2024-05-26 20:00

Most Read: EUR/USD Trade Setup - Bullish Continuation Hinges on Resistance Breakout The new week will start off slowly, as both the US and UK markets will be closed on Monday— the former for Memorial Day and the latter for a bank holiday. Holidays in these financial hubs mean lower trading volume, possibly leading to sluggish price action. But there's a catch: thin liquidity can at times magnify price movements if unexpected news hits the wires, with fewer traders around to absorb buy and sell orders. That said, caution is warranted for those who still decide to trade on Monday. As we progress through the week, we anticipate a relatively calm period with few high-impact events likely to spark significant volatility. Nonetheless, the landscape could change on Friday with the release of critical economic indicators. On one side of the Atlantic, Eurozone May CPI figures will be released. On the other side of the pond, we’ll get core price consumption expenditure data, the Federal Reserve’s most closely watched inflation gauge. Curious about the U.S. dollar’s near-term prospects? Explore all the insights available in our quarterly forecast. Request your complimentary guide today! Eurozone The European Central Bank is likely to reduce borrowing costs from a record high of 4% at its upcoming June meeting. However, the extent of additional rate cuts will depend on the inflation outlook. In this sense, the May Flash CPI report will be crucial, offering valuable insights into recent price trends within the regional economy, which will play a pivotal role in guiding the monetary policy trajectory. Analysts expect Eurozone inflation to rise to 2.5% y-o-y this month from 2.4% in April, with the core gauge anticipated to remain steady at 2.7%. The slight uptick in the headline metric may not deter the ECB from pulling the trigger next month, but an upside surprise may prompt the institution to adopt a more cautious approach to future easing. In light of these developments, euro FX pairs may be subject to heightened volatility heading into the weekend. Want to know where the euro may be headed over the coming months? Explore all the insights available in our quarterly forecast. Request your complimentary guide today! US Core PCE deflator data will also be released on Friday. Consensus estimates suggest a 0.3% increase in April, with the annual rate cooling to 2.7% from 2.8, marking a small but favorable directional move. A downward surprise could reignite optimism that the disinflationary trend, which began in late 2023 but stalled earlier this year, is back on track, strengthening the case for the FOMC to pivot to a looser stance at some point in the fall. This should be bearish for the U.S. dollar but positive for stocks and gold. Conversely, if inflation numbers exceed forecasts, interest rate expectations could shift in a hawkish direction, delaying the Fed’s timeline for initiating rate cuts. In this scenario, November or December could become the new baseline for a potential move by the U.S. central bank. Such a development could propel bond yields and the greenback higher, creating a more challenging environment for equities and precious metals. For an in-depth look at the variables that may impact financial markets in the coming week, explore the comprehensive forecasts and analysis offered by the DailyFX team. Our expert analysis may equip you to navigate the dynamic market environment and make smart trading decisions. FUNDAMENTAL AND TECHNICAL FORECASTS British Pound Weekly Forecast: Lack of Local Cues Could See a Drift Lower Sterling has largely ignored the announcement of a UK election, with the economic fundamentals still very much in charge. Gold Price Forecast: Bearish Bias in Place for Now but Core PCE Data Holds Key This article delves into the fundamental and technical outlook for gold, with a specific focus on analyzing price action dynamics and potential scenarios post the release of U.S. PCE data later this week. US Dollar Forecast: PCE Inflation Data Holds Key as EUR/USD, USD/JPY Await Catalyst The US dollar may prove resilient ahead of the crucial PCE inflation data, while EUR/USD seeks catalysts and USD/JPY maintains its uptrend. Traders eye German and EU inflation figures for guidance. https://www.dailyfx.com/news/forex-markets-week-ahead-gold-eur-usd-usd-jpy-eurozone-inflation-us-core-pce-20240526.html

