2024-06-13 10:23

Euro Latest – EUR/USD and EUR/GBP Technical Outlooks EUR/USD pares Wednesday’s gains after a hawkish FOMC meeting. EUR/GBP volatility may rise as political risk increases. The Euro is giving back some of Wednesday’s US CPI-inspired gains after the US dollar got a bid later in the session after the Fed trimmed US interest rate expectations. The latest dot plot shows Fed officials now forecasting just one 25 basis point rate cut in 2024, down from three cuts seen in March. FOMC Roundup: Fed Reconsiders Rate Cuts as Inflation Forecast Drifts Higher With the US inflation data and the FOMC now in the rearview mirror, EUR/USD should no longer be dominated by the greenback. Looking at the CCI indicator, EUR/USD was heavily oversold going into Wednesday’s events, leaving the pair vulnerable to a sharp move higher. After pairing gains on the FOMC announcement, EUR/USD now sits around 1.0800 below the recent uptrend support line. Initial support is seen around 1.0787 – the 200-day sma – before Tuesday’s 1.0720 and the mid-February swing low at 1.0695 come into focus. Trend resistance around 1.0850 guards the recent multi-week high at 1.0916. EUR/USD Daily Price Chart EUR/GBP is expected to become increasingly volatile over the next month as elections in the UK and France come firmly into focus. EUR/GBP has weakened notably since early May as the ECB shifted towards loosening monetary policy, while rate cuts in the UK have been pushed back. The result of the upcoming elections, and the ongoing fallout from the recent European Parliamentary elections, will now drive the pair. EUR/GBP remains heavily oversold, but yesterday’s move higher lacks conviction. The double low just below 0.8420 remains vulnerable, while a prior zone of support on either side of 0.8500 is now seen as resistance. The pair remain below all three simple moving averages and will struggle to break higher. EUR/GBP Daily Chart All charts using TradingView Retail Trader Sentiment Analysis: EUR/GBP Increasingly Bearish Contrarian Bias According to the latest IG retail trader data 80.79% of traders are net-long with the ratio of traders long to short at 4.21 to 1.The number of traders net-long is 1.21% lower than yesterday and 7.92% higher than last week, while the number of traders net-short is 8.11% lower than yesterday and 15.53% lower than last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBPprices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias. What is your view on the EURO – 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/euro-latest-eur-usd-and-eur-gbp-technical-outlooks-20240613.html

2024-06-13 08:03

USD, US Equities Analysis Post-FOMC Fed forced to trim rate cut bets due to hotter inflation profile USD reclaims some lost ground on hawkish forecasts US equities rally on lower yields, USD despite the hotter inflation outlook The Fed Forced to Trim Rate Cut Bets due to Hotter Inflation Profile Federal reserve members were allowed the opportunity to revise their individual interest rate outlooks after May’s inflation data was released just hours before the two-day meeting was due to conclude on Wednesday. In the end, officials stepped back from their March projections where three rate cuts were deemed appropriate for this year; now opting for just the single 25 basis point cut for 2024. The decision was largely influenced by a series of stubborn inflation prints which recently showed signs of ‘modest’ progress but ultimately forced the Fed to adopt a more conservative stance, being prepared to maintain interest rates at current, restrictive levels. Growth and unemployment forecasts remained the same for this year but the labour market is expected to ease slightly by the end of 2025. The big movers included headline and core PCE data, rising this year and next, with the Fed funds rate also expected to be firmer over the same horizon. Summary of Economic Projections (June 2024) Source: US Federal Reserve Bank, prepared by Richard Snow USD Reclaims Some Lost Ground on Hawkish Forecasts The hawkish forecasts helped the dollar partially recover losses from the earlier, softer CPI print that sent the greenback notably lower. Today the dollar appears to continue the bullish momentum from late in the day yesterday but PPI data this afternoon could bring the focus back to an inflation profile that is evolving in a more favourable manner which could cap USD upside if PPI comes in below the consensus number of 0.1% which is already low as it is. Markets brought a second rate cut back onto the table after the CPI print yesterday but that was thrown into doubt after the Fed projections where it remains a strong possibility but Is no longer fully priced in. Dollar bulls will be encouraged by a vulnerable euro, which sold off after the French President Emmanual Macron announced a snap election scheduled for the end of this month. This theme may re-emerge once the CPI data appears in the rear-view mirror and we get closer to the election. US Dollar Basket (DXY) Source: TradingView, prepared by Richard Snow US Equities Rally on Lower Yields, USD Despite the Hotter Inflation Outlook Stocks rallied on the softer inflation print and appear undeterred by the Fed’s hotter inflation outlook. Stocks tend to do well when the dollar and US Treasury yields sink. This effect has been amplified by the fact markets remain hopeful of that second rate cut which remains a strong possibility. Yesterday, the 5,500 level was identified as upside resistance, a level that is expected to be tested or even breached at the open today. The futures market anticipate a gap higher at the start of trading in New York at 09:30 AM (Eastern Time). S&P 500 E-Mini Futures (ES1!) Daily Chart Source: TradingView, prepared by Richard Snow The Nasdaq is also expected to gap higher at the open today, with the continuous futures falling just shy of the psychological 20,000 level. Something to be wary of is the current overbought nature of the advance heading into the last two sessions of the week. Nasdaq E-Mini Futures (NQ1!) Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/fomc-roundup-fed-reconsiders-rate-cuts-as-inflation-forecast-drifts-higher-20240613.html

