Daily Market Report

[FOREX.com]

USD/JPY: Toppy US bond yields, BOJ intervention threat mean the game has changed. May 3, 2024​

By : David Scutt, Market Analyst

• USD/JPY upside may be difficult from here
• The threat of BOJ intervention cannot be ignored
• US bond yields look at or near their peak for the current cycle
• Non-farm payrolls, ISM services PMI likely to generate wild swings in USD/JPY on Friday

The suspected intervention from the Bank of Japan (BOJ) this week has changed the game for USD/JPY, placing a rather large barrier in the way of further upside at a time when US bond yields are looking toppy. As such, the modus operandi of buying dips may need to be put on ice, replaced by a foreign concept for many traders: selling rallies.

Yield differentials still driving USD/JPY moves​

It’s no secret yield differentials play a significant role in determining the Japanese yen’s valuation, encouraging and discouraging capital flows in and out of Japan as spreads widen and contract. With the BOJ expected to increase overnight interest rates by around another 10 basis points this year, limiting movement in bond yields further out the curve, it’s meant the interest rate outlook outside of Japan continues to drive yield spreads,

The gap between US and Japanese bond yields has been no exception with the Fed’s rapid rate increases of 2022 and 2023 seeing spreads across multiple tenors blow out to multi-decade highs, helping to drive USD/JPY to levels not seen since the early 1990s.

Source: Refinitiv

USD/JPY correlation with US yields strengthening​

If the chart above wasn’t convincing enough to show how influential US bond yields have been on USD/JPY recently, the chart below will, showing that over the past quarter the rolling daily correlation between USD/JPY with US two and 10-year US bond yields has strengthened to 0.87 and 0.9 respectively. In a nutshell, where US yields move, USD/JPY typically follows.

Just as US two-year yields struggle to hold 5%​

That makes the next chart interesting with US two-year bond yields struggling to break and hold above 5%, repeating the same trend seen prior to the GFC in the mid-2000s. Unless the Federal Reserve is forced to lift the funds rate again, it suggests the main factor driving USD/JPY upside may be nearing exhaustion point.

Source: Refinitiv

If yields can’t keep pushing higher in the States, will USD/JPY? The strong positive correlation suggests it will struggle. And that’ before we consider the threat posed by intervention from the BOJ on behalf of Japan’s Ministry of Finance, adding a significant barrier to yen weakness beyond that already seen.

Selling rallies preferred as buying dips ditched​

The backdrop of toppy US yields and BOJ intervention threat has changed the game for USD/JPY. Unless you think the Federal Reserve will be forced to start hiking rates again, the case to buy dips has been greatly weakened. Given relative valuations and interest rate risks, selling rallies is now arguably a better strategy, putting the prospect of renewed downside in play.

USD/JPY squeezes becoming progressively smaller​

You can see the damage the suspected BOJ intervention episode on Monday did to former trendline supports, decimating level after level like they didn’t exist down to 153. While there have been some big bounces since, what’s noticeable is each topped out at lower levels, fitting with the sell rallies mantra.

For longer-term traders, unless we see US yields climb meaningfully above 5% again, consider selling rallies looking for a retest of former key horizontal resistance just below 152. Potential entry levels include 156 and 158, where USD/JPY squeezes topped out following Monday’s downside flush. Stops could be placed either above 158.50 or 160.25 for protection, depending on entry level.

If the trade target were to be reached, it may pay to see how the price interacts with this key level with a clean break likely to open the door to a far larger downside retracement.

Near-term trade considerations​

There are several key US data points released later Friday that could significantly influence US yields and USD/JPY.

In the April non-farm payrolls report, pay particular attention to the unemployment rate and average hourly earnings as these are the key areas Fed policymakers will be watching when it comes to the inflation outlook.

While it won’t receive the same degree of media coverage, don’t discount the importance of the ISM non-manufacturing PMI released after the payrolls report. The separate services PMI released by S&P Global last week had a meaningful impact on US rates and dollar, revealing an unexpected slowdown in activity. Should the more impactful ISM survey confirm those findings, it could lead to broad declines in US yields and greenback.

-- Written by David Scutt

Follow David on Twitter @scutty

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD weekly outlook: Aussie rises for a second week, RBA on tap. May 6 , 2024​

The RBA will announce their cash rate decision on Tuesday alongside their quarterly SOMP with updated staff forecasts. And that can quickly reshape expectations for the rest of the year and move AUD/USD accordingly.

