2023-09-13 03:00

AUD/USD FORECAST: AUD/USD slides and fails to build on Monday’s gains, in a trading session marked by some risk aversion and moderate U.S. dollar strength Despite Tuesday’s subdued performance, AUD/USD seems to be in the process of forging a double bottom The Australian dollar was muted on Tuesday, unable to consolidate Monday's gains in a trading session marked by risk aversion and moderate U.S. dollar strength. Despite Tuesday’s subdued performance, AUD/USD seems to be in the process of forging a double bottom, which normally tends to presage the exhaustion of selling pressure prior to a rebound. To delve into more detail, a double bottom is a reversal pattern that consists of two similar troughs separated by a crest in the middle that often emerges in the context of an extended downtrend. Confirmation of this bullish configuration occurs when the asset in question completes the "W" shape and breaks above neckline resistance, defined by the intermediate peak. To assess the potential extent of the price increase following the validation of the double bottom, traders can project its height vertically from the point of breakout. This estimation offers a practical approximation of the expected move's magnitude, offering valuable guidance when considering trading strategies and risk management. Zooming in on the specific case of AUD/USD, neckline resistance currently lies at 0.6500/0.6510. If the pair manages to take out this barrier in a clean and decisive manner, it could spark increased buying momentum, paving the way for a climb beyond the psychological 0.6600 level. For more robust confirmation signals, it's crucial to examine volume data. In this context, low-volume activity during the formation of the second bottom, followed by a surge in volume during the breakout, serves to reinforce the pattern's bullish bias. On the flip side, if sellers reassert themselves and push prices lower, support is seen at 0.6360. Downside clearance of this floor would nullify the double bottom, creating the right conditions for a drop towards 0.6275. On further weakness, the focus shifts to 0.6170. AUD/USD TECHNICAL CHART AUD/USD Technical Chart Created Using TradingView https://www.dailyfx.com/news/forex-australian-dollar-outlook-aud-usd-falls-yet-bullish-double-bottom-holds-promise-20230912.html

2023-09-13 02:59

In this article, we’ll explore CPI and forex trading, looking at what traders should know about the Consumer Price Index to make informed decisions. We’ll cover what CPI is as a concept, the CPI release dates, how to interpret CPI, and what to consider when trading forex against CPI data. WHAT IS CPI AND WHY DOES IT MATTER TO FOREX TRADERS? The Consumer Price Index, better known by the acronym CPI, is an important economic indicator released on a regular basis by major economies to give a timely glimpse into current growth and inflation levels. Inflation tracked through CPI looks specifically at purchasing power and the rise of prices of goods and services in an economy, which can be used to influence a nation’s monetary policy. CPI is calculated by averaging price changes for each item in a predetermined basket of consumer goods, including food, energy, and also services such as medical care. It is a useful indicator for forex traders due to its aforementioned effect on monetary policy and, in turn, interest rates, which have a direct impact on currency strength. The full utility of knowing how to interpret CPI as a forex trader will be explored below. CPI RELEASE DATES CPI release dates usually occur every month, but in some countries, such as New Zealand and Australia, quarterly. Some nations also offer yearly results, such as Germany’s index. The US Bureau of Labor Statistics has reported the CPI monthly since 1913. The following table shows a selection of major economies and information about their CPI releases. WHY FOREX TRADERS SHOULD FOLLOW CPI DATA Understanding CPI data is important to forex traders because it is a strong measure of inflation, which in turn has a significant influence on central bank monetary policy. So how does CPI affect the economy? Often, higher inflation will translate to higher benchmark interest rates being set by policymakers, to help dampen the economy and subdue the inflationary trend. In turn, the higher a country’s interest rate, the more likely its currency will strengthen. Conversely, countries with lower interest rates often mean weaker currencies. The release and revision of CPI figures can produce swings in a currency’s value against other currencies, meaning potentially favorable volatility from which skilled traders can benefit. Also, CPI data is often recognized as a useful gauge of the effectiveness of the economic policy of governments in response to the condition of their domestic economy, a factor that forex traders can consider when assessing the likelihood of currency movements. The CPI can also be used in conjunction with other indicators, such as the Producer Price Index, for forex traders to get a clearer picture of inflationary pressures. WHAT TO CONSIDER WHEN TRADING FOREX AGAINST CPI DATA When using CPI data to influence forex trading decisions, traders should consider the market expectations for inflation and what is likely to happen to the currency if these expectations are met, or if they are missed. Similar to any major release, it may be beneficial to avoid having an open position immediately before. Traders might consider waiting for several minutes after the release before looking for possible trades, since forex spreads could widen significantly right before and after the report. Below is a chart displaying the monthly inflation rates for the US. For the latest month, expectations are set at 1.6% inflation compared to last year’s data. If CPI is released higher or lower than expectations this news event does have the ability to influence the market. Chart to show US inflation levels in 2018/19. Source: TradingEconomics.com. US Bureau of Labor Statistics One way the effects of CPI data can be interpreted is by monitoring the US Dollar Index, a 2018/19 example chart for which is below. If CPI is released away from expectations, it is reasonable to believe this may be the catalyst to drive the Index to fresh highs, or to rebound from resistance. Since the Index is comprised of EUR/USD, USD/JPY, and GBP/USD, by watching the US Dollar we can get a full interpretation of the events outcome. Chart to show movement in the US Dollar Index. Source: TradingView.com As can be observed in the example above, as inflation rose during the first half of 2018, the US Dollar Index went up accordingly. But with US inflation drifting lower in the following months and with a missed target of 2%, this pushed US interest rate hikes off the agenda. As a result, the dollar struggled and weakened against a basket of other currencies. Not every fundamental news release works out through price as expected. Once the CPI data has been released and analyzed, traders should then look to see if the market price is moving through or rebounding off any areas of technical importance. This will help traders understand the short-term strength of the move and/or the strength of technical support or resistance levels, and help them make more informed trading decisions. https://www.dailyfx.com/education/forex-fundamental-analysis/the-cpi-and-forex.html

