2024-06-04 09:44
Japan’s government will likely warn of the effects of a weak yen in the economic policy roadmap. Business activity in the US manufacturing sector shrank in May. Markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September. The USD/JPY price analysis points to renewed bearish sentiment as the yen gains amid increasing pressure on the Bank of Japan to hike interest rates. Meanwhile, the dollar weakened after PMI data in the previous session revealed another month of contraction in the manufacturing sector. Notably, Bank of Japan Deputy Governor Ryozo Himino said the central bank should be keen on the impacts of a weak currency as it guides monetary policy. Meanwhile, Japan’s government will likely warn of the effects of a weak yen in the economic policy roadmap for 2024. Analysts believe this will pressure the BoJ to hike rates, mainly if a weak yen increases imported inflation. Meanwhile, the dollar tried to recover after hitting fresh monthly lows on Monday due to downbeat US economic data. Business activity in the manufacturing sector shrank in May, with the ISM PMI dropping from 49.2 to 48.7. This decline indicated a slowdown in the economy due to high interest rates. As a result, rate cut expectations increased, leading to a decrease in Treasury yields. Consequently, the yen, which is sensitive to moves in US yields, rose. After the report, markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September. Later in the day, investors will scrutinize a report from the US showing the number of job vacancies. This will shape the outlook for rate cuts in the US. USD/JPY key events today US JOLTS job openings USD/JPY technical price analysis: Bears pierce ascending trendline On the technical side, the USD/JPY trend has reversed from bullish to bearish with a break below the 30-SMA and the bullish trendline. The bullish trend weakened when it made a new high above 156.50 but failed to reach the next key resistance at 158.01. At this point, the price made a lower high and broke below the 30-SMA, the 156.50 level, and the bullish trendline. Currently, the path is clear for bears to retest the 154.02 support level. Moreover, the downtrend will remain intact if the price stays below the 30-SMA and the RSI in bearish territory below 50. https://www.forexcrunch.com/blog/2024/06/04/usd-jpy-price-analysis-yen-soars-on-rising-rate-hike-bets/
2024-06-04 08:09
Data revealed further contraction in the US manufacturing sector. Traders are pricing in a 59.1% chance of a Fed cut in September. Surveys showed a decline in British sales in May. The GBP/USD outlook shows solid bullish momentum as the dollar trades near multi-month lows amid more signs of economic weakness. However, the pound pulled back slightly amid signs of weaker UK consumer spending in May. The dollar fell on Monday after data from the Institute of Supply and Management revealed a further contraction in the manufacturing sector. The ISM PMI fell from 49.2 in April to 48.7 in May, showing the impact of high borrowing costs. This was the second month of contraction and could pile pressure on the Fed to start cutting interest rates. As a result, traders are pricing in a 59.1% chance of a cut in September, up from 55% before the report. Moreover, they expect total reductions of 41 basis points in 2024. This came after the inflation report on Friday, which showed a slight easing. If this trend continues, there will be a greater chance that the Fed will implement two rate cuts this year. The next big test will come on Friday when the US will release its monthly employment report. Policymakers will pay close attention to see whether the crack seen in the labor market last month will continue or not. Meanwhile, surveys by Barclays and The British Retail Consortium in the UK showed a decline in British sales in May. The decline came due to the effects of wet weather across Britain. GBP/USD key events today US JOLTS job openings GBP/USD technical outlook: Bears reject break above 1.2800 resistance On the technical side, the GBP/USD price has punctured the 1.2800 resistance level before pulling back below. This is a sign the price has been rejected above 1.2800, and bears could attempt a takeover. Previously, the price was trading in a solid bullish trend that paused at 1.2800. At this point, bears took over with a break below the bullish trendline and the 30-SMA support line, intending to reverse the trend. However, they could not go below the 1.2700 support level to make a lower low. This allowed the bulls to make another attempt at breaking above 1.2800. However, the RSI has made a slight bearish divergence, indicating weaker bullish momentum. If this plays out, bears might revisit the 1.2700 support level. https://www.forexcrunch.com/blog/2024/06/04/gbp-usd-outlook-dollar-struggles-near-lows-after-dismal-pmi/