By : Matt Simpson, Market Analyst

The RBA are unlikely to change policy any time soon, however...

Regular readers should remember my stance on the RBA’s cash rate; it is unlikely to change for the remainder of the year. But that doesn’t mean things cannot change. Q1 inflation data was broadly above expectations which is the last thing the RBA (or anyone, for the matter) want so see. Especially when prices were already deemed “too high” by the RBA at prior meetings.


The basic theme for Q1 inflation was that it had slowed from Q4 on an annual basis yet was above economic forecasts, yet the q/q figures were above previous and economic forecasts. And if that trend persists, another hike cannot be ruled out.


But the RBA have warning of ‘upside risks’ for some time. And as inflation had previously cooled over multiple quarters, we must also expect some bumps in the road. Besides, consumers remain pessimistic according to Westpac which is backed up by weaker retail sales. And that suggests the cash rate of 4.35% is clearly dampening the economy to a degree. Furthermore, with the Fed closing the door on further hikes it also removes an element of pressure for the RBA to revert to the hawkish side for now (even though a hawkish bias may return in the statement). I therefore doubt a knee-jerk reaction from the RBA at Tuesday’s meeting. Even if market pricing is toying with the idea of one more hike by October.

However, what caught my eye in the AFR (Australian Financial Review) is that the RBA have hiked rates on 7 out of the 9 occasions that quarterly GDP was 1% or higher heading into a meeting. And as that box has been ticked, perhaps we should be on guard for a hike just in case.

Market pricing shows that expectations for a potential hike have risen, but only gradually.

• The 30-day RBA cash rate futures contract implied a 5% chance of a 25bp increase by May 1st
• The yield tops at 4.45% in October 2024 and falls to 4.16% by October 2025
• The OIS curve has increased to show a slight increase of perceived probability of an RBA hike.
• But alarm bells are hardly ringing, with the 1-year OIS implying sitting just 11bp above the cash rate (to suggest less than the usual 25bp hike)

Eyes on the RBA’s updated forecasts

However, the RBA will also release their quarterly SOMP (Statement on Monetary Policy) which will include updated staff forecasts. And that can quickly reshape expectations for the rest of the year. We know the RBA lack the appetite to cut rates any time soon, but given the higher levels of inflation a key thing to look out for is upward revisions to the RBA’s cash rate forecast and CPI forecasts.

To summarise the February SOMP:

• Overall demand is still greater than supply, but the economy is moving towards a better balance
• Economic growth is expected to slow here and overseas
• Labour market conditions are expected to ease further
• Inflation is expected to decline to the 2–3 per cent target range in 2025 and to reach the midpoint in 2026
• While there are encouraging signs, the economic outlook is uncertain and the Board expects it will be some time before inflation is sustainably low and stable

Click the website link below to get our exclusive Guide to AUD/USD trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-aud-usd-outlook/

AUD/USD futures – market positioning from the COT report:

Bears continued to cover which allowed AUD/USD to rise for a second consecutive week. A hotter CPI report for Australia, and a weaker US dollar via weaker US economic data and the Fed closing the door on further hikes sealed the deal for risk appetite.


NZD/USD and AUD/USD were the strongest majors last, Wall Street rallied on Friday which saw SPI 200 futures track higher during out-of-hours trade. And this paints a positive start for the ASX 200 this week.

• Net-short exposure for large speculators and asset managers fell for a second consecutive week
• The weekly fall in net-short exposure fell at its fastest pace since September 2022 among large specs
• Asset manages trimmed shorts and increased longs, whereas large specs trimmed longs and shorts
• AUD/USD rose for a second week and closed above 66c

AUD/USD technical analysis

I was clearly wrong-footed last week seeking another dip lower for AUD/USD, as it rallied for three consecutive days into Friday’s close, thanks to weaker US economic data and the Fed closing the door on another hike.


Bulls made good progress with a firm close above the 200-day EMA and 66c handle. But can it make such easy work of the highs around the Q3 open?


The high tail on Friday is due to the US dollar recouping some of its losses in the second half of Friday’s NY session. And that suggest a hesitancy to test the Q3 open for now. So we may be in for some choppy trade between the 200-day EMA ~0.6560 and the Q3 open at 0.6660 as markets await the outcome of the RBA meeting. Should the RBA not be as hawkish as suspected, the perhaps the rally could peter out.


