Kenny Fisher

Kenny Fisher

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.

Bank of Canada Holds Rates as Governor Macklem Signals Caution Amid Inflation Concerns, USD/CAD Tests Key Support

Bank of Canada Holds Rates as Governor Macklem Signals Caution Amid Inflation Concerns, USD/CAD Tests Key Support

Kenny Fisher Kenny Fisher 26.01.2024 14:48
US to release The Canadian dollar is showing limited movement on Thursday. In the European session, USD/CAD is trading at 1.3513, down 0.08%. Bank of Canada keeps rates on hold There were no surprises from the Bank of Canada, which maintained the benchmark rate at 5% on Wednesday. The rate has remained the same since July and it looks very likely that the central bank has wrapped up its rate-tightening cycle, barring a huge turnaround in inflation, which has been generally moving lower. Governor Macklem said in a follow-up press conference that inflation is still too high and that it was “premature” to be discussing lowering interest rates. Macklem said that he was concerned about “persistence in underlying inflation” and that more time was needed to let monetary policy do its work. Macklem’s pushback was fairly predictable, as he needed to convey a clear message that the battle against inflation is not yet over. The Canadian Imperial Bank of Commerce and the Bank of Montreal both stated after the BoC decision that they expect a rate cut in June. The markets are more bullish and have priced in a rate cut in April at 66%. If inflation moves closer to the 2% target, the odds of an April cut will likely rise. The US economy continues to churn out solid numbers and the January PMI reports were better than expected. The services PMI rose to 52.9, up from 51.4 in December and above the market consensus of 51.0. This marked a seven-month high. The manufacturing PMI clawed into expansion territory with a reading of 50.3, up from 47.9 in December which was also the consensus estimate. This was the highest level since October 2022. The US releases first-estimate GDP for the fourth quarter later today. The consensus estimate stands at 2.0%, which follows a sparkling 4.9% gain in the third quarter, which was the highest growth rate since Q4 2021. If the estimate is wide of the mark, we could see a strong reaction from the US dollar in the North American session. . USD/CAD Technical USD/CAD is putting pressure on support at 1.3494. Below, there is support at 1.3459 There is resistance at 1.3558 and 1.3593
The Japanese yen retreats as US GDP soars 3.3% in Q4

The Japanese yen retreats as US GDP soars 3.3% in Q4

Kenny Fisher Kenny Fisher 26.01.2024 14:46
The Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. US GDP roars with 3.3% gain The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar’s reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed’s preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower.   Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ’s target of 2%. . USD/JPY Technical USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73  
Tepid ECB Holds Rates, Lagarde Eyes Summer Cut, EURUSD Consolidation

Tepid ECB Holds Rates, Lagarde Eyes Summer Cut, EURUSD Consolidation

Kenny Fisher Kenny Fisher 26.01.2024 14:45
ECB leaves rates on hold Lagarde still eyeing summer rate cut EURUSD consolidating after correction The European Central Bank left interest rates on hold on Thursday and claimed inflation is progressing towards its target while giving no clear guidance on when interest rates will start falling. We came into the new year with markets pricing in a March rate cut and that is now looking increasingly difficult. Even with a late pivot – which was always likely the strategy of the central bank – policymakers would have to signal that a rate cut is a live possibility over the next six weeks in appearances made between meetings. That’s not impossible but it’s arguably not particularly transparent. The data is unlikely to surprise to that degree. President Christine Lagarde and some colleagues have previously indicated a rate cut in summer may be appropriate but investors are not convinced we’ll have to wait that long. Lagarde stuck with that today while suggesting demand was weaker, as is the economy, and inflation is falling. Perhaps this is her way of leaving the door slightly ajar for March or maybe the usual lack of clear guidance has left everyone desperately looking for something that isn’t there. I get the feeling Lagarde and her colleagues wanted to give absolutely nothing away today, instead opting for an array of vague, uninformative statements that buy them six more weeks before they may have to say or do something. A bullish correction or sideways continuation?   The euro has drifted lower after the announcement and press conference but it hasn’t broken out of the range it’s traded in over the last week or so. EURUSD Daily Source – OANDA The correction we’ve seen since the turn of the year appears to be running on fumes but there’s still a question of whether this is just that, and will turn higher and look to break the highs, or just a continuation of the longer term sideways trend. There are some important support levels between 1.07 and 1.0850 which could tell us which is the case.  
Rates Spark: Navigating US CPI Data and Foreign Appetite for USTs

Taming the Oil Surge: Analysis of WTI Crude Oil Trends and Potential Reversal Scenarios

Kenny Fisher Kenny Fisher 26.01.2024 14:42
WTI crude oil has started to evolve into a short-term uptrend phase reinforced by the recent liquidity infusion by China’s central bank, PBoC upcoming 50 bps cut on the RRR. The current 5-day rally of WTI crude oil has reached a key medium-term resistance zone of US$79.00/79.40 with a short-term overbought condition. At the risk of a minor mean reversion decline with intermediate supports at US$75.30 and US$74.80. This is a follow-up analysis of our prior report, “WTI Oil Technical: Sideways within a potential minor bottoming configuration” published on 16 January 2024. Click here for a recap. Benchmark oil prices have bottomed and traded higher since the start of this week as the West Texas Oil (a proxy of WTI crude oil futures) had rallied by +4.9% week-to-date at this time of the writing, its best weekly gain since the 9 October 2023. On top of the rising geopolitical risk premium that is supporting firmer oil prices from the ongoing tensions in the Middle East region and Red Sea shipping route, the additional liquidity infusion from China’s central bank (PBoC) with an upcoming 50 bps cut on commercial banks’ reserve requirement ratio has also triggered an indirect “demand-pull” catalyst on oil prices. CTA funds may have contributed to the current bullish momentum frenzy All in all, these factors have created short-term reflexive positive feedback into the oil market reinforced by possible speculative CTA funds that run on momentum-driven models that piled into oil futures with a bullish bias. The price actions of the benchmark Brent and WTI crude oil have pierced above their respective 50-day moving averages on Monday, 22 January and have capped their prices previously since late October 2023; positive momentum begets positive momentum. At the risk of a minor mean reversion decline below US$78.40 Fig 1:  West Texas Oil medium-term trend as of 26 Jan 2024 (Source: TradingView, click to enlarge chart)   Fig 2:  West Texas Oil minor short-term trend as of 26 Jan 2024 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, the recent push-up of West Texas Oil since the start of this week has led its hourly RSI momentum indicator to hover close to an extremely overbought level of around 74 in place since 12 January 2024. This current overbought condition has also taken form as its price action is now coming close to a key medium-term resistance zone of US$78.00/78.40 (upper boundary of the minor ascending channel from 17 January 2024 low & close to the key 200-day moving average). Therefore, the odds have increased for a potential minor mean reversion decline to retrace a portion of the ongoing short-term uptrend phase with the next intermediate supports coming in at US$75.75/75.30 and US$74.80. On the flip side, clearance above the US$78.40 pivotal resistance invalidates the mean reversion decline scenario for a continuation of the bullish trend towards the next intermediate resistance at US$79.75 in the first step.
Political Developments Shape CEE Market Landscape: Hungary's Surprising Hawkish Turn, Poland's Government Tensions, and EU Summit Accor

Japanese Yen Drifts as Tokyo Core CPI Falls to 1.6%

Kenny Fisher Kenny Fisher 26.01.2024 14:41
The Japanese yen is drifting on Friday. In the European session, USD/JPY is trading at 147.80, up 0.10%. Tokyo Core CPI falls to 1.6% Tokyo Core CPI reached a significant milestone today, falling to 1.6% y/y in January, after a December reading of 2.1%. This was the first time the indicator dropped below the Bank of Japan’s 2% target since May 2022. The main driver of the decline was lower energy prices. Tokyo Core CPI excludes fresh food but includes fuel. The Tokyo core-core index, which excludes fresh food and fuel prices, rose 3.1% y/y in January, down from 3.5% in December. The drop in inflation reinforces the BoJ’s view that cost pressures are gradually being replaced by rising service prices as the main driver of inflation. This is hugely significant, as it points to inflation being more sustainable, which is a requirement for the BoJ before it tightens its ultra-loose policy. Japan also released corporate service inflation for December which held steady at 2.4%, a nine-year high. That reading underscores that service prices remain high a companies continue to pass on their costs. BoJ Governor Ueda stated at this week’s policy meeting that progress is being made towards the target of 2% sustainable inflation, and that has the markets speculating that the BoJ could make a major policy shift in April or June. The BoJ wants to see higher wages as evidence that inflation is sustainable and the national wage negotiations in March are expected to provide higher wages for workers.   In the US, the first-estimate GDP for the fourth quarter smashed above expectations, but the US dollar didn’t show much interest. GDP growth rose 3.3% y/y, below the 4.9% gain in the third quarter but well above the consensus estimate of 2.0%. The US economy continues to produce stronger-than-expected data and that has the markets paring expectations for a rate cut in March. The probability of a March cut has fallen to 48%, down sharply from 70% one month ago, according to the CME’s FedWatch tool. . USD/JPY Technical USD/JPY tested support earlier at 147.54. Below, there is support at 146.63 There is resistance at 148.44 and 149.35
Rates Spark: Navigating US CPI Data and Foreign Appetite for USTs

ECB's Divergence: Lagarde Signals Potential Rate Cut Amidst Market Expectations, EUR/USD Faces Key Resistance at 1.0888

Kenny Fisher Kenny Fisher 26.01.2024 13:46
The euro is in positive territory on Friday. In the European session, trading at 1.0846 in the European session. ECB maintains interest rates To nobody’s surprise, the European Central Bank left its benchmark rate unchanged at 4.0% on Thursday. The ECB last raised rates in September and as with the Federal Reserve, the rate-hiking cycle is likely done. The key focus currently is when the ECB can be expected to start lowering rates. The markets have widely priced in a rate cut in April and are expecting 140 basis points in cuts this year, but the ECB is not on the same page and continues to push back against market expectations. It wasn’t long ago that ECB President Christine Lagarde was insisting that rate cuts were not on the table, but she pivoted at the Davos summit, saying that a rate cut was likely in June. Lagarde may have chosen Davos to change her stance rather than at Thursday’s ECB meeting in order to minimize the market’s reaction to her abrupt change in her stance. At the ECB meeting, Lagarde stood by her Davos comments but at the same time insisted that it was “premature to discuss rate cuts”. She noted there were still upside risks to inflation, including the Middle East crisis which could lead to higher energy and freight costs and hurt global trade. Lagarde may be reluctant to discuss rate cuts, but the timing of an initial cut is very much on the minds of investors, reflecting the discrepancy we are seeing between the ECB and the markets regarding the rate path. One topic that both Lagarde and the markets can agree on is that upcoming rate decisions will be highly dependent on key data, in particular inflation and employment reports. . EUR/USD Technical EUR/USD is testing resistance at 1.0888. Above, there is resistance at 1.0929 There is support at 1.0843 and 1.0802
All Eyes on US Inflation: Impact on Rate Expectations and Market Sentiment

China's Caixin Manufacturing Shows Marginal Growth, Boosts Australian Dollar

Kenny Fisher Kenny Fisher 02.01.2024 13:20
China Caixin Manufacturing posts slight growth The Australian dollar is in positive territory on Tuesday. In the European session, AUD/USD is trading at 0.6826, up 0.22%. The week between Christmas and New Year’s was subdued in the currency markets. Still, the Australian dollar hit a six-month high on Christmas Day, rising to 0.6871. The Aussie ended the year on a roll, gaining 3.1% in December. China’s Caixin Manufacturing PMI ticked up to 50.8 in December, up from 50.7 in November and above the consensus of 50.4. This was the highest reading since August, but the reading points to stagnation in manufacturing. The reading was better than the official Manufacturing PMI release on Saturday of 49.0 which indicates contraction. The non-manufacturing PMI edged up to 50.4, compared to 50.2 in November. Activity in the non-manufacturing sector has been minimal over the past six months, as China remains mired in an economic slowdown as we move into 2024. Where is RBA headed? The Reserve Bank of Australia meets next on February 6 and it’s anyone’s guess what the central bank has in mind for 2024. The RBA has raised interest rates just once since June and held the cash rate at 4.35% at the December meeting. It’s likely that the RBA is done with raising rates, but the timing of a rate cut is unclear. Many economists are circling September for the first rate cut, while Bank of America is predicting a rate cut only in 2025. The markets are more optimistic and have priced in a rate cut in mid-2024. What all the views can agree on is that the inflation rate will play a critical role in determining the RBA’s rate path. Inflation has fallen to 4.9% but remains much higher than the RBA’s target band of 2-3%. Australia will release the December inflation report on January 10 and the release should be treated as a market-mover.   AUD/USD Technical AUD/USD is testing resistance at 0.6812. Next, there is resistance at 0.6845 0.6779 and 0.6746 are providing support  
Federal Reserve's Stance: Holding Rates Steady Amidst Market Expectations, with a Cautionary Tone on Overly Aggressive Rate Cut Pricings

2023 Key Highlights & Cross-Assets Performances: A Comprehensive Review and Outlook for 2024

Kenny Fisher Kenny Fisher 02.01.2024 13:18
2023 key highlights & cross-assets performances in the past 2 years Fig 1: Cross assets performances as of 29 Dec 2023 (Source: TradingView, click to enlarge chart)   The US Federal Reserve’s stance of keeping interest rates higher for a longer period in the first half of 2023 triggered a resilient US dollar environment in the absence of a recession scenario in the US that led the US stock market to outperform the rest of the world. The outperformance of the US stock market in 2023 was led by the Magnificent 7 (Apple, Amazon, Microsoft, Alphabet/Google, Nvidia, Meta, Tesla) mega-cap technology stocks that have stronger balance sheets and are skewed toward “AI productivity” theme play. Also, these 7 stocks have a significant combined market-cap weightage in the Nasdaq 100 that recorded an annual gain of 54% in 2023 (2.3 times S&P 500’s 2023 returns). US regional banking crisis that led to the collapse of Silicon Valley Bank & First Republic Bank due to poor balance sheet risk management reinforced by outsized mark-to-market losses on longer-term US Treasuries (higher US Treasury yields via Fed’s tightening monetary policy). It also indirectly led to the demise of Credit Suisse which eventually was brought over by rival UBS. The US regional banking crisis was just a blip, negated by a liquidity backstop orchestrated by the US Treasury; the Bank Term Funding Program (BTFP). The risk-off behaviour in Q3 reversed abruptly in Q4 to a raging risk-on FOMO behaviour triggered by a significant easing liquidity condition in the US; the rapid drawdown of the Fed’s overnight reverse repo facility from a peak of US$2.55 trillion in December 2022 to US$683.25 billion (-74%) for the week of 11 Dec 2023 as money market funds that choose to invest their surplus cash in short-term US Treasury bills instead (rather than parking in overnight reverse repos facility) which in turn helped to fund the US Treasury general account (also US Treasury’s issuance switch from longer-term Treasuries to T-bills for funding needs). A rise in the expectations of a Fed’s dovish pivot where the first Fed funds rate cut is priced in to come as early in March 2024 indicated by the CME FedWatch tool that led to a slide of 120 basis points (bps) in the US 10-year Treasury yield from a 16-year high of 5% printed on 23 October 2023, synchronized with a weakening US dollar that kickstarted a rally in almost all asset classes (equities, bonds, gold, cryptocurrencies) except oil & China-related risk assets. China’s post-Covid re-opening bullish theme play on China and Hong Kong stock markets fizzled out after Q1 due to a heightened deflationary risk spiral caused by a persistent weak property market in China. The Hang Seng Index ended 2023 with a fourth consecutive annual loss of -14% (prior years’ losses of -15% in 2022, -14% in 2021 & -3% in 2020); its worst performance streak since 2000. Due to China’s structural weakness (deflationary risk spiral), China, and Hong Kong stock markets failed to respond to the cyclical upswing in risk assets during Q4 2023 reinforced by renewed US dollar weakness. The CSI 300 and Hang Seng Index recorded losses of -7% and -4.3% respectively in Q4 whereas the MSCI Emerging Markets Ex China exchange-traded fund gained by +12.5% over the same period, slightly outperformed the US S&P 500’s Q4 return of +11.24% The Japanese yen (JPY) plummeted to a 33-year low against the US dollar in Q3 2023 due to the Bank of Japan (BoJ)’s newly appointed Governor Ueda’s reluctance to offer firm guidance to normalize its short-term negative interest rate policy despite Japan’s core inflation rate had exceeded BoJ’s 2% target for the 20th consecutive month. Emerging themes for 2024 A potentially weaker US dollar due to the shrinkage of the US Treasury yield spread premium against the rest of the world, and a potential major JPY strength revival triggered by internal economic factors (service prices in Tokyo rose at their fastest pace since 1994 to a record gain of 3% y/y in November 2023, indicating an increase in the odds of sustainable wage-driven inflationary growth), political and business groups’ mounting pressures against a weaker JPY. The rest of the world equities may outperform the US stock market due to a weaker US dollar environment. Keep a lookout on China for potentially more “generous” fiscal and monetary policy stimulus measures that may stoke positive animal spirits in the short to medium term for China and Hong Kong stock markets. The stepped-up dovish expectations on the upcoming Fed’s interest rate cut cycle compiled with rosy earnings forecasts by analysts polled by FactSet that are projecting an earnings growth of +11.5% y/y for the US S&P 500 in CY 2024, a significant improvement from an expected CY 2023 earnings growth of just 0.6% which in turn have indicated another year of goldilocks scenario for the US economy. In contrast, the hastened speed of 6 interest rate cuts by the Fed in 2024 projected by market participants in the interest rates futures market also implied a probable US recession-liked scenario in 2024. In addition, the latest November 2023 data of the Conference Board US Leading Economic Index (LEI) has continued to flash a recession signal reinforced by weakness in the housing and labour market. If a recession hits the US economy in the second half of 2024, earnings downgrades are likely to materialize and the initial projected S&P 500 CY 2024 earnings growth rate of +11.5% is likely to be tapered to the downside which in turn may trigger a risk-off scenario that can overshadow the initial positive feedback loop from easing liquidity conditions. Potential heightened geopolitical tension between the US and China that may also spark a risk-off scenario in the latter part of 2024; the recently concluded China’s annual economic work plan conference attended by the top leadership stated that 2024 top priority will be on building a modern industrial system with a focus on developing cutting-edge technologies and artificial intelligence. Making high-tech industrialization a key priority in 2024 is likely to invite more scrutinization from neo-conservative US politicians that may put a strain on the current US-China relationship in the run-up to the November 2024 US presidential election. There is likely to be intense debate among the presidential candidates and finger-pointing again at China’s current industrialization policy that needs to be “neutralized” due to its potential national security threat to the US. Chart Of The Year – a potential major top in USD/JPY Fig 2: USD/JPY major trend as of 2 Jan 2024 (Source: TradingView, click to enlarge chart) The price actions of USD/JPY have declined by 8% to hit an intraday low of 140.25 in December 2023 after a bearish reaction from its 151.95 long-term pivotal resistance printed in mid-November 2023. The USD/JPY has traced out a potential impending major bearish reversal “Double Top” configuration considering the developments of its price actions from October 2022 to November 2023. In addition, the weekly MACD trend indicator has flashed out a bearish divergence condition over the same period (October 2022 to November 2023) which indicates the major uptrend phase from the March 2020 low of 101.18 has started to lose upside momentum which in turn increases the odds of a multi-month corrective decline to unfold next. A breakdown with a weekly close below 137.65 support exposes the next major support zone of 130.70/127.10 (also the neckline of the “Double Top” & 50% Fibonacci retracement of the prior major uptrend phase from March 2020 low to November 2023 high). On the other hand, a clearance above 151.95 invalidates the bearish scenario to see the next major resistance coming in at 159.30 in the first step.  
Poland on the Global Investment Map:  Analyzing EBRD’s Record €1.3 Billion  Investment

USD/JPY Gains as US Dollar Recovers Against Yen, Eyes on Chicago PMI

Kenny Fisher Kenny Fisher 02.01.2024 13:17
The Japanese yen is slightly lower on Friday. In the European session, USD/JPY is trading at 141.75, up 0.27%. The US dollar has taken a tumble in recent weeks against most of the major currencies, including the yen. Since mid-November, the yen has jumped 6.4% against the ailing US dollar. This has relieved pressure on Tokyo to intervene in the currency markets, which was a serious concern just six weeks ago when the exchange rate was above 151. The Bank of Japan didn’t adjust its policy settings at the December meeting, although speculation was high that the BoJ might make a shift after Governor Ueda hinted at a change in policy before the meeting. The BoJ could make a move in January or perhaps in April, after the annual wage negotiations in March. The markets are expecting the Fed to hit the rate cut button early and often next year. The markets have priced in a rate cut by March at 86% and anticipate 150 basis points in cuts next year. The Fed is more cautious, and Fed members have urged the markets to lower these expectations. Chicago PMI expected to decelerate The US releases Chicago PMI, an important business barometer, later today. The PMI was unexpectedly strong in November with a reading of 55.8, which marked the first expansion after fourteen straight months of contraction. The 50 line separates expansion from contraction.   The upward spike may have been a one-time occurrence due to the end of the United Auto Workers strike as activity rose in the auto manufacturing industry. The consensus estimate for December stands at 51.0, which would point to weak expansion. . USD/JPY Technical USD/JPY tested support at 141.16 before reversing directions. The next support level is 140.50 There is resistance at 142.08 and 142.74  
The Commodities Feed: Oil trades softer

US Dollar Retreats as Chicago PMI Faces Deceleration; Eyes on China's PMIs for New Zealand Dollar Direction

Kenny Fisher Kenny Fisher 02.01.2024 13:15
Chicago PMI expected to decelerate China releases PMIs on Saturday The New Zealand dollar is in negative territory on Friday. In the European session, NZD/USD is trading at 0.6308, down 0.37%. The US dollar has hit a rough patch lately and retreated against most of the majors. The New Zealand dollar has been full marks, climbing some 400 basis points over the past five weeks. The Federal Reserve meeting earlier this month has boosted risk appetite, as Fed Chair Powell jumped on the rate-cut bandwagon, signalling that the Fed is finally done raising interest rates. Powell pencilled in three rate cuts next year while the markets have priced in double that. Fed members have urged caution, but the markets remain exuberant and have priced in an initial rate cut in March. Inflation is getting closer to the 2% target and with the labour market in good shape, it looks like the Fed could guide the US economy to a soft landing and avoid a recession. Chinese PMIs next New Zealand doesn’t release any tier-1 events until mid-January, but Chinese PMIs, which will be released on Saturday, could have an impact on the direction of the New Zealand dollar. China is New Zealand’s largest export market and the PMIs will provide a report card on the health of China’s service and manufacturing sectors. China’s recovery has been patchy and the slowdown has resulted in deflation in the world’s number two economy. The manufacturing sector has been stuck in contraction for most of this year and non-manufacturing expansion has been steadily falling and has stagnated over the past two months. The Manufacturing PMI is expected at 49.5 and the Services PMI at 50.3.   The US releases Chicago PMI, an important business barometer, later today. The PMI shocked in November with a reading of 55.8, which marked the first expansion after fourteen straight months of contraction. The upward spike may have been a one-time occurrence due to the end of the United Auto Workers strike as activity rose in the auto manufacturing industry. The consensus estimate for December stands at 51.0, which would point to weak expansion. . NZD/USD Technical NZD/USD tested resistance at 0.6345 in the Asian session but has reversed directions. Below, there is support at 0.6031 There is resistance at 0.6150 and 0.6195
Taming Inflation: March Rate Cut Unlikely Despite Rough 5-Year Auction

Spanish CPI Dips to 3.1%, Eurozone Awaits Inflation Data Next Week

Kenny Fisher Kenny Fisher 02.01.2024 13:14
Spanish CPI lower than expected at 3.1% Chicago PMI expected to decelerate to 51.0 The euro is calm in Friday trade. In the European session, EUR/USD is trading at 1.1053, down 0.08%. Spanish CPI dips to 3.1% Spain released the December inflation report today, with CPI dipping to 3.1% y/y, down from 3.2% in November. This was better than expected as the consensus estimate stood at 3.4%. The reading was the lowest rate since August, with the drop attributed to lower prices for fuel, food and electricity. Monthly, CPI rose from -0.3% to 0.0%, but this was lower than the consensus estimate of 0.3%. Core CPI dropped to 3.8% y/y, down from 4.5% in November. Germany, France and the eurozone will follow with their inflation releases next week. If the data shows that inflation eased in December, it will put pressure on the European Central Bank to cut rates in the first half of 2024. The ECB has not followed the Federal Reserve and continues to push back against rate-cut expectations. The markets have priced in 150 basis points from the ECB next year, with an initial cut expected in April. ECB President Lagarde has poured cold water over rate-cut fever, saying that the ECB should “absolutely not lower its guard”. Lagarde may have to shift her hawkish stance or risk tipping the weak eurozone economy into a recession. If next week’s inflation report indicates that inflation is falling, we can expect the voices in the ECB calling for looser policy to get.   The US releases Chicago PMI, an important business barometer, later today. The PMI shocked in November with a reading of 55.8, which marked the first expansion after fourteen straight months of contraction. The upward spike may have been a one-time blip due to the end of the United Auto Workers strike as activity rose in the auto manufacturing industry. The consensus estimate for December stands at 51.0, which would point to weak expansion.   EUR/USD Technical EUR/USD continues to put pressure on resistance at 1.1086. Above, there is resistance at 1.1171 1.1116 and 1.1031 are providing support  
Timing Woes: Czech Koruna Faces Pressure Amid US Inflation Surprise

Unexpected Rise in US Unemployment Claims Sparks Attention, While Fed Remains Cautious Amid Strong Labor Market

Kenny Fisher Kenny Fisher 02.01.2024 13:12
US unemployment claims higher than expected US unemployment claims, released earlier today, climbed unexpectedly to 218,000, up from an upwardly revised 206,000 a week earlier. The reading was higher than the consensus estimate of 210,000. The higher-than-expected release may garner some headlines but the Fed won’t be too concerned, as the four-week moving average, which smooths out week-to-week moves, remained almost the same as the previous four-week moving average. The US labour market has remained strong despite the Federal Reserve’s steep rate-tightening cycle. The US economy is in good shape and there is growing confidence that the Fed will be successful in guiding it to a soft landing. The markets have priced in an 86% probability of a rate hike by March but the Fed is showing more caution, with some Fed members warning that rate cuts are not necessarily imminent. Still, the fact that the Fed is on board for rate cuts next year has lifted risk appetite and sent the US dollar in retreat against the major currencies. Spain kicks off inflation releases on Friday, with Germany, France and the eurozone to follow next week. Inflation has been heading lower in the major eurozone economies and the markets have priced in up to six rate cuts next year. ECB President Lagarde has pushed back against these expectations, saying that rate cuts were not discussed at the December meeting. Spain’s CPI is expected to rise in December, with a market consensus of  3.4% y/y and 0.3% m/m. In November CPI eased to 3.2% y/y and -0.4% m/m. . EUR/USD Technical EUR/USD tested resistance at 1.1086 earlier. Above, there is resistance at 1.1144 1.1050 and 1.0992 are providing support
Hawkish Notes and Global Markets: An Overview

Tensions Rise as BoJ Monetary Policy Decision Looms: Potential Shift Away from Negative Rates

Kenny Fisher Kenny Fisher 19.12.2023 15:27
Consensus is expecting no change to BoJ’s monetary policy, but its policy statement and Governor Ueda’s press conference may signal an imminent shift away from short-term negative interest rates. Mounting pressures from public and private sectors with Economy Minister Shindo attending today’s monetary policy decision meeting as a representative from the Cabinet Office. Technical analysis suggests further potential weakness in the USD/JPY. This is a follow-up analysis of our prior report, “USD/JPY Technical: Potential JPY bullish pressure reasserts” published on 12 December 2023. Click here for a recap. In December, the JPY was the best performer among the major currencies against the US dollar where it soared by +4.85% as of 19 December at this time of the writing. The recent JPY strength has been attributed to two factors; the US Federal Reserve’s dovish pivot where it guided market participants by projecting three cuts on the Fed funds rate in 2024. In contrast, hawkish guidance from top BoJ officials made two weeks ago where Governor Ueda and Deputy Governor Himino’s remarks have dialled up speculations that the current short-term negative interest rate policy in Japan in place since 2016 is likely to be scrapped sooner than expected and may come as early on the 23 January 2024 monetary policy meeting where BoJ releases its latest economic outlook report on the same day. Today, the Bank of Japan (BoJ) will conclude its last two-day monetary policy meeting for 2023 while the consensus expectations are expecting no change to the current monetary policy setting, BoJ can still potentially lay the groundwork for its upcoming shift away from short-term negative interest rates via its policy statement and BoJ Governor Ueda’s press conference at 3.30 pm after the close of the Japan’s stock market. BoJ faced mounting pressures from the public and private sectors Interestingly, ahead of today’s monetary policy decision outcome, it seems that mounting pressure from the public and private sectors has arisen, prominent Jaan business lobby Keidanren head Tokura said yesterday that BoJ must normalize monetary policy as early as possible. Also, today’s meeting outcome will be attended by Economy Minister Shindo as a representative from the Cabinet Office who cannot vote on monetary policy decisions. It is rare for a cabinet minister to attend BoJ monetary policy meetings as such “attendee roles” are usually assigned to deputy ministers. In the past meetings that cabinet ministers attended had resulted in major monetary policy changes such as the launch of the mega quantitative asset-buying programme in April 2013. USD/JPY is hovering around the 200-day moving average Fig 1: USD/JPY medium-term trend as of 19 Dec 2023 (Source: TradingView, click to enlarge chart   The medium and short-term downtrend phases of the USD/JPY in place since a test on its 151.95 major resistance on 13 November 2023 remain intact as price actions remain below its downward sloping 20 and 50-day moving averages without a bullish divergence condition seen on its daily RSI momentum indicator at its oversold region. Short-term momentum has turned bearish Fig 2: USD/JPY short-term minor trend as of 19 Dec 2023 (Source: TradingView, click to enlarge chart In the shorter term as depicted on the hourly chart, the RSI momentum indicator has staged a bearish breakdown below its parallel ascending support after it hit overbought status yesterday, 18 December. Watch the 143.30 short-term pivotal resistance and a break below the recent 140.95 low printed last Thursday, 14 December may expose the next intermediate support at 139.20 in the first step (also the close to the 50% Fibonacci retracement of the prior medium-term uptrend phase from 16 January 2023 low to 13 November 2023 high). On the other hand, a clearance above 143.30 negates the bearish tone for a potential minor countertrend rebound to see the next intermediate resistances coming in at 144.80 and 146.70 if 144.80 is taken out.    
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BoJ Holds Steady, Yen Takes a Dive: Market Disappointment as Bank of Japan Maintains Policy Amid Speculation

Kenny Fisher Kenny Fisher 19.12.2023 15:04
BoJ makes no changes to policy or guidance Yen declines over 1% The Japanese yen is sharply lower on Tuesday. In the European session, USD/JPY is trading at 144.42, up 1.15%. The yen surged 1.95% last week but has faltered and pared most of those gains this week. BoJ maintains policy Tuesday’s Bank of Japan meeting was a live meeting, as there was speculation that the central bank might make a move after some broad hints of tighter policy from senior Bank officials. In the end, the meeting was a non-event as even a tweak in language was not to be found, and disappointed market participants gave the yen a thumbs down. The BoJ maintained its policy settings, but speculation is high that the central bank will tighten policy next year, at a time when the other major banks are loosening policy as inflation moves lower. Governor Ueda acknowledged that prices and wages are moving higher but said more time was needed to determine if a “positive wage-inflation cycle will fall in place”. Core inflation has remained above the 2% target for some 19 months, but the BoJ has argued that inflation has been driven by cost-push factors and is not sustainable. At a post-meeting press conference, Ueda rejected exiting from the Bank’s ultra-loose policy, saying that uncertainty over the outlook is “extremely high”. The markets have been exuberant since the Fed meeting last week when Fed Chair Powell penciled in three rate cuts next year. Traders are far more bullish and are betting on six rate hikes in 2024, starting in March. We’re seeing some pushback from the Fed to reign in market expectations. On Friday, New York Fed President John Williams said a rate cut in March was “premature” and even warned that rates could move higher if inflation were to stall or reverse. Cleveland Fed President Mester said on Monday that the markets are a “bit ahead” of the Fed on rate cuts, as the Fed was focused on how long it would need to maintain rates in restrictive territory, while the markets were focused on rate cuts.   USD/JPY Technical USD/JPY has pushed past resistance at 143.30 and 143.81 and is testing resistance at 144.45.  Above, there is resistance at 145.51 There is support at 142.66 and 142.15    
BoJ Set for Rate Announcement Amidst Policy Speculation, USD/JPY Tests Key Resistance

BoJ Set for Rate Announcement Amidst Policy Speculation, USD/JPY Tests Key Resistance

Kenny Fisher Kenny Fisher 18.12.2023 14:09
BoJ to make rate announcement on Tuesday Fed’s Williams says no rate cuts planned The Japanese yen is lower at the start of the week. In the European session, USD/JPY is trading at 142.77, up 0.44%. The yen continues to power higher and surged 1.9% last week. It marked a fifth straight winning week for the yen, which has climbed 6.2% during that time. The yen strengthened to 140.95 on Friday, its highest level since July 31. Will BoJ make a move? Bank of Japan policy meetings have become must-see events, with investors on edge over speculation that the central bank is planning to tighten policy. Tuesday’s meeting will be closely watched, especially after hints from senior BoJ officials that it could phase out negative rates, which would be a sea-change in policy that would likely boost the yen. The BoJ might not announce any changes at the meeting, but I doubt that will quell speculation that a policy change is coming. The BoJ tends to hold its cards close to its chest, maximizing the surprise effect of any policy moves. The BoJ has been an outlier among central banks in sticking to an ultra-loose policy while its peers were busy raising rates, and the BoJ is expected to tighten policy next year while other major central banks are looking to cut rates. The BoJ has long insisted that inflation is not sustainable, but that position has become difficult to defend, as inflation has remained above the 2% target month after month.   New York Fed President John Williams said on Friday that the Fed was not discussing rate cuts and that the Fed could tighten policy if inflation stalled or reversed directions. The markets don’t seem to be listening, however, and have priced in six rate cuts next year, starting as soon as March. At last week’s meeting, Fed Chair Jerome Powell finally jumped on the rate-cut bandwagon and said that the Fed would cut rates three times in 2024. . USD/JPY Technical USD/JPY is testing resistance at 142.61. Above, there is resistance at 143.06 There is support at 142.02 and 141.57  
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Eurozone, German Service PMI Ease in December, Euro Snaps Four-Day Rally

Kenny Fisher Kenny Fisher 18.12.2023 14:07
Eurozone, German Service PMI ease in December Euro snaps four-day rally The euro has snapped a four-day winning streak on Friday. In the European session, EUR/USD is trading at 1.0949, down 0.38%. The euro has enjoyed a strong week, with gains of 1.77%. Soft Eurozone, German services PMIs weigh on euro Eurozone Services PMI eased in December, indicating that the economy continues to struggle. The PMI fell from 48.7 to 48.1 and missed the consensus estimate of 49.0. This marked a fifth straight month of contraction in the services sector, with 50 separating contraction from expansion. Germany, the largest economy in the eurozone, also reported a decline, with the PMI falling to 48.4, down from 49.6 in November and short of the consensus estimate of 49.8. Euro soars after ECB pause The European Central Bank held the benchmark rate at 4.0% for a second straight time on Thursday. This move was expected, but the central bank pushed back against market expectations for interest rate cuts next year, sending the euro soaring 1.09% against the US dollar after the announcement. ECB President Christine Lagarde reaffirmed that the Bank would continue its “higher for longer” stance, saying that the Bank was not about to let down its guard and lower rates. Lagarde sounded hawkish even though the ECB lowered its inflation forecast at the meeting. Inflation has fallen to 2.4% in the eurozone, within striking distance of the 2% target. Lagarde acknowledged that inflation was easing but said that domestic inflation was “not budging”, largely due to wage growth.   There is a deep disconnect between the markets and the ECB with regard to rate policy. ECB President Lagarde poured cold water on expectations for rate cuts, arguing that inflation had not been beaten. The markets are marching to a very different tune and have priced in at least in around six rate cuts in 2024 and are confident that Lagarde will have to change her stance, with inflation falling and the eurozone economy likely in recession. . EUR/USD Technical EUR/USD is testing support at 1.0957. Below, there is support at 1.0905 1.1044 and 1.1096 are the next resistance lines    
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Tale of Two PMIs: UK Services Accelerate, Manufacturing Declines

Kenny Fisher Kenny Fisher 18.12.2023 14:06
UK Services PMI accelerates, Manufacturing PMI declines Bailey’s dampens rate cut expectations The British pound is steady on Friday, after posting gains of 1.1% a day earlier. In the European session, GBP/USD is trading at 1.2767, up 0.03%. UK PMIs a mix British PMIs were a mixed bag in December. The Manufacturing PMI eased to 46.4, down from 47.2 and shy of market expectations of 47.5. Manufacturers are pessimistic as the UK economy is struggling and demand for UK exports has weakened. The services sector is in better shape, as the PMI rose to 50.9, up from 53.7 in November, which marked the strongest level of growth since May. Services providers continued to show optimism about business conditions, despite the squeeze from the cost of living and elevated borrowing costs. Bailey pushback sends sterling soaring It’s been a dramatic week, with central bank rate decisions in the spotlight. On Wednesday, Fed Chair Powell shifted his hawkish stance and projected that the Fed would trim rates three times in 2024. This sent the US dollar lower against the majors. The Bank of England took the opposite approach on Thursday in its decision to hold rates at 5.25%. Governor Bailey stuck to his script of “higher for longer”. Bailey acknowledged that inflation was moving in the right direction but said in his rate statement that “there is still some way to go” and kept the door open to further rate hikes to bring inflation back down to 2%. Bailey was crystal clear in comments to reporters after the meeting, reiterating that “it’s really too early to start speculating about cutting interest rates”.   There was no mistaking Bailey’s hawkish message and the pound responded with massive gains. Still, Bailey’s view was far from being unanimous, as the MPC vote was 6-3, with three members in support of raising rates. The markets are marching to their own tune and expect a flurry of rate cuts in 2024, despite Bailey’s pushback. The markets trimmed rate-cut bets following the BoE decision but have still priced in around 100 basis points in easing in 2024. Clearly, there is a deep disconnect between the markets and Bailey & Co. with regard to rate policy.     GBP/USD Technical There is resistance at 1.2835 and 1.2906 1.2727 and 1.2653 are providing support    
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Australian Dollar Rebounds as Federal Reserve Signals Likely Pause; Focus on Job Growth and Rate Expectations - 14.12.2023

Kenny Fisher Kenny Fisher 14.12.2023 14:48
UK economy shrinks 0.3% in October Markets price in three rate cuts from the BoE next year EURGBP spikes ahead of BoE and ECB announcements tomorrow The UK economy got the fourth quarter off to a bad start, contracting by 0.3% in October from the month before. The UK economy is struggling under the pressure of higher interest rates and it seems wet weather compounded those challenges for retailers, encouraging consumers to stay indoors. There’s every chance spending bounces back in November and December, with the weather being less of a deterrent and households spending more ahead of the festive period. That said, they may well be looking at a more slimmed-down Christmas this year after two years of high inflation which could leave the economy at risk of recession. Which may explain why interest rate expectations have fallen next year.      EURGBP pares losses ahead of ECB and BoE The euro has recently clawed back some losses against the pound after slipping back toward the summer lows, which it fell just short of.     The question now is whether the pair has simply respected an established support zone or is going to take another run at it. The Fibonacci retracement levels could offer some insight on this front after such a sharp sell-off towards the end of November. There’s a potential confluence of resistance around these as well from recent areas of support – which could become resistance – to simple moving averages. A rotation around these points could be a bearish signal either in the run-up to, or after the BoE and ECB interest rate decisions on Thursday.  
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Australian Dollar Rebounds as Federal Reserve Signals Likely Pause; Focus on Job Growth and Rate Expectations

Kenny Fisher Kenny Fisher 14.12.2023 14:47
Australian dollar rebounds Australian job growth expected to decelerate Federal Reserve likely to pause for third straight time The Australian dollar is in positive territory on Wednesday, after three straight losing sessions. In the North American session, AUD/USD is trading at 0.6584, up 0.38%. Will Powell push back against rate cut expectations? Today’s Federal Reserve’s rate announcement will almost certainly be a pause, which would mark the third consecutive time that the Fed held the benchmark rate at the target range of 5.25%-5.50%. That doesn’t mean the meeting isn’t significant, as investors will be looking for clues to the Fed’s rate plans next year. The markets have scaled back their forecasts of rate cuts in 2024 after the stronger-than-expected job report on Friday and yesterday’s inflation release, which showed that inflation remains high. Earlier in December, the markets were pricing in around five quarter-point cuts in 2024 but that has been trimmed to four cuts. That view is miles apart from that of the Fed, which has insisted that it hasn’t shut the door to further rate hikes and has warned that inflation remains too high. If Powell reiterates this hawkish stance and pushes back against rate hike expectations, the market would likely be forced to again reduce expectations of a rate cut.   Australia will release the November job report on Thursday. The economy is expected to have created 11,000 jobs, compared to 55,000 in October. The unemployment rate has been inching higher and is expected to rise to 3.8%, up from 3.7% in November. The Reserve Bank of Australia has repeatedly said that future rate decisions will be data-dependent and the strength of the labour market is a key factor that will be closely watched by RBA policy makers. . AUD/USD Technical AUD/USD is testing resistance at 0.6598. Above, there is resistance at 0.6671 0.6506 and 0.6433 are providing support  
Turbulent Times for Currencies: Bank of England's Pause and Federal Reserve's Rate Cut Projections - 14.12.2023

Turbulent Times for Currencies: Bank of England's Pause and Federal Reserve's Rate Cut Projections - 14.12.2023

Kenny Fisher Kenny Fisher 14.12.2023 14:42
Short-term technical analysis suggests a potential countertrend rebound with intermediate resistance at 16,890. China’s top policymakers’ reluctance to focus on making domestic demand revival a top priority for 2024 is likely to put a damper on positive animal spirits in the long term. A focus on making high-tech industrialization a top policy may trigger more headwinds for China and Hong Kong stock markets.   This is a follow-up analysis of our prior report, “Hang Seng Index Technical: Entrenched in a downward spiral” published on 7 December 2023. Click here for a recap. The China and Hong Kong benchmark stock indices have managed to catch a positive feedback loop from yesterday’s risk-on rally triggered by the US Federal Reserve’s dovish guidance. But overall, their major downtrend phases have remained intact since February 2021 with the Hang Seng Index on track to end 2024 with a fifth consecutive yearly loss (2023 year-to-date loss is at 17% at this time of the writing); its worst performing streak since January 2002. A similar weak performance is being reflected in the China CSI 300, on sight for a third consecutive yearly loss with a current year-to-date loss of -12.7% for 2023. The persistent underperformance of China and Hong Kong stock markets against the rest of the world has been driven by past “unfriendly” private sector policies enacted in China, lingering geopolitical tensions with the US, and the right now, heightened deflationary risk spiral due to the liquidity crunch inflicted in the property market where it has a significant wealth effect on China’s society.   China’s top policymakers placed industrialization policy as the top priority for 2024   The recently concluded China’s annual economic work conference attended by the top leadership stated that next year’s priority will be on building a modern industrial system with a focus on developing cutting-edge technologies and artificial intelligence. This year’s priority of boosting domestic demand slipped to second spot for 2024. These 2024 economic goals and initiatives will be formalized and made official during the National People’s Congress, and Chinese People’s Political Consultative Conference (Two Sessions) in March 2024. Hence, it seems that low odds for a significant and sustainable revival of bullish animal spirits for China and the Hong Kong stock markets in 2024 as policymakers are still reluctant to make a shift away from the current targeted approach to adopting more broad-based stimulus measures coupled with structural moves to remove bad assets from property developers’ balance sheets to reverse the chronic weakness seen in the property market. US-China geopolitical tension may see an uptick in 2024 Also, making high-tech industrialization a key priority in 2024 is likely to invite more scrutinization from neo-conservative US politicians that may put a strain on the current US-China geopolitical theatrics that have witnessed a tense rivalry between the two superpowers in obtaining cutting-edge semiconductors chips and peripherals.   The US presidential election will be held in November 2024 and in the run-up to election day, there is likely to be intense debate among the presidential candidates and finger-pointing again at China’s current industrialization policy that needs to be “neutralized” due to its potential national security threat to the US. All in all, it is likely to trigger a bout of “uninvestable” narratives on China’s financial markets that may prevent a sustainable recovery from taking shape in 2024 for China and Hong Kong stock markets.     16,100 is the last line of defence for the Hang Seng Index Fig 1: Hang Seng Index long-term secular trend as of 14 Dec 2023 (Source: TradingView, click to enlarge chart)     The current price actions have managed to retest and held at the long-term secular ascending trendline in place since the Asian Financial Crisis’s August 1998 low now acting as support at 16,100. The long-term monthly RSI momentum indicator has continued to exhibit bearish momentum reading below key parallel resistance at the 50 level which suggests that the 16,100 key major support is vulnerable to a major bearish breakdown. A weekly close below 16,100 may trigger a potential multi-month impulsive downleg sequence within its major downtrend phase to expose the next major support at 12,200 (also the Great Financial Crisis’s swing lows area of October 2008/March 2009). Potential short-term minor countertrend rebound   Fig 2: Hong Kong 33 minor short-term trend as of 14 Dec 2023 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, price actions do not move in vertical directional movements as market participants adjust their behaviours accordingly to the latest related events and news flow. The short-term hourly chart of the Hong Kong 33 Index (a proxy of the Hang Seng Index futures) has staged a bullish breakout above the resistance of a minor descending channel from the 23 November 2023 high which increases the odds that a minor countertrend rebound motion may be in progress. Watch the 16,100 key pivotal support and a clearance above 16,500 may see the next intermediate resistance coming in at 16,890 (the downward sloping 20-day moving average & the 38.2% Fibonacci retracement of the prior down move from 16 November 2023 high to 11 December 2023 low). However, failure to hold at 16,100 invalidates the countertrend rebound scenario to expose the next intermediate supports of 15,890 and 15,500 in the first step.  
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Turbulent Times for Currencies: Bank of England's Pause and Federal Reserve's Rate Cut Projections

Kenny Fisher Kenny Fisher 14.12.2023 14:40
Bank of England expected to pause Federal Reserve projects three rate cuts in 2024 The British pound continues to move higher on Thursday. In the European session, GBP/USD is trading at 1.2648, up 0.24%. The US dollar took a tumble on Wednesday after the Federal Reserve gave the nod to rate cuts in 2024. This helped the pound recover after losing ground in the aftermath of a soft UK GDP report on Wednesday. Bank of England expected to stand pat The Federal Reserve created quite a buzz in the financial markets on Wednesday after the Fed signalled that it expected to trim rates in 2024. Will Bank of England Governor Andrew Bailey provide an encore at today’s meeting? The BoE is widely expected to maintain the cash rate at 5.25% for a third straight time. There is little doubt that the BoE’s aggressive rate-tightening is over, with inflation falling and the UK economy limping along. The key question is whether Bailey will change his stance and signal that rate cuts are on the way, as Fed Chair Powell did at the Fed meeting. Bailey has been hawkish, saying that rates will remain in restrictive territory for an extended period (“higher for longer”) and that there is more work needed to bring inflation back down to the Bank’s 2% target. Bailey has said that it’s premature to talk about rate cuts, but the markets aren’t buying it and have priced in five quarter-point rate cuts in 2024, up from three cuts just a few days ago. With a pause widely expected at today’s meeting, the rate statement and Bailey’s press conference could provide some drama and shake up the financial markets, if the BoE shifts from its hawkish stance and acknowledges that it plans to cut rates next year. Powell’s Pivot sends US dollar lower The Federal Reserve maintained the benchmark rate on Wednesday, as expected. What was somewhat surprising was the Fed Chair Powell’s sharp pivot, as he signalled that the Fed expected to trim rates three times in 2024. This forecast comes less than two weeks after Powell said it would be “premature” to speculate about the timing of rate cuts and that the door was still open to further hikes. The rate statement noted that inflation “has eased over the past year but remains elevated”, suggesting that inflation is moving in the right direction but the battle ain’t over yet. . GBP/USD Technical GBP/USD is putting pressure on resistance at 1.2669. Above, there is resistance at 1.2720 There is support at 1.2585 and 1.2534      
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Fed's Surprise: Three Rate Cuts in 2024 Propel Dow to Record Highs

Kenny Fisher Kenny Fisher 14.12.2023 14:36
Fed signals three rate cuts in 2024 ECB and BoE to announce decisions shortly Dow hits record highs after the Fed The most hotly anticipated central bank meeting of the year did not disappoint on Wednesday, with the Fed potentially delivering this year’s Santa rally. I don’t think many will have expected the Fed to go as far as it did in forecasting three rate cuts next year only three months after suggesting the tightening cycle is not over. But clearly, it’s not just investors that have been impressed with the data we’ve seen so far in the fourth quarter and now they’re getting more carried away than before. There’s been a lot of debate in recent weeks about whether investors are getting ahead of themselves, too optimistic about how quickly the Fed will cut rates but the message from the central bank is that is not the case. And in typical fashion, investors have now gone further, pricing in six rate cuts next year starting in March. That’s also forced investors to reassess whether they’re in fact too pessimistic with other central banks too, with the ECB now expected to cut rates by 150 basis points over the next 12 months and the BoE between 100 and 125 basis points. Both now have a lot to live up to today and Christine Lagarde, in particular, may not be thanking her US counterparts for whipping investors up into a frenzy right before their announcement and press conference. A repeat performance from the ECB could leave investors going into the end of the year in a much more festive mood.   New record highs in the Dow Markets got an early festive treat from the Fed, with the Dow hitting fresh record highs on the back of the Fed announcement almost two years after it last achieved that feat. US30 Daily Source – OANDA Now that it’s in uncharted territory, momentum indicators will be much more useful as we don’t have past levels to look to. And we are seeing some sign of exhaustion occurring in the MACD histogram, although not yet in the moving averages or stochastic.    
Tightening the Reins: Bank of England Resists Early 2024 Rate Cuts Despite Market Expectations

Tightening the Reins: Bank of England Resists Early 2024 Rate Cuts Despite Market Expectations

Kenny Fisher Kenny Fisher 14.12.2023 14:30
Bank of England pushes back on calls for early 2024 rate cuts Unlike the Federal Reserve, the Bank of England is clearly reluctant to endorse market pricing for rate cuts in 2024. The Bank has reiterated that rates need to stay restrictive for quite some time, but markets are probably right to expect cuts by next summer.   Bank of England keeps rates on hold The Bank of England has kept rates on hold at its final meeting of 2023. But unlike the Federal Reserve last night, the UK’s central bank is clearly much more reluctant to do or say anything that might be seen as an endorsement of market rate cut expectations. Going into the meeting, markets were pricing upwards of four rate cuts in 2024, starting from May. We only get a statement and set of minutes today, so no press conference or new forecasts. That means there were only ever going to be limited avenues for the BoE to push back on market expectations. Even so, there’s nothing particularly dovish about today’s decision. We still have three out of the nine committee members voting for an immediate rate hike, and that’s a mirror image of the November decision. There was a risk that one or two of those hawks decided to throw in the towel and join the crowd voting for no change. The immediate market reaction – stronger pound and higher two-year bond yields – suggests markets were positioned more in this direction going into the meeting. The Bank also opted against changing any of its forward guidance – that is, statements about the future direction of policy. Importantly, it repeated that rates need to “be restrictive for an extended period of time”. That’s not surprising, but it is another signal that the Bank isn’t totally comfortable with market rate cut pricing. Governor Bailey made this fairly clear in comments he made earlier this month.   Rate cuts are coming in 2024 However, markets are right to be thinking about a series of rate cuts next year. The Bank itself acknowledged in the latest statement that both private-sector wage growth and services inflation – both of which are labelled as key metrics for the BoE – have come down more than it expected. While services inflation is likely to be sticky in the 6% area into early next year, we expect both this and wage growth to reach the 4% region next summer. We think that will be a catalyst for rate cuts to begin. Our current forecast is for an August rate cut, but if markets prove right in that the Fed and ECB will have started cutting in either March or April, we wouldn’t rule out the BoE moving earlier too. Market pricing for four rate cuts next year seems about right.
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Downward Pressure on Australian Dollar as Market Awaits Consumer and Business Confidence Data, RBA Governor's Speech, and US Inflation Report

Kenny Fisher Kenny Fisher 12.12.2023 15:09
Australia releases consumer and business confidence on Tuesday The Australian dollar has posted slight losses in Monday trading. In the North American session, AUD/USD is trading at 0.6564, down 0.18%. The Aussie continues to show sharp swings and declined 1.50% last week. This snapped a three-week winning streak in which the Australian dollar surged 4.9% against its US counterpart. Australian dollar eyes consumer and business confidence Australia will release consumer and business confidence data on Tuesday. Consumer confidence fell sharply in November, as the Westpac Consumer Sentiment index declined 2.6% to 79.9, down from 82 in October. Consumers are deeply concerned about the rising cost of living and the possibility of further interest rate increases. The markets are expecting a rebound in December, with a forecast of 3.0%. The NAB Business Confidence index is expected to improve to -1 in November. The index came in at -2 in October, the first time it dropped into negative territory in four months. The zero level separates pessimism from optimism. Reserve Bank of Australia Governor Michele Bullock speaks at an event in Sydney on Tuesday and the markets will be looking for hints regarding future rate policy. The RBA held the cash rate at 4.35% at its meeting earlier this month and doesn’t meet again until February. This will give policy makers a chance to monitor the effect of elevated rates on the economy.   US nonfarm payrolls beats forecast Friday’s US nonfarm payrolls came in at 199 thousand in November, higher than the consensus estimate of 180,000 and the October gain of 150,000. Unemployment dropped from 3.9% to 3.7% and average hourly earnings rose to 0.4% m/m, up from 0.2% in October and above the market consensus of 0.3%. The strong data points to a resilient labour market despite signs that the economy is cooling down, and has reduced fears of recession. The markets are still expecting around four rate cuts in 2024, while the Fed is still talking about possible rate hikes. Tuesday’s inflation report will be closely watched by the markets, and if CPI is stronger than expected, the markets may have to tone down their expectations of a rate cut early in 2024.   AUD/USD Technical AUD/USD tested support at 0.6555 earlier. Below, there is support at 0.6523 0.6585 and 0.6613 are the next resistance lines  
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Germany 30 Index: Short-Term Bullish Momentum Exhausts, Eyes on Key Resistance at 16,910 for Potential Correction

Kenny Fisher Kenny Fisher 12.12.2023 15:06
Short-term RSI momentum indicator has flashed out bullish exhaustion condition after 6 consecutive weekly positive closes. At the risk of minor corrective decline sequence below 16,910 key short-term resistance. Intermediate supports rest at 16,590 and 16,440. This is a follow-up analysis of our prior report, “Germany 30 Technical: New intraday record high, short-term bullish trend intact” published on 6 December 2023. Click here for a recap. The Germany 30 Index (a proxy for the DAX futures) has managed to soar towards the 16,780/850 resistance zone as highlighted in our last analysis and printed a fresh all-time high of 16,829 yesterday, 12 December. Overall, the major uptrend phase from the October 2022 low of 11,795 remains intact with its major resistance zone at 17,780/18,170 (see Fig 1). Fig 1: Germany 30 long-term secular trend as of 12 Dec 2023 (Source: TradingView, click to enlarge chart) At risk of minor corrective decline after 6 consecutive weekly positive closes Fig 2: Germany 30 minor short-term trend as of 12 Dec 2023 (Source: TradingView, click to enlarge chart) In the shorter term, its medium-term uptrend phase in place since the 27 October 2023 low of 14,586 has reached overstretched conditions as it has recorded six consecutive weekly positive closes. In addition, current price actions have almost reached the upper boundary of the medium-term ascending channel with a bearish divergence condition being flashed out by its hourly RSI momentum indicator at its overbought region yesterday, 11 December. These observations suggest an increasing risk of an impending minor corrective decline sequence with 16,910 as a key short-term pivotal resistance and break down below 16,735 near-term support sees the next intermediate supports coming in at 16,590 and 16,440. However, a clearance above 16,910 negates the bearish tone to expose the next intermediate resistance at 17,100.
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UK Wage Growth Eases to 7.3%, Below Expectations, as US Inflation Set to Fall to 3.0%

Kenny Fisher Kenny Fisher 12.12.2023 14:58
UK wage growth eases to 7.3%, lower than expected US inflation expected to fall to 3.0% The British pound is drifting on Tuesday. In the European session, GBP/USD is trading at 1.2551, down 0.04%. UK wage growth falls to 7.3% Tuesday’s UK employment report was notable for the decline in wage growth. Earnings excluding bonuses rose 7.3% in the three months to October, down from 7.8% in the three months to September. This was lower than the consensus estimate of 7.4%. Wage growth is an important driver of inflation and the decline is an encouraging sign for the Bank of England. Still, earnings are rising much faster than inflation, which suggests that the BoE won’t be cutting interest rates anytime soon. Inflation has fallen to 4.6%, but this is more than double the Bank’s target of 2%. The BoE will announce its latest rate decision on Thursday and is widely expected to hold the cash rate at 5.25%. Governor Bailey has warned that rates could remain in restrictive territory for an extended period, but the markets are marching to a dovish tune and have priced in three rate cuts in 2024. Bailey has come out against expectations about rate cuts and we could see the BoE push back against rate cut speculation at the Thursday meeting. US inflation expected to ease to 3.0% The US releases November CPI later today, with a consensus estimate of 3.0% y/y, compared to 3.2% in October. Monthly, CPI is expected to remain flat, unchanged from October. Core CPI, which has been running higher than the headline rate, is projected to remain unchanged at 4.0% y/y. Monthly, the core rate is expected to inch higher to 0.3%, up from 0.2% in October. The Fed is widely expected to hold rates at a range of 5%-5.25% at the Wednesday meeting, but the inflation release could be a key factor as to what the Fed does in the upcoming months. There is a major disconnect between the markets, which have priced in four rate cuts in 2024, and the Fed, which is insisting that the door remains open to further hikes. A strong inflation report could chill market expectations for rate hikes, while a soft inflation release will provide support for the market stance and could force the Fed to reconsider its hawkish position.. GBP/USD Technical There is resistance at 1.2592 and 1.2682 1.2484 and 1.2369 are the next support levels      
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Yen Rebounds After Two-Day Slide as US Inflation Expected to Drop to 3.0%

Kenny Fisher Kenny Fisher 12.12.2023 14:57
Yen rebounds after two-day slide US inflation expected to drop to 3.0% The Japanese yen has ended a two-day slide, in which it dropped 1.4% against the US dollar. In Tuesday’s European session, USD/JPY is trading at 145.21, down 0.66%. Yen volatility continues The yen has been showing sharp swings since last Thursday, when signals from the Bank of Japan of a possible tightening in policy sent the yen soaring over 2% on Thursday. The yen then reversed directions and gave up much of those gains but has bounced back on Tuesday. The BoJ meets on December 18-19 in what has become a hotly anticipated event due to recent comments from Governor Kazuo Ueda and BoJ Deputy Governor Ryozo Himino. Ueda spoke of “an even more challenging situation” coming up for the BoJ and Himino mused about the consequences if rates were to rise into positive territory. On Monday, a report that Ueda was not referring to possible changes in rate policy sent the yen sharply lower. The takeaway is that the yen is very sensitive to talk about rate tightening and public comments from BoJ policy makers about rate policy ahead of the December meeting could have a strong impact on the yen’s movement. US inflation expected to decline to 3.0% The US releases November CPI later today, with a consensus estimate of 3.0% y/y, down from 3.2% in October. Monthly, CPI is expected to remain flat, unchanged from October. Core CPI, which has been running higher than the headline rate, is projected to remain unchanged at 4.0% y/y. Monthly, the core rate is expected to inch higher to 0.3%, up from 0.2% in October.   It’s a virtual certainty that the Fed will hold rates at a range of 5%-5.25% on Wednesday, but today’s inflation release could be a key factor as to what the Fed does in the upcoming months. There is a major disconnect between the markets, which have priced in four rate cuts in 2024, and the Fed, which is insisting that the door remains open to further hikes. A strong inflation report could temper market expectations for rate hikes next year, while a soft inflation release will provide support for the market stance and could force the Fed to reconsider its hawkish position. . USD/JPY Technical USD/JPY is putting pressure on support at 145.12. Below, there is support at 144.68 There is resistance at 145.85 and 146.89
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Canadian Dollar Strengthens as Job Growth Expected, USD/CAD Faces Resistance Amid Economic Challenges

Kenny Fisher Kenny Fisher 04.12.2023 15:05
Canada’s job growth expected to expand by 15,000 US ISM Manufacturing PMI projected to accelerate to 47.6 The Canadian dollar continues to gain ground against a slumping US dollar. In the European session, USD/CAD is trading at 1.3529, down 0.23%. The Canadian currency is poised to post a third straight winning week against the greenback and soared 2.25% in November. It is a busy Friday, with Canada releasing the employment report, the US publishing the ISM Manufacturing PMI and Fed Chair Powell speaking at an event in Atlanta. Canada’s labour market has softened but remains in good shape and has shown expansion for three straight months. The economy is expected to have added 15,000 jobs in November, slightly lower than the 17,500 reading in October. The market consensus for the unemployment rate stands at 5.8%, compared to 5.7% in October. Canada’s GDP posts negative growth This week’s GDP report was another reminder that the economy remains weak. Third-quarter GDP declined by 0.3% q/q, below the revised o.3% gain in Q2 and the first decline since the second quarter of 2021. High interest rates have cooled the economy and exports were down in the third quarter as global demand remains weak. On an annualized basis, GDP slid 1.1% in the third quarter, compared to a revised 1.4% gain in Q2 and shy of the market consensus of 0.2%. The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a prolonged slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 46.7 in October. A reading below 50 indicates contraction.   Investors will be listening closely to Jerome Powell’s remarks today, looking for hints about upcoming rate decisions. Powell has stuck to his script of a ‘higher for longer’ rate policy, but the markets have priced in a rate cut in May at 84%. . USD/CAD Technical USD/CAD tested resistance at 1.3564 in the Asian session. Above, there is resistance at 1.3665 1.3494 and 1.3434 are providing support    
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Eurozone Inflation Drops to 2.4%, ECB Faces Divergence with Market Expectations

