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/

2024-05-17 09:45

Data showed that US import prices jumped 0.9% last month. Fed policymakers have maintained a cautious stance since the inflation report. Data revealed a smaller-than-expected drop in unemployment claims. The GBP/USD price analysis on Friday is slightly bullish as the dollar recovers after signs that inflation remains a concern. However, the general market sentiment showed higher expectations for Fed rate cuts, which weighed on the dollar in the last few sessions. The dollar rose from Thursday after data showed that US import prices jumped 0.9% last month, raising inflation concerns. Imported inflation could make the Fed hesitate to cut interest rates too early. However, this report followed the US CPI report, which showed that economic inflation was easing. Consequently, Fed rate cut bets are still up. Moreover, investors expect at least two rate cuts this year, one in September and another in December. Meanwhile, although investors are more convinced of a cut in September, Fed policymakers have maintained a cautious stance since the inflation report. Despite the decline, Thomas Barkin said that inflation was still not where it should be. Meanwhile, Loretta Mester noted that the Fed’s current restrictive policy will help lower inflation to the central bank’s target. Further support for the dollar came after the US Labor Department revealed a smaller-than-expected drop in unemployment claims. Notably, jobless claims fell to 222,000, coming above forecasts for a decline to 220,000. This indicated strength in the labor market. Despite the recent cooling in US jobs figures, there has been no confirmation that the downtrend will continue. Therefore, there is still a risk that the resilience will continue, keeping the Fed cautious. GBP/USD key events today Investors don’t expect any high-impact releases from the US or the UK as the week ends. Therefore, the pair might make small moves. GBP/USD technical price analysis: Bullish bias holds amid temporary pullback On the technical side, the GBP/USD price retreats after retesting the 1.2700 psychological level. However, since the retreat comes amid a bullish trend, it might only be temporary. The bullish bias remains strong because the price sits well above the 30-SMA, and the RSI is in bullish territory. Therefore, bears might find it difficult to continue beyond the 30-SMA support. Furthermore, solid support is at the 1.2600 key level, where bulls might resume the uptrend. In such a case, the price would return to retest the 1.2700 resistance level. https://www.forexcrunch.com/blog/2024/05/17/gbp-usd-price-analysis-dollar-rebounds-after-cpi-led-plummet/

2024-05-17 08:55

The euro has had a good run amid signs that the US economy is slowing down and inflation is easing. Data showed that US manufacturing output unexpectedly fell in April. ECB’s Schnabel emphasized caution after June as the outlook remains uncertain. The EUR/USD outlook leans slightly bearish as the euro experiences a pullback following its recent rally. Despite this dip, the currency is on track for its largest weekly gain against the dollar in over two months. For the week, it is up 0.8%. The euro has had a good run amid signs that the US economy is slowing down and inflation is easing. April’s inflation figures fell from the previous month, giving investors and policymakers hope that the downtrend from Q4 last year was still in place. Furthermore, data has revealed a continuing slowdown in the US economy, starting with the labor market. Meanwhile, retail sales figures came in flat, well below forecasts. Similarly, data showed that manufacturing output unexpectedly fell in April. This decline in economic activity indicates a drop in demand due to high interest rates. Therefore, there is more pressure on the Federal Reserve to start cutting interest rates. Meanwhile, the situation in the Eurozone is the opposite. Although policymakers are set on implementing the first cut in June, there is less pressure to do that because the economy is improving. Notably, Germany’s economy expanded more than expected last quarter. At the same time, investor morale in the Eurozone is at a two-year high. Elsewhere, ECB’s Isabel Schnabel said the central bank will cut rates in June. However, she emphasized caution after that as the outlook remains uncertain. EUR/USD key events today After a week packed with high-impact events, the pair might finish quietly, as no significant events are coming from the US or the Eurozone. EUR/USD technical outlook: Pullback after testing channel resistance On the technical side, the EUR/USD price is pulling back from its bullish channel resistance. However, the bullish bias remains intact as the price is still within a bullish channel and above the 30-SMA. Moreover, although the RSI has pulled back from the overbought region, it trades above 50, supporting bullish momentum. Therefore, the pullback might pause at three major support levels. Bulls might emerge at the 30-SMA support line, the 1.0800 support level, or the channel support line. A bullish reversal at any of these levels would allow the price to target the 1.0900 level. https://www.forexcrunch.com/blog/2024/05/17/eur-usd-outlook-euro-heads-for-best-week-in-over-2-months/

