2024-01-11 08:30
Futures indicate the market anticipates 140 basis points (bps) of cuts this year. Japanese workers’ real wages fell again in November. Tokyo’s consumer inflation fell further. The USD/JPY forecast turns slightly bearish on Thursday as traders await US inflation data to shape their expectations on Fed rate cuts this year. Meanwhile, futures indicate the market anticipates 140 basis points (bps) of cuts this year. Moreover, they may begin as early as March. This means that markets are sensitive to unexpected data. Notably, the pair increased significantly after data on Wednesday revealed a 20th consecutive monthly contraction in Japanese workers’ real wages in November. BoJ policymakers had’ hoped for wage gains before policy tightening. Japan’s wage trend attracts a lot of attention globally. This is because the Bank of Japan considers pay and inflation outlooks crucial when debating removing its negative interest rate policy. In November, inflation-adjusted real wages, a crucial factor in determining consumer purchasing power, declined by 3.0% compared to last year. Moreover, it exceeded October’s 2.3% decrease. Meanwhile, the government’s consumer inflation rate, used to calculate real wages, dropped to 3.3%. This value was the lowest level since July 2022. Additionally, the decline came from decreasing fuel costs and food price hikes. However, data on Tuesday revealed that Tokyo’s consumer inflation, a key indicator of nationwide price trends, fell further. Consequently, there is still optimism that real wages will eventually rebound. This would provide a foundation for normalizing the Bank of Japan’s monetary policy. USD/JPY key events today US Core Consumer Price Index m/m US Consumer Price Index m/m US Consumer Price Index y/y US unemployment claims USD/JPY technical forecast: Price tests 145.74 barrier once again On the charts, the USD/JPY price has risen to retest the 145.74 key resistance level after pulling back to retest the 30-SMA and the 143.51 support level. This is the second time bulls have attempted to push above 145.74 and might fail again. The first time, the price made a wick at the level before making a bearish engulfing candle and retreating. This time, bears have again made an engulfing candle that might lead to a collapse below the 30-SMA. Moreover, a bearish divergence in the RSI shows the second attempt at 145.74 is weaker. Consequently, USD/JPY might retest the 143.51 support level. https://www.forexcrunch.com/blog/2024/01/11/usd-jpy-forecast-dollar-pares-gains-ahead-of-us-inflation/
2024-01-10 11:06
XAU/USD seems determined to return higher as long as it stays above the lower median line. The US inflation data should bring sharp movements tomorrow. Only a new lower low invalidates a larger growth. The gold price is trading in the green at $2,034 at the time of writing. The metal seems determined to hit new highs as the US dollar turned downside. The dollar’s sell-off should help the XAU/USD to come back higher and to erase some of the latest drops. Yesterday, the US Trade Balance and RCM/TIPP Economic Optimism came in better than expected, while the Canadian Trade Balance and Building Permits indicators reported poor data. Today, the Australian CPI reported 4.3% growth, less compared to the 4.4% growth estimated and far below the 4.9% growth in the previous reporting period. Later, the BOE Gov Bailey Speaks, and the US Final Wholesale Inventories could bring some action. Still, the traders are waiting for the US inflation data. The Consumer Price Index, CPI y/y, and the Core CPI data will be released tomorrow. Higher inflation could punish the price of gold and lift the USD in the short term. Furthermore, the US PPI, Core PPI, the UK GPD, and the Chinese inflation figures could move the rate on Friday. Technically, the yellow metal challenges the former channel’s downside line. The price has found strong support on the lower median line (LML) of the ascending pitchfork, and now it is trying to jump higher again. Its failure to take out the lower median line (LML) revealed sellers’ exhaustion and that the corrective phase could be over. The downtrend line, $2,050, and the median line (ml) of the ascending pitchfork represent potential upside targets. XAU/USD could develop a broader rebound as long as it stays above the lower median line (LML). https://www.forexcrunch.com/blog/2024/01/10/gold-price-struggling-to-rebound-eyes-on-us-inflation/
2024-01-10 10:27