But a combination of a hawkish RBA and risk-on rally for global equities could send AUD/USD towards and potentially through the 0.6700 handle. I doubt we’ll see such a move ahead of Tuesday’s RBA meeting. And if the US dollar regains its footing then the upside potential for AUD/USD is likely to be capped.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD rises in RBA, GBP/JPY, gold look set to bounce: Asian Open May 7, 2024​

Both gold and GBP/JPY are showing signs of stability around key support levels to suggest they could extend their bounce. But with AUD/USD rising for four days on anticipation of a hawkish RBA, whether AUD/USD can extend its rally beyond resistance is up for question.

By : Matt Simpson, Market Analyst

WTI crude oil prices were a touch higher on Tuesday as the ceasefire in Gaza remains uncertain. Oil prices fell over 7% from the Friday April 26 high to last Friday low, and are now trapped beneath the 200-day average and above the December bullish trendline.


Fed Williams said that the net interest rate move is likely to be lower. The US dollar was little changed on the day and formed a small inside day (and doji) which closed back above 105, during a quiet days trade due to the UK public holiday.


AUD/USD rose for a fourth day yet upside volatility was relatively low. There has been a growing expectation that the RBA will reintroduce a tightening bias, although the consensus remains for them to hold today. And given AUD/USD is fast approaching resistance around the 0.6550 – 0.6660 zone then I am now questioning the upside potential for AUD/USD given the selloff on the US dollar index is showing signs of stability. Should the RBA implement a hawkish bias but little else, then perhaps we’ll see another pop higher before reversing around the Q2 or 3 opens, especially if the US dollar index finds some love around 105.

Economic events (times in AEST)​

Today’s RBA meeting is clearly the big event in today’s Asian session. You can read my full view in the AUD/USD weekly outlook, but in a nutshell I suspect the RBA will hold rates and include a hawkish bias to their statement given the higher inflation print. And this is despite Monday’s reports that former governor Lowe said that he doesn’t think the fight against inflation is yet over, prompting some speculation that today’s meeting could be live.

• 09:50 – Japan foreigner stock/bond purchases
• 11:30 – Australia retail sales
• 14:30 – RBA cash rate decision
• 15:30 – RBA SOMP (statement on monetary policy) and press conference

Click the website link below to get our exclusive Guide to AUD/USD trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-aud-usd-outlook/

GBP/JPY technical analysis:​

The daily chart shows an established uptrend on GBP/JPY, even if late-stage parabolic rally to 200 was met with an almighty thud. Yet bearish volatility receded on Friday before Monday snapped its 3-day losing streak, which suggests a swing low may have formed on Friday. RSI (2) was also overbought on that day, the lower wick failed to close beneath the 50-day EMA and prices are back above the high-volume node from a prior consolidation area.


Bulls could seek dis down to 192 with a stop beneath Friday’s low (or the trendline for extra wriggle room) in anticipation of a retest and potential break of 194. A move towards the 2015 high may not be out of the question, although things might get shaky given the potential for further intervention.


However, there is a reasonable chance that the BOE may not be as dovish as markets hope which could further support the British pound into the weekend.

Gold technical analysis:​

Last week out I outlined a technical scenario for gold to bounce from $2300 on the assumption the weekly low had been seen. NFP figures had other plans and forced a marginal new low, but it now appears we can revisit the potential setup.


A doji formed on Friday and Monday’s bullish price action was part of a 3-bar bullish reversal (morning star). The cycle low formed around the 50% Fibonacci level and prior high-volume node to add weight to the potential swing low. From here, bulls can either enter at market or seek dips towards the $2300 handle with a stop below Friday’s low. $2350 makes a feasible near-term target, near the prior cycle highs.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD snaps 4-day winning streak, ASX 200 set to follow? Asian Open May 8, 2024​

By : Matt Simpson, Market Analyst

The Australian dollar handed back all of its pre-RBA gains, which was trying to notch up a fifth consecutive bullish day on anticipation of a more hawkish RBA. Yet the statement was not overly hawkish and Governor Bullock said the RBA “believe rates are at the right level to get inflation back to target”. Inflation was revised higher to show inflation falling back to target at a slower pace and the RBA remain “vigilant” to upside risks.