2023-09-13 02:58

CRUDE OIL, WTI, RETAIL TRADER POSITIONING, TECHNICAL ANALYSIS – IGCS COMMODITIES UPDATE Crude oil prices close at highest since mid-November Retail traders continue to become increasingly bearish Now, WTI faces the 61.8% Fibonacci extension point Crude oil prices are on pace to rise over 1.8 percent this week so far, with WTI also aiming for a 4th consecutive monthly gain. In response, we can see that retail traders have been becoming increasingly bearish the commodity. This can be seen by taking a look at IG Client Sentiment (IGCS), which often functions as a contrarian indicator. With that in mind, will oil continue higher next? Crude Oil Sentiment Outlook - Bullish According to IGCS, only 37% of retail traders are net-long crude oil. Since the majority of them are biased to the downside, this hints prices may continue rising down the road. This is as downside exposure increased by 10.17% and 12.70% compared to yesterday and last week, respectively. With that in mind, the combination of overall exposure and recent changes offers a stronger bullish contrarian outlook. On the daily chart below, WTI has closed above a string of highs set over the past few days, reaching the highest since the middle of November. The push higher has also brought WTI to the 61.8% Fibonacci extension level at 88.75, which is immediate resistance. A confirmatory breakout higher exposes the 92.43 – 93.72 resistance zone from October. That would open the door to an increasingly stronger bullish technical conviction. Meanwhile, immediate support seems to be the 84.84 inflection point from August. Just below that is the 50-day Moving Average, which could reinstate the broader upside focus in the event of a stronger dip lower. Crude Oil Daily Chart Chart Created in Trading View https://www.dailyfx.com/analysis/crude-oil-price-outlook-wti-soars-to-resistance-as-retail-traders-become-more-bearish-20230912.html

