2024-06-28 11:12
The dollar has risen since the start of the year due to a decline in Fed rate cut expectations. The US economy expanded at a 1.4% rate in the first quarter. Tokyo’s core CPI rose 2.1% in June after last month’s 1.9% increase. The USD/JPY price analysis is bullish as the dollar trades at a 38-year high against the yen ahead of US inflation data. Investors fear a possible intervention as the yen trades at its weakest level since 1986. The dollar has risen since the start of the year due to a decline in Fed rate cut expectations. Currently, it is heading for its second quarter of gains, with the Fed forecasting just one rate cut this year. Meanwhile, investors are expecting at least two. Nevertheless, the outlook will largely depend on incoming data. Notably, data on Thursday showed the US economy expanded at a 1.4% rate in the first quarter, an increase from the previous 1.3% increase. At the same time, unemployment claims dropped last week from 239K to 233K, indicating labor market strength. Markets are now awaiting the PCE report, which might show inflation easing to 2.6% in May. Lower inflation would raise bets for rate cuts and weaken the dollar. This would give the yen some relief after its recent plunge. Meanwhile, core inflation in Japan’s capital, Tokyo, increased in June as a weak yen drove import costs higher. The core CPI rose by 2.1% after last month’s 1.9% increase. Furthermore, data revealed an increase of 2.8% in Japan’s factory output in May. This was a more significant number than the forecast of 2.0%. These reports increased the chances that the Bank of Japan will cut rates in July. Still, this was not enough to stem the yen’s decline. USD/JPY key events US Core PCE Price Index USD/JPY technical price analysis: Bulls eying 162.01 after breaching the 160.00 resistance On the technical side, the USD/JPY price is on a solid bullish trend that recently broke above the 160.00 critical resistance level. Moreover, the price sits above the 30-SMA, and the RSI is going in and out of the overbought region, showing solid bullish momentum. Furthermore, the uptrend is making such short pullbacks, a sign that bulls are much stronger than bears. Currently, the price has paused and is pulling back. It might retest the 30-SMA support before continuing higher. The next major resistance is at the 16.01 level. https://www.forexcrunch.com/blog/2024/06/28/usd-jpy-price-analysis-testing-38-year-top-ahead-of-us-pce/
2024-06-28 09:11
The greenback is heading for a second quarter of gains due to a drop in Fed rate cut expectations. Market participants will pay close attention to the PCE price index report. The US GDP rose from 1.3% to 1.4%, as expected. The GBP/USD outlook remains bearish, even with a slight rebound, as investors eagerly await the US PCE price index report. At the same time, the dollar was steady after rising due to data showing continued strength in the US economy. The greenback is heading for a second quarter of gains due to a drop in Fed rate cut expectations. Markets have had to readjust expectations for rate cuts since the year began. Currently, investors expect two cuts for the year. However, the Fed has a less dovish outlook, forecasting just one rate cut. Consequently, market participants will pay close attention to the PCE price index report later in the day. Economists expect inflation to soften to an annual rate of 2.6% in May. If the figures match these estimates, Fed rate cut expectations will increase. On the other hand, a bigger-than-expected number would reduce rate cut expectations. Furthermore, the dollar got a boost from the previous session’s data. The GDP rose from 1.3% to 1.4%, as expected. Meanwhile, unemployment claims fell from 239,000 to 233,000, showing continued strength in the US labor market. On Thursday, a former MPC member said the Bank of England could cut rates in August. However, it would depend on whether inflation and wage data align with MPC forecasts. Last week, the central bank held rates despite inflation reaching the 2% target. Policymakers are waiting for weaker wage data before starting the rate-cutting cycle. GBP/USD key events today US core PCE price index m/m GBP/USD technical outlook: Downtrend approaches 1.2600 support On the technical side, the GBP/USD price trades below the 30-SMA with the RSI below 50, showing a bearish trend. Moreover, the price is making lower highs and lows, indicating a developed downtrend. Currently, the price trades with the nearest support at 1.2600 and the nearest resistance at 1.2700. Moreover, the decline has paused, and bulls are challenging the 30-SMA resistance. A break above the SMA would allow the price to retest the 1.2700 resistance. However, if the SMA holds firm, the price will continue the downtrend with the next target at 1.2600. https://www.forexcrunch.com/blog/2024/06/28/gbp-usd-outlook-no-respite-as-us-pce-looms/
2024-06-27 10:21
