2024-07-02 10:05

Japan downgraded its Q1 GDP figures to show that the economy shrank more than reported. A rally in US Treasury yields weighed on the yen. Investors are awaiting Fed Chair Powell’s speech. The USD/JPY price analysis shows a strong uptrend as the yen continues its slide due to the interest rate differential between Japan and the US. At the same time, economic data from Japan shows a small chance that the Bank of Japan will hike rates at the next policy meeting. The dollar continued its rally against the yen on Tuesday as the market focused on the wide interest rate gap between Japan and the US. Notably, data from Japan on Monday showed that the country downgraded its Q1 GDP figures, showing that the economy shrank more than reported. The economy contracted 2.9% annually, compared to the reported 1.8% decline. These new figures complicate the outlook for rate hikes in Japan. A vulnerable economy could weaken further with high borrowing costs. However, if the Bank of Japan continues to delay rate hikes, the rate gap between Japan and the US will remain wide, hurting the yen. At the same time, a rally in US Treasury yields weighed on the yen. Yields soared in the previous session, boosting the dollar as markets priced in the possibility of a Trump win. This came after last week’s debate, in which Trump came out stronger than Biden. A Trump government would likely lead to an increase in inflation, which would strengthen the dollar. Meanwhile, investors are awaiting Fed Chair Powell’s speech later today for clues on the rate cut outlook. A cautious tone could further boost the dollar. USD/JPY key events today Fed Chair Powell’s speech US JOLTS job openings USD/JPY technical price analysis: Bulls weaken as they approach the 162.01 level On the technical side, USD/JPY is quickly approaching the 162.01 level. The price is in a steep bullish trend, well above the 30-SMA. At the same time, the RSI trades near the overbought region, supporting bullish momentum. However, it has made a lower high while the price has made a higher high. This indicates a bearish divergence due to fading bullish momentum. Therefore, there is a high chance that the price will soon reverse. If this happens, it might retest the 30-SMA or break below to the 160.00 support level. https://www.forexcrunch.com/blog/2024/07/02/usd-jpy-price-analysis-no-respite-for-yen-amid-rate-differential/

2024-07-02 08:41

US Treasury yields soared overnight amid expectations for a Trump win. Data on Monday showed that the US manufacturing sector shrank further in June. Investors are pricing a 36% chance that the RBA will hike rates in August. The AUD/USD outlook shows solid bearish sentiment as the dollar strengthens with rising Treasury yields. Meanwhile, investors were digesting minutes of the Reserve Bank of Australia’s last policy meeting. US Treasury yields soared overnight amid expectations for a Trump win. After the presidential debate last week, it was clear that Trump did better than Biden. As a result, investors have been pricing the possibility of a Trump presidency, which would increase tariffs and government borrowing. This, in turn, would lead to a rise in inflation, boosting the dollar. Meanwhile, data on Monday showed that the US manufacturing sector shrank further in June. The PMI number fell from 48.7 to 48.5 compared to expectations for an increase to 49.2. A decline in business activity is a sign that the economy is slowing down. Therefore, it supports Fed rate cut expectations. Typically, such a report would have weighed on the dollar. However, a rally in Treasury yields overshadowed this downbeat report. Market participants eagerly await Powell’s speech and the nonfarm payrolls report to provide more clues on the outlook for Fed rate cuts. Elsewhere, RBA minutes showed that policymakers debated raising rates to lower inflation. However, they decided to keep rates steady due to the risk of a significant slowdown in Australia’s labor market. Still, investors are pricing in a 36% chance that the central bank will hike rates in August. This will depend on the inflation figures for Q2. AUD/USD key events today Fed Chair Powell speaks US JOLTS job openings AUD/USD technical outlook: Bears test the 0.6640 solid barrier On the technical side, the AUD/USD price trades near the 0.6640 solid support level. The price has remained in a sideways move between the 0.6580 support and the 0.6700 resistance levels. Therefore, there is no clear direction in the market. Nonetheless, bears are currently in control, with the price trading below the 30-SMA and the RSI slightly below 50. If bears maintain control, the price will likely break below 0.6640 to retest the 0.6580 support level. However, if the support holds firm, the price will break above the SMA to retest the 0.6700 resistance level. https://www.forexcrunch.com/blog/2024/07/02/aud-usd-outlook-rising-treasury-yields-bolster-us-dollar/

