2024-08-21 08:10

Japanese Yen (USD/JPY) Analysis Japan’s July trade balance likely impacted by a significantly stronger yen Economists and market participants expect another rate hike this year USD/JPY bearish continuation may receive a helping hand from the Fed Japan’s July Trade Balance Likely Impacted by a Significantly Stronger Yen Japan’s trade balance in July was worse than expected but the deficit was roughly half of what was seen in May and roughly one third of what it was in January. Imports in July rose more than anticipated while a stronger yen may have impacted exports, which were lower than expected. The deficit has raised some doubts around the Japanese economic recovery, but trade balances have proven to be very inconsistent, typically rising one month and falling the next. After contracting 0.6% in Q1, the Japanese economy expanded by an impressive 0.8% in Q2 of this year, supporting recent measures from the Bank of Japan to raise interest rates to more normal levels. 57% of economists polled by Reuters anticipate another interest rate hike in December this year. This comes off the back of two prior hikes, the most recent of which saw a surprise 15 basis points (bps) rise that caught many market participants off guard. Now, markets price in 6 bps heading into December but that is likely to hinge on whether the US can avoid fears of a possible recession which arose after the Fed voted against a rate cut in July, followed shortly by a worrying rise in the unemployment rate. BOJ Rate Expectations Source: Refinitiv, prepared by Richard Snow Japanese Yen Eases after Sombre Trade Data The Japanese yen headed lower in the early hours of trading, aided by the disappointing trade stats, with the Canadian and US dollars leading the pack for now. It won’t be surprising to see muted moves ahead of the FOMC minutes and an expected downward revision to job gains between April 2023 and March 2024. The combination of lower inflation, rate cut expectations and a weaker jobs market have contributed to the steady dollar decline, which may very well continue if the FOMC minutes and job revisions paint a bearish picture. USD/JPY could therefore manage another leg lower after recently consolidating. Currency Performance Chart Showing Shorter-term Yen Depreciation Source: FinancialJuice, prepared by Richard Snow USD/JPY Bearish Continuation May Receive a Helping Hand from the Fed USD/JPY reached the swing low on Monday the 5th of August when volatility spiked as hedge funds rushed to cover carry trades. Since then, there has been a partial recovery as prices pulled back but ultimately, there has been a continuation of the more medium-term downtrend. The US dollar has come under a lot of pressure as softer inflation and a worsening outlook in the jobs market has prompted traders to reduce USD exposure as the Fed prepare for the much-anticipated rate cut next month. This week’s Jackson Hole address from Jerome Powell will be followed with great interest. Speculation around a 25 bps or 50 bps cut continue to circulate, with markets assigning a 30% change the Fed will front load the rate cutting cycle. The next level of support for USD/JPY lies at the spike low of 141.70, followed by the December 2023 low of 140.25. With some time to go until the BoJ is expected to hike, the catalyst of a further bearish move in USD/JPY is more likely to come from the US with the FOMC minutes, jobs revision, and Jackson Hole Economic Symposium all taking place this week. Resistance appears at the recent high at 149.40, followed by the 200-day simple moving average (red line) and 151.90 level. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/strong-yen-weighed-on-japan-s-trade-balance-in-july-fed-speakers-up-next-20240821.html

2024-08-19 13:00

US Dollar (DXY), USD/JPY, and Gold Latest US dollar weakens further ahead of key Fed chair speech USD/JPY looks technically weak Gold consolidating Friday’s record high. This year’s Jackson Hole Symposium – “Reassessing the Effectiveness and Transmission of Monetary Policy” – will be held on August 22-24 with Fed chair Jerome Powell’s keynote speech on Friday as the main attraction. Traders expect chair Powell to signal that the Federal Reserve will start cutting interest rates in September with financial markets currently pricing in nearly 100 basis points of rate cuts by the end of this year. With only three FOMC meetings left this year, and with the Fed normally moving in 25 basis point clips, one 50 basis point rate cut is looking likely if market predictions prove to be correct. USD/JPY has been on a rollercoaster ride over the last month, shedding 20 big figures in three weeks after the BoJ hiked rates for the second time this year. The pair then rallied by nearly 10 big figures on a bout of US dollar strength before dropping last Friday, and today, on a weaker US dollar. The next area of USD/JPY resistance is seen between 151.45 (200-day sma) and a prior level of horizontal resistance turned support at just under 152.00. A renewed sell-off will likely bring 140.28 into focus. USD/JPY Daily Price Chart Chart via TradingView Gold finally broke through a stubborn area of resistance and posted a fresh all-time high on Friday. Expectations of lower interest rates and fears that the situation in the Middle East could escalate at any time have given a strong, underlying bid. Support is seen at $2,485/oz. ahead of $2,450/oz. while gold continues its price discovery on the upside. Gold Daily Price Chart Chart via TradingView Retail trader data shows 43.65% of traders are net-long with the ratio of traders short to long at 1.29 to 1.The number of traders net-long is 11.99% higher than yesterday and 13.24% lower than last week, while the number of traders net-short is 5.76% higher than yesterday and 30.77% higher than last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests gold prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed gold trading bias. https://www.dailyfx.com/news/us-dollar-remains-weak-ahead-of-jackson-hole-usd-jpy-and-gold-latest-20240819.html