Kenny Fisher Kenny Fisher 04.12.2023 15:04
Eurozone inflation falls to 2.4% US ISM Manufacturing PMI expected to improve to 47.6 Fed Chair Powell will deliver remarks in Atlanta The euro is showing limited movement on Friday. In the European session, EUR/USD is trading at 1.0897, up 0.09%. Eurozone inflation falls more than expected Eurozone inflation has been falling and the November report brought good tidings. Headline inflation ease to 2.4% y/y, down from 2.9% in October and below the market consensus of 2.7%. A sharp drop in energy prices was a key driver in the significant decline. Core inflation, which is running higher than the headline figure, dropped to 3.6%, down from  4.2% in October and below the market consensus of 3.9%. The soft inflation report sent EUR/USD lower by 0.74% on Thursday, but ECB policy makers are no doubt pleased by the release, as it indicates that the central bank’s aggressive tightening continues to curb inflation. Headline CPI has dropped to its lowest level since July 2021 and is closing in on the 2% inflation target. Still, core CPI, which excludes food and energy and is a better gauge of inflation trends, will need to come down significantly before the ECB can claim that the battle against inflation is over. The ECB has signalled a ‘higher-for-longer policy’, and hasn’t given any indications that it plans to cut rates anytime soon. This has resulted in a significant disconnect with the financial markets, as traders believe that the ECB will have to respond to falling inflation and weak growth by trimming rates. The markets have brought forward expectations of a rate cut to April due to the soft inflation report. Just one month ago, the markets had priced in an initial rate cut in July. It will be interesting to see if ECB President Lagarde clings to the higher-for-longer stance or will she acknowledge the possibility of rate cuts in 2024. The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a prolonged slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 46.7 in October. A reading below 50 indicates contraction.   Investors will be listening closely to Jerome Powell’s remarks today, looking for hints about upcoming rate decisions. Powell has stuck to his script of a ‘higher for longer’ rate policy, but the markets have priced in a rate cut in May at 84%. . EUR/USD Technical There is resistance at 1.0920 and 1.0986 1.0873 and 1.0807 are the next support levels
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Analyzing EURCAD: Inflation Rates, Technicals, and Sentiment Indicators

Kenny Fisher Kenny Fisher 04.12.2023 14:51
This article goes over different tools and indicators covering EURCAD, in some cases, cross-pairs can provide trade setups of a different nature as the US Dollar is partially taken out of the equation. Trading in financial markets requires an overview of different types of tools and the same applies to forex trading. Talking points Inflation Rate Overview – European Union and Canada Daily Chart Technical analysis Sentiment Indicators: Commitment of Traders report, and OANDA’s order book. Relative Rotation Graph Inflation Rate Overview – European Union and Canada   Source: Bloomberg Terminal   Inflation Rates globally are declining faster than expected and as global Central banks continue to tread carefully, traders continue to speculate on Central banks’ moves and are sometimes overwhelmed by conflicting central bankers’ comments or analyst’s opinions. Many Market participants are convinced that the recent decline in inflation suggests that Central banks should consider rate cuts, but Central banks still have concerns about inflation returning in any form. The latest CPI report from the EU shows inflation continues to decline reaching 2.4%, close to The European Central Bank (ECB) target of 2%. The current CPI may suggest that the ECB can hold interest rates at its current level but doesn’t warrant any rate cuts. ECB Nagel commented this morning that “Inflation risks are skewed to the upside”. The next CPI release is scheduled for December 19th, 2023, please check the economic calendar and your local time. In Canada, it’s a slightly different story, although the inflation rate is also declining the same as it is globally, it is declining at a slower pace than the EU. The inflation rate currently stands at 3.1%, down from its highs of 8.0% seen in June 2022. Daily Chart Technical analysis   Source: Tradingview.com   EURCAD price broke and closed below an intermediate trendline identified on the above daily timeframe chart, with no pullback to retest the broken level so far. The broken level was also a confluence of Support represented by 3 commonly used Moving average periods, EMA9, MA,9, MA21, and the monthly pivot point at 1.4800 Applying the weekly Stochastic indicator onto the Daily timeframe to smooth the readings suggests that EURCAD may be overbought and shows that %K just crossed below %D along with the break below the intermediate trendline mentioned above. Applying Daily RSI with its default period of 14 shows that RSI is so far in line with price action, however, it is currently neutral near level 50. MACD line crossed below its signal line and the Histogram is also turning bearish.       Sentiment Indicators: Commitment of Traders report, and OANDA’s order book Source: Tradingview.com   The Commitment of Traders report offers insights about positioning changes in the futures market, although delayed, it still helps as a sentiment tool in a trader’s arsenal. Comparing Position levels on the latest COT report shows that Large Speculators on both currencies are favoring long positions, however, it also suggests that the Canadian Dollar is closer to its extreme than the Euro, thus a higher probability of Sentiment change. The above chart is for EURUSD and USDCAD side by side with the COT report applied to both. (COT for Canadian Dollar is inverted, CADUSD) OANDA’s Orderbook Indicator   Source: OANDA.com   Another sentiment tool is the OANDA Orderbook Indicator, the above image reflects an aggregate view of pending entry orders on EURCAD for OANDA’s clients, the data falls under the Retail Traders category. The above image suggests that Retail traders are looking to buy as the price falls and sell as it rises, this is the typical retail trader sentiment and needs to be thought of carefully as Retail Traders can sometimes be in the opposite direction in trendy markets. The order book also reflects price levels that have the highest number of pending orders, these levels can be critical as the price continues to move regardless of direction. It is also important to note that the order book percentages include exit orders such as Stops and limits, we can continue to follow up on position percentage changes. Relative Rotation Graph   Source: Optuma.com   The Relative Rotation graph RRG (A measurement for Momentum and Relative strength) on the daily time frame shows EURUSD, GBPUSD, AUDUSD, and NZDUSD are currently in the Leading Quadrant, with EURUSD leading the pack and CADUSD attempting to catch up from the Improving quadrant. The arrow direction for all pairs except CAD is so far pointing south towards the weakening quadrant.  
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OPEC+ Tentatively Agrees to 2.2 Million Barrels per Day Cut, but Skepticism Prevails as Full Compliance Appears Unlikely

Kenny Fisher Kenny Fisher 04.12.2023 14:50
OPEC+ unofficially agree to 2.2 million barrel per day cut Full compliance with cuts already looks unlikely Brent continues to consolidate near recent lows Oil prices remain quite volatile but more importantly, not too far from their recent lows after traders judged yesterday’s announcement from OPEC+ with some skepticism. The lack of an official announcement, with details gradually appearing from individual member states indicated there’s no firm commitment to the 2.2 million barrel per day cut. And Angola insisting straight after it won’t comply further solidified that view. Saudi Arabia will be hoping that others will, in the main comply, after it committed to extending its one million barrel cut until the end of March, while Russia increased its export reduction from 300,000 to 500,000. But it seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient. Or, of course, that the lack of formal commitment hints at fractures within the alliance which could impact its ability to hit its targets, let alone cut further if necessary. If Brent breaks below its November lows, it will be perfectly clear what markets think of the deal.   rent was testing a big area of resistance ahead of the OPEC+ announcement but has since headed lower creating a very interesting setup. Brent Crude Daily Source – OANDA on Trading View An imperfect inverse head and shoulders appears to be forming with the neckline around the 200/233-day simple moving average band (red). It was also an important area of support over the last few months. A move below the recent lows around $77 though would be a very bearish development, especially against the backdrop of the OPEC+ deal.
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Spot Gold Hits All-Time High in Thin Liquidity: Geopolitical Factors and Global Recession Risks Examined

Kenny Fisher Kenny Fisher 04.12.2023 14:48
Today’s early Asian session’s swift rally to a fresh all-time high is likely to be driven by a thin liquidity trading environment rather than the Israel-Hamas geopolitical war risk premium. Spot Gold’s portfolio hedging role may gain traction as global recession risk resurfaces. Medium-term uptrend phase remains intact but may shape a minor pull-back below US$2,152 key short-term pivotal resistance with immediate supports at US$2,032/2,018. This is a follow-up analysis of our prior report, “Gold Technical: Potential multi-week bullish movement kickstarts” published on 21 November 2023. Click here for a recap.” The price actions of Spot Gold (XAU/USD) have continued to push higher since our last analysis where it clear above the short-term resistance zone of US$2,028/2,037and rallied to retest its current all-time high level of US$2,075 (printed in August 2020) on last Friday, 1 December 2023. In today’s (4 December) early Asian session before the opening of Tokyo trading hours, Spot Gold spurted upwards to hit a fresh intraday all-high of around US$2,148 before it almost gave up all its gains to trade at US$2,083 at this time of the writing. Despite an uplift in geopolitical tensions in the Middle Eastern region after Israel resumed its offensive operations against Hamas in Gaza over the weekend, the geopolitical war risk premium is not being priced in the current price actions of oil where WTI crude remained soft ex-post OPEC+ meeting and it traded lower in today’s Asian session with an intraday loss of -1.10%. Hence today’s intraday swift rally that lasted for around thirty minutes towards a fresh all-time high is likely to be driven by a thin liquidity environment at the start of the week rather than fundamental catalysts.   Potential global recession scenario is supporting a medium-term uptrend     Fig 1: US 10-year Treasury real yield medium-term trend with breakeven inflation as of 4 Dec 2023 (Source: TradingView, click to enlarge chart)     Fig 2: S&P 500 – Spot Gold ratio as of 4 Dec 2023 (Source: TradingView, click to enlarge chart) The next golden question will be is the current medium-term uptrend for Spot Gold sustainable after a rally of +18% from its 6 October 2023 low, and a third major retest on the US$2,075 high printed on 7 August 2020? Using an intermarket analysis approach (see Fig 1 & 2), the medium-term uptrend phase low of 6 October 2023 seen in Spot Gold has coincided closely with the recent softness of the US 10-year Treasury real yield as it has declined by 47 basis points from 2.47% printed on 6 October 2023. Also, the US 10-year breakeven rate (market-based implied US inflation rate 10 years from today) is looking vulnerable for a bearish breakdown below 2.10% suggesting that the US 10-year Treasury real yield still has room for further potential downside that in turn lowers the opportunity costs of holding gold. Secondly, the long-term monthly ratio chart of the US S&P 500 against Spot Gold has continued to exhibit potential S&P 500 underperformance against Spot Gold as it has remained below a former major ascending support from August 2011 low with bearish momentum reading seen in the monthly RSI indicator of the S&P 500 – Spot Gold ratio; a sign of a potential imminent US recession.  
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AUD/USD Starts Week in Decline Ahead of RBA Rate Decision

Kenny Fisher Kenny Fisher 04.12.2023 14:37
AUD/USD lower on Monday RBA likely to maintain rates on Tuesday The Australian dollar has started the week in negative territory. In the European session, AUD/USD is trading at 0.6648, down 0.40%. The Australian dollar is coming off a strong week, with gains of 1.38%. RBA expected to hold rates The Reserve Bank of Australia is expected to hold rates at 4.35% at its Tuesday rate meeting. The central bank has paused for four straight months and the markets don’t expect any further hikes. Still, the RBA could send a hawkish message along with the pause to dampen speculation about a rate hike in 2024, with inflation still high at 4.9%, which is well above the 2% target. Powell sends mixed message, dollar slumps Federal Reserve chair Jerome Powell spoke on Friday, and his split message sent the US dollar sharply lower against most of the majors, including the Australian dollar which jumped 1.06%. Powell noted that monetary policy is “well into restrictive territory” and that inflation is “moving in the right direction”. The markets interpreted these remarks as signals that the Fed is done with rate tightening. Although Powell warned that it was premature to assume that the Fed had achieved a “sufficiently restrictive stance”, investors viewed the remarks as dovish and the US dollar fell sharply.   The futures markets have priced in a rate cut in March at 59% and in May at 87%, according to the CME FedWatch tool. The Fed clearly doesn’t share this stance, as most Fed members who spoke last week supported the case for holding rates at current levels for some time. This disconnect between the Fed and the markets is likely to continue as the Fed is unlikely to discuss rate cuts while inflation remains above the 2% target. The markets are looking at a rate cut in late 2024, but a lot could happen until then. If the economy cools more quickly than expected, the RBA would have to give thought to cutting rates in order to boost growth.   AUD/USD Technical AUD/USD tested support at 0.6639 earlier. Below, there is support at 0.6603 0.6712 and 0.6748 are the next resistance lines
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New Zealand Retail Sales Hold Steady in Q3 as US PMIs Awaited

Kenny Fisher Kenny Fisher 27.11.2023 15:45
New Zealand retail sales flatline in Q3 US releases PMIs later today The New Zealand dollar has posted slight gains on Friday. In the European session, NZD/USD is trading at 0.6059, up 0.17%. The New Zealand dollar is headed to a second-straight winning week and has sparkled in November, with gains of 4% against the US dollar. New Zealand retail sales unchanged The New Zealand consumer hasn’t been in the mood to spend and the markets were braced for a decline in third-quarter retail sales. The news was better than expected, however, as retail sales were flat at 0.0% q/q, breaking a streak of three straight losing quarters. The improvement in retail sales points to resilience in the New Zealand economy. On an annual basis, retail sales came in at -3.4%, little changed from the second-quarter reading of -3.5%. The sharp decline is a result of the central bank’s aggressive tightening and an inflation rate of 5.6%, which is very high and well above the 1%-3% target band. The Reserve Bank of New Zealand meets on November 29th and is expected to leave the cash rate unchanged at 5.5%. The RBNZ has held rates three straight times and market speculation is rising that the RBNZ will pivot and trim rates in 2024. The RBNZ is unlikely to send any signals about cutting rates, however, especially with inflation well above the target. I expect the RBNZ to maintain its ‘higher for longer’ policy, which would mean further rate pauses well into 2024. This would provide RBNZ policy makers the flexibility to raise rates if inflation unexpectedly rises or to trim rates once inflation drops closer to 3%, which is the top of the target range, without risking a loss of credibility.   The US wraps up the week with the release of manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If either of the PMIs miss expectations, that could translate into volatility from the US dollar in the North American session. . NZD/USD Technical NZD/USD continues to put pressure on resistance at 0.6076. The resistance line 0.6161 There is support at 0.5996 and 0.5885    
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Turbulent Times: German GDP Contracts in Q3, US PMIs Awaited

Kenny Fisher Kenny Fisher 27.11.2023 15:44
German GDP shrinks in Q3 US to release manufacturing and services PMIs The euro is almost unchanged on Friday. In the European session, EUR/USD is trading at 1.0903, down 0.03%. German economy declines German GDP posted a minor drop in the third quarter, coming in at -0.1% q/q. This was down slightly from -0.1% in the second quarter and matched the market consensus. On an annualized basis, GDP declined by 0.4%, down from a revised o.1% gain in Q2 and missing the market consensus of -0.3%. The consumer spending component of GDP decelerated in the third quarter and was a key driver of the decline in GDP. German consumers remain in a sour mood and are being squeezed by rising interest rates and a high inflation rate of 3.8%. The German business sector is also pessimistic about economic conditions. The Ifo Business Climate index managed to climb to 87.3 in November, up from 86.9 in October but below the market consensus of 87.5. A reading below 100 indicates that a majority of the companies surveyed expect business conditions to deteriorate in the next six months. Earlier this week, German services and manufacturing PMIs pointed came in below 50, which points to contraction. The manufacturing sector is particularly weak and has been in decline since June 2022. It has been a relatively light week for US releases, with markets back in action after the Thanksgiving holiday. Later today, the US releases manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November are 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If the readings diverge significantly from the estimates, we could see some strong movement from the US dollar before the weekend.   EUR/USD Technical There is resistance at 1.0943 and 1.0997 1.0831 and 1.0748 are providing support  
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Germany 30 Index Shows Continued Positive Elements Amid Short-Term Uptrend

Kenny Fisher Kenny Fisher 27.11.2023 15:42
Key elements remain positive that support the ongoing short-term uptrend phase. Watch the key short-term support at 15,930. Next intermediate resistance stands at 16,200. Fig 1: Germany 30 minor short-term trend as of 24 Nov 2023 (Source: TradingView, click to enlarge chart) Since its bullish breakout from its former medium-term descending channel resistance last Tuesday, 14 November, the price actions of the Germany 30 Index (a proxy for the DAX futures) have continued to exhibit positive elements. Oscillating within a short-term uptrend phase since end of October 2023 Firstly, it has continued to oscillate within the upper half of a minor ascending channel in place since the 27 October 2023 low of 14,586.   Secondly, the hourly RSI momentum indicator managed to stage a rebound from key parrel support at the 45 level without any prior bearish divergence condition at its overbought condition which suggests that short-term bullish momentum remains intact. Watch the 15,930 key short-term pivotal support (the median line of the minor ascending channel & minor congestion area of 21/23 November 2023 and a clearance above 16,050 near-term resistance sees the next intermediate resistance coming in at 16,200 (upper boundary of the minor ascending channel & Fibonacci extension cluster. On the flip side, failure to hold at 15,930 negates the bullish tone for a minor corrective decline towards the next intermediate support zone of 15,660/560 (also the 200 and 20-day moving averages).
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Japanese Core Inflation Edges Up to 2.9%, Adding Pressure on BoJ; US PMIs Awaited for Economic Insights

Kenny Fisher Kenny Fisher 27.11.2023 15:42
Japanese core inflation rises US PMIs expected to show little change The Japanese yen is unchanged on Friday, trading at 149.57. Japan’s core inflation rises to 2.9% Japan’s core CPI rose slightly in October to 2.9% y/y, up from 2.8% in September and just below the consensus estimate of 3.0%. The core CPI print excludes fresh food but includes energy. Core CPI has now exceeded the Bank of Japan’s 2% target for 19 consecutive months. Headline inflation jumped to 3.3% y/y, up from 3.0% in September and above the market consensus of 3.2%. The acceleration in inflation will put further pressure on the BoJ to tighten its ultra-loose policy. There is growing speculation that the BoJ could raise interest rates from -0.1% to zero early in 2024. The BoJ is known to be very tight-lipped and there’s little chance of any communication with the markets with regard to a shift in policy. What is clear is that any move away from the current policy could cause market turmoil and hurt Japan’s fragile economy. Still, with inflation remaining stubbornly high, a shift in monetary policy is likely only a question of time. The Bank of Japan meets next on December 19th. Once dull affairs that barely made the radar of investors, the meetings are now closely watched on expectations that the BoJ could change policy, which would be a sea-change after years of ultra-loose policy. The US wraps up the week with the release of manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy.   The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). The manufacturing sector has been particularly weak, with the PMI indicating declines over most of the past year. If either PMI misses expectations, the US dollar could show stronger movement. . USD/JPY Technical 149.29 and 148.54 are providing support There is resistance at 150.22 and 151.25  
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EURGBP Faces Pressure as Germany Nears Double-Dip Recession and Grapples with Budget Uncertainty"

Kenny Fisher Kenny Fisher 27.11.2023 15:40
German double-dip recession likely after 0.1% contraction in Q3 UK consumer confidence improves but remains weak EURGBP appears to fail again near range high German uncertainty weighing on the single currency The euro is slipping against the pound at the end of the week with economic data highlighting the challenges facing the bloc. Nowhere is that more evident than in Germany which appears to be on the brink of a double-dip recession and facing immense uncertainty over its budget for next year as it scrambles to patch up finances for this one. A supplementary budget next week alongside a proposal to suspend the debt brake now looks likely but even this is just a temporary solution that won’t give investors much confidence in the outlook for an economy already under significant strain. The economy was confirmed to have contracted by 0.1% in Q3 this morning and as we move into the final month of Q4, it’s looking likely data early next year will confirm the country is back in recession. The Ifo business climate survey was a little better and appears to be turning a corner which is hopefully a good sign but at 87.3, it’s still printing figures near historical lows. The early months of the pandemic were understandably much worse, as you’d imagine, but that aside, recent readings have fallen close to 2001 and 2009 levels. UK consumers buoyed by improving real earnings UK consumer confidence is also gradually improving, albeit from very weak levels. At -24, the Gfk survey is 25 points from last September’s lows but still some way below all surveys from mid-2013 through to the pandemic. Still, the direction of travel is more promising and inflation is now running below wage growth which should continue to support that.     A big test of technical support The euro has been struggling near range highs against the pound for a number of weeks but that now appears to be turning into some weakness in the pair. EURGBP Daily Source – OANDA on Trading View Not only did it not break the range highs, it’s now trading at a more than two-week low and testing what could prove to be a key support level. The lower part of the rising channel coincides with the bottom of the 200/233-day simple moving average band. A move below here could be viewed as a very bearish signal and would take the pair much deeper into correction territory. Arguably it could just reaffirm its position in a sideways channel, where it’s traded since May. And based on the size of the rising channel which could be viewed as a slanted double top, a breakout could be seen as a sign of a much deeper correction to come.  
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Multi-Week Correction Looms for CHF/JPY as Bearish Momentum Grows

Kenny Fisher Kenny Fisher 27.11.2023 15:40
Bearish readings seen in the daily and hourly RSI momentum indicators have reinforced the weakening medium-term and short-term impulsive up moves of CHF/JPY. Watch the key short-term resistance at 169.65 for CHF/JPY. The major uptrend phase of the CHF/JPY has started to show signs of bullish exhaustion at this juncture which increases the risk of a multi-week corrective decline to retest its 50-day moving and the median line of a major ascending channel in place since 13 January 2023 low, acting at a support zone of 166.55/165.10.       Fig 1:  CHF/JPY major & medium-term trends as of 27 Nov 2023 (Source: TradingView, click to enlarge chart) The medium-term bullish momentum of CHF/JPY from the 3 October 2023 low of 160.00 has started to dissipate where the daily RSI momentum indicator has staged a recent bearish breakdown on 20 November and retested its former parallel support at the 60 level.     Watch the key short-term resistance at 169.65   Fig 2:  CHF/JPY minor short-term trend as of 27 Nov 2023 (Source: TradingView, click to enlarge chart)     In the shorter time frame as seen on the 1-hour chart, the price actions of CHF/JPY have started to oscillate within an impending minor descending channel from its recent all-time high print of 170.54 on 16 November 2023. Also, the hourly RSI momentum indicator has flashed out a bearish divergence condition at its overbought region. All in all, these observations have advocated the start of a potential multi-week corrective decline scenario for CHF/JPY. If the 169.65 key short-term pivotal resistance is not surpassed to the upside, the CHF/JPY cross pair may see a slide to retest the near-term support of 168.00 (also the 20-day moving average), and below it exposes the next intermediate supports at 166.55 and 165.90 next (also the 50-day moving average and the lower boundary of the minor descending channel). However, a clearance above 169.65 invalidates the bearish scenario for a retest on the 170.50 major resistance.   Fig
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Australian Dollar Surges, Eyes on Retail Sales Amid RBA Overhaul Plans

Kenny Fisher Kenny Fisher 27.11.2023 15:38
Australian dollar extends gains Australian retail sales expected to decelerate to 0.1% The Australian dollar has extended its gains at the start of the week. In the European session, AUD/USD is trading at 0.6603, up 0.28%. The Aussie has posted an impressive streak, rising 3.8% against the greenback since November 14th. Australia releases retail sales for October on Tuesday. The consensus estimate stands at a negligible 0.1%, compared to a strong 0.9% gain in September. The sharp gain, which indicated resilience in consumer spending, provided support for the RBA to raise rates at the November meeting. If retail sales misses the estimate, it could sour sentiment towards the Aussie and send the currency lower. RBA Governor Michele Bullock will speak at an event in Hong Kong on Tuesday and investors will be looking for hints about what the RBA is planning at its meeting on December 5th. RBA to undergo major overhaul Changes, big changes are coming to the Reserve Bank of Australia. The Australian government announced it would introduce legislation to overhaul the central bank. This follows an independent review which called for sweeping changes at the RBA. There has been much criticism of the RBA for its pledge not to raise rates before 2024, only to embark on a tightening campaign which has raised the cash rate to 4.35%. The new Governor, Michele Bullock, has said she is favour of the changes. Last week, Bullock said on Tuesday that inflation has peaked and that the upside risk to inflation was domestic and demand-driven. Bullock noted that inflation had dropped from 8.0% to 5.5% in less than a year, but it would take much longer for inflation to drop that amount again and fall to 3%. The RBA’s target range is 2%-3%. The RBA remains hawkish and raised rates earlier this month after holding rates for four straight times.  
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Canada's Inflation Slides to 3.1% as Fed Signals Continued Caution: USD/CAD Reaction

Kenny Fisher Kenny Fisher 23.11.2023 15:37
Canada’s inflation rate falls to 3.1% Fed minutes indicate rates to remain restrictive The Canadian dollar continues to have a quiet week. In the North American session, USD/CAD is trading at 1.3723, up 0.14%. Canada’s inflation declines to 3.1% Canada’s inflation rate fell to 3.1% y/y in October, down sharply from 3.8% in September and below the consensus estimate of 3.2%. Monthly, inflation edged up to 0.1%, up from -0.1% in September and matching the consensus estimate. Two key core rate gauges dropped to an average of 3.55%, down from 3.8% in September. The drop in inflation is an encouraging sign for Bank of Canada policy makers that its rate policy is working, as inflation continues to head lower. For the markets, the decline will support expectations that the current tightening cycle is done and that the central bank will trim rates in mid-2024. The inflation print has likely closed the door on further hikes, but don’t expect to hear that from anyone at the BoC, which doesn’t want to give a false impression that inflation has been beaten, as there is still more work to do to reach the 2% target. Fed preaches caution At the November meeting, Fed Chair Powell said in his post-meeting remarks that the Fed would have to exercise caution. Tuesday’s FOMC minutes echoed Powell’s comments and also mentioned the need to “proceed carefully”. The minutes gave no indication that members had discussed rate cuts, noting that members felt that the current policy was restrictive and pushing inflation lower. The markets have a different take and have priced in a rate cut sometime in mid-2024, with inflation falling and the US economy continuing to lose steam. The Fed will likely continue to sound hawkish and warn that rate hikes are still on the table, but is anyone listening?   USD/CAD Technical USD/CAD is testing resistance at 1.3741. Above, there is resistance at 1.3776 There is support at 1.3660 and 1.3628  
ECB Warns of Financial Stress, Fed Maintains Caution: Euro Reacts

ECB Warns of Financial Stress, Fed Maintains Caution: Euro Reacts

Kenny Fisher Kenny Fisher 23.11.2023 15:34
ECB financial stability review warns of stress Fed minutes point to rates remaining restrictive The euro is in negative territory on Wednesday. In the North American session, EUR/USD is trading at 1.0864, down 0.42%. ECB says banks showing stress The ECB released its semi-annual financial stability review earlier today and warned of stress in financial stability in the eurozone. The report found that tighter financial conditions were making it difficult for households, businesses and governments. In short, the financial stability outlook remains fragile. The review warned that the Israel-Hamas war posed the risk of affecting the supply of oil, which could push inflation higher and dampen growth. The economic picture in the eurozone is not encouraging, as the eurozone economy is stagnating and Germany, once a global powerhouse, has become a deadweight in the eurozone with its weak economy. The euro has jumped 2.8% against the US dollar in November, but that is more a case of US dollar weakness due to expectations of rate cuts in the US rather than strength in the euro. In the US, unemployment claims were lower than anticipated, coming in at 209 thousand. This was below the market consensus of 225,000 and the previous revised release of 233 thousand. The reading indicates that the labour market is still showing signs of strength, which supports the Federal Reserve’s rate policy of higher for lower. The Federal Reserve minutes of the November meeting stated that the Fed plans to proceed with caution and will be keeping an eye on the data in making future rate decisions. The minutes made no reference to any discussion at the meeting about rate cuts, consistent with Jerome Powell’s comments after the meeting that the Fed “is not thinking about rate cuts at all”. The markets would beg to disagree and have priced in a rate cut in mid-2024.   EUR/USD Technical There is resistance at 1.0951 and 1.1017 1.0831 and 1.0748 are providing support    
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Nikkei 225 Analysis: Medium-Term Uptrend Amid Economic Downgrade and Correlation Flip

Kenny Fisher Kenny Fisher 23.11.2023 15:29
Recent price actions of the Nikkei 225 are still trading above its 20-day moving average despite the latest official downbeat assessment of Japan’s economy. Significant correlation flip between USD/JPY and Nikkei 225 may persist as a weaker JPY may not be a main driver to drive up the price actions of Nikkei 225. A strengthening JPY may see the outperformance of consumer-oriented TOPIX equities sectors such as Retail Sales and IT & Services. A new medium-term uptrend may have kickstarted in Nikkei 225, watch the 32,090 key medium-term support. Japan’s government on this Wednesday, 22 November downgraded its assessment for the first time in ten months, citing economic growth in Japan has recovered moderately but appeared to be pausing due to weak domestic demand. The benchmark Nikkei 225 has continued to trade above its upward-sloping 20-day moving average since the start of this month, November, and rallied by +11% from its key swing low area of 30,530 printed on 4 and 24 October 2024. The latest official downbeat economic assessment has not derailed the current bullish tone of the Nikkei 225 as it has managed to remain above the “gapped up” support of 32,820 formed on last Wednesday, 15 November; the effect in a global risk-on herding behaviour reinforced by the softer than expected US CPI print for October that was released on last Tuesday, 14 November (current level of Nikkei 225 is at 33,452 as of 22 November).   Significant correlation flip between Nikkei 225 & USD/JPY   Fig 1: Correlation trends between Nikkei 225, USD/JPY & S&P 500 as of 22 Nov 2023 (Source: TradingView, click to enlarge chart) Interestingly, the previous long-term traditional high direct correlation between the movements of the Nikkei and USD/JPY has broken down based on its latest 20-day rolling correlation coefficient reading of -0.15. From a fundamental standpoint, a persistently weaker JPY (where the JPY has depreciated by as much as 15.9% against the US dollar since the start of 2023) is likely to have a more detrimental effect now on Japan’s economy due to the risk of higher imported inflation which in turn drives up imported energy costs for resources-scare Japan. Moreover, oil prices are likely to remain sticky on the upside in the medium term as OPEC+ leading member, Saudi Arabia seems to be still in favour of extending current oil supply cuts into 2024. Therefore, a stronger JPY is much needed for Japan at this juncture to negate the risk of elevated imported inflation that can dent business and consumer confidence which in turn dampens internal domestic spending. Hence, this latest narrative explains the current “correlation flip” between USD/JPY and Nikkei 225.   Consumer-oriented TOPIX equities sectors may benefit from a stronger JPY   Fig 2: 1-month rolling performance of the 17 TOPIX sectors as of 22 Nov 2023 (Source: TradingView, click to enlarge chart)   In the past week, the JPY has started to strengthen against the US dollar driven by more of an increasing expectation of a dovish tilt from the US Federal Reserve rather than a hawkish Bank of Japan’s modus operandi. The JPY has been appreciated by as much as around +3% against the US dollar since last Monday, 13 November and it has started to translate to an uptick in bullish sentiment seen in the Japanese equities sectors that are tied to business and consumer confidence and domestic spending. Based on the one-month rolling performance of the 17 TOPIX sectors as of 22 November 2023, Retail Trade (+7.59%) and IT & Services (+7.13%) have started to show outperformance against the broader TOPIX index (+5.98%).   Potential start of new medium-term uptrend for Nikkei 225   Fig 3: Nikkei 225 medium-term trend as of 22 Nov 2023 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, the recent bullish momentum seen in the Japanese stock market is likely to trigger the potential start of a medium-term (multi-week to multi-month) uptrend phase in the Nikkei 225 after the -9.5% corrective decline seen from 16 June to 24 October 2023. The current price action of the Nikkei 225 as of 22 November is retesting a 33-year swing high of 33,770 after an initial pull-back seen on Monday to Tuesday. Meanwhile, the daily RSI momentum indicator has continued to exhibit positive momentum readings after its earlier bullish momentum breakout and retest on 7 November 2023. If the 32,090 key medium-term pivotal support holds, a clearance above 33,770 is likely to see the next medium-term resistance coming in at 36,600. However, a break below 32,090 sees another round of corrective decline to retest the 200-day moving average that also confluences closely with swing low areas of 4/24 October 2023, acting as a support at 30,530.    
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Euro Gains Ground as German and Eurozone PMIs Show Improvement Despite Continuing Contraction

Kenny Fisher Kenny Fisher 23.11.2023 15:28
German, Eurozone PMIs accelerate The euro is trading slightly higher on Thursday. In the European session, EUR/USD is trading at 1.0917, up 0.27%. German PMIs accelerate but still in decline German PMIs were released earlier today, presenting a cup-half-full-half-empty picture. Let’s start with the good news. German Manufacturing PMI hit a six-month high and the Services PMI a two-month high and both beat the forecasts. However, both manufacturing and services remain in contraction, as the eurozone’s largest economy continues to sputter. The Manufacturing PMI rose to 42.3 in November (Oct: 40.8) and beat the consensus estimate of 41.2. Services PMI climbed to 48.7 in November (Oct: 41.2) and edged above the market consensus of 48.5. Manufacturing has been in decline since June 2022 and services has posted four declines. The downturn in the struggling German economy has eased a bit and that bit of positive news has given the euro a slight boost today.  The eurozone PMIs also showed a slight improvement but remain in contraction territory. The soft PMIs suggest that growth in Germany and the eurozone will likely continue to slow, and that could mean disappointing GDP prints for the fourth quarter. Germany’s economy is expected to contract by 0.3% in 2023, while the eurozone is expected to grow by 0.6%. Germany, which not too long ago was a global economic powerhouse, is looking more like the sick man of Europe. US markets are closed for Thanksgiving, which means we’re unlikely to see much movement with the US dollar. That could change on Friday, with the release of US manufacturing and services PMIs. The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). An unexpected reading from either PMI could shake up the US dollar.   EUR/USD Technical EUR/USD is testing resistance at 1.0888. Above, there is resistance at 1.0943 1.0831 and 1.0784 are providing support    
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New Zealand Dollar Gains as Retail Sales Face Expected Decline, US Markets Quiet for Thanksgiving

Kenny Fisher Kenny Fisher 23.11.2023 15:26
New Zealand retail sales expected to decline by 0.8% US markets closed for Thanksgiving The New Zealand dollar is in positive territory on Thursday. Early in the North American session, NZD/USD is trading at 0.6042, up 0.34%. Will New Zealand retail sales continue declining? Retail sales are a key gauge of consumer spending and the New Zealand consumer has been holding tightly to the purse strings. In the second quarter, retail sales fell 1% q/q, with most retail industries showing lower sales volumes. This marked a third consecutive losing quarter. The markets are bracing for another decline for Q3, with a consensus estimate of -0.8%. The soft retail sales data isn’t really surprising as consumers are being squeezed by high inflation and elevated borrowing costs. The decrease in household purchasing power has meant a decline in spending. High interest rates are still filtering through the economy, which could further dampen consumer spending in the fourth quarter. The Reserve Bank of New Zealand has put a pause on rates for three straight times, which has naturally raised speculation that the central bank has completed its tightening cycle, which has brought the cash rate to 5.5%. Inflation in the third quarter eased from 6.0% to 5.6% y/y in the third quarter and this decline means that there is a strong likelihood that the RBNZ will hold rates at the November 27th meeting. US markets are closed for the Thanksgiving holiday, which means we’re unlikely to see much movement today with the US dollar. That could change on Friday, with the release of US manufacturing and services PMIs. The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If either of the PMIs miss expectations, that could translate into volatility from the US dollar.   NZD/USD Technical NZD/USD is putting pressure on resistance at 0.6076. The resistance line 0.6161 There is support at 0.5996 and 0.5885    
The British Pound Faces Further Breakdown Amidst Dollar Strength and Government Shutdown Risks

The British Pound Faces Further Breakdown Amidst Dollar Strength and Government Shutdown Risks

Kenny Fisher Kenny Fisher 27.09.2023 13:41
UK Mortgage approvals expected to continue to drop No major revisions expected with Q2 GDP report BOE overnight index swaps price in a peak rate of 5.369% at the Feb 1st meeting US Government Shutdown risk remains as Senate negotiators propose stopgap solution The British pound looks like it is heading for a further breakdown as dollar strength appears to be resuming.  Technical traders trying to find a bottom are getting frustrated as oversold conditions deepen and on doubts that a DeMark Buy countdown might yield a meaningful rebound.  The bearish trend has steadily broken below several key technical levels and weekly support from 1.2114 seems to be the next target.         The recent surge with the dollar was also supported by safe-haven flows from rising American government shutdown fears, so a potential stopgap solution could allow for the dollar rally to pause.  After the NY close a tentative proposal between Senate Republicans and Democrats would keep agencies functioning through mid-November. The potential solution fund federal agencies at current levels for another 45 days, with little support given towards Ukraine or disaster relief.  It isn’t clear if they have enough votes to avert an October 1st showdown, but momentum is growing for a band-aid solution. If risk aversion remains the dominant theme of the week, it will be hard for the British pound to find key support.  Unless Treasury yields tumble and disinflation signs grow, short-term dollar strength seems likely.    
Australian Inflation Rises to 5.2%: Impact on AUD/USD Exchange Rate

Australian Inflation Rises to 5.2%: Impact on AUD/USD Exchange Rate

Kenny Fisher Kenny Fisher 27.09.2023 13:24
Australia’s inflation rises to 5.2% The Australian dollar has extended its losses on Wednesday and has dropped 1% on the week. In the European session, AUD/USD is trading at 0.6374, down 0.35%. The Australian dollar finds itself perilously close to 0.6357, an 11-month low. Australian inflation rises due to higher fuel costs Australia’s inflation rate rose 5.2% y/y in August, up from 4.9% y/y in July and matching the consensus estimate. This marked the first acceleration in inflation since April, due in large part to higher fuel prices, which also contributed to a high monthly reading of 0.8%, up from 0.3% in July. A key core inflation indicator eased to 5.5% y/y, down from 5.8% y/y in July. The inflation data didn’t have much of an effect on the markets, which are widely expecting a fourth straight pause from the Reserve Bank of Australia in October. The markets are viewing the uptick in inflation as a temporary blip and expect the overall downward trend to continue, with expectations for a rate hike in May 2024. The RBA meets next week, the first meeting since Michelle Bullock took over as the RBA Governor. Bullock has stressed that the door is open to further rate hikes and rate decisions will depend on the data. This stance is not surprising as the central bank does not want to state that rates have peaked while inflation remains well above the 2% inflation target. I expect the RBA to reiterate this view at the meeting.   A key question is whether Bullock will stick to hawkish rhetoric but continue to pause, or will she deliver one final rate hike before the end of the year. That decision will largely be based on economic data, such as the third-quarter inflation report in the last week of October.   AUD/USD Technical AUD/USD is testing support at 0.6380. The next support line is 0.6320 There is resistance at 0.6446 and 0.6506  
BOJ's Ueda: 2% Inflation Target Not Yet Achieved as USD/JPY Pushes Above 149

BOJ's Ueda: 2% Inflation Target Not Yet Achieved as USD/JPY Pushes Above 149

Kenny Fisher Kenny Fisher 26.09.2023 14:55
BoJ Ueda says 2% inflation target not yet achieved USD/JPY pushes above 149 The Japanese yen is unchanged on Tuesday, trading at 148.85. BOJ’s Ueda says monetary policy to continue The Bank of Japan maintained its policy settings on Friday, which really should not have been all that surprising, given the dovish messages that BoJ Governor Ueda and other BoJ members have been sending out for weeks. The BoJ does not appear to be in any rush to phase out its ultra-loose stimulus, given the weakness in Japan’s economy. Domestic consumption remains weak and the slowdown in the global economy is hurting the critical export sector. BoJ Governor Ueda reiterated this stance on Monday, stating that the 2% target of “stable, sustainable” inflation was not yet in sight. Ueda acknowledged that inflation had exceeded 2% for a “prolonged period”, but that was not enough to indicate that the target of stable and sustainable 2% inflation had been achieved. Ueda added that the BoJ would continue to patiently maintain its monetary stance. Inflation has remained above 2% for close to 1.5 years, but that does not seem sufficient for the BoJ. Earlier today, the BoJ Core CPI index, which is closely monitored by the central bank, remained unchanged at 3.3% in August, above the market consensus of 3.2%.   The yen has paid the price for the BoJ’s insistence on maintaining an ultra-loose policy and has had only one winning week against the dollar since July. The US/Japan rate differential continues to rise as Japanese yields stay put while US Treasury yields continue to move higher. USD/JPY broke above the 149 line on Tuesday and the symbolic 150 level seems very close at hand. Japanese officials have responded with some rhetoric about their concern over the depreciating yen and the threat of intervention is rising as the yen falls lower.   USD/JPY Technical There is resistance at 149.19 and 149.93 USD/JPY tested support at 148.79 earlier. Below, there is support at 148.05    
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New Zealand Services PMI Declines, US Manufacturing Data Improves, and Consumer Sentiment Falls

Kenny Fisher Kenny Fisher 19.09.2023 14:03
New Zealand Services PMI declines US manufacturing data climbs, consumer sentiment falls The New Zealand dollar has started the week in positive territory. NZD/USD is trading at 0.5918 in the North American session, up 0.34%. New Zealand’s Services PMI declines New Zealand’s Services PMI eased to 47.1 in August, down from 47.8 in July. The reading marked a third straight decline in activity and was the lowest level since January 2022. This comes on the heels of Friday’s Manufacturing PMI, which fell to 46.1 in August, down from 46.6 a month earlier. This was the sixth consecutive month of contraction (the 50.0 line separates contraction from expansion). The Reserve Bank of New Zealand has been forecasting a recession and the weak PMIs support this view. New Zealand’s economy has cooled down due to the central bank’s steep tightening and global demand has weakened, most notably with China experiencing a slowdown and deflation. The RBNZ paused at the August meeting and interest rates may have peaked. If economic data remains weak, I would expect the RBNZ to prolong the pause at next month’s meeting. The US ended last week with mixed releases. The Empire State Manufacturing Index surprised and jumped to 1.9 in September, up from -19 in August and above the market consensus of -10. The UoM consumer sentiment index slowed to 67.7 in September, down from 69.5 in August and shy of the market consensus of 69.1 points. Inflation Expectations fell to 3.1% in August, down from 3.5% in July and the lowest level since March 2021. This is another sign that inflation is weakening and supports a pause at the Federal Reserve meeting on Wednesday. The markets have priced in a pause at 99%, according to the CME FedWatch tool, up from 92% one week ago.   NZD/USD Technical NZD/USD is testing resistance at 0.5908. The next resistance line is 0.5936 There is support at 0.5871 and 0.5843  
UAW Strike Impact and FX Market Implications Amid Ongoing Negotiations

UAW Strike Impact and FX Market Implications Amid Ongoing Negotiations

Kenny Fisher Kenny Fisher 19.09.2023 14:02
UAW President Fain on latest offer – “It’s definitely a no-go.” A prolonged UAW strike could disrupt the US growth exceptionalism trade The impact of the strike is not as disruptive but it could lead to a lengthier period of production disruption The three Detroit automakers and the United Auto Workers (UAW) union appear to be far from ending the strike that has now entered its fourth day.  It is clear that American car manufacturers, Ford (F), GM (GM), and Stellantis (STLA) will be having higher costs once a deal is reached.  There has been some relief that onset of the strike won’t be as bad as initially thought.  The longer the hold out, the greater the impact on the economy. These negotiations might last a while as many autoworkers haven’t had a meaningful raise in over 15 years.  The union is looking for wage increases of 36% over the next four years, which matches what chief executives have received. In addition to wage increases, they are also looking to bring back pensions.  Over the weekend, the UAW rejected a 20% offer from both Ford and GM, while Stellantis proposed a 21% increase. The longer this strike lasts, the greater the impact on the economy, which will eventually impact the FX market.  An extended strike that lasts more than a couple weeks, will start to rattle markets.  It seems, Wall Street has priced in a short strike already, but the risk that this lasts more than a couple weeks is growing. USD/JPY  Daily Chart   The dollar-yen trade remains focused on the BOJ commitment to an ultra-easy monetary stance and US growth exceptionalism and rising risks of more Fed tightening. If this week’s central bank actions by the Fed and BOJ don’t lead to any surprises, the bullish trend could remain intact.  Unless growth prospects start to take a turn for the worse in the US, the dollar might remain supported over the short-term. Key upside targets the 148.25, while downside eyes the 147.00 region.  Major support remains at the 144 level, while upside targets remain the 150 price barrier.  
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US Nasdaq 100 Analysis: Bearish Momentum Amid Rising Inflation Expectations

Kenny Fisher Kenny Fisher 19.09.2023 14:01
Bullish tone dissipated last Friday, 15 September ex-post Arm’s IPO spectacularly first-day positive performance as the Nasdaq 100 had a weekly close below the 50-day moving average for the 4th time in the past six weeks. Rising market-based inflationary expectations in line with recent magnificent rallies seen in oil prices may cause the Fed to be less dovish on the timing to enact the first interest rate cut in 2024. 15,540 is the key short-term resistance to watch. This is a follow-up analysis of our prior report, “Nasdaq 100 Technical: Bearish momentum reasserts” published on 25 August 2025. Click here for a recap. The price actions of the US Nas 100 Index (a proxy for the Nasdaq 100 futures) have whipsawed in the past four weeks, it cleared above the 15,135 short-term resistance (also the 20-day moving average) as highlighted in our previous report but the bulls failed to make any headway above the 15,460/15,540 medium-term resistance and staged a weekly close below its 50-day moving average on last Friday, 15 September. Last week’s bullish hesitancy is primarily driven by the fears that the US central bank, the Fed in the upcoming FOMC meeting this coming Wednesday, 20 September together with the latest “dot-plot” release may indicate a stance or guidance that a higher level of interest rate can persist for a longer period of time after the last hike on the Fed funds rate in 2023 (either in the November or December FOMC based on interest rates futures data from CME FedWatch tool as of 18 September 2023). Rising market-based inflationary expectations may catch dovish market participants off guard Fig 1: Correlation between WTI crude oil and US 5-year & 10-year breakeven inflation rates as of 19 Sep 2023 (Source: TradingView, click to enlarge chart) A potential Fed’s guidance that indicates a persistent longer period of higher interest rates for next year that stretches beyond Q2 of 2024 due to higher oil prices that have driven up market-based inflationary expectations (5-year & 10-year break-even inflation rates) may catch the market off guard as there is a high chance of 55% for the Fed to enact its first interest rate cut in June 2024 FOMC as inferred from the CME FedWatch tool. The US Nas 100 Index falls under the “long-duration” risk asset classification that is vulnerable to a higher interest rates environment that persists for a longer-term horizon where profit margins of the top component stocks; the magnificent seven mega-caps (Apple, Amazon, Alphabet, Meta, Microsoft, Tesla & Nvidia) are primarily dependent on longer-term revenues or cash inflows that are likely to be received further far out in the future which in turn tend to have lower present values if discounted by a higher interest rate factor, hence higher opportunity costs for holding such mega-cap stocks. To offset such potentially higher opportunity costs, the current lofty valuations (forward price to earnings ratios) of these mega-cap stocks need to come down considerably either by higher earnings growth or lower share prices. If the global demand environment remains lackluster or even slips into a recession or stagflation in 2024, the latter is more likely to occur which can put downside pressure on the US Nas 100 Index. Medium-term momentum remains bearish Fig 2: US Nas 100 medium-term trend as of 19 Sep 2023 (Source: TradingView, click to enlarge chart)   Last week’s close below the 50-day moving average of the US Nas 100 Index has occurred in conjunction with a bearish momentum condition reading as indicated by the daily RSI. The daily RSI has inched downwards and shaped a “lower low” right below a former key parallel ascending support now turns pull-back resistance at the 60 level which suggests a potential resurgence of medium-term bearish momentum. Price actions have broken down below the 20-day moving average Fig 3: US Nas 100 minor short-term trend as of 19 Sep 2023 (Source: TradingView, click to enlarge chart) Last Friday’s 15 September price actions of the Index staged a bearish breakdown below its 20-day moving average and yesterday’s 18 September minor rebound seen at the start of the US session has halted at the 20-day moving average. These observations suggest that short-term bearish momentum remains intact. Watch the 15,540 key short-term pivotal resistance and a break below 15,085 may trigger a further slide towards the next intermediate support at 14,750 in the first step. On the other hand, a clearance above 15,540 invalidates the bearish tone for the next intermediate resistance to come in at 15,800 (27 July/ 29 July 2023 minor swing highs).    
RBA Minutes Reveal Consideration of Rate Hike Amid Economic Uncertainty

RBA Minutes Reveal Consideration of Rate Hike Amid Economic Uncertainty

Kenny Fisher Kenny Fisher 19.09.2023 14:00
RBA minutes show that central bank considered rate hike China to announce loan prime rate decision on Wednesday The Australian dollar continues to trade quietly this week. In Tuesday’s European session, AUD/USD is trading at 0.6456, up 0.30%. The Reserve Bank of Australia released the minutes of this month’s meeting earlier today. The central bank considered a quarter-point hike but eventually decided to maintain the benchmark cash rate unchanged at 4.1%. RBA board members were split in previous decisions and this meeting seems to have repeated the pattern. The minutes noted that weak growth and high inflation supported the case for increasing interest rates, but the board ultimately opted to pause, due to the risk that the effects of the tightening cycle were yet to be felt (“lags in the transmission of policy through the economy”). The minutes noted that board members listed weak domestic demand and contagion from China’s slowdown as risk factors for an economic slowdown. Despite these concerns, the RBA has signalled that inflation remains too high and has left the door open to further hikes. Inflation is currently running at 6% and the RBA has forecast that inflation will slow to around 3.25% by the end of 2024 and won’t fall back into the 2%-3% target range until late 2025. The new RBA Governor, Michelle Bullock, will have to determine a rate path that is suitable for a weak Australian economy that is grappling with high inflation. Bullock has said that upcoming rate decisions will be based on data, but a more proactive approach may be needed rather than simply reacting to the data around the time of a rate meeting. The Australian dollar is sensitive to Chinese releases and investors will be keeping an eye on the PBOC decision on one-year and five-year loan prime rates on Wednesday. These rates are likely to remain unchanged, but any surprises could have an impact on the movement of the Aussie. China’s slowdown has weighed on the Australian dollar, but the August retail sales and industrial production reports beat expectations and have raised hopes that China’s economic downturn is abating.   AUD/USD Technical AUD/USD is putting pressure on resistance at 0.6477. The next resistance line is 0.6524 0.6381 and 0.6332 are the next support levels    
AUD/USD Analysis: Australian Dollar Steady Amidst RBA Transition and US Economic Data

AUD/USD Analysis: Australian Dollar Steady Amidst RBA Transition and US Economic Data

Kenny Fisher Kenny Fisher 18.09.2023 15:26
The Australian dollar continues to drift as we start the new trading week. In Monday’s European session, AUD/USD is trading at 0.6438, up 0.11%. The Reserve Bank of Australia releases its minutes of this month’s meeting. The RBA extended a pause in rates for a third month, holding the official cash rate at 4.10%. This was ex-Governor Philip Lowe’s final meeting. Lowe noted that “passed its peak” but was “still too high and will remain so for some time yet”, as he kept the door open to further rate hikes. The markets are more dovish and are looking ahead to the RBA trimming rates sometime in 2024. Investors will be looking for clues in the minutes with regard to future rate moves. Michelle Bullock takes over today as the new Governor of the RBA. Bullock is not expected to make any major policy shifts and has stated that the upcoming rate decisions will be data-dependent. The new governor will have her hands full with implementing major changes at the bank, after a government committee urged an overhaul at the central bank which is intended to streamline the Bank’s activities and create greater transparency. The US ended last week on a mixed note. The Empire State Manufacturing Index surprised to the upside, jumping to 1.9 in September from -19 in August, above the market consensus of -10. The UoM consumer sentiment index slowed to 67.7 in September, down from 69.5 in August and shy of the market consensus of 69.1 points. Inflation Expectations fell to 3.1% in August, down from 3.5% in July and the lowest level since March 2021. This is another sign that inflation is weakening and supports a pause at the Federal Reserve meeting on Wednesday. The markets have priced in a pause at 99%, according to the CME FedWatch tool, up from 92% one week ago.   AUD/USD Technical AUD/USD tested support at 0.6428 earlier. The next support line is 0.6381 0.6477 and 0.6524 are the next resistance lines  
Australian Employment Surges in August Amid Part-Time Gains, While US Retail Sales and PPI Beat Expectations

Australian Employment Surges in August Amid Part-Time Gains, While US Retail Sales and PPI Beat Expectations

Kenny Fisher Kenny Fisher 15.09.2023 08:39
Australia posts strong job gains, but mostly part-time jobs US retail sales and PPI accelerate, core CPI eases The Australian dollar climbed higher after the solid Australian employment release but has pared these gains following the US retail sales and producer prices reports. In the North American session, AUD/USD is trading at 0.6440, up 0.28%   Australia’s labour market flexes its muscles Australian job creation sparkled in August. The economy added 64,900 jobs, blowing past the consensus estimate of 25,000 and rebounding from a revised decline of 1,400. However, the gains were almost exclusively in part-time roles, with full-time employment rising by only 2,800. The unemployment rate remained unchanged at 3.7%. The Australian dollar responded by rising as high as 0.6454, a nine-day high. The Reserve Bank of Australia has held rates for three straight times and this has contributed to today’s positive employment numbers. The extended pause has raised expectations that the RBA is close to wrapping up its rate-tightening cycle, but given that inflation is at 6%, double the upper range of the RBA’s target, the door is still open for one more rate hike in the fourth quarter. New RBA Governor Michelle Bullock has said rate decisions will be made based on the data, which means the markets won’t be able to rely on any forward guidance from the RBA. US retail sales, PPI beat estimates US retail sales accelerated in August to 0.6% m/m, higher than the consensus estimate of 0.2% and a notch higher than the 0.5% gain in July. The main driver of the strong release was gasoline prices, which jumped over 10% in August (that increase was a key factor in headline inflation rising on Wednesday). Producer prices mirrored the August CPI data, with headline PPI rising while the core rate declined. PPI climbed 0.7%, higher than the July read of 0.4% and the market consensus of 0.3%. Core PPI dropped to 0.2%, down from a revised 0.4% in June and matching the consensus estimate. On an annualized basis, headline PPI rose from 0.8% to 1.6% (1.2% est.) while the core rate dropped from 2.4% to 2.2% (2.2% est.).   AUD/USD Technical AUD/USD tested resistance at 0.6453 earlier. The next resistance line is 0.6528 0.6405 and 0.6330 are providing support  
US Retail Sales and PPI Surge, New Zealand's Eye on Manufacturing PMI and Chinese Data

US Retail Sales and PPI Surge, New Zealand's Eye on Manufacturing PMI and Chinese Data

Kenny Fisher Kenny Fisher 15.09.2023 08:35
US retail sales, PPI accelerates New Zealand to release Manufacturing PMI on Friday China to release retail sales and industrial production on Friday The New Zealand dollar is in negative territory on Thursday. NZD/USD is trading at 0.5904 in the North American session, up 0.12%.   Markets eye Manufacturing PMI, Chinese data New Zealand releases the Manufacturing PMI on Friday. Manufacturing across the globe has been hard-hit by weak demand and New Zealand has not been immune. The Manufacturing PMI has contracted for five straight months, falling from 47.5 to 46.3 in July. The downswing is expected to continue, with a forecast of 46.0 for August. The markets will also be keeping an eye on Chinese releases on Friday. China is New Zealand’s largest trading partner and weak Chinese data has weighed on the New Zealand dollar, which plunged 3.90% against the US dollar in August. Chinese retail sales are expected to rise in August from 2.5% to 3.0%, and industrial production is projected to rise to 3.9% in August, up from 3.7% in July. If China’s numbers improve, it could provide a boost for the New Zealand dollar.   US posts strong retail sales, PPI US retail sales climbed in August to 0.6% m/m, higher than the consensus estimate of 0.2% and a notch higher than the 0.5% gain in July. The main factor behind the upswing was gasoline prices, which jumped over 10% in August (that increase was a key factor in headline inflation rising in August). Producer prices followed the pattern of the August CPI data, with the headline reading rising while the core rate declined. PPI climbed 0.7% in August, higher than the July read of 0.4% and the market consensus of 0.3%. Core PPI dropped to 0.2%, down from a revised 0.4% in June and matching the consensus estimate. On an annualized basis, headline PPI rose from 0.8% to 1.6% (1.2% est.) while the core rate dropped from 2.4% to 2.2% (2.2% est.).   NZD/USD Technical NZD/USD tested resistance at 0.5944 but has retreated. The next resistance line is 0.6003 There is support at 0.5901 and 0.5842    
ECB Rate Decision: A Close Call for Christine Lagarde"

ECB Rate Decision: A Close Call for Christine Lagarde"

Kenny Fisher Kenny Fisher 14.09.2023 15:08
ECB rate decision expected to be a close call US to release retail sales and producer prices The euro is showing limited movement on Thursday, ahead of today’s ECB rate decision. In the European session, EUR/USD is trading at 1.0736, down 0.06%. Will she or won’t she? All eyes are on ECB President Christine Lagarde, who will decide whether the ECB will increase rates by a quarter-point or hold off and take a pause after nine straight increases. Interest rate futures have priced in a hike at 65% but there is a lot of uncertainty among economists and the decision is expected to be a close call, as the Governing Council appears split on the issue. There are strong arguments on both sides, and Lagarde could end up with a type of compromise that ends up being a ‘hawkish hold’ or a ‘dovish hike’. The latest development was a report in Reuters on Wednesday that the ECB inflation forecasts will be increased at today’s meeting, which raised expectations for a hike. Traders should be prepared for volatility from the euro after the decision, which is a binary risk event for the euro. A rate hike would likely boost the euro while a hold could weigh on the currency. Still, any swings in EUR/USD could be immediate and short-lived. The markets will be paying close attention to the policy statement and whether the Governing Council decision was a close call. It’s a busy day in the US as well, with the release of retail sales and producer prices for August. Retail sales are expected to ease to 0.2% m/m, down from 0.7% m/m, while PPI is forecast to rise to 1.2% y/y, up from 0.8% m/m. The releases could trigger volatility from EUR/USD in the North American session.   The US inflation report on Wednesday was a mix, as headline inflation rose in August from 3.2% to 3.7%, while core CPI eased to 4.3%, down from 4.7%. The jump in headline inflation may have attracted media attention, but the Fed will be pleased with the drop in core CPI, which is a better gauge of underlying inflation. The inflation report has cemented a pause at next week’s meeting, with the future markets pricing in a pause at 97%, up from 93% prior to the inflation release. . EUR/USD Technical EUR/USD is testing resistance at 1.0732. Above, there is resistance at 1.0777 There is support at 1.0654 and 1.060        
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

Kenny Fisher Kenny Fisher 14.09.2023 10:12
US inflation rises but core inflation falls to two-year low All eyes on ECB rate decision on Thursday The euro is trading quietly on Wednesday. In the North American session, EUR/USD is trading at 1.0739, down 0.16%. The August US inflation report today was an interesting mix. Headline inflation rose for a second straight month, from 3.2% y/y to 3.7% y/y and above the consensus estimate of 3.6% y/y. On a monthly basis, headline inflation rose 0.6% in August, while core CPI came in at a modest 0.3%. The jump in headline inflation will no doubt grab the headlines and cause some groans.  Nobody wants to see inflation rise, but the main driver of the upswing was higher gasoline prices, which can change quickly from one month to the next. If gasoline prices reverse direction and fall sharply, that will be weigh on headline inflation. The Federal Reserve will be paying more attention to Core CPI, which fell to 4.3%, down from 4.7% in July. This matched the consensus estimate and notably, marked the lowest level since September 2021. The inflation report should cement a pause from the Fed at next week’s meeting.   Will the ECB raise rates? The European Central Bank meets on Thursday and it remains unclear whether policy makers will raise rates by a quarter-point or pause for the first time after nine straight hikes. Interest rate futures have priced in a hike at 65% but both the hawks and doves at the ECB have persuasive arguments. The hawks will argue that inflation has fallen to 5.3% in the eurozone but it’s unrealistic to expect inflation to fall back to the ECB’s 2% target without further rate hikes. With a deposit rate of 3.75%, there is still room for the ECB to continue raising rates and push inflation lower, which is the central bank’s number one priority. The doves will respond that inflation is moving in the right direction and a pause will give the central bank time to monitor the effects of rate hikes. The eurozone economy is sputtering and Germany, the bloc’s largest economy is now expected to fall into a recession, according to the European Commission. If the ECB continues hiking, it will only worsen economic conditions. I don’t envy ECB President Lagarde, who will have to decide which position to adopt and may face criticism no matter what she does.   EUR/USD Technical EUR/USD tested support at 1.0732 earlier. Below, there is support at 1.0654 There is resistance at 1.0777 and 1.0855          
The UK Contracts Faster Than Expected in July, Bank of England Still Expected to Hike Rates

The UK Contracts Faster Than Expected in July, Bank of England Still Expected to Hike Rates

Kenny Fisher Kenny Fisher 14.09.2023 10:09
UK contracts faster than expected One-off factors largely behind the decline, BoE still expected to hike Major support being tested in cable The UK economy contracted faster than expected in July which is weighing on the pound this morning. GDP fell 0.5%, much faster than the 0.2% contraction that was expected, but as has been the case throughout this year, one-off factors played a big role. Strikes and the weather were largely blamed for the steep decline although some are clearly worried that overall momentum in the economy remains weak. I’m not sure the data will really sway the Bank of England at all next week. Not against the backdrop of such strong wage growth, as was reported yesterday. Markets are now pricing in a rate hike at around 75% which seems overly cautious to me but then, perhaps Bailey’s words last week are continuing to ring in the ears of traders. The Governor and his colleagues indicated the discussion will be more balanced than people seem to think which suggested a hold is very much on the table this month. That seems a little far-fetched at this stage and I think the words are probably intended for a little further down the line in November but then it wouldn’t be the first time the BoE has surprised us. That said, it also wouldn’t be the first time they’ve hinted at something and not followed through.   A pivotal level for cable? Cable has continued to drift lower after today’s GDP figures but there appears to be a little less vigor in the decline which may raise a few questions.     Is the decline of the last couple of months running on fumes? If so, are we going to see a correction or has this been a correction in the broader uptrend? The answer to the second question is that we’ll only know in time, should we see a big move higher from here. On the first question, there are signs that the sell-off is losing momentum. The drop today doesn’t appear to have been backed by moves lower on either the stochastic or the MACD. That in itself doesn’t mean the pair is about to reverse higher. But that it occurs around the 200/233-day simple moving average band and the 50/61.8 Fibonacci retracement zone – March lows to July highs – may suggest it could be early signs of struggles which could continue if tested again. A rotation off here would be interesting as it could signal that the sell-off since July has just been a bullish retracement. In that case, the 55/89-day SMA band above could be very interesting. A move below the 200/233-day SMA band and Fib levels could be a very bearish development, on the other hand, especially if back by momentum. And interesting one to watch over the coming days and weeks.  
Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