2024-06-03 10:23
Canada’s economy expanded slower than expected in Q1. The likelihood of a Bank of Canada rate cut in June rose from 66% to 83%. The US core PCE price index increased by a slower 0.2% in April. The USD/CAD outlook turned bullish on Monday as the Canadian dollar weakened amid an increase in Bank of Canada rate cut expectations. At the same time, the dollar recovered after dipping on Friday due to a slowdown in US inflation. Data on Friday revealed that Canada’s economy expanded slower than expected in Q1, boosting expectations for a Bank of Canada rate cut this week. Notably, Canada’s economy expanded by 1.7%, which was well below the forecast of 2.2%. As a result, the likelihood of a rate cut in June rose from 66% to 83%. This means Canada’s interest rates will start declining well before those in the US, creating a gap in interest rates. Meanwhile, the US dollar recovered from a plunge on Friday when inflation data came in lower than expected, raising chances that the Fed will cut in September. The core PCE price index rose by 0.2% in April, below economists’ expectations for a 0.3% increase. This was the second lower surprise in May that led to a decline in the dollar. After the report, the likelihood of a Fed rate cut in September increased slightly from 49% to 53%. However, there is still much uncertainty regarding the Fed’s policy path. Policymakers are awaiting more evidence that inflation will decline to the central bank’s target, so they have remained mostly cautious. USD/CAD key events today US final manufacturing PMI US ISM manufacturing PMI USD/CAD technical outlook: Bulls test 30-SMA resistance within bearish channel On the technical side, the USD/CAD price is rebounding after finding support at the 1.3605 level. Bulls have regained momentum, with the RSI slightly above 50, and are challenging the 30-SMA resistance. A break above the SMA would confirm a shift in sentiment to bullish. However, since the price is also trading within a shallow bearish channel, a move higher would likely pause at the 1.3720 level or the channel resistance. If the larger bearish trend continues, the price will bounce lower at the channel resistance. However, if bulls are ready to reverse the trend, the price will break out of the bearish channel to make a higher high. https://www.forexcrunch.com/blog/2024/06/03/usd-cad-outlook-rising-rate-cut-odds-send-loonie-lower/
2024-06-03 08:50
Market participants are almost certain that the ECB will cut rates on Thursday. The interest rate gap between the Eurozone and the US will widen. The US core PCE price index showed an increase of 0.2% in April, slower than the previous month’s 0.3% increase. The EUR/USD forecast is bearish as investors gear up for a European Central Bank rate cut this week. Meanwhile, the dollar stabilized after Friday’s inflation miss, which led to an increase in bets for a Fed rate cut in September. Market participants are almost certain that the ECB will cut rates on Thursday. This will likely weaken the euro against the dollar as the rate gap between the Eurozone and the US widens. However, the path becomes less certain after Thursday, especially after last week’s Eurozone inflation report. Data on Friday revealed that inflation increased by 2.6% in May, bigger than the previous month’s 2.4% increase. This might cause the ECB to pause after Thursday, as inflation is moving away from the central bank’s target. Meanwhile, the dollar had its first bearish month this year in May as US inflation eased, raising bets of a Fed rate cut in September. The first indicator of easing inflation was the Consumer Price Index report. More recently, the core PCE price index showed an increase of 0.2% in April, slower than the previous month’s 0.3% increase. Economists had expected the value to hold at 0.3%. Consequently, after the report, the likelihood of a Fed cut in September increased from 49% to 53%. If inflation continues with this downtrend, the Fed will be under more pressure to cut interest rates in September. Still, this will come well after the ECB’s first cut. EUR/USD key events today US final manufacturing PMI US ISM manufacturing PMI EUR/USD technical forecast: Fluctuating between 1.0800 and 1.0880 On the technical side, the EUR/USD price trades in a range with support at 1.0800 and resistance at 1.0880. The sideways move came after a bullish trend that failed to continue beyond the 1.0880 resistance. Therefore, it is likely a corrective move that will lead to a continuation of the uptrend or a reversal. The price is pushing lower within the range and has punctured the 30-SMA after retesting the range resistance. Consequently, bears are in the lead. If it closes below the SMA, it will likely fall to retest the range support. https://www.forexcrunch.com/blog/2024/06/03/eur-usd-forecast-ecb-rate-cut-pressure-looms/