2024-08-16 15:30

As Nvidia gets ready to announce its earnings for the second quarter of 2024, investors want to know if the darling of US chip stocks can regain recently lost ground. Key takeaways Nvidia will release its Q2 results on 28 August 2024 Revenue of $28,544 billion: +211.31% year-on-year (YoY) Q2 earnings per share of $0.64 expected Consensus of analysts ‘buy’ rating on the stock When will Nvidia share its latest earnings information? Nvidia will reveal its Q2 financial results after the stock market closes on Wednesday, 28 August 2024. LSEG Data & Analytics analyst Nvidia recommendations LSEG Data & Analytics data shows a consensus analyst rating of ‘buy’ for Nvidia – 19 strong buy, 33 buy and 5 hold (as of 15 August 2024). Source: Refinitiv Reasons for further revenue growth Heading into Nvidia’s Q2 earnings results, expectations are high for the graphics chip maker thanks to its leadership position in several key secular growth markets. Over the past year, Nvidia has seen tremendous demand growth across its various end markets, led by data centres and gaming. In data centres, adoption of AI and machine learning has fuelled robust sales of Nvidia's specialized GPUs and networking products. The company has also benefited as more enterprises move workloads to the cloud. Meanwhile, Nvidia's gaming segment continues to see strong tailwinds thanks to the rise of eSports, game streaming services, and steady launches of blockbuster titles optimized for Nvidia hardware. Nvidia's data centre segment, which includes sales of GPUs, networking gear, and AI software, is projected to increase further as major hyperscale customers like Amazon AWS, Microsoft Azure, and Alphabet GCP are rapidly adopting Nvidia chips to power AI workloads. Ongoing strong demand for the latest Nvidia GPUs for gaming and creative applications is expected to remain a key catalyst in revenue growth. Nvidia's automotive computing platforms are being adopted by more electric and autonomous vehicle makers, creating further demand for the company’s chips. Additionally, the company's Omniverse 3D simulation platform over the past year saw triple-digit customer growth, signalling future enterprise software upside. Potential challenges Nvidia faces some potential headwinds that could impact the upcoming earnings report such as supply chain constraints which may limit the upside. Though improving, foundry and component shortages could restrict Nvidia from fully meeting elevated demand. Any indication that supply issues are not abating could disappoint investors. Demand slowdown in the PC market due to tough macroeconomic conditions may weaken graphics segment performance. This would dampen overall earnings growth. Potential macroeconomic uncertainty may curb business spending should economic conditions deteriorate. This would have an outsized impact on Nvidia's data centre and enterprise segments. Increasing competition from the likes of AMD and Intel, who have also heavily been investing in AI-focused chips, and big tech and automotive companies developing their own AI chips could potentially reduce demand for Nvidia’s offerings. Despite these risks, Wall Street remains overwhelmingly bullish on Nvidia stock heading into the Q2 earnings result. Investors are focused on Nvidia's long-term potential in AI, high-performance computing, autonomous vehicles, and the metaverse. Execution against these opportunities is likely to drive share price momentum post-earnings. Nvidia – technical view The Nvidia share price, up over 145% year-to-date despite its June-to-August 35% drop, is flirting with its $118.04-to-$120.16 resistance zone, made up of the late June low and early August high. Were it to be exceeded on a weekly chart closing basis on Friday, the way would be open for its June record high at $140.76 to be back in sight. Nvidia Weekly Chart Source: TradingView This bullish view will remain intact while the early August low at $90.69 holds ona weekly chart closing basis. For a medium-term top to be formed, the Nvidia share price would have to fall through its $90.69 early August low, in which case a further decline to the 200-day simple moving average (SMA) at $83.14 and the April trough at $75.61 may be on the cards. Nvidia Daily Chart Source: TradingView A rise and daily chart close above the 23 July high at $124.69 would likely lead to a continuation of the medium-term uptrend. https://www.dailyfx.com/news/nvidia-s-q2-earnings-preview-the-fight-to-stay-on-top-20240816.html

2024-08-15 13:17

Gold (XAU/USD) – Repeated Attempts at a Fresh All-Time High, US Retail Sales Weigh Gold continues to test, and reject, its previous all-time high at $2,485/oz. and a break higher is being pared by a strong US retail sales report Gold unable to break higher as resistance holds firm. Weekly net-short positions jump. Gold is coming under pressure after the release of a stronger-than-expected US retail sales report. Expectations of a 50 bp rate cut have been pared back - from 38% to 25% - while expectations of a smaller 25 basis point cut have been boosted from 62% to 75%. Gold continues to test the mid-July all-time high at $2,484/oz. and is likely to do so again but slightly further out. The daily chart remains technically bullish - short-term higher lows and supportive simple moving averages – with initial support off the 20-dsma at $2,417/oz. followed by $2,400/oz. A break below $2,380/oz. would negate the short-term bullish outlook. Gold Price Daily Chart Chart via TradingView Retail trader data shows 50.72% of traders are net-long with the ratio of traders long to short at 1.03 to 1.The number of traders net-long is 8.89% higher than yesterday and 13.18% lower than last week, while the number of traders net-short is 9.63% lower than yesterday and 34.51% higher than last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias. What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/gold-xau-usd-repeated-attempts-at-a-fresh-all-time-high-us-retail-sales-weigh-20240815.html