UK GDP Contracts by 0.5% Amid Economic Concerns, Impact on GBP/USD Exchange Rate

Kenny Fisher Kenny Fisher 13.09.2023 13:36
UK GDP falls by 0.5% GBP/USD dips slightly lower The British pound has edged lower on Wednesday. In the European session, GBP/USD is trading at 1.2472, down 0.17%. The pound fell as low as 1.2441 earlier today but has recovered some of those losses. UK economy contracts by 0.5% The UK economy contracted by 0.5% in July, the largest decline this year. The reading reversed the 0.5% gain in June and missed the consensus estimate of 0.5%. The GDP report pointed to weakness across the economy, with declines in services, manufacturing and construction. There’s no question that the sharp increase in borrowing rates has cooled the economy, but there’s uncertainty as to what action the Bank of England will take at the meeting on September 21st. The markets have priced in a quarter-point rate hike at 75%, which means there is a possibility of a pause in rate increases. The UK economy may already be in recession and another hike will put a further strain on the economy. On the other hand, the battle against inflation is far from over, and with inflation running at a 6.8% clip, the BoE will need to do more to bring inflation closer to the 2% target. The UK jobs report on Tuesday was a reminder that inflation is alive and kicking. The economy shed a massive 207,000 in the three months to July, as the labour market is showing larger cracks. However, wage growth including bonuses hit 7.8%, unchanged from a month earlier and the highest on record. Wages are now rising faster than consumer inflation, which is one more headache for the Bank of England, which had a rough time in its attempts to bring down inflation.   GBP/USD Technical GBP/USD is testing support at 1.2459. Next, there is support at 1.2395  There is resistance at 1.2519 and 1.2592  
US Treasury Rates Hold Strong as Inflation Report Looms, Dollar Resilience Continues

US Treasury Rates Hold Strong as Inflation Report Looms, Dollar Resilience Continues

Kenny Fisher Kenny Fisher 13.09.2023 09:03
Treasury rates remain attractive: 2-year at 5.009%, 5-year at 4.428%, 10-year at 4.288%, and 30-year at 4.370% US inflation report expectations are for core readings to remain subdued, while headline jumps on rising gas prices. CPI M/M: 0.6%e v 0.2%; Y/Y: 3.6%e v 3.2% prior; core m/m: 0.2%e v 0.2% prior; y/y: 4.3.%e v 4.7% prior Fed rate hike expectations are pricing in slightly a greater chance of more tightening this winter. Implied rate peak at 5.452% vs 5.446% last Tuesday.   USD/JPY is not ready to turn bearish despite BOJ Governor Ueda’s verbal intervention that kicked off the trading week.  The higher for longer and risks of more Fed tightening could keep the dollar supported a little while longer.  This afternoon’s US 10-year auction went as planned, awarding 4.289%, which was the highest yield since 2007.  Yesterday we saw strong demand for the Treasury’s three- and six-month bill auctions.  The flows that are coming the dollar’s way are not going to be easing anytime soon and that should provide a level underlying support for the dollar. The big risk for the dollar is if inflation cools and economic resilience quickly vanishes.  A bearish dollar outlook should not be the base case just yet, but if the data suggests that is happening currency markets could jump on that trade.       While dollar strength has resumed it is still over 50 pips away from levels that trade before BOJ Governor Ueda’s comment on a ‘quiet exit’ reducing monetary policy easing.  This week will either see a resilient US economy force more jawboning from Japan, or support the belief that the Fed’s done raising rates.  Initial support resides at the 146.80 level, followed by Monday’s low of 145.90. To the upside, key resistance is provided by the 147.90 level, followed by the psychological 150 handle.    
British Pound Rallies Amidst Volatility Ahead of Key Employment Data

British Pound Rallies Amidst Volatility Ahead of Key Employment Data

Kenny Fisher Kenny Fisher 12.09.2023 10:53
British pound posts strong gains UK to release employment report on Tuesday The British pound has started the week with strong gains. In the North American session, GBP/USD is trading at 1.2537, up 0.61%. The pound has been on a nasty slide, falling as much as 300 basis points since August 31st. The volatility could continue for the pound on Tuesday, with the release of key employment data. The labour market is showing signs of slowing down and the economy is expected to have shed 185,000 jobs in the three months to July on top of the loss of 66,000 a month earlier. If the consensus is within expectations, it would mark a massive job loss and would support the BoE taking a pause at next week’s rate meeting. At the same time, wage growth remains high, which is driving inflation. Average earnings including bonuses are expected to remain unchanged at 8.2% in the three months to July. The June reading was the highest since July 2021, as employers are in urgent need of workers. The Bank of England has been non-committal about what it will do at next week’s meeting, although Governor Bailey said last week that the BoE was “much nearer” to ending the current tightening cycle. Bailey also said that the BoE might have to raise rates further due to persistently high inflation. Inflation has been falling but has been stickier than expected.  Bailey may be trying to calm the markets with the message that rate hikes could end soon, while keeping further increases on the table, given that inflation remains above the Bank’s 2% target.   GBP/USD Technical GBP/USD is testing resistance at 1.2519. Above, there is resistance at 1.2592  There is support at 1.2441 and 1.2395      
China's August Yuan Loans Soar," Dollar Weakens Against Yen and Yuan, AUD/JPY Consolidates at 94.00 Level

China's August Yuan Loans Soar," Dollar Weakens Against Yen and Yuan, AUD/JPY Consolidates at 94.00 Level

Kenny Fisher Kenny Fisher 12.09.2023 10:33
China’s new yuan loans skyrocketed to 1.36 trillion yuan in August, much higher than the prior month’s 345 billion yuan. Optimism grows for China’s outlook as stimulus appears to filtering throughout the economy Dollar has biggest drop in two months as yen and yuan gain The big risk aversion trade over the summer has seen AUD/JPY consolidate around the 94.00 level.  A downbeat outlook for China kept the Australian dollar heavy, while US economic resilience has kept yen softer on a widening interest rate differential.  The AUD/JPY daily highlights a global growth picture that is either looking for a China rebound, which should help Australia’s growth momentum or a Japan recovery that is not on solid footing. The AUD/JPY daily displays a symmetrical triangle that shows price has converged towards the 94.00 region.  The bullish trend that started in the spring ended mid-June ahead of the 97.70 level.  Price is poised to either resume the longer-term bullish trend that started after the pandemic low was made in March 2020 or potentially show the start of a significant bearish reversal.                   The Australian dollar and Japanese yen seems likely to remain a key risk barometer, which means it could react strongly with what happens with this week’s US inflation data and with China’s decision on rates and their activity data.  If bullishness emerges, price could initially targets the 95.50 region, while downside support would come from the 200-day SMA level, which currently resides at the 92.00 level. This week the Australian economic calendar is filled with economic data that might take a backseat to everything that happens from the US and China.  The main Australian data release of the week is Australia jobs, which could show job growth rebounded, but will unlikely bring back rate hike expectations for the RBA  
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Gold Finds Support Ahead of Key Events: US CPI and ECB Policy Decision

Kenny Fisher Kenny Fisher 11.09.2023 11:24
Last Friday’s price actions of spot Gold (XAU/USD) have managed to find support again at the 200-day moving average ahead of the US CPI data release & ECB monetary policy decision this week. The recent -5.15 % decline seen in Gold from its 20 July 2023 swing high of US$$1,987.53 has started to see some signs of short-term bullish reversal elements since 21 August 2023. The up-trending 10-year US Treasury real yield has also started to consolidate between 1.95% to 2.00% level which may negate the bearish tone on Gold at least in the short-term. US$1,910 support and US$1,932 resistance are the two key short-term technical levels to watch.   Since its 20 July 2023 swing high of US$1,987.53, spot Gold (XAU/USD) has declined by -5.15% to print a low of US$1,885 on 17 August 2023 in line with a rising longer-term 10-year US Treasury real yield which increased the opportunity costs of holding gold as it is a non-interest yielding asset.   Major uptrend remains intact Fig 1: Gold (XAU/USD) major trend as of 11 Sep 2023 (Source: TradingView, click to enlarge chart) Despite the underperformance of Gold seen in the past five weeks, its major uptrend phase in place since the 3 November 2022 low of US$1,616 remains intact as the -5.15% fall from the 20 July 2023 high of US$1,987.15 has managed to stall at the lower boundary of a major ascending channel from its 3 November 2022 major swing low and close to the 38.2% Fibonacci retracement of the prior major uptrend phase from 3 November 2022 low to 4 May 2023 high (see daily chair). Also, the up-trending 10-year US Treasury real yield (derived via the inflation-protected securities, TIPS of the same duration) has started to consolidate at the 1.95% to 2.00% level which may negate the bearish tone on Gold at this juncture.     Short-term momentum has tilted toward the bullish camp  
AUD Faces Dual Challenges: US CPI Data and Australian Labor Market Statistics

UK Home Prices Drop 4.6% in Year to August, Weakest Since 2009, Adding Pressure on GBP

Kenny Fisher Kenny Fisher 08.09.2023 13:43
UK home prices plunge 4.6% in the year up to August, worst y/y drop since 2009 UK businesses expected to deliver smallest price rise since February 2022 GBP underperforms as BOE rate hike expectations shrink; implied rate peak at 5.699%  vs 5.671% on Sept 1st GBP/USD (a daily chart of which is show) has steadily weakened this month, now falling below the 1.25000 level.  This occurs within the context of a strong accelerated downtrend extending originally from the 1.3140 area highs in July.  The UK inflation outlook is for pricing pressures to continue to ease as business prepare to raise prices at the slowest pace since 2021.  The latest report from the BOE’s Decision Maker Panel (DMP) survey showed one-year ahead inflation expectations improved from 5.4% in July to 4.8% in August.  The three-year outlook improved a tick to 3.2%. With BOE rate hike expectations starting to come down, the focus is shifting to how weak is the economy.  Britain’s residential property market woes are not getting any better as a couple of the top lenders signal prices are falling at the worst pace since 2009.  Questions are growing about how strong the consumer is and if the debt situation will significantly worsen.     Inflation is still too high and that seems to have markets convinced that the BOE will deliver one more rate hike.  Divide is brewing amongst policymakers, but it should easily be justified to deliver one more rate hike in this cycle.  If the softer trend emerges with inflation, the BOE might be done hiking and that could pave the way for pound weakness towards the 1.2350 region.  Major support resides at the 1.2000 and 1.2090 zone.    
Canada Expected to Report 6,400 Job Losses; BoC Contemplates Further Rate Hikes

Canada Expected to Report 6,400 Job Losses; BoC Contemplates Further Rate Hikes

Kenny Fisher Kenny Fisher 08.09.2023 13:40
Canada expected to have shed 6,400 jobs BoC’s Macklem says rate increases may be needed to lower inflation The Canadian dollar is steady on Friday in what should be a busy day. In the European session, USD/CAD is trading at 1.3670, down 0.12%. Canada releases the August job report later today, with the markets braced for a decrease of 6,400 in employment. The US dollar has been on a tear against the major currencies since mid-July. The Canadian dollar has slumped, losing about 450 basis points during that span. The Canadian economy hasn’t been able to keep pace with its southern neighbor, and that was made painfully clear as GDP contracted by 0.2% in the second quarter, below expectations. The deterioration in economic growth is a result of a weak global economy as well as the Bank of Canada’s steep tightening cycle. After back-t0-back increases, the BoC opted to pause at this week’s meeting and held the benchmark cash rate at 5.0%. Governor Macklem likes to use the term “conditional pause”, which means that a break from rate hikes will depend on economic growth and inflation levels.   At this week’s meeting, the BoC’s rate statement was hawkish, warning that inflation was too high and not falling fast enough. This was a signal that the door remained open to interest rate increases. Macklem was more explicit on Thursday, stating that further rate hikes might be needed to lower inflation and warning that persistently high inflation would be worse than high borrowing costs. The markets are more dovish about the BoC’s rate path, given that the economy is cooling and the central bank will be wary about too much tightening which could tip the economy into a recession. The markets have priced in a 14% probability of a rate hike at the October meeting.   USD/CAD Technical USD/CAD is testing resistance at 1.3657. The next resistance line is 1.3721 1.3573 and 1.3509 are providing support  
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AUDUSD Hits Two-Month Low as RBA Holds Rates and Signals Further Tightening

Kenny Fisher Kenny Fisher 06.09.2023 13:01
RBA leaves the cash rate at 4.1% but signals more tightening may be needed China Caixin services PMI unexpectedly falls to 51.8 AUDUSD tumbles again to test recent support   The Australian dollar fell further this morning despite the RBA holding interest rates steady and warning that further tightening may be necessary. The central bank warned that while inflation is declining, a strong labor market and economy remain a risk. What’s more, persistent services price inflation which is being seen in other countries could be another potential upside risk in Australia in the future. Markets aren’t buying the hawkish warning though and continue to price in a 70% chance of no further increases from the RBA, with cuts then likely to start late next year. This will almost certainly change repeatedly over the months ahead but as things stand, clear progress is being made on inflation and the central bank has no desire to needlessly crash the economy.   AUDUSD tumbles after Chinese data and RBA decision The Aussie dollar continued to decline despite this, probably driven initially by the weaker Chinese Caixin services PMI reading but the technicals weren’t looking too good either.   AUDUSD Daily Source – OANDA on Trading View   In fact, they haven’t for a number of weeks, since the pair broke below the neckline of a double top pattern. In this case, the top fell around 0.69 and the neckline around 0.66. The first thing worth mentioning is this isn’t a perfect double top as it doesn’t follow a prolonged move higher in the pair. That said, it has trended lower since and the move below the neckline isn’t far from the size of the pattern itself, as the textbooks indicate can happen. More recently, the pair has traded between much tighter support and resistance – 0.6370 and 0.6520, respectively – and that still broadly remains the case, although today’s trading has been rather bearish and that support is being significantly tested.  
The Euro's Fate Hangs in the Balance: Will the ECB Raise Rates Amid Stubborn Inflation?

The Euro's Fate Hangs in the Balance: Will the ECB Raise Rates Amid Stubborn Inflation?

Kenny Fisher Kenny Fisher 05.09.2023 11:47
The euro has started the week with gains, after falling around 1.3% over the past two days. In the North American session, EUR/USD is trading at 1.0795, up o.19%. With US markets closed for the Labour Day holiday, we can expect an uneventful day from the euro. Will she or won’t she? ECB President Christine Lagarde has avoided giving a clear signal about the ECB rate decision on September 14th. At the Jackson Hole symposium, Lagarde said that rates would have to remain at “sufficiently restrictive levels for as long as necessary” in order to bring down inflation to the ECB’s 2% target. Eurozone inflation remained stuck at 5.3% in August, which is more than double the target. Given that disparity, one could be forgiven for assuming that Lagarde would have followed up with a heavy hint about a rate hike in September. Instead, she steered clear of the rate debate. Fast forward to today, when Lagarde delivered a speech in London. The pattern was the same – a declaration that “we will achieve a timely return” to the 2% inflation target, but no mention of the September meeting. The lack of direction from Lagarde could mean that the doves and hawks continue to push their agendas and Lagarde hasn’t decided which way to roll the dice. Inflation remains high, but the eurozone economy is not in the best shape, which means that further rate hikes could trigger a recession. On Monday, ECB Governing Council member Mario Centeno, the head of the Bank of Portugal, warned there was a risk of “doing too much” by continuing to raise rates.   The manufacturing sector in Germany and the eurozone remains mired in contraction, as last week’s PMIs indicated. The services sector has been in better shape with readings above 50.0, which indicates expansion. Still, Service PMIs have been weakening in recent months and are expected to fall into contraction territory in both Germany and the eurozone on Tuesday.  The consensus for September stands at 47.3 in Germany and 48.3 in the eurozone, which would confirm the initial estimates last month. If investors show jitters over contraction in the services sector, the weak euro could lose ground. . EUR/USD Technical There is resistance at 1.0831 and 1.0889 1.0716 and 1.0658 are providing support    
Canada's GDP Contracts in Second Quarter, US Nonfarm Payrolls Signal Weak Labor Market

Canada's GDP Contracts in Second Quarter, US Nonfarm Payrolls Signal Weak Labor Market

Kenny Fisher Kenny Fisher 05.09.2023 11:45
Canada’s GDP contracts in second quarter US nonfarm payrolls, wages point to weak US labour market The Canadian dollar is unchanged early in Monday’s North American session, trading at 1.3594. Canada’s GDP unexpectedly soft in Q2 The Canadian dollar posted gains throughout last week but surrendered all of those gains on Friday after second-quarter GDP was softer than expected. Canada’s economy contracted in the second quarter by 0.2% y/y, much weaker than the consensus of a 1.2% gain. The Bank of Canada was also taken by surprise, as it had projected a gain of 1.5%. The economy has slowed sharply since the first quarter, which showed GDP at a revised gain of 2.6%. The BoC’s rate hikes continue to filter throughout the economy, which may be in a slight recession, as June GDP contracted by 0.2% and July is expected around zero. The GDP report was the last major domestic release before the BoC meeting on Wednesday. The soft data has cemented a pause from the BoC, after two consecutive meetings in which the BoC raised rates by a quarter-point but said that the decisions were a close call between a hike and a hold. The BoC odds for a hold have jumped to 97%, up from 78% prior to the GDP release. With a pause a virtual certainty, investors’ focus will be on the rate statement. Goldman Sachs is projecting a pause and one final rate hike in October.     In the US, the August employment report pointed to a cooling labour market. Nonfarm payrolls came in at 187,000, the third straight release below 200,00. Wage growth fell to 0.2% in August, down from 0.4% in July and below the consensus of 0.3%. The weak jobs report raised the odds of a Fed hold at the September meeting to 93% according to the FedWatch tool, up sharply from 78% just a week ago. . USD/CAD Technical USD/CAD is putting pressure on support at 1.3573. Below, there is support at 1.3509 1.3657 and 1.3721 are the next resistance lines  
RBA Expected to Pause as Inflation Moves in the Right Direction

RBA Expected to Pause as Inflation Moves in the Right Direction

Kenny Fisher Kenny Fisher 04.09.2023 15:42
RBA expected to pause US nonfarm payrolls rise slightly to 187,000 The Australian dollar has started the week with slight gains. In Monday’s European session, AUD/USD is trading at 0.6464, up 0.21%.   RBA expected to pause The Reserve Bank of Australia is expected to hold interest rates at 4.10% when it meets on Tuesday and a rate hike would be a huge surprise. The central bank has paused for two straight meetings and the odds of a third pause stand at 86%, according to the ASX RBA rate tracker. The most important factor in RBA rate policy is of course inflation. In July, CPI fell to 4.9% y/y, down from 5.4% y/y and better than the consensus of 5.2% y/y. Inflation is moving in the right direction and has dropped to its lowest level since February 2022. A third straight pause from the RBA will likely raise expectations that the current rate-tightening cycle is done but I don’t believe we’re at that point just yet. This is Governor Lowe’s final meeting and he is expected to keep the door open to further rate hikes. Incoming Governor Bullock stated last week that the RBA “may still need to raise rates again”, adding that the Bank will make its rate decisions based on the data. The RBA isn’t anywhere near declaring victory over inflation and has projected that inflation will not fall back within the 2%-3% inflation target until late 2025.   The week wrapped up with the US employment report for August. The Fed will be pleased as nonfarm payrolls remained below 200,00 for a third straight month, rising from a revised 157,000 to 187,000. Wage growth fell to 0.2% in August, down from 0.4% in July and below the consensus of 0.3%. The data cements a rate hold at the September 20th meeting, barring a huge surprise from the CPI report a week prior to the rate meeting. . AUD/USD Technical AUD/USD is testing resistance at 0.6458. Above, there is resistance at 0.6516 There is support at 0.6395 and 0.6337    
West Texas Oil: Short-Term Uptrend with Potential for Minor Pull-Back

West Texas Oil: Short-Term Uptrend with Potential for Minor Pull-Back

Kenny Fisher Kenny Fisher 04.09.2023 15:40
Erased prior two weeks of consecutive losing streaks to trade a current year-to-date closing high of US$86.31 per barrel printed on last Friday, 1 September. Price actions are oscillating within short-term and medium-term uptrend phases. Hourly technical indicators (RSI & Bollinger Bands Bandwidth) are suggesting the risk of an imminent minor pull-back in price actions after last week’s strong upside reversal. Watch the key short-term pivotal resistance at US$87.25 per barrel. This is a follow-up analysis of our prior report, “WTI Oil Technical: Potential bullish reversal to resume medium-term uptrend” published on 21 August 2023. Click here for a recap. The price actions of West Texas Oil (a proxy of WTI crude oil futures) have managed to snap its prior two weeks of consecutive losing streak and cleared above the US$84.90 resistance as highlighted in our previous report. Also, it recorded a weekly gain of +7.35% for the week ended last Friday, 1 September.     Rallied to a 10-month high   Fig 1:  West Texas Oil medium-term trend as of 4 Sep 2023 (Source: TradingView, click to enlarge chart) In addition, last Friday’s bullish momentum has allowed it to surpass its recent medium-term swing high of US$84.92 per barrel printed on 10 August 2023 and notched a current year-to-date closing high of US$86.31 on last Friday, also its highest level since 15 November 2022. In addition, current price actions have managed to trade above their respective 20, 50, and 200-day moving averages which indicates that West Texas Oil is oscillating within short-term and medium-term uptrend phases. Risk of an imminent minor pull-back in price actions Fig 2:  West Texas Oil minor short-term trend as of 4 Sep 2023 (Source: TradingView, click to enlarge chart)   However, the current up move of +10.7% from its 23 August 2023 low of US$78.03 to its 1 September 2023 high of US$86.36 seems overstretched which suggests that the current short-term uptrend phase is due for a potential minor pull-back/setback. Two key technical conditions are advocating this potential minor pull-back/setback scenario for West Texas Oil within its ongoing short to medium-term uptrend phases. Firstly, the hourly RSI oscillator has exploded to an extreme overbought condition of 84.53, its highest level since 2 April 2023. Secondly, the hourly Bollinger Bands Bandwidth (%) has increased to a two-week high which indicates a significant expansion in short-term volatility. An expansion in short-term volatility as indicated by the widening of the hourly Bollinger Bands Bandwidth (%) tends to lead to a normalization of such a heightened level of volatility in the next few trading sessions which supports an imminent potential minor pull-back/setback for price actions. Watch the US$87.25 key short-term pivotal resistance to maintain the potential minor pull-back/setback scenario for West Texas Oil towards the intermediate supports at US$84.90 and US$83.60. However, a clearance above US$87.25 invalidates the minor bearish tone for a continuation of the bullish impulsive up move sequence to see the next resistance at US$89.10 (Fibonacci retracement/extension cluster; 38.2% Fibonacci retracement of the major downtrend from 7 March 2022 high to 4 May 2023 low & 0.618 Fibonacci extension of the medium-term uptrend from 28 June 2023 low to 10 August 2023 high projected to 23 August 2023 low).  
EUR/USD Flat as Eurozone and German Manufacturing Struggle Amid Weak PMI Reports

EUR/USD Flat as Eurozone and German Manufacturing Struggle Amid Weak PMI Reports

Kenny Fisher Kenny Fisher 04.09.2023 10:58
The euro is flat on Friday, after sustaining sharp losses a day earlier. In the European session, EUR/USD is trading at 1.0844. Eurozone, German manufacturing struggling There wasn’t much to cheer about after today’s Manufacturing PMI reports for Germany and the eurozone. Although both PMIs improved slightly in August, business activity continues to decline in the manufacturing sector. The Eurozone PMI came in at 43.5 in August, up from 42.7 in July and just shy of the consensus estimate of 43.7. In Germany, manufacturing is in even worse shape – the August reading improved from 38.8 to 39.1, matching the consensus. Manufacturing is in deep trouble in the eurozone and in Germany, the largest economy in the bloc. The PMIs point to a constant string of declines since June 2022. The volume of new orders is down and exports, already struggling in a weak global environment, have been hit by the slowdown in China which has reduced demand. Germany’s weak manufacturing data is particularly disturbing. Once a global powerhouse, Germany has seen economic growth slide and is officially in a recession, with two consecutive quarters of negative growth in the fourth quarter of 2022 and the first quarter in 2023. US nonfarm payrolls expected to ease In the US, the nonfarm payroll report is expected to decline slightly to 170,000, compared to 187,000 in the previous reading. If nonfarm payrolls are within expectations, it will mark the third straight month of gains below 200,000, a clear signal that the US labour market is cooling down. A soft nonfarm payrolls report would cement an expected pause by the Federal Reserve next week and also bolster the case for the Fed to hold rates for the next few months and possibly into 2024. . EUR/USD Technical EUR/USD is tested support at 1.0831 earlier. Below, there is support at 1.0731 1.0896 and 1.0996 are the next resistance lines Content  
The ECB's Rate Hike: EUR/USD Rally in Question

Oil Prices Extend Rally Amid Mixed Chinese Data and Technical Signals

Kenny Fisher Kenny Fisher 01.09.2023 11:34
Strong run continues Chinese data doesn’t hinder the rally Momentum may be key as price approaches August highs   Oil prices are nudging higher again today, technically on course for a fifth day of gains in six in Brent – six in a row in WTI – although broadly speaking they’re just a little above the middle of what appears to be a newly established range. Brent peaked near $88 a few weeks ago and bottomed around $82 last week as we await more direction on the economy and therefore demand. Data this week has been on the weaker side, although it’s the jobs report tomorrow we’re most interested in. The Chinese PMIs overnight had something for everyone. Manufacturing was unexpectedly improved but still contracting at 49.7 while services were quite the opposite, expanding but at a slower pace than anticipated. All in all, it continues to paint the picture of a sluggish economy that’s showing few signs of bouncing back stronger.   Head and shoulders not meant to be The head and shoulders that formed over the last month appears to have failed before it even completed, with the recent rally taking the price above the peak of the right shoulder.     BCOUSD Daily   While these formations are never perfect, as per the textbook, and it could be argued that a decline from here could still potentially qualify as a second right shoulder, that may be clutching at this point. It’s peaked a dollar above, even if it only looks relatively minor on the chart which suggests to me the previous formation – which is only complete with a break of the neckline – is now null and void. Perhaps I can be persuaded otherwise if the price heads south from here. The question now is how bullish a signal this actually is? Are we going to see a run at this month’s highs? A break above $90? I’m not convinced at this stage. Recent momentum looks quite healthy but which could be a promising sign. But that will only be put to the test as we near the previous highs around $88. If the MACD and stochastic keep making higher highs as the price approaches $88 then that would certainly look more promising.  
Tepid BoJ Stance Despite Inflation Surge: Future Policy Outlook

Market Developments: Australian Inflation Slides to 4.9%, US GDP Expected to Rise to 2.4%, Australian Dollar Dips Amid Mixed Economic Data

Kenny Fisher Kenny Fisher 30.08.2023 15:47
Australian inflation falls to 4.9% US GDP expected to rise to 2.4% The Australian dollar has edged lower on Wednesday after sharp gains a day earlier. In the European session, AUD/USD is trading at 0.6473, down 0.10% on the day.   Australia’s inflation slips to 4.9% There was good news on the inflation front as July CPI fell to 4.9% y/y, down from 5.4% in June and below the consensus estimate of 5.2%. Inflation has now fallen to its lowest level since February 2022. Core inflation, which has been stickier than headline inflation, gained 5.8% in July, down from 6.1% in June. The markets are widely expecting the Reserve Bank of Australia to hold rates at the September 5th meeting and the drop in the headline and core inflation readings could well cement a pause. Inflation remains well above the RBA’s 2% target, but it is an encouraging sign that inflation continues to move in the right direction.   Soft US numbers send Aussie sharply higher The Australian dollar sparkled on Wednesday, climbing 0.80% and hitting a one-week high. The uptick was more about US dollar weakness than Aussie strength, as the US posted softer-than-expected consumer confidence and employment data on Wednesday. US consumer confidence took a hit as the Conference Board Consumer Confidence Index fell to 106.1 in July. This was a sharp drop from the August reading of 116.0 and marked a two-year low. JOLTS Job Openings fell to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, another sign that the strong US labour market is showing cracks.
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

Kenny Fisher Kenny Fisher 30.08.2023 13:27
Germany to release CPI on Wednesday, Eurozone on Thursday US consumer confidence and jobs data disappoint   The euro’s mini-rally has run out of steam. EUR/USD climbed 0.80% over the past two days but is trading in negative territory on Wednesday. In the European session, the euro is trading at 1.0867, down 0.11%. The markets will be keeping a close eye on European inflation releases today and Thursday. Germany releases the July CPI report later today, with a consensus estimate of 6.0%, compared to 6.2% in July. The once-formidable German juggernaut is in trouble and inflation remains high. The eurozone releases July CPI on Thursday, which is expected to drop from 5.3% to 5.1%. The ECB meets next on September 14th and ECB President Lagarde may have signalled that another rate hike is coming. Lagarde attended the Jackson Hole summit last week and said that interest rates would remain high “as long as necessary” in order to bring inflation back to the ECB’s 2% target. Lagarde’s hawkish remarks were more hawkish than her comments at the July meeting, where she said that ECB policy makers had an “open mind” about the September decision.   There’s no arguing that eurozone inflation remains too high, but the argument against raising rates even higher is that the eurozone economy is not in great shape, and nine straight rate hikes from the ECB have cooled economic growth. Further hikes could tip the economy into a recession, which means that the ECB has its work cut out in deciding whether to raise rates again or take a pause in September. The Federal Reserve is widely expected to hold rates at next week’s meeting, and disappointing data on Tuesday may have cemented a pause. The Conference Board Consumer Confidence Index fell sharply to 106.1 in July, compared to 116.0 in August, marking a two-year low. As well, JOLTS Job Openings slowed to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, a sign that the resilient US labour market is showing cracks.   EUR/USD Technical EUR/USD is putting strong pressure on resistance at 1.0896. The next resistance line is 1.0996 1.0831 and 1.0731 are providing support    
The Japanese Yen Retreats as USD/JPY Gains Momentum

The Japanese Yen Retreats as USD/JPY Gains Momentum

Kenny Fisher Kenny Fisher 30.08.2023 10:02
The Japanese yen continues to lose ground on Tuesday. In the North American session, USD/JPY is trading at 147.26, up 0.50%. The yen broke above the 147 level for the first time since November 2022.   Tokyo says battle with inflation has reached turning point Just a few days after Bank of Japan Governor Kazuo Ueda’s speech at the Jackson Hole summit, the Japanese government released a potentially significant white paper. To say that the two events were contradictory might be a stretch, but they appeared to present a very different stance towards inflation. At Jackson Hole, Ueda stuck to the BoJ’s well-worn script that underlying inflation remains lower than the BoJ’s target of 2%. As a result, the BoJ has insisted it will stick with the current ultra-easy policy until there is evidence that inflation remains sustainably above target. The white paper sounded a different tone, noting that “Japan has seen price and wage rises broaden since the spring of 2022. Such changes suggest the economy is reaching a turning point in its 25-year battle with deflation” and “a window of opportunity may be opening to exit deflation.” Could this be a turning point that leads to a tightening in policy? The government hasn’t acknowledged that deflation is over, despite the fact that core inflation has remained above the 2% target for 16 successive months. Wages are also on the rise after companies significantly bumped up employee wages earlier in the year. The white paper spoke of the need to “eradicate the sticky deflationary mindset besetting households and companies”, but I wonder if the BoJ also suffers from the same mindset, even with inflation remaining above target month after month. Investors should remain on guard for a shift in central bank policy, especially if the yen continues to head towards the key 150 level.     USD/JPY Technical There is resistance at 147.19 and 147.95 146.30 and 145.10 are providing support        
Quiet Start for Japanese Yen as USD/JPY Trades Higher

Quiet Start for Japanese Yen as USD/JPY Trades Higher

Kenny Fisher Kenny Fisher 29.08.2023 10:31
The Japanese yen is trading quietly at the start of the week. In the North American session, USD/JPY is trading at 146.60, up 0.11%. The yen has plunged 3.05% in August against the US dollar and is trading at its lowest levels since November 2022.   Powell, Ueda speak at Jackson Hole  There was a degree of anticipation as major central bankers gathered at the Jackson Hole summit. The meeting has been used as a launch-pad for shifts in policy, but one would be hard-pressed to point to any dramatic news from the summit. Bank of Governor Kazuo Ueda stayed true to his script that underlying inflation remains lower than the BoJ’s target of 2% and as a result, the BoJ will stick with the current ultra-easy policy. Ueda has followed his predecessor Haruhiko Kuroda and insisted that he will not lift interest rates until there is evidence that domestic demand and stronger wage growth replace cost-push factors and keep inflation sustainably around the 2% target. Ueda continues to argue that inflation is below target and that he expects inflation to fall, but core inflation indicators continue to point to broad-based inflationary pressures and have remained above the 2% target for around 15 months. Still, the BoJ is sticking to its loose policy and trying to dampen speculation that it will tighten policy. The BoJ tweaked its yield curve control policy in July but at the time, Ueda insisted that the move was not a step towards normalization of policy. Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”. Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. There was no mention of rate cuts, a signal that the Fed isn’t looking to trim rates anytime soon. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago.   USD/JPY Technical There is resistance at 147.19 and 147.95 145.86 and 145.10 are providing support    
Australia Retail Sales Rebound with 0.5% Gain; AUD/USD Sees Volatility - 28.08.2023

Australia Retail Sales Rebound with 0.5% Gain; AUD/USD Sees Volatility

Kenny Fisher Kenny Fisher 28.08.2023 16:26
Australia retail sales rebounds with 0.5% gain Fed’s Powell keeps door open to further hikes The Australian dollar started the week with gains but then retreated. In the European session, AUD/USD is trading at 0.6408, up 0.09%. Last week, the Australian dollar showed significant swings of around 1%. Australia’s retail sales surprise on the upside Australian retail sales rebounded in July with a respectable gain of 0.5% m/m.  This followed a dismal -0.8% reading in June and beat the consensus estimate of 0.3%. The welcome uptick was driven by the Women’s World Cup which was held in Australia and was a massive boost for Australia’s travel and retail sectors. Much of the tournament took place in August, which means that the August retail sales report should also receive a shot to the arm. The August report showed that consumers still have an appetite for spending, but there are unmistakable signs that the economy is cooling. Inflation has been falling, wage growth in the second quarter was weaker than expected and unemployment rose to 3.7%. This all points to the Reserve Bank of Australia holding rates at the September 5th meeting, and the future markets have priced a hold at around 90%. The slowdown in China, which is Australia’s largest trading partner, could throw a monkey wrench into the central bank’s efforts to guide the economy to a soft landing. There is a always the concern that aggressive tightening, with the aim of curbing inflation, will choke economic growth and tip the economy into a recession. The Australian dollar is sensitive to Chinese releases and the recent batch of soft Chinese data has weighed on the struggling Australian dollar.   Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”. Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. This was a deliberate omission of any mention of rate cuts, a signal that the Fed isn’t even thinking about lowering rates. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago.     AUD/USD Technical AUD/USD is testing resistance at 0.6424. Above, there is resistance at 0.6470 There is support at 0.6360 and 0.6317    
Australia Retail Sales Rebound with 0.5% Gain; AUD/USD Sees Volatility - 28.08.2023

Australia Retail Sales Rebound with 0.5% Gain; AUD/USD Sees Volatility - 28.08.2023

Kenny Fisher Kenny Fisher 28.08.2023 16:26
Australia retail sales rebounds with 0.5% gain Fed’s Powell keeps door open to further hikes The Australian dollar started the week with gains but then retreated. In the European session, AUD/USD is trading at 0.6408, up 0.09%. Last week, the Australian dollar showed significant swings of around 1%. Australia’s retail sales surprise on the upside Australian retail sales rebounded in July with a respectable gain of 0.5% m/m.  This followed a dismal -0.8% reading in June and beat the consensus estimate of 0.3%. The welcome uptick was driven by the Women’s World Cup which was held in Australia and was a massive boost for Australia’s travel and retail sectors. Much of the tournament took place in August, which means that the August retail sales report should also receive a shot to the arm. The August report showed that consumers still have an appetite for spending, but there are unmistakable signs that the economy is cooling. Inflation has been falling, wage growth in the second quarter was weaker than expected and unemployment rose to 3.7%. This all points to the Reserve Bank of Australia holding rates at the September 5th meeting, and the future markets have priced a hold at around 90%. The slowdown in China, which is Australia’s largest trading partner, could throw a monkey wrench into the central bank’s efforts to guide the economy to a soft landing. There is a always the concern that aggressive tightening, with the aim of curbing inflation, will choke economic growth and tip the economy into a recession. The Australian dollar is sensitive to Chinese releases and the recent batch of soft Chinese data has weighed on the struggling Australian dollar.   Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”. Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. This was a deliberate omission of any mention of rate cuts, a signal that the Fed isn’t even thinking about lowering rates. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago.     AUD/USD Technical AUD/USD is testing resistance at 0.6424. Above, there is resistance at 0.6470 There is support at 0.6360 and 0.6317    
Declining Bank Lending and Negative Money Growth Raise Concerns for Eurozone Economy

Euro Slides Below 1.08 Mark for First Time Since June, Fed's Harker Suggests Peak in Interest Rates

Kenny Fisher Kenny Fisher 28.08.2023 09:24
Euro falls below 1.08 for first time since June Fed’s Harker says interest rates may have peaked The euro has extended its losses for a second straight day. In the European session, EUR/USD is trading at 1.0785, down 0.23% and falling below the 1.08 line for the first time since June. Later today, Germany’s Business Climate is expected to ease for a fourth straight month. It has been a nasty slide for the euro, which has been unable to find its footing and has plunged a staggering 500 points over the past six weeks. EUR/USD is down 0.80% this week, in large part due to soft eurozone manufacturing and services PMI readings on Wednesday. The eurozone economy has been damaged by the war in Ukraine and Germany, known as the locomotive of Europe, is in trouble as well. The deterioration of China’s economy is more bad news for the eurozone’s export sector. The ECB’s rate-tightening cycle, aimed at curbing high inflation, has also dampened economic activity. Lagarde & Co. have a tricky task in charting out a rate path. If rates remain too low, inflation will remain well above the 2% target. However, too much tightening raises the risk of tipping the weak eurozone economy into a recession. Lagarde has a difficult decision to make and the markets are uncertain as well – ECB rate odds for the September meeting are around 50-50 between a hike or a pause. Harker says Fed could be done Investors are anxiously awaiting Jerome Powell’s speech at Jackson Hole later today. Meanwhile, Philadelphia Federal Reserve Harker made headlines on Thursday when he said that the Fed may have reached the end of its current rate-tightening cycle. Harker said that he didn’t see a need to raise rates further “absent any alarming new data between now and mid-September”.   At the same time, Harker stressed that he expected rates to remain at high levels for “a while” and ruled out rate cuts anytime soon. This was a pointed message to the markets not to assume that rate cuts are just around the corner.  I expect Fed Chair Powell to be even more cautious in today’s speech, perhaps with a reminder that inflation remains above target and that the door is still open to further tightening.   EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
Tokyo Core CPI Falls Short at 2.8%, Powell and Ueda Address Jackson Hole Symposium, USD/JPY Sees Modest Gains

Tokyo Core CPI Falls Short at 2.8%, Powell and Ueda Address Jackson Hole Symposium, USD/JPY Sees Modest Gains

Kenny Fisher Kenny Fisher 28.08.2023 09:22
Tokyo Core CPI gains 2.8%, less than expected Powell and Ueda to speak at Jackson Hole symposium USD/JPY has posted small gains on Friday, enough to push above the symbolic 146 line. On the data calendar, Tokyo Core CPI dipped lower and Fed Chair Powell addresses the Jackson Hole Symposium later today.   Tokyo Core CPI eases to 2.8% Japan released the Tokyo Core CPI earlier today. This is the first inflation release of the month, making it a key event. In August, Tokyo Core CPI rose 2.8% y/y, down from 3.0% in July and just under the consensus estimate of 2.9%. Despite the drop in inflation, the indicator has remained above the Bank of Japan’s 2% target for some fifteen months. Earlier in the month, the so-called “core-core index”, which excludes fresh food and energy, remained at 4.0%. This points to broad inflationary pressure and raises questions about the BoJ’s insistence that inflation is transient. The BoJ has said it will not exit its ultra-loose monetary policy until wage growth rises enough to keep inflation sustainable around 2%. Still, the markets have been burned before by the BoJ making unexpected moves and are on guard for the BoJ tightening policy, especially with the yen at very low levels. The markets are keeping a close eye on the Jackson Hole symposium, with Fed Chair Powell and BoJ Governor Ueda both attending. Powell delivers a key speech on Friday and Ueda will participate in a panel discussion on Saturday. If either one provides insights into future rate policy, it could mean some volatility from USD/JPY on Monday. What does the Fed have planned? That depends on which Fed member is addressing the media. Philadelphia Fed President Patrick Harker said on Thursday that he didn’t see a need to raise rates further, absent any unexpectedly poor data, but added that the Fed wouldn’t be lowering rates anytime soon.  However, Boston Fed President Susan Collins said that rate increases might still be necessary. The Fed is likely to pause at the September meeting, but what happens after that is unclear.       USD/JPY Technical USD/JPY is facing resistance at 146.41, followed by 147.44 There is support at 145.54 and 144.51  
Oil Prices React to Economic Uncertainty Amid Ongoing Supply Cuts

Oil Prices React to Economic Uncertainty Amid Ongoing Supply Cuts

Kenny Fisher Kenny Fisher 28.08.2023 09:19
Investors becoming wary about the economic outlook Supply cuts remain supportive Head and shoulders neckline provides support Oil prices recovered a little toward the back end of the week after coming under some pressure this month. Supply cuts from OPEC+ continue to support the market but uncertainty over the global economic outlook – sluggish recovery in China, possible recession in the US and Europe – are weighing a little.  Recent economic data has not been encouraging and central banks are maintaining their hawkish positioning which could compound that pressure further going into the end of the year. But with supply cuts continuing to be extended, particularly the voluntary monthly reductions from Saudi Arabia and Russia, the market is being supported, perhaps in a new higher trading range above $80 in Brent.     A major area of support Brent crude ran into support over the last couple of days in a very interesting area, around $82.50, a break of which could have sent a very bearish signal.   This area coincides with support from earlier this month as well as the 200/233-day simple moving average band which it only broke back above a month ago for the first time since August last year. A rebound off here could be viewed as confirmation of the initial breakout. A move below would not only have sent a bearish signal, it would also have triggered the break of the neckline of a suspected head and shoulder pattern which could have been quite significant.     
EUR/USD Flat as Eurozone and German Manufacturing Struggle Amid Weak PMI Reports

Tokyo Core CPI and US Economic Data Impact USD/JPY Movement

Kenny Fisher Kenny Fisher 25.08.2023 09:33
Tokyo Core CPI expected to tick lower to 2.9% US to release jobless claims and durable goods orders later on Thursday USD/JPY put together a mid-week rally with gains of 1% but is considerably lower on Thursday.  In the European session, USD/JPY is trading at 145.72, up 0.60%.   Markets eye Tokyo Core CPI Japan releases Tokyo Core CPI on Friday, the third inflation report in just over a week. The previous two releases were for July, but Tokyo Core CPI is the first indicator of August inflation, hence its importance. The Bank of Japan closely follows core inflation, which excludes fresh food, as it is considered a more accurate estimate of underlying price pressures than headline inflation.  But which way is core inflation headed? Last week, National Core CPI eased to 3.1% in July, down from 3.3% in June.  However, BoJ Core CPI followed this week with a gain of 3.3%, up from 3.0%. Tokyo Core CPI eased to 3.0% in July, marking the 14th consecutive month above the Bank of Japan’s 2% target.  This is a sign that inflationary pressures remain strong.  Little change is expected for August, with a consensus estimate of 2. The BoJ has insisted that inflation is transient and that without evidence that high inflation is sustainable, such as stronger wage growth, it will not tighten policy. Still, there is speculation that unless inflation falls significantly, we could see the central bank make a shift in policy, especially if the yen remains at such low levels.     USD/JPY Technical USD/JPY is testing resistance at 145.54. Above, there is resistance at 146.41 There is support at 144.51 and 143.64
Eurozone PMIs Weigh on Euro as US Data Awaited

Eurozone PMIs Weigh on Euro as US Data Awaited

Kenny Fisher Kenny Fisher 25.08.2023 09:32
Euro yawns after weak German and eurozone PMIs US to release unemployment claims and durable goods orders on Thursday The euro has edged lower on Thursday. In the European session, EUR/USD is trading at 1.0851, down 0.11%. On the data calendar, there are no releases from the eurozone. The US releases unemployment claims and durable goods orders and we could see some movement from EUR/USD in the North American session. On Friday, Germany releases Ifo Business Climate. The index has decelerated for three consecutive months and the downturn is expected to continue (87.3 in July, 86.7 expected).   Euro pares losses after dismal PMIs Eurozone and German PMIs were nothing to cheer about, as the August numbers pointed to contraction in the manufacturing and services sectors. Germany’s manufacturing sector has been particularly weak, although the Manufacturing PMI rose slightly to 39.1 in August, up from 38.8 in July and the consensus estimate of 38.1. Eurozone Manufacturing PMI climbed to 43.7 in August, higher than the July reading of 42.7 and the estimate of 42.6 points. The services sector is in better shape and has been expanding throughout 2023. That trend came to a screeching halt on Wednesday when German and Eurozone Services PMIs fell into contraction territory in August (a reading of 50.0 separates expansion from contraction). Germany dropped to 47.3, down from 52.3 in July and below the estimate of 51.5. Similarly, the eurozone slowed to 48.3, down from 50.9 and shy of the estimate of 50.5 points.   The weak PMI reports pushed the euro lower but it managed to recover without much fuss. As for the ECB, the data supports the case for a pause, as the softness in manufacturing and services is evidence that the eurozone economy is cooling down. A pause would give the ECB some time to monitor the impact of previous rate hikes are having on the economy and on inflation. Future market traders are viewing the September meeting as a coin toss between a 25 basis point hike and a pause.   EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
FX Daily: Lagarde and Powell Address Jackson Hole – Hawkish Expectations and Eurozone Concerns

Subdued Euro Reaction to Weak German and Eurozone PMIs; US Unemployment Claims and Durable Goods Orders Awaited

Kenny Fisher Kenny Fisher 24.08.2023 14:11
Euro yawns after weak German and eurozone PMIs US to release unemployment claims and durable goods orders on Thursday The euro has edged lower on Thursday. In the European session, EUR/USD is trading at 1.0851, down 0.11%. On the data calendar, there are no releases from the eurozone. The US releases unemployment claims and durable goods orders and we could see some movement from EUR/USD in the North American session. On Friday, Germany releases Ifo Business Climate. The index has decelerated for three consecutive months and the downturn is expected to continue (87.3 in July, 86.7 expected).   Euro pares losses after dismal PMIs Eurozone and German PMIs were nothing to cheer about, as the August numbers pointed to contraction in the manufacturing and services sectors. Germany’s manufacturing sector has been particularly weak, although the Manufacturing PMI rose slightly to 39.1 in August, up from 38.8 in July and the consensus estimate of 38.1. Eurozone Manufacturing PMI climbed to 43.7 in August, higher than the July reading of 42.7 and the estimate of 42.6 points. The services sector is in better shape and has been expanding throughout 2023. That trend came to a screeching halt on Wednesday when German and Eurozone Services PMIs fell into contraction territory in August (a reading of 50.0 separates expansion from contraction). Germany dropped to 47.3, down from 52.3 in July and below the estimate of 51.5. Similarly, the eurozone slowed to 48.3, down from 50.9 and shy of the estimate of 50.5 points.   The weak PMI reports pushed the euro lower but it managed to recover without much fuss. As for the ECB, the data supports the case for a pause, as the softness in manufacturing and services is evidence that the eurozone economy is cooling down. A pause would give the ECB some time to monitor the impact of previous rate hikes are having on the economy and on inflation. Future market traders are viewing the September meeting as a coin toss between a 25 basis point hike and a pause.     EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
US Corn and Soybean Crop Conditions Decline, Wheat Harvest Progresses, and Weaker Grain Exports

Canadian Retail Sales Show Weak Gain as Markets Focus on Jackson Hole Symposium

Kenny Fisher Kenny Fisher 24.08.2023 12:26
Canadian retail sales post weak 0.1% gain Markets eye Jackson Hole Symposium as tightening cycles near end The Canadian dollar remains under pressure on Wednesday. In the North American session, USD/CAD is trading at 1.3554, up 0.04%. Earlier, the Canadian dollar fell below the 1.36 line for the first time since May 31st.   Canada’s retail sales stagnant in June Canada’s retail sales for June barely moved, with a gain of just 0.1% m/m. This was unchanged from the May reading, which was downwardly revised from 0.2%, and just above the consensus estimate of zero. On a yearly basis, retail sales slipped 0.8% in June, compared to a gain of 0.2% (revised downwards from 0.5%) and shy of the estimate of 0.3%. The data indicates that consumer consumption is cooling down as higher interest rates continue to filter through the economy. Canada’s GDP in the first quarter was solid at 3.1%, but second-quarter growth is expected to be much more modest, at around 1%. Consumer spending has been a key factor in the Bank of Canada’s rate decisions. Earlier in the year, stronger-than-expected consumer spending resulted in the BoC raising interest rates in June and July. Today’s soft retail sales figures will provide support for the central bank to take a pause at the September 6th meeting, with GDP the final key release ahead of that meeting.   Markets await Jackson Hole There has been a whole lot happening this week and investors will be hoping for some interesting comments from central bankers who are meeting this week in Jackson Hole, Wyoming. Many of the major central banks, including the Federal Reserve, are winding up their rate-tightening cycles and Jackson Hole has often served as a venue for announcing shifts in policy. That said, Fed Chair Powell has insisted that the fight against inflation is not done, although the dark days of high inflation appear to be over. There is talk in the markets of the Fed trimming rates next year, but I doubt that Powell will mention any cuts to rates, when he is yet to acknowledge that the Fed is done tightening.   USD/CAD Technical USD/CAD put strong pressure on the resistance at 1.3606 earlier. Above, there is resistance at 1.3660 1.3522 and 1.3468 are providing support    
Strong August Labour Report Poses Dilemma for RBA: Will Rates Peak or Continue to Rise?

UK Services and Manufacturing PMI Show Sharp Decline, Raising Recession Concerns and Impacting GBP

Kenny Fisher Kenny Fisher 24.08.2023 12:19
UK Services PMI falls to 48.7 (50.8 expected, 51.5 in July) UK Manufacturing PMI falls to 42.5 (45 expected, 45.3 in July) Cable tests support but rebounds for the third time The UK services and manufacturing PMI surveys fell well short of forecasts this morning, the former deep into contraction territory. What’s more, the weakness was widespread from new orders to hiring and prices paid, which suggests we’re not just talking about a blip in the data, but rather the prospect of a recession in the second half of the year. From the Bank of England’s perspective, there’s a lot within the data that will be viewed as encouraging, with slower employment resulting in less tightness in the labor market and lower prices paid across manufacturing and services sectors indicating easing inflationary pressures, in theory at least. The surveys alone won’t be enough to convince the MPC and another rate hike in September looks a near-certainty but beyond that, traders have been paring back expectations on the back of these releases, with only one more then priced in this year.   A bearish or bullish signal for cable? The pound headed lower after the report having drifted higher over the last week or so but once again it ran into trouble around a previous support level.       That level is just above 1.26 where it also rebounded off a little over a week ago and a little over a week before that. This is clearly now a very notable support level, one which if broken could send a strong bearish signal. What’s interesting is that it’s now rebounded back into the 55/89-day simple moving average band and a close within this would further suggest there’s still plenty of support around this important support zone too. This was a crucial support zone a few months ago and it’s proving so again. To the upside, 1.28 continues to look significant, having provided plenty of resistance over the last few weeks and it also roughly coincides with the 38.2% Fibonacci retracement level.  
"UK Manufacturing and Services Sectors Show Signs of Contraction as Market Focus Shifts to Jackson Hole Symposium

"UK Manufacturing and Services Sectors Show Signs of Contraction as Market Focus Shifts to Jackson Hole Symposium

Kenny Fisher Kenny Fisher 23.08.2023 11:08
UK order expectations decline Manufacturing and services PMIs are expected to tick lower on Wednesday The British pound started the Tuesday session in positive territory but has given up these gains. In North American trade, GBP/USD is trading at 1.2737, down 0.16%.   UK manufacturing continues to sputter The Confederation of British Industry industrial order expectations fell to -15 in August, down from -9 in July and missing the consensus estimate of -13. Output volumes for the past three months fell to -19, a huge decline from the July reading of +3. The data paints a grim picture of the manufacturing sector, and Wednesday’s manufacturing PMI is expected to point to ongoing contraction (the 50.0 line separates expansion from contraction). The August estimate stands at 45.0, compared to 45.3 in July, which was the lowest reading since May 2020. The manufacturing PMI last indicated to expansion in July 2022. The services sector has looked better and is in expansion territory. Still, there are concerns as services business activity has been slowing. The July PMI slipped to 51.5, down from 53.7 in June and the estimate for July stands at 51.0, which would indicate very little growth. The silver lining from weak activity in manufacturing and services is that it points to a cooling UK economy which could provide support for the Bank of England to ease up on interest rate hikes.   Markets eye Jackson Hole symposium Fed Chair Powell hosts the annual Jackson Hole Symposium which begins on Thursday. The Fed Chair’s speech is always a highlight, as investors will be looking for clues about the Fed’s future rate policy. Powell will be hoping not to make any waves and I expect a cautious, perhaps hawkish speech when Powell speaks on Friday. The future markets have priced in a pause at the Fed’s September meeting, but traders are divided over the November meeting and Powell’s remarks will be closely followed.     GBP/USD Technical There is support at 1.2714 and 1.2641  1.2812 and 1.2885 are the next resistance lines    
Positive Start Expected as Nvidia's Strong Performance Boosts Market Confidence

BRICS Summit Focuses on Bolstering Trade and Currency Cooperation Amid Yuan's Weakening

Kenny Fisher Kenny Fisher 23.08.2023 11:05
Xi meets Ramaphosa and discuss how to bolster trade in their own currencies Yuan still weakens despite PBOC’s most forceful fixing on record BRICS might lead to more investment in Africa, potentially bolstering rand   The annual BRICS Summit begins in Johannesburg with China’s President Xi meeting South African President Ramaphosa.  China and India have enjoyed 25 years of diplomatic ties and are looking to bolster trade and investment with more countries.  The three-day summit will be attended by leaders of China, India, Brazil and South Africa, as well as 30 African leaders. Russian President Putin will be participating via video conference as he has an international arrest over alleged war crimes in Ukraine.  Russian Foreign Minister Lavrov will represent Russia at the summit. BRIC nations make up a quarter of the global economy, so their voice will clearly be listened to, especially if they expand.  So far, 22 other countries have formally applied to join the bloc, but it seems difficult for the institution given they do not have a BRICS currency that can challenge the dollar.  The current members have lots of challenges to go all-in with de-dollarization and embrace a BRICS currency.  India does not want a China-led initiative. Given all the sanctions Russia is facing, they have billions of rupees that are stranded. There is no easy solution that can address all the problems facing the key members, which means they will take small steps, which include expanding use of a development bank to help with lending.   5-year USD/CNH, USD/INR, and USD/BRL The 5-five year chart above shows how robust the dollar has been against the yuan and rupee in 2023, with Brazil and their attractive interest differential being the one standout.  Alternatives to the dollar in trade will grow, but for now the big risk is the great refinancing that will occur over the next year could lead to extreme turmoil for emerging markets and that might keep the dollar supported against most of the BRIC currencies. The weekly USD/CNH and USD/INR chart below exemplifies how overbought this dollar trade has become.  There is a lot of macro risk on the table this week and FX markets could see either a strong extension of dollar strength or a major pullback.    
German Ifo Index Continues to Decline in September, Confirming Economic Stagnation

NZD/USD Gains Amidst Concerns Over New Zealand Retail Sales and China's Economy

Kenny Fisher Kenny Fisher 23.08.2023 10:36
NZD/USD posts strong gains on Tuesday New Zealand retail sales are expected to decline by 2.6%   The New Zealand dollar has posted strong gains on Tuesday. In the European session, NZD/USD is trading at 0.5959, up 0.55%. On the data calendar, New Zealand retail sales are expected to decline by 2.6% q/q in the second quarter, compared to -1.4% in Q1. The New Zealand dollar has gone on a dreadful slide since mid-July, falling as much as 500 basis points during that spell. The current downswing has been driven by weak global demand and jitters over China’s economy, which is showing alarming signs of deterioration. Chinese releases have been pointing downward recently. Exports and imports have fallen, manufacturing activity is weak and the world’s second-largest economy is experiencing deflation. Last week, Evergrande, a huge Chinese property developer, filed for bankruptcy in the United States, raising fears of contagion to other parts of the economy. It wasn’t long ago that the Chinese ‘miracle’ was being touted as an economic powerhouse on the global stage, but now the world’s second-largest economy is in deep trouble and is dragging down global growth. An interesting silver lining is that deflation in China could help lower inflation worldwide, which would be good news for the Fed, ECB and other central banks that are battling to push inflation lower. The People’s Bank of China (PBOC) has responded in recent days to the economic slowdown with some cuts to lending rates, but surprisingly, has not trimmed the five-year loan prime rate, which has a major impact on mortgages. The PBOC’s lukewarm move to the economic crisis could mean China’s economy will continue to sputter, and that is bad news for the New Zealand dollar, as China is by far New Zealand’s largest trading partner. If Chinese releases continue to head lower, we can expect the New Zealand dollar to continue losing ground.   NZD/USD Technical NZD/USD has pushed above resistance at 0.5941 and is putting pressure on resistance at 0.5978. There is support at 0.5885 and close by at 0.5848  
Market Reaction to Eurozone Inflation Report: Euro Steady as Data Leaves Impact Limited

Market Reaction to Eurozone Inflation Report: Euro Steady as Data Leaves Impact Limited

Kenny Fisher Kenny Fisher 22.08.2023 09:12
The euro started the week on a stable note, with little response to the eurozone inflation report released on Friday. In the North American session, EUR/USD is trading at 1.0886, reflecting a minor increase of 0.13%. Given the sparse data calendar for Monday, it is expected that the euro will maintain its calm trajectory for the rest of the day. Eurozone Inflation Trends: Headline Falls, Core Remains Unchanged The past week concluded with a eurozone inflation report that brought about a mixed reaction. The euro displayed minimal volatility in response to the data. The headline inflation rate for June was confirmed at 5.3% year-on-year (y/y), down from 5.5% in the previous month. This decline marked the lowest level observed since January 2022, primarily driven by a drop in energy prices.     Markets show little reaction to Friday’s eurozone inflation report Headline inflation falls but core rate unchanged The euro is steady at the start of the week. In the North American session, EUR/USD is trading at 1.0886, up 0.13%. With a very light data calendar on Monday, I expect the euro to remain calm for the remainder of the day.   Eurozone headline inflation falls, core inflation unchanged The week ended with a mixed inflation report out of the eurozone and the euro showed little reaction. Inflation was confirmed at 5.3% y/y in June, down from 5.5% in June. This marked the lowest level since January 2022 and was driven by a decline in energy prices. Core CPI remained unchanged at 5.5% in July, confirming the initial reading. The news was less encouraging from services inflation, which rose from 5.4% to 5.6% with strong wage growth driving the upswing. The labour market remains tight and inflation is still high, which suggests that wage pressure will continue to increase. Inflation has been moving in the right direction but core inflation and services inflation remain sticky and are raising doubts, within the ECB and outside, if the central bank’s aggressive tightening cycle can bring inflation back to the 2% target. The deposit rate stands at 3.75%, its highest level since 2000. The ECB’s primary goal is to curb inflation but policy makers cannot ignore that additional rate hikes could tip the weak eurozone economy into a recession. The ECB meets next on September 14th and there aren’t many key releases ahead of the meeting. ECB President Lagarde has said that all options are open and investors will be listening to any comments coming out of the ECB, looking for clues as to whether the ECB will raise rates next month or take a pause.   EUR/USD Technical EUR/USD tested resistance at 1.0893 earlier. Above, there is resistance at 1.0940 There is support at 1.0825 and 1.0778    
Dollar Strength Continues as 10-year Treasury Surges to 4.34%, Reaching Highest Levels Since Financial Crisis

Dollar Strength Continues as 10-year Treasury Surges to 4.34%, Reaching Highest Levels Since Financial Crisis

Kenny Fisher Kenny Fisher 22.08.2023 09:10
Canadian Dollar Experiences Biggest Intra-day Gain Since End of July. The Canadian dollar has been experiencing a steady weakening against the US dollar since mid-July. The ongoing bullish uptrend of USD/CAD is meeting resistance as foreign exchange traders speculate on the possibility of the Fed and BOC being close to completing their tightening cycles with one more rate hike. Major resistance at the 1.36 level could hold, potentially leading to a pullback targeting the 1.3454 level, the current 200-day SMA. The upcoming week might bring a hawkish stance from Fed Chair Powell, which could revive the king dollar trade. Oil Market Rally Fizzles Amid Strong Dollar Trade and Rising Real Yields Crude oil prices initially rallied in the morning, driven by expectations of a tight oil market due to current backwardation trends. However, the surge in real yields and a potential strong dollar resurgence after Jackson Hole are contributing to the reversal of the oil price rally. While risks to crude demand are emerging, the oil market's tightness should provide some support.     Dollar supported as 10-year Treasury hits 4.34%, highest levels since financial crisis Oil market to remain tight, but so far offers little help for the loonie Loonie was having biggest intra-day gain since end of July   The Canadian dollar has been steadily weakening against the greenback since the middle of July.  The USD/CAD bullish uptrend appears to be facing some resistance as FX traders anticipate both the Fed and BOC are possibly one more rate hike away from being done with tightening. It appears that major resistance from the 1.36 level might hold, so if a pullback emerges, downside could target the 1.3454 level, which is currently the 200-day SMA.  If markets get a very hawkish Fed Chair Powell this week could see the return of the king dollar trade.   Oil The morning oil price rally is fizzling as the strong dollar trade might be back given the surge in real yields.  Crude prices were much higher in early trade on expectations that the oil market would remain tight given the current backwardation. Risks to the crude demand outlook are growing, especially after China disappointed with last night’s easing, but for now a tight market should keep oil supported. The biggest risk for energy traders is if we see a massive wave of dollar strength after Jackson Hole. Right now there are so many oil drivers and most support higher prices. Heating oil prices are elevated and that might continue.  Iran nuclear talks won’t be having any breakthroughs anytime soon. Gulf of Mexico oil production could be at risk as a few formations build on the Atlantic.     Gold Gold’s worst enemy is surging real yields.  It was supposed to be a quiet start to the week for gold with China coming to the rescue and some calm before Friday’s Jackson Hole speech by Fed Chair Powell.  There is a little bit of nervousness from the long-term bulls as gold futures are getting dangerously close to the $1900 level, which could trigger a wave of technical selling.  It seems gold needs some disorderly stress in financial markets for it to rally and that doesn’t seem like it is happening anytime soon. The outlook for the next few quarters is cloudy at best, but it seems that there is still too much strength in the economy that is dampening safe-haven flows for gold.  It doesn’t help that hedge funds are throwing in the towel for gold, which now has net-long positions at a five month low.        
USD/JPY Breaks Above 146 Line: Bank of Japan's Core CPI in Focus

