2024-03-21 00:00

FORECAST - GOLD, EUR/USD, NASDAQ 100 The Fed held borrowing costs unchanged and continued to indicate it would deliver three rate cuts this year The dovish policy outlook weighed on the U.S. dollar and yields, boosting gold prices and the Nasdaq 100 This article examines the technical outlook for XAU/USD, EUR/USD and the NDX Most Read: Fed Holds Rates Steady, 2024 Policy Outlook Unchanged – What Now? U.S. stocks and gold prices rallied while the U.S. dollar skidded lower on Wednesday after the Federal Reserve stuck to the script and largely maintained the same policy outlook embraced three months ago in the previous Summary of Economic Projections, shrugging off firming price pressures in the economy. For context, the FOMC kept borrowing costs at their current levels at its March gathering, reaffirming its intention to implement 75 basis points of easing in 2024. Wall Street, fearing a hawkish outcome in the face of growing inflation risks, breathed a sigh of relief at the institution’s restrained response. While there were some hawkish elements in the Fed’s guidance, such as the upward revision to the long-run equilibrium rate, traders chose to focus on the near-term future and the fact that the easing cycle is inching closer and looming on the horizon. With all that said, the main takeaway from the FOMC meeting was this: nothing has really changed for the central bank; plans to cut rates this year remain on track and the process to slow the pace of quantitative tightening is rapidly approaching, with Powell saying tapering could start “fairly soon”. Taking into account today’s developments, bond yields will struggle to move much higher in the near term, especially if incoming economic data starts cooperating with policymakers. This could prevent the U.S. dollar from extending its rebound in the coming days and weeks. Meanwhile, risk assets and precious metals such as gold and silver could be better positioned to maintain upward momentum heading into the second quarter. This could potentially mean fresh all-time highs for both gold and the Nasdaq 100. Eager to gain insights into gold's future path? Discover the answers in our complimentary quarterly trading guide. Request a copy now! GOLD PRICE FORECAST - TECHNICAL ANALYSIS Gold surged on Wednesday, breaking past its previous record and notching a new all-time high above $2,220. With bulls seemingly in control of the market, a potential move towards trendline resistance at $2,225 is conceivable. On further strength, a rally above $2,250 cannot be ruled out. Conversely, if sellers stage a comeback and pullback, support looms at $2,195, the swing high from early March. Below this level, attention will turn to $2,150, followed by $2,090. Bulls must vigorously defend this technical floor; failure to do so will expose the 50-day simple moving average at $2,065. GOLD PRICE TECHNICAL CHART Gold Price Chart Created Using TradingView If you're looking for an in-depth analysis of U.S. equity indices, our first-quarter stock market trading forecast is packed with great fundamental and technical insights. Get it now! NASDAQ 100 FORECAST - TECHNICAL ANALYSIS The Nasdaq 100 climbed sharply on Wednesday in response to the Fed’s dovish outlook, coming within striking distance from retesting its all-time high near 18,690. Traders should closely monitor this technical ceiling as a breakout could pave the way for a rally toward trendline resistance at 19,175. On the flip side, if market sentiment shifts back in favor of sellers and prices begin to correct lower, initial support will emerge at 18,150. Below this threshold, the spotlight will be on 17,805, a key level that currently coincides with the 50-day simple moving average. NASDAQ 100 CHART – TECHNICAL ANALYSIS Nasdaq 100 Chart Created Using TradingView EUR/USD FORECAST - TECHNICAL ANALYSIS EUR/USD jumped on Wednesday, with bulls seemingly determined to challenge trendline resistance at 1.0950 after the FOMC announcement. In the event of a retest, sellers will need to fend off the advance; otherwise, there will be minimal obstacles to a rally towards 1.0970, a key Fibonacci level. Alternatively, if upside pressure begins to fade and sellers spark a bearish reversal, support can be identified at 1.0890, followed by 1.0850, where an ascending trendline converges with the 50-day and 100-day moving averages. EUR/USD PRICE ACTION CHART EUR/USD Chart Created Using TradingView https://www.dailyfx.com/news/forex-fed-sticks-to-dovish-policy-roadmap-setups-on-gold-eur-usd-nasdaq-100-20240321.html