Australia’s consumer price index rose at an annual pace of 4.3% in November. The soft inflation reinforced the belief that there would be no need for further increases in interest rates. Fed funds futures suggest a 64% probability of the Fed easing in March. Despite signs of easing inflation in Australia, Wednesday’s AUD/USD forecast leans slightly bullish as the currency had little reaction to the news. In November, Australian consumer price inflation hit a nearly two-year low, with a big slowdown in core inflation. According to data on Wednesday, the consumer price index rose at an annual pace of 4.3% in November. It decreased from October’s 4.9% and was below the expected 4.4%. Meanwhile, the trimmed mean, a measure of core inflation, dropped from 5.3% in October to an annual rate of 4.6% in November. As a result, the soft outcome reinforced the belief that there would be no need for further increases in interest rates. On the other hand, in the US, the Fed surprised markets in December with a dovish stance, projecting 75 basis points (bps) of rate cuts in 2024. As a result, it heightened easing expectations, with traders initially anticipating up to 160 bps of cuts. However, the market has since changed, pricing in 140 bps of cuts for the year. Furthermore, Fed funds futures suggest a 64% probability of the Fed easing in March, down from 80% a week earlier. Moreover, traders are closely monitoring Thursday’s upcoming US consumer price index report to assess the likelihood of a rate cut in March. Experts expect a 0.2% increase in headline inflation for the month and a 3.2% rise annually. AUD/USD key events today Investors will keep digesting Australia’s inflation data as no more key economic reports are scheduled for today. AUD/USD technical forecast: Price trades in a triangle pattern after a bearish leg On the technical side, AUD/USD trades in a triangle after a bearish leg that paused at the 0.6674 key support level. The bias is bearish as the price has stayed below the 30-SMA since bears took control. Moreover, the RSI has respected the pivotal 50 level as resistance, staying in bearish territory. However, inside the triangle, the price has rebounded to the 30-SMA. Because bears are in control, the price will likely respect this resistance level and break out of the triangle and the 0.6674 support level. The price might then make another bearish leg, dropping to the 0.6550 support level. https://www.forexcrunch.com/blog/2024/01/10/aud-usd-forecast-australian-inflation-reaches-two-year-lows/
2024-01-10 08:58
The dollar has risen by 1% this month, recovering from a 2% drop in December. The Canadian dollar weakened to a nearly four-week low on Tuesday. Data from Canada revealed a narrowing trade surplus to C$1.6 billion in November. Wednesday’s USD/CAD price analysis painted a bullish picture, with the dollar holding its ground in a cautious trading environment ahead of crucial US inflation data. The anticipation of these inflation figures adds an extra layer of anxiety, as they can sway the direction of Federal Reserve policy. Notably, the dollar has risen by 1% this month, recovering from a 2% drop in December, as traders reassess expectations for the timing and extent of Fed rate cuts. Meanwhile, the Canadian dollar weakened against the US dollar and reached a nearly four-week low on Tuesday. Aaron Hurd, senior portfolio manager at State Street Global Advisors, noted that the impact of monetary policy is more evident in Canada than in the US, creating a consistent backdrop favoring a weaker Canadian dollar. Moreover, the BoC has stated that a slowdown in the domestic economy signals the effectiveness of its monetary policy. Consequently, money markets anticipate an interest rate cut in April. Elsewhere, Statistics Canada reported a narrowing trade surplus to C$1.6 billion in November, down from C$3.2 billion in October. The decline in exports, led by precious metals, is the first in five months. Additionally, separate data showed a 3.9% drop in the value of Canadian building permits from October to November. USD/CAD key events today The pair will likely consolidate as Canada and the US will not release any major reports today. USD/CAD technical price analysis: Bulls form a shallow channel near 1.3350 On the technical side, USD/CAD trades in a shallow, bullish channel, staying close to the 1.3350 key level. Therefore, although the bias is bullish, momentum is fading. The price is above the 30-SMA but not swinging far above it, a sign that bulls are weak. Finally, supporting the view that bullish momentum is fading is the RSI, which has made a bearish divergence. Consequently, there is a big chance the price will soon break out of the bullish channel support and the 30-SMA. Moreover, such a reversal would allow the price to break below the 1.3350 key level and retest the 1.3200 key support level. https://www.forexcrunch.com/blog/2024/01/10/usd-cad-price-analysis-dollar-stays-firm-on-eve-of-inflation-data/
