2024-05-21 10:00
Producer prices in Germany fell by 3.3%, beating forecasts for a drop of 3.1%. Inflation in the Eurozone fell from 2.6% to 2.4% in March. Markets are pricing in 65 basis points of ECB rate cuts this year. The EUR/USD price analysis shows solid bullish sentiment as the euro strengthens despite weaker inflation in the Eurozone. The rally comes amid dollar weakness as investors digest recent economic releases from the US. Data on Tuesday revealed that producer prices in Germany fell by 3.3%, beating forecasts for a drop of 3.1%. Producer inflation held at 0.2% for the month, missing estimates of 0.3%. Inflation in the Eurozone has consistently trended lower. It fell from 2.6% to 2.4% in March, edging closer to the central bank’s target. As a result, investors and policymakers are more confident that the ECB will start cutting rates in June, well ahead of the Fed. However, ECB policymakers like Isabel Schnabel have called for caution after the June cut. Nonetheless, markets are pricing in 65 basis points of rate cuts this year. Investors will now wait for the Eurozone PMI reports coming on Thursday for more clues on the ECB’s policy outlook. Meanwhile, the dollar remained vulnerable after data revealed cracks in the economy last week. High borrowing costs have weakened demand and inflation, giving the Fed more reason to start cutting interest rates. However, policymakers have dampened rate-cut expectations and maintained a cautious tone. Most policymakers are not ready to change their stance on the central bank’s policy outlook until there is more evidence of declining inflation. EUR/USD key events today Neither the US nor the Eurozone will release any major reports today, so the pair might trade in a range. EUR/USD technical price analysis: Bulls reemerge above 30-SMA support On the technical side, the EUR/USD price is climbing higher after retesting the 30-SMA support, showing bulls are in the lead. At the same time, the price is trading within a bullish channel, further supporting the bullish bias. The price recently broke above the 1.0800 resistance level, trying to surpass the 1.0900 level. After that, the price entered a period of consolidation as the SMA caught up. From here, bulls are likely ready to revisit and break above 1.0900 to make a higher high. https://www.forexcrunch.com/blog/2024/05/21/eur-usd-price-analysis-euro-gains-despite-downbeat-inflation/
2024-05-21 08:55
Weak US data has contributed to a 2% surge in the pound this month. Economists expect a sharp drop in UK inflation, from 3.2% in March to 2.1% in April. Markets expect two BoE cuts starting in August. The GBP/USD outlook shows a bullish bias as the pound strengthens ahead of UK inflation data. In contrast, the dollar remained weak after a set of downbeat economic data raised expectations for Fed rate cuts in the previous week. Weak US data this month on employment, inflation, and retail sales has contributed to a 2% surge in the pound against the dollar. The reports have also revealed an economic deterioration that could pressure the Federal Reserve to lower borrowing costs. Consequently, there is a higher chance that the Fed will cut rates twice this year. However, policymakers do not seem convinced that this will last. As a result, they have maintained a slightly hawkish tone, emphasizing that inflation was still high. Investors are eagerly awaiting the UK inflation report, which will guide the Bank of England’s policy outlook. Economists expect a sharp drop in inflation from 3.2% in March to 2.1% in April, bringing it close to the central bank’s target. Currently, markets expect two BoE cuts starting in August. At the same time, there is a 55% chance that the central bank will start cutting rates in June. The BoE governor and deputy have said that rate cuts might come in the summer. Therefore, the pound might reverse due to the divergence in policy outlooks between the UK and the US. GBP/USD key events today BOE Gov Bailey Speaks GBP/USD technical outlook: Bulls fading near Fib resistance On the technical side, the GBP/USD price is in a bullish trend, with the price above the 30-SMA and the RSI in bullish territory. The bullish move is heading for the 1.2750 level, which coincides with the 1.618 Fib extension level. However, the bullish move might not go past this resistance because there are signs that momentum is fading. Notably, while the price makes a higher high, the RSI has made a lower high, showing a bearish divergence. Therefore, bulls are exhausted and might give up control at the nearest resistance. In such a case, the price would likely make a deep pullback to retest the 1.2601 key level. https://www.forexcrunch.com/blog/2024/05/21/gbp-usd-outlook-pound-gains-as-uk-awaits-key-inflation-data/
2024-05-20 09:57