Ultimately, the Fed closing the door on further hikes has provide the RBA more wriggle room to see if a 4.35% cash rate can finally work its magic. There are signs of strain in the economy, but not enough to cut rates whilst there’s also no immediate threat of a hike. My view remains unchanged that a 4.35% cash rate is likely to remain in place this year.


The US dollar retraced higher for a second day although it doesn’t have the hallmarks of something that wants to return to ‘bull’ status soon, especially if the Fed continue to drop dovish cues.


Gold could appeal to bulls for a potential long setup after prices retraced lower against Monday’s bullish range expansion day. $2300 seem to be a level of importance, so ideally prices can hold above that level for a move towards the highs near $2350.

AUD/USD technical analysis:​

A bearish outside / engulfing day formed on AUD/USD to show a reluctance to retest the Q3 open, or last week’s high of 0.6650 for that matter. But does that mean it can simply roll over? That is likely down to the US dollar which notched up its second bullish day. And I suspect there is a little more upside potential for the dollar as it retraces against the ‘dovish’ Fed moves, but at the same time dollar strength could also be limited. And that suggest potential support for AUD/USD and choppy trade in the top third of its recent rally.


The 1-hour chart shows a strong bullish trend into the highs and a likely correction / sideways consolidation. RSI (2) reached oversold during US trade, and prices are holding above the weekly pivot point at 0.6575, near a high-volume node and prior consolidation area. Any dips towards the 0.6570-80 may be appealing to bulls who want to trade the range to the long side, although I’m not expecting it to simply break to new highs from here given the levels of resistance overhead.

Click the website link below to get our exclusive Guide to AUD/USD trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-aud-usd-outlook/

Economic events (times in AEST)​

Unless some unexpected happens, we could be in for a quiet day’s trade. US stockpiles could give a bump for crude oil prices, which are stuck between December’s bullish trendline and the 200-day average and $80 handle. We then have three Fed speakers, who if provide further dovish cues might help send the US dollar low against its 2-day mild rebound.

• 12:30 – RBA chart pack release
• 13:35 – 10-year JGB auction
• 16:00 – German industrial production
• 00:00 – US wholesale inventories
• 00:30 – US crude oil inventories
• 01:00 – Fed Governor Jefferson speaks
• 01:45 – Fed Collings speaks
• 03:30 – Fed Governor Cook speaks

ASX 200 at a glance:​

• Positive sentiment and a less-hawkish-than-expected RBA helped the ASX 200 rise for a fourth day
• The ASX 200 cash index has opened at the low of the day on each occasion and within its most bullish week of the year
• Yet price action on SPI 200 futures overnight show a market that may be losing some steam
• RSI (2) has reached overbought on the daily chart and the 1-hour RSI (2) has formed a bearish divergence with prices
• Price action is also oscillating as it grinds higher to suggest a falling wedge (bearish reversal) pattern could be forming on the 1-hour chart
• With upside potential limited, bulls may want to tighten stops or seek to fade into moves towards the 7850 handle and seek mean reversion lower.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

USD ‘rebound’ lacks the enthusiasm of last week’s selloff: Asian Open May 9, 2024​

The US dollar may have risen for a third day, yet bulls lack the conviction that bears displayed last week. And that suggests this bounce could be corrective.

By : Matt Simpson, Market Analyst

The US dollar extended its rise for a third day, although its corrective nature suggests this could be the build up to its next drop. The index was certainly hesitant to break and hold above 106 this year and the high-volume bearish outside week likely marks the beginning of at least a minor correction – even if the dollar is trying to form a small bullish inside week.


Perhaps a move towards 104 or the bullish trendline could be on the cards. Whether it could provide a deeper drop likely requires US economic data to roll over. As much as traders want to hear about Fed cuts, they’re not yet confirmed and the Fed still retain the highest interest rate among developed central banks. And that risks limited downside unless US economic data rolls over.


But looking at the daily chart suggests the dollar’s next leg lower could be near; Wednesday’s high-to-low range was its smallest in nearly two months, at just 0.25; the past three days has seen just a 0.75% rise from Monday’s low to Wednesday’s high compared to the -1.85% drop of the prior three days.


Ultimately, I suspect another leg lower could soon be approaching, and that should throw a level of support under its respective FX major peers.