2024-01-09 15:17
Activating the flag pattern indicates more gains. A new lower low invalidates the upside scenario. Returning above the median line (ml) signals a larger upward movement. The USD/JPY price dropped slightly in the short term as the US dollar remained under pressure. The pair is trading at 144.07 at the time of writing. The outlook seems neutral, with no directional bias. The greenback was in a short correction even though the US NFP, Average Hourly Earnings, and Unemployment Rate came in better than expected. Yesterday, the US Consumer Credit Came in at 23.8B, above the 8.9B expected. Today, the Tokyo Core CPI reported a 2.1% growth, matching expectations, while Household Spending dropped by 2.9%, exceeding the 2.2% drop expected. Later, the US will release the trade balance indicator, which is expected to be at -64.9B versus -64.3B in the previous reporting period. The US dollar depreciated a little, but it could take the lead again as the US Consumer Price Index m/m and CPI y/y may announce higher inflation in December versus November. The inflation figures should drive the markets on Thursday. The FED is expected to cut the Federal Funds Rate in 2024, but higher inflation could postpone such decisions. The USD/JPY price developed a minor flag pattern. The bias remains bullish in the short term as long as it stays above the 50% Fibonacci line of the ascending pitchfork. An upside breakout and activating the flag formation indicate an upside continuation. Still, only coming back above the median line (ml) and making a new higher high validates larger growth. On the contrary, taking out the 50% Fibonacci line and making a new lower low confirms more declines. https://www.forexcrunch.com/blog/2024/01/09/usd-jpy-price-lacking-bullish-conviction-near-144-0-eyes-on-cpi/
2024-01-09 09:54
Investors were mostly on the sidelines ahead of the US inflation report Investor morale in the eurozone reached its highest level since May. US consumers’ short-term inflation expectations dropped to the lowest level in nearly three years. On Tuesday, the EUR/USD price analysis revealed a subtle bearish tone, with investors opting to remain on the sidelines as the market braces for the impending US inflation report. Moreover, there was little reaction to the US and Eurozone data on Monday. A survey revealed that investor morale in the eurozone reached its highest level since May. However, a full recovery for the 20-country currency bloc is uncertain. In January, Sentix’s index for the eurozone increased to -15.8 points from December’s -16.8. However, Sentix cautioned that this may not signify a turnaround for the eurozone, mainly due to Germany’s ongoing recession. Meanwhile, the expectations index rose to -8.8 points in January from -9.8 in December. The index reflecting the current situation in the eurozone also rose, reaching -22.5 in January. Meanwhile, in the US, the New York Fed disclosed that US consumers’ short-term inflation expectations dropped to the lowest level in nearly three years in December. According to the Survey of Consumer Expectations, inflation one year from now will likely be at 3%, the lowest reading since January 2021. According to the report, inflation three years from now will be at 2.6%, down from 3% in November. Additionally, five years from now, price pressures were projected to be at 2.5%, down from 2.7% in November. EUR/USD key events today The pair will likely consolidate as investors do not expect high-impact news from the Eurozone or the US. EUR/USD technical price analysis: Price oscillates within 1.1000-1.0900 boundaries On the technical side, EUR/USD ranges between the 1.1000 resistance and the 1.0900 support levels. This consolidation comes after a solid bearish leg to the 1.0900 key support level. Although the price went above the 30-SMA, it seems ready to return below. Still, for bulls to reverse the trend, the price must break above 1.1000 to start making higher highs. Otherwise, it will keep consolidating until the previous downtrend continues with another leg lower. If the price breaks below the 1.0900 support, it will likely retest the 1.0750. https://www.forexcrunch.com/blog/2024/01/09/eur-usd-price-analysis-euro-edges-lower-with-focus-on-cpi/