USD/JPY Breaks Above 146 Line: Bank of Japan's Core CPI in Focus

Kenny Fisher Kenny Fisher 22.08.2023 09:05
The Japanese yen faced considerable losses on Monday as USD/JPY surged to 146.23 during the North American session, marking a 0.57% increase for the day. The US dollar's strength has propelled it dangerously close to pushing the yen below the critical 146 line, a scenario witnessed last week when the robust US dollar drove the struggling yen to a nine-month low. Once synonymous with deflation, the Japanese economy has undergone a significant transformation in the era of high global inflation. With Japan's inflation hovering slightly above 3%, a level that many major central banks would eagerly welcome, the landscape has shifted. Notably, inflation remains relatively high by Japanese standards, as both headline and core inflation have consistently outpaced the Bank of Japan's (BoJ) 2% target. Japan's inflation data is closely scrutinized as the prospect of elevated inflation sparks speculations that the BoJ might need to tighten its lenient policy stance. Although the central bank has maintained that the high inflation is transitory, it's worth remembering that other central banks have made similar claims only to backtrack later. The Federal Reserve (Fed) and the European Central Bank (ECB) come to mind as examples. In the previous week, July's Consumer Price Index (CPI) remained steady at 3.3% year-on-year, while Core CPI experienced a slight dip to 3.1% year-on-year from the previous 3.3%. Looking ahead, Tuesday brings the release of BoJ Core CPI, the central bank's favored inflation metric, which is projected to decrease to 2.7% for July, down from June's 3.0%.   USD/JPY pushes above 146 line Bank of Japan’s Core CPI is expected to ease to 2.7% The Japanese yen has posted significant losses on Monday. USD/JPY is trading at 146.23 in the North American session, up 0.57% on the day. The US dollar has looked sharp and is within a whisker of pushing the yen below the 146 line, as was the case last week when the strong US dollar pushed the ailing yen to a nine-month low. The Japanese economy was once synonymous with deflation, but that has changed in the era of high global inflation. Japan’s inflation is slightly above 3%, a level that other major central banks would take in a heartbeat. Still, inflation is relatively high by Japanese standards and both headline and core inflation have persistently been above the Bank of Japan’s 2% target. Japan’s inflation reports are carefully monitored as higher inflation has raised speculation that the BoJ will have to tighten its loose policy. The central bank has insisted that high inflation is transient, but the BoJ wouldn’t be the first bank to make that claim and then backtrack with its tail between its legs. Remember the Fed and the ECB? Last week, July’s CPI remained unchanged at 3.3% y/y. Core CPI dropped to 3.1% y/y, down from 3.3%. On Tuesday, Japan releases BoJ Core CPI, the central bank’s preferred inflation gauge, which is expected to dip to 2.7% in July, down from 3.0% in June. China’s economic troubles have sent the Chinese yuan sharply lower, with the Chinese currency falling about 5% this year against the US dollar. A weak yuan makes Chinese exports more attractive, but this is at the expense of other exporters including Japan. As a result, there is pressure in Japan to lower the value of the yen in order to compete with Chinese exports.   USD/JPY Technical USD/JPY pushed above resistance at 145.54 earlier today. The next resistance line is 146.41 There is support at 144.51 and 143.64    
USD Outlook: Fed's Push for Higher Rates and Powell's Speech at Jackson Hole Symposium

USD Outlook: Fed's Push for Higher Rates and Powell's Speech at Jackson Hole Symposium

Kenny Fisher Kenny Fisher 22.08.2023 09:02
2-year Treasury yield rises 3.7bps to 4.979% (supports Fed’s higher for longer push) Dollar softens as risk appetite tentatively returns following last week’s stock market rout Fed Chair Powell to speak at Jackson Hole Symposium on Friday The fate of the dollar will not solely depend on what Fed Chair Powell says at Jackson, but on several other factors. Will Nvidia’s earnings reignite the AI trade and provide much needed relief to tech stocks? How much additional support will we see from China? Is ECB President Lagarde ready to show which way she is leaning towards for the September meeting? Finally, will the global flash PMIs show that rate hiking cycles are starting to bring down the service sector? Fed Chair Powell will be trying to avoid a policy mistake here. The annual Jackson Hole gathering will undoubtedly emphasize the need for policymakers to keep rates higher for longer.  Powell might stick to his hopes of a soft landing, while hinting that eventually rates will be able to come down.  It seems the majority of Wall Street is expecting Powell to deliver a hawkish hold, but any signs that the Fed is concerned about disorderly markets could end up supporting the case that the Fed will cut rates early next year. EUR/USD Daily Chart     The EUR/USD (a daily chart of which is shown) as of Monday (8/21/2023) is seeing its bearish trend cool ahead of the Jackson Hole Symposium.  The euro’s slide had its eyes on the July low (1.0834), but that seems to be providing key support for now.  If the bond market selloff remains intact, we might not have to wait for any fireworks from Jackson Hole speeches by both ECB’s Lagarde and Fed Chair Powell.     If euro-dollar sees a sharp plunge, key support will come from the 1.0740 to 1.07400 region. It is around that area that price could see the formation of a potential bullish ABCD pattern, which might target a key harmonic level of 350 pips. The key story on Wall Street remains the movement with real yields.  The yield on 10-year inflation-protected Treasuries rose above the 2% level, this is the first time it did that since 2009.  Soft landing or not, some investors won’t be able to pass up getting paid over 5% on short-term debt they can hold for a few months. If at the end of the week, the dollar’s rally is exhausted, upside could target the 1.0925 region.  Only a daily close above the 1.1050 level would open the door for an extended euro rally.    
Assessing Global Markets: From Chinese Stimulus to US Jobs Data

AUD/USD Holds Near 9-Month Lows as China's Economic Woes Persist

Kenny Fisher Kenny Fisher 21.08.2023 13:07
AUD/USD close to 9-month lows China fails to cut 5-year LPR   The Australian dollar is steady at the start of the new trading week. In the European session, AUD/USD is unchanged at 0.6404. It’s a very quiet week for Australian releases, with no tier-1 releases. On Wednesday, Australia releases services and manufacturing PMIs for August. Services and manufacturing both contracted in July, with readings below the 50.0 level. The Aussie has hit a rough patch and has reeled off five straight losing weeks against the US dollar, sliding over 400 basis points in that period. The economic picture in China continues to deteriorate, and this has been a major reason for the Australian dollar’s sharp deterioration. China is Australia’s number one trading partner, and when China sneezes there’s a good chance Australia will catch a cold. China’s economic data has been pointing downward and the world’s second-largest economy is experiencing deflation. Last week, Evergrande, a huge Chinese property developer, filed for bankruptcy in New York, raising fears of contagion to other parts of the economy. The People’s Bank of China (PBOC) responded to the economic slowdown with a surprise cut to the one-year medium-term lending rate. The central bank was expected to follow up with cuts to the one-year and five-year loan prime rates (LPR). On Monday, the PBOC trimmed its one-year LPR from 3.55% to 3.45%, but surprisingly, did not lower the 5-year LPR, a key lending rate that affects mortgages. Lower lending rates are intended to boost credit demand, but the central bank’s lukewarm move is unlikely to provide much of a boost to China’s ailing economy. That does not bode well for the struggling Australian dollar, and if China’s economy continues to show signs of weakening, I would expect the Australian dollar to continue losing ground.   AUD/USD Technical AUD/USD is putting pressure on resistance at 0.6431. Next, there is resistance at 0.6496 There is support at 0.6339 and 0.6274  
Market Sentiment and Fed Policy Uncertainty: Impact on August Performance

UK Retail Sales Decline Amid Weather and Economic Factors

Kenny Fisher Kenny Fisher 21.08.2023 12:58
UK retail sales post a sharp decline Rainy weather and high prices weighed on consumer spending The British pound has given up ground on Friday after several days of modest gains. In the European session, GBP/USD is trading at 1.2736, down 0.07%.   UK retail sales decline more than expected The weather in the UK continues to have a major impact on consumer spending. The June retail sales report was stronger than expected, with record-hot weather contributing to an increase in spending. July brought cold and rainy weather, which led to a decline in spending as shoppers preferred to stay home. Retail sales declined -1.2% m/m in July, down from +0.6% in June and below the consensus estimate of -0.5%. The UK consumer’s spending appetite isn’t only dependent on the weather, of course. Consumer spending has been surprisingly resilient in a tough economic environment, but high inflation and rising interest rates are taking their toll. The cost-of-living crisis has created a situation in which sales volumes are falling but the value of goods purchased has been rising – in other words, consumer purchasing power has been falling as consumers are spending more to buy less. What is bad for consumers may be welcome news for the Bank of  England, whose battle with inflation hasn’t gone all that well. The BoE has raised interest rates to 5.25% in order to curb inflation, but a tight labour market and strong consumer spending have contributed to high inflation, which is currently running at a 6.8% clip. If the cracks we saw this week in the labour market and consumer spending continue, it could mean that the BoE has finally turned the corner in its tenacious battle to bring inflation closer to the 2% target.   GBP/USD TechnicalNew button GBP/USD is testing support at 1.2787. Below, there is support at 1.2634  1.2879 and 1.2940 are the next resistance lines  
Australian Dollar's Decline Persists Amid Evergrande Concerns and Economic Data

Australian Dollar's Decline Persists Amid Evergrande Concerns and Economic Data

Kenny Fisher Kenny Fisher 21.08.2023 12:33
The Australian dollar’s slide continues Evergrande bankruptcy raises contagion fears It has been all red for the Australian dollar, as AUD/USD has closed lower for eight straight days and declined 230 basis points during that time. The downswing has continued on Friday, as AUD/USD is trading at 0.6390 in the European session, down 0.20%. There are no Australian or US releases today, so I expect a calm day for AUD/USD.   Evergrande collapse raises contagion fears Chinese economic releases have looked weak in recent weeks, with exports and imports in decline, a slump in domestic demand, and soft services and manufacturing data. The news from Evergrande, one of the country’s largest property developers, is one more headache that the Chinese economy could do without. Evergrande filed for bankruptcy in New York on Thursday. The company defaulted on its massive debt in 2021, which triggered a massive property crisis in China and damaged the country’s financial system. The bankruptcy has raised fears that China’s property sector problems could spread to the rest of the economy, which is experiencing deflation and is suffering from weak growth. There are growing concerns about the stability of the Chinese economy and the Evergrande bankruptcy has raised contagion fears, similar to when the company defaulted on its debt. Australia is particularly sensitive to economic developments in China, which is Australia’s largest trading partner. A slowdown in China has meant less demand for Australian exports, and that has contributed to the Australian dollar’s sharp slide, with the currency plunging a massive 4.93% in August.   In the US, there was unexpected good news from the manufacturing sector on Thursday. Manufacturing has been in the doldrums worldwide, as high inflation and weak demand have taken a heavy toll. The US is no exception, but Philly Fed Manufacturing sparkled in August with a reading of +12, up sharply from -13.5 in July and blowing past the consensus estimate of -10 points.   AUD/USD Technical AUD/USD is testing support at 0.6402. This is followed by support at 0.6319 0.6449 and 0.6532 are the next resistance lines    
Declining Bank Lending and Negative Money Growth Raise Concerns for Eurozone Economy

Japan's CPI Eases, Yen Gains, and BoJ Policy Considerations

Kenny Fisher Kenny Fisher 21.08.2023 12:31
Japan’s core CPI eases in July The decline supports expectations that BoJ will maintain policy USD/JPY has dipped lower on Friday The Japanese yen has extended its gains on Friday. In the North American session, USD/JPY is trading at 145.29, down 0.38%. The month of August has been kind to the US dollar, which has posted strong gains against all of the major currencies. USD/JPY has risen 2.34% in that period and on Thursday, the yen fell as low as 146.56, a nine-month low against the US dollar. The yen has been the worst performer among the majors over the past month, and the currency’s sharp depreciation has raised speculation that Tokyo could respond by intervening in the currency markets. Japan’s Ministry of Finance (MOF) shocked the markets in September 2022 when it intervened and bought billions of dollars with yen, which propped up the Japanese currency. At that time, the yen was also trading around the 146 level, and that has many investors on edge that the MOF may be planning another intervention.   Japan’s core CPI eases in July Japan’s inflation has been hovering above 3% for a prolonged period, higher than the Bank of Japan’s target of 2%. The BoJ has insisted that it will not loosen its ultra-accommodative monetary policy until it has evidence that inflation is sustainable, such as higher wage growth. The markets are not taking the BoJ at its word, as the BoJ keeps its cards very close to the chest in order to surprise the market when it shifts policy. Clearly, transparency is not high on the BoJ’s list, in contrast to the Federal Reserve and other major central banks. Since inflation data could well lead to a shift in policy, every inflation report out of Japan attracts significant attention. The July CPI report, released today, was no exception. Core CPI, which excludes fresh food, eased to 3.1% y/y, matching the consensus estimate and down from 3.3% in June. The indicator is closely watched by the BoJ and the decline supports expectations that the BoJ will maintain its current policy. This, despite the fact that Core CPI has now exceeded the BoJ’s 2% inflation target for 16 consecutive months.   The BoJ is not expected to make any major shifts to policy in the near-term, but that doesn’t necessarily mean that the central bank will stay completely on the sidelines. At the July meeting, the BoJ surprised the markets with a tweak to its monetary policy which provided more flexibility to the 10-year bond yield cap. Governor Ueda insisted that this was not a move towards normalization, but investors have learned the hard way that the BoJ is not hesitant to make policy moves that have blindsided the markets.   USD/JPY Technical USD/JPY is testing support at 145.71. Below, there is support at 144.07 There is resistance at 1.4640 and 147.31  
AUD/USD Touches 9-Month Low as Australian Job Growth Slips

AUD/USD Touches 9-Month Low as Australian Job Growth Slips

Kenny Fisher Kenny Fisher 18.08.2023 10:13
AUD/USD touches 9-month low Australian job growth slips Fed minutes note concern about inflation The Australian dollar has been on a nasty slide. Earlier, AUD/USD fell as low as 0.6364, a nine-month low, before recovering. In the European session, AUD/USD is trading at 0.6433, up 0.16%. Australia’s job growth slides Australia’s labour market has been surprisingly robust in the face of the central bank’s aggressive tightening, but cracks have finally appeared. Employment in Australia fell by 14,600 in July, compared to a downwardly revised gain of 31,600 in May and missing the consensus estimate of 15,000. The unemployment rate rose to 3.7% in July, up from the previous reading of 3.5% and above the estimate of 3.6%. This is the highest level since April. The Reserve Bank of Australia has repeatedly stated that its rate decisions will be based on the data, and inflation and employment reports are likely the most critical readings for the RBA. July’s soft jobs report has dragged the Aussie lower and should cement a third successive pause from the RBA at the September meeting. The benchmark cash rate currently stands at 4.10% and the futures markets have priced in a 50-50 chance of one more quarter-point hike before the end of the year. If inflation continues to head lower, the RBA will be able to look at trimming rates sometime in 2024. The Federal Reserve remains concerned about high inflation and said that additional rate hikes might be needed, according to the minutes of the July meeting. At the meeting, the Fed raised rates by 0.25%, a move that was widely anticipated. Most members “continued to see significant upside risks to inflation, which could require further tightening of monetary policy”.       Inflation has fallen to 3.2%, but members agreed inflation is “unacceptably high”. Most members saw a  significant upside risk to inflation, but interestingly, the minutes noted that there is uncertainty over the future rate path since there were also signs that inflationary pressures could be easing. . AUD/USD Technical AUD/USD is testing support at 0.6402. This is followed by support at 0.6319 0.6449 and 0.6532 are the next resistance lines
Market Highlights: US CPI, ECB Meeting, and Oil Prices

UK Retail Sales Expected to Slip as Concerns about Inflation Persist

Kenny Fisher Kenny Fisher 18.08.2023 10:09
UK retail sales expected to slip in July Fed minutes note concern about inflation The British pound has extended its gains on Thursday. In the North American session, GBP/USD is trading at 1.2772, up 0.32%. UK retail sales expected to decline The UK will wrap up a busy week with retail sales on Friday. The July report is expected to show a decline in consumer spending. Headline retail sales are expected to fall by 0.5% after a 0.7% gain in May and core retail sales are projected to decline by 0.7% after a 0.8% increase in May. The June numbers were higher than expected despite high inflation, helped by record-hot weather. Will the July data also surprise to the upside? The UK consumer has been grappling with the highest inflation in the G7 club, which means shoppers are getting less for their money. This has dampened consumption, a key driver of the economy. Energy prices are lower, thanks to the energy price cap, but food inflation continues to soar and was 17.4% y/y in June. Consumer confidence has been mired deep in negative territory and the GfK consumer confidence index, which will be released later today, is expected at -29, almost unchanged from the previous release of -30 points. The Bank of England would like to follow some of the other major central banks that are in a pause phase, but the grim inflation picture may force the BoE to keep raising interest rates, which could tip the weak economy into a recession. Wage growth jumped to 7.8% in the three months to June, up from 7.5% in the previous period. In July, headline CPI fell to 6.9%, down sharply from 7.9%, but core CPI remains sticky, and was unchanged at 6.9%. The data points to a wage-price spiral which could impede the BoE’s efforts to curb inflation.   The Federal Reserve remains concerned about high inflation and said that additional rate hikes might be needed, according to the minutes of the July meeting. At the meeting, the Fed raised rates by 0.25%, a move that was widely anticipated. Most members “continued to see significant upside risks to inflation, which could require further tightening of monetary policy”. At the same, time, members expressed uncertainty over the future rate path since there were signs that inflationary pressures could be easing.   GBP/USD Technical GBP/USD is testing resistance at 1.2787. The next resistance line is 1.2879  1.2726 and 1.2634 are providing support    
Fed's Watchful Eye on Inflation Expectations Amid Rising Energy Prices

Japanese Yen Rebounds Amid Intervention Concerns Ahead of Inflation Data

Kenny Fisher Kenny Fisher 18.08.2023 10:08
Japanese yen rebounds, but intervention worries remain Japan releases July inflation on Friday The Japanese yen has bounced back on Thursday after failing to post a winning day since August 4th. In the North American session, USD/JPY is trading at 145.92, down 0.30%. USD/JPY has been the worst performer among the major currencies over the past month, declining about 7%. The yen dropped below the 146 line on Wednesday which marked a new nine-month low. The Japanese currency lost ground in the aftermath of the Federal Reserve minutes, in which members expressed concern about high inflation. The sharp depreciation of the Japanese currency is raising concerns that Japan’s Ministry of Finance (MOF) could respond by intervening in the currency markets in order to prop up the yen. The yen is now trading at levels at which the MOF shocked the markets last September and instructed the Bank of Japan to sell billions of dollars in support of the yen. The MOF and the BoJ have stated in the past that they are more concerned with sharp swings in the exchange rate and not so much with a particular value for the yen. The yen has plunged about 800 points since late July which means that another intervention cannot be ruled out. The US/Japan rate differential has been widening, with the yen depreciating as a result. The economic troubles in China have led to a sharp drop in the Chinese yuan, which is another factor weighing on the ailing yen. Japan releases the July CPI inflation report on Friday. Headline CPI is expected to fall from 3.3% to 2.5%, while the core rate is projected to dip from 3.3% to 3.1%. The ‘core-core’ rate, which excludes food and energy items, is projected to rise to 4.3%, up from 4.2%. Any surprises from the inflation report could mean volatility for the Japanese yen.   USD/JPY Technical There is resistance at 146.74 and 147.31 USD/JPY tested support at 145.71 earlier. Below, there is support at 144.92  
ECB Meeting Uncertainty: Rate Hike or Pause, Market Positions Reflect Tension

UK Job Growth Slows as Wages Surge, Focus Shifts to CPI Release

Kenny Fisher Kenny Fisher 16.08.2023 11:45
UK job growth falls but wages soar UK releases CPI on Wednesday The British pound has edged higher on Tuesday. In the European session, GBP/USD is trading at 1.2697, up 0.08%.   UK job market cools but wages jump Investors were treated to a mixed UK employment report today. The labour market, which has been surprisingly resilient in the face of the Bank of England’s tightening, is showing unmistakable signs of cooling. Employment fell by 66,000 in the three months to June, a huge reversal from the 102,000 gain in the previous period. The consensus estimate stood at 75,000. Notably, this was the first decline in job growth since August 2022. The unemployment rate rose from 4.0% to 4.2%, above the estimate of 4.0%, and unemployment claims rose to 29,000, up from 16,200 and above the estimate of -7,300. The one exception to the soft jobs report, but a critical one, was wage growth. Average earnings excluding bonuses rose 7.8% y/y in the three months to June, up from 7.5% and above the estimate of 7.3%. This was the highest level since records began in 2001. Average earnings including bonuses jumped 8.2%, compared to an upwardly revised 7.2% previously and above the estimate of 7.3%. The jump in wage growth will be unwelcome news for the Bank of England, as it indicates that the dreaded wage-price spiral continues to feed inflation. Higher wages are a key driver of inflation, and the BoE has warned that if wage growth doesn’t ease, it will be forced to raise rates even higher. This could mean that the weak UK economy will tip into a recession, but the BoE considers that the lesser evil compared to high inflation.   The BoE meets on September 21st and I do not envy Governor Bailey, who may have to cause more financial pain and raise rates. The UK releases the July inflation report on Wednesday, with CPI expected to fall to 6.7%, down from 7.9%. That would be a significant decline but it would still leave inflation more than triple the BoE’s target of 2%. The BoE and investors will be glued to the inflation report and I expect the British pound to have a busier day.   GBP/USD Technical GBP/USD is testing resistance at 1.2726. The next resistance line is 1.2787  1.2634 and 1.2573 are providing support    
Canadian Inflation Rises to 3.3%, US Retail Sales Climb: USD/CAD Analysis

Canadian Inflation Rises to 3.3%, US Retail Sales Climb: USD/CAD Analysis

Kenny Fisher Kenny Fisher 16.08.2023 11:42
Canada’s inflation rises to 3.3% US retail sales climb 0.7%, core rate soars 1% The Canadian dollar is showing limited movement on Tuesday. In the North American session, USD/CAD is trading at 1.3477, up 0.13%.   Canada’s inflation jumps Canada released the July inflation report earlier today. CPI rose 3.3% y/y, up from 2.8% in June and above the consensus estimate of 3.0%. On a monthly basis, CPI was up 0.6% in June, compared to 0.1% in May and higher than the estimate of 0.3%. The average of two of the Bank of Canada’s core measures came in at 3.65% y/y in June, a drop lower than the 3.7% gain in May. Core CPI, which is considered more reliable than headline CPI, remains uncomfortably high for the Bank of Canada. The June inflation reading managed to fall within the BoC’s 1%-3% target, for the first time since March 2021. The rise in the July reading is a reminder that the fight against inflation is not over and it will be a challenge for the BoC to keep inflation below 3%. The Bank of Canada holds its next meeting on September 6th. The BoC has said that its rate decisions will be based on the data, and the rise in July CPI could provide support for a rate hike at that meeting. Reuters reported that the money markets have raised the probability of a 25 basis point hike in September to 31% currently, up from 22% prior to the inflation report release.   Consumer spending remains resilient In the US, retail sales for July surprised on the upside. Headline retail sales rose 0.7% m/m, above the June reading of 0.3% (upwardly revised from 0.2%). The core rate jumped 1.0%, blowing past the 0.2% gain in June. Both readings beat the consensus estimate of 0.4%. The Fed is widely expected to hold rates in September, but November is less clear-cut, with a 64% chance of a pause, a 32% likelihood of a 25-basis point hike and a 3% chance of a 50-bps increase.   USD/CAD Technical There is resistance at 1.3513 and 1.3580 1.3434 and 1.3367 are providing support      
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

New Zealand Dollar Continues Slide Amid China's Economic Slowdown

Kenny Fisher Kenny Fisher 11.08.2023 14:47
The New Zealand dollar has extended its slide for a fourth straight day. In the European session, NZD/USD is trading at 0.6005, down 0.26%. New Zealand It’s been an awful ride for the New Zealand currency, which is down 1.50% this week. NZD/USD hasn’t posted a winning week since early July and has plunged 270 basis points since then. The latest setback for the New Zealand dollar is the soft data out of China, which is New Zealand’s biggest trading partner. China’s highly-touted recovery has been a bust. The government abruptly shifted its Covid policy from zero tolerance to reopening the economy, and the hope was that economic activity would soar. Instead, domestic demand has been weak and a soft global economy has meant less demand for Chinese goods. This week’s trade release indicated in a decline in China’s exports and imports. The economy has slowed to such an extent that the country is officially in a deflation phase – CPI for July declined for the first time since February 2021. A slowdown in China is especially bad news for commodity currencies like the New Zealand dollar, which has fallen sharply this week due to the soft trade and inflation reports out of China. If the Chinese economy weakens further, I would expect the New Zealand dollar to lose even more ground. The Reserve Bank of New Zealand meets on August 16th and there is a strong likelihood that it will hold rates for a second straight month. The RBNZ has been signalling that its rate-tightening cycle is over but that it will maintain rates in restrictive territory. This could well mean an extended pause until the central bank feels that conditions are ripe for rate cuts. New Zealand inflation has been moving in the right direction, but the current 6% clip is much too high. The key question is whether high rates will filter into the economy and continue to push inflation lower without the need for additional rate hikes. The RBNZ will be keeping a close eye on inflation and employment numbers in order to determine its future rate path.   US inflation rises, but Fed expected to pause US headline inflation rose in July to 3.2%, above the June gain of 3.0% but below the 3.3% consensus estimate. Core CPI nudged lower to 4.7% in July compared to the June reading of 4.8% which was also the estimate. The report was within expectations and should cement a pause in rates in September, with the odds of a rate hike at just 10%, according to the CME FedWatch. . NZD/USD Technical NZD/USD is testing support at 0.6031. Below, there is support at 0.5964 0.6129 and 0.6196 are the next resistance lines  
Soft US Jobs Data and Further China Stimulus Boost Risk Appetite

US Inflation Accelerates to 3.2%, UK GDP Forecast, and Pound's Reaction to Economic Data

Kenny Fisher Kenny Fisher 11.08.2023 08:23
US inflation accelerates by 3.2% UK GDP expected to rise 0.1% in Q2 The British pound showed some strength earlier but reversed directions and lost ground after the US inflation report. In the North American session, GBP/USD is trading at 1.2725, up 0.05%. US headline CPI rises, core rate ticks lower The US inflation report was somewhat of a mix, but most important was that both headline and core inflation were within expectations. This meant that the reaction of the US dollar was muted following the inflation release. Headline CPI climbed to 3.2% y/y in July, above the June reading of 3.0% but shy of the consensus estimate of 3.0%. This marked the first time in 13 months that headline CPI accelerated, but the upswing isn’t all that significant, as it was due to base effects. Core CPI ticked lower to 4.7% y/y in July, down from 4.8% in June. The Fed will be encouraged by the fact that on a monthly basis, both headline and core CPI posted a very modest gain of 0.2%, matching the estimate and unchanged from June. Inflation has fallen sharply in recent months, but the Fed will find it more difficult to bring core inflation down to the 2% target. The sharp drop in energy prices has sent headline CPI lower, but the core rate excludes food and energy prices. Inflation is being driven by services and wages, which explains why core CPI is so much higher than headline CPI. The inflation report has cemented the Fed holding rates in September, barring a huge surprise. The odds of a pause have risen to 90%, up from 86% prior to the inflation report, according to the CME FedWatch tool. The Fed may well be done with the current rate-tightening cycle, but don’t expect to hear that from anyone at the Fed, which does not want the markets to become too complacent about inflation.   UK GDP expected to rise by 0.1% The UK will post preliminary GDP on Friday. The consensus estimate stands at 0.1% q/q for the second quarter. If GDP misses the estimate and falls into negative territory, investors could get nervous and send the pound lower. Conversely, if GDP beats the estimate, the pound could gain ground. The Bank of England will be watching carefully, as it digests key economic data ahead of the next meeting on September 21st. . GBP/USD Technical GBP/USD is testing resistance at 1.2747. The next resistance line is 1.2874  1.2622 and 1.2495 are providing support  
Doubts Surround Euro Amid European Economic Concerns and Political Speeches

Australian Sentiment Shift: Consumer Confidence Slides, Business Confidence Holds Steady

Kenny Fisher Kenny Fisher 10.08.2023 09:35
Australian consumer confidence declines, business confidence steady Fed member Harker says Fed may be done raising rates The Australian dollar has bounced back on Wednesday and is trading at 0.6552, up 0.13%. AUD/USD slipped 0.45% on Tuesday and dropped to its lowest level since June 1st. Australian consumer confidence slips, business mood stays steady Australia’s consumers remain deeply pessimistic about economic conditions. The Westpac consumer sentiment index declined in August by 0.4% to 81 points, well below the 100 level which divides optimists and pessimists. In July, the index rose 2.7%. Consumer sentiment fell despite the Reserve Bank of Australia’s decision in July to hold rates steady for a second straight month. The RBA has raised rates by some 400 basis points in the current cycle and high borrowing costs continue to dampen consumer sentiment. Business confidence also remains low, but the situation is somewhat better. The National Bank Business Confidence (NAB) index for July improved to 2, up from a downwardly revised -1 in June. This was the highest level since January. The zero level divides optimists from pessimists. Business conditions eased slightly to 10, indicating that businesses continue to show resilience to higher borrowing costs. The strength of the business sector is an encouraging sign that the economy could avoid a hard landing despite the RBA’s aggressive tightening cycle. Fed’s Harker eyes rate cuts in 2024 Fed member Harker said on Tuesday that the Fed might be done raising rates, “absent any alarming new data”. Harker said that rates would need to stay at the current high levels “for a while” and went as far as saying that the Fed would likely cut rates at some point in 2024. Harker was careful not to express an opinion about the September decision, but the Fed rate hike odds are just 14%, according to the FedWatch tool. The Fed raised rates in July, and Fed Chair Powell has signalled that he would raise rates one more time a stance that is clearly more hawkish than that of the markets.   AUD/USD Technical There is resistance at 0.6607 and 0.6700 0.6475 and 0.6382 are providing support  
Key Economic Events and Corporate Earnings Reports for the Week Ahead – September 5-9, 2023

Inflation Dynamics: New Zealand Expectations Rise, China's Slump Continues

Kenny Fisher Kenny Fisher 10.08.2023 09:34
New Zealand inflation expectations rise to 2.83% China’s inflation decreases for the first time since February 2021 The New Zealand dollar is showing limited movement on Wednesday, trading at 0.6060 in the European session. New Zealand inflation expectations nudge higher to 2.83% Like most major central banks, the Reserve Bank of New Zealand has been waging a long and tough battle against inflation by raising interest rates. CPI fell to 6.0% in the second quarter, down from 6.7%. That’s certainly good news, but let’s remember that inflation is still rising sharply and is much higher than the RBNZ’s 2% target. The central bank is also concerned about inflation expectations, which can become embedded when inflation is high and translate into even higher inflation. Wednesday’s 2-year inflation expectations release showed a rise to 2.83% in the third quarter, up from 2.79% in the second quarter. One-year inflation expectations fell to 4.17% in Q3, down from 4.17% in Q2. The data indicates that inflation expectations remain high, and that perception could make the life of policy makers more difficult in the fight to bring down inflation. The RBNZ has a long way to go before inflation falls to the 2% target, and that will likely mean further rate hikes unless inflation levels fall sharply. The RBNZ held rates at 5 .50% in July and meets next on August 16th.   China is experiencing a bumpy recovery, and that is bad news for the global economy. Commodity currencies such as the New Zealand dollar are sensitive to Chinese economic releases and a soft Chinese trade release on Tuesday sent NZD/USD lower by as much as 80 basis points. The bad news continued on Wednesday as China’s CPI for July declined by 0.3% y/y, down from 0.0% in June and just above the consensus estimate of -0.4%. This marked the first decrease in CPI since February 2021 and points to weakness in the Chinese economy, which will likely mean less demand for New Zealand exports, a negative scenario for the New Zealand dollar.   NZD/USD Technical NZD/USD continues to put pressure on support at 0.6031. Below, there is support at 0.5964 0.6129 and 0.6196 are the next resistance lines  
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Navigating Gold's Summer Slump: Impact of Higher Yields and US CPI

Kenny Fisher Kenny Fisher 10.08.2023 09:28
Higher yields push gold lower Could the US CPI be a game-changer? A break of June lows could be very bearish The second half of the summer hasn’t been kind to gold so far, with the yellow metal coming close to $2,000 once more before plunging back toward $1,900 where it spent most of late June and early July. Higher yields, particularly in the US, and a stronger dollar have been primarily responsible for this but there’s probably also an element of uncertainty in the economic data that’s making traders a little nervous. We’ve finally reached the end of the tightening cycles – or extremely close to it – and now we’re left wondering how long we’ll be stuck here. We’ve seen some significant improvement in some areas but not yet enough to convince policymakers that the case for rate hikes has passed, let alone that there is any case for easing again early next year. That narrative may change if we see some further improvement in the data, starting with the US CPI tomorrow, but for now, that nervousness is creeping back in.     For one, it would make the rotation on 20 July all the more significant and would confirm the rally that preceded it as a retracement, indicating the broader decline may still be in play. What’s more, a move below the 200/233-day simple moving average band – the lower end of which falls around $1,860 – could be viewed as another very bearish development.
China's Ninth Straight Month of Gold Holdings Increase; Oil Resilient Despite Russian Tanker Incident; Dollar Supported by Bond Supply Concerns

China's Ninth Straight Month of Gold Holdings Increase; Oil Resilient Despite Russian Tanker Incident; Dollar Supported by Bond Supply Concerns

Kenny Fisher Kenny Fisher 08.08.2023 08:48
China increased gold holdings for a ninth straight month in July Oil unfazed as Ukraine sea attack Russian oil tanker didn’t lead to a major disruption Dollar supported amidst bond supply concerns; 10-year Treasury yield rises 3.8bps to 4.074%   Oil Crude prices are lower following a surge in the US dollar and as Saudi Arabia anticipates a bumpy road for the crude demand.  The Saudis are raising prices across most of Asia and Europe, with the Arab light crude only being boosted by 30 cents, which was less than the 50-cent rise expected by traders. The initial rally from news that a Russian oil tanker was damaged  only provided a brief rally on Sunday night.  Unless we see a meaningful disruption to crude supplies, prices will remain  Also dragging oil prices down is the rising expectations that the US will see a recession by the end of 2024.  A Bloomberg investor poll showed two-thirds of 410 respondents expect a recession by the end of next year and 20% see one by the end of this year.    Gold Gold prices are struggling here on a strong dollar and as global bond yields rise and after an early round of Fed speak are still supporting the case for one more hike by the Fed. Wall Street is playing close attention to fixed income at the start of the trading week, which saw the bond market selloff cool at the end of last week after a mixed nonfarm payrolls report. If Treasury yields rally above last week’s high, that could trigger some technical buying and that could be very negative for gold prices.  For many traders, this week is all about inflation data and any hot surprises could prove to be short-term bearish for gold.  As earnings season wraps up, stocks have mostly posted better-than-expected results (excluding Apple) and that has hurt the gold’s safe-haven appeal.  At some point over the next few weeks, if the stock market rally can’t recapture the summer highs, a decent pullback could help trigger a big move back into gold.     
Fed's Bowman Highlights Potential for More Rate Hikes; German Industrial Production Dips to 6-Month Low

Fed's Bowman Highlights Potential for More Rate Hikes; German Industrial Production Dips to 6-Month Low

Kenny Fisher Kenny Fisher 08.08.2023 08:47
Fed’s Bowman reiterates that more hikes might be need to bring down inflation German Industrial Production fell to a 6-month low US inflation data expected to support a September pause, but possible coin flip for the November meeting   The US dollar is stronger across the board as the bond market selloff returns, sending the 10-year Treasury yield 6.9 basis points higher to 4.103%. After a mixed jobs report (slower job growth pace but higher wages) this week is all about an inflation report that will probably show moderate price growth.  The focus for many traders is all about the end of tightening and this weekend’s Fed speak supported the higher for longer stance.  Fed’s Bowman noted that it will likely need to raise interest rates further to bring down inflation.  A New York Times article this morning reported that Fed’s Williams stated that the central bank’s work to cool the economy is almost done and that he expects rate cuts could happen next year.    Heading into Thursday’s US inflation report, expectations are for headline CPI to rise from 3.0% to 3.3%, mainly due to base effects, but snapping a long streak of declines that has been in place since last August. Fixed income markets are growing confident that the September FOMC will support a rate pause.  The core readings are also expected to hold steady, but any hot surprises could keep the pressure on for a November hike.    At the end of last week, the euro saw some volatility after the Bundesbank said domestic government deposits would not receive any interest, sparking a move into bills and other high-yielding markets.  This decision surprised many traders and could lead to significant outflows for German debt.  Today’s disappointing German industrial production data also sent the euro lower as recession risks continue to rise.  Output continues to drop, falling to a 6-month low.   The weekly EURUSD chart shows price is approaching key trendline support at 1.0930. If downward momentum accelerates, downside targets include the 1.0850 region followed by 1.07667 level.  To the upside the 1.1050 provides initial resistance followed by the 1.1135 level.    
Behind Closed Doors: The Multibillion-Dollar Deals Shaping Global Markets

Global Economic Data and Market Watch: US Inflation, Earnings Reports, and Energy Trends

Kenny Fisher Kenny Fisher 07.08.2023 09:14
US Everyone will be watching the US inflation report as a cool report could help support soft landing hopes and seal the deal for some that the Fed is done raising rates. Expectations for the July inflation report is for headline inflation to rise towards the mid-3% range, while core inflation remains steady and holding onto the lowest levels since 2021 on both a monthly basis at 0.2% and at 4.8% from a year ago.   Any hot surprises might bolster the case that the Fed may need to raise rates at the November meeting. Wall Street will pay close attention to Tuesday’s NFIB Small Business Optimism report and trade data. Thursday is all about the inflation report and the initial jobless claims. Friday contains the release of the PPI report and the preliminary University of Michigan Sentiment report/inflation expectations. Fed speak will also include appearances by Bostic and Bowman on Monday. Harker speaks on Tuesday and Bostic provides remarks on employment on Thursday. Earnings for the week include Alibaba Group Holding, Allianz, Bayer, Berkshire Hathaway, China Mobile, China Telecom, Eli Lilly, Honda Motor, Novo Nordisk, Palantir Technologies, Rivian Automotive, RWE, Saudi Arabian Oil, Siemens, SoftBank Group, United Parcel Service, and Walt Disney Eurozone Next week starts quickly on Monday with both Eurozone Investor Sentiment and German Industrial Production.  The August Sentix Eurozone sentiment reading should show confidence remains low in August, declining further from -22.5 to -25.0.   The June German industrial production data should show the manufacturing isn’t ready to rebound as expectations on a monthly basis are for a -0.5% drop, worse than the -0.2% prior reading. Weakening data points should support the view that inflation will slow significantly later this year. UK This week is all about growth and that is disappearing in the UK. Friday’s preliminary look at Q2 GDP is expected to show the economy is stagnating.  The consensus estimate for Q2 GDP is for a flat reading (consensus range of 0.0% to 0.1%), down from 0.1% in Q1.  The BOE is still likely to deliver more rate hikes, which should mean the UK economy is recession bound. Russia The CBR will have further pressure to keep on raising rates after a hot July inflation report.  Headline inflation in July is expected to jump from 3.25% to 4.25%, well above the 4% target.  At the end of the week, the release of the advance Q2 GDP reading is expected to show the economy rebounded from -1.8% to +3.3%. South Africa Next week mainly offers tier two and three economic data with both mining data and Manufacturing production results that are expected to show a modest rebound. Turkey A few economic indicators will be released this week, with the focus mainly on June Industrial Production, which should show activity turned negative. Switzerland Unemployment data on Monday is expected to show the labor market remains tight as the unemployment rate holds steady at 2.0%.  The focus remains on inflation for Switzerland and a strong labor market could keep wages strong and that should support the SNB case for a September hike. China Three key data to watch. On Tuesday, the Balance of Trade for July, another horrendous print is being forecasted for exports growth to plunge further to -14% year-on-year from -12.4% recorded in June If it turns out as expected, it will be the third consecutive month of contraction. Imports growth is forecasted to improve slightly to -5.2% year-on-year from -6.8% in June but still a potential fifth consecutive month of contraction. Overall, such forecasts are pointing to a continuation of weak internal and external demand that market participants are getting fatigued from China’s top policymakers’ ongoing stimulus rhetoric that is too vague and too minor in the past two months in order to boost domestic consumption and the languish property sector. Consumer inflation and producer prices data will be out on Wednesday. Higher odds of deflationary risk as the forecast is calling a negative reading on inflation at -0.3% year-on-year from 0% printed in June. Producer prices are forecasted to contract again to -5% year-on-year from -5.4% in June, a potential ten consecutive months of negative growth. On Friday, we will have outstanding loan growth and M2 money supply data for July. On the earnings front, Alibaba, one of China’s Big Tech will report its June quarter 2023 earnings results on Thursday, 10 August. Noteworthy to scrutinise Alibaba’s earnings and forward guidance as China policymakers have loosened their grip on the business operations of China’s Big Tech firms. India The key highlight will be RBI’s interest rate decision on Thursday where the consensus is expecting RBI to stand pat at 6.5%, a potential third consecutive of no change on the policy rate due to easing inflationary pressures. On Friday, industrial production for June will be out, and a drop in growth is being forecasted at 4.1% year-on-year from 5.7% in May, still a potential eight consecutive month of expansion. Australia A light data week ahead, Westpac consumer confidence for August out on Tuesday where a dip of -0.7% month-on-month is being forecasted from 2.7% printed in July. Lastly, consumer inflation expectations for August will be released on Thursday.     New Zealand Two data to take note of: electronic retail card spending for July out on Wednesday, and manufacturing PMI for July on Friday. Japan The Bank of Japan (BoJ) Summary of Opinions will be out on Monday and market participants will be scrutinising any hints on the next step in monetary policy normalisation in terms of timing and form as BoJ has indirectly revised upward on the upper limit of its Yield Curve Control (YCC) on the 10-year JGB yield to 1% during its last meeting in July. On Tuesday, we will have household spending for June where the consensus is expecting a slight contraction to -4.1% year-on-year from 4% in May but on a month-month basis, a recovery is expected at 0.3% in June from -1.1% printed in May. Bank lending data for July will be released as well on the same day. Singapore The only key data will be the Q2 GDP finalised reading out on Friday where the prior flash figures brushed away a recession scare as Q2 q/q and y/y came in positive at 0.3% and 0.7% respectively. Markets Energy Oil prices have remained supported by OPEC+, as they appear committed to keeping this market tight.  The upcoming week should have some of the focus shift back to demand.  On Monday, Saudi Aramco will post their earnings results.  Tuesday has two events, with the release of some key Chinese trade data, which includes oil imports and the US EIA Short-term Energy Outlook (STEO).  On Thursday, OPEC publishes their monthly report, while the EIA releases their monthly publication on Friday. Natural gas prices have also steadied in the US over cooler weather, while Europe continues to deal with a tight market over Norwegian outages. Gold After the Treasury’s quarterly refunding announcement, concerns grew over the US widening deficit.  Gold pared weekly losses as the bond market selloff saw some relief after the NFP report showed the labor market is softening. The focus next week will be all about US inflation and some major data out of China. Soft landing hopes remain, but that could get rattled if the disinflation process stalls. Crypto Bitcoin continues to consolidate below $29,000 as volatility struggles to return.  Bitcoin was little changed after both the Treasury quarterly refunding announcement and NFP report. Regulatory decisions and ETF rulings still remain the likely catalysts to trigger a meaningful crypto move.  
SEK: Enjoying a Breather as Technical Factors Drive Correction

Mixed Job Data Leaves CAD and USD Awaiting Clarity

Kenny Fisher Kenny Fisher 07.08.2023 09:04
Canada added a negligible 1700 jobs in July US nonfarm payrolls almost unchanged at 187,000 The Canadian dollar is showing limited movement on Friday. In the North American session, USD/CAD is trading at 1.3360, up 0.06%. Canadian and US job numbers were soft today, but the Canadian dollar’s reaction has been muted. Canada’s economy sheds jobs After a stellar job report in June, the July numbers were dreadful. Canada’s economy shed 6,400 jobs in July, compared to a 59, 900 gain in June. Full time employment added a negligible 1,700 jobs, following a massive 109,600 in June. The unemployment rate ticked up to 5.5%, up from 5.4%. Perhaps the most interesting data was wage growth, which jumped 5% y/y in June, climbing from 3.9% in May. The rise is indicative of a tight labour market and will complicate the Bank of Canada’s fight to bring inflation down to the 2% target. US nonfarm payrolls slips below 200K It was deja vous all over again, as nonfarm payrolls failed to follow the ADP employment report with a massive gain. In June, a huge ADP reading fuelled speculation that nonfarm payrolls would also surge, and the same happened this week. Both times, nonfarm payrolls headed lower, a reminder that ADP is not a reliable precursor to the nonfarm payrolls report.   July nonfarm payrolls dipped to 187,000, very close to June reading of 185,000 (downwardly revised from 209,000). This marks the lowest level since December 2020. The unemployment rate ticked lower to 3.5%, down from 3.6%. Wage growth stayed steady at 4.4%, above the consensus estimate of 4.2%. What’s interesting and perhaps frustrating for the Fed, is that the jobs report is sending contradictory signals about the strength of the labour market. Job growth is falling, but the unemployment rate has dropped and wage growth remains strong. With different metrics in the jobs report telling a different story, it will be difficult for the Fed to rely on this employment report as it determines its path for future rate decisions. . USD/CAD Technical There is resistance at 1.3324 and 1.3394 1.3223 and 1.3182 are providing support    
Eurozone PMI Shows Limited Improvement Amid Lingering Contraction Concerns in September

NZD/USD Drops 1% on Weak Chinese Manufacturing PMI and Upcoming New Zealand Employment Report

Kenny Fisher Kenny Fisher 02.08.2023 15:12
NZD/USD is down 1% China’s Caixin Mfg. PMI contracted in July The New Zealand dollar continues to show sharp volatility early in the week. In Tuesday’s European session, NZD/USD is trading at 0.6142, down 1.06%. The decline has wiped out the gains the New Zealand dollar made on Monday when it rose 0.85%. China’s Caixin Mfg. PMI declines China’s recovery has been bumpy, and this week’s PMIs didn’t bring any good news. The Caixin Manufacturing PMI for July declined for the first time in three months, falling from 50.5 to 49.2 and missing the consensus estimate of 50.3 points. On Monday, the official PMIs pointed to weak activity, with manufacturing coming in at 49.3 and non-manufacturing at 51.5 points. The 50.0 line divides expansion from contraction. The weak Caixin Manufacturing PMI has sent the New Zealand dollar sharply lower on Tuesday. China is a key trading partner for New Zealand and the New Zealand dollar is sensitive to Chinese economic releases. New Zealand’s labour market has been tight, which has interfered with the central bank’s efforts to bring inflation back to the 2% target. We’ll get a look at the second-quarter employment report on Wednesday, and the data may not be to the Reserve Bank’s liking. Employment Change is expected to rise by 0.5%, compared to 0.8% in Q1. The unemployment rate is projected to inch higher to 3.5% in the second quarter, up from 3.4% in the first quarter. There aren’t many tier-1 releases ahead of the Reserve Bank’s meeting on August 16th, which makes Wednesday’s employment report doubly important. If, as expected, the data shows that the labour market is robust, it will support the Reserve Bank raising rates. Conversely, a weak employment report would be a reason for the central bank to take a pause from raising rates. In the US, the manufacturing data reaffirmed weakness in the sector. The ISM Manufacturing PMI for July improved from 46.0 to 46.4 but missed the estimate of 46.8. ISM Manufacturing Employment slipped to 44.4, down from 48.1 and shy of the estimate of 48.0 points.     NZD/USD Technical NZD/USD has pushed below support at 0.6184. Below, there is support at 0.6093 0.6246 and 0.6337 are the next resistance lines  
FX Daily: Eurozone Inflation Impact on ECB Expectations and USD

AUD/USD Faces Bearish Momentum as RBA Decision Divides Economists and Traders

Kenny Fisher Kenny Fisher 02.08.2023 09:21
AUD underperformed among the major currencies against the USD from 27 to 28 July 2023 ex-post FOMC, ECB, and BoJ. Split view among economists and interest rates traders on RBA monetary policy decision today. Short-term bearish downside momentum at this juncture as the AUD/USD failed to trade above the 200-day moving average. Key short-term resistance on AUD/USD is at 0.6740. This is a follow-up analysis of our prior report, “AUD/USD Technical: Rebounded right at 200-day moving average” published on 25 July 2023. Click here for a recap. The AUD/USD staged a rebound thereafter and reached an intraday high of 0.6821 on 27 July, just shy of the 0.6835 intermediate before it staged a bearish reversal and shed -198 pips ex-post FOMC, ECB, and BoJ to print an intraday low of 0.6623 on last Friday, 28 July. The Aussie has underperformed among the major currencies against the US dollar in the last two trading days of last week where the AUD/USD recorded an accumulated loss of -1.68% from 27 July to 28 July versus EUR/USD (-0.63%), GBP/USD (-0.71%), and JPY/USD (-0.65%) over the same period. The weak performance of the AUD/USD is likely to be attributed to the wishy-washy monetary policy guidance of the Australian central bank, RBA that led to a split forecast among economists and traders for today’s RBA monetary policy decision.   Split view among economists and traders on RBA decision According to polls, the consensus among economists is calling for a hike of 25 basis points hike to bring the policy cash rate to 4.35% after a pause in the previous meeting in July. In contrast, data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance priced a week ago.     Fig 1: AUD/USD medium-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) From a technical analysis standpoint, the price actions of the AUD/USD are still trapped within a major sideway range configuration with its range resistance and support at 0.6930 and 0.6580 respectively.   Short-term momentum has turned bearish   Fig 2: AUD/USD minor short-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has managed to stage a minor rebound of 117 pips from its last Friday, 28 July intraday low of 0.6622 in conjunction with an oversold reading seen in the hourly RSI oscillator on the same day. Interestingly, the minor rebound has challenged and retreated at the key 200-day moving average yesterday, 31 July during the US session (printed an intraday high of 0.6739). Right now, the hourly RSI oscillator has broken below its ascending support after it hit an overbought condition yesterday which indicates that short-term momentum has turned bearish. Watch the 0.6740 key short-term pivotal resistance to maintain the bearish tone, and a break below 0.6625 intermediate support exposes the major range support of 0.6600/6580. However, a clearance above 0.6740 negates the bearish tone to see the next resistance at 0.6835 in the first step.
Fed Expectations Amid Mixed Data: Wishful Thinking or Practical Pause?

RBA Holds Policy Cash Rate at 4.1% Amid Data-Dependent Approach, AUD/USD Suffers 1.3% Slide

Kenny Fisher Kenny Fisher 02.08.2023 09:19
  Australia’s central bank, RBA has kept its policy cash rate unchanged at 4.1% for the second consecutive month. The tonality of the latest monetary policy implies that RBA is now data-dependent, and indirectly acknowledged the negative adverse lagged effects of higher interest rates towards economic growth. Overall, RBA may continue to remain on hold on its policy cash rate at 4.1% for the rest of 2023 which in turn negates any potential major bullish movement of the AUD/USD. Expectations of interest rates traders were right in line with the Australian central bank, RBA’s latest monetary policy decision (no interest rate hike today) that was in contrast to the 25-basis points hike consensus from the majority of the economists surveyed. RBA has decided to hold on to its official policy cash rate at 4.1% for the second consecutive month; data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance being priced a week ago. These are the key takeaways from today’s RBA monetary policy statement; The Board has decided to hold the interest rate steady this month to access the impact of the prior rate increases and monitor the economic outlook. Risk of below-trend growth for the Australian economy due to weak household consumption growth and dwelling investment. The labour market has remained tight, with job vacancies and postings at high levels, though labour shortages have lessened. But the unemployment rate is expected to rise gradually from 3.5% to around 4.5% in late 2024. Even though wage growth has picked up due to the tight labour market and high inflation but wage growth, together with productivity growth remains consistent with the inflation target. The current growth rate of 6% inflation in Australia is still considered too high. The central forecast expects CPI inflation will decline to around 3.5% by the end of 2024 and revert to the target range of 2% to 3% by late 2025. The Board may consider further tightening of monetary policy to ensure inflation returns to the target range of 2% to 3% depending on data and evolving risk assessments.   Switched to being “data-dependent” suggests RBA may stand pat on interest rates till end of 2023 The last point as mentioned above stood up starkly, in the previous July’s monetary policy statement, it was noted as “some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve”. In today’s monetary policy, it has been stated as “that will depend upon the data and the evolving assessment of risks”. Hence, this latest framing of being data-dependent, and acknowledging the implied negative adverse lagged effects of a higher interest rate environment towards economic growth (risk assessment) seems to portray that if the recent trend of key economic indicators continues their respective trajectories, it is likely the RBA may continue to remain on hold on its policy cash rate at 4.1% for the rest of 2023 while monitoring the global inflationary environment.   Lacklustre sentiment for AUD/USD     AUD/USD minor short-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart)  A “data-dependent” RBA has knocked out the bullish tone of AUD/USD after a reprieve rebound seen yesterday, 31 July where the pair staged a minor rebound of 117 pips from its last Friday, 28 July intraday low of 0.6622 to an intraday high of 0.6739 during yesterday’s US session. Right now, it has shed -81 pips to print a current intraday low of 0.6657 at this time of the writing, and the Aussie is the worst performer intraday today, 1 Aug (-0.65%) among the major currencies against the US dollar; EUR (-0.03%), CHF (-0.03%), GBP (-0.07%), CAD (-0.22%), and JPY, (-0.34%). The Aussie has resumed its underperformance against the US dollar seen in the last two trading days of last week where the AUD/USD recorded an accumulated loss of -1.68% from 27 July to 28 July versus EUR/USD (-0.63%), GBP/USD (-0.71%), and JPY/USD (-0.65%) over the same period ex-post FOMC, ECB, and BoJ. From a technical analysis standpoint, short-term bearish momentum remains intact as yesterday’s rebound has failed to surpass the 200-day moving average after a re-test on it, now acting as a key short-term pivotal resistance at around 0.6740 with the next major support coming in at 0.6600/6580.    
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

Kenny Fisher Kenny Fisher 02.08.2023 09:07
RBA pauses rates Australian dollar slides 1.3% ISM Manufacturing PMI expected to remain in negative territory The Australian dollar continues to swing wildly this week. In Tuesday’s European session, AUD/USD is trading at 0.6630, down 1.30%. On Monday, AUD/USD jumped 1% higher.   RBA pauses rates, as expected There were no surprises from the Reserve Bank of Australia, which paused for a second straight month and maintained the cast rate at 4.10%. The money markets had priced in a pause but the Australian dollar still took a nosedive after the decision, as the money markets have lowered the probability of a rate hike in September to below 20%. Recent key data showed that the Australian economy has cooled off, with inflation easing in the second quarter and retail sales for June falling by 0.8%. These numbers provided support for the RBA to take a pause at today’s meeting. Still, the argument can be made that with inflation at 6%, double the upper band of the RBA’s target range, there is room for further rate hikes. The RBA did not change its inflation outlook, predicting that inflation would not return to the 2%-3% target range before late 2025. Services inflation, which includes rising rent prices, remains sticky and this is a key concern for the central bank. Governor Lowe’s rate statement said that future rate decisions “will depend upon the data and the evolving assessment of risks.” This is a reminder that inflation and employment reports will play a key role in determining the RBA’s rate path. There is speculation that the RBA is done with tightening, but with inflation still at high levels, Lowe’s message to the markets was that further hikes remain on the table.   In the US, today’s key event is ISM Manufacturing PMI. The manufacturing sector remains in the doldrums and has been in decline since October, with readings below the 50.0 level. In June, the Manufacturing PMI slipped to 46.0, the lowest level since May 2020. Another decline is expected for July, with a consensus estimate of 46.8 points.   AUD/USD Technical AUD/USD has pushed below support at 0.6697. Below, there is resistance at 0.6573 There is resistance at 0.6771 and 0.6875    
Eurozone PMI Shows Limited Improvement Amid Lingering Contraction Concerns in September

USD/JPY Surges Above 143 as Japanese Yen Continues to Slide on BoJ's Yield Control Tweaks

Kenny Fisher Kenny Fisher 02.08.2023 09:00
The Japanese yen continues to slide and is down 1.41% this week. In Tuesday’s European session, USD/JPY is trading at 143.16, up 0.64%.   Dollar/yen powers above 143 The yen continues to lose ground against the US dollar. Earlier in the day, the yen weakened to 143.18, its weakest level against the US dollar since July 7th. The yen has plunged 370 basis points since Friday when the Bank of Japan stunned the markets and tweaked its yield control (YCC) policy. The Bank of Japan has loosened its YCC and this has sent the yen sharply lower. The BoJ had set a rigid cap of 0.50% yields on 10-year government bonds but has turned that cap into a yardstick, saying it would offer to purchase JGBs at 1%. The 10-year yield rose has risen to a multi-year high of 0.61% and there is a strong possibility of the yield continuing to rise. The BoJ has been an outlier of central banks, sticking to its policy of negative rates. True, inflation in Japan is much lower than in other developed economies, but there is growing criticism that this policy is outdated and the central bank needs to take further steps toward normalization. Governor Ueda stressed on Friday that the YCC tweak was not a move towards normalization and we’re unlikely to see any tightening from the BoJ unless inflation moves significantly higher.   In the US, ISM Manufacturing PMI is today’s key release. The manufacturing sector remains in the doldrums and has been in decline since October, with readings below the 50.0 level. Demand has been weak and production has been declining due to the lack of orders. In June, the Manufacturing PMI slipped to 46.0, the lowest level since May 2020. Another decline is expected for July, with a consensus estimate of 46.8 points. . USD/JPY Technical USD/JPY has pushed above resistance at 142.63. Above, there is resistance at 144.09 There is support at 141.47 and 140.35  
The Euro Dips as German Business Confidence Weakens Amid Soft Economic Data

The Euro Dips as German Business Confidence Weakens Amid Soft Economic Data

Kenny Fisher Kenny Fisher 26.07.2023 09:15
The euro continues to lose ground and is in negative territory on Tuesday. In the European session, EUR/USD is trading at 1.1036, down 0.26%. German Ifo Business Climate dips Germany continues to post soft numbers this week, pointing to weakness in the eurozone’s largest economy. The Ifo Business Climate index fell from 88.6 to 87.3 in July and missed the consensus estimate of 88.0. This was the lowest level seen since November 2022. Business Expectations also slowed slightly, from 83.8 to 83.5 points. This was just above the consensus of 83.4 points. The soft business confidence reading comes a day after disappointing PMI releases, which saw a deceleration in manufacturing and services in June. The numbers could impact the ECB’s rate policy after a widely expected hike at the Thursday meeting. The ECB has aggressively raised interest rates in order to curb inflation but runs the risk of tipping the weak eurozone economy into a recession. The ECB has signalled that it will raise rates on Wednesday, which would bring the main rate to 3.50%. What happens after July is less certain. This week’s soft German data will provide support to dovish ECB policymakers who want the ECB to ease up on rate hikes, even though inflation remains well above the 2% target. In the US, we’ll get a look at consumer confidence and manufacturing data later on Tuesday, with both expected to improve. The Conference Board Consumer Confidence index, which rose sharply in June to 109.7, is expected to rise to 111.8 in July. The Richmond Fed Manufacturing index, which has been mired in negative territory, is expected to improve in July to -2, up from -7 in June.   EUR/USD Technical EUR/USD is putting pressure on support at 1.1063. The next support level is 1.1002 1.1170 and 1.1231 are the next resistance lines  
Europe's Economic Concerns Weigh as Higher Rates Keep US Markets Cautious

USD/JPY: Pre-FOMC Consolidation as Investors Await Fed and BOJ Decisions

Kenny Fisher Kenny Fisher 26.07.2023 09:02
USD/JPY       Dollar-yen has entered its pre-FOMC/BOJ consolidation range.  Heading into the FOMC decision the data has been holding up.  The US economy has still yet to feel the complete impact of the Fed’s rate hiking campaign as the flash PMIs showed that business activity is slowing and as consumer confidence surged to a two-year high.  Wall Street wants to believe the Fed will be one and done, but the data might not allow that to happen.  They are likely to signal an extended pause, but hold onto a tightening bias, which could help push dollar-yen higher initially.  Will USD/JPY rise towards prior intervention levels around the 145 is the big question at hand.  A short-term advance in the dollar seems possible going into and that could extend post Fed if policymakers focus on the resilience of the US economy. The bigger driver for USD/JPY might stem from the BOJ decision.  There was a chance that we could get a Yield Curve Control (YCC) tweak, but that seems less likely.  A key Tokyo CPI report will occur hours before the BOJ decision, but probably won’t sway the bank unless it comes scorching hot.  The BOJ should deliver a tweak, but Ueda’s comments from a conference in India last week suggest they will stay the course with their ultra-loose monetary stance.  The BOJ might eventually need to trigger an abrupt change to policy given the trajectory of the US economy and how high inflation has turned. To the downside, a break of the 140 level could see momentum selling target the 137.50 region.  The 142.50 level should provide initial resistance, with the 145 level likely to trigger calls of future currency intervention.  
Market Watch: Earnings Boost and Consumer Confidence Surge Ahead of Key FOMC Decision

Market Watch: Earnings Boost and Consumer Confidence Surge Ahead of Key FOMC Decision

Kenny Fisher Kenny Fisher 26.07.2023 08:59
Earnings give stocks one last boost before the FOMC decision Consumer Confidence surges to a 2-year high Dow eyes longest winning streak in six years Volatility should be elevated this week as we have a key FOMC meeting and peak earnings season.  So far, the trade has been for the money flow to continue go into small stocks, with some lowering their exposure to mega-cap tech trade.  This earnings week has the potential to drive the recession-based pullback that seems to have evaded us this year. US stocks have had an interesting run here as relentless Nasdaq rally has cooled, the Dow Jones Industrial Average winning doesn’t want to stop, the Russell 2000 tries to play catchup, and the S&P 500 nears record high territory. After more than a year of Fed unity in raising rates to combat inflation, the end of the rate hiking campaign will start to see some dissent from the hawks, centrists, and doves. The voting hawks Waller, Bowman, and Logan might argue that the Fed needs to keep optionality about more tightening on the table.  The voting doves are Cook and Goolsbee, who both will probably remain supportive for raising rates on Wednesday, but might show support for a long pause, that might eventually become the peak in rates. Powell and the centrists have the luxury of not overcommitting a position about the future path of rates, potentially setting up the Jackson Hole Symposium as the time to signal that they are most likely done raising rates. US stocks are entering a consolidation phase ahead of massive earnings (Microsoft, Alphabet, Meta, and LVMH) and three big rate decisions by the Fed, ECB, and BOJ.  Stocks have been mostly posting a short-term advance heading into these major market moving events and that could extend to an attempt at record highs if the Fed shows confidence that the disinflation process is firmly intact and if the mega-cap tech earnings deliver better-than-expected earnings with promising outlooks.  A lot needs to go right for a longer-term rally to unfold, which might suggest we could see the Dow Jones Industrial Average and Russell 2000 outperform the Nasdaq over the short-term.  If after this week, Wall Street becomes worried that the Fed is still leaning towards delivering one more rate hike, that could spook a lot of investors, which would see that as a policy mistake. If odds for a September 20th meeting rate hike end up becoming a coin flip, that could see a good portion of the recent rally with market breadth trade come undone.    
The Influence of Rising Oil Prices on Fed Rate Expectations and the US Dollar