2024-03-20 18:20

FOMC DECISION – MARCH MEETING The Federal Reserve leaves interest rates unchanged at the end of its March meeting, in line with expectations The 2024 policy outlook remains the same, with the Fed still signaling 75 basis points of easing for the year Gold prices head higher as the U.S. dollar and yields take a turn to the downside Most Read: UK Inflation Falls to a Two-Year Low, GBP/USD Stable for Now The Federal Reserve on Wednesday left its benchmark interest rate unchanged at its current range of 5.25% to 5.50% after concluding its March policy gathering, keeping borrowing costs on hold for the fifth consecutive meeting, in line with consensus estimates. In addition, policymakers made no adjustments to their ongoing quantitative tightening program, just as expected. Focusing on the statement, the Fed maintained an upbeat view of the economy, noting that macroeconomic indicators suggest activity has been expanding at a solid pace and that the unemployment rate remains low. Turning to consumer prices, the central bank reiterated that inflation has eased over the past year, but persists at elevated levels. In terms of forward guidance, the FOMC restated that it does not expect it will be appropriate to remove policy restrain until it has gained greater confidence that inflation is converging sustainably toward the 2.0% target. This message, echoing January's communication, suggests officials are seeking additional reassurance on disinflation before pivoting to a looser stance. FED SUMMARY OF ECONOMIC PROJECTIONS GDP, UNEMPLOYMENT RATE AND CORE PCE The March Summary of Economic Projections revealed important revisions compared to the quarterly estimates submitted in December of last year. First off, GDP growth projections for 2024 were upgraded to 2.1% from 1.4% previously, pointing to increased confidence in the economy's resilience and its capacity to steer clear of a recession. Turning to the labor market, the outlook for the unemployment rate for this marked down to 4.0% from 4.1%, suggesting the Fed doesn't anticipate widespread layoffs over the medium term. On the inflation front, the Fed revised upwards its 2024 forecast for the core PCE deflator to 2.6% from the previous 2.4%, a sign that price pressures are expected to remain sticky for an extended period. FED DOT PLOT The dot plot, outlining Federal Reserve officials' expectations for the trajectory of interest rates over several years and the long run experienced notable changes compared to the previous version presented three months ago. Back in December, the Fed projected borrowing costs to end 2024 at 4.6%, suggesting three quarter-point rate cuts for a total easing of 75 basis points. Today's iteration shows the same outlook, indicating policymakers may not be overly worried about firming inflationary pressures just yet. Looking ahead to 2025, officials see rates falling to 3.9%, slightly above the previously forecasted 3.6%. In addition, the central bank raised its projection for the long-run federal funds rate from 2.5% to 2.6%, perhaps reflecting structural shifts in productivity or enduring price pressures. This adjustment is slightly hawkish, but markets appear more concerned about the near-term outlook for now. The following table provides a summary of the Federal Reserve's updated macroeconomic projections. MARKET REACTION AND IMPLICATIONS Shortly after the Fed's decision was announced, gold prices pushed higher, propelled by the pullback in the U.S. dollar and yields. The indication that the Fed is still intent on delivering three quarter-point rate cuts this year is having a bearish effect on the greenback at the time of writing. For a clearer understanding of the Fed's monetary policy outlook, however, traders should attentively monitor Chairman Powell's press conference. In any case, today’s reaction could still reverse given the upside revision to the long-term equilibrium rate. US DOLLAR, YIELDS AND GOLD PRICES CHART Source: TradingView https://www.dailyfx.com/news/fed-on-hold-2024-policy-outlook-unchanged-gold-us-dollar-on-the-move-20240320.html