2024-05-25 15:30

Most Read: EUR/USD Trade Setup: Bullish Continuation Hinges on Resistance Breakout Gold prices plunged this week after briefly hitting an all-time high on Monday, sinking more than 3% to settle slightly below the $2,335 mark. The selloff was driven primarily by the rally in short-term Treasury yields following hawkish Fed minutes and better-than-expected U.S. PMI data, which showed that business activity in the services sector accelerated to its strongest pace in over two years in May, a sign that the economy is holding up remarkably well and is able to tolerate higher interest rates for longer. With inflationary pressures proving to be stickier than initially anticipated and the prospects of central bank easing pared back on account of economic resilience, U.S. Treasury yields may have room to move a little higher in the near term, especially those on the front end of the curve. This, in turn, could keep the U.S. dollar biased upwards, preventing bullion from making another attempt at fresh records heading into the end of the month. While gold’s very near-term outlook appears neutral to slightly bearish, we will need to reassess this view late in the upcoming week when fresh core personal consumption expenditures price data, the Fed's preferred inflation measure, is released. Consensus estimates indicate that the underlying PCE deflator advanced 0.3% in April, bringing the annual reading down to 2.7% from 2.8% previously, a small step in the right direction and welcome news for policymakers. For gold to reverse course and resume its upward trend, bulls need to see the core PCE report surprise to the downside. Such an outcome could reignite optimism that the disinflationary trend, which began in late 2023 but stalled earlier this year, is back on track, strengthening the argument for the Federal Reserve to start dialing back on policy restraint early in the fall. As it stands, there is about a 45% chance of a 25-bps rate cut occurring at the September FOMC meeting. Wondering how retail positioning can shape gold prices in the near term? Our sentiment guide provides the answers you are looking for—don't miss out, get the guide now! FOMC MEETING PROBABILITIES Source: CME In the event of red-hot inflation numbers that top Wall Street’s forecasts, interest rate expectations are likely to drift higher as traders push out the timing of the first rate cut, possibly to November or December. This could boost yields and the greenback, fostering a hostile environment for precious metals. Higher yields typically reduce the appeal of non-interest-bearing assets such as gold and silver, while a stronger dollar increases their cost for overseas buyers, suppressing their demand. Acquire the knowledge needed for maintaining trading consistency. Grab your "How to Trade Gold" guide for invaluable ideas and tips! GOLD PRICE TECHNICAL ANALYSIS Gold (XAU/USD) plummeted this week, slipping below a key trendline at $2,360 and the 38.2% Fibonacci retracement of the 2024 advance at $2,335. With bearish momentum seemingly accelerating, sellers could soon make a move on the 50-day SMA at $2,310. On further weakness, the focus will be on the psychological $2,300 threshold, followed by $2,280, May’s swing low. In case of a market rebound, resistance could manifest near the $2,375 zone. Surmounting this technical ceiling could prove challenging, yet a breakout could encourage buyers to launch an assault on $2,420. Additional gains beyond this point could set the stage for a rally towards $2,430, with the all-time high at $2,450 representing the next noteworthy bullish target to keep an eye on. GOLD PRICE TECHNICAL CHART Gold Price Chart Created Using TradingView https://www.dailyfx.com/news/xau-usd-gold-price-forecast-bearish-bias-in-place-for-now-but-core-pce-data-holds-key-20240525.html

