Tue, Jun 18, 2024

EURUSD Analysis

EURUSD is moving in the Descending channel and the market has reached the lower high area of the channel.

FED This week, Powell will deliver his semi-annual monetary policy report before the Senate Banking Committee. The target rate was 5.5% by the end of 2023, but there are still 75 basis points available.

Some FED members stated that a pause in rate hikes is possible this summer, while others stated that there is no possibility of a pause this summer. Companies paid a premium for a small number of employees due to a scarcity of available labour.

This week, any significant increase in Non-Farm Payrolls could be beneficial for the US Dollar.

On the one hand, the tightening labour market indicates that the U.S. economy is strengthening, while on the other hand, the declining inflation rate indicates that economic growth is slowing.

The DXY Dollar Index declined 0.7% last week, indicating that the US Dollar aimed marginally lower. The greatest week for the S&P 500 since January (+1.9%) indicated that sentiment was the primary driver of financial markets. This diminished demand for safe-haven assets, such as the US dollar. Traders may be getting ahead of themselves in this optimistic atmosphere. Investors appeared focused on the remarks of Atlanta Fed President Raphael Bostic. He stated that the central bank could possibly halt rate hikes this summer. Thomas Barkin, president of the Richmond Fed, noted that he does not see a case for pausing rate increases “at this time.” Given these comments, it is not remarkable that markets appear to be focusing more on the dovish side of things.

Recent inflation data (including CPI and the Fed’s preferred PCE gauge) indicated that deflation was moderating. This was further supported by ISM prices paid data from the previous week, which unexpectedly increased. In other terms, inflation’s deceleration is slowing. This is not exactly what the central bank wishes to see, especially with the labour market remaining tight. Regarding this, all eyes will be on this week’s nonfarm payrolls report. The data is scheduled to be transmitted at 13:30 GMT on Friday. The nation is expected to add 215k jobs in February, while the unemployment rate remains unchanged at 3.4%. Importantly, the labour force participation rate is anticipated to remain at 62.4%. This indicates that the active labour force has not yet returned to pre-pandemic levels.

In general, the lack of labour supply has resulted in higher wages as firms compete for a smaller proportion of potential employees. The Citi Economic Surprise Index for the United States remains positive and is near its greatest level since April 2022. This indicates that economists have underestimated data outcomes in general. This opens the door for a positive employment report surprise. Such a result would presumably dash summertime hopes for a pause in tightening. According to the graph below, markets currently anticipate a federal funds rate of 5.5% by the end of the year. Compared to estimates made at the end of January, this is an increase of two. As a result, additional dovish disappointment paves the way for a firmer US Dollar.

GOLD Analysis

XAUUSD Gold price is moving in an Ascending channel and the market has reached the higher low area of the channel

XAUUSD Gold price is moving in an Ascending channel and the market has reached the higher low area of the channel.

As US Treasury rates rose last week, gold prices continued to rise. Gold and other non-yielding investments depreciate when interest rates are rising. In light of this, the future course of Gold will be determined by the FED Powell statement and non-farm payrolls. China is the world’s top user of gold, according to the vice-chair of the NDRC of China. China’s economy is doing better and growing, which makes people happy to buy gold.

SILVER Analysis

XAGUSD Silver Price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

XAGUSD Silver Price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

As traders prepare for the important data and events that will take place in Europe early on Monday, the gold price  stays largely illiquid at $1,855. The conflicting news coming out of China and the US Dollar’s inaction despite a decline in Treasury bond rates may add filters to the XAU/USD movements. According to Reuters, China’s National Development and Reform Commission (NDRC) recently declared that it “Will further unleash the potential for consumption” and noted that China’s economy is gradually improving. Market sentiment earlier in the day soured as a result of China’s National People’s Congress (NPC) annual session appearing to be a gloomy occasion due to its development goal and geopolitical worries. Mary Daly, president of the San Francisco Federal Reserve Bank, emphasised elsewhere the significance of incoming statistics in determining how high rates may rise. Raphael Bostic, president of the Atlanta Federal Reserve, previously expressed new concerns about the Federal Reserve’s policy reversal, and on Friday, the Federal Reserve published its semi-annual Monetary Policy Report, which stated unequivocally that “continuous increases in the Fed funds rate target are necessary.” The Fed is steadfastly dedicated to bringing inflation back to 2%, according to the report.

It should be mentioned that US 10-year Treasury bond yields increased in the past week to their highest levels since November 2022 before declining to 3.95% by Friday night, moving as high as the same level at the latest. More significantly, US two-year bond coupons increased to their greatest levels since 2008 before falling to 4.85% by the time of publication. However, despite a moderately slow start to the crucial week, the S&P 500 Futures print modest gains, following Wall Street’s movements, while the US Dollar Index (DXY) remains weak at 104.45, down 0.05% intraday as of press time. As traders remain cautious ahead of important events like Fed Chair Jerome Powell’s testimony, China’s inflation data, and Friday’s US employment report for February, gold traders may experience more market inaction in the coming days.

USDCHF Analysis

USDCHF is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern

USDCHF is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern.

The expected Swiss inflation rate for February is 2.9% YoY, down from this week’s prior readings of 3.3%. The USDCHF pairs are consolidating as they await this week’s Swiss Franc statistics.

As it tussles with the 50-SMA resistance in the early hours of Monday, USD/CHF battles to hold onto the corrective bounce from 0.9360. As a result, the Swiss currency pair conveys a cautious attitude ahead of the Consumer Price Index (CPI) data from Switzerland for February, which are anticipated to show a 2.9% YoY decrease from 3.3% prior readings. In addition to the pre-data caution, the USD/CHF buyers are challenged by the bearish MACD signals and a one-week-old horizontal barrier near 0.9430.