Australian Inflation Expected to Slow in Q2 as US Consumer Confidence Jumps; AUD/USD Rises Sharply

Kenny Fisher Kenny Fisher 26.07.2023 08:50
Australian inflation expected to slow in Q2 US consumer confidence jumps AUD/USD rises sharply The Australian dollar has gained ground on Tuesday. In the North American session, AUD/USD is trading at 0.6783, up 0.65%.     Australian inflation expected to decelerate Australia releases the second-quarter inflation report on Wednesday. The consensus is expecting inflation to slow down to 6.2% y/y after a 7.0% print in the first quarter. The core trimmed mean measure of CPI, a key gauge of underlying inflation, is expected to fall from 6.6% to 6.0%. The RBA will be keeping a close eye on the inflation data, which is the final key release ahead of the RBA decision on August 1st. Recent RBA decisions have been close calls and that could well be the case with the August decision. The money markets have priced in a 41% probability of a 0.25% rate hike, which would bring the cash rate to 4.35%. If inflation falls significantly as expected, the money markets will likely lower the probability of a rate hike in August. Last week’s employment report reiterated that the labour market remains tight. The economy added 32,500 jobs in June, beating expectations, and unemployment remained at 3.5%. The strong labour market is driving inflation and complicating the RBA’s attempts to bring inflation back down to the 2% target.     US consumers more optimistic The US Conference Board (CB) consumer confidence index rose in July to 117, up from 110.1 in June. This beat the consensus estimate of 110.5 and was the highest level since July 2021. Consumer expectations also rose significantly. The CB report attributed the boost in consumer confidence to falling inflation and the tight labour market. The CB noted that consumer expectations of a recession have eased compared to earlier in the year, but the CB still considers a recession as “likely” before the end of the year.   AUD/USD Technical AUD/USD is testing resistance at 0.6767. Above, there is resistance at 0.6878 0.6687 and 0.6643 are providing support  
UK Retail Sales Surge in June Amid Concerns Over Fed Rate Hikes

UK Retail Sales Surge in June Amid Concerns Over Fed Rate Hikes

Kenny Fisher Kenny Fisher 24.07.2023 10:30
UK retail sales rise in May Former Fed Chair Bernanke says Fed hikes could be done after July The British pound is in negative territory on Friday. In the European session, GBP/USD is trading at 1.2824, down 0.34%. The pound continues to show strong volatility – after gaining 2% last week, it has surrendered all of those gains this week.   UK retail sales beat expectations UK retail sales rebounded in June after a sluggish May due to King Charles’ coronation, which dampened consumer spending. Retail sales rose 0.7% m/m in June, up sharply from the 0.1% gain in May (revised downwards from 0.3%). Core retail sales jumped 0.8% in June, up from 0.0% in May (revised downwards from 0.1%). The hot weather in June contributed to strong sales and the uptick was broadly distributed throughout the economy. At the same time, high inflation means that consumers are getting less for their buck. Food prices have been especially high and jumped in June by 17.4% y/y according to the Office for National Statistics. Consumers may still be spending but that doesn’t mean they are a happy lot. GfK Consumer Confidence slipped to -30 in July, down from -24 in June and below the consensus of -26. This marked the first time that consumer confidence declined since January. High interest rates and an inflation rate of close to 8% have soured the mood of consumers. The Bank of England has struggled to curb inflation despite aggressive tightening, and the UK boasts the unwanted record of the highest inflation among the major economies.   Is the Fed finally done? The Federal Reserve meets on July 26th and investors have priced in a 0.25% hike as a near certainty.  Will that wind up the current tightening cycle? The markets seem to think so and have priced a hike in September at just 16%, according to the CME FedWatch tool. Are the markets out of sync with the hawkish Federal Reserve? Fed members have said that inflation isn’t falling fast enough, which could mean that another hike is coming after July. Former Fed Chair Ben Bernanke appeared to side with the market view, saying on Thursday that the July hike could be the final rate increase in the current tightening cycle. Bernanke said that the economy would slow further before the 2% inflation target was reached, but he expected any recession to be mild.     GBP/USD Technical There is weak support at 1.2816. Next, there is support at 1.2766  There is resistance at 1.2891 and 1.2995  
EUR/USD Outlook: Dovish Shift and Inflation Data Impact Forex Markets

Canada's Retail Sales Slow as Former Fed Chair Suggests Last Hike

Kenny Fisher Kenny Fisher 24.07.2023 10:27
Canada’s retail sales expected to slow Former Chair Bernanke says the July hike may be the last increase The Canadian dollar is trading quietly on Friday. In the European session, USD/CAD is trading at 1.3157, down 0.09%. It has been a busy week in the currency markets, with the US dollar rebounding and posting strong gains against the major currencies. The notable exception has been the Canadian dollar, which has held its own against the greenback this week. We could see some movement from USD/CAD in the North American session when Canada releases retail sales for May.   Will Canada’s retail sales point to a softer economy? We’ll get a snapshot of consumer spending later on Friday, as Canada releases the May retail sales report. The markets are bracing for a slowdown in May after an impressive April release. The consensus estimate for retail sales is 0.5% in May, down from 1.1% in April. The core rate is expected to fall to 0.3%, compared to 1.3%. If the estimates prove to be accurate, it would point to the economy cooling down and provide support for the Bank of Canada to take a pause at the next meeting in September.   Is the Fed finally done? The Federal Reserve meets on July 26th and investors have priced in a 0.25% hike as a near certainty. September is less clear, but the markets have priced another hike at just 16%, according to the CME FedWatch tool. Are the markets being too dovish? Fed members have said that inflation isn’t falling fast enough, which could mean that another hike is coming after July. Former Fed Chair Ben Bernanke appeared to side with the market view, saying on Thursday that the July hike could be the final rate increase in the current tightening cycle. Bernanke said that the economy would slow further before the 2% inflation target was reached, but he expected any recession to be mild.   USD/CAD Technical There is resistance at 1.3205 and 1.3318 1.3106 and 1.2993 are providing support  
US Retail Sales Mixed, UK Inflation Expected to Ease: Impact on GBP/USD and Monetary Policy

US Retail Sales Mixed, UK Inflation Expected to Ease: Impact on GBP/USD and Monetary Policy

Kenny Fisher Kenny Fisher 19.07.2023 08:21
US retail sales dip, core retail sales rise UK inflation expected to fall The British pound has edged lower on Tuesday. In the North American session, GBP/USD is trading at 1.3038, down 0.27%.     UK inflation expected to fall The UK is lagging behind other major economies in the fight to curb inflation. Will Wednesday’s inflation report bring some good news? In May, CPI remained stuck at 8.7% y/y but is expected to ease to 8.2% in June. The core rate is expected to remain steady at 7.1%. On a monthly basis, headline CPI is expected to fall from 0.7% to 0.4% and the core rate is projected to slow to 0.4%, down from 0.8%. The inflation report could be a game-changer with regard to the Bank of  England’s meeting on August 3rd. The BoE delivered an oversize 50-basis point hike in June and will have to decide between a modest 25-bp hike or another 50-bp increase at the August meeting. Last week’s employment report pointed to wage growth picking up, which moved the dial in favour of a 50-bp increase.   US retail sales report a mixed bag US retail sales for June provided a mixed spending picture. Headline retail sales rose just 0.2% m/m, below the 0.5% consensus estimate and the upwardly revised May reading of 0.5%. Core retail sales were much stronger at 0.6%, above the 0.3% consensus and the upwardly revised May release of 0.3%. The data points to resilience in consumer spending although momentum has slowed. The retail sales report did not change expectations with regard to rate policy, with the Fed expected to raise rates in July and take a pause in September. The Fed has tightened by some 500 basis points in the current rate-hike cycle and this has curbed inflation, which has fallen to 3%. Nevertheless, the Fed remains concerned that the solid US economy and a tight labour market will make it difficult to hit the 2% inflation target, and the Fed hasn’t given any hints that it will wrap up its tightening in July, although the money markets appear to think this is the case.   GBP/USD Technical GBP/USD has support at 1.2995 and 1.2906  There is resistance at 1.3077 and 1.3116    
RBA Minutes Signal Close Decision, US Retail Sales Expected to Rise

RBA Minutes Signal Close Decision, US Retail Sales Expected to Rise

Kenny Fisher Kenny Fisher 18.07.2023 12:16
RBA minutes point to close call at July decision US retail sales for June expected to climb The Australian dollar has edged lower on Tuesday, trading at 0.6807, down 0.14%. We could see some further movement in the North American session when the US releases retail sales.   RBA minutes point to uncertainty about the economy The RBA minutes didn’t provide much in the way of insights and the Australian dollar barely showed a muted response. Perhaps the most interesting aspect of the minutes was the spelling out of both sides of the argument about whether to raise rates or take a pause. In support of a hike, the minutes noted that wage growth is rising, inflation is falling and the labour market remains tight. The case for a pause relied on inflation remaining high and weaker growth. In the end, policy makers voted to pause since the arguments in favour of holding rates were more compelling. The minutes stated that monetary policy was “clearly restrictive” at the current rate level but that would not preclude the RBA from further tightening, which would depend on the economy and inflation. The money markets have priced a pause at the August 1st meeting at 75%, according to the ASX RBA rate tracker. At the July meeting, the decision to pause was a close call and that could repeat itself at the August meeting, so I am not as confident in a pause as the money markets.     US retail sales expected to climb The US releases the June retail sales report, with expectations that consumers remain in a spending mood. The consensus estimate for headline retail sales is 0.5% m/m, up from 0.3%, and the core rate is expected to rise 0.3%, up from 0.1%. The Federal Reserve is widely expected to raise rates at the July 27th meeting. If retail sales improve as expected, we could see the pricing for a September rate hike increase – currently, there is only a 14% chance of a rate hike, according to the CME Tool Watch.   AUD/USD Technical There is resistance at 0.6878 and 0.6947 0.6786 and 0.6676 are providing support        
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

China's Internal Demand Weakens, PBoC Holds Key Interest Rate Amid Liquidity Trap Risk

Kenny Fisher Kenny Fisher 17.07.2023 14:34
NZD/USD in negative territory after jumping 2.58% last week US dollar was broadly lower last week on expectations that Fed rate-tightening almost over The New Zealand dollar has started the week with considerable losses. In the European session, NZD/USD is trading at 0.6338, down 0.51%. This follows a superb week for the New Zealand dollar, which soared 2.58%.   US dollar in trouble over Fed expectations It was a week to forget for the US dollar, which hit a 15-month low. The US dollar index fell by 2.52% last week, its worse weekly performance since November 2022. The New Zealand dollar made the most of the greenback’s woes and pummelled the US dollar even though the Reserve Bank of New Zealand took a pause last week for the first time in almost two years. The US dollar’s nosedive last week against the major currencies was exacerbated by the US inflation report, which was softer than expected. The headline and core rates both eased in June, raising market speculation that the Fed may finally wrap up its rate-tightening cycle after the July 26th meeting. The markets have priced in a July hike at 96% and a pause in September at 83%, according to the CME tool. The Fed has relied on interest rate hikes as its main tool to curb inflation, and an end to the cycle will result in investors looking elsewhere to park their funds. The US dollar is under pressure, but traders and investors should be careful before writing off the US currency. Earlier this year, the markets were too hasty in betting that the Fed would cut rates and the US dollar would fall. Instead, the Fed continued to raise rates as the US economy remained robust and the US dollar rebounded. Fed Chair Powell has signalled one more rate after the July meeting and Fed members have sounded hawkish, noting that inflation remains much higher than the 2% target. The markets may once again be getting ahead of themselves in assuming that inflation is won and the Fed is done. . NZD/USD Technical There is support at 0.6316 and 0.6221 0.6466 and 0.6561 are the next resistance lines    
RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

Kenny Fisher Kenny Fisher 13.07.2023 11:40
RBA Governor Lowe announces major changes at RBA Board US inflation expected to decline The Australian dollar was sharply higher on Wednesday but could not consolidate these gains. AUD/USD is unchanged in Europe, trading at 0.6691.   Will RBA Governor be replaced? Reserve Bank of Australia Governor Lowe spoke on Wednesday and announced key changes to the RBA Board. The moves were in response to a scathing review that called for major changes in how the RBA Board operates. Lowe announced that the RBA Board would meet eight times a year rather than the current eleven times, although each meeting would be longer. The RBA Governor will hold a press conference after every meeting to explain the Board’s interest rate decision. As well, the rate statement announcing the decision will be issued by the Board, rather than the governor as is currently the case. The RBA and particularly Governor Lowe have faced intense criticism over their rate decisions, in particular Lowe’s promise as late as November 2021 that he would not raise rates until 2024. This resulted in households borrowing heavily, only to be whacked with an aggressive rate-tightening campaign in early 2022. Lowe later claimed that he had not made such a promise but the damage was done and it’s a strong possibility that he may be replaced as RBA Governor- a decision could be made in the next few days. Lowe has indicated he would be happy to remain at the helm of the RBA. Lowe’s speech also touched on policy but didn’t add anything new. Lowe said that the full effects of high rates were yet to be felt and it remained to be seen if more hikes would be required. Lowe said the situation remains complex, which is very much the case both for the Australian economy and his role as Governor.   US inflation expected to drop All eyes are on the US June inflation report, which will be released later on Wednesday. Headline inflation is expected to drop to 3.1% y/y, down from 4.0%. That would be good news, but the Fed will be more interested in how the core rate performs. Core CPI is expected to fall from 5.3% y/y to 5.0%, and on a monthly basis from 0.4% to 0.3%. If the core rate is higher than expected, we could see market pricing rise with regard to a September hike. A rate hike at the July 27th meeting is widely expected, but the key question is what is the Fed planning after that, and today’s inflation release could help answer that question. . AUD/USD Technical AUD/USD is testing support at 0.6666. This is followed by support at 0.6623 0.6732 and 0.6838 are the next resistance lines  
Strong Gains for Canadian Dollar as Bank of Canada Raises Rates and US Inflation Falls

Strong Gains for Canadian Dollar as Bank of Canada Raises Rates and US Inflation Falls

Kenny Fisher Kenny Fisher 13.07.2023 11:37
Bank of Canada raises rates by 0.25% US inflation falls to 3.0%, lower than expected The Canadian dollar has posted strong gains in Wednesday’s North American session. In the North American session, USD/CAD is trading at 1.3146, down 0.63%. On the economic calendar, it has been a busy day, with the Bank of Canada raising interest rates and US inflation falling lower than expected.   Bank of Canada hikes by 0.25% The Bank of Canada raised rates by 0.25% on Wednesday, bringing the cash rate to 5.0%. The BoC has delivered 475 basis points in hikes since March 2022 and the aggressive tightening has sent inflation lower. Still, the BoC’s rate statement noted that it remains concerned that progress towards the 2% target could stall and that it does not expect to hit the target before mid-2025. This can be considered a hawkish hike and the Canadian dollar has responded with strong gains on Wednesday.   US inflation falls more than expected Wednesday’s US inflation report should please the Federal Reserve, which has circled high inflation has enemy number one. The June release showed headline inflation falling to 3.0%, down from 4.0% in May. This beat the consensus estimate of 3.1% and was the lowest level since March 2021. Even more importantly, the core rate fell from 5.3% to 4.8%, below the consensus estimate of 5.0%. On a monthly basis, both the headline and core rate came in at 0.2%, below the consensus estimate. The inflation release was excellent news, but isn’t expected to change the Fed’s plans to raise rates at the July 27th meeting. The inflation data didn’t change market pricing for the July meeting (92% chance of a hike), but did raise the chances of a September hike from 72% prior to the inflation release to 80% after the release. Although the jobs report on Friday showed nonfarm payrolls declining considerably, wage growth was higher than expected and likely convinced the Fed to raise rates at the July 26th meeting before taking a pause.   USD/CAD Technical There is resistance at 1.3191 and 1.3289 1.3105 and 1.3049 are providing support    
US Inflation Data in Focus as Attention Shifts, UK100 Rebounds with Caution Looming

US Inflation Data in Focus as Attention Shifts, UK100 Rebounds with Caution Looming

Kenny Fisher Kenny Fisher 12.07.2023 13:30
Attention remains on US inflation data today Only a much lower core CPI reading could tempt the Fed to reconsider hiking in two weeks UK100 rebounds but caution may remain unless key level is overcome European stock markets are tentatively higher on Wednesday, with the FTSE 100 leading the way up more than 1%,  as traders adopt a cautious position ahead of the US inflation report. Any hopes of another pause from the Fed this month have dwindled in recent weeks as the data simply hasn’t delivered what it needed to in order to convince the FOMC to do so for a second consecutive meeting. A second pause would be taken as a sign that the tightening cycle is over so it’s not a decision that would be taken lightly. The jobs report on Friday was nowhere near good enough to convince the Fed that it has achieved its objectives. There will no doubt have been relief that the NFP number didn’t replicate that of the ADP but together with the wage component, it still pointed to a labor market that is very tight. It would take something remarkable from the inflation report today to convince policymakers that they can afford to pause again. The headline CPI falling to 3.1% doesn’t fall into that category when the core number is expected to remain high at 5%. It would take a real shock on the core side to really stimulate the debate in two weeks. A failure to break back above 7,400 could be viewed as confirmation of the initial break It hasn’t been a great few months for the UK index, having fallen almost 9% from its April peak before rebounding a little this week. It did run into some support around 7,200 where it has reacted to on numerous occasions in the past, including in March, the last time it fell back to these levels.     Having recovered a little in the last couple of days, it now faces a test around 7,400, another level it has previously been responsive to, most recently a couple of weeks ago when it saw strong support here. A rebound off that level this time could be viewed as confirmation of the break below there on Thursday and therefore a bearish signal. That would draw attention back to 7,200 which may, as a result, look a little more vulnerable.  
Market Sentiment and Fed Policy Uncertainty: Impact on August Performance

New Zealand Central Bank Hits Pause After 12 Consecutive Rate Hikes: Manufacturing Stalls and Inflation Expected to Decline

Kenny Fisher Kenny Fisher 12.07.2023 13:23
New Zealand’s central bank takes a pause after 12 consecutive hikes New Zealand Manufacturing PMI expected to show manufacturing is stalled US inflation expected to decline to 3.1% The New Zealand dollar showed some gains after the Reserve Bank of New Zealand paused rates, but has given up most of those gains. In the European session, NZD/USD is trading at 0.6206, up 0.14%.   RBNZ takes a breather There was no dramatic surprise from the RBNZ, which kept interest rates on hold at Wednesday’s meeting, as expected. The central bank has been aggressive, raising rates 12 straight times since August 2021 until Wednesday’s meeting. This leaves the cash rate at 5.50%. The RBNZ had signalled that it would take a break, with Deputy Governor Hawkesby stating last month that there would be a “high bar” for the RBNZ to continue raising rates. Today’s rate statement said that interest rates were constraining inflation “as anticipated and required”, adding that “the Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to within its target range.” The RBNZ did not issue any updated forecasts or a press conference with Governor Orr, which might have resulted in some volatility from the New Zealand dollar. The central bank has tightened rates by some 525 basis points, which has dampened the economy and chilled consumer spending. Is this current rate-tightening cycle done? The central bank would like to think so, but that will depend to a large extent on whether inflation continues to move lower toward the Bank’s inflation target of 1-3%. The pause will provide policymakers with some time to monitor the direction of the economy and particularly inflation. If inflation proves to be more persistent than expected, there’s every reason to expect the aggressive RBNZ to deliver another rate hike later in the year. New Zealand releases Manufacturing PMI for June on Wednesday after the rate decision. The manufacturing sector has contracted for three straight months, with readings below the 50.0 line, which separates contraction from expansion. The PMI is expected to rise from 48.9 to 49.8, which would point to almost no change in manufacturing activity. The US will release the June inflation report later in the day. Headline inflation is expected to fall from 4.0% to 3.1%, but core CPI is expected to rise to 5.3%, up from 5.0%. If core CPI does accelerate, that could raise market expectations for a September rate hike. A rate increase is all but a given at the July 27th meeting, with the probability of a rate hike at 92%, according to the CME FedWatch tool.   NZD/USD Technical 0.6184 is a weak support level. Below, there is support at 0.6148 0.6260 and 0.6383 are the next resistance lines  
Summer's End: An Anxious Outlook for the Global Economy

Mixed Market Reactions: US CPI, Microsoft Acquisition, and Strong Demand for 3-Year Notes

Kenny Fisher Kenny Fisher 12.07.2023 09:50
Australia’s consumers and business confidence improve US inflation expected to fall to 3.1% The Australian dollar is in negative territory on Tuesday. AUD/USD is trading at 0.6656 in the North American session, down 0.28%.   Consumer and business confidence rise  Australia released business and confidence data on Tuesday, with both showing improvement. Westpac Consumer Confidence rose to 81.3 in June, up from 79.2 in May, a gain of 2.7%. As well, NAB Business Confidence climbed to zero in May, up from -3 a month earlier. Confidence levels for consumers and businesses are still weak, but the improvement is welcome news. The stronger numbers may have been aided by the Reserve Bank of Australia’s decision to pause rates last week, which provided some relief to households and businesses. RBA Governor Lowe will be in the spotlight on Wednesday when he delivers a speech about monetary policy. Investors will be looking for some clues about future rate policy. Inflation fell in May to 5.6%, but that is still way off the Bank’s target of 2%. The money markets were split ahead of the July decision on whether the RBA would raise rates or pause, and it’s uncertain what the central bank will do at the next meeting on August 1st. The money markets have priced a pause at 59% and 25-bp hike at 41%, according to the ASX RBA rate tracker. Over in the US, there’s little doubt about the Federal Reserve plans, at least for the July 26th meeting. The money markets have priced in a July rate hike at 92%, according to the CME FedWatch Tool. What happens after that? The answer could depend a lot on the June inflation report which will be released on Wednesday. Inflation is expected to fall from 4.0% to 3.1%, but core CPI is expected to rise to 5.3%, up from 5.0%. If core CPI does accelerate, I would expect that to increase the likelihood of a September rate hike. Three Fed officials spoke on Monday, and the message was that rate hikes have pushed inflation lower but the job is not done yet and more rate hikes are still necessary.   AUD/USD Technical AUD/USD is testing support at 0.6666. This is followed by support at 0.6623 0.6732 and 0.6838 are the next resistance lines  
"Global Steel Output Rises as Chinese Production Surges, Copper Market Remains in Deficit

New Zealand central bank expected to pause after 12 consecutive hikes

Kenny Fisher Kenny Fisher 11.07.2023 15:13
New Zealand central bank expected to pause after 12 consecutive hikes New Zealand Manufacturing PMI expected to show manufacturing is stalled The New Zealand dollar is lower on Tuesday. In the European session, NZD/USD is trading at 0.6189, down 0.35%. RBNZ expected to take a pause The Reserve Bank of New Zealand will be in the spotlight on Wednesday. The central bank holds its policy meeting and is expected to leave the official cash rate unchanged at 5.5%. The RBNZ has raised rates 12 consecutive times since August 2021 but has signalled that it’s time for a breather. Shortly after the May hike, Deputy Governor Hawkesby said that there would be a “high bar” for the RBNZ to continue raising rates.  The RBNZ won’t be issuing a rate statement and there may not be much for the markets to digest other than the expected pause. The decision to pause is certainly not a no-brainer, given current economic conditions. Inflation is running at 6.7%, more than triple the Bank’s target of 2% and the labour market remains tight. At the same time, demand has slowed and economic activity has cooled as the RBNZ’s relentless rate hikes filter through the New Zealand economy. RBNZ policymakers are confident that the economy has cooled and inflation, although high, is on the right path. If inflation continues to fall, there is a good chance that the pause could be extended – the central bank would clearly like to wrap up the current rate-tightening cycle, and unlike what we saw when the Fed took a pause, there are no signals to the markets that this pause will be a one-time occurrence. New Zealand releases Manufacturing PMI for June on Wednesday after the rate decision. The manufacturing sector has contracted for three straight months, with readings below the 50.0 line, which separates contraction from expansion. The PMI is expected to rise from 48.9 to 49.8, which would point to almost no change. . NZD/USD Technical NZD/USD tested support at 0.6184 earlier. Below, there is support at 0.6126 0.6260 and 0.6383 are the next resistance lines  
EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

UK Employment Falls, but Wage Growth Remains High; BoE Governor Bailey Signals More Rate Hikes Needed

Kenny Fisher Kenny Fisher 11.07.2023 14:06
UK employment falls but wage growth remains high BoE Governor Bailey says inflation will fall but more rate hikes needed The British pound has edged upward on Tuesday. In the European session, GBP/USD is trading at 1.2898, up 0.28%. The pound has put on an impressive rally, rising close to 200 pips against the dollar since Thursday.   UK employment softens, wages rise The UK delivered a mixed employment report for June. The economy created 102,000 jobs, far less than the 250,000 in May and shy of the consensus of 125,000. The unemployment rate rose from 3.8% to 4% and unemployment claims rose by 25,700, after a decline of 22,500 in May. However, wage growth excluding bonuses remained at 7.3% in the three months to May, above the consensus estimate of 7.1%. For Bank of England policymakers, the employment report is a good news/bad news release. The central bank needs the labour market to cool as it struggles to bring inflation down. To put it mildly, that battle has not gone as planned, with the OECD giving the UK the ignominious distinction of being the only major economy where inflation is rising. The June employment and unemployment numbers showed some cracks in the tight labour market, but wage growth, a key driver of inflation, remains stubbornly high. The takeaway from the jobs report is that the labour market is a bit less tight but wage growth remains inconsistent with the 2% inflation target and the BoE will have to continue to tighten policy. The cash rate is currently at 5.0% but the money markets have priced in a peak rate of 6.5%, which means that more pain is coming for businesses and households in the form of higher interest rates. BoE Governor Bailey is doing his best to put a brave face on a difficult situation. On Monday, Bailey said that inflation would fall “markedly” due to falling energy and food prices, but more rate hikes would be needed to bring inflation down from the current 8.7% to the 2% target.   GBP/USD Technical GBP/USD tested support at 1.2782 earlier today. The next support level is 1.2716 There is resistance at 1.2906 and 1.2972  
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

US Nonfarm Payrolls Decline, Strong Job Growth in Canada; Bank of Canada Rate Hike Expected

Kenny Fisher Kenny Fisher 11.07.2023 08:25
US nonfarm payrolls decline Canada adds 60,000 jobs Bank of Canada expected to raise rates on Wednesday The Canadian dollar is trading quietly at the start of the week. In the North American session, USD/CAD is trading at 1.3286, up 0.07%. On Friday, the Canadian dollar gained 0.68% on the back of soft nonfarm payrolls and a strong Canadian jobs report.   US nonfarm payrolls decline There was plenty of drama ahead of Friday’s nonfarm payrolls. The consensus estimate for June stood at 225,000 and this was close to the actual reading of 209,000 but much lower than the downwardly revised reading of 306,000 in May. So why the excitement? The reason was the ADP Employment report prior to nonfarm payrolls. ADP is not considered a reliable precursor to NFP, but the markets couldn’t ignore the massive ADP reading of 497,000. This prompted speculation of a banner NFP which would force the Fed to keep tightening. In the end, nonfarm payrolls performed as expected, renewing speculation that the Fed may soon wind up its rate-hike cycle if there are additional signs of the US economy cooling down. Canada also released the June employment report on Friday, with job growth showing strong gains. The economy produced 59,900 jobs, smashing the consensus estimate of 20,000 and bouncing back from the May reading of -17,300. Even more impressive, the economy created a massive 109,600 full-time jobs, as part-time employment fell by 49,800. At the same time, there were indications that the economy is cooling – the unemployment rate climbed to 5.4%, up from 5.2% and wage growth slowed to 4.2%, down from 5.1% in May. The numbers show a mixed employment report, raising the question of what will be the Bank of Canada’s takeaway from the job numbers ahead of Wednesday’s rate announcement. The BoC has stopped providing forward guidance about its rate plans, instead saying that rate decisions would be based on economic data, particularly inflation and employment numbers. The BoC is expected to raise rates by 0.25% at the Wednesday meeting, which would bring the cash rate to 5.0%.   USD/CAD Technical USD/CAD is testing resistance at 1.3289. Next, there is resistance at 1.3375 1.3191 and 1.3105 are providing support    
FOMC Minutes Reveal Policy Divisions as USD/JPY Falls Sharply

FOMC Minutes Reveal Policy Divisions as USD/JPY Falls Sharply

Kenny Fisher Kenny Fisher 07.07.2023 09:26
FOMC minutes highlight policy divisions USD/JPY falls sharply Japan releases Household Spending and Average Cash Earnings on Friday The Japanese yen is showing strong gains on Thursday. In the European session, USD/JPY is trading at 143.82, down 0.57%.   Fed minutes point to disagreement over rate path The Federal Reserve has been aggressively tightening rates in order to curb inflation but took a pause in June after ten consecutive hikes. At the meeting, the Fed said that a pause would provide members with time to assess the impact of the hikes, which have amounted to some 500 basis points. The minutes of the June meeting were significant in highlighting that Fed members were in disagreement about the decision to pause rates. The decision to pause may have been unanimous, but the minutes made it clear that there was a difference of opinions, with some members preferring a hike but reluctantly agreeing to a pause. There was also disagreement over the pace of tightening in the second half of the year, with 16 of 18 members expecting at least one hike and 12 members expecting two or more hikes. After the minutes, the money markets slightly raised the probability of a 0.25% hike in July from 86% to 91%, according to the CME FedWatch tool. The pricing could continue to change, with two key reports ahead of the July meeting. The non-farm payrolls report will be released on Friday. Job growth is expected to have cooled to 225,000 in June, down sharply from 339,000 in May. This will be followed by the June inflation report next week, with headline inflation expected to fall from 4.0% to around 3.0%. Japan releases Household Spending and Average Cash Earnings on Friday. Household Spending declined by 4.4% in April and another decline of 2.4% is expected for May, as inflation has dampened consumer spending. Average Cash Earnings gained 1% in May and the consensus for June stands at 0.7%. . USD/JPY Technical There is resistance at 145.28 and 146.23 144.11 is a weak support level. The next support line is 143.16  
Market Insights: Dollar Position Shifts and Central Bank Speeches Drive Currency Trends

Strong Australian Trade Surplus and Surprising US ADP Employment Boost AUD/USD, while Focus Shifts to Unemployment Claims and ISM Services PMI

Kenny Fisher Kenny Fisher 07.07.2023 09:21
Australia posts strong trade surplus US ADP employment surprises with massive gain US unemployment claims and ISM Services PMI will be released later on Thursday Thursday has been a busy day for AUD/USD. The Australian dollar rose after a strong Australian trade balance report but has reversed directions following a sparking US ADP employment release. In the North American session, AUD/USD is trading at 0.6639, down 0.20%.   Australia’s trade surplus widens Australia continues to post monthly trade surpluses, supported by exports of iron ore and natural gas to Asian Pacific countries. China’s recovery has been uneven but there has still been an increased demand for iron ore and coal from Australia. The June trade surplus was A$11.8 billion, above the consensus of A$10.9 billion. The Australian dollar gained ground on the strong trade surplus, only to give up all these gains after the US ADP employment report posted a massive gain of 497,000 in June, up from 267,000 in May and well above the consensus of 228,000. The ADP report is not considered a reliable indicator for Friday’s nonfarm payrolls release, but investors still keep an eye on it and the huge gain has boosted the US dollar against the major currencies. US nonfarm payrolls are expected to move in the opposite direction of the ADP report, with a consensus of 225,000 in June, down sharply from 339,000 in May. Later on Thursday, the US releases unemployment claims and the ISM Services PMI. Unemployment claims dropped sharply to 239,000 in the previous release and are expected to rise to 245,000. The ISM Services PMI has shown weak expansion in recent months, with readings slightly above the 50.0 level, which separates expansion from contraction. The June consensus stands at 51.0, slightly higher than the May reading of 50.3 points. . AUD/USD Technical AUD/USD continues to test resistance at 0.6659. This is followed by resistance at 0.6722 0.6597 and 0.6534 are providing support
ADP Employment Surges with 497,000 Gain, Nonfarm Payrolls Awaited - 07.07.2023

ADP Employment Surges with 497,000 Gain, Nonfarm Payrolls Awaited

Kenny Fisher Kenny Fisher 07.07.2023 08:57
ADP employment surprises with a huge gain of 497,000 On Friday, US releases nonfarm payrolls and Canada publishes the employment report Nonfarm payrolls are expected to fall to 225,000, Canada projected to add 20,000 jobs The Canadian dollar is in negative territory on Thursday. In the North American session, USD/CAD is trading at 1.3360, down 0.58%. The Canadian dollar has slipped over 1% since Wednesday.   ADP employment shows a massive gain  After the Fed minutes on Wednesday, the markets were awaiting the nonfarm payrolls on Friday. The ADP employment report, which precedes nonfarm payrolls, often gets no more than a cursory glance as it’s not considered a reliable precursor to the NFP. Thursday’s release, however, was simply too large to ignore. The ADP reported a gain of 497,000 in June, up from 267,000 in May and well above the consensus of 228,000. US nonfarm payrolls are expected to move in the opposite direction of the ADP report, with a consensus of 225,000 in June, down sharply from 339,000 in May. After today’s ADP shocker, Fed policy makers will be hoping that nonfarm payrolls decline as expected. If nonfarm payrolls follow the ADP lead and climb sharply higher, the Fed may be forced to raise rates more than expected in the second half of the year to cool the hot labour market. The money markets have repriced rate expectations for July following the ADP release. The probability of a 0.25% hike is currently at 94%, up from 86% prior to the ADP report. Fed Chair Powell has hinted at one more rate hike after July, but a September hike will be more likely if nonfarm payrolls rise on Friday. The ADP report grabbed all the headlines, but other employment numbers on Thursday could indicate that the labour market is slowly weakening. Unemployment claims rose from 236,000 to 238,000, higher than the consensus estimate of 245,000. As well, JOLTS Jobs Openings fell from 10.32 million to 9.82 million, shy of the consensus estimate of 9.93 million. The ISM Services PMI may be another headache for the Fed, as it jumped in June to 53.9, well above the May reading of 50.2 and the consensus estimate of 51.2 points. The report indicates that business activity is expanding and the economy remains strong, despite the Fed’s aggressive tightening cycle. Canada releases the June employment report on Friday. The economy is expected to rebound with 20,000 new jobs in June, after a loss of 17.3 thousand in May. The unemployment rate is projected to rise to 5.3% in June, up from 5.2% in May. . USD/CAD Technical USD/CAD is testing resistance at 1.3318. Next, there is resistance at 1.3386 1.3217 and 1.3149 are providing support  
Eurozone and German Services PMIs Weaken in June as Markets Await Fed Minutes

Eurozone and German Services PMIs Weaken in June as Markets Await Fed Minutes

Kenny Fisher Kenny Fisher 06.07.2023 08:35
Eurozone and German Services PMIs weaken in June Markets looking for clues as Fed releases minutes on Wednesday EUR/USD is showing limited movement on Wednesday. In the European session, the euro is almost unchanged at 1.0882.   German and eurozone Services PMIs ease The eurozone services sector continues to show growth, but the June numbers showed a deceleration. Eurozone PMI slowed to 52.0, shy of the consensus of 52.4 and down from 55.1 in May. This marked a five-month low. Germany’s services sector stalled, dropping from 53.9 to 50.6 and missing the consensus of 50.8 points. The 50.0 level separates contraction from expansion. The eurozone economy has been recovering slowly, with services driving economic activity as manufacturing continues to decline. The ECB, which showed up late to the rate-hiking party but has been quite hawkish, will need to tread carefully in order to guide the economy to a soft landing. The central bank meets next on July 27th and is expected to raise rates. Inflation has been falling but core CPI remains persistently high. The ECB has signalled more rate hikes are coming and Joachim Nagel, head of the German central bank, reiterated the ECB’s stance, saying this week that inflation risks are tilted to the upside and the ECB’s rate-hike cycle has “some way to go”. Wednesday’s highlight is the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate to a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but aren’t sure about another rate hike this year. Fed Chair Powell has signalled that the Fed plans two hikes in the second half of the year and the minutes could change the market’s tune if the Fed’s tone is hawkish.   EUR/USD Technical EUR/USD is testing resistance at 1.0908. The next resistance line is 110.50 1.0838 and 1.0766 are providing support  
AUD/USD slips after rally as China's Services PMI eases; Australian retail sales jump - 06.07.2023

AUD/USD slips after rally as China's Services PMI eases; Australian retail sales jump

Kenny Fisher Kenny Fisher 06.07.2023 08:32
AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support
AUD/USD slips after rally as China's Services PMI eases; Australian retail sales jump - 06.07.2023

AUD/USD slips after rally as China's Services PMI eases; Australian retail sales jump - 06.07.2023

Kenny Fisher Kenny Fisher 06.07.2023 08:32
AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support
ECB's Dovish Shift: Markets Anticipate Softer Policy Guidance

Eurozone PMIs Expected to Ease, Fed Minutes Awaited as US Yield Curve Signals Recession Concerns

Kenny Fisher Kenny Fisher 05.07.2023 08:41
German and Eurozone PMIs expected to ease on Wednesday Fed releases minutes of June meeting on Wednesday US yield curve hits deepest inversion since 1981 EUR/USD is drifting downward on Tuesday. In the North American session, the euro is trading at 1.0898, down 0.15%. The US markets are closed for the July Fourth holiday, and we can expect limited movement from EUR/USD for the remainder of the day.   Services PMIs expected to show weaker expansion After disappointing German and eurozone Manufacturing PMIs on Monday, it’s the turn of Services PMIs on Wednesday.  Although the Service PMIs are expected to weaken, both are expected to point to expansion, with readings above the 50.0 level. The eurozone PMI is expected to dip to 52.4, down from 55.1, while the German PMI is projected to slow from 57.2 to 54.1. The euro didn’t show much of a reaction to the Manufacturing PMIs, as the prolonged decline in manufacturing was not a surprise. I don’t expect the Service PMIs to weigh on the euro unless the releases are below expectations. The markets will be keeping a close on the Fed minutes from the June meeting, which will be released on Wednesday. The Fed delivered a 0.25% hike at the June meeting and the markets are widely expecting a repeat in July, which would bring the cash rate to a range of 5.25%-5.50%. The markets have fallen into line with the Fed’s aggressive stance, and investors are no longer expecting a rate hike or two before the end of the year. Fed Chair Powell has hinted at one more rate hike after July before the end of the year and there are growing concerns that if the Fed continues to increase rates the economy will tip into a recession. The spread between 2-year and 10-year Treasury note yields hit its widest level since 1981 on Monday, raising fears of a recession. A yield curve inversion is considered a reliable indication of a recession and the current inversion has been in place since July, stoking concern about the direction of the US economy.   EUR/USD Technical EUR/USD is testing support at 1.0908. This is followed by support at 1.0838 1.0980 and 1.1050 are the next resistance lines      
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

Kenny Fisher Kenny Fisher 04.07.2023 15:48
Swiss inflation lower than expected US markets closed on Tuesday Fed minutes will be released on Wednesday The Swiss franc is showing little movement on Tuesday, trading at 0.8959 in the European session. US markets are closed for the July Fourth holiday and we can expect a quiet day for USD/CHF.   Swiss inflation falls to 1.7% Switzerland’s inflation rate dipped in June to 1.7% y/y, down from 2.2% in May and just below the consensus of 1.8%. On a monthly basis, inflation rose 0.1%, down from 0.3% and below the consensus of 0.2%. Core inflation eased to 1.8% y/y, down from 1.9%. Swiss National Bank President Jordan has often complained that inflation remains too high, although other central bankers, who are grappling with much higher inflation, would be happy to change places. Both the headline and core rates have now dropped into the Bank’s target range of 0%-2%, which should lend support to the SNB taking a pause at the September meeting. However, Jordan has been quite hawkish and one positive inflation report may not be enough to convince the SNB that the decline in inflation is temporary. The markets have priced in a 66% probability of a 0.25% in September, which would bring the cash rate to an even 2.0%. US markets are closed today, but Wednesday should be a busy session as the Fed releases the minutes from the June meeting. The markets are widely expecting a rate hike in July, and there are growing concerns that if the Fed continues to hike, the economy will tip into a recession.  The spread between 2-year and 10-year Treasury note yields deepened to a 42-year high on Wednesday, raising fears of a recession. A yield curve inversion is considered a reliable indication of a recession and the current inversion has been in place since July, raising fears about the direction of the US economy.   USD/CHF Technical USD/CHF is testing support at 0.8961. Below, there is support at 0.8904 0.9009 and 0.9081 are the next resistance lines  
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

Economic Calendar and Bitcoin Consolidation: Assessing Trading Lull and Bullish Signals

Kenny Fisher Kenny Fisher 04.07.2023 08:42
We may be seeing a bit of a trading lull at the start of the week with tomorrow’s US bank holiday tempting many into an extended weekend. The economic calendar looks busy but with a large portion being PMI revisions, that doesn’t necessarily equate to an abundance of trading activity. The revisions are often small and don’t really move the needle in terms of expectations for the economy and, at this moment, interest rates. And then there’s the fact that manufacturing being deep in contraction territory is nothing new and what revisions we did see doesn’t really change that. Even as far as prices are concerned, central banks at this stage are far more concerned with what’s happening in services than manufacturing so even that providing welcome disinflationary pressure won’t be enough.   Is the bitcoin consolidation a bullish signal? Bitcoin is continuing to fluctuate largely between $30,000-$31,000 in a manner that may feel encouraging to the crypto community after such a powerful rally a couple of weeks ago. While it hasn’t managed to capitalize any further, that it hasn’t given back a portion of those gains gives the impression that traders think there’s more to come and that this is merely a period of consolidation amid a bigger move. Time will tell whether that turns out to be the case and news flow may have a big part to play in the outcome but what we’ve seen so far is encouraging.  
Australian Employment Surges in August Amid Part-Time Gains, While US Retail Sales and PPI Beat Expectations

Eurozone Manufacturing Contracts as Euro Remains Steady; US ISM Manufacturing PMI Weakens; US PCE Index Slows, Fed Rate Hike Still Expected

Kenny Fisher Kenny Fisher 04.07.2023 08:40
Manufacturing PMIs point to contraction across the eurozone but euro remains steady US ISM Manufacturing PMI weakens US PCE Index slows but Fed still expected to hike in July EUR/USD is almost unchanged on Monday, trading at 1.0909.   Eurozone manufacturing continues to sputter The eurozone manufacturing sector has been in poor shape for months and the downturn worsened worse in June. The eurozone PMI slowed to 43.4 in June, down from 44.8 and shy of the consensus of 43.6 points. Germany, the largest economy in the bloc, looked even worse, as the PMI fell to 40.6, down from 43.2 and below the consensus of 41.0 points. Spain, Italy and France also reported readings below 50, which separates contraction from expansion. Manufacturing in the eurozone has now contracted for 12 straight months and the PMI reading was the lowest since May 2020. Customer demand has fallen sharply and manufacturing employment declined in June for the first time since January 2021. These latest numbers indicate that manufacturing is in trouble, but this is nothing really new and the euro shrugged off the weak numbers. The news wasn’t much better in the US, as ISM Manufacturing PMI eased to 46.0 in June, down from 46.8 in May. ISM Manufacturing Employment contracted as well, falling from 51.4 to 48.4 and missing the consensus of 50.5 points. The week wrapped up with inflation releases showing that deceleration is alive and well. On Friday, the PCE Price Index, which is the Fed’s preferred inflation indicator, declined from 0.4% to 0.1% in June. As well, UoM Inflation Expectations dropped to 3.3% in June, down from 4.2% in May and the lowest since March 2021. Inflation may be headed in the right direction, but the Fed is still widely expected to raise rates at the July 12th meeting. Traders have priced in a 25-basis point hike at 86%, according to the CME FedWatch tool.   EUR/USD Technical EUR/USD is putting pressure on support at 1.0908. This is followed by support at 1.0838 1.0980 and 1.1050 are the next resistance lines    
Inflation Outlook: Energy Prices Drive Hospitality, Food Inflation Eases

Money Markets Divided as RBA Decision Looms: Will Rates Rise or Pause?

Kenny Fisher Kenny Fisher 03.07.2023 12:43
Money markets split on RBA decision on Tuesday US PCE Price Index eases in May The Australian dollar is showing some movement right off the bat on Monday. AUD/USD fell as much as 70 pips in the Asian session but has recovered most of those losses. In the European session, AUD/USD is trading at 0.6657 down 0.03%.     Money markets split on RBA decision The Reserve Bank of Australia meets on Tuesday, and it’s a coin-toss as to whether the central bank will raise rates for a third straight time or will it take a pause. Traders have priced in a 52% chance of a pause, according to the ASX RBA rate tracker. Just one week ago, the odds of a pause were 70%, after May inflation declined more than expected. Headline CPI fell from 6.8% to 5.6%, its lowest level in 13 months. Core CPI eased to 6.1%, down from 6.7%. The split over what call the RBA will make on Tuesday is indicative of the case that can be made both for a hike and a pause. The drop in inflation is certainly welcome news, but the RBA wants inflation to fall faster, as it remains almost triple the target of 2%. Additional rate hikes would likely send inflation lower, but that would raise the risk of the economy tipping into a recession. The Australian economy has cooled down, but the labor market remains strong and consumer spending has been resilient, despite high inflation. Retail sales for May jumped 0.7% m/m, up from 0.0% in April and smashing the consensus of 0.1%. RBA members in favor of a hike can point to employment and retail sales data as evidence that the economy can withstand additional hikes. The RBA minutes, which can be considered a guide of its rate policy plans, might point to a pause at Tuesday’s meeting. The April and May minutes were hawkish and the RBA raised rates after these releases. The June minutes were more dovish, sending the Australian dollar lower. Could that signal a pause? In the US, the week wrapped up with the PCE Price Index, the Fed’s preferred inflation indicator. In June, the index rose 0.1% m/m, down from 0.4% in May. This indicates that the disinflation process continues and traders have raised the probability of a July hike to 88%, up from 74% a week ago, according to the CME FedWatch tool.   AUD/USD Technical 0.6659 is a weak resistance line. Above, there is resistance at 0.6722 0.6597 and 0.6534 are providing support    
August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

USD/JPY Outlook: Tokyo Core CPI Data and Ueda's Policy Stance Impact Yen's Direction

Kenny Fisher Kenny Fisher 29.06.2023 14:18
Japan releases Tokyo Core CPI on Friday USD/JPY moves closer to symbolic 145 line Ueda says no changes to policy unless core inflation rises USD/JPY has edged lower on Thursday. In the European session, the yen is trading at 144.19, down 0.20%. The yen dropped as low as 144.70 in the Asian session, as the symbolic 145 line remains under pressure.   Tokyo Core CPI expected to tick higher Japan releases a key inflation indicator, Tokyo Core CPI, on Friday. The indicator dipped to 3.2% in May but is expected to inch up to 3.3% in June. Tokyo CPI excluding food and energy, currently at 2.4% and known as the “core core index”, will be under the microscope after the National “core core index” rose unexpectedly in June. Earlier this week, BoJ Core CPI, the preferred inflation gauge of the central bank, rose from 2.9% to 3.1%, above the consensus of 3.0%. If today’s inflation report also shows that inflation is creeping higher, it will put into question the BoJ’s stance that cost-driven inflation is temporary and therefore there is no need to tighten monetary policy. Governor Ueda reiterated this position at the ECB Bank Forum on Wednesday. Ueda stated that he would continue the BoJ’s ultra-easy monetary policy unless he was “reasonably sure” that inflation accelerated in 2024. He said that the BoJ was not confident that this would occur, noting that even though headline inflation was above 3%, core inflation remained below the Bank’s 2% target. The BoJ’s ultra-accommodative policy has seen the yen slide to 7-month lows, which has drawn warnings from the Ministry of Finance about intervening in the currency markets. Ueda declined to comment on the possibility of intervention, saying that the BoJ was closely monitoring the exchange rate and that the yen was influenced by many other factors besides BoJ policy.     USD/JPY Technical There is resistance line at 144.65 and 145.36 143.94 and 142.94 are providing support  
Italian Inflation Continues to Decelerate in August, Reaffirming 6.4% Forecast for 2023

Lagarde Signals ECB Rate Hike in July, German Inflation Report and Eurozone CPI Awaited

Kenny Fisher Kenny Fisher 29.06.2023 14:16
Lagarde signals ECB rate hike in July Germany releases inflation report later on Thursday Eurozone inflation report follows on Friday EUR/USD is unchanged on Thursday and is trading at 1.0912 in the European session,   German CPI  Germany releases the June inflation report later today. Inflation in the eurozone’s largest economy fell to 6.1% in May, down sharply from 7.2% in April. Much of the decline, however, was driven by lower energy prices. Inflation is expected to head higher, with a consensus of 6.3%. If CPI surprises to the downside, the euro could get a boost.   Lagarde signals rate hike in July Investors were hoping to gain some insights this week from ECB President Lagarde, who hosted the ECB Bank Forum in Sintra. There really wasn’t anything new in her remarks, which may have been disappointing to some. One could make the argument that Lagarde is being consistent in her message to the markets and used the Sintra meeting to reiterate the ECB’s intent to raise rates at the July 27th meeting, unless there is an unexpected drop in inflation, in particular the core rate. Lagarde stated on Wednesday that the central bank is not considering a pause in July as things currently stand. At the same time, Lagarde has some wiggle room, as she has said each rate decision will be data-dependent. The ECB has an entire month before the next meeting, and if core inflation slides or the eurozone economy takes a turn for the worse, the ECB could pause, arguing the conditions were appropriate for holding rates steady. Lagarde & Co. will get a look at eurozone inflation data on Friday. Headline inflation is expected to fall to 5.6% in June, down from 6.1% in May. Core CPI is projected to rise from 5.3% to 5.5%.   EUR/USD Technical EUR/USD is putting pressure on resistance at 1.0916. This is followed by 1.0988 1.0822 and 1.0750 are providing support    
EUR/USD Edges Lower as German Consumer Confidence Falls

EUR/USD Edges Lower as German Consumer Confidence Falls

Kenny Fisher Kenny Fisher 29.06.2023 08:32
German consumer sentiment falls ECB’s Lagarde will participate in a panel discussion on policy   EUR/USD has edged lower on Wednesday. In the European session, EUR/USD is trading at 1.0939, up 0.20%.   German consumer confidence dips The German GfK Consumer Sentiment report found that consumer confidence is expected to fall in July to -25.4, down from a downwardly revised -24.4 in June. The report noted that the German consumer is reluctant to spend due to economic uncertainty, and high inflation has eroded the purchasing power of households. The consumer confidence release comes on the heels of the German Ifo Business Climate index, which fell from 91.7 to 88.5 in June. This missed expectations and marked the index’s lowest level this year. The weak confidence numbers highlight a persistent lack of confidence in the German economy.   The ECB, which continues to signal that more rate hikes are coming, finds itself between a rock and a hard place. The Bank’s number one priority is curbing inflation, which will require more rate hikes. However, tightening too quickly runs the risk of choking economic activity and tipping the German economy into a recession. How far will the ECB go in raising interest rates? Investors hope to get some clues from ECB President Lagarde later today when she participates in a panel on policy at the ECB bank forum in Sintra. Lagarde said on Tuesday that eurozone inflation remains too high and reiterated that ECB policy “needs to be decided meeting by meeting and has to remain data-dependent.”   In the US, Tuesday’s strong releases were further proof of a solid economy. Durable Goods Orders and New Home Sales were higher and beat expectations, and Conference Board Consumer Confidence jumped in June from 102.5 to 109.7, its highest level since January 2022. These strong releases will provide support for the hawkish Fed, which is expected to raise rates in July and again in September or October.   EUR/USD Technical EUR/USD is putting pressure on support at 1.0916. Next, there is support at 1.0822 1.0988 and 1.1082 are the next resistance lines    
Yen's Rapid Weakening: Japan's Warning and Potential Currency Intervention

Yen's Rapid Weakening: Japan's Warning and Potential Currency Intervention

Kenny Fisher Kenny Fisher 29.06.2023 08:28
Earlier this week, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention.   The markets have become accustomed to verbal intervention when the yen drops sharply, but Tokyo followed its bark with a bite late last year, when it intervened in the currency markets after the yen fell below 151. As the yen continues to depreciate, currency intervention becomes a stronger possibility.   On Tuesday, the US posted solid releases, an indication that the economy remains resilient despite the Fed’s aggressive tightening. Durable Goods Orders and New Home Sales were higher and beat expectations, and Conference Board Consumer Confidence jumped in June from 102.5 to 109.7, its highest level since January 2022. The strong numbers provide support for a Fed hike in July, with the markets pricing rate increase at 79%, according to FedWatch.     USD/JPY Technical USD/JPY is testing resistance at 144.65. The next resistance line is 145.36 There is support at 142.94 and 142.00       US Data MBA mortgage applications in the US rose for a third straight week, despite surging rates as housing demand remains healthy. The effects of the tightening of lending conditions are being reflected in the data, as the credit jumbo rate(expensive homes) rose to 6.91%, which is well above the Average 30 year fixed rate of 6.75%. The housing market isn’t weakening yet despite rising costs because demand is still growing and supplies remain tight.    
Germany's Economic Challenges: Waiting for 'Agenda 2030

Australian Inflation Report and RBA Decision: Impact on Australian Dollar and Rate Outlook

Kenny Fisher Kenny Fisher 28.06.2023 08:50
Australian inflation expected to slow in May The inflation report will have a significant impact on RBA decision in July The Australian dollar is in positive territory on Tuesday. AUD/USD rose as high as 50 pips earlier but has pared these gains and is trading at 0.6685, up 0.16%. The Australian dollar is showing some life after last week’s awful performance, in which it declined by 2.87%.   Markets eye Australian CPI On Wednesday, Australia releases the monthly inflation report for May. Inflation is expected to ease to 6.1% y/y, down from 6.8% in April. If the consensus is accurate, this would mark the lowest inflation level since March. The Reserve Bank will be keeping close tabs on the inflation release, especially core CPI, which is a more accurate gauge of inflation trends. The core rate fell from 6.9% to 6.5% in April, but that is incompatible with a 2% inflation target, and the RBA will need to see core inflation fall much more quickly before it can think about winding up the current rate-tightening cycle. The markets have priced in a rate pause from the Reserve Bank of Australia at 77%, and a significant drop in inflation on Wednesday should cement a pause at the July meeting. The RBA surprised the markets earlier this month when it raised rates by 25 basis points, bringing the cash rate to 4.35%. The minutes of the meeting indicated that the decision to hike was close, and a key factor in the decision was concern over persistently high inflation. The central bank is well aware of the pain inflicted on households and businesses due to rising rates, and a pause in rate hikes would provide some relief, as well as allow the RBA to monitor the effects of its rate policy. At the same time, the central bank has made it absolutely clear that its number one goal is curbing high inflation, which means Wednesday’s inflation release could have a significant effect on the direction of the Australian dollar.   AUD/USD Technical AUD/USD put pressure on resistance at 0.6729 in the Asian session. Above, there is resistance at 0.6823 0.6598 and 0.6518 are providing support    
USD/JPY Targets Resistance Level Amid Divergence and Intervention Concerns

CHF/JPY Surges Above Key Resistances, Maintains Bullish Momentum

Kenny Fisher Kenny Fisher 28.06.2023 08:48
Current impulsive up move of CHF/JPY has cleared above major resistances of 157.98 & 158.45. Short-term momentum remains bullish. 159.90 is the key short-term support to watch.   The CHF/JPY cross has continued to its relentless rally as it broke above key resistance levels; 157.98 (the high obtained right during the EUR/CHF unpegged shock in January 2015) and 158.45 (Oct 1979 major swing high).   Broke above Oct 1979 major swing high of 158.45     Fig 1: CHF/JPY long-term secular trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The next key medium-tern resistance zone stands at 163.20/166.70 defined by a cluster of Fibonacci extension levels (see 3-month chart). The key medium-term support rests at 146.60 defined by the 200-day moving average and the former swing highs of July/October 2022.   The short-term uptrend remains intact     Fig 2: CHF/JPY minor short-term trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The price actions of CHF/JPY have continued to evolve within a minor ascending channel in place since the 13 June 2023 low of 153.37 and traded above the upward-sloping 5-day moving average (see 1-hour chart). The hourly RSI has just staged a bullish breakout which indicates that short-term momentum remains positive. Watch the 159.90 key short-term pivotal support with the next resistances coming in at 162.00 (psychological level) and 163.20 (the intersection between the upper boundaries of both the medium-term and minor ascending channels). However, a break below 159.90 negates the bullish tone to expose the next minor supports at 158.70 and 157.20.
Challenges Loom Over Eurozone's Economic Outlook: Inflation, Interest Rates, and Uncertainty Ahead

Canada's Inflation Eases as US Durable Goods Orders Accelerate, Impacting CAD/USD Exchange Rate

Kenny Fisher Kenny Fisher 28.06.2023 08:46
Canada’s inflation rate eases US Durable Goods Orders accelerate The Canadian dollar spiked and gained 50 points after Canada released the May inflation report but has pared these gains. USD/CAD is unchanged at 1.3158.   Canadian inflation heads lower Canada’s inflation rate fell sharply in May to 3.4%, down from 4.4% in April. As expected, much of that decline was due to lower gasoline prices. Still, this is the lowest inflation rate since June 2021.The core rate, which is comprised of three indicators, fell to an average of 3.8% in May, down from 4.2% a month earlier. The decline should please policy makers at the Bank of Canada, as inflation slowly but surely moves closer to the 2% target. The BoC cited the surprise upswing in inflation in April as one reason for its decision to hike rates earlier this month. With headline and core inflation falling in May, will that be enough to prevent another rate increase in July? Not so fast. The BoC has said its rate decisions will be data-dependent, and there is the GDP on Friday and employment next week, both of which will factor in the rate decision. The US released a host of releases today, giving the markets plenty to digest. Durable Goods Orders jumped 1.7% in June, up from an upwardly revised 1.2% in May and crushing the consensus of -1%. The core rate rebounded with a 0.6% gain, up from -0.6% and above the consensus of -0.1%. Later today, the US publishes the Conference Board Consumer Confidence and New Home Sales. Wednesday is a light day on the data calendar, with the Fed will in the spotlight. Fed Chair Jerome Powell will participate in a “policy panel” at the ECB Banking Forum in Sintra, Portugal, and investors will be looking for some insights into Fed rate policy. As well, the Fed releases its annual “stress tests” for major lenders, which assess the ability of lenders to survive a severe economic crisis. The stress tests will attract more attention than in previous years, due to the recent banking crisis which saw Silicon Valley Bank and two other banks collapse.   USD/CAD Technical There is resistance at 1.3197 and 1.3254 1.3123 and 1.3066 are providing support  
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Insights from Global Markets: Data Releases and Monetary Policy Developments in Russia, South Africa, Turkey, Switzerland, China, and India

Kenny Fisher Kenny Fisher 27.06.2023 10:36
Russia A few data releases on the agenda next week including unemployment, retail sales, industrial output and monthly GDP.   South Africa A very quiet week with PPI the only notable release. Inflation is falling back towards target and the PPI may offer insight into whether those pressures are continuing to head in the right direction.   Turkey Thursday’s 6.5% rate hike suggests Turkey is on the path back to a conventional monetary policy approach. Markets were pricing in a lot more but with President Erdogan openly against hiking rates – despite replacing the Governor who was happy to cut on his behalf – the CBRT may be treading a little carefully. As we’ve seen before, Erdogan will not hesitate to sack a Governor so perhaps his new appointment simply has ambitions to still be employed in September. No major economic releases next week.   Switzerland There are a few data releases next week, but SNB Chair Thomas Jordan’s appearance will probably be the highlight. The SNB hiked rates by 25 basis point this past week and markets believe there’s another in the pipeline. Jordan previously hinted at the neutral rate being 2% and the SNB indicated on Thursday that another hike may follow. With inflation forecast to stay above 2% for the next couple of years, only a drop in it over the next couple of months may change the SNBs mind.   China Not much action on the economic data front with the only key data on manufacturing and services activities to digest. On Friday, we will have the release of the NBS Manufacturing and Non-Manufacturing PMIs for June. Manufacturing PMI is forecasted to rebound slightly to 49.0 after it contracted to a five-month low of 48.8 in May. In contrast, the growth trajectory of Non-Manufacturing PMI is forecasted to dip to 53.7 in June from 54.5 in May. If it turns out as expected, it will be the third consecutive month of a growth slowdown in services activities. These data will be closely watched to determine and gauge the next move from China’s top policymakers as market participants wait eagerly for the amount and scope of an impending new fiscal stimulus measure that the State Council stopped short of giving out any details about it last week.   India A couple of key data to take note of on Friday; bank loan growth, Q1 current account where its deficit is forecasted to narrow to -$16 billion from $-18.2 billion recorded in Q4 2022, and Q1 external debt that is forecasted to edge lower to US$602 billion from $613.1 billion recorded in Q4 2022.
Market Focus: US Rate Hikes, Eurozone Inflation, and UK Monetary Policy Uncertainty

Market Focus: US Rate Hikes, Eurozone Inflation, and UK Monetary Policy Uncertainty

Kenny Fisher Kenny Fisher 27.06.2023 10:33
US While Europe appears at great risk for a recession as traders bet on aggressive rate rises by all the European central banks, the Fed is still expected to be nearing the end of their respective rate hiking campaign.  The focus in the US will fall on the PCE readings. If inflation comes down as expected, the swap futures might grow even more confident that the Fed will only deliver one more rate hike.  Wall Street will also pay close attention to the Conference Board’s consumer confidence reading, which is expected to show a modest rebound.  Friday’s Personal income and spending data will also be closely watched as incomes continue to grow, while spending softens. Fed’s Williams speaks at the Bank for International Settlements on Sunday.  Fed Chair Powell heads to Europe and speaks at the ECB’s global banking forum in Portugal.  The Fed will also release the results of their annual banking stress tests.   Eurozone There’ll be a lot of attention on ECB President Christine Lagarde’s appearances early in the week, particularly in light of what we’ve seen recently with central banks continuing to raise interest rates amid stubborn inflation. But it’s the flash HICP data on Friday that investors will be most interested in. The ECB recently warned that it will take a significant improvement in the data to avoid another rate hike next month and another repeat performance of the May report could be just that. Instead, we’re expected to see a small move in the other direction as base effects become less favourable for a couple of months, enabling the ECB to hike again in July before reassessing the situation in September. Inflation data from individual countries earlier in the week may offer some insight into what we can expect on Friday.   UK In light of the Bank of England decision to hike interest rates by 50 basis points last week, focus will be on what MPC members have to say. There’s been a lack of unity for months but that was increasingly evident at the June meeting. Going forward, the decisions aren’t going to get easier which means there’s likely to be less unity, rather than more. It won’t take many votes to pause the tightening cycle and so, despite the clear inflation problem, comments from MPC members will become increasingly scrutinized.
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