Investors eagerly await Canada’s inflation report on Tuesday. For April, economists expect Canada’s inflation to drop to 2.8%. Fed policymakers have remained cautious despite a drop in inflation. The USD/CAD outlook paints a bearish picture, with the Canadian dollar in a strong position ahead of Canada’s inflation figures. At the same time, investors are still digesting the US inflation report, which showed a drop in inflation in April. Investors eagerly await Canada’s inflation report on Tuesday, which will give insight into the Bank of Canada’s rate cut outlook. The last report showed an annual inflation rate of 2.9%, giving policymakers confidence that it will reach the central bank’s target. For April, economists expect the figure to drop to 2.8%. Lower inflation in Canada would solidify bets that the BoC will start cutting interest rates in June. This is well before the Fed, which might implement the first cut in September. This outlook has contributed to the decline in the currency this year. Notably, the Canadian dollar has lost 2.7% of its value against the dollar since the year began. However, BoC policymakers are not threatened by the fact that divergence with the Fed might weaken their currency. According to BoC Governor Tiff Macklem, it would take a lot to weaken the loonie to a point where it would increase inflation in Canada. Meanwhile, Fed policymakers still hesitate to settle on a time for the first cut. Although there is a consensus that the next move will be a cut, there is still caution despite last week’s downbeat consumer inflation report. USD/CAD key events today No key economic reports are coming from the US or Canada today. Therefore, investors will likely keep speculating ahead of Canada’s inflation report. USD/CAD technical outlook: Challenging tough support at 1.3600. On the technical side, the USD/CAD price has paused at the 1.3600 support level. Moreover, the bias is bearish as the pause is below the 30-SMA resistance line, and the RSI is in bearish territory below 50. The price recently broke below 1.3650, a strong support level. It now trades with the nearest support at 1.3600 and the nearest resistance at 1.3650. The recent pause at 1.3600 shows that bulls might take charge. If this happens, the price might consolidate in the 1.3600-1.3650 range before continuing the downtrend. It could also make a deeper pullback to retest the resistance trendline before making new lows. https://www.forexcrunch.com/blog/2024/05/20/usd-cad-outlook-loonie-holds-firm-as-inflation-data-looms/
2024-05-20 09:13
The dollar fell last week after the US released April’s consumer inflation figures. Fed’s Thomas Barkin warned that inflation was still not where it should be. Japan’s economy contracted more than expected in Q1. The USD/JPY forecast looks bullish, with the dollar holding steady as Fed policymakers adopt a cautious stance despite the recent dip in inflation figures. Meanwhile, the yen remained vulnerable after data from last week revealed weak economic growth in Japan. The dollar fell last week after the US released April’s consumer inflation figures. Notably, the numbers came in lower, raising expectations that the Fed will cut rates twice this year. It also increased market confidence that last year’s downtrend was still intact. However, when policymakers spoke after the report, they maintained a cautious tone, with Thomas Barkin warning that inflation was still not where it should be. Meanwhile, the yen weakened following data on Thursday that showed Japan’s economy contracted more than expected in Q1. As a result, the Bank of Japan faces a challenge as it plans to hike interest rates. A weak economy is more vulnerable to high interest rates. Therefore, the central bank might hesitate to hike, especially if this trend continues. The weak yen has increased the cost of living in the country, which has put pressure on consumer consumption. Notably, the yen has lost 10% of its value against the dollar this year due to the gap in interest rates between Japan and the US. Sadly, the yen will likely remain weak if this gap remains. USD/JPY key events today Investors are not expecting high-impact economic reports from Japan or the US. As a result, the pair might consolidate. USD/JPY technical forecast: Bulls battle for control at the 30-SMA On the technical side, the USD/JPY price trades at a solid resistance zone after finding support at the 154.01 level. After a strong surge, the price has paused and is chopping through the 30-SMA in a tight range. The pause is below the 0.5 Fib retracement, a strong resistance level. Meanwhile, the RSI has also risen to trade above 50, indicating stronger bullish momentum. The bullish bias will strengthen if bulls detach from the 30-SMA and break above the 0.5 Fib level. Furthermore, the price will likely retest the 158.00 resistance level. However, if the resistance holds firm, it will fall to 154.01. https://www.forexcrunch.com/blog/2024/05/20/usd-jpy-forecast-fed-cautious-despite-cooling-inflation/
2024-05-19 08:24