• Wall Street indices were mixed with the S&P 500 flat, Nasdaq -0.04% lower but the Dow Jones rose 0.44%
• Gold prices failed retraced slightly lower for a second day, and whilst it didn’t spring higher in line with yesterday’s bias it still shows the potential to do so whilst it hold above $2300
• Silver’s structure appears to be the stronger of the two with its small bullish doji holding above $27
• The Japanese yen retraced lower for a third day, although it essentially moved sideways during US trade to show a hesitancy to continue its trend
• USD/JPY still shows the potential to push for 156, but if analysis on the US dollar index is correct then perhaps the upside is limited (particularly if the BOJ become more vocal about the weaker yen and markets take notice to push USD/JPY lower)
• AUD/USD retraced for a second day and closed beneath 66c, yet again due to the suspicions of limited US dollar upside and a lower tail on AUD/USD, perhaps it is close to forming a base (if not, a rebound)
• WTI crude oil prices saw a false break of $78 before closing the day with a bullish outside day with lower tail – is the swing low finally in?

Click the website link below to get our exclusive Guide to EUR/USD trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-eur-usd-outlook/

Economic events (times in AEST)​

• 09:30 – BOJ summary of opinions
• 11:30 – Australian building approvals
• 13:00 – China trade balance
• 15:00 – Japan leading index
• 21:00 – BOE interest rate decision, MPC votes, minutes
• 22:15 – ECB De Guindos speaks
• 22:30 – US jobless claims
• 23:15 – BOE Bailey speaks

ASX 200 at a glance:​

• A fifth consecutive bullish day was achieved on the ASX 200, its first such sequence since late January
• Although the very narrow range surely suggests a hesitation to push much higher without a risk-on catalyst – so I remain on guard for a pullback
• Futures prices were lower overnight which points to a minor gap lower for the cash index at today’s open
• With no top tier news scheduled until the BOE interest rate decision, we could be in for another narrow-ranged day without a fresh catalyst

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

EUR/USD, AUD/USD, gold look set to take advantage of US dollar weakness. May 10, 2024​

The US dollar snapped its 3-day winning streak and formed a bearish outside day, helping gold reach our upside target. EUR/USD and AUD/USD are now eyeing a move towards key resistance levels.

By : Matt Simpson, Market Analyst

The Bank of England edged closer to a rate cut, although stopped short of announcing any such moved for June as I suspected. Seven of the nine MPC members voted to hold (down from eight) and two to cut (up from one), with a “range of views” among MPC members voting to hold suggesting that a June cut is not yet a slam dunk. The 3-year CPI forecast was lowered to 1.6% from 1.9% previously, and 2.6% for one year, down from 2.8% prior. Incoming data will be closely monitored to see if it shows a “receding risk of inflation persistence”.


The BOE next meet on June 20th and August 1st. Key data points to watch to decipher the likelihood of a June cut include claimant and earnings data next Tuesday and of course the inflation report on Wednesday 22nd May.


GBP was lower against AUD (-0.4%), NZD (-0.25%) and CAD (-0.12%) although made gains against the weaker yen (+0.2% and the US dollar, sending GBP/USD 0.23% higher and forming a bullish engulfing / outside day.


Yet it was the US dollar which took the crown as the weakest forex major on Thursday as traders rejoiced weaker employment data, on hopes it will bring forward Fed rate cuts. US jobless claims rose to an 8-month high of 231k, continuous claims rose 17k to 1.785 million. These figures hardly scram Armageddon, but we’re in the phase where traders will take any scrap of weakness of a sign the Fed might cut rates at some time this year, to send the US dollar lower and Wall Street higher accordingly.

I outlined my bearish bias for the US dollar a couple of time this week, and the US employment figures (rightly or wrongly) were the required catalyst. The US dollar index perfectly tested the 61.8% Fibonacci ratio before rolling over and forming a bearish outside week, which now brings the move down to at least 104.50, or the 104 / 200-day EMA / Q3 open zone into view for bears.


The 1-hour chart shows that losses materialised in one straight move, although bearish volatility is waning around the cycle lows. Take note of the monthly and weekly pivot points between 105.25 – 105.37 which could appeal to bears if prices retrace towards this zone and allow for a fresh short entry.

