2024-05-10 09:38
Consumer spending in Japan declined for the 13th month in March. Economists in a Reuters poll expect Japan’s economy to shrink in Q1. There was an unexpected increase in US initial unemployment claims last week. The latest USD/JPY price analysis indicates a bullish trend as the yen weakens following a drop in Japan’s consumer spending for March. The disappointing report has clouded the outlook for potential rate hikes by the Bank of Japan. Data on Friday showed that consumer spending in Japan declined for the 13th month in March. Weak spending could be a sign that consumers are not earning as much. Therefore, prices will remain low, challenging the Bank of Japan’s outlook for rate hikes. In the previous session, data revealed that real wages in Japan fell two years in a row, another challenge for the Bank of Japan. Meanwhile, economists in a Reuters poll expect Japan’s economy to shrink in the first quarter of 2024 due to weak demand. These are all bearish for the yen which is struggling at a weak position against the dollar. Notably, most major currencies gained against the dollar overnight after poor US employment data. However, the yen remained weak, which raised concerns that Japanese authorities might intervene again to support their currency. Data on Thursday revealed an unexpected increase in US initial unemployment claims, raising hopes for policymakers that the labor market is finally cracking. Recent labor market data has all surprised to the downside and increased bets that the Fed will cut rates in September. Moreover, there is a higher chance that the central bank will implement two rate hikes in 2024. USD/JPY key events today US UoM consumer sentiment USD/JPY technical price analysis: Bulls rest after a strong move to the 156.00 level On the technical side, the USD/JPY price has paused below the 156.00 resistance level. However, the bullish bias is strong because it trades above the 30-SMA with the RSI in the bullish region above 50. This pause comes after an impulsive move that saw the price break out of its bearish channel. Bulls have paused to rest as the 30-SMA catches up with the price. When it does, USD/JPY will likely break above 156.00 to retest the 158.00 resistance level. The bullish bias will remain if the price stays above the 30-SMA. https://www.forexcrunch.com/blog/2024/05/10/usd-jpy-price-analysis-yen-slips-on-weaker-consumer-spending/
2024-05-10 08:51
The UK economy expanded by the most in almost three years in Q1. US data revealed a significant jump in initial jobless claims to an 8-month high. One more BoE policymaker voted for a rate cut. The GBP/USD outlook shows a surge in bullish momentum as the pound strengthens after better-than-expected GDP data. At the same time, the dollar was weak after another poor employment report. Data on Friday showed that the UK economy expanded the most in almost three years in Q1. This ends the shallow recession experienced in the second half of 2023. The GDP expanded by 0.6% in the first quarter of 2024. Meanwhile, data on Thursday from the US revealed a significant jump in initial jobless claims to an 8-month high. This confirmed the recent view that the labor market was cooling, leading to a sharp decline in the dollar. Moreover, the unemployment claims report came after poor nonfarm payrolls figures, revealing a bigger-than-expected drop in employment in April. Furthermore, other data showed that US jobless claims fell to a 3-year low in March. All these reports have raised confidence in the market that the US labor market is easing. As a result, there will be less inflationary pressure, allowing the Fed to cut interest rates. For this reason, investors are back to pricing in two Fed rate cuts in 2024. Elsewhere, the pound fell after the Bank of England policy meeting, where the central bank held rates at 5.25%, as expected. One more policymaker voted for a rate cut, indicating growing confidence that inflation will reach the central bank’s target. Moreover, Governor Bailey said he was optimistic that things were moving in the right direction. GBP/USD key events today US consumer sentiment report GBP/USD technical outlook: Bullish momentum cracks 30-SMA On the technical side, the GBP/USD price is on the brink of breaking above the 30-SMA. Meanwhile, the RSI has crossed above 50, showing a shift in sentiment to bullish. This comes after the price failed to break below the 0.5 Fib retracement level. Bulls reversed the move with a bullish engulfing candle. If the price closes above the SMA, it will confirm a bullish takeover. Moreover, it would allow the price to target and retest the 1.2600 key resistance level. A break above this level would make a higher high and strengthen the bullish bias. https://www.forexcrunch.com/blog/2024/05/10/gbp-usd-outlook-pound-rallies-on-the-heels-of-strong-gdp-data/
2024-05-09 10:01
