2024-05-01 08:10

US Dollar (DXY) Analysis Rising price pressures and employment costs elevate USD and yields ahead of FOMC US dollar index tests key upside level but markets may be in for disappointment Major risk events ahead: FOMC, ISM PMI, ADP and JOLTs data, NFP on Friday Get your hands on the U.S. dollar Q2 outlook today for exclusive insights into key market catalysts that should be on every trader's radar: Rising Prices and Employee Costs Demand the Fed’s Attention The three-month percent rise in civilian worker’s total compensation rose above the maximum estimate from economists/analysts. The data for the three-month period ending in March rose 1.2% after rising 0.9% in the three months before that, beating estimates of 1%. The number is of less significance than the surprise element itself and when you tally this up alongside accelerating month-on-month core inflation, questions start to be raised around just how restrictive the current policy stance really is. Source: Bureau of Labor Statistics Considering the Fed can still point to signs of continued disinflation, despite recent challenges, suggests the committee may repeat that more work needs to be done and that policy setters will look to in coming data. The summary of economic projections are not due until June meaning the Fed is more likely to bide its time until then, avoiding the risk of jumping to conclusions. Jerome Powell may simply repeat what he said on the 17th of April concerning recent price pressures, “the recent data have clearly not given us greater confidence and instead indicate that is likely to take longer than expected to achieve that confidence”. USD Tests Key Resistance Level but Markets May be in for Disappointment The US dollar trades higher in the lead up to the FOMC meeting after the boost in employment costs yesterday. However, it is worth noting that each of the three previous Fed meetings ended with a lower dollar, so dollar bulls ought to keep that in mind. DXY tests the yearly high of 106.51, revealing a slight intra-day aversion for the level in the early London session as traders jockey for positioning. The dollar appears to be making an attempt to breakout from the descending channel which emerged after the Israel-Iran de-escalation. In the absence of a change in the wording in the statement to reflect the possibility of a rate hike, I believe the bar to upside momentum remains rather high for now. That being said, a hawkish tone from the Fed may be enough to see marginal gains for bulls after the announcement. A level of interest to the downside emerges at the March 2023 high of 105.88. Stay attentive to data ahead of the meeting, for example, the ADP and JOLTs data as they inform the market’s perceptions of the labour market ahead of NFP on Friday. US Dollar Basket (DXY) Daily Chart Source: TradingView, prepared by Richard Snow US Treasury Yields Rise – 2Y Breaches 5% Yields on the shorter end of the curve, like the 2-year yield, have risen and now trade above the 5% marker. Signs of hotter inflation have led the market to delay their expectations of when a rate cut is likely to emerge and have fully priced in a 25 basis point cut in December. At the end of 2023, markets had priced in between six and seven, while the Fed stands firm on three rate cuts before year end but even this appears optimistic now. US elections in November also complicates the matter further by essentially eliminating a meeting date as the Fed prefer not to move on rates during a presidential election as their was of remaining impartial to politics. US 2-Year Treasury Yield Daily Chart Source: TradingView, prepared by Richard Snow Main Event Risk Today The high importance data points on the radar today include the FOMC announcement and presser but also PMI data after the flash S&P Global version revealed the sharpest decline in service sector employment since 2009 (not including the Covid decline). Therefore, keep an eye on ADP payroll data and the hiring rates outlined in the JOLTs report also due today. https://www.dailyfx.com/news/us-dollar-yields-receive-bullish-boost-ahead-of-fomc-meeting-20240501.html