2024-03-20 14:08

USD/JPY, Fed Analysis Yen looking vulnerable ahead of FOMC and all-important dot plot USDJPY builds on positive momentum – Yen sinks post-BoJ selloff The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library Yen Looking Vulnerable Ahead of FOMC and All-Important Dot Plot The yen continued to weaken against the dollar in the London AM session ahead of the crucial FOMC decision this evening. While there is no realistic expectation of a change in the Fed funds rate, market participants are eagerly awaiting the Fed’s ‘dot plot’ which maps out individual views on the likely path of interest rates in 2024, 2025, 2026 and in the ‘long-run’. Stubborn US inflation has revealed its head in some form or another since December last year, forcing markets to factor in the potential for just two cuts this year (50 bps) and reinforce the need to keep rates elevated for longer. A relatively robust economy and a tight labour market add to the reasons why financial conditions may not be as tight as initially thought. Fed Dot Plot from December 2023 Source: US Federal Reserve, Refinitiv Workspace Apart from the Fed’s dot plot, markets will be looking for clues on the timing of the first rate cut, as expectations are shifting from June towards July – something that is likely to support the greenback and weigh on the yen. In the early hours of Tuesday morning, USD/JPY Builds on Positive Momentum - Yen Sinks Post-BoJ Selloff The yen has really struggled in the lead up to the BoJ rate hike on Tuesday after the Bank issued a very accommodative statement to support a historic decision to exit negative interest rates. Hiking interest rates normally provides some form of support for the local currency but when you consider the vast interest rate differential between the yen and most other major currencies, there is still a long way to go to reverse the carry trade. Constructed, Equal-Weighted Japanese Yen Index (USD/JPY, GBP/JPY, EUR/JPY, AUD/JPY) Source: TradingView, prepared by Richard Snow The daily USD/JPY chart shows the bullish acceleration from yesterday which has continued into today. Smashing past 150.00 with ease, the pair is currently testing the November swing high of 151.90 but fast approaching oversold territory via the RSI – meaning the move may soon look to pullback slightly before making a push towards levels not seen in 34-years. The 150 marker has now turned into support and could come back into play if the dot plot remains unchanged for 2024 (three rate cuts) but any dollar softness is likely to be short-lived given the fact the economy remains robust and signs of stubborn inflation are yet to disappear. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow USD/JPY is one of the more liquid FX pairs and often allows traders a way to speculate on interest rates via the carry trade phenomenon. Learn more here: The weekly chart shows the broader, longer-term ascending channel which continues making higher highs and higher lows. The chart also highlights that such elevated levels have attracted attention from the Japanese Finance Ministry – although the main point of concern had been undesirable volatility at the time. The recent volatility is likely to warrant similar dissatisfaction meaning FX intervention threats to strengthen the yen may enter the fray once more. USD/JPY Weekly Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/usd-jpy-selloff-continues-ahead-of-the-fomc-meeting-20240320.html

2024-03-20 08:39

GBP/USD Price, Analysis, and Charts UK CPI fell to 3.4%, beating expectations. Fed rate decision, new dot plot, and press conference now key Most Read: British Pound Wilts as Markets Await Both Fed and BoE According to the latest Office for National Statistics data, UK inflation fell faster than expected in February, pushed lower by falling food prices. Headline inflation fell to 3.4%, down from 4% in January and marginally lower than market forecasts of 3.5%, while core inflation fell to 4.5%, down from 5.1% and a fraction below market estimates of 4.6%. Good news for the Bank of England as it continues to bring price pressures down to 2%. The Bank of England is fully expected to leave interest rates untouched tomorrow at its latest MPC meeting, although today’s data will encourage the more dovish BoE members to press harder for a rate cut. Financial markets are fully pricing in the first move in the UK Bank Rate at the August meeting, although the probabilities of a cut at the June meeting have risen slightly post-inflation data to around 50%. Later today – 18:00 UK – the Federal Reserve will announce their latest monetary policy decision with the US central bank fully expected to leave all policy settings untouched. Chair Powell will also announce the latest dot plot, a visualization of Fed members' thoughts on future interest rate levels. The current FOMC projections are centered around 4.625%, suggesting three 25 basis points this year. The new dot plot and Chair Powell’s commentary will be key for the US dollar going forward. GBP/USD has drifted marginally lower post-data but remains in thrall of today’s Fed decision. Cable is clinging on to the 1.2700 level at the moment but any US dollar strength could see GBP/USD test 1.2667 ahead of this evening’s announcement. Currently 1.2742 acts as first resistance. GBP/USD Daily Price Chart IG Retail data shows 52.58% of traders are net-long with the ratio of traders long to short at 1.11 to 1.The number of traders net-long is 1.55% lower than yesterday and 22.23% higher than last week, while the number of traders net-short is 3.04% higher than yesterday and 21.02% lower than last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. See How IG Client Sentiment Can Help Your Trading Decisions What is your view on the British Pound and the FTSE 100 – 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/uk-inflation-falls-to-a-two-year-low-gbp-usd-stable-all-eyes-on-the-fed-20240320.html