2024-05-24 07:58

Japanese Yen (USD/JPY), BoJ News and Analysis Japanese CPI eased in April as record wage rises fail to show up in general prices The BoJ’s challenge: Hiking into weakness as inflation path remains uncertain USD/JPY edges higher once more but advances have been contained Learn the ins and outs of trading USD/JPY - a pair crucial to international trade and a well-known facilitator of the carry trade Japanese CPI Eased in April as Record Wage Increases Fail to Show up in Prices Headline inflation in Japan dropped to 2.5% when compared to April last year, down from 2.7% in March. Additionally, the core measure (excluding fresh food) dropped from 2.6% to 2.2% as expected. The reading that strips out volatile items like fresh food and energy also noted a decline from 2.9% to 2.4% as a lack of consumer activity appears to be taking its toll on the “virtuous relationship” between wages and prices in Japan. Ahead of Japan’s first rate hike since 2007, the Bank of Japan (BoJ) communicated preconditions for a movement in the interest rate which depended on the board attaining the necessary confidence that inflation would remain above 2% in a stable and sustained manner, often referring to a virtuous relationship between wages and prices. The Bank also specified that demand driven inflation needs to be observed instead of ‘cost push inflation’ which had been brought about by supply disruptions leading to surging oil prices. Since then, Japanese wages rose at the highest annual rate in the past 33 years in response to higher prices but inflation has failed to advance in a consistent manner. Instead, inflation data has been inconsistent and the higher cost of labour has not yet passed through to higher prices for consumers which ought to stoke inflation higher over time. The BoJ’s challenge: Hiking into Weakness amid Uncertain Inflation Path Japanese GDP contracted 0.5% in the first quarter to follow up a flat reading in Q4 (0%) of last year to narrowly avoid a technical recession. One major concern observed in the weak data has been local consumer spending and general consumption. Economic activity is relied upon to stimulate growth and pave the way towards another rate hike but if consumers are retreating it becomes very difficult to tighten financial conditions. Therefore, it may be a while longer before the BoJ attain the necessary confidence to hike interest rates again with the market pricing in a potential 10 basis point hike in July with a total of 25 basis points for the year. In the meantime, sellers of Japanese Government bonds (JGBs) appear to be waning, allowing the 10-year yield to breach 1% recently. The rise in yields suggests an acceptance in the market that rates and yields are on an upward trajectory and that the BoJ may be able to reduce future bond purchases. Higher yields have done little to strengthen the yen though, as US yields have also been on the up since a return to the ‘higher for longer’ narrative from prominent Fed officials in recent days alongside the hawkish FOMC minutes. Japanese Government Bond Yields (10-Year) Source: TradingView, prepared by Richard Snow USD/JPY Edges Higher Once More but Moves Remain Measured Less than one month after it was suspected that Japanese officials intervened in the FX market, USD/JPY now trades closer to the 160 marker that set the process into action. However, the grind higher has been gradual, not exhibiting the same volatility that prompted officials into action. In a quieter week for top tier US data, it was largely expected that the dollar would shine – accommodating a market preference for higher yielding currencies during times of lower observed volatility. The pair trades above 157.00 after bouncing sharply higher off the 50-day simple moving average (SMA) back in the early stages of May, followed by a rise above 155.00. The problem is likely to persist as long as the interest rate differential between the two nations remains wide. The carry trade remains strong. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow Are you new to FX trading? The team at DailyFX has curated a collection of guides to help you understand the key fundamentals of the FX market to accelerate your learning https://www.dailyfx.com/news/boj-faces-dilemma-hiking-rates-into-economic-weakness-as-inflation-path-wavers-20240524.html

2024-05-24 00:00

Most Read: Japanese Yen Sentiment Analysis & Outlook – USD/JPY, EUR/JPY, GBP/JPY Gold prices plummeted on Thursday following stronger-than-expected U.S. economic data, which drove U.S. Treasury yields higher and boosted the U.S. dollar against most currencies. When it was all said and done, the precious metal fell over 2% after a volatile session, breaking through several support levels and hitting its lowest point in two weeks. With the U.S. economy performing exceptionally well and inflationary pressures proving more persistent than anticipated, the Federal Reserve is likely to maintain its restrictive policy stance for longer. This scenario of higher interest rates for longer could limit gold's upside potential in the near term, assuming risk aversion remains in check. Eager to gain insights into gold's future path? Discover the answers in our complimentary quarterly trading guide. Request a copy now! In terms of technical analysis, XAU/USD retreated for the third straight session on Thursday, breaching an important trendline at $2,360 and the 38.2% Fibonacci retracement of the 2023 rally at $2,335. If losses accelerate in the coming days, the 50-day simple moving average at $2,310 will be the next line of defense against a bearish assault, followed by $2,300 and $2,280 thereafter. In the event of a bullish turnaround, overhead resistance emerges at $2,365, followed by $2,375. Overcoming these technical barriers could be difficult, but a successful breakout could embolden buyers to initiate an attack on $2,420. On further strength, we cannot rule out a rally towards $2430, ahead of a possible retest of the all-time high around $2450. Wondering how retail positioning can shape gold prices? Our sentiment guide provides the answers you are looking for—don't miss out, get the guide now! GOLD PRICE TECHNICAL CHART Gold Price Chart Created Using TradingView https://www.dailyfx.com/news/gold-prices-sink-support-breakdown-heralds-more-weakness-xau-usd-key-levels-20240524.html