The US CPI report showed a decline in inflation that led to an increase in Fed rate cut bets. Investors pushed up the chances of a Fed cut in September to 70%. Investors will watch inflation figures from Canada. The USD/CAD weekly forecast points south as bets for a Fed cut increase ahead of more clues on the BoC’s policy outlook. Ups and downs of USD/CAD The USD/CAD pair had a bearish week as the dollar fell due to signs of easing inflation. The week started with the US PPI report, which came in higher than expected. However, it had the opposite effect on the dollar, showing investors had priced in such an outcome. On Wednesday, the US CPI report showed a decline in inflation that led to an increase in Fed rate cut expectations. Investors pushed up the chances of a Fed cut in September to 70%. Moreover, they now expect two cuts this year. Next week’s key events for USD/CAD Next week, investors will watch inflation and retail sales figures from Canada. Meanwhile, from the US, they will read through the FOMC meeting minutes and the durable goods orders report. Canada’s inflation report will guide markets on the outlook for BoC rate cuts. At the moment, investors are confident that the Bank of Canada will cut rates in June. Notably, inflation has continued to ease while the economy has slowed. Therefore, there is more pressure on the BoC to cut rates than any other major central bank. Thus, another downbeat report would solidify bets for a June cut. However, if inflation beats forecasts, it could lead to declining rate cut expectations. Meanwhile, the FOMC meeting will give clues on policymakers’ bias regarding rate cuts. On the other hand, the durable goods orders will show the state of demand in the economy. USD/CAD weekly technical forecast: Bears challenge crucial support trendline On the charts, USD/CAD is at a pivotal support trendline. It trades below the 22-SMA with the RSI under 50, showing bearish sentiment. However, bears can only take full control if the price breaks below the support trendline and start making lower highs and lows. However, if the shallow bullish trend holds, USD/CAD will bounce off the trendline, break above the 22-SMA, and retest the 1.3800 resistance level. A break above this level would confirm a continuation of the bullish trend. Meanwhile, a break below the trendline would allow bears to revisit the 1.3502 support level. https://www.forexcrunch.com/blog/2024/05/19/usd-cad-weekly-forecast-fed-rate-cut-bets-grow-after-cpi/
2024-05-18 08:24
The US CPI report showed a decline in inflation. Employment data from the UK showed a significant drop in jobless claims. Next week, the UK will release its crucial inflation report. The GBP/USD weekly forecast shows more upside potential as easing US inflation increases Fed rate cut expectations, weighing on the dollar. Ups and downs of GBP/USD The GBP/USD pair ended the week very bullish as economic data from the US weakened the dollar. At the same time, data from the UK strengthened the pound. The US Consumer Price Index was the major catalyst during the week, showing a decline in inflation. Consequently, investors gained confidence that the Fed would cut rates in September. Meanwhile, employment data from the UK showed a significant drop in jobless claims, indicating a tight labor market that could keep the BoE from cutting rates too soon. Next week’s key events for GBP/USD Next week, the UK will release its crucial inflation report. At the same time, investors will focus on retail sales and the manufacturing PMI. Meanwhile, the US will release the FOMC meeting minutes and data on durable goods orders. The UK inflation report will significantly shape the outlook for Bank of England rate cuts. Currently, markets are pricing in a 55% chance that the BoE will cut rates in June. On Tuesday, BoE chief economist Huw Pill said that the central bank might be ready to cut rates in the summer. However, the labor market remains tight. If inflation remains high, this outlook might change significantly. Meanwhile, the FOMC minutes will reveal what led policymakers to the last decision to hold rates. It might also give clues on what the Fed will do next. GBP/USD weekly technical forecast: Bulls aiming for 1.2802 resistance. On the technical side, the bias for GBP/USD has gone from bearish to bullish. At the same time, the price is back within the 1.2551–1.2802 range area. The previous bearish trend paused and was reversed at the 1.2300 level. Here, the price made a morning star candlestick pattern, leading to a break above the 22-SMA and the 1.2551 key level. Furthermore, when the price broke above the SMA, it pulled back to retest it as support before making a new high. This confirmed that bulls were ready to take charge. Currently, the path is clear for the pound to retest the 1.2802 resistance level. A break above this level would further strengthen the bullish bias. https://www.forexcrunch.com/blog/2024/05/18/gbp-usd-weekly-forecast-cooling-us-inflation-boosts-pound/
