2024-05-22 09:57

Canadian inflation data met forecasts of 2.7%, easing from the previous month. There is a 55% chance the BoC will cut rates in June. Fed policymakers have remained cautious despite easing inflation. The USD/CAD forecast looks bullish, driven by a weakening Canadian dollar following inflation figures that matched expectations. Simultaneously, the US dollar was steady after Fed policymakers dampened hopes for rate cuts. On Tuesday, Canadian inflation data met forecasts of 2.7%, easing from the previous month. Similarly, core measures declined, giving investors more confidence that the Bank of Canada will cut rates at its June meeting. Before the report, there was a 40% likelihood of a cut in June. However, after the inflation figures, it rose to 56%. Consequently, the Canadian dollar plunged. The Bank of Canada is getting closer to its rate-cutting cycle as Canada’s economy slows down and prices ease. Analysts believe the central bank is ready to cut at least three times before the Fed. However, after three cuts, the outlook becomes unclear since a weaker currency could increase inflationary pressure. Meanwhile, despite a decline in inflation in April, policymakers have remained cautious in the US. This has led to a drop in Fed rate-cut expectations and boosted the dollar. Fed officials are finding it had to make such a sudden shift from hawkish to dovish. There is still little confidence that the lower inflation will continue. Therefore, they might wait for more evidence before taking a more dovish stance. Still, the divergence in policy outlooks will likely keep the Canadian dollar weak. This weakness will increase when the Bank of Canada starts cutting interest rates. USD/CAD key events today Fed policy meeting minutes. USD/CAD technical forecast: Bulls take charge but face solid resistance above On the technical side, the USD/CAD price attempts to stay above the 1.3650 resistance level after respecting the 30-SMA support. Bulls recently triggered a shift in sentiment when the price respected the 1.3600 key psychological level. The price confirmed the change when it broke above and retested the 30-SMA. At the same time, the RSI broke above 50 and now trades in bullish territory. Bulls must now make a higher high to confirm a new bullish trend. However, the new trend might not go far because of the strong resistance trendline above. This trendline has caused reversals before and could do it again. https://www.forexcrunch.com/blog/2024/05/22/usd-cad-forecast-canadian-dollar-tumbles-on-cooling-inflation/

2024-05-22 08:27

UK inflation fell from 3.2% to 2.3% in April. There is a 50% chance the BoE will cut rates in June. Investors await the FOMC meeting minutes. The GBP/USD price analysis shows increased bullish momentum as the pound soars on a smaller-than-expected decline in inflation. Meanwhile, investors eagerly awaited the FOMC policy meeting minutes. On Wednesday, data from the UK revealed a sharp decline in headline inflation from 3.2% to 2.3% due to decreased household energy prices. However, economists had expected a more significant drop to 2.1%, just slightly above the Bank of England’s target. Therefore, there was a slight drop in rate cut expectations. Previously, markets were pricing in a 55% chance that the BoE would implement the first rate cut in June. After the report, this figure fell to 50%, and the pound rallied. Furthermore, a closer look at the inflation report revealed a bigger-than-expected increase in services inflation, complicating the outlook for BoE rate cuts. Meanwhile, the dollar held steady as policymakers pushed back expectations for Fed rate cuts. The recent drop in inflation has caused a lot of excitement in the market about US interest rates. However, calm has returned as policymakers have maintained a cautious tone. Most have warned that it is too early to conclude that the downtrend in price increases is back. Nevertheless, there is more confidence now that the Fed’s next move will be a rate cut. The only uncertainty is the timing of the first cut. The FOMC meeting minutes later today might give more clues on this outlook. GBP/USD key events today FOMC Meeting Minutes GBP/USD technical price analysis: Price gets overbought below 1.2750 On the technical side, the GBP/USD price has made a sharp, bullish move to the 1.2750 resistance level. At the same time, the price hit the 1.618 Fib extension level, showing the bullish bias is strong. Currently, it sits above the 30-SMA with the RSI in the overbought region, showing bulls have pushed the price to the limit. Therefore, the uptrend might pause because of the strong resistance above. Moreover, the RSI is showing some weakness in the recent surge as it has made a slight bearish divergence. If it plays out, the price will pull back to retest the 30-SMA or the 1.2601 support. On the other hand, if bulls regain momentum, GBP/USD might breach the 1.2750 barrier. https://www.forexcrunch.com/blog/2024/05/22/gbp-usd-price-analysis-above-forecast-cpi-boosts-pound/

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/