• USD/JPY closed flat with a Rikshaw man doji after reversing just beneath the 156 handle, and with the US dollar losing ground and the BOJ potentially looking to take advantage, the bias is for a move lower for the pair
• A bullish engulfing candle formed on AUD/USD which brings the potential for further gains today, although bulls may want to err on the side of caution as we approach the 0.6666 resistance level as the Aussie has failed to gain any real traction around these highs this year so far
• EUR/USD formed a bullish outside day to show demand above the 1.07 handle, with eyes now on trend resistance for a potential break above the 1.08 handle
• Wall Street extended its gains led by the Dow Jones (0.85%), S&P 500 (0.51%) and Nasdaq (0.16%)
• The DAX reached a record high, seemingly because Dortmund reached the UEFA cup final
• Gold rallied 1.6% and reached my target around $2345-$2350 outlined earlier this week. Should US dollar weakness persist then an upside break of $2352 is likely on the cards.
• Silver also broke higher in line with yesterday’s bias and now trades just above the $28.30 target
• Crude oil prices rose in line with my bias, although only just. There is plenty of resistance nearby including the $80 and the 200-day MA, but with traders remain net long and prices having already fallen -12% from the April high, I suspect a break above $80 is on the cards

Click the website link below to get our exclusive Guide to EUR/USD trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-eur-usd-outlook/

Economic events (times in AEST)​

• 09:30 – Japan household spending
• 09:50 – Japan foreigner bond/stock purchases, FX reserves
• 15:00 – Japan economy watchers current index
• 16:00 – UK business investment, manufacturing production, construction output, monthly GDP, index of services, trade balance
• 21:45 – BOE member Dhingra speaks
• 22:30 – Canada employment report
• 23:00 – FOMC bowman speaks
• 00:00 – US consumer sentiment, inflation expectations (Michigan University)
• 02:45 – Fed Goolsbee speaks

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD weekly outlook: Patiently awaiting a breakout. May 13,2024​

The prospects of a weaker US dollar are growing which brings a potential breakout on the cards for AUD/USD, although it has some tough levels to crack first.

By : Matt Simpson, Market Analyst

Key themes and events for AUD this week:​

• Jerome Powell speech
• US inflation
• AU wages
• AU employment

Thursday’s US inflation data will once again take centre stage next week, although it is also worth keeping an ear out for Jerome Powell’s comments when the speaks late on Wednesday. Powell is speaking alongside ECB hawk Knot during a ‘moderated’ discussion, and with traders feverishly seeking clues for cuts from the Fed and ECB then we can expect markets to react accordingly if any such clue is dropped. We know that US PCE inflation was hotter than liked, headline core CPI remains elevated at 3.8% y/y and CPI is now pointing higher. Therefore, unless we see some softer figures from the US inflation report then we might expect a headwind for AUD/USD next week. Ultimately, weaker US economic data is required to justify Fed cuts that traders crave, and that could weigh on yields and the US dollar to help support AUD/USD.


As for domestic data, Australia’s quarterly wages and monthly employment reports are released, but I doubt they’ll make a material impact on any upcoming RBA decisions. Whilst the RBA reintroduced a tightening bias in their statement, Governor Bullock did say during her press conference that she things rate are at the right level. And that basically means we can likely expect 4.35% to remain the current rate into next year. To stand any chance of a cut this year likely requires two or more cuts from the Fed alongside a welcomed drop of domestic inflation, and unfortunately neither of those scenarios seem likely at present. Of course, should wages rise and employment knock out decent figures, it may stir some speculation of another hike to support AUD pairs, even if a hike also seems unlikely.

AUD/USD futures – market positioning from the COT report:​

Futures traders continued to trim short exposure to AUD/USD futures last week, sending net-short exposure among asset managers and large speculators to their least bearish levels since January and February respectively. Long exposure among both sets of traders are also trending higher, so perhaps these are the earlier stages of a rise for AUD/USD. The ideal scenario for AUD/USD bulls from here is to see US data continue to soften to justify Fed cuts, yet not deteriorate too quickly as to fan fears of a global recession. Under this ‘soft landing’ scenario, equity markets and therefore sentiment in general could flourish and take AUD/USD along with it.


However, the weekly doji shows a clear hesitancy to break higher for now, so perhaps we’re in for another range-bound week below resistance levels unless US dollar strength returns to helped AUD/USD retrace a tad.

AUD/USD technical analysis​

The rally from 64c appears to be impulsive, and with traders closing shorts in exchange for longs an eventual bullish breakout above the Q3 open (0.6660) I the core bias.


However, we may need to be patient for any such breakout unless we see another clear round of US dollar weakness. Furthermore, the AU-US 2-year spread is not backing up the recent swing higher for AUD/USD seen on Thursday, even though spot prices are holding above the 10/20day EMAs.