2023-09-13 02:56

BRITISH POUND VS US DOLLAR, EURO, JAPANESE YEN – PRICE SETUPS: Still-hot UK wage growth hasn’t translated into higher GBP/USD yet. EUR/GBP is holding above vital support, frustrating bears. GBP/JPY continues to be well guided by a rising channel. What is the outlook and key levels to watch in select GBP crosses? The British pound is testing crucial support against the US dollar ahead of UK GDP data due later Wednesday. The pound has been underperforming against some of its peers in recent weeks and so far, there is no sign of reversal. For more discussion on the underperformance, see “See “Pound’s Resilience Masks Broader Fatigue: GBP/USD, EUR/GBP, GBP/JPY Setups,” published August 23. The mixed UK jobs data on Tuesday did little to alter the soft bias. The blistering wage growth seals the case for a 25-basis points rate hike by the Bank of England (BoE) when it meets on September 22. BoE Governor Andrew Bailey last week said interest rates might still rise further due to stick price pressures, but the central bank is “much nearer” to ending its tightening cycle. The key focus now shifts to UK GDP for July – expected 0.4% on-year, down from 0.9% in June. The three-month average, however, ticked up to 0.3% in July from 0.2% previously. GBP/USD Daily Chart Chart Created by Manish Jaradi Using TradingView GBP/USD: Testing vital support On technical charts, the failure so far this month to rise past immediate resistance at the early-August high of 1.2820 has kept the downward bias intact for GBP/USD – a risk highlighted in the previous update. Furthermore, in a sign of weakness, GBP/USD has failed to hold above vital converged support on the 89-day moving average, the lower edge of the Ichimoku cloud on the daily charts, and the end-June low of 1.2600. On the previous two occasions since the end of 2022, the pair has rebounded from similar support (see the daily chart). GBP/USD 240-Minute Chart Chart Created by Manish Jaradi Using TradingView The pair is now testing a crucial cushion on the 200-day moving average – the last time it was decisively below this average was in 2022. So, a hold above is key for the broader bias to stay constructive. From a medium-term perspective, the rise in July to a multi-month high has confirmed the higher-tops-higher-bottom sequence since late 2022, leaving open the door for some medium-term gains. GBP/USD Monthly Chart Chart Created by Manish Jaradi Using TradingView Importantly, as pointed out late last year, a higher high this year (relative to 2022) could be unfolding into something more than just a corrective rebound, that is, it opens the door for a reversal of GBP/USD’s medium-term downtrend (first highlighted in October – see “GBP/USD Technical Outlook: Forming an Interim Base?” published October 3. Whether the medium-term rebound is the start of a long-term uptrend? To be fair, such evidence is lacking. GBP/USD remains below major resistance on the 89-month moving average and the Ichimoku cloud on the monthly charts, coinciding with a downtrend line from 2014, suggesting the long-term downtrend is yet to reverse. EUR/GBP Daily Chart Chart Created by Manish Jaradi Using TradingView EUR/GBP: Still holding above Q2-2023 support line EUR/GBP continues to hold above the converged floor on a horizontal trendline from June and another horizontal trendline since late 2022 (at about 0.8550-0.8600). Still, unless the cross clears resistance at the mid-July high of 0.8700, the path of least resistance is sideways to down. GBP/JPY Daily Chart Chart Created by Manish Jaradi Using TradingView GBP/JPY: Consolidation within the uptrend GBP/JPY has continued to be well-guided by the rising Pitchfork channel since early 2023. However, most recently the cross has been struggling to hold above the resistance-turned-support at the July high of 184.00. A decisive break below would indicate that the immediate upward pressure had faded but won’t necessarily imply a reversal of the broader uptrend. Only a break below the July low of 176.25 would puncture the broader uptrend. https://www.dailyfx.com/news/british-pound-ahead-of-uk-gdp-gbp-usd-eur-gbp-gbp-jpy-setups-20230913.html

2023-09-13 02:54

Gold, XAU/USD, Treasury Yields, TIPS, Real Yields, BRIC, Gold Hoarding - Talking Points The gold price stabilised after the US Dollar found some support overnight Rising Treasury yields appear to be driving real yields ahead of US CPI A miss in CPI forecasts might have implications for real yields and XAU/USD The gold price dipped going into Wednesday’s trading session with the US Dollar consolidating after Monday’s rout and ahead of US CPI later today. Undermining the precious metal is the continual climb of US real yields. When we step back and look at the bigger picture, the ascent of real yields might appear to be one-way traffic for now. If today’s US CPI figure falls short of expectations, it might see long-term inflation expectations dip, adding to real yields. If today’s US CPI figure beats estimates, it could add to worries of a tighter monetary policy from the Federal Reserve at next week’s Federal Open Market Committee (FOMC) meeting. This could lead to the back end of the Treasury yield curve backing up, potentially underpinning real yields, particularly around the closely watched 10-year part of the curve. A Bloomberg survey of economists is looking for headline CPI to print at 3.6% year-on-year to the end of August and 4.3% for the core reading. Looking at the chart below, energy appears to be a notable contributing factor to CPI. Crude oil was little changed through August but it has rallied significantly in September. Source; Bloomberg and tastytrade US real yields have been on the march higher for the better part of 2023 and recently stretched to a 14-year peak at the 10-year part of the curve, trading above 1.95%. The real yield is the nominal yield less the market-priced inflation rate derived from Treasury inflation-protected securities (TIPS) for the same tenor. It is looked at by markets as the true return of an investment as it allows for the time value of money that is impacted by price changes through inflation or deflation. When we strip out the components of the real return, it is apparent that nominal yields have been driving real yields higher with the market-priced inflation expectations steady near 2.3%. That is slightly above the Fed’s CPI target of 2%. The last time that real yields were this high was 2009 when spot gold was below US$ 1,000. More recently in 2018, when the real yield was near 1.0%, spot gold was under US$ 1,300 an ounce. SPOT GOLD AGAINST US 10-YEAR REAL YIELD – THE BIGGER PICTURE Chart created in TradingView Of course, a global pandemic and a European theatre of war have opened up a different era and consequent change in the dynamic of demand for gold. Looking ahead, a break of the recent range of US$ 1,885 – 1,900 could be the catalyst for the next notable move for XAU/USD. Click on the banner below to learn more about range trading. GOLD TECHNICAL ANALYSIS SNAPSHOT The gold price appears to be ensconced in the range for now, having traded between 1885 and 1897 for six months. Support could be in the 1885 – 1895 area where there are a series of prior lows, a breakpoint, and the 38.2% Fibonacci Retracement level of the move from 1614 up to 2062. Further down the 50% Fibonacci Retracement at 1838 might lend support. On the topside, resistance might be at the recent peaks of 1953 and 1897 or the spsychological level of 2000 where there is also the breakpoint nearby. SPOT GOLD CHART Chart created in TradingView https://www.dailyfx.com/news/gold-price-slips-as-us-dollar-recovers-ahead-of-us-cpi-lower-xau-usd-20230913.html