Kenny Fisher Kenny Fisher 27.06.2023 10:30
Tokyo sends warning over yen’s deprecation Yen has slumped over 7% against US dollar since April USD/JPY is in positive territory on Monday. In the European session, the yen is trading at 143.15, down 0.36%.   Tokyo issues warning over slumping yen The Japanese yen continues to lose ground and the Japanese government is not amused. The yen slipped 1.26% last week and fell as low as 143.87 on Friday, its lowest level since November 7th. Since the start of April, the yen has plunged over 7% against the dollar. On Monday, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention. The markets have become accustomed to verbal intervention when the yen drops sharply and these verbal warnings don’t have much effect. The concern is that the government could intervene and purchase yen, as it did in September and October 2022. At that time, the yen was below 151, but Tokyo could decide that it doesn’t want to wait for the yen to fall that low before it intervenes. The Bank of Japan maintained its ultra-loose policy at last week’s meeting, and the divergence between the BoJ and other major central banks keeps hammering at the yen. The US/Japan rate differential has been widening as the Fed has tightened aggressively and is expected to raise rates further in the second half of the year. The BoJ could provide some fast relief to the yen if it raised interest rates, but that doesn’t seem likely anytime soon. A more likely scenario is for the central bank to tweak its yield currency curve control, which sparked a yen rally when the BoJ widened its target band for interest rates. Governor Ueda, who took over in April, has sounded more receptive to tightening policy than his predecessor but so far he has toed the line and maintained a dovish stance.   USD/JPY Technical USD/JPY is testing support at 143.45. The next support level is 142.35 There is resistance at 144.65 and 145.59    
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Kenny Fisher Kenny Fisher 27.06.2023 10:28
Canada’s inflation expected to ease in May The inflation data could be a key factor in BoC’s July rate decision The Canadian dollar moved higher earlier on Monday but has pared these gains. In the North American session, USD/CAD is trading at 1.3169, down 0.10%. The Canadian dollar has been red-hot against its US counterpart, surging 3% in the month of June.   Canadian inflation expected to ease Canada releases May inflation numbers on Tuesday, and the markets are expecting inflation to fall after rising slightly in April. Headline inflation is expected to fall to 3.4%, down sharply from the current 4.4%. Core CPI is projected to ease to 3.9%, down slightly from 4.1%. The Bank of Canada has been fighting a long and tough battle against inflation, and a deceleration on Tuesday would be welcome news. Still, it may not be enough to convince the bank to hold rates at the July 12th meeting. The BoC raised rates in May, citing stronger-than-expected GDP growth as one of the reasons for the hike. Last week’s strong retail sales report could force the Bank to raise rates again, as the solid economic numbers are making it more difficult for the BoC to reach its 2% inflation target.   A sharp drop in headline inflation is unlikely to prevent a July rate hike since much of that decline can be attributed to lower energy prices. The real test will be the core rate – a sharper-than-expected decline could convince BoC policy makers to take a pause, which would be welcome news for weary householders who are grappling with high inflation and rising mortgage costs. Otherwise, Canadian consumers are likely to see more rate hikes in the coming months. The Federal Reserve releases its annual “stress tests” for major lenders, which assess whether the lenders could survive a sharp economic downturn. The stress tests will attract more attention than in previous years, due to the recent banking crisis which saw Silicon Valley Bank and two other banks collapse.   USD/CAD Technical There is resistance at 1.3197 and 1.3254 1.3123 and 1.3066 are providing support  
Tokyo Issues Warning as Yen Depreciates, USD/JPY in Positive Territory

Tokyo Issues Warning as Yen Depreciates, USD/JPY in Positive Territory

Kenny Fisher Kenny Fisher 26.06.2023 15:55
Tokyo sends warning over yen’s deprecation Yen has slumped over 7% against US dollar since April USD/JPY is in positive territory on Monday. In the European session, the yen is trading at 143.15, down 0.36%.   Tokyo issues warning over slumping yen The Japanese yen continues to lose ground and the Japanese government is not amused. The yen slipped 1.26% last week and fell as low as 143.87 on Friday, its lowest level since November 7th. Since the start of April, the yen has plunged over 7% against the dollar. On Monday, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention. The markets have become accustomed to verbal intervention when the yen drops sharply and these verbal warnings don’t have much effect. The concern is that the government could intervene and purchase yen, as it did in September and October 2022. At that time, the yen was below 151, but Tokyo could decide that it doesn’t want to wait for the yen to fall that low before it intervenes. The Bank of Japan maintained its ultra-loose policy at last week’s meeting, and the divergence between the BoJ and other major central banks keeps hammering at the yen. The US/Japan rate differential has been widening as the Fed has tightened aggressively and is expected to raise rates further in the second half of the year. The BoJ could provide some fast relief to the yen if it raised interest rates, but that doesn’t seem likely anytime soon. A more likely scenario is for the central bank to tweak its yield currency curve control, which sparked a yen rally when the BoJ widened its target band for interest rates. Governor Ueda, who took over in April, has sounded more receptive to tightening policy than his predecessor but so far he has toed the line and maintained a dovish stance. . USD/JPY Technical USD/JPY is testing support at 143.45. The next support level is 142.35 There is resistance at 144.65 and 145.59  
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

Kenny Fisher Kenny Fisher 26.06.2023 15:53
German Business Confidence falls for second straight month ECB’s Lagarde hosts central banking conference in Portugal EUR/USD is drifting higher on Monday. In the European session, EUR/USD is trading at 1.0917, up 0.20%.   German business confidence slips Germany once prided itself as being the locomotive of the eurozone, which blazed the way with a strong economy. The country is still by far the largest economy in the bloc, but hard times in the global economy haven’t spared Germany. The week started with disappointing news as the German Ifo Business Climate index dropped for a second straight month, falling from 91.7 to 88.5 in June. This missed the consensus of 90.7 and was the index’s weakest level this year. The Ifo release did not indicate reasons for the decline, but a weak global economy, exacerbated by China’s wobbly recovery, and the ECB’s aggressive tightening appear to be weighing on business sentiment. Last week’s German PMI data indicated slower activity in manufacturing and services. Manufacturing has been mired in a recession and fell from 43.5 to 41.0 points. Services is showing growth, but slipped from 54.7 to 54.1 points. The 50 line separates contraction from expansion. The ECB has been playing catch-up with inflation but has made progress as higher rates have dampened economic activity in the eurozone. The ECB has hinted strongly that it will raise rates in July and there is a strong possibility of another hike in September or October. ECB President Christine Lagarde will be in the spotlight as host of the ECB forum on Central Banking in Sintra, Portugal this week. The markets will be monitoring her remarks and looking for insights into future rate policy, which could result in stronger movement from the euro. . EUR/USD Technical EUR/USD is testing resistance at 1.0916. Next, there is resistance at 1.0988 1.0822 and 1.0780 are providing support
USD/JPY Climbs Above 143 as Japan's Core CPI Remains Above 3%

USD/JPY Climbs Above 143 as Japan's Core CPI Remains Above 3%

Kenny Fisher Kenny Fisher 26.06.2023 08:34
USD/JPY climbs above 143 Japan’s core CPI remains above 3%   The Japanese yen has stabilized on Friday after falling close to 1% a day earlier.  In the European session, USD/JPY is trading at 143.05, down 0.04%. Earlier, USD/JPY touched a high of 143.45, the highest level since early November 2022. On the data calendar, the US releases ISM Services PMI later today. The consensus stands at 54.0 for June, following 54.9 in May. The services sector has posted four straight readings over the 50 level, which separates expansion from contraction.     Japan’s core inflation higher than expected Japan continues to grapple with high inflation and core CPI for May was higher than expected. With inflation around 3%, other central banks would love to trade places with the Bank of Japan, but Japan’s inflation remains above the 2% target and has become an issue for the central bank after decades of deflation.   Nationwide core CPI, which excludes fresh food but includes energy items, climbed 3.2% in May y/y, down from 3.4% in April but above the consensus of 3.1%. What was more worrying was the “core-core index”, which excludes fresh food and energy, jumped 4.3% in May, up from 4.1% in April. This was above expectations and marked the highest level since June 1981.     Core CPI has now remained above the BoJ’s inflation target of 2% for 14 consecutive months. This puts into question the BoJ’s stance that cost-driven inflation is temporary and therefore there is no need to tighten monetary policy. Inflation risks are tilted to the upside and the BoJ will find it more difficult to defend its ultra-loose policy if inflation pressures don’t ease.   The BoJ maintained its policy settings at last week’s meeting and has no plans to tighten interest rates anytime soon. This puts the BoJ at odds with other major central banks, which have been aggressively tightening rates in order to curb inflation. The US/Japan rate differential has been widening as the Fed raises rates while the BoJ stands pat. This has sent the yen sharply lower, raising concerns that the government could intervene in the currency markets in order to prop up the yen.   The Ministry of Finance stunned the global financial markets in September and October when it intervened, at a time when the yen had fallen below the 150 line. The yen hasn’t fallen quite that low, but I would expect to hear louder verbal intervention out of Tokyo if the yen falls below 145.     USD/JPY Technical USD/JPY tested support at 142.82 earlier. The next support level is 142.07 There is resistance at 143.83 and 144.27  
Eurozone and German PMIs Weaken in June, EUR/USD Falls

Eurozone and German PMIs Weaken in June, EUR/USD Falls

Kenny Fisher Kenny Fisher 26.06.2023 08:15
Eurozone and German PMIs weakened in June EUR/USD fell as much as 110 pips on Friday EUR/USD has taken a tumble on Friday. In the European session, the euro is trading at 1.0885, down 0.64%. The euro fell as low as 1.0844 earlier in the day. Later today, the US releases ISM Services PMI. The consensus stands at 54.0 for June, following 54.9 in May. The services sector is in solid shape and the ISM Services PMI has posted four straight readings over the 50 level, which separates expansion from contraction.     Eurozone, German PMIs fall in June Eurozone PMIs for June pointed to weaker activity in the services and manufacturing sectors. The Services PMI eased to 52.4, down from 55.1 in May and below the consensus of 54.5 points. The Manufacturing PMI fell to 43.6, down from the May reading of 44.8 which was also the consensus. Germany, the largest economy in the eurozone, showed a similar trend, with Services PMI falling from 54.7 to 54.1 and Manufacturing PMI dropping from 43.5 to 41.0 points. The 50 line separates contraction from expansion. The takeaway from these numbers is that the eurozone economy is cooling down. Business activity is still growing but at a weaker pace, while the manufacturing recession has deepened. The eurozone economy is yet to recover after negative growth in the past two quarters, as the ECB’s aggressive tightening makes its way through the economy. At first glance, the weak PMI readings should be good news for the ECB, which is trying to dampen economic growth in order to wrestle inflation back down to the 2% target. However, inflation remains very high at 6% and further tightening could tip the weak eurozone economy into a recession. The ECB’s efforts to push inflation lower have been made more difficult, as unemployment is at historic lows and wage growth is high. Germany, the bloc’s largest economy, isn’t the power locomotive that it once was and is still in recovery mode. The ECB has signalled that it will hike rates in July and another increase could be coming in September unless inflation decelerates more quickly.  
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UK Core Inflation Rises, BoE Likely to Raise Rates as Powell Testifies Before Congress

Kenny Fisher Kenny Fisher 22.06.2023 08:36
UK core inflation rises in May BoE likely to raise rates on Thursday Fed Chair Powell testifies before House Committee The British pound has edged lower on Wednesday. GBP is trading at 1.2724 in Europe, down 0.3%. GBP/USD spiked after today’s inflation release but in currently in negative territory.   UK inflation disappoints The UK released the May inflation report today, and the results were a major disappointment, to put it mildly. With inflation falling for two straight months, there were hopes that the Bank of England’s rate policy was slowly working and the downtrend would continue. The monthly readings showed that headline and core CPI eased, but the annualized readings were worse than expected. Headline CPI remained at 8.7%, above the consensus of 8.4%. Core CPI rose from 6.8% to 7.1%, above the consensus of 6.8%, the highest level since March 1992. The core rate, which excludes food and energy prices, is considered more important, and the 0.3% gain is a huge disappointment for the BoE. The Bank of England won’t have much time to mull over the inflation figures, as it announces its rate decision on Thursday. There’s little doubt that the BoE will have to raise rates for a 13th consecutive time, and today’s inflation numbers mean there is a strong possibility of an oversize 0.50% increase. The BoE finds itself between a rock and a hard place, as it struggles to contain inflation without causing a recession. The resilient labor market has complicated the BoE’s attempts to cool the economy, and the markets are projecting that the Bank Rate, currently at 4.5%, won’t peak until 6%. High inflation has already caused a cost-of-living crisis, and more rate hikes will only exacerbate the pain.   Powell on the hot seat? Fed Chair Powell begins two days of testimony before Congress on Wednesday. Lawmakers are expected to grill Powell about the Fed’s rate policy. The Fed paused at this month’s meeting but is expected to raise rates at the July meeting. Powell has said that he can pull off a soft landing that will avoid a recession and a jump in unemployment, but he’ll likely have to answer pointed questions from lawmakers who are concerned that higher rates will damage the economy. . GBP/USD Technical 1.2719 remains under pressure in support. Next, there is support at 1.2645 There is resistance at 1.2848 and 1.2950    
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Swiss National Bank Anticipated to Raise Interest Rates Amid Hawkish Stance

Kenny Fisher Kenny Fisher 22.06.2023 08:24
Swiss National Bank expected to raise interest rates on Thursday Fed Chair Powell testifies before Congress Wednesday and Thursday The Swiss franc is showing little movement on Wednesday, trading at 0.8984 in the North American session.   Will Swiss National Bank deliver a hawkish surprise? The Swiss National Bank will announce its rate decision on Thursday, and the meeting is live, as the markets have priced a 0.50% hike at 60% and a 0.25% at 40%. The current benchmark rate is 1.50%. SNB Chair Jordan hasn’t missed an opportunity to send out warnings that inflation remains too high. Earlier this month, Jordan stated that inflation “is more persistent than we initially thought” and that with rates at a low 1.5%, it wasn’t a good idea to keep rates low and face higher inflation later. Jordan’s rhetoric has remained hawkish even though inflation is low in Switzerland and fell to 2.2% in May. Other central bankers would be happy to switch roles with Jordan, with inflation around 2%, but the SNB is not happy with the inflation picture. Inflation remains above the Bank’s 0%-2% target and Jordan appears willing and able to continue hiking in order to curb inflation. The SNB, once known for its negative rates, has been aggressive, raising rates by 225 points in the current tightening cycle. It should be remembered that since the SNB meets only four times a year, the SNB may opt for a 0.50% hike at Thursday’s meeting in order to get “a bigger bang for the buck”.
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UK inflation expected to fall to 8.4%, BoE rate hike likely, Powell's testimony, GBP/USD lower

Kenny Fisher Kenny Fisher 21.06.2023 08:47
UK inflation expected to fall to 8.4% on Wednesday BoE likely to raise rates on Thursday Fed Chair Powell to testify before House committee on Wednesday The British pound is lower on Tuesday. In the European session, GBP/USD is trading at 1.2739, down 0.41%.   UK inflation expected to ease The UK releases the May inflation report on Wednesday and BoE policy makers will be hoping that inflation continues to trend lower. Inflation dropped in April to 8.7%, decelerating for a second straight month. The consensus stands at 8.4%, and the good news is that those awful readings above 10% appear to be over. On a monthly basis, inflation is expected to fall to 0.5% in May, down from 1.2% in April. Inflation appears to have peaked and is heading lower, but nobody at the Bank of England is smiling. The UK is expected to have one of the highest inflation rates in the G-20 this year at 6.9% and the BoE’s 2% target is miles away. Finance Minister Sunak has set a goal of lowering inflation to 5% by the end of the year, which seems feasible if inflation continues to downtrend in the coming months. The BoE will be in the spotlight on Thursday when it makes its rate announcement. The markets have priced in a 25-basis point hike at 70%, with a 30% chance of an oversize 50-bp increase. If inflation falls as expected to 8.4% or lower, the MPC should be able to proceed with the 25-bp hike, although central banks have a tendency of surprising the money markets. In the US, it’s an unusually light data calendar this week. There are no tier-1 releases on Tuesday, and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will have to clarify to lawmakers the Fed’s interest rate path, as the Fed paused last week after ten straight hikes but expects to renew hiking in July. . GBP/USD Technical 1.2719 is under pressure in support. Next, there is support at 1.2589 There is resistance at 1.2848 and 1.2950  
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NZD/USD down 1.3% this week! Powell to testify before a House Committee on Wednesday

Kenny Fisher Kenny Fisher 21.06.2023 08:45
NZD/USD is down 1.3% this week New Zealand consumer confidence rises Powell to testify before a House Committee on Wednesday The New Zealand dollar is sharply lower for a second straight day. In the North American session, NZD/USD is trading at 0.6148, down 0.83%.   New Zealand consumer confidence rises New Zealand Westpac consumer confidence accelerated to 83.1 in May, up from 77.7 in April and above the consensus of 76.2 points. Still, this is a low level as consumers remain pessimistic about economic conditions. The Westpac survey found that even though household incomes were higher due to strong wage growth, household finances were squeezed for two reasons. First, the cost-of-living crisis has hurt households, with inflation climbing 6.7% over the past year. Second, high interest rates have impacted on many households as mortgage rates have shot up. Weak consumer confidence, which could well translate into a drop in consumer spending, would not be bad news at all for the Reserve Bank of New Zealand, which needs the economy to slow in order to pause interest rate hikes. The benchmark rate currently stands at 5.50% and the RBNZ meets next on July 12th. Last week’s GDP report for the first quarter showed growth contracted by 0.1%, which means that technically New Zealand is in a recession, with two consecutive quarters of negative growth. In the US, this week’s data calendar is very light. There are no tier-1 releases on Tuesday and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will likely be grilled by lawmakers on the Fed’s unconventional interest rate path, as the Fed paused last week after ten straight hikes but has signalled that it plans to renew hiking at next month’s meeting. . NZD/USD Technical NZD/USD is putting strong pressure on support at 0.6147. Below, there is support at 0.6056 0.6198 and 0.6276 are the next resistance lines  
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RBA Minutes Reveal Close Rate Hike Decision, China's Central Bank Trims Key Lending Rates: Impact on AUD/USD

Kenny Fisher Kenny Fisher 20.06.2023 13:02
RBA minutes state that the rate hike decision was close China’s central bank trims key lending rates The Australian dollar has hit a bump in the road and is down 1% this week. In the European session, AUD/USD is trading at 0.6795, down 0.80% on the day.   RBA minutes – rate decision was close The Reserve Bank of Australia has a habit of surprising the markets. The RBA’s rate hike earlier this month was a shocker, as the markets had expected rates to remain unchanged. The minutes of the meeting, released today, indicated that the decision was “finely balanced” between a pause and a hike. In support of a pause, members noted that the sharp increases in rates raised the possibility of the economy stalling. In the end, however, concerns over persistent inflation won the day as the Bank voted to hike rates by 0.25%. The takeaway from the dovish minutes is that the RBA was very close to taking a pause and will be open to holding rates at the July meeting, depending on the data, especially inflation. The Australian dollar has fallen sharply today as investors have lowered their expectations over future rate hikes. The RBA has backed up hawkish words with action, raising rates to 4.1%, the highest level since 2011. Still, inflation has been stickier than expected, and headline inflation jumped in April from 6.3% to 6.8%. The core rate fell from 6.9% to 6.5%, but that is incompatible with the target of 2%. The RBA has projected that inflation will not fall to 2% until mid-2025, which means more hikes are likely, barring a sharp drop in inflation. China’s central bank announced on Tuesday that it was cutting key lending rates, in a move to boost investment and consumption. The post-pandemic recovery has been slow, and soft demand for exports has been bad news for Australia, as China is a key trading partner. China posted 4.5% growth in the first quarter, which was better than expected, but key indicators such as retail spending and industrial output missed expectations in May. . AUD/USD Technical 0.6772 is under pressure in support. Below, there is support at 0.6668 0.6836 and 0.6940 are the next resistance lines        
Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

Kenny Fisher Kenny Fisher 22.05.2023 14:53
BoJ Core CPI expected to ease USD/JPY steadies after extended slide In Monday’s European session, USD/JPY is steady, trading at 137.90. The yen gained 0.53% on Friday, after a nasty slide last week in which it fell 440 points and hit a six-month low. BoJ Core CPI expected to inch lower Inflation has become a hot topic for Japanese policy makers, which marks a sea-change after years of deflation. Japan is dealing with inflation of around 3%, which is much lower than in other major economies but nevertheless higher than the Bank of Japan’s 2% target. The new inflationary era has forced central banks to raise interest rates, but the BoJ remains an outlier as it has continued its ultra-loose monetary policy. Still, it appears that change is coming. There is a new sheriff in town, with Kazuo Ueda now at the helm of the BoJ. Ueda has said he would tighten policy if inflation remains sustainable at 2%, which makes every inflation reading a potential market-mover. Last week, core CPI rose to 3.4% in April, up from 3.1% a month earlier. The rise in inflation, together with a stronger-than-expected GDP report for the first quarter, has fuelled speculation that the BoJ could tighten policy in the near future. Read next: UK Gfk Consumer Confidence index got better fourth month in a row| FXMAG.COM The markets will be closely watching BoJ Core CPI, the BoJ’s preferred inflation gauge, which will be released early on Tuesday. The estimate for March stands at 2.8%, a drop lower than the 2.9% reading in February. We’re unlikely to see interest rates rise anytime soon, but Ueda has hinted at phasing out the Bank’s yield curve control (YCC) policy. Such a move would likely send the yen sharply higher, and unsurprisingly, the possibility that the BoJ will tighten policy has attracted the attention of speculators, who are betting on a shift in policy that will boost the yen. USD/JPY Technical In the Asian session, USD/JPY put strong pressure on support at 137.45. Below, there is support at 1.3615 There is resistance at 138.37 and 139.25 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Japanese yen drifting ahead of BOJ Core CPI - MarketPulseMarketPulse
UK Gfk Consumer Confidence index got better fourth month in a row

UK Gfk Consumer Confidence index got better fourth month in a row

Kenny Fisher Kenny Fisher 19.05.2023 16:14
UK Consumer Confidence hits 15-month high BoE’s Bailey warns of wage-price spiral The British pound has pushed higher on Friday. GBP/USD is trading at 1.2449 in North America, up 0.32% on the day. The week is wrapping up on a positive note, as UK GfK Consumer Confidence index improved for a fourth straight month. That’s not to say that the UK consumer is in a cheery mood. The index improved from -30 to -27 and has been stuck in negative territory since 2016. Still, there has been steady movement upward in recent months and today’s reading marked a 15-month high. Energy prices have come down and consumers are feeling better about their personal finances. An improvement in consumer confidence often translates into stronger consumer spending, which would be good news for the UK economy. BoE Bailey’s warns of wage-price spiral  Bank of England Governor Bailey warned the markets this week that rate hikes were on the table and he would tighten policy if inflation remained persistent. The central bank has been unable to curb inflation, which remains in double-digits, despite an aggressive rate-tightening campaign which has raised the cash rate to 4.50%. The BoE has been content with small hikes of 25 basis points and has insisted that inflation will fall rapidly, but there is pressure on the Bank to deliver larger hikes in order to curb red-hot inflation. Bailey acknowledged this week that the UK was in the midst of a wage-price spiral, which will make the battle against inflation that much more difficult. Public sector employees continue to strike, in an effort to secure higher wages in response to the cost-of-living crisis. The government will likely have to cough up more money for the workers, which will lead to higher inflation. The US debt ceiling crisis is weighing on the financial markets, but it seems likely that lawmakers will reach an 11th-hour agreement. Lawmakers don’t want to be blamed for the US defaulting on its debt for the first time ever, and Republican House Speaker McCarthy says there could be a vote on a debt ceiling agreement next week. GBP/USD Technical There is support at 1.2366 and 1.2289 1.2474 and 1.2604 are the next resistance levels Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. British pound rises as consumer confidence improves - MarketPulseMarketPulse
Decline of Canadian retails sales plays in favour of holding the rates by Bank of Canada

Decline of Canadian retails sales plays in favour of holding the rates by Bank of Canada

Kenny Fisher Kenny Fisher 19.05.2023 14:42
Canadian retail sales expected to decline Fed Chair and two FOMC members will speak later The Canadian dollar is trading quietly ahead of a key retail sales report later today. USD/CAD is trading in Europe at 1.3484, down 0.13%. Markets brace for soft Canadian retail sales The Canadian consumer is holding tightly to their wallet, which is not all that surprising in the current economic climate. Inflation ticked higher in April, rising from 4.3% to 4.4%. Add in high interest rates and it’s not hard to sympathize with consumers who are struggling with the cost of living. The April retail sales report may show that things are getting worse – headline retail sales is expected to slow to -1.4%, down from -0.2% in March, and the core rate is expected to fall from -0.7% to -0.8%. Not exactly a winning recipe for economic growth. A decline in today’s report could unnerve investors and send the Canadian dollar lower. The Bank of Canada will not be pleased with the slight increase in inflation, although the core rate, which is a more reliable gauge of inflation trends, did move lower. The BoC meets next on June 7th and there is only one more tier-1 release before the meeting, that being GDP. If retail sales contracts for a second straight month as expected, there will be more support for the BoC to continue to hold rates at 4.50%, where they have been pegged since March. Read next: Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant| FXMAG.COM It’s a bare economic calendar in the US today, with no data releases. The markets will have a chance to focus on Fedspeak, with Jerome Powell and two FOMC members delivering public remarks. Just a few weeks ago, the markets had priced in a pause at the June meeting at over 90%. That has changed to a 66% chance of a pause and a 33% chance of a hike of 25 basis points, according to CME’s FedWatch. That downward revision is due to a consistently hawkish message from the Fed and a solid US economy. USD/CAD Technical USD/CAD is testing support at 1.3479. Below, there is support at 1.3394 1.3644 and 1.3729 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CAD - Will retail sales weigh on the Canadian dollar? - MarketPulseMarketPulse
Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant

Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant

Kenny Fisher Kenny Fisher 12.05.2023 14:29
UK GDP remains steady at 1% in Q4 BoE raises rates by 25 bp BoE revises upwards its growth, inflation forecasts UoM consumer sentiment expected to slow GBP/USD is trading at 1.2517 in Europe, almost unchanged. In the UK, GDP declined by 0.3% in March m/m, below the 0.1% estimate and the February reading of 0.0%. Still, the economy managed to gain 0.1% in the first quarter, unchanged from Q4 2022 and matching the estimate. BoE raises rates by 25 bp, revises inflation, GDP forecasts There was no surprise as the Bank of England raised rates by 25 basis points, bringing the cash rate to 4.50%, its highest since 2008. This marked the twelfth consecutive hike in the current rate-tightening cycle, underscoring the BoE’s pledge to curb hot inflation. Governor Bailey said after the rate announcement that Bank would “stay the course to make sure that inflation falls all the way back to the 2% target”. Nobody is expecting that the road to 2% will be easy, with inflation currently in double digits. The BoE remains optimistic that inflation will fall rapidly during the year and will fall to 5% by the end of the year. In February, the BOE predicted 4% inflation by the end of the year. This seems like a tall order but is certainly possible if the rate hikes make themselves felt and cool the economy. Read next: New Zealand dollar against US dollar decreased by 1.07% yesterday| FXMAG.COM There have been constant concerns that the BoE’s aggressive rate policy would lead to a recession, and six months ago, the BoE had projected a recession. Bailey reversed course yesterday, saying that the drop in energy prices and stronger economic growth meant that GDP would expand by a weak 0.25% in 2023, versus the 0.5% contraction in the previous forecast. In the US, the economy is showing signs of cooling and high interest rates are expected to dampen the robust labour market. Unemployment claims surprised on the upside on Thursday, rising from 245,000 to 264,000, well above the estimate of 242,000. This is just one weekly report, but it’s sure to raise speculation that the labour market is showing cracks. The US wraps up the week with UoM Consumer Confidence, which is pointing to a rather sour US consumer. The indicator fell to 63.5 in April and is expected to ease to 63.0 in May. Weak consumer confidence can translate into a decrease in consumer spending, a key driver of economic growth. GBP/USD Technical GBP/USD is putting pressure on support at 1.2495. The next support level is 1.2366 1.2573 and 1.2676 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD flat as UK GDP a mixed bag - MarketPulseMarketPulse
New Zealand dollar against US dollar decreased by 1.07% yesterday

New Zealand dollar against US dollar decreased by 1.07% yesterday

Kenny Fisher Kenny Fisher 12.05.2023 14:23
New Zealand Inflation Expectations falls to 2.79% US unemployment claims rise UoM consumer sentiment to be released later today The New Zealand dollar is getting pummelled by the US dollar and is trading at 0.6240, down 0.93% on the day. This follows a drop of 1.07% on Thursday. New Zealand inflation expectations decline The week is ending on a high note for policy makers at the Reserve Bank of New Zealand. Inflation Expectations for the first quarter eased to 2.79%, down from 3.30% in Q4 of 2022. This marked a second straight deceleration and the first time inflation expectations have fallen below 3% in six months. The soft reading has pushed the New Zealand dollar sharply lower on expectations that the RBNZ might ease up on its rate hikes. Central banks are constantly on the alert for inflation expectations becoming entrenched, which can generate inflation and complicate the battle to curb inflation. The RBNZ has been aggressive in its rate-hike cycle, raising the benchmark cash rate to 5.25%. At the April meeting, the RBNZ hiked by 50 basis points and the downturn in inflation expectations will provide support for the Bank to ease its pace of rate hikes at the May 24th meeting to 25 bp, depending on the data. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The US economy has been showing signs of cooling, and the markets are widely expecting the Fed to pause in June, after ten straight hikes. The labour market has been surprisingly resilient, despite the Fed’s aggressive tightening. Unemployment claims surprised on the upside on Thursday, rising from 245,000 to 264,000, well above the estimate of 242,000. This is just one weekly report, but it’s sure to raise speculation that the labour market is showing cracks. The US wraps up the week with UoM Consumer Confidence, which hasn’t looked very strong. The indicator fell to 63.5 in April and is expected to ease to 63.0 in May. Weak consumer confidence can translate into a decrease in consumer spending, a key driver of economic growth. NZD/USD Technical NZD/USD is testing support at 0.6257. The next support level is 0.6199 There is resistance at 0.6352 and 0.6482 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. NZ dollar slide continues as inflation expectations ease - MarketPulseMarketPulse
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

Reserve Bank of New Zealand to keep a close eye on inflation expectations release tomorrow

Kenny Fisher Kenny Fisher 11.05.2023 16:11
New Zealand releases inflation expectations Markets react positively to US inflation report NZD/USD is trading at 0.6342, down 0.38% on the day. New Zealand Inflation Expectations The Reserve Bank of New Zealand will be keeping a close eye on inflation expectations release early on Friday. Inflation expectations eased to 3.3% in Q1, down from 3.62% and the central bank will be hoping that the downswing continues. The RBNZ hiked by 50-basis points in April to 5.25% and meets next on May 24th. The inflation expectations report will be the final inflation release prior to the meeting and could move the dial of the New Zealand dollar. A hot report will increase the chances of a rate hike at the next meeting, while a weak report will point to inflation falling and ease pressure on the RBNZ to raise rates. US inflation report unlikely to sway Fed US inflation in April dropped a notch, but the disinflation process appears to have stalled. Headline inflation ticked down to 4.9%, down from 5.0% in March. It was the same story with the core rate, which dropped from 5.6% to 5.5%. NZD/USD rose 0.40% and hit a 3-month high after the release, as investors focussed on a decline in CPI Core Services Ex-Housing. Read next: Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little| FXMAG.COM I don’t expect this inflation release to sway the Fed’s rate policy, which is to keep rates elevated until inflation falls closer to the 2% target. Fed Chair Powell has hinted at a rate pause in June, and this has been widely priced in by the markets. The big question is what happens later in the year. Powell has insisted that rate cuts are not on the table, but the markets disagree and have priced in a 70% chance of a rate cut in September, according to the CME Group. A lot can happen before September, and if inflation falls more rapidly in the coming months, we may see the Fed rethink trimming rates, which would provide much-needed relief to consumers and businesses. NZD/USD Technical NZD/USD is testing support at 0.6352. The next support level is 0.6257 There is resistance at 0.6482 and 0.6592   Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. NZD/USD lower ahead of inflation expectations - MarketPulseMarketPulse
Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

Kenny Fisher Kenny Fisher 11.05.2023 13:04
BoE likely to raise rates by 25 bp US to release PPI and unemployment claims later today GBP/USD is trading at 1.2587 in Europe, down 0.30% on the day. BoE expected to raise rates by 25 bp The Bank of England is expected to raise rates today for a 12th consecutive time, with a 25-basis point hike. This would bring the benchmark cash rate to 4.50%. The BoE can’t be faulted for not being aggressive, but it failed to react to rising inflation fast enough and has found itself playing catch-up with inflation. In March, CPI dipped but remained in double digits, at 10.1%. This has led to a severe cost-of-living crisis and the BoE has little choice but to continue raising rates until it is clear that inflation is on a downswing. The BoE remains optimistic and projected in February that inflation would fall to 3% within 12 months. This may be a bit of a stretch but I expect inflation to fall more quickly as the rate hikes make themselves felt and cool economic activity. The rate hike itself is unlikely to move the dial on the pound, but Bank statement and updated economic forecasts, especially with regard to inflation, could result in a market reaction. US inflation dips lower The US inflation report for April showed a small drop, with headline CPI falling from 5.0% to 4.9%. Still, the financial markets were pleased and the US dollar lost ground. Investors appeared to focus on one particular indicator that declined (CPI Core Services Ex-Housing) while ignoring that Core CPI was almost unchanged at 5.5%. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The markets are widely expecting a pause in June, with a 91% probability, according to the CME Group. With the core rate remaining sticky, I am doubtful that the Fed is considering any rate cuts at this stage, although the markets have mostly priced in a cut in September. GBP/USD Technical GBP/USD tested support at 1.2573 earlier in the day. The next support level is 1.2475 1.2676 and 1.2789 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD edges lower ahead of BoE meeting - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

USD/CAD - Canadian economy added 41,400 jobs beating expectations

Kenny Fisher Kenny Fisher 08.05.2023 14:24
Canada add 41K new jobs US nonfarm payrolls jump to 253K Canadian dollar surges by 1.2% The Canadian dollar has extended its gains on Monday. USD/CAD is currently trading at 1.3339, down 0.26%. Canada’s job market stays hot Canada’s labour market defied expectations in April, as the economy added 41,400 jobs, above the March gain of 34,700 and the consensus estimate of 20,000. The unemployment rate remained at 5.0%, below the forecast of 5.1%. Wage growth remained unchanged at 5.2%. The employment report was surprisingly strong given that there are signs of the economy weakening, with GDP for March expected at -0.1%. The BoC is keeping a watchful eye on inflation, which has fallen to 4.3% but is still more than double the BoC’s target. The central bank would like to continue pausing, but a rate cut is unlikely so long as wage pressures remain high. In the US, nonfarm payrolls for April surprised on the upside, rising to 253,000. This follows a March gain of 165,00, revised down from 236,000, and well above the consensus estimate of 179,000. Wage growth ticked up to 4.4%, above the upwardly revised 4.2% gain in March and above the estimate of 4.2%. Unemployment fell to 3.4%, down from the March reading of 3.4% which was also the estimate. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM Somewhat surprisingly, the better-than-expected jobs data did not boost the US dollar, and the Canadian dollar jumped 1.2%, its best one-day showing since January. The markets have repriced a pause in July at 90%, down from 99% just before the employment release on Friday. Fed Chair Powell said last week that rate cuts were not on the table, but the markets have priced in a cut in rates in the fourth quarter. USD/CAD Technical USD/CAD is testing support at 1.3345. Below, there is support at 1.3284 1.3462 and 1.3553 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Canadian dollar powers to 5-week high on strong job numbers - MarketPulseMarketPulse
Rates Spark: Balancing data and risk factors

Euro against US dollar lost 0.55% on Thursday despite Christine Lagarde's hawkish message

Kenny Fisher Kenny Fisher 05.05.2023 15:36
Eurozone, German data disappoint ECB raises rates by 25 bp US nonfarm payrolls expected to decline EUR/USD is drifting on Friday. In the European session, EUR/USD is trading at 1.1028, up 0.13% on the day. Today’s eurozone and German data were a disappointment. Eurozone retail sales for April declined 1.2% m/m, following a downwardly revised -0.2% in March and below the consensus of 0.0%. German Factory Orders for March plunged 10.7% m/m, versus a downwardly revised 4.5% in February and a consensus of -2.2%. The weak numbers were a reminder of weakness in the German and eurozone economies, but the euro shrugged off the data. Investors are preoccupied with digesting the ECB’s modest rate hike of 25 basis points and are waiting for the US nonfarm payrolls release later today. ECB raises rates, keeps door open to further increases The ECB mimicked the Federal Reserve and raised rates by 25 bp on Thursday. This marked a seventh straight rate increase from the ECB, but it was the smallest hike in the current tightening cycle. The ECB is trying to chart a rate path amidst weak growth and stubbornly high inflation and had to choose between hikes of 25 or 50 basis points. In the end, the central bank opted for the smaller increase, but ECB President Lagarde had a clear message that the Bank was not pausing and rates were not yet “sufficiently restrictive” to bring inflation down to the 2% target. EUR/USD fell by 0.55% on Thursday despite Lagarde’s hawkish message, possibly on disappointment that the rate hike was not 50 basis points. Inflation has been moving lower but upside risks remain, and that means that there is a good chance that the ECB will raise rates at least once or twice more. The markets have priced in a terminal rate of 3.65%, indicating that one more 25-bp hike is fully priced in but a second hike is less certain. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The US wraps up the week with nonfarm payrolls for April. The estimate stands at just 179,000, following 236,000 in March. The strong labour market, which has withstood the Fed’s tightening remarkably well, appears to be showing cracks. Unemployment claims jumped to 242,000 last week, up from a downwardly revised 229,000 and above the consensus of 240,000. Business optimism remains weak and that could translate into less hiring. If NFP falls to 180,000 or lower, the US dollar could lose ground on expectations that the Fed will ease its rate policy. EUR/USD Technical EUR/USD is testing resistance at 1.1022. The next resistance line is 1.1146 1.0956 and 1.0839 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. EUR/USD -Euro shrugs off weak eurozone, German data - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th

Kenny Fisher Kenny Fisher 05.05.2023 15:05
Canada’s employment change expected to slow US nonfarm payrolls projected to fall to 179,000 Canadian dollar rallies for third straight day The Canadian dollar continues to rally today and has climbed 120 points since Tuesday. Earlier in the day, USD/CAD touched a low of 1.3490, its lowest level since April 21st. Canadian employment change expected to ease The markets will be treated to key employment numbers on both sides of the border later today. Canada is expected to have added 20,000 new jobs in April, following 34,700 in March. This would be the lowest reading in four months and would be a clear sign that the labour market is weakening as interest rate hikes make their effect felt on the economy. In the US, nonfarm payrolls for April could move the dial on the US dollar ahead of the weekend. The markets are braced for a drop to 179,000, following 236,000 in March. There is a growing feeling that the labour market, which is been surprisingly resilient to relentless rate hikes, is showing cracks. Unemployment claims jumped to 242,000, up from a downwardly revised 229,000 and above the consensus of 240,000. Business optimism remains weak and that could translate into less hiring. If nonfarm payrolls fall to 180,000 or less, I would expect to see the US dollar lose ground, on expectations that the Fed may ease policy. The Fed’s rate hike of 25 basis points this week may have been the end of the current rate-hike cycle, in which the Fed has raised rates 10 consecutive times. Fed Chair Powell hinted that the Fed could pause rates as soon as June, although he reminded his listeners that the battle against inflation was far from over and didn’t close the door on further hikes. The markets are betting on a pause in June, with a probability of 99%, according to the CME Group. Read next: China: Caixin Services PMI decreased after four consecutive months of increase| FXMAG.COM Powell said that given the inflation outlook, rate cuts were not on the table. The markets don’t buy it and have priced in a rate cut at around 50% in July and a whopping 88% in September, according to the CME Group. USD/CAD Technical USD/CAD tested support at 1.3492 earlier. Next, there is support at 1.3435 1.3580 and 1.3637 are the next resistance lines   Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CAD extends slide ahead of job reports - MarketPulseMarketPulse
Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

Kenny Fisher Kenny Fisher 28.04.2023 16:20
Bank of Japan maintains monetary policy BoJ removes forward guidance and announces policy review Tokyo Core CPI rises higher than expected USD/JPY soars USD/JPY has jumped 1.3% today and is trading at 135.74. Earlier, the yen touched a low of 135.86, its lowest level since March 10th. BoJ holds policy but changes guidance Today’s Bank of Japan meeting was closely watched, as New Governor Ueda chaired his first meeting. As expected, there were no dramatic announcements about a shift in policy, but the yen still dropped sharply, as those investors that had hoped for a hint of monetary tightening in the short term were disappointed. The BoJ announced that key policy settings will stay the same. Interest rates will remain at -0.10% and the yield curve control (YOC) scheme on 10-year government bonds will maintain a band of 0.50% on either side of the 0% target. There was no surprise here, as Ueda has stated on numerous occasions and again this week that he would not change these policy settings. At the same time, the central bank modified its future guidance, removing its pledge to maintain rates at “current or lower levels”. The BoJ said it would “patiently continue with monetary easing” while saying it would conduct a broad review of monetary policy, which it expects to take one to one-and-half years. The takeaway from the BoJ meeting is that the markets can expect more of the same in the short term, but there is the possibility of a shift in policy down the road. Ueda stated earlier in the week that if inflation and wage growth were to accelerate faster than expected, he would consider the possibility of tightening policy.  Ueda does not seem as glued to current policy as his predecessor Kuroda, but the new Governor is unlikely to make any moves absent a major change in economic conditions. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM Ahead of the BoJ meeting there was an interesting note from Barclays which said that the yen could regain its status as a safe-haven currency, which has been taken over by the US dollar. Barclays said that if the BoJ normalizes policy and central banks cut rates due to a weak global economy, rate differentials would tighten and the yen would move higher. Barclays is projecting that the yen will rise to 123 by the end of next year, and the stronger currency could re-establish itself as a safe haven. Overshadowed by the BoJ meeting, Tokyo Core CPI rose in April, an indication that high inflation is alive and well. The indicator rose from 3.2% to 3.5%, above the market consensus of 3.2%. USD/JPY Technical USD/JPY tested resistance at 1.3585 earlier today. The next resistance line is 1.3657 134.99 and 1.3427 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY surges after BoJ maintains policy, inflation rises - MarketPulseMarketPulse
Australian dollar was boosted by record low Australian unemployment rates, historical local budget surplus and a surprising resumption of cash rate

Reserve Bank of Australia may take a pause at the next meeting on May 2nd

Kenny Fisher Kenny Fisher 27.04.2023 15:55
AUD/USD is trading at 0.6606, down 0.31%. Earlier, AUD/USD fell to a low of 0.6595, its lowest level since March 15th. Australian inflation heads south Australia’s inflation levels have been falling and the downward trend continued in the first quarter. The headline figure slowed to 7.0%, down from 7.8% in Q4 and a notch above the market consensus of 6.9%. On a quarterly basis, headline CPI from 1.9% to 1.3%, versus the market consensus of 1.4%. The monthly CPI for March fell from 6.8% to 6.1%, below the estimate of 6.6%. Core CPI, which is considered a more reliable gauge of inflation trends, headed lower and beat the estimates, falling from 6.9% to 6.6% y/y (7.2% est.). On a quarterly basis, core CPI dropped to 1.2%, down from 1.7% and below the estimate of 1.4%. The key takeaway from these positive numbers is that they appear to have cemented another rate pause at the May 2nd meeting. The odds of a pause have risen from 83% prior to the inflation report to 100% at present. It looks safe to say that inflation has peaked, although the cautious RBA is unlikely to use the “P” word just yet. At the same time, it is premature to declare victory in the inflation battle, with headline inflation and the core rate running more than three times the RBA’s target band of 2-3%. Despite the market’s confidence in another pause, some economists feel that the RBA remains concerned that the high core rate could fuel a price wage spiral if it doesn’t tighten further. Read next: USD/JPY: BoJ meeting starts today, but the bank is expected to keep rates unchanged| FXMAG.COM First Republic’s shares sink AUD/USD is also under pressure as the banking crisis is back in the headlines. First Republic Bank shares fell by 50% after the Bank’s earnings report showed that deposits plunged by 40% in the first quarter. Risk sentiment has fallen as First Republic’s future very survival is at stake, and if banking jitters worsen, the US dollar could continue to climb higher. AUD/USD Technical AUD/USD tested resistance at 0.6620 earlier today. The next resistance line is 0.6714 0.6572 and 0.6459 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD stems the bleeding - MarketPulseMarketPulse
Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

USD/JPY: BoJ meeting starts today, but the bank is expected to keep rates unchanged

Kenny Fisher Kenny Fisher 27.04.2023 15:43
Tokyo Core CPI expected to remain unchanged at 3.2% US to release unemployment claims and GDP BoJ’s 2-day meeting begins today USD/JPY is trading quietly at 133.84, up 0.13% on the day. The yen’s lack of movement could change today with a host of key releases. Japan will release Tokyo Core CPI, while the US publishes Preliminary GDP for the first quarter and unemployment claims. Japan releases Tokyo Core CPI for April early on Friday, which is expected to remain steady at 3.2%. Will BoJ meeting bring more of the same? Japan’s inflation is running around 3%, a dream for most central banks but a headache for the Bank of Japan. There has been pressure on the BoJ to tighten policy as inflation remains above the target of 2%. Japan has experienced decades of deflation and the massive stimulus programme was meant to stimulate the economy. Inflation has moved higher, but former BoJ Governor Kuroda insisted that the central bank would not consider tightening until it was convinced that inflation was sustainable, which required stronger wage growth. New BoJ Governor Ueda has toed the party line so far, but left open the possibility of tightening if wage growth and inflation climb faster than expected. All signs point to the BoJ maintaining its policy settings when it wraps up its 2-day meeting on Friday, but the central bank has surprised the markets in a big way before, and the markets will be following the meeting closely. Read next: According to Oanda's analyst, bullish bias on gold is supported by de-dollarization, US-China High Tech War and more| FXMAG.COM In the US, unemployment claims have moved higher for four straight weeks and come in above the estimate each time. The upward trend is expected to continue, with claims expected to rise to 248,000, up from 245,000. The labor market remains strong, but the upswing could signal cracks in what has been a robust US labour market. Preliminary GDP for the fourth quarter is expected to drop to 2.0% y/y, down from 2.6% in Q4. USD/JPY Technical USD/JPY tested support at 133.41 earlier in the day. The next support line is 132.69 134.27 and 134.99 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY - Yen eyes Tokyo CPI, US GDP - MarketPulseMarketPulse
Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

Earnings season is underway. Economic events remain in focus too

Kenny Fisher Kenny Fisher 24.04.2023 23:52
It’s been a slow start to the week in the markets as investors have an eye on what’s to come with earnings season getting into full flow and major economic releases on the agenda. We’ve reached an interesting moment in which investors have been forced to retreat on post-SVB positioning on rate hikes, albeit not entirely, but they seem far from convinced that central banks will actually follow through and, if they do, that they will not reverse course. Credit conditions have tightened The reason for the apprehension is that early evidence suggests credit conditions have tightened in the aftermath of the mini-banking crisis but the extent to which it has happened, what the real economic consequences are, and what exactly it means for interest rates isn’t clear. And this is occurring at a time when inflation appears very stubborn but is set to fall sharply due to favourable base effects but the pace of disinflation is ultimately what, along with credit conditions, will determine how central banks respond. I feel things may look very different in a couple of months’ time but for now, we have to patiently play the waiting game. Earnings season is obviously giving us plenty of food for thought in the interim but the first day of the week isn’t typically the most thrilling and we’re seeing another example of that today. Stock markets are treading water and we may see that continue throughout the rest of the session. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. A slow start to the week in markets but there's plenty still to come - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

USD/CAD: March retail sales may be 1.4% lower. Decelerating economy may mean Bank of Canada will continue holding rates

Kenny Fisher Kenny Fisher 24.04.2023 12:12
Canadian retail sales declined US Manufacturing and Services PMIs accelerated USD/CAD has climbed 200 points in one week USD/CAD continued to rally today but has pared most of those gains. In Europe, USD/CAD is trading at 1.3527 Canada’s core retail sales drop  The markets were bracing for a weak Canadian retail sales report in February, and the numbers were indeed soft. Headline retail sales fell 0.2%, above the -0.6% gain but down from 1.6% in January. The core rate was even worse, with a decline of 0.7%, versus an estimate of -0.1% and a prior reading of 0.9%. The weak numbers extended the Canadian dollar’s woes, as USD/CAD is about 200 points higher since April 14th. The March numbers could be far worse, with Statistics Canada forecasting a 1.4% slide in retail sales. It’s clear that the Bank of Canada’s aggressive tightening is dampening consumer spending, and high inflation has taken a bite out of disposable income. The BoC has paused at its last two meetings and left the benchmark rate at 4.50% and is monitoring the effects of its tightening cycle. If the economy decelerates, we can expect the BoC to continue to hold rates, as long as inflation doesn’t move upwards. Canada releases February GDP on Friday, with the economy expected to have expanded by just 0.2%. Read next: Alphabet, Meta, Amazon - mega cap tech companies are to report their earnings they after day starting tomorrow!| FXMAG.COM In the US, Friday’s PMI reports for March beat the forecasts and indicated a slight acceleration in manufacturing and services. After six months of contraction, manufacturing pushed (barely) into expansion territory, rising from 49.2 to 50.4 (49.0 est.). Services rose to 53.5, up from 52.3 and above the estimate of 52.8 points. The strong numbers could reignite inflation and force the Fed to continue raising rates after the May meeting. Core inflation has been sticky and actually rose in March from 5.5% to 5.6% and we could see the core rate rise again in April. USD/CAD Technical There is resistance at 1.3577 and 1.3616 1.3487 and 1.3435 are providing support   Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Canadian dollar hits 3-week low as retail sales decline - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

Oanda's Kenny Fisher talks US dollar against Canadian dollar - April 21st

Kenny Fisher Kenny Fisher 21.04.2023 15:15
Canadian retail sales expected to have declined US Services and Manufacturing PMIs projected to have slowed USD/CAD pushes above 1.35 The US dollar is broadly higher today, and USD/CAD has climbed to 1.3530, up 0.40% on the day. The Canadian dollar is on a downturn and has lost close to 200 points since last Friday. Canadian dollar eyes retail sales, US PMIs The week wraps up with key releases on both sides of the border. Canada releases retail sales for February, with the markets expecting declines after strong gains in the prior reading. Headline retail sales are expected to fall by 0.6%, after a sharp gain of 1.4%. The core rate is projected to dip by 0.1%, after a 0.9% gain in January. A decline in consumer spending would not be all that surprising, given current economic conditions. Inflation, which is public enemy number one, appears to have peaked, but prices continue to rise and this is weighing on consumers. Households are seeing a decrease in disposable income as higher interest rates mean rising mortgage costs. The Conference Board of Canada has projected real GDP will expand by 0.9% in 2023, a negligible gain. Consumer spending is a key driver of economic growth and a sour consumer holding tightly on the purse strings will hamper the economic recovery. Read next: Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed| FXMAG.COM The US releases April PMIs later today and any surprises could affect the movement of USD/CAD before the weekend. The Services PMI is expected to dip to 51.5, down from 52.6, while the Manufacturing PMI is projected to tick lower to 49.0, down from 49.2 points. The 50.0 level separates expansion from contraction. Services is expected to show expansion for a third straight month, while manufacturing is forecast to remain in contraction for a seventh straight time. These trends are evident worldwide and are not limited to the US. The service sector (business activity) remains resilient in the face of an uncertain global outlook, while manufacturing continues to struggle with rising prices and supply chain issues. USD/CAD Technical USD/CAD is testing resistance at 1.3509. Above, there is support at 1.3629 1.3406 and 1.3275 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CAD extends rally, markets brace for weak Canadian retail sales - MarketPulseMarketPulse
Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

Kenny Fisher Kenny Fisher 21.04.2023 15:05
AUD/USD has fallen sharply Fed members continue to urge more rate hikes Fed members say inflation still too high The Australian dollar has been relatively quiet during the week but is getting pummelled on Friday. AUD/USD is trading at 0.6685, down 0.84% on the day. The sharp drop can be attributed to technical factors and hawkish comments from Fed members on Thursday. The Federal Reserve is not yet ready to wrap up its current rate-tightening cycle and has sent out the troops to blitz the airwaves and reiterate the Fed’s hawkish stance. On Thursday, Fed member Bostic said he favors one more rate hike and then an extended pause, saying the tightening will take time to work its way through the economy. Bostic noted that the banking crisis had led to tighter financial conditions, which has made the Fed’s work easier. Read next: CMC Markets' analyst: Today's European and UK economic data continues to point to a divergence between manufacturing and services| FXMAG.COM Fed member Mester also came out in support of more rate hikes but suggested that the economy would have a soft landing. A day earlier, Fed member Williams said “inflation is still too high” and the Fed would use monetary policy to “restore price stability”. Williams added that he expected inflation to drop to 3.25% this year and hit the 2% target by 2025. The markets are hearing this message loud and clear, and have priced in a 25-basis point hike in May at 81%, according to the CME Group. Where the markets and the Fed differ is on rate cuts – the markets are anticipating cuts before the end of the year, while Fed members have said that it does not see the economy stalling to such an extent as to justify rate cuts. AUD/USD Technical There is resistance at 0.6803 and 0.6896 AUD/USD is testing support at 0.6711. Next, there is support at 0.6618 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD slides on hawkish Fedspeak - MarketPulseMarketPulse
Reserve Bank of New Zealand: Kenny Fisher says he expects a 25bp rate hike on May 24th

Reserve Bank of New Zealand: Kenny Fisher says he expects a 25bp rate hike on May 24th

Kenny Fisher Kenny Fisher 20.04.2023 15:11
New Zealand inflation fell to 6.7%, lower than expected NZD/USD is down 0.40% and dropped to its lowest level since April 16 Four members of FOMC will speak today New Zealand inflation eases more than expected Policy makers at the Reserve Bank of New Zealand are in a bubbly mood, as New Zealand’s inflation rate dropped to 6.7% in the first quarter, beating the market consensus of 7.1%. The RBNZ had braced for an acceleration to 7.3%, so the substantial drop was a welcome surprise. The central bank has been heavy-handed in its battle with inflation. The RBNZ shocked the markets earlier this month when it delivered a 50-basis point hike, as the markets had anticipated a modest 25-bp move, given the lackluster New Zealand economy. The oversize hike brought the benchmark cash rate to 5.25%, the highest level of any major central bank. The RBNZ’s aggressive tightening has cooled the economy and appears to have finally broken the back of inflation. Another drop in inflation would strongly suggest that inflation has peaked, but it’s early to celebrate, as inflation still remains much higher than the target band of 1%-3%. Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| FXMAG.COM What’s next for the RBNZ? As things currently stand, I would expect a 25-basis point hike at the May 24th meeting, although the central bank has a knack for surprising the markets. The key releases prior to the meeting include employment and inflation expectations, both of which will be closely watched for their potential impact on the rate decision. In the US, unemployment claims are expected to nudge up from 239,000 to 240,000. Unless the estimate is wide of the mark, the release is unlikely to affect the US dollar. Investors will be keeping a close eye on four voting members of the FOMC who will deliver public remarks today. The Fed is expected to deliver a 25-basis point hike next month, which could wrap up the current rate-hike cycle. NZD/USD Technical NZD/USD is testing support at 0.6213. Below, there is support at 0.6127 0.6289 and 0.6368 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. NZD/USD falls to 5-week low as inflation slows - MarketPulseMarketPulse
These findings of a review of the Reserve Bank of Australia may surprise you!

These findings of a review of the Reserve Bank of Australia may surprise you!

Kenny Fisher Kenny Fisher 20.04.2023 11:57
Australian Business Confidence and Business Conditions fall RBA review calls for overhaul of central bank Governor Lowe says willing to continue AUD/USD is almost unchanged, trading at 0.6714 Australian Business confidence declines again The NAB Business Confidence Index declined for a second straight quarter, falling by 4 pts. This missed the estimate of 2 and follows a Q4 2022 reading of -1. Business Conditions also dropped by 4 pts. The NAB found that businesses remain most concerned about wage growth and continue to report a shortage of workers. The good news was that supply chains have improved and there are expectations that inflation may have peaked. RBA review calls for major overhaul of central bank Australian Treasurer Chalmers released the findings of a review of the Reserve Bank of Australia today. The central bank last underwent major changes in the 1990s and the report had some 51 recommendations. The key suggestions include setting up a separate policy board, press conferences after each policy meeting and reducing board meetings from 11 to 8, in order to give households more time to react to rate decisions. Read next: US Treasury yields have increased since 13 April. VIX has decreased to a 14-month low| FXMAG.COM The changes are not expected to affect rate policy and the markets shrugged as the Australian dollar is drifting today. The report did not make any recommendations regarding the future of Governor Lowe, whose mandate expires in September. Lowe welcomed the report’s recommendations and said he would be happy to continue serving if ask to do so by the government. Lowe has absorbed heavy criticism for the sharp rise in rate hikes after stating in 2020 that rising inflation was transient and the RBA would not raise rates for three years. This forecast was of course way off the mark and the RBA has raised rates some 350 basis points over the past year, which has weighed heavily on households as mortgage payments have soared. AUD/USD Technical There is resistance at 0.6803 and 0.6896 AUD/USD is testing support at 0.6711. Next, there is support at 0.6018 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD - Aussie shrugs as business confidence falls, RBA review released - MarketPulseMarketPulse
BoE rates may remain uncut until the middle of 2024. Bank of England is expected to hike the rates 12th time in a row today

GBP/USD: UK economy: inflation dropped to 10.% remaining "hot and stubbornly high"

Kenny Fisher Kenny Fisher 19.04.2023 12:30
UK inflation falls to 10.1%, higher than expected BoE likely to raise rates in May Three Fed members will deliver public remarks today GBP/USD is trading at 1.2445, up 0.16% on the day. UK inflation stays above 10% UK inflation remains hot and stubbornly high. In March, headline CPI dropped to 10.1%, down from 10.4% but above the consensus estimate of 9.8%. Inflation is still stuck in double digits, but the silver lining is that inflation has resumed its downswing after unexpectedly rising in February from 10.4% to 10.1%. The core rate remained unchanged at 6.2%, above the estimate of 6.0%. The usual suspects were at play in the headline release, as food and energy costs continue to drive inflationary pressures. It hasn’t been the best of weeks for the Bank of England. The employment report showed that wage growth remains high and inflation is galloping at a double-digit pace. The BoE has raised rates to 4.25%, but the battle against inflation has been difficult, and it’s unclear if inflation has even peaked. The latest wage and inflation numbers have likely cemented another rate hike at the May meeting, but that’s not good news for a struggling economy. Read next: Suprisingly, Nikkei 225 is still more than 30% below its ATH (printed in 1989)| FXMAG.COM GDP in February was flat, as widespread strikes and the cost-of-living crisis dampened economic activity. Consumers are struggling with higher taxes, hot inflation and rising interest rates. Inflation remains the central bank’s number one priority and a pause in rates will isn’t likely until the tight labour market, which is causing higher wage growth, cools down. In the US, there are no tier-1 events on the calendar. Investors will be focussing on Fedspeak, with Fed members Williams, Goolsbee and Mann making public statements. Earlier this week, Williams said that he expects inflation to continue falling and to reach 3.75% by the end of this year and hit the 2% target by 2025. GBP/USD Technical GBP/USD is testing resistance at 1.2436. The next resistance line is 1.2526 There is support at 1.2325 and 1.2235 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD edges higher as UK inflation higher than expected - MarketPulseMarketPulse
Forex: On Friday US dollar against Japanese yen increased by 0.9%

Forex: On Friday US dollar against Japanese yen increased by 0.9%

Kenny Fisher Kenny Fisher 17.04.2023 16:13
USD/JPY slips to 1-month low US retail sales fall for second straight month Fed members Waller and Bostic urge more rate hikes Japanese yen extends losses The Japanese yen took it on the chin on Friday, as USD/JPY jumped 0.90%. The yen has edged lower on Monday and fell as low as 134.22, its lowest level since March 15th. With expectations rising that the Fed will raise rates in May, the yen could remain under pressure and fall closer to the symbolic 135 line. It was a light data calendar in Japan last week, giving investors plenty of time to focus on comments from new BoJ Governor Ueda. At the G-20 meeting in Washington, Ueda stuck to his script of “more of the same”, saying the Bank would continue its ultra-loose monetary policy. There has been pressure on Ueda to tighten policy, given that inflation hit 3.1% in February, higher than the 2% target. The Bank of Japan has become an outlier as other central banks have raised rates in order to contain inflation. In fairness, inflation in Japan compares to the levels we are seeing in most developed economies. Former Governor Kuroda insisted that inflation has been driven by higher import costs rather than stronger domestic demand and said real wages would have to rise before the BoJ would consider raising rates. The problem is that real wages continue to fall – the decline of 2.6% in February, marked an 11th straight decline. Read next: Oanda's Kenny Fisher points to Tuesday as a potential time of Aussie movement| FXMAG.COM Until wage growth recovers, there is little chance that the BoJ will tighten policy. That doesn’t mean the BoJ won’t make any moves in the near future, especially if the yen continues to depreciate. In December, the BoJ blindsided the markets by widening the target band on 10-year government bonds, which sent the yen sharply higher. Fed’s Waller, Bostic says more hikes needed The US dollar powered higher on Friday despite a soft retail sales report, as a rise in inflation expectations and hawkish Fedspeak raised the odds of a rate hike in May. UoM inflation expectations for the next 12 months jumped 4.6% in April, up sharply from 3.6% in March. Consumer confidence has been on the low side as inflation remains high, and the decline in retail sales was another sign that the US economy is losing steam. Fed member Waller stated on Friday that the Fed would need to continue raising rates because inflation is “far above target” and the labor market remains “quite tight”. Waller warned that the Fed would have to keep rates at a high level for an extended period and for longer than the markets expected. Fed member Bostic urged one or two more 25-bp hikes before wrapping up the current rate-tightening cycle. The likelihood of a 25-bp increase in May jumped to 80% on Friday, up from 68% a day earlier, which propelled the US dollar to strong gains at the end of the week. USD/JPY Technical There is resistance at 134.60 and 135.42 133.45 and 132.39 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY - Yen falls below 134 as US dollar gains strength - MarketPulseMarketPulse
Australian dollar against US dollar decreased amid weak China CPI data

Oanda's Kenny Fisher points to Tuesday as a potential time of Aussie movement

Kenny Fisher Kenny Fisher 17.04.2023 16:05
US retail sales decelerate sharply in May US bank earnings were solid Markets have priced a May rate hike at 80% AUD/USD steady after swings of over 1% late last week The Australian dollar has steadied on Monday, trading just above the 0.67 level. We could see further movement from the Aussie early on Tuesday, as China releases GDP. Aussie sinks after strong US earnings, Fed speak The markets received another clear sign on Friday that the US economy is slowing, after a disappointing March retail sales report. Headline retail sales fell by 1% and the core rate by 0.8%, worse than expected and marking a second straight decline for both. A soft US retail sales report is usually a recipe for US dollar weakness, but that wasn’t the case on Friday, as AUD/USD fell by 1%. The US dollar received a boost from strong earnings results, higher inflation expectations and some hawkish Fed speak. Bank earnings impressed on Friday, with strong results from JP Morgan, Citigroup and Wells Fargo.  This indicates that the bank crisis has been contained for now, although further contagion cannot be ruled out. Read next: InstaForex analyst: Bitcoin is approaching the completion of the local stage of the upward movement, which will be followed by a corrective movement| FXMAG.COM On the inflation front, UoM inflation expectations for 12 months jumped 4.6% in April, up sharply from 3.6% in March. Consumer confidence has been on the low side as inflation remains high, and the weak retail sales report was clear proof that consumers are spending less due to high inflation and rising rates. Fed member Waller had a hawkish message on Friday, saying that the Fed would need to continue raising rates because inflation is “far above target” and the labor market remains “quite tight”. Waller warned that the Fed would have to keep rates at a high level for an extended period and for longer than the markets expected. Fed member Bostic said he supported one or two more 25-bp hikes to end the current tightening cycle. The likelihood of a 25-bp increase in May has jumped to 80%, up from 68% prior to the retail sales release. AUD/USD Technical There is resistance at 0.6897 and 0.6791 AUD/USD tested support below 0.6700 earlier today. The next support level is 0.6608 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD - Australian dollar takes traders for a wild ride - MarketPulseMarketPulse
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

Oanda's Kenny Fisher talks New Zealand dollar against US dollar - April 14th

Kenny Fisher Kenny Fisher 14.04.2023 16:52
New Zealand Manufacturing PMI declines in March US retail sales expected to decline in March NZD/USD is trading quietly around the 0.6300 line New Zealand manufacturing declines New Zealand wrapped up the week on a sour note, as Manufacturing PMI for March slipped to 48.1, after a downwardly revised 51.7 in February and below the estimate of 51.0. A reading above 50.0 indicates expansion; below 50.0 indicates contraction. The manufacturing sector has been struggling across the globe due to weak economic conditions and supply chain issues, and the market reaction to the weak release was muted. Inflation remains the Reserve Bank of New Zealand’s number one priority. The central bank has taken off the gloves and has been very aggressive, including a 50-basis point hike last week which completely blindsided the markets. The benchmark cash rate is currently at 5.25%, but inflation remains stubbornly high at 7.2%. The markets are bracing for inflation to rise to 7.5% for the first quarter, and RBNZ Governor Orr will have a lot of explaining to do if inflation accelerates despite the relentless rise in interest rates. The US releases March retail sales later today, with the markets projecting soft numbers. Headline retail sales is expected to decline by 0.4% for a second straight month, while the core rate is forecast to fall by 0.3%, after a -0.1% read in February. Currently, the odds of a 25-bp hike are 69%, with a 31% chance of a pause, according to the CME Group. The retail sales release could impact the movement of the US dollar. A strong release would make a rate hike more likely, which is bullish for the greenback, while a soft release would raise expectations of a Fed pause and weigh on the dollar. NZD/USD Technical NZD/USD is putting pressure on support at 0.6282. Below, there is support at 0.6192 0.6356 and 0.6446 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. New Zealand dollar drifting after soft Manufacuturing PMI, markets brace for soft US retail sales - MarketPulseMarketPulse
These findings of a review of the Reserve Bank of Australia may surprise you!

