan is trying to support a vulnerable economy that could worsen with higher borrowing costs. On the other hand, the Fed is waiting for more evidence that inflation will reach 2%. Elsewhere, Japan’s wholesale inflation increased in June as a weak yen raised import costs, including raw materials. This raised the likelihood of a BoJ hike in July. USD/JPY key events today US Core CPI m/m US CPI m/m US CPI y/y US unemployment claims USD/JPY technical forecast: Bears fail to keep the price below the 30-SMA On the technical side, the USD/JPY price is in a bullish move, approaching the 162.01 critical level. Initially, bears had taken control when the price broke below the 30-SMA after a bearish RSI divergence. However, the move failed to continue below the 160.50 support level. As a result, bulls took back control. However, they must make a higher high to confirm a continuation of the previous bullish trend. Otherwise, the price might start consolidating with support at 160.50 and resistance at 162.01. https://www.forexcrunch.com/blog/2024/07/11/usd-jpy-forecast-dollar-firms-versus-yen-ahead-of-us-inflation/

2024-07-10 10:37

EUR/USD forecast is slightly bullish after Fed’s cautiousness. Powell insisted that the central bank needs greater confidence to start cutting interest rates. Fabio Panetta said the ECB can continue to lower borrowing costs. The EUR/USD forecast is bullish as the dollar retreats after rising in the previous session due to Powell’s cautious remarks. Meanwhile, ECB policymakers are calling for more rate cuts which could put pressure on further gains for the euro. Markets perceived Powell’s speech on Tuesday as cautious. However, there were dovish tones which kept rate cut bets mostly steady. The recent jobs report raised market expectations that the Fed will cut rates in September. Therefore, investors had expected a similar reaction from the Fed. Unfortunately, Powell insisted that the central bank needs greater confidence to start cutting interest rates. Policymakers have decided to wait until the last minute to call for rate cuts. The last time inflation showed signs of easing, it reversed after most officials had assumed a dovish stance. Therefore, they had to shift their tone. To avoid another such outcome, the Fed will wait for more data to gain confidence that inflation will fall to the 2% target. The next major report will come on Thursday. The US will release consumer inflation numbers that could indicate further easing in price pressures. Economists expect an easing in the annual figure to 3.3%. Meanwhile, the monthly figure might increase slightly to 0.1%. Elsewhere, ECB policymakers are calling for more rate cuts as inflation nears the central bank’s target. Fabio Panetta said the ECB can continue to lower borrowing costs as inflation remains in line with the central bank’s expectations. Moreover, since interest rates are still high, they will eventually lower the stubborn services inflation. EUR/USD key events today Fed Chair Powell’s testimony EUR/USD technical forecast: Price prepares to bounce higher after SMA retest On the technical side, the EUR/USD price has found support at the 30-SMA line and might bounce higher. The pair has been on a bullish trend since it found solid support at the 1.0675 level. An uptrend means that the SMA acts as support and the price bounces higher each time it retests the level. Therefore, if the trend is still strong, the price might soon challenge the 1.0850 resistance for a new high. However, if bears have gained momentum, the price will break below the SMA to retest support levels like the trendline and the 1.0750 level. https://www.forexcrunch.com/blog/2024/07/10/eur-usd-forecast-dollar-falls-after-brief-rise-on-fed-remarks/

2024-07-10 08:52

Powell said the Fed needs greater confidence that inflation will reach its target. Investors lowered the chances of a Fed rate cut from 76% to 73%. Australia’s index for business conditions fell by two points in June. The AUD/USD price analysis reveals a positive outlook, spurred by the dollar’s decline after Powell’s cautious comments in his latest speech. Meanwhile, the Aussie remained steady after data revealed worsening business conditions in June. After the US jobs report last week, investors were eagerly awaiting Powell’s speech to see whether policymakers were gaining confidence to cut rates. However, when he spoke, he maintained that the Fed needs greater confidence that inflation will reach its target. Only then can policymakers be ready to implement a rate cut. Still, Powell noted that the risk of a deterioration in the labor market was growing. Therefore, the central bank has to balance inflation with growth. After his speech, market participants lowered the chances of a rate cut from 76% to 73%. According to experts, Powell and other policymakers will likely maintain their cautious tone because there are still several economic reports to come before the September meeting. Notably, the US will release three more inflation reports and two employment reports. On Thursday, investors will watch the US consumer inflation report to see the state of price pressures. Further easing will increase confidence in a September cut. On the other hand, data from Australia on Tuesday showed that the index for business conditions fell by two points in June. However, business confidence rose by six points, showing firms were confident about the future. The Reserve Bank of Australia might be the last major central bank to implement rate cuts. Therefore, high borrowing costs will likely continue hurting businesses for longer. AUD/USD key events today Fed Chair Powell Testifies AUD/USD technical price analysis: Exhausted bulls face the 0.6750 hurdle On the technical side, the AUD/USD price trades near the 0.6750 key resistance level. It is above the 30-SMA and the RSI trades in bullish territory, supporting a bullish bias. Bulls recently broke above the 0.6700 major resistance level with a strong candle. However, the bullish move has weakened near 0.6750. Therefore, bulls need a new surge in momentum to make a higher high and continue the uptrend. If they fail, the price will likely break below the 30-SMA and move to revisit the 0.6700 support level. https://www.forexcrunch.com/blog/2024/07/10/aud-usd-price-analysis-powells-cautious-remarks-weaken-usd/