2024-05-01 01:30

Most Read: S&P 500 Trade Setup: Bearish Reversal in Play ahead of Confluence Resistance The Federal Reserve is poised to unveil its monetary policy decision from the April 30-May 1 gathering on Wednesday, with expectations indicating that the FOMC will maintain borrowing costs within the current range of 5.25% to 5.50% and leave forward guidance unchanged in the statement. With no fireworks anticipated, all eyes will be on Fed Chair Powell's press conference for insights into the policy outlook, particularly given the absence of new economic projections at this meeting. Considering recent economic developments, including faltering progress on disinflation, coupled with tight labor markets, Powell is likely to embrace a more aggressive position. He may convey that policymakers are far from confident enough to commence scaling back policy restraint and advocate for patience in the interim. For context, inflation has surprised to the upside and trended higher in recent months, with core PCE running at 4.4% annualized over the past three months. A shift towards hawkish rhetoric may suggest that the 75 basis points of easing projected for 2024 in the central bank's last dot-plot is no longer valid. This could lead to a delay in commencing the rate-cutting cycle until late 2024 or even 2025 to prevent a resurgence of inflationary pressures. The prospects of higher interest rates for longer, if confirmed by the FOMC chief, should be bullish for U.S. Treasury yields and, by corollary, the U.S. dollar. However, this outcome may hurt gold prices. While rate hikes are no longer the default scenario following a 525 basis points tightening between 2022 and 2023, attention will be on Powell's response to queries regarding this topic during the media Q&A session. Any indication that the Fed might resume hiking or that some officials are considering this possibility would constitute a doubly hawkish outcome, potentially sparking increased volatility and a significant sell-off in risk assets. GOLD PRICE TECHNICAL ANALYSIS Gold (XAU/USD) dropped sharply on Tuesday, breaching a couple key technical floors on the way down and hitting its lowest mark since early April. If losses accelerate in the coming sessions, Fibonacci support awaits at $2,260. Prices may start a bottoming-out process in this area during a retracement, but on a breakdown, we could see a move towards the 50-day simple moving average at $2,225. In the event of a bullish reversal from current levels, resistance levels stand at $2,295, $2,320, and $2,355. Eyes will then be on a short-term descending trendline located at $2,390. While bulls may have a hard time taking out this barrier, the emergence of a breakout could set the stage for a potential rally toward $2,320 in the near future. GOLD PRICE TECHNICAL CHART Gold Price Chart Created Using TradingView S&P 500 TECHNICAL ANALYSIS The S&P 500 suffered a major setback on Tuesday, sinking more than 1.5% after falling short in its attempt to overtake confluence resistance in the 5,165/5,185 range. If the bears maintain control of the market in the near term, we could soon see a move toward the April lows at 4,690. Bulls have to defend this area tooth and nail; otherwise, a deeper pullback towards 4,855 could be on the horizon. Despite the bearish outlook, traders are advised to be cautious and refrain from going against prevailing price action. With that in mind, if the S&P 500 pivots to the upside and finally manages to clear the 5,165/5,185 ceiling convincingly, sentiment could make a turn for the better, allowing prices to head towards the 5,260 area. Continued gains from here onwards would shift attention towards the record. S&P 500 TECHNICAL CHART S&P 500 Chart Created Using TradingView https://www.dailyfx.com/news/fed-preview-powell-could-fire-hawkish-warning-shot-gold-s-p-500-setups-20240501.html

2024-04-30 17:00

Oil (Brent Crude, WTI) Analysis Topside surprise in US employment costs stoke USD and ‘higher for longer’ narrative ahead of FOMC meeting EIA revision sees US oil demand rise in February Brent crude, WTI turn lower with key support levels in sight Get your hands on the Oil Q2 outlook today for exclusive insights into key market catalysts that should be on every trader's radar: Topside Surprise in US Employment Costs Stoke USD and the ‘Higher for Longer’ Narrative Ahead of FOMC The Employment Cost Index rose by more than even the most optimistic of analyst predictions, sending the US dollar higher towards the end of the European session. Compensation costs for civilian workers reported by the US Bureau of Labor Statistics rose in the three-month period ending March 2024 by 1.2%, up from 0.9% for the three months ending in December 2023. The data appears in a week full of jobs data before non-farm payrolls takes center stage on Friday. Source: BLS The increase in labour costs exacerbate concerns around a reacceleration in price pressures in the US after CPI and PCE measures of inflation revealed hot month-on-month figures. The FOMC is due to release its statement tomorrow evening where is widely anticipated that further acknowledgement of the stubborn prices will emerge. Markets propped up the greenback on the even of the FOMC announcement. In addition, the Energy Information Agency (EIA) revised total US oil consumption in February to 19.95m barrels per day (bpd), up 425,000 bpd from estimates based on weekly data. This has done little to counter the daily decline at the time of writing. Brent Crude, WIT Turn Lower with Key Support Levels in Sight Brent prices dropped notably on Tuesday afternoon in the European session sometime after the dollar pushed higher. Brent Crude 5-Minute Chart Source: TradingView, prepared by Richard Snow Brent has pulled back in the days following the de-escalation between Israel and Iran, building some momentum to the downside. However, a tight oil market may prevent prices from dropping too fast. The immediate consideration for bears is the 50-day simple moving average (SMA), followed closely by the psychological $85 level, the 200 SMA and channel support. In the event the confluence zone of support holds, $89 remains as the most significant level of resistance. Markets will be closely watching the Fed and Jerome Powell at the press conference. Recent moderation in US growth stepped up a gear in Q1 as the economy grew less than anticipated – which runs the risk of filtering into the oil market. However, inflation is the Fed’s more immediate target, meaning the Fed won’t ease policy just because growth trends lower. Brent Crude Oil Daily Chart Source: TradingView, prepared by Richard Snow There are many fundamental factors to keep in mind whenever trading oil, like demand and supply, geopolitical tensions and the state of the global economy. Read the comprehensive oil trading guide below: WTI trades in a similar fashion to Brent, testing the 50 SMA ahead of the $79.77 level which coincides with he 200 SMA. The next level of support emerges at the general area around $77.40 and channel support. WTI continues to trade within the broader ascending channel after the breakout attempt in early April. WTI Oil Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/oil-prices-drop-after-us-employment-data-lifts-usd-fomc-next-20240430.html