2024-07-01 10:27

The Canadian dollar ended the month 0.3% lower, weakened by the Bank of Canada’s first rate cut. Canada’s Gross Domestic Product increased by 0.3% in April as expected. The US dollar fell when data revealed softer inflation in May. The USD/CAD outlook remains bearish as the Canadian dollar holds firm after Friday’s upbeat GDP report. Meanwhile, the US dollar recovered but remained fragile after data further confirmed that inflation was easing towards the Fed’s 2% target. The Canadian dollar ended the month 0.3% lower, weakened by the Bank of Canada’s first rate cut. The central bank was confident enough to lower borrowing costs as inflation eased. At the same time, the economy had slowed down significantly and struggled to grow since 2023. Consequently, the rebound in April showed a rebound that led to a decline in rate cut expectations. Canada’s Gross Domestic Product increased by 0.3% in April as expected. After this report, markets lowered the likelihood of a rate cut in July from 65% to 45%. On the other hand, the US dollar fell when data revealed softer inflation in May. The core PCE price index is the Fed’s best inflation measure. It showed the annual figure easing to 2.6% in May, meeting forecasts. This is a step closer to the Fed’s 2% target and paves the way for rate cuts. As a result, traders were more confident that the Fed would cut rates starting September, raising this likelihood to 63%. However, policymakers might wait for more data to confirm this downtrend. The next major report comes on Friday, showing the state of the labor market. Economists expect fewer jobs in June than the previous month. Such an outcome would further support rate-cut expectations. USD/CAD key events today US ISM Manufacturing PMI USD/CAD technical outlook: Price retests 30-SMA after breaking below On the technical side, the USD/CAD price is challenging the 30-SMA resistance after bears pushed the price below the level. The general trend points south as the price makes lower highs and lows. At the same time, it trades within a bearish channel with clear support and resistance lines. The price recently retested the channel resistance line near the 1.3720 key level before dropping. Therefore, there is a high chance it will reach the channel support. If the price stays below the 30-SMA with the RSI under 50, bears might revisit the 1.3640 support and continue lower. https://www.forexcrunch.com/blog/2024/07/01/usd-cad-outlook-gdp-growth-keeps-canadian-dollar-firm/

2024-07-01 08:58

Elections in France put the far-right National Rally party in first position. ECB policymakers remain confident that inflation will reach the target. The US core PCE price index eased from the previous month. The EUR/USD forecast leans bullish as the euro rises after round one of the French elections. Meanwhile, the dollar was on the back foot after inflation data in the previous session raised bets for a Fed cut in September. On Sunday, elections in France put the far-right National Rally party in first position. However, the win was by a smaller margin than expected, supporting the euro. If the far right performs poorly, there will be less fear of a financial crisis. The euro has fallen in recent sessions since Macron announced a snap election that created a cloud of political uncertainty. However, after the election, the EUR/USD pair reached a two-week high before pulling back. Elsewhere, ECB policymakers remain confident that inflation will reach the central bank’s target. Consequently, the central bank will likely continue cutting interest rates. Meanwhile, the Fed is yet to start its cutting cycle. The dollar was weak after data on Friday showed weaker inflation in May. The US core PCE price index met expectations at 2.6%, easing from the previous month. This gave investors more confidence that the Fed will cut in September. However, policymakers might continue watching incoming data for more evidence that the decline to 2% will continue. Currently, markets are pricing a 63% chance that the Fed will start lowering borrowing costs in September. This might change this week after the US nonfarm payrolls report, which is due on Friday. EUR/USD key events today German Prelim CPI m/m US ISM Manufacturing PMI EUR/USD technical forecast: Bulls break range above 1.0750 On the technical side, the EUR/USD price has gapped up and broken above the 1.0750 resistance level. Moreover, the price has broken out of its consolidation area between the 1.0675 support and the 1.0750 resistance. The previous bearish move showed weakness when the price punctured the 30-SMA resistance. At the same time, the RSI made a bullish divergence, showing fading bearish momentum. Afterwards, the price entered an area of consolidation, where bulls and bears fought for control. Bulls won when the price gapped up, showing massive bullish momentum, before breaking above 1.0750. Bulls might now target the 1.0850 resistance level. https://www.forexcrunch.com/blog/2024/07/01/eur-usd-forecast-french-election-results-lift-euro/