2024-06-02 07:53
Data on Friday revealed hotter-than-expected Eurozone inflation in May. The core PCE price index report revealed a decline in US inflation Investors eagerly await the nonfarm payrolls report. The EUR/USD weekly forecast is bullish as Eurozone inflation unexpectedly rises, contrasting with a drop in US inflation. Ups and downs of EUR/USD EUR/USD had a nearly flat week but closed well above its lows. The week started with a rally in the dollar after the release of better-than-expected consumer confidence figures. However, the euro was back on the front foot when data showed a decline in US GDP in Q1, raising expectations that the Fed will cut rates in September. Moreover, data on Friday revealed hotter-than-expected Eurozone inflation in May. The CPI rose from 2.4% to 2.6%, beating forecasts for a 2.5% increase. This slightly lowered expectations for an ECB rate cut next week, boosting the euro. More support came from a decline in US inflation as shown by the core PCE price index report. Next week’s key events for EUR/USD Next week, the US will release data on business activity in the manufacturing sector. Additionally, investors will watch the nonfarm payrolls report for clues on the Fed’s policy path. Meanwhile, in the Eurozone, traders will monitor the outcome of the European parliamentary elections. The US employment report comes when there is uncertainty about the Fed’s policy outlook. The last monthly report revealed softer labor market conditions that raised expectations for rate cuts in the US. Another such report would indicate the start of a downtrend in the sector that would pressure the Fed to start lowering borrowing costs. EUR/USD weekly technical forecast: Bulls seek new high above resistance trendline On the technical side, the EUR/USD price has broken above a strong bearish trendline and is looking to make a higher high. Moreover, it has respected the 22-SMA as support, showing bulls are in control. At the same time, the RSI is rising after finding support at the 50 level, a sign of strong bullish momentum. However, the price must break above the 1.0900 resistance level before making a new high. A break above this level would clear the path for bulls to retest the 1.1101 resistance. However, if the resistance holds firm, the price might fall below the 22-SMA to retest the recently broken trendline before continuing higher. https://www.forexcrunch.com/blog/2024/06/02/eur-usd-weekly-forecast-eu-inflation-rises-us-inflation-falls/
2024-06-01 08:53
Upbeat consumer confidence data from the US sent the dollar soaring. Canada’s GDP fell from 0.2% to 0.0% on a monthly basis. Markets are pricing a 60% chance of a rate cut in Canada on coming Wednesday. The USD/CAD weekly forecast shows more downside potential as there is a high chance that the Bank of Canada will cut rates next week, well ahead of the Fed. Ups and downs of USD/CAD USD/CAD fluctuated throughout the week but ended lower after poor US inflation data. When the week started, upbeat consumer confidence data from the US sent the dollar soaring against the Canadian dollar. However, the trend changed when, on Thursday, US data revealed a drop in GDP from 1.6% to 1.3% in Q1. Similarly, Canada’s GDP fell from 0.2% to 0.0% on a monthly basis. Therefore, the Bank of Canada is under more pressure to cut rates next week. The major catalyst for the week was the US core PCE index, which revealed an unexpected decline in inflation from 0.3 to 0.2%. This raised bets that the Fed will cut rates in September. Next week’s key events for USD/CAD Next week, investors will focus on the Bank of Canada policy meeting and employment data from Canada. At the same time, the US will release PMI data and the nonfarm payrolls report. The BoC policy meeting comes after much speculation on the central bank’s rate-cutting cycle. On coming Wednesday, markets are pricing a 60% chance of a rate cut in Canada. Meanwhile, the NFP report will give more clues on the outlook for rate cuts in the US as it will show the state of the labor market. USD/CAD weekly technical forecast: Bears approach solid support at 1.3601 On the technical side, the USD/CAD price has broken below its bullish trendline and is approaching the 1.3601 support level. This comes after the bullish trend rose to the 1.3803 resistance level. Although sentiment has shifted to bearish, the move lower has been choppy, showing it might be a corrective move. If it is, the price will likely bounce off the 1.3601 to retest the 1.3803 resistance level. A break above this resistance would make a higher high, confirming a continuation of the bullish trend. However, if bears make a stronger move in the coming week, the price could break below 1.3601 to retest the 1.3400 support level. https://www.forexcrunch.com/blog/2024/06/01/usd-cad-weekly-forecast-boc-poised-for-early-rate-cut/