2023-09-11 06:46

US DOLLAR OUTLOOK The U.S. dollar index advanced and settled near its highest level since early March on Friday, rising for the eighth consecutive week The greenback's recent upward momentum has been driven by rising bond yields in an environment of resilient economic activity and sticky inflation The August U.S. CPI report will steal the spotlight in the coming week and will likely set the tone for the FX markets in the near term The U.S. dollar, as measured by the DXY index, closed the week above the psychological 105.00 handle, settling around its highest level since early March. This marked its eighth consecutive week of gains and the longest winning streak since 2014 – a bullish run catalyzed by the resurgence in U.S. Treasury yields on the back of a hawkish repricing of the Federal Reverse’s policy path. The chart below shows how the DXY index has closely tracked the uptrend in U.S. bond yields since mid-July. US DOLLAR INDEX VERSUS US TREASURY YIELDS Source: TradingView The FOMC has raised borrowing costs 11 times since 2022 as part of a strategy to quash rampant inflation, bringing its benchmark rate to a range of 5.25% to 5.50%, the highest in 22 years. Despite the forceful actions by the Fed, the current tightening cycle is likely not yet over, considering the prevailing macroeconomic conditions. Recent data has shown that the economy, rather than weakening, has reaccelerated this summer, contrary to historical experience in times of aggressive central bank monetary policy. For instance, the ISM services sector PMI jumped in August to 54.5 from 52.7 previously, topping all projections and reaching its strongest reading since February. Given these positive developments, the Atlanta Fed's GDP Nowcast indicates that output is poised to grow at an annualized rate of 5.6% in the third quarter. The resilience of the economy, coupled with tight labor markets, will keep household spending healthy for now, putting upward pressure on aggregate demand – a key driver of inflation. This could compel policymakers to deliver additional tightening this year despite their pledge to “proceed carefully” going forward. Turning our attention to the forthcoming FOMC meetings, investors anticipate no change in the policy stance in September, but see the November conclave as “live”, with a 43.6% probability assigned to a quarter-point hike. This likelihood may increase in the days ahead, particularly if the upcoming U.S. inflation report reflects heightened inflationary pressures. FOMC MEETING PROBABILITIES Source: CME Group The U.S. Bureau of Labor Statistics will release August consumer price numbers on Wednesday. Projections suggest headline CPI rose 0.6% m/m last month, pushing the annual rate to 3.6% from 3.2% in July. The core gauge, for its part, is seen climbing 0.2% m/m, with the 12-month reading easing to 4.3% from 4.7% prior. An upward deviation of the actual data from market estimates would be positive for the U.S. dollar insofar as it would strengthen the case for further policy firming. Conversely, if the results align with or fall short of expectations, the greenback could suffer a setback, erasing some of its recent gains and losing ground against its top peers. US ECONOMIC CALENDAR Source: DailyFX US DOLLAR INDEX (DXY) TECHNICAL ANALYSIS The U.S. dollar broke out on the topside this past week, clearing trendline resistance and its May peak decisively before setting a fresh multi-month high above the 105.00 handle ahead of the weekend. With the bulls in clear control of the market, the DXY index might maintain its upward momentum in the coming days, particularly if it manages to remain above technical support at 104.50. In such a scenario, prices may charge towards 105.30, a key ceiling created by the 38.2% Fib retracement of the September 2022/July 2023 slump. On further strength, a retest of the 2023 highs becomes increasingly probable. On the flip side, if sellers regain the upper hand and trigger a pullback, initial support appears at 104.50, followed by 103.95. Below these thresholds, the next area of significance in the event of extended weakness is situated at 103.50. US DOLLAR (DXY) TECHNICAL CHART US Dollar Index (DXY) Chart Prepared Using TradingView https://www.dailyfx.com/news/forex-us-dollar-forecast-how-will-us-inflation-data-impact-yields-and-usd-20230910.html