Therefore, trading conditions to be choppy within the top third of the 0.6400 – 0.6650 range before the anticipated lift off. And such conditions usually favour traders with shorter hold times (between a few hours to 2-3 days).

A swing low has formed at 0.6658 and prices retraced around half of Thursday’s bullish range-expansion day. Bulls may want to seek dips towards Thursday’s lows for a cheeky long towards 0.6650. Yet I’d prefer to err on the side of caution and book quick profits the closer AUD/USD rises towards the Q3 open, as this is an area we’re yet to see a daily close above this year.





-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

US dollar stabilises ahead of Powell, PPI, USD/JPY eyes 157: Asian Open May 14, 2023​

The US dollar has regained its footing heading into a Powell speech and US PPI report, whilst USD/JPY looks set to break resistance and head for 157.

By : Matt Simpson, Market Analyst

The US dollar index traded in a tight range during a relatively quiet session on Monday and held above 105 for a second day. This follows on from a small bullish inside week to shows stability has been found after the prior bearish engulfing week temporarily slammed prices below 105.


Traders like binary outcomes as it can provide clarity for expectations and cleaner trends. Yet the pause of the dollar's demise may be attributed to the fact that traders are grappling with higher-for-longer rates alongside hopes of cuts.


Taking NFP as an example, perhaps traders were too quick to price in cuts given job growth is still knocking out 6-figure gains and unemployment remains low by historical standards. Yet inflation expectations are higher, even if confidence is softer. Mixed data calls for a mixed response.


For the wheels to truly fall off of the US dollar, incoming data needs to point to disinflation, not just pockets of weakness here and there. Overall, I believe the US dollar has topped for now and that inflation will eventually behave. But ewe might see some US dollar upside before its next leg lower materialises.

US dollar index (DXY) technical analysis:​

The weekly chart shows a high-volume engulfing week ad three failed attempts to close above 106. Yet the small bullish inside week shows a hesitancy to break immediately lower, and the daily chart shows prices holding above 105. Furthermore, Friday’s NFP bearish engulfing day was on relatively low volume, meaning bears lacked conviction on the day. Therefore, my bias is for the US dollar to pop higher from here and potentially see a false break above Friday’s high, before bearish momentum returns and prices head for at least 104.50, the bullish trendline or Q3 open.

Economic events (times in AEST)​

We have two key themes to watch for today, which revolve around the BOE and Fed. UK earnings and employment data could provide some last minute bets for whether the BOE will hint at a June cut at Thursday’s meeting, where hotter figures could diminish expectations of a dovish tone and potentially send GBP/USD higher. We also have a talk from the BOE’s Chief Economist Hew which will include an economic outlook, making it a key event. The attention will then shift to US producer prices, which could set the tone for the key CPI report released tomorrow, or the warm-up act for Jerome Powell’s speech later today.


Click the website link below to get our exclusive Guide to USD/JPY trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-usd-jpy-outlook/

• 08:45 – New Zealand retail sales
• 09:50 – Japan producer prices
• 10:30 – Australian consumer sentiment (Westpac)
• 13:45 – Japan 5-year JGB auction
• 16:00 – UK earnings, employment
• 16:00 – Germany CPI
• 17:30 – BOE Chief Economist Hew speaks
• 20:00 – US small business optimism (NFIB)
• 21:00 – OPEC monthly report
• 22:30 – US producer prices
• 23:10 – Fed Governor Cook speaks
• 23:15 – ECB’s Schnabel speaks
• 00:00 – Fed Chair Powell speaks

USD/JPY technical analysis:​

The rise of USD/JPY is beginning to remind me of every stock-market rally hater miss out on. But like it or now, USD/JPY is rising, even if there is a growing concern the BOJ may intervene once more. But it has got this far, why not one final burst for 157?


A bullish trend is apparent on the 1-hour chart although prices have stalled just beneath monthly pivot point and key swing high (the third prominent leg lower). Perhaps we’ll see markets tease with a break of resistance today, which might provide some less-than-friendly price action and a pullback towards the 20 or 50-bar EMA. At which point dip buyers may be tempted to load up for the real break. But if we see a 1-hour close above resistance, bulls could seek to enter on lower timeframes (seek consolidation patterns) with a view on targeting the high-volume node or 157 handle.