2024-05-23 18:00

Most Read: Gold, EUR/USD, USD/JPY – Price Action Analysis & Technical Outlook In the dynamic world of trading, it's tempting to follow the masses, buying in bullish cycles, and selling during bearish phases. However, seasoned traders know that substantial opportunities often arise from unconventional strategies. One such strategy involves moving against the dominant market view, which can sometimes lead to favorable outcomes. Contrarian trading isn't about opposing the crowd for the sake of it. Instead, it's about recognizing moments when the majority might be wrong and seizing those opportunities. Tools like IG client sentiment provide valuable insights into the overall market mood, highlighting periods of extreme optimism or pessimism that could indicate an upcoming reversal. Yet, relying solely on contrarian signals doesn't guarantee success. Their true value emerges when integrated into a comprehensive trading strategy that combines both technical and fundamental analysis. By merging these perspectives, traders can uncover deeper market dynamics often missed by those who follow the majority. To illustrate this concept, let's examine IG client sentiment data and what current retail segment positioning indicates for three key Japanese yen FX pairs: USD/JPY, EUR/JPY, and GBP/JPY. Analyzing these examples shows how contrarian thinking can help uncover attractive trading opportunities and navigate market complexities. USD/JPY FORECAST – MARKET SENTIMENT IG data reveals a prevailing bearish sentiment on USD/JPY, with 73.65% of clients holding net-short positions, resulting in a significant short-to-long ratio of 2.80 to 1. The tally of sellers has remained relatively stable since yesterday, but has increased by 4.57% over the past week. Meanwhile, bullish traders have fallen by 5.36% since the previous session and are down 14.21% compared to last week. Our trading strategy often adopts a contrarian perspective, finding opportunities where the majority disagrees. That said, the widespread pessimism on USD/JPY suggests the potential for further price appreciation in the near future. The persistent net-short positioning over key timeframes reinforces the positive outlook for USD/JPY. Key Insight: Sentiment data indicates a strong contrarian bullish signal for USD/JPY. However, it is crucial to incorporate both technical and fundamental analysis into your trading strategy to fully understand the pair's potential direction. EUR/JPY FORECAST – MARKET SENTIMENT IG data paints a picture of widespread bearish sentiment towards EUR/JPY, with 78.83% of traders selling the pair (short-to-long ratio of 3.72 to 1). This typically signals potential upside from a contrarian perspective. However, the picture is more nuanced than it seems. While the overall mood remains bearish, there's been a slight easing in net-short bets compared to yesterday (down 2.05%). On the other hand, the number of sellers has risen compared to last week, with net-short positions increasing by 7.43%. This creates a mixed contrarian signal. While the overall bearishness hints at possible further gains for EUR/JPY, the recent fluctuations in positioning raise questions about the strength of this contrarian outlook. Key Insight: The current market sentiment for EUR/JPY presents a complex picture. While a contrarian view suggests potential upside, the recent shifts in positioning warrant caution. A comprehensive approach, integrating technical and fundamental analysis with sentiment data, is crucial for making informed trading decisions. Disheartened by trading losses? Empower yourself and refine your strategy with our guide, "Traits of Successful Traders." Gain access to crucial tips to help you avoid common pitfalls and costly errors. GBP/JPY FORECAST – MARKET SENTIMENT IG client data reveals a pronounced bearish bias towards GBP/JPY, with 73.82% of traders holding short positions (short-to-long ratio of 2.82 to 1). This pessimism has grown in recent days, with a noticeable increase in short positions compared to both yesterday (up 8.75%) and last week (up 22.37%). Our trading strategy often leverages a contrarian perspective. This widespread negativity towards GBP/JPY, along with the surge in bearish wagers, hints at the possibility of continued upward momentum for the pair in the near term. The persistent bearishness further reinforces this bullish contrarian outlook. Key Insight: The current IG client sentiment data points to a strong contrarian bullish signal for GBP/JPY. However, remember that a comprehensive trading strategy should also incorporate technical and fundamental analysis to gain a full picture of the pair's potential path. https://www.dailyfx.com/news/forex-japanese-yen-sentiment-analysis-outlook-usd-jpy-eur-jpy-gbp-jpy-20240523.html