2024-06-12 15:40

Market Snapshot Ahead of the FOMC Meeting S&P 500 receives another excuse to break new ground What happened to the euro amid the shock political developments USD/JPY pulls back ahead of BoJ meeting The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library US CPI for the month of May cooled, sending the dollar sharply lower ahead of the FOMC statement and updated forecasts due for release at 19:00 (UK). For the real-time coverage, read our US CPI report from senior strategist Nicholas Cawley. On the face of it, it was a good report, seeing headline measures of core and headline inflation come in below expectations on a yearly and monthly basis. Fed officials look to services inflation and super core inflation (services excluding housing and energy) as key gauges of inflation momentum. More recently, officials have been interested to see monthly core cpi breaking the trend of successive 0.4% prints which has now materialized after April's 0.3% and now May's 0.2% . Source: Refinitiv, Prepared by Richard Snow Learn how to prepare for high impact economic data or events: S&P 500 Gets Another Excuse to Break New Ground In the lead up to the inflation print, it is fair to say US equity markets were tentative, consolidating around the recent high. Now, with inflation heading in the right direction again, markets have put a second rate cut back on the table – providing stocks with new vigor. The Fed is due to update their dot plot projection of the likely Fed funds rate for 2024. In March, officials projected three quarter-point rate cuts but May’s inflation data could see that revised to just two or in an extreme case, one. Nevertheless, the prospect of lower future rates has stocks trading higher with 5,500 the next level of interest to the upside. S&P 500 Daily Chart Source: TradingView, prepared by Richard Snow What Happened to the Euro Woes amid the Shock Political Developments? The euro has recovered against the dollar despite weakness presenting itself at the start of the week when markets got wind of French President Macron’s snap election announcement. The Euro frailties remain despite the reactionary move but are very much in the background and are likely to resurface the closer we get to the first round of the French parliamentary elections on the 30th of June. For now, markets are focused on US data and the upcoming FOMC meeting. EUR/USD has shot up from yesterday’s close, almost engulfing the post-NFP sell-off. 1.0855 is the nearest level of resistance followed by the swing high of 1.0916 and the zone of resistance around 1.0950 – however this may only be attainable in the event the Fed shave not one but two rate cuts from their March outlook. Support sits at 1.0795. EUR/USD Daily Chart Source: TradingView, prepared by Richard Snow USD/JPY Pulls Back Ahead of the BoJ Meeting Yen depreciation and undesirable volatility has plagued Japanese officials for some time now but the latest US CPI data provided some breathing room. The Bank of Japan (BoJ) is due to meet in the early hours of Friday morning where there is likely to be more focus on easing up on aggressive bond buying, allowing the Japanese Government bond yield to rise freely above 1%. This can be viewed as the next step in the Bank’s path to normalisation in a manner that is unlikely to destabilise markets. Japan’s economy has revealed hardships, complicating a faster rate hiking cycle than what we are experiencing. Some doubts remain about the sustainability of inflation beyond 2% over the medium-term and officials have communicated their desire for wage pressures to continue outside of annual negotiations/reviews. A commitment to slowing the pace of bond purchases is potentially supporting of the yen however, this all depends on whether the market view any reductions from the BoJ as being sufficient to illicit such a response. USD/JPY heads lower with the 50 SMA and the psychological 155.00 level in focus. Resistance at 157.70. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow Learn the ins and outs of trading USD/JPY - a pair crucial to international trade and a well-known facilitator of the carry trade. In addition, this collection of guides provide valuable insights that all traders must have when trading the most liquid markets: https://www.dailyfx.com/news/market-snapshot-pre-fomc-eur-usd-s-p-500-usd-jpy-20240612.html