-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

USD falters ahead of US CPI, ASX set to track Wall Street higher? Asian Open May 15, 2024​

The USD was weaker despite higher producer prices, as traders placed greater emphasis on last month's figures being revised lower. And that now sees a 51% chance of a September Fed cut, according to Fed Fund futures.

By : Matt Simpson, Market Analyst


If there’s a case to be made that traders simply see what they want, it is visible in the US dollar’s reaction compared to headlines. Jerome Powell said that whilst he expects inflation to move lower, it likely won’t be as quickly as he expected. And US producer prices were hotter than expected on the eve of a Key CPI report, Yet traders took more notice of that fact that prior figures were revised lower. Perhaps I’m wrong to do so, but I would place greater emphasis on incoming data over downward revisions of past data. Yet with bond yields and the US dollar lower, who am I to argue.

• The US dollar closed below 105 and US yields were broadly lower on bets the Fed could cut rates this year.
• Fed fund futures now imply a 51% chance of a September rate cut, or 45.2% chance of one in November.
• GBP/USD was the strongest major thanks to firmer economic data bringing doubt to a June rate cut by the BOE
• A bullish engulfing day formed on NZD/USD, AUD/USD closed at a 6-day high
• Gold recouped most of Monday’s losses to reveal demand around $2333
• Wall Street indices pushed higher to see the S&P 500 trade just -0.34% from its all-time high, whilst the Nasdaq 100 is -0.77% below its record high

US dollar index (DXY) technical analysis:​

We didn’t see the expected bounce on the US dollar, which instead has closed below 105 with an outside day and is now trying to hold above the 50-dy EMA. Yet I remain unconvinced prices will simply fall to my 104.50 target unless CPI data comes in very soft later today. RSI (2) is approaching oversold, and the 50-day EMA is likely to provide a level of support, at least initially.


Click the website link below to get our Guide to central banks and interest rates in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-central-banks-outlook/

BOE June cut appears less likely​

UK data threw an inevitable spanner in the work for a potential June cut from the BOE, with earnings remaining relatively high at 6% (or 5.7% y/y including bonus, above 5.3% expected and unchanged from prior). The jobless claimant amount also fell to 8.9l (13.9k expected) and prior revised to -2.4k from 10.9k. -177 jobs were lost, but this was not as bad as the -215k consensus estimate. Still, BOE’s Chief Economist Pill said that it was “not unreasonable” to consider rate cuts over the summer, although it is unclear whether this refers to June or August. My bet August, and the rebound of GBP appears to back this up.

US-China trade war heating up one more​

Shots have been fired by the Whitehouse after they unveiled steeper of tariffs on China, which include EV batteries, medical products and computer chips. EV duties have quadrupled from 5% to 100% and semiconductors have been doubled to 50%. Clearly this is a ploy to look tough on China in the name of in the name of American jobs in the lead up to the elections. Yet it is worth pointing out these inflationary policies could become an own goal and spark a fresh trade war. As expected, China were quick to vow retaliation and take measures to defend its interests.

Economic events (times in AEST)​

• 09:50 – Japan foreigner stock/bond purchases
• 11:30 – Australia wage price index
• 19:00 – Euro GDP, employment, industrial production
• 22:30 – UC CPI, retail sales
• 00:00 – Fed Vice Chair for Supervision Barr Speaks, US business inventories, retail inventories
• 02:00 – Fed Atlanta GDPnow

Click the website link below to get our exclusive Guide to index trading in Q2 2024.

https://www.forex.com/en-us/market-outlooks-2024/q2-indices-outlook/

ASX 200 technical analysis:​

• The ASX 200 cash index formed a relatively small bearish outside / engulfing day as it retraced against last week’s bullish range expansion
• Given Wall Street remains supported and SPI futures were higher overnight, I suspect the cash index is building up for another leg higher
• SPI 200 futures are on track for a bullish engulfing day, and prices have been coiling up within a small symmetrical triangle pattern which assumes a bullish breakout
• The 1-hour chart shows a volume cluster around 7780, so any low-volatility retracements towards the 7772 low could be appealing to bullish swing traders
• RSI (2) is overbought, hence the bias for an initial retracement lower before the anticipated breakout occurs
• A break above 7800 assumes bullish continuation, and brings the 7580 high into focus, below the 7866 high-volume node

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[jomina]

thank you for the update and the link.