US inflation has stalled above the central bank’s target. Investors are waiting to see if US inflation will surprise again. China’s exports and imports improved in April as domestic and overseas demand improved. The AUD/USD outlook is relatively flat as the dollar gains ahead of the US inflation report, while the Aussie stands firm thanks to encouraging data from China. The greenback is gaining momentum as markets gear up for next week’s inflation figures, which could change the outlook for Fed rate cuts. In recent months, the US has released hotter-than-expected inflation numbers, leading to the conclusion that inflation has stalled above the central bank’s target. As a result, policymakers have lost confidence in the progress to lower inflation, leading to confusion about the timing of rate cuts. However, the last jobs report increased expectations that the Fed might start cutting interest rates in September. Next week, investors will wait to see if inflation will surprise again. A positive surprise could revive the view that the Fed might cut only once or not at all in 2024. Such an outcome would be bullish for the dollar. However, if the recent weakness in the labor market reflects in the inflation report, the chances of a cut in September will increase. Meanwhile, data from China on Thursday showed the economy was improving. Consequently, the Yuan and the Australian dollar gained. As domestic and overseas demand increased, China’s exports and imports improved in April. Clearly, recent policy support measures have improved economic activity in the fragile economy. Notably, exports expanded by 1.5% on an annual basis in April. Similarly, imports for April expanded by 8.4%, which was well above forecasts for an increase of 4.8%. AUD/USD key events today US initial jobless claims US 30-y Bond auction AUD/USD technical outlook: Bullish bias holds despite a break below the 30-SMA On the technical side, the AUD/USD price is trading in a tight range near the 0.6575 key level. Moreover, it trades below the 30-SMA with the RSI slightly below 50, indicating a bearish sentiment. However, the larger bullish trend remains intact because the price still trades above the support trendline. If it fails to break below this trendline, it will reverse and target the 0.6650 level. On the other hand, if it breaks below the trendline, it would confirm a new bearish bias. This would allow the price to reach the 0.6475 support level. https://www.forexcrunch.com/blog/2024/05/09/aud-usd-outlook-aussie-stabilizes-on-firm-chinese-data/
2024-05-09 08:26
Next week’s US inflation report will shape the outlook for Fed rate cuts. Tokyo has spent approximately $60 billion to try and support its weak currency. BoJ policymakers were increasingly hawkish at the April meeting. The USD/JPY forecast leans bullish as the dollar strengthens ahead of next week’s US inflation data. Markets believe the economy is still robust, which could mean another upbeat inflation report. Meanwhile, hawkish sentiments from BoJ policymakers at their last meeting helped briefly support the yen. Market participants are getting ready for the US inflation report, which will shape the outlook for Fed rate cuts. The last report led to a significant rally in the dollar that weighed on the yen and had Japanese authorities concerned. Another report could return the pair to the $160.00 level and trigger another intervention. In the last week, Tokyo has spent approximately $60 billion to try and support its weak currency. If inflation remains persistent, there is a high chance that investors will push back the timing for the first Fed rate cut. On the other hand, a surprise decline would be a big relief for the Fed, especially after the recent jobs report. It would solidify bets that the central bank will cut interest rates in September. Elsewhere, minutes from the Bank of Japan’s last meeting in April revealed that policymakers were increasingly hawkish. As a result, experts believe the next rate hike could come in June or July. Although this strengthened the yen, it was only brief as it quickly resumed its decline against the dollar. USD/JPY key events today US unemployment claims US 30-y Bond auction USD/JPY technical forecast: Channel breakout confirms bullish reversal On the technical side, the USD/JPY price has broken out of its bearish channel and is quickly approaching the 156.00 key resistance level. The breakout shows that bulls have taken control. At the same time, the price trades above the 30-SMA with the RSI above 50, supporting the new bullish bias. Bulls gained confidence when the price broke above the channel resistance. However, after such a strong rally, the price might pause at the 156.00 key resistance. This would allow it to pull back and retest the 30-SMA as support before continuing higher. Given the new bullish bias, the price might break above the 156.00 level to retest the 158.00 key resistance level. https://www.forexcrunch.com/blog/2024/05/09/usd-jpy-forecast-dollar-firms-as-investors-prepare-for-us-cpi/