On Wednesday, the yen plunged to a 38-year low. Investors remained cautious ahead of the French elections. Policymakers remain confident that Eurozone inflation will reach the 2% target. The EUR/USD outlook is bearish as the dollar holds near recent peaks driven by a decline in the yen. Meanwhile, ECB policymakers and experts increased market confidence that Eurozone inflation will reach the central bank’s target. On Wednesday, the yen plunged to a 38-year low as investors focused on the interest rate differential between the US and Japan. This allowed the dollar to strengthen against its peers. This rally came ahead of GDP and inflation data from the US that might give more clues on the Fed’s rate cut outlook. The PCE price index report, due on Friday, will significantly shape the outlook for Fed interest rates. If inflation eases as expected, rate-cut bets will increase, and the dollar might pull back. Moreover, investors might assume a more dovish tone with more confidence in the inflation downtrend. On the other hand, investors remained cautious ahead of the French elections. Political uncertainty since Macron’s snap election announcement has weighed on the euro. A radical shift in the government could mean fiscal policy changes that might cause a financial crisis. That risk will remain until the elections are done. Meanwhile, policymakers remain confident that Eurozone inflation will reach the 2% target. ECB’s Olli Rehn said on Wednesday that data showed inflation would reach the central bank’s target. At the same time, experts are planning to advise the ECB to continue cutting rates, which would weaken the euro. Markets currently price 68bps of ECB rate cuts this year. EUR/USD key events today US final GDP q/q US jobless claims EUR/USD technical outlook: Price reaches 1.0680 level for the third retest On the technical side, the EUR/USD price has fallen to retest the 1.0680 support level a third time. At the same time, it has pulled back to retest the recently broken channel resistance line. Moreover, the price is back below the 30-SMA with the RSI in bearish territory, supporting a bearish bias. However, the RSI still shows a bullish divergence that could lead to a bullish reversal. The RSI divergence indicates weaker bearish momentum, meaning the price might fail to break below 1.0680. If this happens, bulls might break above the SMA to target the 1.0800 resistance level. https://www.forexcrunch.com/blog/2024/06/27/eur-usd-outlook-dollar-remains-strong-amid-yens-decline/
2024-06-27 08:39
The Canadian dollar has fallen since Tuesday despite an unexpected jump in Canada’s inflation. Canada’s inflation rose at an annual rate of 2.9% in May. The greenback strengthened Wednesday as the yen fell to a new 38-year low. The USD/CAD forecast shows slight bearish momentum as the Canadian dollar recovers from its recent slump amid a drop in BoC rate cut bets. However, the bullish trend remains, with the dollar rallying against most currencies due to a decline in the yen. The Canadian dollar has fallen since Tuesday despite an unexpected jump in Canada’s inflation. It is a sign that investors are more focused on the dollar, which is on the rise. Notably, data on Tuesday showed that Canada’s inflation rose at an annual rate of 2.9% in May. It was a much bigger-than-expected jump from the previous month’s 2.7%, leading to a decline in rate cut expectations. Bank of Canada policymakers were quite confident about the downtrend in price pressures when they cut rates for the first time in June. Therefore, investors had high expectations that the central bank would cut again in July. However, after the inflation numbers, these expectations have fallen. This should have given the Canadian dollar a big boost. However, dollar strength overshadowed Canada’s inflation surprise. The greenback strengthened Wednesday as the yen fell to a new 38-year low. The catalyst behind this move is the wide gap in interest rates between Japan and the US. This has increased demand for the dollar compared to the yen, which weighs on other currencies like the Canadian dollar. The dollar rose despite poor housing data showing a drop in new home sales in the US. Investors are now awaiting GDP data and the PCE price index report. USD/CAD key events today US final GDP q/q US unemployment claims USD/CAD technical forecast: Price pauses at 0.786 Fib and reverses On the technical side, the USD/CAD price failed to close below the 0.786 Fib retracement level. Instead, it made a large wick before reversing and breaking above the 1.3680 key level and the 30-SMA. The break above the SMA indicates a shift in sentiment to bullish. Currently, the price is pulling back to retest the recently broken levels. However, since it remains above the 30-SMA with the RSI over 50, there is a high chance the bullish move will resume. Consequently, USD/CAD might revisit the 1.3780 key resistance level. https://www.forexcrunch.com/blog/2024/06/27/usd-cad-forecast-falling-boc-rate-cut-bets-boost-cad/