2024-08-15 08:03

UK GDP, GBP/USD Analysis UK GDP for Q2 expanded as expected but June reveals stagnant growth Growth trends reveal optimism as the UK enters the rate cutting cycle Sterling’s pullback reaches a point of reflection UK GDP for the Second Quarter as Expected – June Reveals Stagnant Growth The first look at economic growth in the UK for Q2 printed as expected at 0.6%, quarter on quarter. UK growth has struggled throughout the rate hiking cycle but has shown more recent signs of recovery in the lead up to this month’s Bank of England (BoE) meeting where the monetary policy committee voted to lower interest rates for the first time since March 2022. A stronger showing in Q1 (0.7%) is followed by a similar 0.6% expansion in Q2 according to the preliminary estimate. GDP data is subject to numerous revisions as more data becomes available, meaning the number may change but for now, the economy is showing signs of promise. A better gauge of growth trends, the 3-month average ending in June, proves growth has lifted off stagnant, and even negative, levels. It isn’t all good news as June was a month of stagnant growth (0%) when compared to May as declines in the services sector were offset by strong manufacturing output. UK GDP 3-Month Average Sterling’s Pullback Reaches a Point of Reflection GBP/USD has partially recovered after the major selloff in July, with bulls looking for a bounce off trendline support in search of another leg higher. Yesterday’s UK inflation data told a mixed story as inflation in July rose by less than expected. The fact that we’d see a higher print has been well-telegraphed by the bank of England after forecasts revealed inflation would remain above the 2% target for a long time after hitting the significant marker. However, inflation is not expected to spiral out of control but potential surprises to the upside may help keep sterling buoyed - especially at a time when the prospect of a potential 50 basis point cut from the Fed remains a real possibility. Front loading the cutting cycle could weigh heavily on the dollar, to the benefit of GBP/USD. GBP/USD has risen after bouncing off the 200-day simple moving average (SMA) around the former level of support at 1.2685 (May and June 2024). Since then the pair has burst through trendline support, former resistance. Bulls will be looking for the pair to respect the test of support with 1.3000 in sight. Support is clustered around the zone comprising of 1.2800, trendline support, and the 50 SMA. GBP/USD Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/uk-growth-continues-to-show-signs-of-recovery-despite-stagnant-june-print-20240815.html

2024-08-14 13:10

US CPI Analysis US CPI prints mostly in line with estimates, yearly CPI better than expected Disinflation advances slowly but shows little signs of upward pressure Market pricing around future rate cuts eased slightly after the meeting US CPI Prints Mostly in Line with Expectations, Yearly CPI Better than Anticipated US inflation remains in huge focus as the Fed gears up to cut interest rates in September. Most measures of inflation met expectations but the yearly measure of headline CPI dipped to 2.9% against the expectation of remaining unchanged at 3%. Market probabilities eased a tad after the meeting as concerns of a potential recession take hold. Softer survey data tends to act as a forward-looking gauge of the economy which has added to concerns that lower economic activity is behind the recent advances in inflation. The Fed’s GDPNow forecast foresees Q3 GDP growth of 2.9% (annual rate) placing the US economy more or less in line with Q2 growth – which suggests the economy is stable. Recent market calm and some Fed reassurance means the market is now split on weather the Fed will cut by 25 basis points or 50. Implied Market Probabilities Source: Refinitiv, prepared by Richard Snow Immediate Market Reaction The dollar and US Treasuries have not moved too sharply in all honestly which is to be expected given how closely inflation data matched estimates. It may seem counter-intuitive that the dollar and yields rose after positive (lower) inflation numbers but the market is slowly unwinding heavily bearish market sentiment after last week’s massively volatile Monday move. Softer incoming data could strengthen the argument that the Fed has kept policy too restrictive for too long and lead to further dollar depreciation. The longer-term outlook for the US dollar remains bearish ahead of he Feds rate cutting cycle. US equity indices have already mounted a bullish response to the short-lived selloff inspired by a shift out of risky assets to satisfy the carry trade unwind after the Bank of Japan surprised markets with a larger than expected hike the last time the central bank met at the end of July. The S&P 500 has already filled in last Monday's gap lower as market conditions appear to stabilise for the time being. Multi-asset Reaction (DXY, US 2-year Treasury Yields and S&P 500 E-Mini Futures) Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/us-cpi-steadies-around-estimates-usd-and-treasuries-rise-20240814.html