After that, the rally aiming for a late November 2022 swing high of close to the 0.9600 barrier can be validated by the monthly high around 0.9440. On the other hand, the USD/CHF pair’s immediate downtrend is constrained by the 23.6% Fibonacci retracement of the pair’s February month upside, which is located near 0.9350.

An upward-sloping support line from early February and the 100-DMA, which are located near 0.9340 and 0.9300, respectively, may serve as the last line of defence for the USD/CHF buyers even if the quote stays weak past 0.9350. If the pair trades lower than 0.9300, the 0.9135 and 0.9060 lows from February 2023 will come into focus. Overall, unless the quote successfully maintains above 0.9430, USD/CHF is likely to stay on the bear’s radar.

GBPUSD Analysis

GBPUSD is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern

GBPUSD is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern.

This week, the UK GDP is scheduled to be released, and if the data is positive, the GBP will appreciate. If the data is negative, however, the GBP will retrace its gains.

The Bank of England’s monetary policy meeting is scheduled for the following week, and the fact that last week’s PMI numbers were stronger than anticipated was positive for the British pound.

The likelihood that the UK’s Gross Domestic Product (GDP) will decline below zero can induce fears of a recession in the country.

GBPAUD Analysis

GBPAUD is moving in an Ascending channel and the market has reached the higher high area of the channel

GBPAUD is moving in an Ascending channel and the market has reached the higher high area of the channel.

Tomorrow’s RBA interest rate decision meeting has a 75% probability of a 25 basis point rate increase. Australia’s trade surplus is A$14.1 billion, compared to A$5.5 billion expected and AUD 0.8 billion from AUD 2.3 billion previously. January retail sales were as high as 1.9%, compared to the expected 1.5%, and fourth-quarter GDP was low at 0.50%, compared to the predicted 0.80%.

Since the Covid-19 period, the RBA has increased interest rates nine times in response to the current inflation rate of 7.8% (the target is 2-4%). If this occurs, it will mark the tenth consecutive rate increase by the RBA.

GBPJPY Analysis

GBPJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

GBPJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

Monetary policy for the Bank of Japan is planned for this coming Friday; however, the incoming governor, Kazuo Ueda, has already stated that he will not be raising interest rates, and that he will instead continue in the same policy vein as his predecessor, Haruhiko Kuroda.

This means that the YCC bandwidth, which was raised in December 2020 from +/-0.25% to +/-0.50%, will be readjusted in the third or fourth quarter of that year.

The easing of Treasury yields has given the Japanese Yen some support, and they may hold the key for USD/JPY in the coming week. Crucially, when he presents his semi-annual Monetary Policy Report on Tuesday and Wednesday, US time, Federal Reserve Bank Chair Jerome Powell will be speaking before the Senate Banking Committee. His remarks will be closely scrutinised for hints about his future thoughts regarding the Fed funds target rate. Any indication that the bank is reversing its hawkish attitude could spark the market and lead to a further lowering of Treasury yields. Of course, yields could rise if the tightening path is kept and perhaps even emphasised more.

CADJPY Analysis

CADJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

CADJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

At least a 25 basis point tightening is anticipated at the Federal Open Market Committee (FOMC) sessions in March, May, and June, according to the futures and swaps markets. The Bank of Japan (BoJ) will announce its monetary policy decision this week on Friday, though the market does not anticipate any adjustments. The BoJ targets a range of +/- 0.50% around zero for Japanese Government Bonds (JGBs) out to 10 years and has a policy rate of -0.10%. This is how the BoJ maintains yield curve control (YCC). The 10-year JGB has been trading consistently close to its upper limit of 0.50%. Kazuo Ueda, the new governor of the Bank of Japan (BoJ), stated last week that he would take the same position as departing Governor Haruhiko Kuroda.

At least for the time being. According to increasing rumours, the policy may be changed in the second or third quarter in a similar manner to how the YCC band was expanded from +/- 0.25% to +/- 0.50% in December. Therefore, with the BoJ’s policy on hold, the Fed’s active attitude may continue to influence the USD/JPY for the time being. In addition to Powell’s statement and the BoJ meeting, this week’s release of US jobs data and Japanese GDP figures could cause market volatility.

EURNZD Analysis

EURNZD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

EURNZD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

Policymaker Centeno of the ECB stated that a rate increase is conceivable at the March meeting; he believes that interest rates are rising too quickly. Too rapid an increase in interest rates is detrimental to the economy, so we must increase rates monthly based on inflation data.

ECB should not reach a decision as quickly as feasible. In March, we see reduced inflation readings.

When asked about a potential 50 basis point (bps) rate hike in March, Centeno of the European Central Bank (ECB) stated that the decision must be based on data. Adding that “interest rates have increased too quickly.

The ECB should not hurry to conclusions. The March inflation forecasts should be heeded.

CADCHF Analysis

CADCHF is moving in the Box pattern and the market has reached the horizontal support area of the pattern

CADCHF is moving in the Box pattern and the market has reached the horizontal support area of the pattern.

This week’s Bank of Canada monetary policy conference is scheduled, and the lack of any policy adjustments and an increase in interest rates caused the CAD to decline. If a rate increase is possible, however, the CAD will be stronger relative to its counterparts.

FED and the Bank of Canada If interest rates are not raised this week, policy rates could differ even more.

As the market awaits the BoC interest rate decision and Fed Chair Powell’s testimony, the Federal Reserve and Bank of Canada (BoC) are this week’s major event risks. With interest rate forecasts continuing to drive volatility, the Bank of Canada is expected to pause its policy rate hikes, while the Federal Reserve is anticipated to increase rates by an additional 25 basis points. Given the widening interest rate differentials between the two currencies, any changes to the narrative or the repricing of new information may affect price action.


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