2024-05-26 08:03
The Canadian dollar weakened as Canada’s inflation eased in May. Some Fed policymakers called for rate hikes if inflation continued to beat forecasts. Next week, the US and Canada will release their GDP reports. The USD/CAD weekly forecast shows bullish sentiment as the policy outlook divergence between the Fed and the Canadian dollar widens. Ups and downs of USD/CAD The USD/CAD pair had a bullish week as the dollar strengthened on upbeat data and hawkish Fed minutes. Meanwhile, the Canadian dollar weakened as Canada’s inflation eased in May. The FOMC meeting minutes released on Wednesday showed that policymakers were ready to hold restrictive policy for long to tame stubborn inflation. Additionally, some policymakers called for rate hikes if inflation continued to beat forecasts. Consequently, investors scaled back expectations for a rate cut in September. Furthermore, the US released PMI data showing better-than-expected business activity in the manufacturing and services sectors. Meanwhile, data from Canada showed cooling inflation, raising bets for a June rate cut by the Bank of Canada. Next week’s key events for USD/CAD Next week, the US and Canada will release their Gross Domestic Product reports, which will show the state of their economies. These reports will significantly define the gap in policy outlooks between the US and Canada. A bigger-than-expected figure in the US would indicate a robust economy, likely leading to a decline in Fed rate cut expectations. Meanwhile, the GDP report is more likely to reveal a slowdown in Canada, which would pressure the BoC to cut rates and increase the divergence in policy outlooks. USD/CAD weekly technical forecast: Bears retest bullish trendline On the technical side, the USD/CAD price is in a bullish trend that has paused after reaching the 1.3800 key resistance level. After hitting this level, the price entered a period of consolidation, chopping through the 22-SMA. Moreover, the price has traded with the nearest support at 1.3600 and the nearest resistance at 1.3800. However, on a larger scale, the price has maintained its position above a bullish trendline. Moreover, it has consistently made higher highs and lows. Currently, the price is trading near the trendline, which has acted as support several times. Therefore, the price might bounce off this trendline to retest the 1.3800 resistance. A break above this level would make a higher high to continue the uptrend. https://www.forexcrunch.com/blog/2024/05/26/usd-cad-weekly-forecast-fed-boc-policy-gap-widening/
2024-05-25 19:19
Some policymakers suggested hiking interest rates to tame stubborn inflation. Data revealed improved business activity in the US manufacturing and services sectors. Investors will focus on the US GDP data next week. The AUD/USD weekly forecast points south as the US dollar recovers amid a decline in Fed rate cut expectations. Ups and downs of AUD/USD The Aussie had a bearish week as the dollar recovered amid a decline in Fed rate cut expectations. The major catalysts in the week were the FOMC meeting minutes and the US PMI figures. When the Fed meeting minutes came out, investors were surprised that some policymakers had suggested hiking interest rates to tame stubborn inflation. As a result, expectations for a cut in September dropped. Then came the US PMI reports, which revealed improved business activity in the manufacturing and services sectors. This gave the dollar another boost, weighing on the Australian dollar. Next week’s key events for AUD/USD Next week, investors will focus on only one major report from the US showing the Gross Domestic Product. The last report missed forecasts and raised fears that high interest rates were hurting the economy. Another downbeat report would raise expectations that the Fed will cut rates in September. However, if the economy expands at a faster-than-expected rate, there will be a decline in rate cut expectations. Notably, recent data, including business activity, shows the economy is doing well. Therefore, if the GDP report continues this trend, there will be a lower chance that the Fed will cut rates in September. AUD/USD weekly technical forecast: Temporary pullback to the 0.5 Fib retracement level On the technical side, the AUD/USD price is in a bullish trend above the 22-SMA, with the RSI supporting bullish momentum above 50. However, the price has pulled back after touching the 0.6700 key psychological level. This is also near the 0.618 Fib retracement level. However, given the bullish bias, the pullback is likely temporary. Moreover, the price has met strong support at the 0.5 Fib retracement level and the 22-SMA. Price action has shown that the price might reverse since it has made a bullish candle. In the coming week, there is a high chance the price will bounce off the support zone to retest the 0.6851. A break above this level would make a higher high, confirming a continuation of the bullish trend. https://www.forexcrunch.com/blog/2024/05/25/aud-usd-weekly-forecast-dollar-gains-as-rate-cut-hopes-dim/