2024-04-30 13:30

British Pound: GBP/USD Analysis and Charts GBP/USD gains have halted close to its 200-day moving average This may be merely a pause for breath What the Fed has to say will now be key The Pound seems to have stalled close to one-month highs against the United States Dollar on Tuesday, with the cable market like all others now fixed on the Federal Reserve’s May monetary policy call. That’s coming up on Wednesday and the wait for it will probably sap European market appetite. The US central bank is not tipped to alter interest rates, but its commentary will be combed through to see whether the markets’ view of when it will cut them remains tenable. The US economy has proven much more resilient than seemed possible at the start of this year. Consequently, the first interest rate reduction is now not expected until the end of the third quarter, and even that expectation is tentative. The Bank of England meanwhile is thought likely to start trimming its own key borrowing costs in August, with the European Central Bank expected to move two months before that. Of course, all these views remain heavily data-dependent, with inflation heading lower but still above target across most developed economies. For its part, the BoE has said that inflation appears to be heading in the right direction but that significant uncertainties remain. GBP/USD has risen steadily this month, buoyed up by a modest increase in risk appetite and London stock markets’ full participation in strong gains for equity. However the pair remains within a broader downtrend from the peaks of March, which makes sense given those interest rate forecasts. For as long as they make sense, it’s hard to see durable gains for Sterling. GBP/USD Technical Analysis GBP/USD Daily Chart Compiled Using Trading View Bulls appear to be running out of steam close to the 200-day moving average, which now comes in at 1.25563, but at this stage, it’s hard to say whether this is a genuine topping out or merely (and more probably) a little caution ahead of the Fed. Durable gains above this would put the current downtrend channel top very much in play. A break above that would be significant as it has dominated trade since March. It now offers resistance at 1.25791. Reversals will concentrate initially on retracement support at 1.24947, and bulls will strive to keep the market above 1.2300 psychological support, as it defends this month’s six month low, posted on April 23. Given current fundamentals the most likely near-term path for GBP/USD is to remain within its downtrend band with occasional tests of its topside. Gains above that level should probably be treated with skepticism unless they come with solid fundamental news, underlining the need to combine both technical and fundamental elements. --By David Cottle for DailyFX https://www.dailyfx.com/news/british-pound-down-but-paring-losses-vs-dollar-as-market-looks-to-fed-20240430.html