2024-05-16 10:07

Data on Thursday revealed a bigger-than-expected jump in Australia’s employment. Australia’s unemployment rate jumped from 3.9% to 4.1%. Investors raised the likelihood of an RBA rate cut in December to 54%. The AUD/USD outlook has turned slightly bearish as the Australian dollar retreats from recent highs, prompted by an unexpected spike in Australia’s unemployment rates. Meanwhile, the dollar remained weak following data showing easing inflation in the US. Data on Thursday revealed a bigger-than-expected jump in Australia’s employment. The country added 38,500 jobs in April from the previous month, beating expectations for an increase of 23,700. However, the market focus was on the unemployment rate, which jumped from 3.9% to 4.1%. This was a sign that demand in the labor market was easing. Therefore, there is a lower chance that the RBA will hike again. After the report, investors raised the likelihood of a rate cut in December to 54%. As a result, the Australian dollar declined. If the chances of a cut in 2024 increase, the Aussie loses its edge against the dollar. Still, Australia will likely be among the last to lower interest rates compared to other major economies. The decline in the AUD/USD pair came after it hit highs in the previous session due to an increase in Fed rate cut expectations. Market participants gained confidence that the Fed would cut rates in September after the US CPI figures missed forecasts. Inflation surprised to the downside for the first time this year, giving the Fed some relief that the downtrend is intact. At the same time, retail sales plunged indicating weaker consumer spending and a slowdown in the economy. AUD/USD key events today US initial jobless claims AUD/USD technical outlook: Bears resurface at the channel resistance line On the technical side, the AUD/USD price is retreating after retesting its channel resistance line. Still, the bullish bias remains intact because the price has made a new high above the 0.6650 key level. Moreover, it remains within a bullish channel that formed when the trend reversed to bullish. Therefore, a pullback could retest the 0.6650 level and the 30-SMA support before the uptrend continues. Meanwhile, a deeper pullback would retest the channel support where bulls will retake control. The bias will only shift to bearish if the price breaks below the channel support line. https://www.forexcrunch.com/blog/2024/05/16/aud-usd-outlook-aussie-stumbles-on-downbeat-employment/

2024-05-16 08:47

The Canadian dollar hit a 5-week high after the US released its consumer inflation report. The US released its retail sales report, which revealed a significant drop from 0.7% to 0.0%. Canadian home sales fell 1.7% in April. The USD/CAD forecast leans bearish as the dollar hovers near recent lows following a disappointing inflation report. Meanwhile, after rallying alongside US equities in the previous session, the Canadian dollar has retreated slightly. On Wednesday, the Canadian dollar hit a 5-week high after the US released its consumer inflation report. The data revealed a lower-than-expected figure for April, solidifying bets that the Federal Reserve will cut rates in September. The CPI increased 0.3% in April and 3.4% annually. This was a decline from the previous month’s readings and gave policymakers confidence that inflation was still on a downtrend. At the same time, the US released its retail sales report, which revealed a significant drop from 0.7% to 0.0%. This was another sign that the economy was slowing down due to high interest rates. It piled more pressure on the Fed to settle on the timing for the first rate cut. Consequently, rate-cut expectations increased, weighing on the dollar. Meanwhile, the Canadian dollar, which tracks Wall Street, soared as investors cheered the downbeat reports. Elsewhere, data from Canada showed that home sales fell 1.7% in April. Although the Canadian dollar got a boost from dollar weakness, investors sobered to the fact that Canada’s economy is also deteriorating. Therefore, the Bank of Canada will likely still implement its first rate cut before the Fed. USD/CAD key events today US unemployment claims USD/CAD technical forecast: Bearish bias strengthens below 1.3650 On the technical side, the USD/CAD price has broken below 1.3650, a significant support level. The bias is bearish because the price trades far below the 30-SMA, and the RSI is in bearish territory below 50. After breaking below 1.3650, bulls might trigger a retest of the level before the downtrend continues. Moreover, the price might retest the 30-SMA resistance line. Notably, the price has made a lower low in the more significant downtrend with a resistance trendline. Therefore, bears are in charge of the larger and the smaller moves. Consequently, there is a high chance that the price may fall towards the 1.3551 support. https://www.forexcrunch.com/blog/2024/05/16/usd-cad-forecast-dollar-struggles-following-downbeat-us-cpi/