2024-06-26 12:58
The dollar rose on Tuesday after Fed policymakers maintained a cautious tone. Fed’s Lisa Cook rate cuts would depend on incoming data. The BoJ is under a lot of pressure to raise rates due to the yen’s weakness. The USD/JPY forecast points North as a surge in the dollar puts the yen at the $160 level that triggered a BoJ intervention in April. Consequently, there is a lot of caution in the market as investors fear another intervention. The dollar rose Tuesday after Fed policymakers kept cautious and failed to provide clear guidance on the central bank’s rate-cut outlook. Fed’s Lisa Cook noted that the central bank was on track to cut rates, but it would all depend on incoming data. Therefore, she failed to provide a clear timing for the first rate cut. Policymakers remain hesitant to assume a more dovish tone as they await more data. This is to avoid making the same mistake they made last year. Although inflation had started a downtrend, it reversed, and they had to change their outlook completely. The next report that might give more evidence of the state of inflation is the PCE price index. Forecasts show further easing, which would support Fed rate cut expectations. Such an outcome would further weigh on the yen. Meanwhile, Bank of Japan policymakers have given hawkish signals in the past week, raising the possibility of a rate hike in July. The central bank is under a lot of pressure to raise rates due to the yen’s weakness. A weak currency pushes up import costs which drives inflation higher. A hike in July would have a big impact as it would coincide with plans to reduce bond purchases. USD/JPY key events today US new home sales USD/JPY technical forecast: Bulls show exhaustion at the 160.00 resistance On the technical side, the USD/JPY price has continued its rally past the 1.618 Fib extension level. Moreover, the price has stayed above the 30-SMA, showing bulls are in the lead. However, the RSI has made a bearish divergence that could lead to a reversal. The divergence indicates fading bullish momentum as the price trades near the 160.00 key resistance level. Therefore, there might be a pullback to retest the 30-SMA support. A deeper pullback would retest the 157.75 support level. However, if bulls regain momentum, the price might breach the 160.00 level to make a new high. https://www.forexcrunch.com/blog/2024/06/26/usd-jpy-forecast-dollar-surges-to-critical-160-00-level/
2024-06-26 09:49
Inflation in Australia rose at an annual rate of 4.0% in May. The likelihood of an RBA rate hike in November rose to 60%. Markets eagerly await the US PCE price index report on Friday. The AUD/USD price analysis paints a bullish picture, with the Aussie soaring on an unexpected jump in Australia’s inflation. The risks of an RBA rate hike increased. Meanwhile, the dollar was also steady after slightly hawkish Fed remarks. Data on Wednesday showed that inflation in Australia rose at an annual rate of 4.0% in May from 3.6% in the previous month. Furthermore, this was a bigger jump than the forecast of 3.8%. After the report, investors raised the chances of a Reserve Bank of Australia rate hike this year and lowered the chances of a cut. The chances of a hike in September rose slightly above 50%. At the same time, the likelihood of one in November rose to 60%. Meanwhile, investors do not expect a rate cut until late 2025. This inflation report gives the Australian dollar a stronger edge over its peers. While other major central banks begin their rate-cutting cycles, the RBA is more likely to hike. On the other hand, the dollar firmed as policymakers maintained a cautious tone despite the recent decline in inflation. Michelle Bowman and Lisa Cook kept from saying when a Fed rate cut will occur. Although there is more confidence that the US central bank will eventually cut rates, they said it would depend on incoming data. Therefore, markets eagerly await the PCE price index report on Friday. This might give more clues on the timing for rate cuts. Economists expect the report to show inflation eased to 2.6% in May, the slowest in three years. AUD/USD key events today US New Home Sales AUD/USD technical price analysis: Bulls eye range resistance amid consolidation On the technical side, the AUD/USD price has made a sharp, bullish move and has broken above the 30-SMA line. Consequently, there was a surge in bullish momentum. This can also be seen in the RSI, which trades above 50 in bullish territory. However, the price has remained in consolidation for a long time between the 0.6580 support and the 0.6700 resistance levels. Therefore, there is no clear direction in the market. Still, bulls are eyeing the 0.6700 resistance level. A break above would signal the start of a bullish trend. On the other hand, the consolidation will continue if the resistance level holds firm. https://www.forexcrunch.com/blog/2024/06/26/aud-usd-price-analysis-aussie-rallies-on-inflation-surge/