2024-04-30 10:13

Euro (EUR/USD, EUR/GBP) Analysis EU inflation steadies and growth may have turned the corner EUR/USD recovers after EU GDP and inflation data EUR/GBP attempts to halt the decline Get your hands on the Euro Q2 outlook today for exclusive insights into key market catalysts that should be on every trader's radar: EU Inflation Steadies and Growth May have Turned the Corner Euro area annual inflation is expected to be 2.4% in April 2024, stable when compared to March according to a flash estimate from Eurostat. While services inflation is expected to cool a tad compared to March, energy prices declined by less then before - somewhat offsetting the price declines seen elsewhere. Breaking down the main components of euro area inflation, services is expected to have the highest annual rate in April (3.7%, compared with 4.0% in March), followed by food, alcohol & tobacco (2.8%, compared with 2.6% in March). Then, non-energy industrial goods (0.9%, compared with 1.1% in March) and energy (-0.6%, compared with -1.8% in March). Additionally, EU GDP rose 0.3% in the first quarter which is promising seeing that all of 2023 oscillated around 0.1% and -0.1%. Year on year growth also surprised to the upside at 0.4% compared to the expectation of a minor 0.2% expansion. EUR/USD Recovers after EU GDP and Inflation Data EUR/USD dropped in the moments after Germany’s economy avoided a technical recession. Q1 grew by 0.2% after Q4 last year registered a contraction of 0.3%. However, the single currency recovered after the broader EU growth and inflation numbers revealed a slight cool down in services inflation and an uptick in growth. EU sentiment and confidence indicators have improved in the lead up to the ECB’s first rate cut which is expected to arrive in June. EUR/USD trades within an ascending channel, which developed during the current risk on sentiment that has emerged since tensions between Israel and Iran died down. Positive US earnings, for the most part, have also helped buoy sentiment in riskier FX currencies with AUD, EUR and GBP managing to claw back prior losses against the greenback. EUR/USD appears to have tested the psychological level of 1.0700 on an intra-day level, with channel resistance in focus for bulls around 1.0765 and potentially the confluence zone above 1.0795 where the 50 and 200-day simple moving averages reside. EUR/USD Daily Chart Source: TradingView, prepared by Richard Snow EUR/GBP Attempts to Halt the Decline EUR/GBP has produced a massive reversal since rising out of the prior horizontal channel which has encased the majority of price action in 2024. The move found resistance at the 0.8635 level, turning sharply lower since. The Bank of England is expecting inflation to drop sharply into the middle of the year but sterling still boasts a superior interest rate differential to the euro, meaning the bullish EUR/GBP move was always at risk of a pullback/reversal. After trading below 0.8560, the pair appears supported after the positive data dump this morning and heads back towards 0.8560. EUR/GBP Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/surprise-german-eu-growth-buoys-the-euro-as-inflation-moderates-20240430.html

2024-04-30 07:58

Risk Sentiment: VIX, Gold, and US Dollar Analysis and Charts The VIX has slumped by nearly 32% in the last seven sessions. US Dollar remains ahead of the FOMC decision and NFP report. Gold slipping lower as negative technical pattern begins to play out. Most Read: Markets Week Ahead, FOMC, Apple, Amazon, USD/JPY, Gold and USD Outlooks Risk markets are looking to push ahead in early turnover after a marginally positive session in the US and Asia. The VIX is touching a near three-week low and has fallen by nearly a third from the Friday 19th multi-month high. The Israel-Iran crisis is, for now, not dominating market headlines or thinking, boosting risk assets, while gold continues to nudge lower. Ahead, the latest FOMC decision and chair Powell’s press conference, and Friday’s US Jobs Report (NFPs) are likely to stoke volatility and may turn risk sentiment around. Still, for now risk markets are happy to nudge higher. In the equity space, Amazon (AMZN) releases its latest quarterly results after the US market close today. Recent Mag 7 earnings have produced wild, and unpredictable price swings and Amazon’s numbers must be followed closely. What is the VIX? A Guide to the S&P Volatility Index VIX Daily Price Chart Keep informed of all earnings releases with the DailyFX Earnings Calendar The US dollar daily chart continues to build a bullish flag formation with additional support seen from the 20-day simple moving average. The FOMC decision (Wednesday) and NFP data (Friday) are key for the US dollar this week. US Dollar Index Daily Chart Gold is slipping and looking to break lower as a short-term bearish flag formation unfolds. The 20-day sma is now acting as resistance and continued weakness will see $2,280/oz. come under pressure. Learn how to trade gold like an expert with our complimentary guide: Gold Daily Price Chart All charts using TradingView IG Retail Sentiment 53.82% of traders are net-long with the ratio of traders long to short at 1.17 to 1.The number of traders net-long is 3.75% higher than yesterday and 6.05% higher from last week, while the number of traders net-short is 3.79% higher than yesterday and 6.58% higher from 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. Are you risk-on or risk-off ?? 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/risk-sentiment-positive-vix-and-gold-move-lower-us-dollar-firms-amazon-s-results-near-20240430.html