2024-05-24 10:17
Japan’s core CPI rose 2.2%, a smaller increase than the 2.6% reported in March. The BoJ might not be ready to hike interest rates in June or July. The dollar surged on Thursday after data showed robust business activity in May. The USD/JPY price analysis shows more upside potential for the pair as Japan’s soft inflation figures lower the chances of a BoJ rate hike. Meanwhile, the dollar was heading for its most significant weekly gain in over two months after data showed strong business activity in May. Japan’s core inflation slowed further in April, challenging the Bank of Japan’s outlook for rate hikes. The core CPI rose by 2.2%, a smaller increase than the 2.6% reported in March. As a result, the BoJ might not be ready to hike interest rates in June or July. Policymakers have been waiting for more sustainable domestic consumption, with inflation well above the central bank’s target. However, most economic indicators point to weak consumption. Notably, Japan’s economy shrank by 2% in the first quarter due to poor demand. If consumption remains fragile, the BoJ will hesitate to hike interest rates, and the gap in rates between the US and Japan will remain wide. This could mean further weakness for the yen. Meanwhile, the dollar surged Thursday after data showed robust business activity in May, lowering Fed rate cut expectations. The US Composite PMI rose from 51.3 to 54.4 in May, indicating a resilient economy despite high interest rates. As a result, there was uncertainty about the outlook for rate cuts in the US. USD/JPY key events today Revised UoM Consumer Sentiment USD/JPY technical price analysis: Bulls weakening below 157.00 On the technical side, the USD/JPY price is trading in a thin range after breaking above the 156.50 key resistance level. Nevertheless, the bias is bullish because the price sits above the 30-SMA, and the RSI trades slightly below the overbought level. However, bulls are exhausted, as seen in the shallow slope of the current move. Moreover, the price is sticking close to the 30-SMA, a sign that bulls are not committing to significant swings. If this shallow trend continues, the price will retest the 158.01 resistance. However, if it reverses, the price will break below the SMA and the 156.50 level. https://www.forexcrunch.com/blog/2024/05/24/usd-jpy-price-analysis-soft-cpi-dims-boj-rate-hike-prospects/
2024-05-24 08:46
The flash US Composite Output Index jumped from 51.3 to 54.4. Canada’s inflation hit a three-year low of 2.7%. The prospect of higher rates for longer in the US weighed on oil. The USD/CAD outlook points northward as the pair holds near a two-week high on growing policy divergence between the US and Canada. At the same time, the Canadian dollar was weak due to a decline in oil prices. The divergence in policy outlooks between the Fed and the Bank of Canada was highlighted on Thursday when the US released upbeat PMI data. Business activity improved significantly in May. Notably, the flash US Composite Output Index jumped from 51.3 to 54.4, leading to a decline in Fed rate cut expectations. If the economy is doing so well, demand is still high, which might lead to further delay in rate cuts. The recent FOMC policy meeting minutes revealed that some policymakers were ready to hike interest rates if inflation remains stubborn. Therefore, any signs of strong demand that could drive inflation raises uncertainty regarding future policy moves. Meanwhile, the situation in Canada is different because inflation hit a three-year low of 2.7%, raising bets that the Bank of Canada will cut rates in June. Furthermore, experts have said there might be three cuts in Canada before the Fed starts its rate-cutting cycle. Therefore, the longer it takes for the Fed to start, the more the Canadian dollar will weaken. Elsewhere, oil prices fell, putting more downward pressure on the loonie. The prospect of higher rates for longer in the US is bearish for oil prices. Therefore, the positive PMI data also affected oil. USD/CAD key events today Revised University of Michigan consumer sentiment USD/CAD technical outlook: Bullish breakout On the technical side, the USD/CAD price has made a bold, bullish step by breaking above a solid resistance trendline. The bullish bias has strengthened as the price sits far above the 30-SMA, and the RSI is near the overbought region. The break above the trendline marks a solid shift in sentiment to bullish. However, the price must break above the 1.3750 resistance to confirm a new bullish trend to make a higher high. This would allow it to retest the 1.3800 level. However, the price might pull back to retest the recently broken trendline before rising higher. https://www.forexcrunch.com/blog/2024/05/24/usdcad-outlook-policy-outlook-divergence-weakens-loonie/
2024-05-23 10:38