2024-06-30 08:01

The yen reached a new 38-year low and raised intervention concerns. An increase in Tokyo’s inflation increased the chances of a BoJ hike in July. The US core PCE index was softer, confirming the recent decline in price pressures. The USD/JPY weekly forecast is bullish as the interest rate differential between Japan and the US weighs on the yen. Ups and downs of USD/JPY USD/JPY had a bullish week, with the yen reaching a new 38-year low and raising intervention concerns. The decline in the yen last week came as investors focused on the gap in rates between the US and Japan. Therefore, there was little focus on economic data, which resulted in many warnings from Japanese authorities. Data showed an increase in Tokyo’s inflation, which increased the chances of a BoJ hike in July. Meanwhile, in the US, the core PCE index came in softer, confirming the recent decline in price pressures. Consequently, bets for a Fed cut in September rose. However, none of these reports could stop the yen’s plunge. Next week’s key events for USD/JPY Next week, investors will focus on US data, such as nonfarm payrolls and the manufacturing PMI. They will also pay attention to Powell’s speech and the FOMC minutes for clues on the Fed’s policy outlook. At the last Fed meeting, policymakers assumed a slightly hawkish tone, forecasting just one rate cut this year. However, traders have maintained a more dovish outlook for two cuts this year due to softer inflation figures. Therefore, they will pay close attention to Powell’s speech to see whether his tone will change. Meanwhile, the employment report will shape expectations for rate cuts. A bigger-than-expected number would lower expectations for rate cuts. On the other hand, a smaller-than-expected figure would increase bets for the first cut in September. USD/JPY weekly forecast: Price exceeds 160.00 resistance to set a new high On the technical side, the USD/JPY price recently broke above the 160.00 key resistance level to make a new high in the bullish trend. The price has consistently risen with higher lows and highs, indicating a solid uptrend. Moreover, it has mostly stayed above the 22-SMA with the RSI above 50, supporting solid bullish momentum. However, with the recent new high, bulls have grown weaker. The RSI has made a bearish divergence with the price, a sign of exhaustion in the bullish move. If this divergence plays out, the price might revisit the support trendline before either breaking below or rising higher. https://www.forexcrunch.com/blog/2024/06/30/usd-jpy-weekly-forecast-japan-us-rate-gap-weighs-on-yen/

2024-06-29 10:01

The EUR/USD weekly forecast was overshadowed as the US economy expanded at a bigger 1.4% rate in Q1. The US core PCE report showed softer inflation. Next week’s primary focus will be the US monthly employment report. The EUR/USD weekly forecast shows more upside potential as Fed rate cut expectations rise with softer inflation data. Ups and downs of EUR/USD EUR/USD had a slightly bullish week, during which the dollar fell. However, it was a slow week since there were few significant reports from the US. Since the week started, the main focus has been the core PCE price index. Other reports during the week included the US GDP, consumer confidence, and unemployment claims. The US economy expanded at a bigger 1.4% rate in Q1. Meanwhile, although consumer confidence fell, it came in higher than expected. The unemployment claims fell slightly, indicating strength in the labor market. Finally, the core PCE report aligned with expectations, showing softer inflation. As a result, expectations for a cut in September increased, weighing on the dollar. Next week’s key events for EUR/USD Next week, the US will release significant reports, including manufacturing business activity, FOMC meeting minutes, and nonfarm payrolls. At the same time, Fed Chair Powell will speak on Tuesday. Meanwhile, in the Eurozone, investors will review the ECB meeting minutes. Next week’s primary focus will be the US monthly employment report, which will show the state of the labor market. Although inflation has eased in recent months, employment has remained robust. As a result, policymakers have remained cautious about rate cuts. For June, economists expect 180,000 additional jobs. This would be a drop from the previous 272,000 and would pave the way for rate cuts. Furthermore, the ECB and Fed minutes will provide clues on the rate cut outlooks for the US and the Eurozone. EUR/USD weekly technical forecast: Price retests trendline and 1.0700 support On the technical side, the EUR/USD price recently broke above its resistance trendline. However, the move paused at the 1.0900 key resistance level before pulling back. The price has fallen below the 22-SMA to retest the recently broken trendline and the 1.0700 key support level. Therefore, EUR/USD is currently in a strong support zone. If this support holds firm, the price will bounce higher to retest the 1.0700 resistance level. A break above this level would confirm the start of a bullish trend with a higher high. https://www.forexcrunch.com/blog/2024/06/29/eur-usd-weekly-forecast-softer-inflation-fuels-fed-cut-bets/