2024-05-08 11:02
BoE policymakers have grown comfortable with the view that inflation in the UK is falling towards the central bank’s target. The US economy remains far more robust than other major economies. The recent US employment report raised expectations for a Fed rate cut in September. The GBP/USD forecast paints a bearish picture as investors gain confidence that the Bank of England will implement two rate cuts this year. At the same time, the dollar regained momentum as the effects of the downbeat jobs report wore off. The Bank of England will meet on Thursday, and economists expect policymakers to maintain interest rates. However, the focus will be on clues for future policy moves. BoE policymakers have grown comfortable with the view that inflation in the UK is falling towards the central bank’s target. As a result, investors are fully pricing in two 25-basis-point rate cuts this year. Moreover, analysts expect the first cut as early as June. This would put the pound in a weaker position against the dollar since the Fed might implement its first rate cut in September. Although the recent US employment report raised expectations for Fed rate cuts, the US economy remains far more robust than other major economies. The employment figures gave the Fed a moment’s relief. However, after the news settled in, it became clear that policymakers would need more than one downbeat report to settle on the timing for the first rate cut. Consequently, the dollar regained strength, rallying against most major currencies on Wednesday. GBP/USD key events today No high-impact reports are coming from the UK or the US today. As a result, investors will keep speculating ahead of the BoE meeting. GBP/USD technical forecast: Decline pauses at key Fib retracement level On the technical side, the GBP/USD price is on a sharp decline that has paused at the 0.5 Fib retracement level. The bias shifted from bullish to bearish when the price broke below its support trendline and the 30-SMA. At the same time, the RSI dipped below 50 into bearish territory. If bearish momentum remains strong, the price will soon break below the Fib level and aim for the 1.2301 support. On the other hand, if the Fib level holds firm, the price will bounce higher to retest the recently broken SMA before resuming the decline. https://www.forexcrunch.com/blog/2024/05/08/gbp-usd-forecast-boe-to-implement-two-rate-cuts-in-2024/
2024-05-08 09:38
The Canadian dollar fell on interest rate differentials and lower oil prices. The Ivey PMI revealed that economic activity in Canada expanded faster in April. American Petroleum Institute data revealed a jump in US crude inventories last week. The USD/CAD price analysis shows a soaring bullish sentiment as the Canadian dollar slides on interest rate differentials and lower oil prices. This week, the currency has weakened significantly, with economists warning that policy outlook divergence will continue to weigh on the loonie. The Canadian dollar fell despite data on Tuesday showing an improvement in economic activity in April. The Ivey PMI revealed that economic activity in Canada expanded faster in April, with the index rising to 63.0 from 57.5 in March. However, this was not enough to lift the loonie since markets are confident that the Bank of Canada will cut rates at its June 5 meeting. Meanwhile, the Federal Reserve will start much later in September or November. This makes the dollar more appealing for investors as US rates will remain high for longer. At the same time, the Canadian dollar fell with oil prices. The decline in oil came after American Petroleum Institute data revealed a jump in US crude inventories last week. This is a sign of weak demand in the US. A drop in oil negatively impacts the Canadian dollar since Canada is a significant oil exporter. Investors are now awaiting Canada’s employment figures to get more clues on the rate cut outlook. More economic deterioration would solidify bets for June’s cut as it would pressure the Bank of Canada to lower borrowing costs. USD/CAD key events today Market participants are not expecting any key economic releases from Canada or the US. Therefore, the pair might continue in its current move. USD/CAD technical price analysis: Bulls take the lead after a false breakout On the technical side, the USD/CAD price has broken back above its trendline, and the 30-SMA shows bulls have taken the lead. This also indicates that the recent move below the trendline was a false breakout. Bulls showed their intention to take control when the price made a bullish, engulfing candle at the 1.3650 key level. The price now sits well above the SMA, with the RSI near the overbought region, indicating a bullish bias. Bulls are targeting the 1.3800 critical resistance level. A break above this level would make a higher high, strengthening the bullish bias. https://www.forexcrunch.com/blog/2024/05/08/usd-cad-price-analysis-policy-divergence-weighs-on-loonie/