The UK manufacturing sector jumped from contraction to expansion. Business activity in the UK services sector fell from 55.0 to 52.9. Prime Minister Rishi Sunak announced an election for July 4th. The GBP/USD outlook remains bullish as the pound shrugs off mixed PMI data. The pair is recovering after dropping in the previous session due to a stronger dollar. Meanwhile, investors mostly ignored the news of a British election in July. PMI data from the UK on Thursday revealed that the manufacturing and services sectors both expanded in the previous month. However, the manufacturing sector jumped from contraction to expansion, rising from 49.1 to 51.3. Meanwhile, activity in the services sector fell from 55.0 to 52.9, although it remained expanding. The mixed report barely had an impact on the pound. Another key event that traders mostly ignored was the news of a national election in the UK. Prime Minister Rishi Sunak announced an election for July 4th. The pound maintained its position near highs hit after a hotter-than-expected inflation report. Moreover, services inflation remained sticky, eroding some bets on a June BoE rate cut. Meanwhile, investors were still absorbing hawkish sentiments in the Fed meeting minutes that strengthened the dollar in the previous session. The minutes showed that policymakers had faith that inflation would continue easing. However, some were ready to hike interest rates if price pressures remained stubborn. However, the risk of a rate hike fell significantly after the latest inflation report. Investors are now hoping that the downtrend seen last year will resume. GBP/USD key events today US unemployment claims US flash manufacturing PMI US flash services PMI GBP/USD technical outlook: Signs of a bearish reversal On the technical side, the GBP/USD price trades slightly above the 30-SMA with the RSI above 50, supporting a bullish bias. However, the slope of the bullish trend has become shallow, showing bulls are not making big swings above the SMA. This indicates weaker bullish momentum. At the same time, the RSI has made a bearish divergence with the price, indicating exhaustion in the uptrend. Bulls have failed to push beyond the 1.2750 and 1.618 Fib extension levels, allowing bears to make a bearish engulfing candle that could lead to a reversal. Bears will take over when the price breaks below the 30-SMA. Otherwise, bulls will continue the uptrend with a break above 1.2750. https://www.forexcrunch.com/blog/2024/05/23/gbp-usd-outlook-pound-unmoved-by-mixed-pmi-data/
2024-05-23 08:38
The data showed better-than-expected PMI figures for Germany. ECB President Lagarde is very confident inflation is under control. Fed meeting minutes revealed some hawkish sentiments among policymakers. The EUR/USD forecast shows a slight bullish tilt as the euro rebounds on positive Eurozone PMI data. However, the overall bearish trend persists due to the dollar’s strength following hawkish FOMC meeting minutes. Data on Thursday from the Eurozone showed better-than-expected PMI figures for Germany, which strengthened the euro slightly. The manufacturing PMI rose from 42.5 to 45.4. Meanwhile, the services PMI rose from 53.2 to 53.9. These figures show that business activity in the bloc is improving despite high interest rates. Therefore, there is less pressure on the ECB to start cutting rates. Nonetheless, ECB policymakers are increasingly confident that they have tamed inflation. The last inflation report showed a drop from 2.6% to 2.4%. Moreover, ECB president Christine Lagarde said on Tuesday that she is very confident inflation is under control. Consequently, markets are more confident that the central bank will cut rates in June. Meanwhile, Fed meeting minutes released on Wednesday revealed some hawkish sentiments among policymakers, which boosted the dollar. Inflation in the US has remained stubborn since the beginning of the year. Consequently, most policymakers called for the Fed to maintain high rates. However, some went as far as suggesting rate hikes to tame inflation. Still, since the meeting came before the latest downbeat inflation report, the chances of a rate hike remain low. In the meantime, policymakers are maintaining a cautious tone as they await more evidence that inflation will continue to lower. EUR/USD key events today US unemployment claims US flash manufacturing PMI US flash services PMI EUR/USD technical forecast: Bullish channel gives way to bears On the technical side, the EUR/USD price has broken out of its bullish channel to the downside, showing a bearish reversal. The bullish trend got as high as the 1.0900 level, where the price reversed. Bears have now confirmed the reversal by breaking below the 30-SMA and the channel support line. Currently, the price is pulling back to retest the 30-SMA and the channel line before either trending lower or returning inside the channel. If the price trends lower, it will likely break below the 1.0800 level to retest the 1.0725 support level. Otherwise, it will retest the 1.0900 level. https://www.forexcrunch.com/blog/2024/05/23/eur-usd-forecast-euro-rebounds-on-strong-german-pmi-data/