2024-05-23 14:33

Gold (XAU/USD) Analysis Hawkish FOMC minutes deliver a harsh dose of reality Gold on track for largest weekly drop since December XAU/USD daily chart highlights negative divergence as bullish momentum wanes Gold market trading involves a thorough understanding of the fundamental factors that determine gold prices like demand and supply, as well as the effect of geopolitical tensions and war. Find out how to trade the safe haven metal by reading our comprehensive guide: Hawkish FOMC Minutes Deliver a Harsh Dose of Reality The FOMC minutes released last night brought with it a renewed focus on the problem at hand, inflation. The April US CPI managed to snap a run of hotter-than-expected inflation readings, a reason to breathe a slight sigh of relief but the FOMC minutes reminded markets of the harsh reality that lies ahead. Participants at the meeting envision it will take longer than previously thought to acquire the necessary confidence that inflation is moving sustainably towards the 2% target. In addition, various participants discussed their willingness to tighten policy further should risks to the inflation outlook deem it appropriate. As a result, the rate sensitive 2-year Treasury yield rose, as did the US dollar – weighing on the precious metal as can be seen below. Spot Gold, DXY (green line) and US 2-year Treasury Yields (purple line) Source: TradingView, prepared by Richard Snow Gold on Track for Largest Weekly Drop Since December Gold reached a new all-time high this week but wasted no time to head back lower, currently on track for the largest weekly drop since the end of last year. In 2024, gold has enjoyed massive gains in anticipation of lower interest rates which are not only yet to materialize in the US but appear further away thanks to stubborn inflation prints. Central bank buying has also seen a notable increase, particularly in China where the local yuan has been depreciating against the dollar on a consistent basis. Additionally, pullbacks during the bull trend have been shallow apart from what we saw in April, which emerged as the first signal that bullish momentum may start to wane. Gold (XAU/USD) Weekly Chart Source: TradingView, prepared by Richard Snow The daily gold chart is notable, not only for the sharp reversal but also for the unfolding negative divergence – a topic explored in our educational article uncovering the ins and outs of the relative strength indicator. While gold made a higher high, the RSI indicator printed a lower high, suggesting that the underlying momentum may come under pressure. Gold tests the 161.8% Fibonacci extension of the 2020 to 2022 decline. A close below this level suggests the pullback may garner newly found momentum into next week where markets will be looking ahead to US PCE inflation data to round out the month. $2,319 is the next level of support to the downside, followed by the May swing low of $2,277. In the event bulls pick things back up, a close above the 161.8% Fib retracement at $2,360 appears as a good level to consider a continuation of the bull trend. Gold (XAU/USD) Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/gold-price-outlook-xau-usd-turns-on-hawkish-fed-stronger-usd-and-yields-20240523.html