2024-06-12 12:59

US Dollar Index Slumps as Inflation Data Comes in Lower Than Expected US inflation fell unexpectedly in May US dollar slumps post-release. The latest US inflation report showed price pressures easing by more than forecast, with all headline numbers coming in below expectations and last month’s numbers. The move lower in core CPI y/y, from 3.6% to 3.4%, surprised the market and sent the USD lower and risk markets higher. US Bureau of Labor Statistics – US CPI Report (May) The US dollar index fell by around 3/4s of a point after the release, before finding support off the 200-day simple moving average. US Dollar Index Daily Chart Later today (19:00 UK), the Fed will announce its latest monetary policy decision and its quarterly Summary of Economic Projections. While the US central bank is expected to leave all policy dials untouched, today’s inflation report may alter their thoughts on where interest rates are headed in the months ahead. The new dot plot will be worth watching closely. Before the CPI release, the market was forecasting a total of 39 basis points of easing this year, this has now been upgraded to a fraction under 50 basis points. The September meeting is now back in play for the first-rate cut. US Dollar Eyes CPI Data and FOMC Policy Release, Dot Plot Key Indicator What are your views on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/us-dollar-index-slumps-as-inflation-data-comes-in-lower-than-expected-20240612.html

2024-06-12 09:33

UK Growth Flatlines, Sterling Hesitant and FTSE Lifts: UK GDP stalls in April, adding to the misery of yesterday’s jobs rout Sterling reveals a slight reprieve from recent bearish pressure as all eyes turn to US CPI, FOMC The FTSE provided a strong start to the day on news of Rentokil’s new investors The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library UK GDP Stalls in April, Adding to the Misery of Yesterday’s Jobs Rout The UK economy failed to grow in the entire month of April as manufacturing, industrial production and especially construction registered contractions. April’s data compared to April of 2023 witnessed a 0.6% increase, marginally lower than last month’s 0.7% increase. Learn how to prepare for high impact economic data or events with this easy to implement approach: The data comes hot off the heels of yesterday’s UK jobs report which registered an alarming 50k claimants seeking unemployment benefits and an unemployment rate of 4.4%, up from 4.3%. The data does very little to support Rishi Sunak in his Tory Party’s desperate attempts to win back the voter base after polls show overwhelming support for the Labour Party. The cost of living crisis, anaemic growth, and a string of missteps from party officials have contributed to the shift away from the governing party with the elections scheduled for the 4th of July this year. Sterling Reveals a Slight Reprieve from Recent Bearish Pressure as All Eyes Turn to US CPI, FOMC Cable (GBP/USD) has managed to halt the recent decline spurred on by Friday’s hot NFP print in the US. The move may be due to a squaring off of positions ahead of what is a very uncertain and potentially volatile trading session. High impact data out of the US today (US CPI and the FOMC statement and forecasts) has the full attention of the market. Stubborn inflation is likely to add to the loss of confidence amongst the committee when it comes to inflation returning to the 2% target. Hot monthly CPI for most of 2024 has forced the Fed to manage their expectations around the number and timing of Fed funds rate cuts this year. If this continues to be the case, GBP/USD may be vulnerable to a move lower but such a move could be limited by the fact the FOMC dot plot is due to be released a few hours later. GBP/USD found support at 1.2736, remaining within the ascending channel. Upside levels of interest appear at 1.2800 and 