Reserve Bank of Australia: After the employment data release, chances of a pause in rate hikes have shrunk

Kenny Fisher Kenny Fisher 13.04.2023 16:06
Australia added 53,000 new jobs in March Australian dollar climbs 0.50% RBA Deputy Governor Bullock says rate pause not related to banking crisis Australian job creation surges Australia posted a blowout employment report today, giving the Australian dollar a strong boost. The economy created 53,000 new jobs in March, after a downwardly revised 63,600 a month earlier. This crushed the estimate of 20,000 and especially impressed as full-time employment increased by 72,000 (part-time decreased by 19,200). Unemployment was unchanged at 3.5%, below the forecast of 3.6%. Read next: Bank of Canada keeps the rates unchanged. After the release of the US inflation, Fed's Barkin drew attention to cooling demand, but still strong labour market and inflation| FXMAG.COM What can we expect from the RBA? The central bank paused in March for the first time in the current rate-tightening cycle and Governor Lowe made clear that another pause was data-dependent. The next meeting is on May 2nd and the odds of a pause have eased to 78%, compared to 94% before the employment release. Australia releases the March inflation report less than a week prior to the meeting, and if inflation is higher than expected, the RBA will have to consider a 25-basis point increase in order to cool down the job market and inflation. The recent bank crisis, which roiled the global financial markets, appears to have eased. Still, the extent of the fallout of the collapse of four US banks and Credit Suisse is not yet clear, and central banks need to give consideration to the crisis in mind as they determine their rate path. RBA Deputy Governor Bullock addressed this issue on Wednesday, saying the RBA had considered a pause well before the bank crisis, and the bank decided on the non-move in order to protect job gains and to take into account lags in rate policy. Bullock maintained that there were no signs that the bank crisis had caused a tightening in financial conditions in Australia. AUD/USD Technical There is resistance at 0.6897 and 0.6791 AUD/USD tested support below 0.6700 earlier today. The next support level is 0.6608 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD - Australian dollar jumps on sizzling jobs report - MarketPulseMarketPulse
Bank of Canada keeps the rates unchanged. After the release of the US inflation, Fed's Barkin drew attention to cooling demand, but still strong labour market and inflation

Bank of Canada keeps the rates unchanged. After the release of the US inflation, Fed's Barkin drew attention to cooling demand, but still strong labour market and inflation

Kenny Fisher Kenny Fisher 13.04.2023 16:00
Bank of  Canada pauses rates for second straight month US headline inflation drops to 5%, core rate rises to 5.6% Canadian dollar climbs to highest level since February 16 The Canadian dollar has extended its rally, and is up 0.29% today, trading at 1.3402 in Europe. Bank of Canada holds rates There wasn’t much drama ahead of the Bank of Canada’s decision to hold rates, as the non-move was widely expected. The benchmark cash rate is at 4.5% and the rate statement said that the BoC was prepared to raise rates “if needed to return inflation to the 2% target”. The BoC’s growth forecast for 2023 was upwardly revised to 1.4%, up from 1.0%. This pleased investors and has boosted the Canadian dollar. US inflation report sends mixed signals The Fed and the markets eagerly awaited Wednesday’s March inflation report, but the mixed signals mean that little may have actually changed with regard to the Fed’s rate path. Gasoline and food prices fell but housing costs remained high. The good news was that headline inflation fell from 6.0% to 5.0%, lower than the consensus estimate of 5.2%. The bad news was that the core rate rose to 5.6% as expected, nudging up from the 5.5% read in February. Investors weren’t quite sure how to respond to the data – equities initially rose but the rally soon faded. Read next: Canadian dollar: Next week, all eyes will be on the inflation data, which is expected to cool down further to as low as four percent| FXMAG.COM After the inflation release, Fed member Barkin expressed concern that core inflation continues to run above 5%. Barkin noted that demand is cooling but the job market and inflation remain strong. Market pricing continues to sway ahead of the Fed meeting on May 4th. The odds of a 25-basis point hike are currently at 66%, according to the CME Group. This is down from the 72% probability prior to the inflation report. It was only a week ago that the odds of a 25-bp hike or a pause were split 50/50 and I expect further repricing ahead of the meeting. The markets expect the current rate-tightening cycle to end soon, with a few rate cuts expected by the end of the year. USD/CAD Technical USD/CAD is testing support at 1.3436. Below, there is support at 1.3356 1.3486 and 1.3566 are the next resistance lines   Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CAD - Canadian dollar hits 2-month high as BoC pauses again - MarketPulseMarketPulse
Rates Spark: Balancing data and risk factors

European Central Bank meets in the beginning of May. Eurozone Sentix Investor Confidence rises to -8.7

Kenny Fisher Kenny Fisher 11.04.2023 15:37
EUR/USD has climbed around 0.60% today and pushed above the 1.09 line Eurozone Sentix Investor Confidence improved to -8.7 Eurozone retail sales fell by 0.8% US releases inflation on Wednesday Eurozone Sentix Investor Confidence rises The Eurozone economy continues to recover, but there is plenty of work ahead. The Sentix Investor Confidence index improved to -8.7 in April, above the March read of -11.1 and better than the estimate of -11.7 points. The concerns over an energy crisis in Europe this winter failed to materialize and Germany and the rest of the eurozone came out of the winter better than many had expected, given the weak global economy and the Russia-Ukraine war. Still, the economic outlook remains pessimistic, as Sentix Investor Expectations remain negative in both Germany and the eurozone, at -13 and -11.5, respectively. Still, the markets were pleased with the slight improvement in investor confidence and the euro has responded with gains of around 0.60%. Read next: US inflation is released on Wednesday. Bank of Canada decides on the interest rate the same day| FXMAG.COM Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses. The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February. The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%. EUR/USD Technical EUR/USD is testing support at 1.0889. Below, there is support at 1.0804 There is resistance at 1.0989 and 1.1074 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. EUR/USD - Euro gains ground as investor confidence improves - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

US inflation is released on Wednesday. Bank of Canada decides on the interest rate the same day

Kenny Fisher Kenny Fisher 11.04.2023 15:26
Three Fed members will deliver public statements on a very light data calendar today On Wednesday, the Bank of Canada is expected to pause, and US inflation is projected to fall to 5.2% USD/CAD is almost unchanged, trading around 1.3500 The Canadian dollar is almost unchanged, trading at 1.3501 in Europe. With no Canadian events and no tier-1 releases out of the US, we can expect a quiet day for USD/CAD. The markets will be listening closely as Fed members Goolsbee, Harker and Kashkari will speak. Wednesday should be much busier for the Canadian dollar, with key releases in both Canada and the US. The Bank of Canada will make a rate announcement and the US releases the inflation report for March. Bank of Canada likely to hold rates The Bank of Canada meets on Wednesday and is widely expected to pause rates for a second straight time, leaving the cash rate at 4.50%. Governor Macklem announced a “conditional pause” on rates, saying that the central bank would pause if warranted by the data. The key to the Bank’s rate path is inflation, which the central bank is committed to wrestling back to the target of 2%. Read next: Taiwan’s softer inflation and weak exports should make the central bank pause and weaken the currency| FXMAG.COM The battle against inflation is moving in the right direction, with CPI falling to 5.2% in February, down from 5.9% a month earlier. The employment market remains robust, with the economy adding 34,700 jobs in March, up from 21,800 in February. A rate hike would help cool the labour market but would dampen growth and hurt consumers and businesses which are struggling under the weight of high interest rates. With a pause being the likely decision, the tone of the rate statement could affect the movement of the Canadian dollar on Wednesday. US inflation The US releases March inflation on Wednesday. This will be the last CPI release prior to the Fed’s May 3rd meeting and will play a key factor in the Fed’s rate decision. Currently, the markets have priced in a 25-basis point hike at 67%, according to the CME Group, and an unexpected inflation reading will very likely lead to the repricing of rate hike bets. Inflation fell from 6.4% to 6.0% in February and is expected to ease to 5.4% in March. USD/CAD Technical USD/CAD tested support at 1.3486 earlier today. Below, there is support at 1.3397 1.3566 and 1.3629 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CAD steady, Bank of Canada expected to pause again - MarketPulseMarketPulse
Unexpected drop in Swiss inflation may complicate SNB decision

Unexpected drop in Swiss inflation may complicate SNB decision

Kenny Fisher Kenny Fisher 03.04.2023 15:55
USD/CHF is unchanged in the European session, trading at 0.9150. The Swissie pushed higher earlier but has given up those gains. Switzerland’s inflation rate fell to 2.9%, down from 3.4%, and the drop could make the Swiss central bank think twice about another rate hike in June. The US releases ISM Manufacturing PMI, which is expected to post another decline, with an estimate of 47.7 points. Swiss inflation underperforms Swiss inflation fell to 2.9% y/y in March, down from 3.4% in February and below the estimate of 3.2%. On a monthly basis, inflation slipped to 0.2% in March, vs. 0.7% prior and 0.4% anticipated. The driver behind the drop was lower fuel costs. Switzerland’s inflation levels may be the envy of other major economies, but the Swiss National Bank (SNB) finds itself in a tough fight, given that inflation has exceeded its 0%-2% target for over a year. The SNB has been very aggressive, relatively speaking, with its rate policy in order to contain inflation. The SNB delivered a 50-basis point hike in March, marking a fourth straight increase which brought the cash rate to 1.5%. The rate hike helped propel the Swiss franc in March when it gained 2.5% against the US dollar. Read next: RBA decision: according to Governor Lowe, inflation, employment and consumer spending data would play vital role| FXMAG.COM What’s next for the SNB? The next meeting isn’t until June, and prior to the inflation release, there was a reasonable likelihood of another rate hike. The unexpected drop in CPI could complicate that decision, as policymakers will have to give thought to a 25-bp hike or even a pause in rates, as the economy is showing signs of weakness. GDP was flat in the fourth quarter, and last week’s numbers were soft. The KOF Economic Barometer fell to 98.2, down from 98.9 and below the estimate of 100.5 points. Retail sales posted a weak gain of 0.3%, better than the prior release of -1.7% but shy of the forecast of 1.9%. If inflation continues to head south, policy makers will have their excuse to ease up on the pace of rates and give the economy a break. Weak manufacturing remains a global problem, as the Russian invasion of Ukraine and China’s zero-Covid policy disrupted supply chains and dampened demand. On Friday, Swiss manufacturing PMI dipped to 47.0 in March, down from 48.9 in February which was also the consensus forecast. US ISM Manufacturing PMI will be released later today and is expected to weaken to 47.5 in March, down from 47.7 in February. USD/CHF Technical USD/CHF tested resistance at 0.9164 earlier in the day. The next resistance line is 0.9221 0.9104 and 0.9002 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/CHF - Swiss franc steady, inflation lower than expected - MarketPulseMarketPulse
Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

RBA decision: according to Governor Lowe, inflation, employment and consumer spending data would play vital role

Kenny Fisher Kenny Fisher 03.04.2023 15:43
The Australian dollar has edged higher at the start of the week. In the European session, AUD/USD is trading at 0.6715, up 0.45%. The RBA meets on Tuesday (Australia time) and is expected to pause rates. The US releases ISM Manufacturing PMI, which is expected to record another decline. RBA likely to pause rate hikes The RBA has aggressively tightened interest rates in the current cycle, raising rates 10 straight times. The fight against inflation continues but there has been some improvement. February CPI fell sharply to 6.8%, vs. 7.4% prior and 7.1% anticipated. Inflation is more than triple the RBA target, but the sharp rise in rates has dampened economic activity and further hikes could jeopardize a soft landing. The RBA is widely expected to stay on the sidelines, with the market pricing in a pause at 86%. Governor Lowe has said that in addition to inflation, employment and consumer spending data would play a key factor in the RBA’s decision. The labour market remains tight, but retail sales hit the breaks in February and slowed to just 0.2%, down from 1.8% in January and just above the consensus estimate of 0.1%. The weak retail sales data supports the RBA taking a breather. The banking crisis, which roiled global financial markets, raised fears of a financial meltdown. Although the contagion appears to have been contained, central banks are having to think twice about raising rates in an uncertain economic landscape, and if the RBA does pause, it could use the banking crisis as further ammunition in defending its decision. US ISM Manufacturing PMI expected to decline We’re seeing a decline in manufacturing across the globe as demand remains weak. The Russian invasion of Ukraine and China’s Covid-zero policy interrupted supply chains and dampened demand, and manufacturing is yet to recover even though China has made an about-face and relaxed its Covid regulations. Read next: The US ISM services survey expected to remain resilient. Italian and Spain PMI forecasted to go above 50| FXMAG.COM The US is no exception to this disturbing global trend. ISM Manufacturing PMI has been in decline for four straight months, with readings below the 50 threshold, which separates expansion from contraction. The estimate stands at 47.5, a bit lower than the 47.7 reading in January. AUD/USD Technical AUD/USD is putting pressure on resistance at 0.6737. Above, there is resistance at 0.6790 There is support at 0.6678 and 0.6582 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/USD - Aussie on the move, RBA expected to pause rates - MarketPulseMarketPulse
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

In Q4 New Zealand economy gained 2.2%, much less than in Q3

Kenny Fisher Kenny Fisher 29.03.2023 23:19
The New Zealand dollar is lower on Wednesday. NZD/USD is trading at 0.6236 in the North American session, down 0.28%. In the US, Pending Home Sales slowed but were better than expected. Later in the day, New Zealand releases ANZ Business Confidence. New Zealand business confidence expected to improve New Zealand’s business sector has been pessimistic about the economy and that is expected to continue. The ANZ Business Confidence Index has been mired in negative territory, and no relief is expected from the March release on Thursday (New Zealand time). The estimate stands at -47.5, versus -43.3 prior. The silver lining is that things have improved since a multi-year low reading of -70.2 in December. The New Zealand economy slowed in Q4, with a gain of 2.2% y/y, down sharply from 6.4% in Q3 and below the estimate of 3.3%. The continuing rise in interest rates has dampened economic activity, with RBNZ Chief Economist Conway describing the slowdown as “welcome”. Conway acknowledged that even with the central bank’s aggressive tightening cycle, it was uncertain if inflation expectations had been contained. The RBNZ has projected inflation expectations for Q1 at around 5.5%, and inflation is running at a 7.2% clip, despite the central bank’s tightening. The RBNZ meets next on April 5th  and the markets have priced in a 25-bp hike at 90%. That could be the end of the current tightening cycle, with a 50/50 chance of another rate hike in May and rising speculation of a rate cut before the end of the year. US Pending Home Sales outperform In the US, Pending Home Sales beat expectations, as the February reading came in at 0.8%, versus 8.9% prior and an estimate of -2.9%. The Case-Shiller Housing Index declined for a ninth straight month, falling to 2.5% in January, shy of the forecast of 2.6% and the prior reading of 4.6%. The housing sector is in a slump, with mortgage payments almost doubling from a year ago. NZD/USD Technical NZD/USD put pressure on resistance at 0.6276 earlier in the day. Above, there is resistance at 0.6349 There is support at 0.6221 and 0.6148   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. NZD/USD - New Zealand dollar runs out of steam, business confidence next - MarketPulseMarketPulse
ZEW Economic Expectations came in at -41.3. Swiss retail sales go public on Friday

ZEW Economic Expectations came in at -41.3. Swiss retail sales go public on Friday

Kenny Fisher Kenny Fisher 29.03.2023 22:57
The Swiss franc has edged higher on Wednesday. USD/CHF is trading at 0.9176 in the European session, down 0.23%. The ZEW Economic Expectations index fell sharply to -43.3 points. In the US, CB Consumer Confidence improved to 1o4.2 points. Banking crisis sends Swiss economic expectations crashing lower The banking crisis has eased after causing market turmoil across the globe. Switzerland’s banking sector has taken a hit, as Credit Suisse, the country’s second-largest bank, collapsed and had to be rescued by rival UBS, with the Swiss government injecting some $108 billion to ensure that the takeover is completed. The reputation of the Swiss banking system has been badly tarnished and the fallout will likely have a negative impact on the Swiss economy. Even before the banking crisis, the Swiss economy was sputtering. GDP was flat in Q4 of 2022, as a weak global economy meant less demand for Swiss exports. The economy was expected to grow by 1.1% in 2023, lower than average growth, and that figure could well be revised lower due to the banking crisis. Inflation hit 3.5% in 2022, much lower than in other major economies but high for Switzerland. The Swiss National Bank has tried to curb inflation with higher interest rates and delivered a 50-basis point hike earlier this month. Read next: Craig Erlam and Jonny Hart talk UK inflation, Bank of England and Binance| FXMAG.COM ZEW Economic Expectations has been mired deep in negative territory for over a year, but showed a significant improvement in January, rising from -40.0 to -12.3 points. The February reading, released today, came in at -41.3, as the January improvement was short-lived. We’ll get another snapshot of the strength of the Swiss economy on Friday, with the release of retail sales and the KOF Economic Barometer. In the US, consumers have been concerned about their bank deposits and the stability of the banking system. Despite these worries, the Conference Board Consumer Confidence index improved to 104.2 in March, up from an upwardly revised 103.4 prior. Consumer expectations also rose, from 73.0 to 74.0 points. If the banking crisis does not worsen, the strong consumer expectation numbers should translate into increased consumer spending. USD/CHF Technical USD/CHF tested resistance at 0.9212 earlier in the day. The next resistance line is 0.9304 0.9106 and 0.9014 are providing support   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/CHF - Swiss franc steady after economic expectations slide - MarketPulseMarketPulse
Asia Morning Bites - 23.05.2023

RBA decision: according to Governor Lowe, retail sales and inflation print will be crucial

Kenny Fisher Kenny Fisher 28.03.2023 16:45
The Australian dollar is trading at 0.6672 in Europe, up 0.39%. Australian retail sales posted a weak gain of 0.2% and the quarterly CPI release is next. The banking crisis has eased a bit and risk currencies like the Aussie are in positive territory today. RBA keeping eye on retail sales and inflation ahead of rate meeting The markets were braced for a sharp deceleration in retail sales for February, but the meagre 0.2% gain missed the estimate of 0.4% and follows a strong gain of a revised 1.8% in January. Consumers are holding tighter to their wallets as the double whammy of rising interest rates and high inflation has dampened consumer spending. RBA Governor Lowe said that this week’s retail sales and inflation release will be key factors in the rate decision on April 4th. The strong drop in retail sales supports the case for the Reserve Bank of Australia to take a pause. As for inflation, it is expected to drop to 7.1% in February, down from 7.4% in February. If the release is higher than the forecast, the RBA will be under pressure to raise rates at next week’s meeting. Another factor that Lowe will have to consider is the banking crisis, as central banks will need to think twice before raising rates since it puts further stress on the banking system. The markets have priced in a pause at 86%, with the likelihood of a 25 bp increase of only 13%. Read next: According to Conotoxia's Grzegorz Dróżdż, UBS shares seem to have stopped losing value| FXMAG.COM The Federal Reserve announces its rate decision on Wednesday and the fact that the meeting is a live one will add to the drama. Market pricing has swung wildly, as only a few weeks ago the markets expected a 50 bp hike. Throw in a nasty bank crisis, and currently, the markets are split between a 25 bp increase and a pause. In December, the Fed’s Summary of Economic Projections (SEP) which includes forecasts for interest rates and inflation. There has been a lot of market turbulence since then, and any revisions in the SEP could affect the movement of the US dollar. AUD/USD Technical AUD/USD is testing resistance at 0.6676. Above, there is resistance at 0.6728. There is support at 0.6565 and 0.6402 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. AUD/USD - Aussie rises as risk appetite improves, CPI next - MarketPulseMarketPulse
Forex: On Friday US dollar against Japanese yen increased by 0.9%

Japan's inflation goes down to 2.7%. Taking it into consideration, JPY hasn't reacted vividly

Kenny Fisher Kenny Fisher 28.03.2023 11:30
The Japanese yen is in positive territory and broke below the 131 line in the Asian session. USD/JPY is trading at 131.17, in Europe, down 0.30% on the day. BoJ inflation indicator eases BoJ Core CPI, the preferred inflation gauge of the central bank, dropped to 2.7% in February, down from 3.1% in January and below the estimate of 3.5%. The decline in core inflation wasn’t all that surprising, as last week’s National Core CPI also fell sharply, due to government subsidies for utility bills which took effect in February. The yen’s response has thus been muted to the inflation release. The Bank of Japan has been very reluctant to tighten policy, and the only moves we’ve seen over the past few months have related to yield curve control, in order to prop up the yen. The BoJ has insisted that high inflation is transient and will fall to 2% later this year as the effect of high commodity prices eases. The Bank has said it would consider tightening if wages move higher, as this would be a sign that inflation is sustainable. Stay tuned as employees won substantial wage hikes at annual labour talks earlier this month. If wage growth does translate into higher inflation, the BoJ will be under pressure to tighten policy, but the new BoJ Governor, Kazuo Ueda, has not given any indications that he plans to exit accommodative policy anytime soon. BoJ Governor Kuroda spoke earlier today, with a “business as usual” message. Kuroda said that the sustainable infation target had not been met and it was too early to discuss an exit from the Bank’s loose monetary policy. The Federal Reserve announces its rate decision on Wednesday, and after a roller-coaster ride for market pricing, it’s currently close to a 50/50 toss-up. Will the Fed hike by 25 basis points or will it take a pause for the first time in the current rate-tightening cycle? The Fed was expected to raise rates by 25 bp, but the banking crisis, which has shaken up the financial markets, is a compelling reason for the Fed to stay on the sidelines and let the markets catch their breath. USD/JPY Technical There is resistance at 130.60 and 131.57 129.30 and 127.05 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Japanese yen tests 131, BOJ Core CPI eases - MarketPulseMarketPulse
UK Gfk Consumer Confidence index got better fourth month in a row

Although, there are no crucial releases this week, but that doesn't mean it will be a resilient week for GBP

Kenny Fisher Kenny Fisher 27.03.2023 15:42
The British pound is trading quietly on Monday. In the European session, GBP/USD is trading at 122.49, up 0.15%. The pound has looked sharp of late, and last it touched a high of 1.2343, its highest level since late January. In the UK, there are no tier-1 releases this week, but that doesn’t mean it will be a quiet week for the pound. Investors will be listening closely as BoE Governor Bailey speaks at public engagements today and on Tuesday. The latter should be especially interesting, as Bailey will testify before the Treasury Select Committee about the Silicon Valley collapse. Bailey to testify on SVB collapse Bailey has sounded surprisingly optimistic, given that inflation remains in double digits despite the BoE raising rates 11 consecutive times. After the 25-bp rate hike earlier this month, Bailey said that he expected inflation to fall “quite rapidly” in the next few months. On Friday, Bailey said that the prospects for growth were better and there was a “pretty strong likelihood” that the country would avoid a recession this year. I’m not at all sure that lawmakers share the Governor’s optimism, and they will likely grill Bailey on the Bank’s rate policy, which has failed to reign in high inflation. Sticky inflation is not the only headache that Bailey needs to deal with. The banking crisis has caused stress in the financial markets, and investors remain concerned about the stability of the banking sector. Authorities in Switzerland and the US have acted quickly and decisively, which has helped calm down the markets. President Biden and Treasury Secretary Yellen have said that the banking system is safe, and on Friday, the Financial Stability Oversight Council, a group of financial regulators, said that the US banking system remains “sound and resilient”. The stresses on the banking system are being closely watched by central banks, which are fearful of the contagion spreading as well as a credit crunch, which could slow economic growth. ECB President Lagarde said last week that the bank crisis could help lower inflation, and UK lawmakers might ask Bailey if the crisis could dampen inflation in the UK. GBP/USD Technical GBP/USD is testing resistance at 1.2248. The next resistance line is 1.2341 There is support at 1.2152 and 1.2071 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD - Will BoE's Bailey shake up the British pound? - MarketPulseMarketPulse
Forex: Euro against US dollar - forecast on April 24th, 2023

First Republic bank received $30bln from other US banks. ECB's primary focus remains containing inflation

Kenny Fisher Kenny Fisher 21.03.2023 17:47
The euro has put together a 3-day rally and is up again on Tuesday. In the European session, EUR/USD is trading quietly at 1.0756, up 0.30%. Financial markets settle down Let’s start with some good news. European stock markets have settled down and are in positive territory. The euro took a bath last Wednesday and plunged 1.47% as Credit Suisse shares tumbled, but the currency has battled back and recovered these losses. The emergency takeover of Credit Suisse by UBS and the joint announcement by six major central banks to boost liquidity have provided some reassurance to the markets that the banking system is not in danger of collapse. That’s not to say that this nasty bank crisis is behind us. Investors are still trying to come to terms with the lightning collapse of three US banks and Credit Suisse, the second-largest bank in Switzerland, all in just 11 days. Another US bank, First Republic, received an emergency injection of $30 billion from some major US banks, but this may not prove to be enough, as depositors are estimated to have removed $89 billion and the bank’s shares are in freefall. Read next: Weak Polish retail sales add to gloomy outlook| FXMAG.COM In light of the bank crisis, central banks will have to weigh their moves carefully and re-evaluate rate policy. The ECB didn’t flinch and delivered a 50-basis point move as promised. Had the ECB decided not to go ahead with the 50-bp hike, it risked losing credibility. As well, the ECB’s primary focus remains containing inflation. With eurozone inflation running at an 8.5% clip, the ECB needed another oversize rate hike. Could the financial crisis turn out to be a blessing in disguise? Perhaps, according to ECB President Lagarde. On Monday, Lagarde told European lawmakers that market turmoil could dampen demand and “might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes”. Lagarde reiterated that more rate hikes were needed to curb inflation, but didn’t make any commitments as to the pace of rate hikes, which makes sense, given that the current crisis is not over. EUR/USD Technical EUR/USD is putting pressure on resistance at 1.0778. Next is 1.0890 There is support at 1.0647 and 1.0535 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - euro extends rally, market turmoil eases - MarketPulseMarketPulse
Ralph Shedler talks US dollar against Swiss franc - May 12th

Next Credit Suisse case developments may add volatility to Swiss franc

Kenny Fisher Kenny Fisher 20.03.2023 14:11
USD/CHF is trading quietly on Monday, after a tumultuous week. In the European session, USD/CHF is trading at 0.9276, up 0.15%. Credit Suisse takeover, central banks take action There was a flurry of activity on Sunday in response to the banking crisis which has shaved some $1 trillion from global financial shares this month. UBS has agreed to take over Credit Suisse, the second-largest bank in Switzerland. The move hasn’t stopped the bleeding at Credit Suisse, as its shares are down some 60% today. UBS shares are down 6% today and Deutschebank and other major European banks are also in the red. As well, six central banks, including the Swiss National Bank (SNB) and the Federal Reserve announced they had coordinated action in order to boost liquidity. This move is aimed at restoring market confidence in the global banking system, which has been rocked by the failure of two US banks and the meltdown at Credit Suisse. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM The Swiss franc was not immune to the market mayhem, as the sharp fall in Credit Suisse shares on Wednesday sent the Swissie tumbling by 2.1% and only settled down after intervention by the SNB. The Swiss franc, traditionally a safe-haven bastion, has seen its reputation tarnished as Swiss banks are in the middle of a banking crisis. Further developments in the Credit Suisse saga could lead to more volatility in the Swiss currency. The market turmoil has seen market pricing for Wednesday’s Fed meeting shift from an increase of 50 basis points to 25, with an outside chance of a pause in hikes. The Fed has adopted a hawkish stance in its battle with inflation, but the latest crisis will make the Fed think twice about its pace of rate hikes. The markets have priced in a terminal rate in a range of 4.75% to 5.25%, and with the current rate at 4.50-4.75%, that means the markets are expecting the Fed to take a pause in the coming months. USD/CHF Technical USD/CHF is testing resistance at 0.9304. Above, there is resistance at 0.9382 0.9226 and 0.9110 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Swiss franc in calm waters, but is there are a storm ahead? - MarketPulseMarketPulse
Small factors combine to pressure credit

Euro against US dollar: what were the reasons of a 50bp ECB rate hike?

Kenny Fisher Kenny Fisher 20.03.2023 12:54
After a tumultuous week in the financial markets, things appear to have settled down. The euro is showing limited movement, trading at 1.0655. Central banks move in unison to contain contagion It was anything but a quiet Sunday, as the Swiss government engineered an emergency bank merger, with UBS agreeing to buy Credit Suisse, the second largest bank in Switzerland. At the same time, six major central banks, including the Federal Reserve and the ECB, announced a joint move to ensure liquidity in the financial system. Both moves were aimed at restoring confidence after two US banks collapsed and Credit Suisse shares plunged. This has caused market turmoil and battered the global banking system, with European, Japanese and US bank shares all down by around 10%. The palpable fear is that the contagion could spread and trigger a full-blown financial crisis and it remains to be seen if the Credit Suisse merger and the central banks’ move will calm the markets. Read next: UBS Take over of Credit Suisse means over 50% of deposits will be held by a single institution| FXMAG.COM The ECB kept the pedal on the floor last week, delivering a 50-basis point rate hike which brought the cash rate to 3.0%. The move came in the middle of the banking crisis, and there was speculation that the Bank would opt for a modest 25-bp increase. There were two strong reasons for the oversize rate hike. First, ECB President Lagarde had stated that the ECB would raise rates by 50 bp, and not following through could have damaged the Banks’ credibility. Second, inflation remains high at 8.5%, and with Germany and the eurozone showing some decent economic numbers, the conditions were ripe for a 50-bp move. The ECB is lagging behind other central banks with a cash rate of 3.0% and will have to continue raising rates to lower inflation closer to the target of around 2%. EUR/USD Technical 1.0622 has been a key level throughout the week. EUR/USD is testing resistance at this line. Next is 1.0718 There is support at 1.0542 and 1.0446 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro edges lower, ECB and other central banks take joint action - MarketPulseMarketPulse
Bank of England raised the interest rate for the 12th meeting in a row

British pound against US dollar - UK inflation expectations got reduced

Kenny Fisher Kenny Fisher 17.03.2023 14:31
We have seen some strong movement from the British pound this week, which is not surprising given the turmoil which has gripped the financial markets in the wake of the US banking crisis. In the European session, GBP/USD is showing little movement and is trading at 1.2119. Big banks to the rescue Market mayhem has been the buzzword this week, as the financial markets were shaken by the collapse of Silicon Valley Bank (SVB) over the weekend. The contagion spread and Credit Suisse, Switzerland’s second-largest bank saw its shares tumble 30% on Wednesday. In the US, shares of First Republic Bank, a mid-size bank, sank after a run on the bank by depositors. The major US banks sprang into action, fearing that the contagion would spread to mid-size and small banks. Bank of America, Goldman Sachs and others pledged to lend First Republic $30 billion. The rescue plan is unprecedented and nervous markets are hopeful that the crisis will not worsen. The Fed and the US government are also watching developments with bated breath. Treasury Secretary Yellen told a Senate finance committee that the US banking system is “sound” and that there would be a review of what went wrong at SVB. For now, the big bank rescue plan has calmed fears and risk appetite has improved. Still, with bank shares moving up and down like a yo-yo this week, caution sounds like sound advice for traders. Read next: Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen| FXMAG.COM The Fed holds its policy meeting on March 22nd and market pricing has been all over the map. Earlier in the week, it was a toss-up between a 25-basis point hike or a pause, according to the CME Group. The big bank rescue plan has shifted the odds to 79% for a 25-bp increase and 21% for a pause in hikes. I would not be surprised to see further market repricing ahead of the Fed meeting. In the UK, there was some welcome news on the inflation front. Inflation Expectations eased to 3.9% in February, down from 4.8% in January and a 5-month low. Inflation is running at a 10.1% clip, but the drop in inflation expectations could signal that inflation is headed back into single digits. GBP/USD Technical GBP/USD tested resistance at 1.2164 earlier in the Asian session. The next resistance line is 1.2294 There is support at 1.2113 and 1.1984 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD - Pound steady, inflation expectations ease - MarketPulseMarketPulse
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Kenny Fisher Kenny Fisher 17.03.2023 13:15
The Japanese yen is in positive territory on Friday, trading at 133.02, up 0.56%. USD/JPY touched a one-month low on Thursday, falling as low as 131.72. How will BoJ react to the new wage agreement? The Kazuo Ueda era has begun at the Bank of Japan. Former Governor Kuroda has departed after 10 years at the helm and the markets are on alert as Ueda takes over. In his confirmation hearings, Ueda toed the line, stating that the current policy was appropriate. The markets aren’t so sure, as the Bank’s yield control curve (YCC) policy has distorted the bond markets and is in need of change. Kuroda didn’t make any moves at his final meeting earlier this month, which may have put more pressure on Ueda to tweak YCC, which would likely have a significant impact on the markets and the yen. Meanwhile, the annual Japanese rite of collective wage talks has ended, with employees getting the last laugh. Major Japanese companies, including automakers, agreed to fork over the largest pay increases since 1997, with an average wage increase of around 3%. Japan’s inflation rate of around 4% is much lower than in other major economies but is at a 42-year high and this put pressure on employers to provide hefty wage hikes. Read next: Maybe inflation isn't stealing the show as before, but for ECB it's still the key thing| FXMAG.COM How will the BoJ react to the wage agreement? Former Governor Kuroda insisted that current inflation was due to external factors such as high commodity prices and said that the BoJ would not consider tightening unless there was evidence that inflation was sustainable and being driven by wage growth. The new wage agreement could provide the BoJ with an excuse to tighten policy and even raise interest rates. Governor Ueda’s first meeting on April 28th promises to be interesting. USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Yen climbs to 1-mth high on market turmoil - MarketPulseMarketPulse
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Maybe inflation isn't stealing the show as before, but for ECB it's still the key thing

Kenny Fisher Kenny Fisher 17.03.2023 12:06
It has been a busy week for the euro, reflective of the gyrations we’re seeing in the financial markets. EUR/USD has bounced back from a mid-week slide and is trading at 1.0661, up 0.46% on the day. ECB moves full steam ahead In the midst of market turmoil and fears of a full-blown financial crisis, the ECB held its rate meeting on Thursday and had everyone guessing about its intentions. The central bank had strongly signalled it would raise rates by 50 basis points but the bank crisis certainly complicated matters. Credit Suisse shares tumbled by as much as 30% a day before the meeting, weighing on the euro and eurozone bonds. It would have been understandable if the ECB had opted for a 25-bp move due to the market mayhem, but the central bank kept its word and delivered a 50-bp hike, bringing the main rate to 3.0%. Was the 50-bp hike risky in these volatile conditions? Yes, but policy makers may have been encouraged by the Swiss National Bank stepping up and lending Credit Suisse $53 billion, and there was the issue of the ECB’s credibility, after President Lagarde had essentially pledged a 50-bp increase. Also, a 50-bp was the strongest medicine the central bank could deliver in the fight against sticky inflation. Read next: Kim Cramer Larsson takes a technical look at Nasdaq 100, S&P 500, Dow Jones and Russel 2000| FXMAG.COM Inflation may have been knocked out of the headlines this week, but it hasn’t gone anywhere and remains the ECB’s number one priority. There was good news as the ECB’s inflation projections were revised downwards from December. Currently, inflation is expected to average 5.3% in 2023 and 2.9% in 2024, compared to the December estimate of 6.3% in 2023 and 3.4% in 2024. In her press conference after the meeting, President Lagarde was careful not to commit to further rate hikes, saying that rate decisions will be “entirely data dependent.” Still, with inflation well above the 2% target, it’s a safe bet that the ECB is not done with the current rate-tightening cycle. EUR/USD Technical 1.0622 has been a key level throughout the week. EUR/USD is testing resistance at this line. Next is 1.0718 There is support at 1.0542 and 1.0446   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - Euro heads higher as ECB delivers 50-bp hike - MarketPulseMarketPulse
Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

Australia: employment report stronger than expected. Reserve Bank of Australia expected to pause

Kenny Fisher Kenny Fisher 16.03.2023 22:17
The Australian dollar has taken investors on a roller-coaster ride this week, reflective of the gyrations we’re seeing in the financial markets. In the North American session, AUD/USD is trading at 0.6656, up 0.56%. Australian job growth outperforms Australia’s employment report for February was stronger than expected. The economy produced 64,600 news jobs, after a decline of 10,900 in January. This beat the estimate of 48,500. What was especially encouraging was that full-time jobs rose by 74,900, with part-time positions declining by 10,300. The unemployment rate fell to 3.5%, its lowest level in almost 50 years, down from 3.7% and below the estimate of 3.6%. The tightness in the labour market has allowed the RBA to aggressively tighten, with ten straight rate hikes since April 2022. Inflation slowed to 7.4% in January, down from 8.4% in December, so the rate hikes are having an effect on curbing inflation. Still, it will be a long road back to the inflation target of around 2%. The central bank is leaning to taking a pause at the April meeting and leaving the cash rate at 3.60%. Major central banks are moving away from continued tightening and the RBA will have to take that into account, as well as the Silicon Valley crisis which has investors on edge about contagion spreading. Central banks have to be cautious with all the market turmoil, for fear that additional tightening would make a global recession more likely. Read next: Credit Suisse, which decreased by 25% on Wednesday, dragged the euro lower| FXMAG.COM Market pricing of rate moves has been gyrating like a yo-yo, and currently there is a 10% chance that the RBA will cut rates by 25 basis points at the April meeting. Just a month ago, the markets expected rates to peak at 4.1% in August. The SVB crisis has completely shifted pricing and the markets are currently expecting rates to fall to 3.35% by August.On There was more good news as Australian consumer inflation expectations for March ticked lower to 5.0%, down from 5.1% and below the forecast of 5.4%. AUD/USD Technical AUD/USD is testing support at 0.6639. Below, there is support at 0.6508 0.6713 and 0.6844 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Australian dollar climbs on strong employment data - MarketPulseMarketPulse
New Zealand dollar against US dollar decreased by 1.07% yesterday

The US unemployment claims reached 192K. According to Kenny Fisher, this points to a resilient labour market, what can support hawkish Fed

Kenny Fisher Kenny Fisher 16.03.2023 22:04
The New Zealand dollar has had a busy week, which is not surprising given the turmoil which has gripped the markets. NZD/USD has extended its losses on Thursday and is trading at 0.6162, down 0.40%. New Zealand GDP declines  The markets were braced for a soft GDP report for Q4, but the decline was sharper than expected. GDP slowed to 2.2% y/y, down from 6.4% in Q3 and shy of the estimate of 3.3%. On a monthly basis, GDP fell 0.6%, following a gain of 2.0% in Q3 and shy of the estimate of -0.2%. The Reserve Bank of New Zealand had projected 0.7% growth, and the miss could mean the central bank will ease up on the pace of rate hikes. The economy is showing weakness across the board, including manufacturing, consumer spending and trade. The RBNZ had projected that the economy would tip into a recession in the second quarter of 2023, but the contraction in Q4 may signal that the economy is already in recession. The forecast for Q1 of 2023 is gloomy, exacerbated by the severe flooding in January and February. Read next: ECB hikes by 50bp and drops forward guidance, while keeping the door open to more hikes| FXMAG.COM Given this bleak backdrop, the central bank may have to back its tightening plans. The markets had priced in the RBNZ hiking the cash rate by another 75 basis points to 5.50% by the third quarter, but this has fallen to 5.10%. The RBNZ meets next on April 5 and the market is 50/50 on whether the next hike will be 25 or 50 basis points. In the US, today’s data was a mixed bag. Unemployment claims fell to 192,000, down from 212,000 and lower than the forecast of 205,000. This points to a resilient US labour market, a key pillar of support for the Fed’s hawkish rate stance. Manufacturing has been struggling and the Philly Fed Manufacturing Index ticked higher to -23.2, compared to -24.3 prior and well below the forecast of 14.5 points. This release follows the Empire State Manufacturing Index, which tumbled to -24.6, down from -5.8 and below the forecast of -8.0 points. NZD/USD Technical NZD/USD is testing support at 0.6149. Below, there is support at 0.6071 0.6212 and 0.6290 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. New Zealand dollar extends losses as GDP contracts - MarketPulseMarketPulse
ECB cheat sheet: Difficult to pull away from the Fed

Credit Suisse, which decreased by 25% on Wednesday, dragged the euro lower

Kenny Fisher Kenny Fisher 16.03.2023 14:15
The euro has rebounded on Thursday after sliding 1.5% a day earlier, its worst daily showing since September 2022. In the European session, EUR/USD is trading at 1.0613, up 0.35%. The financial markets are in turmoil, with fears growing that the Silicon Valley collapse could lead to a full-blown banking crisis. Stock markets have fallen sharply and global banks took a hit on Wednesday after Credit Suisse stocks plunged by 25%. Credit Suisse dragged the euro sharply lower and US Treasury yields and eurozone bond also tumbled. Investors are understandably jittery and the lack of any action from the authorities is not helping matters. ECB meets in midst of market turmoil How will this volatile situation impact on the ECB decision later today? Given all the market turmoil, it’s anyone’s guess what ECB policy makers will do. Just last week, the markets had priced in an 85% chance of a 50 basis-point increase, but that has been shaved to 25 bp since the SVB collapse. ECB President Lagarde had signalled very clearly that the central bank would raise rates by 50 bp, and if the ECB doesn’t deliver it risks damaging credibility. A pause in rates is unlikely, but given the ugly economic backdrop, such a move cannot be discounted. Read next: Is the end of NFT flipping and speculation near? LiveArt announces an NFT membership card| FXMAG.COM Inflation in the eurozone is red-hot at 8.50% and remains the ECB’s number one concern. The current banking crisis may have shifted attention away from inflation, but the ECB will have to continue raising rates to bring inflation closer to the 2% target. The current market turmoil could lead the ECB to be more cautious at today’s meeting, but I expect that policy makers won’t shift their aggressive rate policy. The ECB will release an updated inflation forecast at the meeting, and if, as expected, the core rate projection is revised upwards, hawkish policy members at the ECB will be calling for more rate hikes. EUR/USD Technical EUR/USD is testing resistance at 1.0718. The next resistance level is 1.0798 There is support at 1.0622 and 1.0542 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - Credit Suisse woes knock down euro, will ECB hike today? - MarketPulseMarketPulse
UK Gfk Consumer Confidence index got better fourth month in a row

Inflation in the UK still above 10%. OBR projects it may decline to 2.9% by the end of the year

Kenny Fisher Kenny Fisher 15.03.2023 23:45
The British pound has taken a nasty tumble on Wednesday. In the North American session, GBP/USD is trading at 1.202, down 1.1% on the day. Credit Suisse drags down US banking sector, boosts US dollar Since the collapse of the Silicon Valley Bank, the financial markets have been on a roller-coaster ride. Today the ride has been straight down, as equity markets are sharply lower. Credit Suisse, a major Swiss bank, saw its shares slump 25% today and fall to a record low, after Saudi National Bank, Credit Suisse’s largest investor, said it would not provide further funding. This has put further pressure on the already reeling financial sector and sent the shares of US banks sharply lower today. The financial crisis has dampened risk appetite, which has boosted the safe-haven US dollar higher against all the majors except the Japanese yen, which is also a safe-haven asset. Read next: Facebook and Instagram parent Meta has announced discontinuing NFT support on mentioned platformed | FXMAG.COM Today’s US releases, led by retail sales, were a disappointment. The retail sales headline figure came in at -0.4% m/m, missing the estimate of -0.3% and well off the January reading of an upwardly revised 3.2%. The core rate slowed as expected to -0.1%, after an upwardly revised 2.4% gain in January. The Producer Price Index also slowed in February and the NY Empire State Manufacturing Index fell by -24.6, compared to -5.8 prior. The soft data has raised the likelihood of a Fed pause at the March 22 meeting, with the markets pricing the odds of a pause or a 25-bp hike at close to 50/50. Just a week, ago the markets were expecting the Fed to hike by 50 bp at next week’s meeting. Inflation in the UK remains above 10%, which has taken a significant toll on households. Real household disposable income is expected to fall by some 5.7% over the next two years, according to the Office for Budget Responsibility (OBR). That would mark the biggest two-year drop since records began in 1956. The OBR had a surprisingly optimistic view on inflation, however, projecting that it would fall to just 2.9% by the end of the year. GBP/USD Technical GBP/USD has broken below support at 1.2113. The next support level is at 1.1984 There is resistance at 1.2294 and  and 1.2474 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. British pound sinks on banking sector fears - MarketPulseMarketPulse
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

New Zealand GDP expected to shrink 0.2%, according to Oanda's Kenny Fisher, road to RBNZ's inflation target may be long

Kenny Fisher Kenny Fisher 15.03.2023 16:31
The New Zealand dollar is in negative territory on Wednesday, ending a 3-day rally that saw NZD/USD climb 160 points. In the North American session, NZD/USD is trading at 0.6205, down 0.50%. New Zealand GDP projected to contract in Q4 New Zealand releases fourth-quarter GDP later today, with the markets braced for a slowdown compared to Q3. GDP is expected to decline 0.2% q/q in Q4, compared to a 2% gain in Q3. On an annualized basis, the consensus stands at 3.3% growth, down sharply from 6.4% in Q3. The Reserve Bank of New Zealand has been aggressive in its tightening, raising the cash rate to 4.75%. The central bank is in an all-out battle against inflation, but success remains elusive as inflation remains stickier than anticipated. In the fourth quarter, inflation came in at 7.2%, the same as in Q3 and a tick lower than the 7.3% gain in Q2. The sharp rise in rates hasn’t eased inflation but has hurt the economy. Retail sales for Q4 fell 0.6%, after an upwardly revised gain of 0.6% in Q3, and manufacturing sales fell sank to -0.4% in Q4, after a 5.0% gain in the third quarter. A weak GDP report will likely result in more criticism of the central bank’s rate policy, which is causing economic damage but has failed to rein in inflation. The road from 7% inflation to the RBNZ’s target of 1-3% promises to be a long and bumpy journey, and the markets are expecting the central bank to raise rates as high as 5.25% in mid-2023 before taking a pause. That means more misery for households and businesses who are grappling with the double whammy of rising interest rates and red-hot inflation. Read next: The payrolls bump was mostly witnessed in leisure, hospitality, retail trading, government and health care| FXMAG.COM In the US, today’s numbers were dismal. The retail sales headline figure came in at -0.4% m/m, missing the estimate of -0.3% and well off the January reading of an upwardly revised 3.2%. The core rate slowed as expected to -0.1%, after an upwardly revised 2.4% gain in January. The Producer Price Index also slowed in February and the NY Empire State Manufacturing Index fell by -24.6, compared to -5.8 prior.  These unimpressive numbers have lent support to the case for a pause from the Fed at the next meeting. Currently, the markets have priced in the likelihood of a 25 bp hike or a pause at close to 50/50. NZD/USD Technical NZD/USD is testing support at 0.6212. Below, there is support at 0.6149 0.6290 and 0.6353 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. US retail sales decline, PPI softens, New Zealand GDP next - MarketPulseMarketPulse
Asia Morning Bites - 23.05.2023

Reserve Bank of Australia tightening cycle may end soon. Employment report to be released soon

Kenny Fisher Kenny Fisher 15.03.2023 13:18
The Australian dollar, which has posted strong gains early in the week, has run into a wall on Wednesday. In the European session, AUD/USD is trading at 0.6638, down 0.66%. Australian job growth expected to rebound Australia releases the February employment report on Thursday (Australia time). Job growth is expected to rebound, with a consensus of 48,500 after a soft January read of -11,500. The unemployment rate is expected to tick lower to 3.6%, down from 3.7%. The Reserve Bank of Australia will be watching closely, as a robust labour market has enabled the central bank to continue its tightening – the Bank raised rates last week by 25 basis points, a 10th straight hike which brought the cash rate to 3.60%. The good news is that the end of the tightening cycle could be near, with the markets pricing in a pause at the April meeting. Consumers and businesses are weary of rising interest rates and confidence indicators do not paint an optimistic picture. Read next: The year-to-date trend for green cryptos remains very bullish. ADA has propelled 32%, and DOT witnessed a 37% surge, just to name a few| FXMAG.COM Along with the job data, Australia releases consumer inflation expectations for March. The markets are braced for the indicator to rise to 5.4%, after a 5.1% gain in February. Inflation expectations is a key inflation gauge as it can set the direction of actual inflation, and the RBA will not be happy if inflation expectations accelerate. There is an uneasy calm in the air as the dust begins to settle after the Silicon Valley Bank collapse. The sky is not falling, not even above US bank towers, as regional bank stocks have rebounded. The US inflation release on Tuesday delivered as expected, with both the headline and core CPI readings matching the estimates. Headline CPI fell to 6.0%, down from 6.4%, while the core rate ticked lower to 5.5%, down from 5.6%. Inflation is cooling but we’re not seeing the disinflation process that the markets were celebrating only a few weeks ago. AUD/USD Technical AUD/USD is testing support at 0.6639. Below, there is support at 0.6508 0.6713 and 0.6844 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
UK Gfk Consumer Confidence index got better fourth month in a row

The Pound Has Not Reacted To The Release Of Data

Kenny Fisher Kenny Fisher 14.03.2023 14:27
The British pound has reversed directions after an impressive rally that saw GBP/USD climb 370 points. In the European session, GBP/USD is trading at 1.2154, down 0.24%. US dollar recovers The collapse of the Silicon Valley Bank (SVB) on Friday sent the financial markets into turmoil on Monday. US bank stocks declined sharply, while safe-haven gold powered higher. The US dollar retreated against the major currencies and the 2-year Treasury yield fell almost a full point. Tuesday has brought better news, as the markets appear to have settled down. The US dollar has regrouped and is higher against the majors. There is an uneasy calm in the air, but that doesn’t necessarily mean that this latest crisis is behind us. Investors are on alert and will be very sensitive to new developments and any negative news could renew market volatility. The Fed and Treasury Department acted quickly to protect depositors and President Biden sent a reassuring message at an impromptu television address, but the collapse of the 16th largest lender in the US means it’s unlikely to be “business as usual” for some time. It was just a week ago that Fed Chair Powell’s hawkish testimony on the Hill raised expectations of the Fed delivering a 50-bp increase at the March 22 meeting. Those expectations have vanished into smoke, with the markets now expecting a 25-bp hike, with an outside chance of a pause.  We could see further market repricing after today’s CPI report, with headline CPI expected to fall to 6.0%, down from 6.4%. In the UK, the employment report was within expectations. The unemployment rate remained at 3.7%, shy of the estimate of 3.8%. Hourly earnings fell to 5.7%, as expected, down from an upwardly revised 6%. The pound hasn’t reacted to the release and the data is unlikely to change minds at the Bank of England, which is expected to raise rates by 25 bp at the March 23 meeting.   GBP/USD Technical GBP/USD tested resistance at 1.2113 earlier in the day. Above, there is resistance at 1.2294 There is support at 1.1984 and 1.1854 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
These findings of a review of the Reserve Bank of Australia may surprise you!