2024-03-19 23:00

Most Read: Japanese Yen Outlook & Market Sentiment: USD/JPY, EUR/JPY, GBP/JPY The Federal Reserve will release its March monetary policy announcement on Wednesday. Consensus estimates overwhelmingly suggest that the institution led by Jerome Powell will hold its benchmark rate unchanged at its current 5.25% to 5.50% range, effectively maintaining the status quo for the fifth consecutive meeting. Moreover, analysts widely anticipate that the central bank will keep its quantitative tightening program intact for now, continuing to reduce its bond holdings gradually. While the decision on interest rates themselves may not deliver dramatic surprises, markets will be laser-focused on the forward guidance. With that in mind, the FOMC may repeat that it does not expect it will be appropriate to reduce borrowing costs until it has gained greater confidence that inflation is converging sustainably toward 2 percent – a move that would indicate more evidence on disinflation is needed before pulling the trigger. Current FOMC meeting probabilities are shown below. Source: CME Group In terms of macroeconomic projections, the Fed is likely to mark up its gross domestic product and core PCE deflator forecasts for the year, reflecting economic resilience and sticky price pressures evidenced by the last two CPI and PPI reports. The revised outlook could compel policymakers to signal less monetary policy easing over the medium term, potentially scaling back the three rate cuts initially envisioned for 2024 to only two (this information will be available in the dot plot). The following table shows projections from the December FOMC meeting. For a complete overview of the U.S. dollar’s technical and fundamental outlook, grab a copy of our free quarterly forecast! Source: Federal Reserve If the Federal Reserve signals a greater inclination to exercise patience before removing policy restraint and shows less willingness to deliver multiple rate cuts, we could see U.S. Treasury yields and the U.S. dollar charge upwards in the near term, extending their recent rebound. Meanwhile, stocks and gold, which have rallied strongly recently on the assumption that the central bank was on the cusp of pivoting to a looser stance, could be in for a rude awakening (bearish correction). https://www.dailyfx.com/news/forex-fed-seen-holding-rates-steady-policy-outlook-to-drive-markets-us-dollar-20240319.html

2024-03-19 19:11

Canadian CPI, USD/CAD Analysis Canadian inflation slows more than expected in February – raising USD/CAD Markets bring a potential BoC cut closer while delaying the onset of Fed cuts USD/CAD’s bullish response tapered off but pair heads for channel resistance The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library Canadian inflation slows more than expected in February – raising USD/CAD Canadian inflation, both core and headline measures, came in lower than last month’s figures while CPI came in well below the 3.1% estimate, at 2.8%. The core measure eased to lows not seen in more than two years – adding pressure to the Bank of Canada to start contemplating when it may be appropriate to loosen financial conditions. The graph below depicts the inflation rate for selected major economies, showing Canada (red line) as one of the standouts, particularly when compared with countries that witnessed inflation of 8% plus. Annual Percentage Change in Inflation (CPI) Source: Refinitiv Workspace, prepared by Richard Snow USD/CAD’s Bullish Response Tapered off but Pair Heads for Channel Resistance USD/CAD continued the bullish move in the moments following the softer inflation data but as the Ney York session continued, lost a bit of steam. The current bullish move stemmed from a test and bounce of channel support at 1.3420, breaking above the 200-day simple moving average (SMA) and 1.3500 in the process. 1.3500 posed as support as far back as October 2022 and has reappeared to provide either support or resistance thereafter. The current directional move has its sights set on a test of channel resistance which is likely to coincide with the 61.8% Fibonacci retracement of the major 2020 to 2022 move (1.3651). However, the massive upper wick developing today, could signal that bulls may need to regroup before another push higher. Canada has been one of the standouts when it comes to bringing inflation back at a reasonable level and currently falls within the 1-3% band typically targeted by the Bank. USD/CAD Daily Chart Source: TradingView, prepared by Richard Snow Implied probabilities via rates markets suggests that the Bank of Canada may have to gear up for a first rate cut in June as markets assign roughly 62% chance of a cut at the mid-year mark. Cad may continue to come under pressure as persistently lower inflation provides a strong reason to consider easing monetary policy in an effort to restrain the economy less. On the other hand, markets are pushing back estimates of when the Fed may cut interest rates from June to July. Delaying monetary easing in this fashion naturally support the dollar as the greenback is likely to enjoy a superior interest rate differential compared to most G7 currencies, for a little while longer. Source: Refinitiv https://www.dailyfx.com/news/lower-canadian-cpi-brings-rate-cuts-closer-while-fed-cuts-appear-delayed-20240319.html