1.2895. Conversely, an encouraging CPI print (lower CPI than expected) can add to the reprieve seen in the pair recently. However, the main event of the day is likely to be the updated dot plot representation of the Fed's rate outlook for the remainder of 2024. In March, the Fed anticipated they would cut the Fed funds rate three times but sticky inflation and a resurgent labour market are likely to see this estimate trimmed. The question is whether the Fed removes just one, or two rate cuts from the March projections. In the event the Fed remove two rate cuts, the dollar is likely to appreciate as rates are likely to buoy the greenback at a time when other central banks are about to or have already started cutting rates. GBP/USD Daily Chart Source: TradingView, prepared by Richard Snow Typically, sterling strengthens when gilt yields rise – especially the rate sensitive 2-year gilt. Yields have edged lower on the worsening jobs and growth data but thus far this has not weighed on the pound. UK 2-Year Bond Yield (2-Year Gilt Yield) Source: TradingView, prepared by Richard Snow The FTSE 100 Index started the day on a strong footing, lifted by news of a major investment in Rentokil by activist investor Nelson Peltz's Trian Fund Management. The blue 50-day simple moving average has provided some form of dynamic support as the index looks to halt the recent bearish move. FTSE 100 Index Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/gbp-usd-navigating-the-uncertainty-of-us-cpi-and-fomc-releases-20240612.html

2024-06-12 07:16

US Dollar Eyes CPI Data and FOMC Policy Release, Dot Plot Key Indicator US inflation is likely to remain uncomfortably sticky for the Fed. Will Fed officials pencil in one or two rate cuts this year? Risk markets are opening the session slightly better bid, but moves are expected to be limited ahead of the keenly awaited US inflation report (13:30 UK) and the latest Federal Reserve monetary policy decision (19:00 UK). Markets expect core inflation y/y to nudge 0.1% lower to 3.5%, while headline inflation is expected to remain unchanged at 3.4%. Any notable deviation from these forecasts would fuel a spike in market volatility. The Federal Open Market Committee (FOMC) meeting, scheduled for later today, is expected to leave interest rates unchanged within the current range of 5.25% to 5.5%. However, the main event will revolve around the release of the latest Summary of Economic Projections and the closely watched "dot plot" visualization. The dot plot is a crucial tool that illustrates where FOMC officials anticipate interest rates to be at the end of the current year and the subsequent two years. The March dot plot revealed a range of opinions, with two officials expecting rates to remain static, two anticipating a single rate cut, five projecting two rate cuts, and nine officials forecasting three rate cuts in 2024. Market analysts and economists will scrutinize the updated dot plot for shifts in these projections. A key area of focus will be whether officials who previously predicted three rate cuts have now moderated their expectations to one or two cuts. The consensus view among market participants will hinge on whether the dot plot signals a preference for one or two rate cuts by the end of the year, and if additional FOMC members have migrated to the no rate cut camp. This FOMC meeting carries significant weight as it will shape market expectations regarding the Federal Reserve's monetary policy trajectory and the potential implications for the broader economy. Investors will closely monitor the dot plot and the accompanying statements for insights into the Fed's assessment of economic conditions and its plans for future rate adjustments. What are your views on the US Dollar – 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/us-dollar-eyes-cpi-data-and-fomc-policy-release-dot-plot-key-indicator-20240612.html