AUD/USD Pair Tested 0.6639 In Resistance Earlier In The Day

Kenny Fisher Kenny Fisher 13.03.2023 12:56
The Australian dollar is considerably higher on Monday. In the European session, AUD/USD is trading at 0.6617, up 0.58%. Earlier in the day, AUD/USD rose 95 points before paring much of those gains. Bank collapse clouds Fed policy The week is starting off with a light data calendar, but the markets are abuzz after the Silicon Valley Bank (SVB) suddenly collapsed. The failure of SVB has raised contagion fears but so far the damage seems contained and hasn’t weighed too much on the large banks. The Federal Reserve and Treasury Department stepped in quickly and said SVB depositors would be protected, which calmed down jittery markets to some extent. The SVB debacle was the largest failure of a US bank in 15 years and has dramatically shifted market pricing of interest rates expectations. Before the collapse, the markets had priced a 50-bp hike at 70% and a 25-bp at 30%. Currently, there is a 70% of a 25-bp increase and a 30% chance of the Fed taking a pause. This shift away from a 50-bp hike is weighing on the US dollar, which has lost ground against the major currencies as a result. Still, if it becomes clear that no further banks are in danger of failing, we could see the markets again price in a 50-bp increase. Besides the contagion issue, investors will be keeping a close eye on Tuesday’s inflation report. The February US employment report on Friday was hot/cold. Job growth came in at 311,000, blowing past the estimate of 225,000. The rest of the report was not as impressive and lent support to the view that the labour market may be about to cool. Wage growth ticked lower to 0.2% m/m, down from 0.3% in January and a consensus of 0.3%. As well, the unemployment rate rose to 3.6%, above the prior reading of 3.4%, which was also the estimate. Australia releases consumer and business confidence indicators on Tuesday, with both expected to show improvement. Westpac Consumer confidence is expected to post a gain of 0.1% after a miserable -6.9% reading, while National Australia Bank’s Business Conditions are projected to improve to 21, following a reading of 18 prior.   AUD/USD Technical AUD/USD tested 0.6639 in resistance earlier in the day. Above, there is resistance at 0.6713 There is support at 0.6508 and 0.6434 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Kuroda Stayed On The Sidelines And The Yen Responded With Losses

Kuroda Stayed On The Sidelines And The Yen Responded With Losses

Kenny Fisher Kenny Fisher 10.03.2023 13:30
The Japanese yen is trading at 1.36.83 in the European session, down 0.52%. USD/JPY fell 0.90% on Thursday but has recovered much of those losses today. Kuroda exits with a whimper Bank of Japan Governor Kuroda didn’t fire any final shots at his final meeting today. The BoJ maintained interest rates at -0.1%, where they have been pegged since 2016, and didn’t make any changes to its to yield curve control (YCC) policy. Traditionally, BoJ governors do not make waves at their final meeting, but there was an outside chance that Kuroda might buck the trend. Kuroda has surprised the markets in the past, most notably when he widened the yield curve band in December and jolted the markets. This time, Kuroda stayed on the sidelines and the yen responded with losses as some investors were disappointed that he didn’t tweak the YCC. Kazuo Ueda takes over as BoJ Governor next month, and there is growing speculation that Ueda will change forward guidance and tweak or even abandon YCC, as distortions in the yield curve are damaging the bond markets. Ueda may not press the trigger when he chairs his first meeting in April but is expected to shift policy in the coming months. The US releases its February employment report, highlighted by nonfarm payrolls, later today. The blowout January reading of 517,000 is widely seen as a blip, although the labour market remains surprisingly resilient, despite the bite of rising interest rates. The estimate for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The Fed will also be keeping a close eye on wage growth, in addition to nonfarm payrolls. Average hourly earnings are expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. Higher wages drive inflation higher and an acceleration in wage growth would complicate the Fed’s battle to curb inflation.   USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Kenny Fisher Kenny Fisher 10.03.2023 13:00
The Canadian dollar continues to sag and has dropped 1.9% this week. Hold onto your hats, as we could have some further volatility from USD/CAD in the North American session, with the release of the US and Canadian employment reports. All eyes on NFP The highlight of the day is the US nonfarm payrolls report, which is expected to head back to earth after a blowout gain of 517,000 in January. The consensus for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The ADP payroll report, which precedes the nonfarm payroll release, improved to 242,000, up from an upwardly revised 119,000 and above the estimate of 200,000. The ADP reading is not considered all that reliable at forecasting the nonfarm payrolls report so I wouldn’t read too much into it. Still, the US labour market remains strong despite the Fed’s tightening, and I would not be surprised to see nonfarm payrolls follow the ADP’s lead and beat the estimate. In addition to nonfarm payrolls, the Fed will also be keeping a close eye on wage growth. Average hourly earnings is expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. The Fed is focussed on lowering inflation and an acceleration in wage growth could prompt the Fed to be more aggressive with its pace of rate increases. Canada also recorded a sharp gain in new jobs in January, with a reading of 150,000, up from 104,000 prior. The markets are braced for a small gain of 10,000 in February, and a soft print of 5,000 or lower would likely weigh on the Canadian dollar. The unemployment rate is expected to tick up to 5.1%, up from 5.0%.   USD/CAD Technical There is support at 1.3787 and 1.3660 1.3927 and 1.4190 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
InstaForex's Ralph Shedler talks Euro against Japanese yen

The Governors Of The Bank Of Japan Are Unlikely To Make Policy Changes

Kenny Fisher Kenny Fisher 09.03.2023 12:32
The Japanese yen is showing strength on Thursday. In the European session, USD/JPY is trading at 136.27, down 0.79%. Kuroda’s last hurrah After 10 years at the helm of the Bank of Japan, Governor Kuroda chairs his final policy meeting on Friday. Traditionally, BoJ governors have not made policy changes at their last meeting, and in all likelihood, Kuroda will not go out into the night with guns blazing. Still, Kuroda likes to keep the markets guessing and his tweak of the 10-year yield target range in December completely blindsided traders and jolted the financial markets. This has kept the markets on alert for Kuroda tweaking or even abandoning the BoJ’s yield curve control (YCC) policy. The bond market remains dysfunctional due to the YCC, even with the band widening in December. Governor-elect Ueda has stated that the current policy is appropriate, but this is to be expected at this sensitive time of changing the guard at the BoJ. Ueda will be under pressure right away to make changes to the YCC, and that could occur as soon as he takes over in April. Fed Chair Powell didn’t add anything new at a second day of testimony on Capitol Hill, but the markets have been scrambling since his hawkish comments to lawmakers a day earlier. Powell’s said that the Fed would accelerate the pace of interest rate increases if that was what the data dictated. The markets have fallen in line and have priced a 50-basis point hike at the March 22 meeting at 77% according to the CME Group, compared to 25% before Powell’s testimony on Tuesday. Powell’s hawkish stance has also fuelled expectations that the peak rate will be higher than expected. In December, the Fed projected a rate of 5.1%, but that is clearly out of date. The markets have priced in a peak rate of around 5.5% and Blackrock, the world’s largest asset manager sees rates peaking at 6%. Currently, the benchmark rate stands at 4.75%.   USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
USD/CAD - Canadian economy added 41,400 jobs beating expectations

The Bank Of Canada Is Widely Expected To Maintain The Cash Rate At 4.50%

Kenny Fisher Kenny Fisher 08.03.2023 14:04
The Canadian dollar has steadied on Wednesday, after sliding 1% a day earlier. Later today, the Bank of Canada meets for its monthly meeting. BoC likely to pause The Bank of Canada is widely expected to take a pause at today’s meeting and maintain the cash rate at 4.50%. This would mark the first pause in rate hikes since the current tightening cycle began in January 2022. The BoC has raised rates by 425 basis points during this time and the tightening has had a dampening effect on the economy – GDP in Q4 flattened out and inflation has fallen under 6%. There is a possibility that the BoC will continue to hold rates, but that will depend on the data, particularly inflation and employment. The shift in policy is bearish for the Canadian dollar, especially with the Federal Reserve expected to continue raising rates. Currently, there is only a 25-bp differential in rates between the US and Canada, but if the Fed keeps raising and the BoC stays on the sidelines, the divergence in rates will weigh on the Canadian dollar, which has plunged some 3% since its February high. It’s a very different story south of the border, where the US economy is churning out strong numbers and the disinflation process appears to be on hold. In his testimony on Capitol Hill, Fed Chair Powell noted that the latest (January) data was stronger than expected and signalled that the Fed would respond with higher rates than it had previously anticipated. Although the January numbers may have been a blip, the markets are marching to the Fed’s tune and have now priced in a 50-bp hike at the March 22 meeting at 75%, up from 25% prior to Powell’s testimony, according to the CME Group.   USD/CAD Technical 1.3701 and 1.3784 are the next resistance lines 1.3571 is a weak support line, followed by 1.3478 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Australian dollar against US dollar - "It seems that the currency will soon hit a price above 0.68"

AUD/USD Pair Sustained Its Second Most Bearish Day

Kenny Fisher Kenny Fisher 08.03.2023 13:02
The Australian dollar has stabilized on Wednesday after a dreadful outing a day earlier. In the European session, AUD/USD is trading just below the 0.66 line. AUD/USD sustained its second most bearish day this year on Wednesday, with a staggering decline of 2.1%. Earlier today, the Australian dollar touched a low of 0.6567, its lowest level in four months. A combination of a dovish rate hike by the Reserve Bank of Australia and hawkish comments from Fed Chair Powell sent the Australian dollar reeling. The RBA hike of 25 basis points was practically business as usual, but investors picked up on the removal of a reference to raising rates “over the months ahead”, a possible signal that the RBA could be near the end of the current rate-tightening cycle. The rate statement explicitly said that inflation had peaked, clearly a dovish signal from policy makers. Earlier today, Governor Lowe used a second “p” word which weighed on the Australian dollar, saying that a pause in rate increases was closer. Does that mean that the April meeting will be a “one and done”? Perhaps, but Lowe has said previously that the Bank will make its rate decisions on a meeting-by-meeting basis, after evaluating the data. This means that the next inflation and employment reports will have a critical impact on what the RBA does at next month’s meeting. In the US, Fed Chair Powell remained in hawkish mode in his testimony on Capitol Hill. Powell pointed to the recent string of strong releases and said the Fed would likely need to raise rates more than it had anticipated. Powell said that the Fed would evaluate the need to increase the pace of rate hikes based on the “totality of the data”. The remarks caused a huge shift in market pricing, with the likelihood of a 50-bp at the March 22 meeting rising to 70%, up from 25% prior to Powell’s testimony, according to the CME Group.   AUD/USD Technical 0.6565 is a weak support line. Below, there is support at 0.6402 There is resistance at 0.6626 and 0.6749 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
US dollar pressured by Euro and Swiss franc. EUR and CHF supported by data and a rate hike

The SNB Does Not Provide Forward Guidance For Its Rate Policy

Kenny Fisher Kenny Fisher 07.03.2023 14:16
USD/CHF has rebounded on Tuesday, ending a rally that saw the Swiss franc climb over 1%. In the European session, USD/CHF is trading at 0.9344, up 0.40%. Swiss inflation higher than expected Switzerland released the February inflation report on Monday and the reading was higher than expected. CPI rose 0.7% m/m, up from 0.6% in February and above the 0.4% forecast. On an annualized basis, CPI climbed 3.4%, edging up from 3.3% and higher than the forecast of 3.1%. These inflation numbers would be a dream come true for most major central banks, which are struggling with inflation levels two or three times higher. Still, the Swiss National Bank is concerned about high inflation, as its target is 0-2%. The SNB was widely expected to raise rate by 50 basis points at the rate meeting on March 23 and the uptick in February inflation cements the likelihood of such a move. Swiss National Bank Chair Jordan will make an appearance later today and is likely to address the rise in inflation. The SNB does not provide forward guidance for its rate policy, but the central bank has projected an inflation rate of 2.4% for 2023. With the cash rate currently at 1%, it’s a safe bet that we’ll see another hike in June of either 25 or 50 basis points. The continuing tightening should provide a boost to the Swiss franc, but traders should keep in mind that the SNB has not hesitated to intervene in the foreign exchange market when the Swiss franc became too strong for its liking. In the US, Federal Reserve Chair Powell will be in the spotlight as he testifies before a Senate committee later today. The Fed has remained hawkish and after a host of strong January releases, the markets have shifted their expectations closer to the Fed’s stance. It was only a few weeks ago that the markets were projecting a pause followed by rate cuts, but this has changed to pricing in three more rate hikes this year. There is a lot of uncertainty in the air about inflation and interest rates and the markets are hoping that Powell’s comments will provide some clarity.   USD/CHF Technical There is resistance at 0.9381 and 0.9420 0.9304 and 0.9224 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

The Dovish Tone Of The Statement Has Sent The Australian Dollar Lower

Kenny Fisher Kenny Fisher 07.03.2023 14:12
The Australian dollar continues to lose ground and is sharply lower on Tuesday. In the European session, AUD/USD is trading at 0.6676, down 0.81%. Earlier, the Australian dollar fell as low as 0.6674, its lowest level since December 23rd. RBA delivers a ‘dovish hike’ There were no surprises from the RBA, which hiked rates by 25 basis points and raised the cash rate to 3.6%. This marked a fifth consecutive increase of 25 bp, as the central bank continues to raise rates in modest increments in a bid to curb inflation without choking economic growth. This rate decision was noteworthy in the language of the rate statement, which suggested that the RBA could be nearing the end of the current rate cycle. The statement removed a reference in the February statement to needing to raise rates “over the months ahead”, and instead stated that “tightening of monetary policy will be needed to ensure that inflation returns to target. The markets picked up on this change in language as a dovish signal. As well, the statement explicitly said that inflation had peaked, another hint that multiple rate hikes may not be needed. The dovish tone of the statement has sent the Australian dollar considerably lower today. In the US, Federal Reserve Chair Powell testifies today on the semi-annual monetary policy report. The Fed has been consistently hawkish about the need to continue raising rates and the markets have aligned their expectations closer to the Fed. It was only a few weeks ago that the markets were projecting a pause followed by rate cuts, but this has changed to expectations for three more rate hikes this year. There is a lot of uncertainty in the air about inflation and interest rates after a host of stronger-than-expected data in January, such as a blowout employment report. These strong numbers may have been a blip, and it will be interesting to see if Powell reiterates a hawkish stance and ignores the January numbers. The markets are widely expecting a 25-basis point hike at the March 22 meeting, but a 50 bp increase cannot be discounted, as the Fed has said that the pace of rate hikes could be ‘higher and longer’.   AUD/USD Technical AUD/USD is testing support at 0.6749. Below, there is support at 0.6660 There is resistance at 0.6862 and 0.7025 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Kenny Fisher Kenny Fisher 07.03.2023 10:56
It’s shaping up to be another relatively flat day in the markets as investors turn their attention to Capitol Hill ahead of Jerome Powell’s first testimony. The Fed Chair will appear before the Senate Banking Committee later today to testify on the semi-annual monetary policy report. These events naturally attract a lot of attention but the reality is the Chair’s performance is usually quite polished and uncontroversial, and the occasion itself can drag on and frequently venture away from topic. In other words, we shouldn’t assume we’re about to get fireworks from Powell. What may make this occasion different is the fact that there’s so much uncertainty around the outlook for interest rates and inflation. While the Fed has maintained that rate hikes must continue, the economic data from January has forced markets to adjust to that reality too so there’s every chance we get a hawkish offensive from Powell. Considering the likelihood of the January data being a blip rather than a trend, I think it would probably be wiser for Powell to maintain his previous tone as he may risk spooking the markets but if the FOMC truly is weighing up a 50 basis point hike this month, this would be a good opportunity to lay the groundwork for it. Nearing the end The RBA appeared to soften its tone once more after hiking rates by another 25 basis points today. The central bank is now of the opinion that inflation has peaked and so multiple rate hikes may no longer be the base case. That said, the RBA will decide meeting by meeting and a lot can change in between. Markets are now pricing in at least one more hike in the cycle and maybe two. The Australian dollar is a little lower on the day as the decision was perceived to be a dovish hike. Some promising signs Chinese trade data highlighted some modest improvements but remain quite weak overall. The drop in imports can possibly be attributed to some one-off factors including Covid exit waves and the Lunar New Year and the data will surely improve over the coming months as the economy returns to normal. Exports remained under pressure, although the number was better than expected, indicating still soft global demand which aligns with what we’ve seen recently elsewhere. Hanging on in there Bitcoin has been in consolidation since Friday’s sell-off with traders seemingly fearful of further ripple effects but still willing to hang on for now just in case. It’s been a fantastic year for crypto so far but events late last week were a quick reminder of the challenges facing the industry in the short term and the consequences of that. There’ll also be an eye on Powell’s testimony today as it may influence overall risk appetite in the markets. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

According to Oanda's Kenny Fisher, Kazuo Ueda will be under pressure to tweak the YCC

Kenny Fisher Kenny Fisher 06.03.2023 22:51
The Japanese yen is drifting at the start of the week. In the North American session, USD/JPY is trading just under the 136 line. Japan’s wage growth expected to slow Japan will release Average Cash Earnings for January later today. The wage growth indicator surged 4.8% y/y in December and is expected to slow to 1.9% in January. The sharp jump in December was likely a one-time bump, driven in large part by December bonuses. Wage growth is a key factor in the Bank of Japan’s ultra-loose policy. Governor Kuroda has said that he will not tighten policy, despite rising inflation, until there is evidence that inflation is being driven by wage growth rather than external factors such as commodity prices. Kuroda will chair his final policy meeting on March 10. Barring a huge surprise, Kuroda is expected to maintain policy and not make any changes to the yield control curve (YCC). Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM BoJ Governor-elect Kazuo Ueda takes over from Kuroda in April and has stated has his confirmation hearings that current policy is appropriate. Still, Ueda will be under pressure to tweak the YCC which continues to cause bond market distortion and he could make a change in policy as early as his first policy meeting in April. Federal Reserve Chair Powell will testify before Congress on Tuesday and Wednesday, and inflation will be the hot topic. The Fed’s aggressive rate-hike cycle has led to inflation dropping for seven straight months, and Powell acknowledged last month that the “disinflation” process had finally started. What has complicated matters is a string of better-than-expected releases, notably a sizzling nonfarm payrolls of 517,000 in January. Consumer spending has remained strong and Friday’s ISM Services PMI came in at 55.1 in February, which indicates strong expansion. How will the Fed respond to an economy that is performing better than expected? The markets hope to get some answers this week from Powell’s testimony on the Hill. USD/JPY Technical 136.06 is a weak resistance line, followed by 136.86 135.02 and 134.22 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Will wage growth shake up the yen? - MarketPulseMarketPulse
USD/CAD - Canadian economy added 41,400 jobs beating expectations

Bank of Canada is expected to keep the rate unchanged, NFP expected to come at 200K

Kenny Fisher Kenny Fisher 06.03.2023 17:43
The Canadian dollar is coming off a relatively quiet week but that could change as there a host of key releases this week. Ivey PMI kicks things off later today, followed by the Bank of Canada rate decision on Wednesday and the February employment report on Friday. Canada’s Ivey PMI recorded a massive rebound in January, climbing from 33.4 all the way to 60.1 points. A reading above 50.0 points to expansion. The reading is expected to remain strong in February, with an estimate of 57.7 points. Canada’s economy ended 2022 in an unimpressive fashion, posting a growth rate of 0.0% y/y in the fourth quarter, compared to 2.3% in Q3. This was much lower than the market estimate of 1.5% and the Bank of Canada’s projection of 1.3%. On a monthly basis, December GDP contracted by 0.1%, down from 0.0% in November and below the estimate of 0.0%. BoC expected to pause The Bank of Canada meets on Tuesday and is widely expected to hold rates at 4.50%. A non-move would be significant, as the BoC hasn’t taken a pause since the current rate-tightening cycle began in January 2023. Governor Macklem has signalled to the markets that he wants to take a pause in tightening, and the weak GDP report will support the BoC easing off the rate pedal as the economy shows signs of slowing. The steep hike in rates has pushed inflation lower, as it fell to 5.9% in January, down from 6.3% a month earlier. What will the BoC do after tomorrow’s rate decision? The BoC would love to pause rates throughout the year, but Macklem has made clear that a pause is dependent on supportive data. There is also the complication that the Federal Reserve is likely to continue hiking several more times this year, and the BoC does not want to fall too far out of sync with rate levels in the US. Read next: Important Week For The Australian Dollar And Japanese Yen, BoJ And RBA Monetary Policy Decision Ahead| FXMAG.COM In the US, this week’s key events are Fed Chair Powell’s semi-annual testimony before Congress and the nonfarm payroll report, both of which could move the US dollar. If Powell provides any hints about further rate hikes, the US dollar could respond with gains. Nonfarm payrolls was red-hot in January with 517,000 new jobs, but this is expected to be a one-time bump, with the estimate for February standing at 200,000. The surprisingly resilient labour market has the Fed concerned about wage pressures, and a strong wage growth release could raise market expectations of higher rates. USD/CAD Technical 1.3701 and 1.3784 are the next resistance lines 1.3571 is a weak support line, followed by 1.3478 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Canadian dollar eyes Ivey PMI - MarketPulseMarketPulse
The RBA’s aggressive rate tightening cycle will be continued

The RBA’s aggressive rate tightening cycle will be continued

Kenny Fisher Kenny Fisher 06.03.2023 14:00
The Australian dollar is under pressure at the start of the new trading week. AUD/USD is trading at 0.6735 in Europe, down 0.50%. RBA expected to hike by 25 bp The RBA is widely expected to raise rates by 25 basis points on Tuesday, which would bring the cash rate to 3.60%, the highest level in a decade. The RBA’s aggressive rate tightening cycle has not been as effective as the central bank had hoped, as inflation has been stickier than expected. Australia’s monthly CPI for January dropped to 7.4%, down from 8.4% a month earlier. This drop indicates that rate hikes are having an impact on the economy, but there is a long road ahead before inflation falls back to the RBA’s target of 2-3%. There was some positive news on Monday, as the Melbourne Inflation gauge for February showed a drop in core inflation to 4.9% y/y, down from 5.3% in January. The headline figure remained unchanged at 6.3% y/y. Australian Treasurer Jim Chalmers has said he is “cautiously hopeful” that inflation has peaked, but it’s likely that the RBA will have to hike rates at least one more time before it can hit the pause button. Investors will be keeping a close eye on Governor Lowe’s rate statement, which will likely be hawkish given the stubbornly high inflation levels. Any hints about the need for further rate increases would likely be bullish for the Australian dollar. In the US, it promises to be a busy week. The key events are Fed Chair Powell’s semi-annual testimony before Congress and the nonfarm payroll report, both of which could move the US dollar. The markets will be keeping a close eye on Powell’s remarks and whether he will sound less hawkish, given the recent string of unexpectedly strong US releases. Nonfarm payrolls sizzled in January with 517,000 new jobs, but this is expected to be a one-time bump, with the estimate for February standing at 200,000. The surprisingly resilient labour market has the Fed concerned about wage pressures, and a strong wage growth release could raise expectations for further rate hikes.   AUD/USD Technical AUD/USD is testing support at 0.6749. Below, there is support at 0.6660 There is resistance at 0.6862 and 0.7025 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Technical look: Euro against US dollar - what can we expect from the pair?

Euro against US dollar shaped by inflation prints. Eurozone CPI reached 8.6%

Kenny Fisher Kenny Fisher 02.03.2023 13:55
The euro remains busy and is down 0.40% on Thursday, trading at 1.0624. This follows the euro gaining 0.90% a day earlier. Eurozone inflation falls to 8.6% The euro’s moves today and yesterday have in large part been dictated by inflation releases. Earlier today, Eurozone Final CPI came in at 8.6% for January, down sharply from 9.2% in December. Headline inflation eased for a third straight month, after hitting a peak of 10.6% in October. The core rate has not followed this downward trend and ticked higher to 5.3% y/y in January, up from 5.2% in December. The improvement in headline inflation eased worries that the ECB would have to deliver another 50-basis point hike in May, after the expected 50-bp increase at the March 16 meeting. These concerns that the ECB would remain aggressive pushed the euro almost 1% higher on Wednesday after German inflation edged up to 9.3% in February, up from 9.2% in January and above the estimate of 9.0%. The usual suspects were at play in driving inflation higher – food and energy. The government has provided energy subsidies, but energy prices still shot up in January by 23.1% y/y, while food prices surged 20.2% in January y/y. In addition to the German inflation report, France and Spain also recorded unexpectedly strong inflation. The eurozone data calendar will wrap up with German and eurozone Service PMIs, which have been showing improvement and are back in expansion territory, an indication of a pickup in economic activity. The German PMI is expected at 51.3 and the eurozone PMI at 52.3 points. Read next: Patrick Reid on Kazuo Ueda's testimony: the speech did not give any clues away and kept many of us guessing| FXMAG.COM In the US, the Federal Reserve remains hawkish with its message that higher rates are on the way. Fed member Bostic reiterated this stance, saying that the terminal rate would be between 5% and 5.25% and have to remain at that level well into 2024. The markets have priced in a terminal rate of 5.50%, but worries over sticky inflation have led to some calls for rates to rise as high as 6%. EUR/USD Technical EUR/USD is testing support at 1.0655. Below, there is support at 1.0596 There is resistance at 1.0765 and 1.0894 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD dips as eurozone inflation eases - MarketPulseMarketPulse
The RBA Is Expected To Raise Rates By 25bp Next Week

The RBA Is Expected To Raise Rates By 25bp Next Week

Kenny Fisher Kenny Fisher 01.03.2023 14:17
The Australian dollar is showing strong gains for the first time in a week. AUD/USD is trading at 0.6764 in Europe, up 0.53%. Australia’s inflation eases Australia’s inflation fell to 7.4% in January, down from 8.4% in December and below the estimate of 8.0%. Australian Treasurer Jim Chalmers said that he was “cautiously hopeful” that inflation has peaked, but inflation still remained the economy’s biggest challenge. The GDP report was not as positive, with a gain of 0.5% q/q in Q4, below the Q3 gain of 0.7% and the forecast of 0.8%. On an annualized basis, GDP slowed to 2.7% in Q4, down sharply from 5.9% in the third quarter. The RBA’s rate-hike cycle has slowed economic activity and is responsible for the drop in inflation as well as the soft GDP. The central bank will have to consider how aggressive it should be with regard to future rate increases. Inflation needs to come down much further, but further rate hikes raise the risk of the economy tipping into a recession. The RBA is expected to raise rates by 25 basis points next week but may pause at the April meeting if the data, particularly inflation, allows the Bank to take to a breather. The Aussie received a boost today from strong Chinese PMIs. Manufacturing and Non-manufacturing PMIs improved in February and beat expectations, with readings of 52.6 and 56.3, respectively. A reading above 50.0 indicates expansion. China is Australia’s largest trading partner and a stronger Chinese economy means greater demand for Australian exports, which is bullish for the Australian dollar. China’s transition from zero-Covid to reopening the economy has gone well so far and a rebound in China is important not just for China and the region but for the global economy as well. Read next: Euro Is Rising, USD/JPY Falls Below 136.00, The Aussie Pair Also Gains| FXMAG.COM AUD/USD Technical AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

There Is A Strong Chance Of The Canadian Economy Tipping Into A Recession By Mid-2023

Kenny Fisher Kenny Fisher 28.02.2023 14:57
Canadian GDP expected to slow in Q4 It’s a very light data calendar for Canadian releases this week, with today’s GDP report the sole tier-1 event. Canada’s economy is expected to slow to 1.5% y/y in the fourth quarter, following a solid 2.9% gain in Q3. A slowdown in economic activity is what the Bank of Canada is looking for, as inflation remains public enemy number one.  CPI is moving in the right direction as it fell to 5.9% in January, down from 6.3% in December. The BoC is optimistic that the downturn will continue, with a forecast that inflation will fall to 3% by mid-2023 and hit the 2% target by the end of the year. The BoC will have to tread carefully in this tricky economic landscape. The economy is cooling and while inflation is easing, it remains much higher than the 2% target and will require additional rate hikes which will make a soft landing a difficult endeavour. If growth continues to weaken in 2023, there is a strong chance of the economy tipping into a recession by mid-2023. The Bank meets next on March 8 and the markets are expecting a 0.25% hike for the second straight time. The Bank would like to take a pause in its tightening cycle but this will require a substantial drop in inflation. In the US, strong employment and consumer data and stubborn inflation have supported the Fed’s hawkish stance and there is talk of the Fed raising rates as high as 6%. It was only a few weeks ago that the markets were talking about a ‘one and done’ rate hike in March, followed by a long pause and perhaps some cuts by year’s end. This has all changed as the US economy has proven to be surprisingly resilient, despite rising rates and high inflation. The markets are currently pricing in three more rate hikes this year, but that could change in a hurry if key releases in February show that the economy is slowing down.   USD/CAD Technical There is resistance at 1.3701 and 1.3794 1.3570 is under strong pressure in support. 1.3478 is the next support line This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

Whether The RBA Will Be Able To Avoid A Recession?

Kenny Fisher Kenny Fisher 28.02.2023 14:46
The Australian dollar remains under pressure and has edged lower on Tuesday. AUD/USD dropped below the 0.67 line on Monday for the first time since Jan. 3. Australian retail sales bounce back Australian retail sales jumped 1.9% m/m in January, following an upwardly revised 4% decline in December and beating the consensus of 1.5%. The data indicates that consumer demand remains resilient despite rising interest rates and higher inflation. For the RBA, the upswing in consumer spending is a sign that the economy can continue to bear higher rates. The central bank has hiked some 325 basis points since May 2022 in a bid to curb inflation. The cash rate is currently at 3.35% and the markets have priced in a peak rate of 4.3%, with four rate hikes expected before the end of the year – one more than what is expected for the Fed. The RBA meets on March 7 and is widely expected to raise rates by 25 basis points. Wednesday could be a busy day for the Australian dollar, as Australia releases inflation and GDP reports. Inflation for January is expected to ease to 7.9% y/y, following an 8.4% gain in December. GDP for the fourth quarter is projected to slow to 2.7% y/y, after a robust gain of 5.9% in Q3. A decline in inflation and in GDP would indicate that high interest rates are having their intended effect and slowing economic activity. The question is whether the RBA will be able to guide the slowing economy to a soft landing and avoid a recession. In the US, a recent string of strong numbers has raised speculation that the Fed could raise interest rates as high as 6%. The unseasonably warm weather in January may have played a part in the better-than-expected numbers and we’ll have to see if the positive data repeats itself in February. The markets have shifted their stance from a final rate hike in March with rate cuts late in the year to pricing in three more rate hikes in 2023. If upcoming inflation, employment and consumer spending reports point to a weaker economy, we can expect the markets to revert to pricing in a dovish pivot by the Federal Reserve.   AUD/USD Technical AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

The Kiwi Pair (NZD/USD) Touched Its Lowest Level

Kenny Fisher Kenny Fisher 27.02.2023 14:07
The New Zealand dollar has extended its losses on Monday, after a dismal end to the week. In the European session, NZD/USD is trading at 0.6151, down 0.20%. Earlier, NZD/USD touched a low of 0.6131, its lowest level since Nov. 23. The US dollar flexed its muscles against the majors on Friday, courtesy of a sharp rise in the US personal consumption expenditures price index (PCE), the Fed’s preferred inflation indicator. Headline PCE inflation climbed 0.6% m/m in January, up from 0.2% in December and above the estimate of 0.5%. Core PCE inflation also rose 0.6% m/m, above the December reading of 0.4%, which was also the forecast. As well, Personal Spending in January surged 1.8%, compared to -0.1% in December and an estimate of 1.3%. The uptake from the better-than-expected inflation and consumer data is that the economy remains resilient and the Fed may have to raise rates even higher, perhaps closer to 6%. The markets have quickly shifted from expecting a hold in rate cuts to pricing three more rate increases this year, and the US dollar is showing gains on expectations that more rate hikes are coming.  Following the PCE release, Fed member Mester said she wasn’t surprised by the strong numbers and said that the Fed needed to do more to put inflation on a “sustainable downward path to 2%”. New Zealand retail sales decline In New Zealand, retail sales for Q4 disappointed at -0.6% q/q, down from an upwardly revised 0.6% reading in Q3 and shy of the estimate of 1.5%. This marks the third decline in four quarters. The core rate fell by 1.3%, compared to an upwardly revised 0.6% in Q3 and an estimate of 1.5%. The central bank remains in aggressive mode and raised rates by 0.50% last week, bringing the cash rate to 4.75%. The decline in retail sales signals that the extensive tightening is taking a bite out of economic activity, which is necessary in order for inflation to decline. Read next: BNP Paribas Sued For Providing Financial Services To Companies That Allegedly Contribute To Deforestation Of The Amazon Rainforest| FXMAG.COM NZD/USD Technical 0.6124 is under pressure in support. Below, there is support at 0.6049 0.6193 and 0.6245 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The German economy underperformed in the Q4 of 2022, GDP declined

The German economy underperformed in the Q4 of 2022, GDP declined

Kenny Fisher Kenny Fisher 24.02.2023 14:28
The euro is down slightly on Friday. EUR/USD has been slowly moving lower and is down 1.1% this week. German GDP misses estimate The German economy, the biggest in the eurozone, underperformed in the fourth quarter of 2022. GDP declined by 0.4% in Q4 2022 q/q, below the 0.5% gain in Q3 and shy of the forecast of -0.2%. On an annualized basis, GDP slowed to 0.9%, down from 1.4% in Q3 and below the forecast of 1.1%. It was a rough end to 2022 for the German economy – the energy crisis, high inflation and the end of fuel subsidies all contributed to negative growth in the fourth quarter. The German consumer spent less in Q4 compared to Q3, but the silver lining is that consumer confidence continues to rise. GfK Consumer Climate is estimated to have improved to -30.5 in March, up from -33.8 in February. Consumer confidence is still deep in negative territory but has now accelerated over five consecutive months. The Federal Reserve remains in hawkish mode, as members continue to remind the markets that inflation is too high and more rate hikes are coming. The recent employment and retail sales reports helped convince the markets that the Fed means business, and investors are no longer talking about a ‘one and done’ rate hike in March with rate cuts before the end of the year. The markets appear to have bought into the ‘higher and longer’ stance that the Fed has been pushing, and expectations of a 0.50% hike in March have risen. According to CME’s FedWatch, the markets have currently priced the odds of a 25-basis point hike at 76% and a 50-bp increase at 24%. Earlier this week, the split was 83% for a 25-bp hike and 17% for a 50-bp rise.   EUR/USD Technical 1.0604 is a weak resistance line. Above, there is resistance at 1.0704 There is support at 1.0513 and 1.0413 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

The BoJ is hoping that the government’s massive stimulus package will help bring down inflation

Kenny Fisher Kenny Fisher 24.02.2023 13:45
The Japanese yen is slightly weaker on Friday. In the European session, USD/JPY is trading just above the 135 line. Ueda pledges to continue easy policy Incoming Bank of Japan Governor Kazuo Ueda appeared at a parliamentary hearing on Friday and the markets were all ears. The buzz-word from Ueda was ‘continuity’, which really wasn’t a surprise. Ueda has already said that the current policy is appropriate and he maintained this stance at the hearing. Ueda said that ultra-low rates are needed while the economy is fragile and ruled out fighting inflation by tightening policy. With inflation running at 4%, above the BoJ’s target of 2%, there is pressure on Ueda to abandon or at least adjust the Bank’s yield control policy (YCC), which is being criticised for distorting market functions. Ueda treated this hot potato with caution. He acknowledged that the YCC had caused side effects but said that the BoJ should evaluate whether recent steps such as widening the band around the yield target would ease these problems. The takeaway from Ueda’s testimony is that he is in no hurry to shift central bank policy. Still, there is strong pressure on Ueda to address YCC, which is damaging the bond markets. Investors should not discount the possibility that Governor Kuroda could widen the target yield band at the March meeting in order to relieve pressure on Ueda. If Kuroda doesn’t act, the bond markets could respond with massive selling before Ueda takes the helm of the BoJ in April. The inflation pressures facing the BOJ were underscored by National Core CPI for January, which rose from 4.0% to 4.2%. This was just shy of the 4.3% estimate, but still the highest reading since 1981. The BoJ has insisted that inflation is temporary (remember that line from the ECB and the Fed?), and is hoping that the government’s massive stimulus package, which includes subsidies for electricity, will help bring down inflation.  Read next: Visa Success At The Expense Of Small Businesses| FXMAG.COM USD/JPY Technical USD/JPY is testing resistance at 134.85. Above, there is resistance at 135.75 1.3350 and 131.90 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  Source: Yen edges lower after BoJ's Ueda testimony - MarketPulseMarketPulse
Market Focus: European Data Releases, ECB Survey, US FOMC Minutes, and UK Bond Supply

The RBNZ Raised Rates And New Zealand Dollar (NZD) Moved Higher But Quickly Pared Those Gains

Kenny Fisher Kenny Fisher 23.02.2023 14:08
The New Zealand dollar remains in calm waters, with little reaction to the Reserve Bank of New Zealand’s rate hike or the FOMC minutes. The RBNZ raised rates by a half-point on Wednesday, as the central bank remains aggressive in its battle to curb inflation. The move was in line with expectations and the New Zealand dollar moved higher but quickly pared those gains. The increase brings the cash rate to 4.75%, its highest level since 2009. With inflation running at a 7.2% clip, the RBNZ will have to keep raising rates until there is clear evidence that inflation has peaked. There was a strong possibility that the RBNZ would deliver a second straight hike of 0.75%, but Cyclone Gabrielle, which caused massive damage, led the bank to opt for a more modest hike of 0.50%. RBNZ Governor Orr said that it was too early to assess the monetary policy implications of Gabrielle but Orr noted that the rebuilding efforts would add to inflationary pressures. The rate statement was crystal clear with regard to future policy. The statement said although there are signs of inflation falling, the core rate and inflation expectations are too high and “monetary conditions need to tighten further” in order to bring inflation back down to the target of 1%-3%. FOMC says more hikes needed The FOMC minutes sounded a lot like the RBNZ statement, with Fed policy makers saying that there were signs that inflation had eased but more rate hikes were needed to lower inflation back to the 2% target. The minutes noted that the labour market remains robust, which is contributing to continuing upward pressures on wages and prices.” The Fed meeting took place before the blowout January employment report, and concerns over a hot labour market will be even more amplified. An important takeaway from the minutes is that although the vote to hike by 0.25% was unanimous, two members (Bullard and Mester) saw a case for a 0.50% increase. The Fed has been consistent in its hawkish stance, and what has changed over the past few weeks is that market pricing is more aligned with the Fed, with the markets no longer projecting a rate cut late in the year. Still, market pricing could shift again if the next batch of key data weakens ahead of the March 22 meeting. Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM NZD/USD Technical There is resistance at 0.6275 and 0.6357 0.6162 and 0.6080 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
GBP/USD Trading Plan: Bulls Eyeing Further Growth, Resistance Level Holds Key, COT Report Signals Interest Rate Expectations

The RBNZ Gave The New Zealand Dollar (NZD) A Brief Boost

Kenny Fisher Kenny Fisher 22.02.2023 12:43
The New Zealand dollar jumped after the Reserve Bank of New Zealand meeting but has pared most of these gains. In the European session, NZD/USD is almost unchanged at 0.6216. RBNZ hikes by 50 basis points The RBNZ delivered a 50 bp rate increase today, bringing the cash rate to 4.75%, its highest level since 2009. The move was widely expected, but a hawkish tone from the central bank gave the New Zealand dollar a brief boost. The rate statement noted that while there are signs that inflationary pressures are easing, CPI remains too high. The statement said that the cash rate “still needs to increase” in order to get inflation back to the Bank’s target of 1%-3%. There is plenty of life left in the RBNZ’s rate-tightening cycle, as the central bank has forecast a peak rate of 5.5% later this year. The next rate meeting is in April, and as things stand, we can expect another 50-bp hike at that time. Inflation is running at a 7.2% clip and a 75-bp hike was a strong possibility at today’s meeting before Cyclone Gabrielle hit and caused damage in the billions of dollars. This is expected to dampen growth in the slow term, although the rebuild should boost inflation. In the US, Manufacturing PMI was almost unchanged at 47.8, while Services PMI improved to 50.5, an 8-month high. The 50.0 level separates contraction from expansion, and both services and manufacturing have been in decline for months, as high inflation and rising interest rates have dampened activity in these sectors. The Fed will release the minutes of its February meeting, when it delivered a 25-basis point hike. The markets will be interested in the extent of support for a 50-bp hike at the meeting. The blowout employment report and a strong retail sales release have forced the markets to come closer to the Fed’s stance, and there is now talk of more rate hikes this year, when only a few weeks ago the markets were confidently projecting rate cuts in late 2023. Read next: Sweden And Finland Are Getting Closer To Becoming NATO Members| FXMAG.COM NZD/USD Technical There is resistance at 0.6245 and 0.6357 0.6162 and 0.6049 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

The Reserve Bank of Australia keeps getting in the way of the Australian dollar

Kenny Fisher Kenny Fisher 21.02.2023 14:45
The Australian dollar is in negative territory on Tuesday. In European trade, AUD/USD is trading at 0.6876, down 0.50%. RBA minutes indicate concern over inflation The Reserve Bank of Australia keeps getting in the way of the Australian dollar. RBA Governor Lowe appeared before a parliamentary committee last Wednesday and confirmed that further rate hikes were on the way as inflation was still unacceptably high. The Aussie responded by dropping 1.1%. The RBA minutes were released today and members expressed concern at the upside risk to inflation, noting that there was “more breadth and persistence” in inflation. The hawkish tone of the minutes has boosted rate-hike bets but the Australian dollar remains under pressure over concerns that the RBA is having trouble getting a handle on inflation, despite its aggressive rate-tightening cycle. Again, the Aussie has responded with losses. How much higher will interest rates go? That will depend to a large extent on upcoming data, starting with Wednesday’s Wage Price Index for Q4. Wages are expected to have climbed 3.5% y/y in Q4, up from 3.1% and the highest level since September 2012. Wages are an important driver of inflation and higher wages will make it more difficult for the Bank to curb inflation. The RBA minutes also indicated that members debated whether to raise rates by 25 or 50 basis points. Ultimately, the RBA opted for a modest 25-bp increase, which brought the cash rate to 3.35%. The money markets are projecting a terminal cash rate of 4.25% by August, which means that the RBA will likely be busy in the coming months. We’ll also hear from the Federal Reserve on Wednesday, with the release of the minutes from the February meeting. The Fed didn’t have any surprises and raised rates by 25 basis points. The markets will be looking to see how close the Fed was to hiking by 50 basis points. If the rate decision was a close call, the US dollar could continue to rally. Read next: The Pound Gained After The Publication Of PMI Reports, Euro Is Below 1.07, USD/JPY Pair Is Above 134.50| FXMAG.COM AUD/USD Technical AUD/USD is testing support at 0.6907. Below, there is support at 0.6784 There is resistance at 0.7001 and 0.7124 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

The RBNZ Is Widely Expected To Deliver A 50-Bp Increase

Kenny Fisher Kenny Fisher 21.02.2023 14:17
The New Zealand dollar is slightly lower on Tuesday. NZD/USD declined over 0.50% earlier but has pared most of these losses and is trading at 0.6240, down 0.20%. RBNZ expected to hike by 50 bp The Reserve Bank of New Zealand will meet on Wednesday, its first policy meeting this year. The Bank last met in November, at which time it hiked rates by a record 75 basis points, bringing the cash rate to 4.25%. There had been expectations of another 75-bp increase at tomorrow’s meeting, but Cyclone Gabrielle has thrown a monkey wrench into the decision. The cyclone, which caused damage in the billions of dollars, has raised concerns about the economy and the RBNZ is widely expected to lower gears and deliver a 50-bp increase. In the short term, the major disruptions from the cyclone are projected to raise inflation, which is already running at 7.2%, its highest level since 1990. Aside from Gabrielle, there are signs that inflation may have peaked. Inflation Expectations eased in Q1 to 3.3%, down from 3.6% in Q4 2022. Inflation hit 7.2% in the final quarter of 2022, lower than the RBNZ’s forecast of 7.5%. The RBNZ still has its foot on the brake, but if inflation continues to head lower, we can expect the Bank to ease up on the pace of rates in the coming meetings. In the US, we’ll get a look at the February PMI reports. Recent US numbers have beaten expectations, including employment growth, retail sales, and inflation. This is not a complete picture of the economy, as the services and manufacturing sectors have been in contraction territory for months, with readings below the 50.0 level. This negative trend is expected to continue, with Manufacturing PMI expected at 47.3 and Services PMI at 47.2 points. Read next: Baltic Pipe Is Alternative Energy Source For Poland| FXMAG.COM NZD/USD Technical There is resistance at 0.6275 and 0.6357 0.6162 and 0.6080 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Expect the ECB to keep increasing rates at the short-term, at least until the summer

The Disinflation Process Has Not Started In The Eurozone

Kenny Fisher Kenny Fisher 20.02.2023 14:19
The euro showed some volatility at the start of last week but since then it has been in calm waters and has stayed close to the 1.0.7 line.We’ll get a look at eurozone and German PMIs on Tuesday. ECB signals another 50 bp hike The ECB has been criticized for sending mixed messages to the markets, but Christine Lagarde was crystal clear last week when she told EU lawmakers that “in view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March”. Lagarde said the ECB would then evaluate future moves, but with inflation still high, the risks for further rate hikes are skewed to the upside. The ECB’s primary focus is to tame inflation. Headline inflation fell to 8.5% in January, down from 9.2% in December, but is still unacceptably high. Core CPI has been stickier than expected and wage increases are stemming the drop in inflation. ECB member Isabel Shnabel said last that investors risk underestimating inflation, a warning that the Fed has also made to the markets that have consistently been more dovish about rate policy than the Fed. Schnabel noted that the disinflation process has not started in the eurozone, another signal that the central bank will remain in a hawkish mode for the near future. Fed members continue to pound out the message that inflation remains too high and more rate hikes are needed. Investors are clearly concerned that the Fed will make good on these statements, which has sent risk sentiment lower and the US dollar higher. The markets had high hopes that the March rate increase would be a ‘one and done’, but it looks like the Fed will continue raising rates into the second quarter. According to CME’s FedWatch, the markets have priced in an 83% of a 25-bp hike and a 17% of a 50-bp increase. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0704. Above, there is resistance at 1.0795 1.0604 and 1.0513 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

The US Dollar Is Broadly Higher And Has Pummelled The Yen, USD/JPY Broke Above 135.00 Today

Kenny Fisher Kenny Fisher 17.02.2023 13:52
The Japanese yen is down sharply on Friday. In the European session, USD/JPY is trading at 134.93, up 0.73%. The yen fell below 135 earlier today for the first time since December 23. Solid US data sends dollar higher The US dollar is broadly higher and has pummelled the yen, climbing 2.6% this week. Strong US numbers have boosted the dollar, as the Fed is likely to remain hawkish with the economy remaining strong. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Consumer inflation ticked lower but was stronger than expected. Is the disinflation process stalled? The economy has proven to be surprisingly resilient to rising interest rates, leading to hopes for a soft landing or even a ‘no landing’. The Fed has been consistent in its message of ‘higher for longer’ with regard to rates, but the markets haven’t really been listening, assuming that the Fed would have to pivot and even cut rates later in the year. The stronger-than-expected releases, from nonfarm payrolls to inflation to retail sales have forced the markets to revise their stance and move closer to the Fed position that the terminal rate will be above 5%. Fed speak remains hawkish Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn’t falling quickly enough. Mester said that she didn’t see inflation falling to 2% until 2025, which points to a long disinflation process. The depreciation of the yen will be raising eyebrows in Tokyo. The Bank of Japan and the Ministry of Finance have often voiced unease when the yen has plunged and this has led to currency interventions in order to prop up the yen. It’s a delicate time for the Bank of Japan, as Kozo Ueda is set to take over as Governor in April. If the yen continues to lose ground, we’re sure to hear warnings from the BoJ and the Ministry of Finance, possibly with threats of intervention. Read next: Wyoming Prohibits Forced Disclosure Of Private Cryptographic Keys By US State Courts, JP Morgan Projections Of FX Market| FXMAG.COM USD/JPY Technical USD/JPY is testing resistance at 134.47. Above, there is resistance at 136.05 There is support at 1.3355 and 1.3296 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Kenny Fisher Kenny Fisher 17.02.2023 10:29
The euro is down for a third straight day and fell earlier to 1.0629, its lowest level since Jan. 23. In the European session, EUR/USD is trading at 1.0639, down 0.30%. US dollar flexing muscles The US dollar is showing some strength this week against the majors, as US data continues to shine. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Is the disinflation process stalled? The markets didn’t expect such good numbers, but the economy has proved to be surprisingly resilient to rising interest rates. The Fed has been preaching ‘higher for longer’ for some time, but the markets stuck to their dovish stance, expecting that the Fed would have to pivot and even cut rates later in the year. The host of strong US numbers has forced investors to recalibrate, and the markets have revised upwards their peak rate forecast to above 5%. The US dollar has been the big winner of the shift in market thinking, and US Treasury yields are at their highest level this year. Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn’t falling quickly enough. Mester said that she didn’t see inflation falling to 2% until 2025, which points to a long disinflation process. The ECB raised rates by 50 basis points in February and has signalled that it will do the same at the Mar. 16 meeting. The main financing rate is currently at 3%, well below the Fed (4.5%) and other major central banks. It’s not clear what the Bank has planned after the first quarter, but with inflation running at 8.5%, the risk for further rate hikes is skewed to the upside. The ECB has made it clear that rates will remain high until there is evidence that inflation is falling toward the target, which means that the current rate-tightening cycle isn’t anywhere near its end. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM EUR/USD Technical EUR/USD is testing support at 1.0629. Below, there is support at 1.0581 1.0762 and 1.0847 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
USD/CAD - Canadian economy added 41,400 jobs beating expectations

Forex: Kenny Fisher comments on US dollar against Canadian dollar - February 16th

Kenny Fisher Kenny Fisher 17.02.2023 00:04
The Canadian dollar continues to lose ground on Thursday. In the North American session, USD/CAD is trading at 1.3461, up 0.50%. Soft data weighs on Canadian dollar Weak Canadian releases are weighing on the Canadian dollar, which is down about 1% this week. Housing Starts fell to 215 thousand y/y, down from 248,000 (est. 240,000) and the lowest level since October 2020. Manufacturing Sales came in at -1.5% m/m, down from -0.2% (est. -1.8%). The Bank of Canada raised rates by 25 basis points in January, bringing the cash rate to 4.50%. At the meeting, the BoC signalled that it would hold rates at this level while it assessed the impact of its steep rate-tightening cycle. Inflation dropped to 6.3% in December, down from 6.8% and the lowest since February 2022. The battle with inflation isn’t won yet, but the BoC is quite optimistic, projecting that headline inflation will drop to just 2.6% in 2023. Lower inflation is unlikely to lead to rate cuts as long as wage growth, a key driver of inflation, remains strong. Read next: Judging from FxPro analyst's words, the US economy is doing well, but... | FXMAG.COM The BoC doesn’t have it easy when it comes to establishing rate policy, since Canada’s economy is so heavily dependent on the US. Currently, signs are pointing to the US experiencing a mild recession, but a more severe downturn in the US economy would dampen Canada’s export-reliant economy. In the US, we continue to see stronger-than-expected releases. The US Producer Price Index slowed to 6.0% in January, down from 6.5% but stronger than the estimate of 5.4%. This follows the January CPI report that ticked lower to 6.4% but was higher than the 6.2% estimate. Retail sales delivered an impressive gain of 3% in January, above the estimate of 1.8%. This was a strong rebound from the December reading of -1.1% and marked the largest gain since January 2022.  These strong numbers have boosted the US dollar, as the Fed will likely raise rates higher and for longer in order to put the brakes on the resilient economy and bring down inflation. USD/CAD Technical USD/CAD is testing resistance at 1.3439. Next is resistance at 1.3528 1.3386 and 1.3297 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Canadian dollar extends losses - MarketPulseMarketPulse
Ipek Ozkardeskaya: BoE will certainly leave the door open for further hikes

The Markets Are Braced For Bad News Form UK Report

Kenny Fisher Kenny Fisher 16.02.2023 14:22
The British pound has steadied on Thursday. In the European session, GBP/USD is trading at 1.2053, up 0.25%. This follows a sharp drop of 1.2% a day earlier. UK inflation continues to fall but remains disturbingly high. Headline inflation fell to 10.1% in January, down from 10.5% in December and below the consensus of 10.3%. The drop in inflation is welcome news, but food prices, a key driver of inflation, surged by 16.8% in January. With inflation still in double digits, the Bank of England will have to continue raising rates, with the most likely scenario being a 25-basis increase at the Mar. 22 meeting. The market probability of a 25-bp hike rose as high as 73% on Wednesday before dipping to 66% today, according to Refinitiv data. In the US, retail sales delivered an impressive gain of 3% in January, above the estimate of 1.8%. This was a strong rebound from the December reading of -1.1% and marked the largest gain since January 2022. This positive release follows the January inflation report that ticked lower to 6.4% but was higher than expected. These strong numbers translated into strong gains for the US dollar on Wednesday, as the Fed will likely raise rates even higher in order to put the brakes on the strong economy. The UK wraps up the week with retail sales on Friday. The markets are braced for bad news, with an estimate of -5.5% y/y for the headline figure (-5.8% prior) and -5.3% for the core rate (-6.1%). A weak retail sales report could sour investors on the pound and send the currency lower.   GBP/USD Technical GBP/USD tested resistance at 1.2071 earlier in the day. The next resistance line is 1.2180 1.1958 and 1.1838 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

Analysis Of The Aussie Pair, Lowe Is Insistent That The Number One Priority Is To Curb Inflation

Kenny Fisher Kenny Fisher 16.02.2023 12:34
It has been a busy session for the Australian dollar, which started the day with losses but has recovered. In European trade, AUD/USD is trading at 0.6919, up 0.23%. Mixed Australian data Australia delivered some mixed data earlier today. The headline Employment Change for January surprised on the downside at -11,500 after -14,600 prior, well below the forecast of 20,000. There was better news on the inflation front, as Consumer Inflation Expectations for February fell to 5.1%, down from 5.6% expected and prior. The Australian dollar initially declined after these releases but has recovered and eked out small gains. The Aussie had a miserable outing on Wednesday, falling 1.1%. This was courtesy of hawkish remarks from RBA Governor Lowe, which unnerved investors. Lowe appeared before a parliamentary committee and confirmed that further rate hikes are on the way. The central bank has tightened sharply but this has not brought down inflation. In December, CPI hit 7.8%, the highest level since 1990, which Lowe admitted was “way too high”. The double whammy of rising rates and red-hot inflation is squeezing households and businesses, but Lowe is insistent that the number one priority is to curb inflation and avoid inflation expectations from becoming entrenched. US retail sales surprised with a huge 3% gain in December, the largest gain since January 2022. This rosy reading comes on the heels of an inflation release that was higher than expected. These strong numbers should have been bullish for the US dollar, as the Fed will likely raise rates even higher in order to put a brake on the strong economy. Investors, however, shrugged off the inflation and retail sales data and sent equities higher on Wednesday with a “bad news is good news” view. With risk appetite still intact, the US dollar hasn’t been able to capitalize on the inflation and retail sales releases. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM AUD/USD Technical AUD/USD is testing resistance at 0.6929. Above, there is resistance at 0.7001 0.6846 and 0.6774 and providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Bank of England hikes rates and keeps options open for further increases

UK Inflation Continues To Fall, But Also British Pound (GBP) Too

Kenny Fisher Kenny Fisher 15.02.2023 14:08
UK inflation falls but remains above 10% The British pound is sharply lower on Wednesday. In the European session, GBP/USD is trading at 1.2069, down 0.88%. UK inflation continues to fall, although it clearly has a long way to go. January’s inflation dropped to 10.1%, down from 10.5% in December and below the consensus of 10.3%. The core rate dropped to 5.8%, down from 6.3% in December and lower than the consensus of 6.2%. These numbers offer room for a bit of optimism, as does the drop in wage growth on Tuesday. Still, inflation is a bumpy road that will feature highs and lows and market participants would be wise not to make decisions based on one release. With headline inflation still in double digits, the Bank of England will have to continue raising rates, with the most likely scenario being a 25-basis increase at the Mar. 22 meeting. In the US, inflation in January ticked lower to 6.4%, down from 6.5% but higher than the forecast of 6.2%. It was a similar story for the core rate, which dropped from 5.7% to 5.6% and was above the forecast of 5.5%. Inflation is still falling but the trend may be stalling, which will provide support for the Federal Reserve’s hawkish stance. After the US inflation release, several Fed members reiterated the “higher for longer” theme. Fed members Barkin, Logan and Harker all had a similar message that the Fed would likely raise rates if inflation did not fall fast enough. The Fed has projected a federal funds rate of 5% to 5.5% by the end of the year, but given the strong economy and high inflation levels, there have been forecasts of a terminal rate as high as 6%.   GBP/USD Technical 1.2180 has strengthened in resistance as GBP/USD is down sharply. 1.2304 is the next resistance line 1.2071 and 1.1947 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Asia Morning Bites - 04.05.2023

The NAB Noted That Firms Are More Optimistic About Global Growth

Kenny Fisher Kenny Fisher 14.02.2023 14:45
The Australian dollar is unchanged on Tuesday, after starting the week with strong gains. In the European session, AUD/USD is trading at 0.6966. Australia’s Business Confidence jumps Australia’s NAB Business Confidence rebounded in January, rising from 0 to 6 and above the forecast of 1 point. Business Conditions rose to 18, up from 13 and higher than the forecast of 8 points. This follows three months of softening in late 2022. The NAB noted that firms are more optimistic about global growth and the jump in business conditions is a sign that the economy is more resilient than previously expected. The positive news failed to send the Aussie higher, as the markets are waiting for today’s US inflation report. Reserve Bank of Australia Governor Lowe will be on the hot seat when he appears before parliamentary committees on Wednesday and Friday. Inflation rose to 7.8% in December, its highest level since 1990. The RBA has hiked rates by some 325 basis points in 10 months, yet inflation isn’t showing signs of peaking. The RBA raised rates by 25 bp last week and Lowe has signalled that more increases will be needed to tame inflation. Inflation isn’t expected to fall to the RBA’s target of 2% to 3% until 2025. Lowe has faced a barrage of criticism in his handling of inflation and interest rate policy and it’s far from certain that he will be reappointed for another term. Lowe is likely to face a grilling from the committee members, who may be thinking that “something isn’t working here”. All eyes on US inflation The US releases January inflation later today. Inflation is projected to fall to 6.2%, down from 6.5%, but there is unease in the markets that headline inflation might be stronger than expected. The sizzling jobs report indicated that the US labour market remains strong and January has seen higher energy and used car prices. The markets aren’t as confident that the Fed will cut rates late in the year and if the inflation report is higher than expected, the markets could fully price in two more rate hikes. This would be a major shift towards the Fed stance, as Jerome Powell has been saying for months that the pace of rate hikes will likely be higher and longer than previously expected. Recent inflation reports have overestimated inflation and the US dollar has responded with sharp losses. Today’s inflation report will likely follow that pattern, and if inflation is weaker than expected, the dollar should lose ground. Conversely, the dollar should get a boost if inflation is higher than expected.   AUD/USD Technical 0.6962 is a weak resistance line, followed by 0.7080 0.6841 and 0.6761 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
InstaForex's Ralph Shedler talks Euro against Japanese yen

Markets Saw Kauza Ueda's Appointment As A Signal To Change Policy Of BoJ But Ueda Himself Suppressed This View

Kenny Fisher Kenny Fisher 13.02.2023 14:18
The Japanese yen has started the week with sharp losses. In the European session, USD/JPY is trading at 132.54, up 0.86%. Japan’s GDP expected to rebound There are high hopes for the Japanese economy, which is expected to climb by 2% in the fourth quarter, following a 0.8% decline in Q3. Japan reopened to tourists in October, which fueled a recovery in the services sector and this will likely boost GDP. Even so, the economy has headwinds to deal with such as higher inflation and a weaker global economy, which will likely weigh on growth in 2023 Q1. Ueda to take over at BoJ There has been a guessing game over the successor to Haruhiko Kuroda as Governor of the Bank of Japan and press reports about a successor have generated plenty of volatility from the Japanese yen. Last week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen briefly lower, as Amamiya is considered a dove. Amamiya declined the offer and in a surprise move, the BoJ has decided to appoint Kazua Ueda. The news initially resulted in yen buying, as the markets viewed the choice as a signal for fresh thinking and a change in policy. This view was quickly dampened by Ueda himself, who said on Friday that current policy settings were appropriate. This has sent the yen sharply lower on Monday. Ueda may be trying to sound diplomatic in order to avoid any waves ahead of his appointment, and it’s very possible he will tighten policy once he’s in charge. In the meantime, the BoJ is expected to maintain its ultra-loose policy, so the yen won’t be getting any help from the BoJ for the time being. Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM USD/JPY Technical USD/JPY has support at 131.38 and 130.71 There is resistance at 132.96 and 134.18 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
InstaForex's Ralph Shedler talks Euro against Japanese yen

The Question Of Who Will Become The Next BoJ Governor Has Resulted In Volatility For The Yen

Kenny Fisher Kenny Fisher 10.02.2023 14:07
It has been a busy day for the Japanese yen, which jumped as much as 1.1% today before paring most of those gains. In the European session, USD/JPY is trading at 131.04, down 0.37%. Report says BoJ has chosen next governor The Japanese yen posted sharp gains after a Nikkei report that Kazua Ueda would be selected as the Bank of Japan’s next governor. Ueda is a former member of BoJ’s policy board and will replace Haruhiko Kuroda in early April. The yen’s gains, although only lasting a short time, indicate that Ueda is expected to take a more hawkish stance than Kuroda, who was the architect of an ultra-loose monetary policy that has largely remained in place even while other major banks have been hiking rates to tackle inflation. The question of who will become the next BoJ Governor has resulted in volatility for the yen. Earlier this week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen lower for a brief time, as Amamiya is considered a dove. Amamiya declined the offer and if the latest report is accurate, things should get very interesting under the helm of the hawkish Ueda. US unemployment claims rose for the first time in six weeks, from 183,000 to 196 thousand, which was above the consensus of 190,000. Still, this marked a fourth week of claims below the 200,000 level. The four-week moving average, which smooths out much of the week-to-week volatility, actually edged lower to 189,250. This is an indication that the labour market remains tight, despite reports of mass layoffs by Amazon, Facebook and other large companies.   USD/JPY Technical USD/JPY tested support at 130.71 earlier. The next support line is 129.12 There is resistance at 132.23 and 133.27 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Weak Data From The German Economy Will Make It Difficult For The ECB To Make Excessive Interest Rate Hikes

Kenny Fisher Kenny Fisher 09.02.2023 13:11
The euro has posted strong gains on Thursday. EUR/USD is trading at 1.0749, up 0.57%. German CPI ticks higher German inflation came in at 8.7% y/y in January, up from 8.6% in December. On a monthly basis, CPI rose 1.0%, following a -0.8% reading in December. The report shows that German inflation remains high and it’s still too early to talk of a peak. The good news is that nasty double-digit inflation seems behind us, thanks in large part to lower energy prices due to a warm winter in Europe. The ECB raised rates by 50 basis points last week, bringing the cash rate to 3.0%. The cash rate remains well below that of all other major central banks – the Fed’s rate, for example, is at 4.75%. ECB policy makers have noted that core inflation, which is a more reliable gauge than headline inflation, remains stickier than expected. The central bank meets next on Mar. 16 and the markets have priced in a 50-bp hike. What happens after March is uncertain. The ECB could take a pause in order to assess the impact of its tightening cycle or it could continue hiking, perhaps in modest increments of 25 bp, until there is a clear indication that core inflation is coming down. ECB rate policy is primarily focused on taming inflation, but it must also keep an eye on the strength of the German economy, the largest in the eurozone. Recent data has been weak, which will make it harder for the ECB to deliver oversize rate hikes. German Industrial Production came in at -3.2% in December, GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The Fed paraded four policy makers on Wednesday, each of whom drummed the message that the fall in inflation was welcome but the fight was not yet over. Fed member Williams said that a restrictive policy stance could last for a few years until inflation dropped to the target of 2%. The markets may be listening more closely to the Fed since the blowout employment report on Friday, but continue to underestimate the Fed’s end game. The markets have priced in a terminal rate of 4.6%, while the Fed has projected a terminal rate of 5.1%. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0758. Above, there is resistance at 1.0873 1.0714 and 1.0633 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Expect the ECB to keep increasing rates at the short-term, at least until the summer

German Industrial Production Decreased, Which Is Bad News For The Rest Of The Eurozone

Kenny Fisher Kenny Fisher 07.02.2023 15:28
The euro has fallen for three straight sessions and has extended its losses on Tuesday. Earlier in the day, EUR/USD fell below the 1.07 line for the first time since Jan. 23. Eurozone data disappoints German and eurozone numbers have been soft this week, adding to the euro’s woes. Eurozone retail sales fell 2.7% in December, worse than the estimate of -2.5% and well off the November read of 1.2%. German Industrial Production came in at -3.2% in December, down from 0.4% in November and below the expectation of -0.6%. Germany is the locomotive of the bloc but the engine is stuttering, which is bad news for the rest of the eurozone. GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The US dollar received a much-needed boost from the January nonfarm payroll report, as the 517,000 gain crushed expectations. There are no major releases out of the US today, but Fed Chair Powell will participate in a panel discussion. If Powell strikes a hawkish tone, the US dollar could extend its gains. There are a host of Fed members speaking this week, and if they reiterate the “higher for longer” stance that the Fed continues to embrace, the US dollar could continue to move north. How will the Fed react to the stellar employment report?  Fed member Mary Daly called the employment release a “wow number” and said that the Fed’s December forecast of a peak rate of 5.1% was a “good indicator” of Fed policy. With the benchmark rate currently at 4.5%-4.75%, we’re likely looking at two more rate hikes, exactly what Jerome Powell said at the FOMC meeting last week. The spike in job creation has raised hopes that the Fed can pull off a “soft landing” and there is even talk on Wall Street of a “no landing” which would mean that a recession could be avoided. Read next: EUR/USD Drop Below 1.0700$ And GBP/USD Drop To 1.967$, The Aussie Pair Holds Above 0.69| FXMAG.COM EUR/USD Technical 1.0758 is a weak support line, followed by 1.0633 There is resistance at 1.0873 and 1.0954 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

The Aussie Pair (AUD/USD) Is Steady On Monday

Kenny Fisher Kenny Fisher 06.02.2023 13:56
After a miserable end to the week, the Aussie is steady on Monday and is trading at 0.6912. The January US nonfarm payrolls was a blowout that shocked the markets. The economy created a stunning 517,000 new jobs, crushing the estimate of 185,000 and well above the previous read of 260,000. The unemployment rate fell from 3.5% to 3.4%, its lowest rate since 1969. There was more positive news as the ISM Services PMI climbed back into expansion territory with a reading of 55.2, up from 49.2 and above the forecast of 50.4 points. The US dollar surged against most of the major currencies after the employment report, while equity markets were down. The Australian dollar plunged by 2.2% on Friday. There had been speculation that the Fed might deliver a “one and done” rate hike in March which would end the current rate-hike cycle, but the job report has poured cold water on those hopes. The labour market is running much too hot for the Fed’s liking and wage growth remains an important driver of inflation. Fed member Mary Daly called the employment release a “wow number” and said that the Fed’s December forecast of a peak rate of 5.1% was a “good indicator” of Fed policy. RBA expected to raise rates The RBA will be in the spotlight on Tuesday with its monthly rate announcement. The central bank is expected to raise rates by 25 basis points, which would bring rates to 3.35%, a 10-year high. This would mark a fourth straight hike of 25 bp, as the RBA continues to fight inflation with steady but modest rate hikes. There are signs that rising interest rates are starting to bite the economy, with today’s retail sales release of -3.9% the latest reminder. The cash rate is projected to peak around 3.6%, although it could rise further if inflation remains stickier than expected. The employment market remains robust, allowing the central bank to continue raising rates as it sees fit. Read next: The US Judge Denied The FTC's Request, Giving The Meta An Important Victory| FXMAG.COM AUD/USD Technical AUD/USD faces resistance at 0.6962 and the round number of 0.7000 0.6841 and 0.6761 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Ralph Shedler talks US dollar against Swiss franc - May 12th

US dollar against Swiss franc: Swiss National Bank focused on limiting the effects of inflation

Kenny Fisher Kenny Fisher 03.02.2023 16:40
The Swiss franc is unchanged on Friday, trading at 0.9132. USD/CHF has posted sharp swings over the past several days and is down 0.80% this week. Swiss releases have been a mixed bag this week. The KOF Economic Barometer rose to 97.2, up sharply from 91.5 and above the consensus of 93.3 points. This is an important sign that the economic recovery is strengthening. However, retail sales fell by 2.8%, down from -1.4% and Manufacturing PMI dropped from 54.1 to 49.3, which indicates a contraction. Consumer climate remains in negative territory, although it did rise to -9, up from -38 points. Jordan signals a rate hike in March Swiss National Bank President Jordan said on Thursday that inflation is above the level of “price stability” and the SNB is focused on limiting the effects of inflation. Jordan said that further interest rate hikes were on the table in order to keep inflation in check. Jordan also said that the SNB would intervene in the currency markets if necessary. Inflation climbed 2.8% in 2022, which is low compared to other major economies but above the SNB’s target of 2%. The SNB was busy last year, raising rates out of negative territory to 1%. The next meeting isn’t until Mar. 23, with a 57% probability of a 25-bp hike and a 43% probability of a 50-bp increase. The Fed has relied on a strong labour market to enable it to continue raising rates, and today’s US job report could be a market-mover. Nonfarm payrolls fell from 256,000 to 223,000 in December and the downturn is expected to continue, with an estimate of 190,000 for January. The ADP payroll report showed a decline in December, but unemployment claims and JOLT job openings both moved higher, so this week’s employment releases have been mixed. The markets will also be keeping a close look at hourly earnings and the unemployment rate. USD/CHF Technical USD/CHF tested resistance at 0.9153 earlier today. Above, 0.9219 is the next resistance line 0.9027 and 0.8894 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Swissie takes a pause after busy week - MarketPulseMarketPulse
Rolls-Royce share price has increased by over 60% since the start of the year

The Decision Of The Bank Of England Had A Negative Impact On The British Pound (GBP)

Kenny Fisher Kenny Fisher 03.02.2023 13:13
The British pound is showing little movement on Friday, after plunging 1.2% a day earlier. In the European session, GBP/USD is trading at 1.2210. Major central bank announcements have been in the spotlight this week, including the Federal Reserve and Bank of England rate decisions. GBP/USD posted modest gains after the Fed decision, rising 0.43%. Investors liked what they heard from Fed Chair Powell, even though he warned that rates would stay high and the battle against inflation was far from over. The markets are expecting inflation to fall faster than the Fed is thinking and are counting on some rate cuts this year, even though Powell said yesterday that he does not expect to cut rates this year. Powell did acknowledge that disinflation had started, which boosted risk sentiment and helped send the dollar broadly lower. Pound slides after BoE decision The pound fell sharply after the BoE raised rates by 50 basis points for a second straight time. As with the Fed, the markets were cheered by the dovish comments of Governor Bailey who said that inflation had turned a corner and noted that members had removed the word “forcefully” from its forward guidance statement. Bailey warned that inflation pressures remained and inflation risks were tilted upwards, but investors ignored this part of his message. Besides inflation, the Fed is focussed on the strength of the labour market, so today’s US job report could be a market-mover. Nonfarm payrolls fell from 256,000 to 223,000 in December and the downturn is expected to continue, with an estimate of 190,000 for January. The ADP payroll report showed a decline in December, but unemployment claims and JOLT job openings both moved higher, so this week’s employment releases have been mixed. The markets will also be keeping a close look at hourly earnings and the unemployment rate. Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM GBP/USD Technical 1.2184 and 1.2104 are providing support There is resistance at 1.2289 and 1.2369 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.