GOLD Analysis
XAUUSD Gold price has broken the Ascending channel in downside.
After FED Chairman Powell expressed a less hawkish outlook for the June interest rate meeting, gold prices are surging today. The US President frequently invokes Amendment 14 to prevent a US default because the US Debt Ceiling problem is still unresolved.
In the Tokyo session, the price of gold has comfortably risen above the key resistance level of $1,980.00. The US debt-ceiling negotiations between the White House and Republicans have stalled, giving the precious metal tremendous strength. The Federal Reserve is strengthening the gold bulls by considering a stable interest rate policy. S&P500 futures have largely recovered from their early Asia-related losses. The general market sentiment is cautious, though, as no agreement between US President Joe Biden and Speaker of the House Kevin McCarthy would force the former into a corner. To prevent the economy from going into default, US Biden might need to invoke his 14th amendment right.
The US Dollar Index has retreated to its day’s low of 102.96 as the Fed is anticipated to maintain its interest rate strategy because the US regional banks’ stringent credit policies are significantly weighing down inflation. The recent banking crisis, which resulted in stricter credit standards, has lessened pressure to raise interest rates, according to Fed’s Powell on Friday. Our policy rate may not need to increase as much as it would have otherwise, he continued. Preliminary S&P US PMI will continue to be a hot topic. Manufacturing PMI has dropped from its previous reading of 50.4 to 50.0. It is anticipated that the Services PMI will stay at 53.6.
USDCAD Analysis
USDCAD is moving in the Descending triangle pattern and the market has reached the lower high area of the pattern.
Due to an increase in global interest rates and a slowdown in business growth, oil prices are declining. Since OPEC+ already reduced production earlier this year and China’s economic recovery from COVID-19 is taking its time, the major economies’ demand for oil is declining. This has caused the Canadian Dollar to decline against other currency pairs.
As bears fail to stop the first daily loss in three days while bouncing off the 100-DMA in the early hours of Monday, USDCAD gains strength near the intraday low. The recent strengthening of the Loonie could be attributed to WTI crude oil’s disappointing performance, which is Canada’s main export good. Despite this, the price of black gold continues to fall as energy bears target $71.00, down 1.0% on the day as of press time. Thus, the black gold justifies hopes for increased oil production and concerns over future slower economic growth. However, the US Energy Information Agency (EIA) reported in its monthly report that the country’s average daily crude oil production increased from 11.9 million barrels in 2021 to 11.9 million barrels in 2022, a 5.6% increase. The Federal Offshore Gulf of Mexico and increased production in the Permian region are anticipated to be the main drivers of this growth, according to the EIA. The US Dollar Index, which had just reversed from a two-month high, is currently licking its wounds around 103.000. This boosts recent cautious optimism about US policymakers’ ability to avoid the debt ceiling expiry despite the most recent failure of talks, according to the greenback’s gauge against the six major currencies.
Crude Oil Analysis
Crude oil price is moving in the Descending channel and the market has rebounded from the lower low area of the channel.
US President Joe Biden recently stated that his conversation with Republican House Speaker Kevin McCarthy went well and that they would speak again on Monday. Senior White House adviser Steve Ricchetti had previously stated, according to Reuters, that they would continue to work as he left the debt ceiling discussion early on Monday morning during the Asian session. According to Reuters, US House Republican Speaker Kevin McCarthy told reporters at the US Capitol after the call that there had been productive discussions about finding a solution to the crisis and that staff-level negotiations would resume later on Sunday. On the other hand, due to the last week’s positive US economic data and hawkish remarks from Fed (Fed) officials, the market has recently increased its bets on a 0.25% Fed rate hike in June and decreased its calls for a rate cut in 2023. As a result, the US Dollar Index deters the bears while maintaining the USDCAD buyers’ optimism.
As it defends the previous day’s U-turn from the highest levels since August 2022 amidst these gains, S&P500 Futures register slight losses of about 4,200. Additionally, the yields on US 10-year and 2-year Treasury bonds decreased to 3.65% and 4.23%, respectively, which illustrates the market’s rush to Treasury bonds for risk protection. It should be noted that due to conflicting concerns about the Fed and the drama surrounding the US debt ceiling, Wall Street closed with minor losses on Friday. Moving on, the Canadian holiday might make USDCAD pair traders less impulsive, but the key to predicting short-term pair movements is the US debt ceiling announcements.
USDCHF Analysis
USDCHF is moving in the Box pattern and the market has fallen from the resistance area of the pattern.
The negative figures for Swiss Q1 industrial production dampen enthusiasm for the CHF pair versus counter pairs. This is a lower figure than the 6.1% previous readings for Q4 2021, which printed at 3.4% YoY. Due to slower industrial production and concerns about a recession, SNB holds off on raising rates.
In the early hours of Monday’s European session, USDCHF retreats to 0.8975 as bears wrestle with a temporary support line. In doing so, the Swiss Franc pair fails to defend Switzerland’s disappointing first quarter Industrial Production growth, while the US Dollar fails to celebrate recent encouraging news that helped allay concerns about the US default and temper hawkish Federal Reserve (Fed) bets. Nevertheless, with 3.4% YoY figures versus 6.1% earlier readings, the Swiss Q1 Industrial Production showed the slowest growth since the fourth quarter of 2021. In this way, the data support the Swiss National Bank’s (SNB) hesitation to raise benchmark rates following a significant increase in borrowing costs. The US Dollar Index, on the other hand, receives bids to reduce intraday losses around 103.10 but continues to fall for the second day in a row due to looming uncertainty regarding the US debt ceiling expiry. Despite the most recent round of generally positive US data, recent mixed concerns about Sino-American relations and the Fed’s next steps may also pose a challenge to the US Dollar’s recovery.
At the conclusion of the G7 summit on Sunday in Japan, US President Joe Biden stated that he expected relations with China to improve “very shortly” following a dispute over an alleged spy balloon earlier this year. Contrarily, according to the Wall Street Journal, China’s ban on Micron Technology products raises concerns about a potential conflict between the US and China. Additionally, US Vice President Biden expressed satisfaction that his conversation with Republican House Speaker Kevin McCarthy went well and added that they would speak again on Monday. On the other hand, while highlighting inflation concerns on Friday, Fed Chair Jerome Powell also said that the recent banking crisis, which resulted in tighter credit standards, has lessened the pressure to raise interest rates. Neel Kashkari, president of the Minneapolis Federal Reserve Bank, delayed discussions of the Fed’s policy change over the weekend even though he appeared prepared to vote in favour of keeping interest rates unchanged. Despite this, the market is increasingly betting on a 0.25% Fed rate increase in June, and calls for a rate cut in 2023 have declined as a result of the last week’s positive US economic data and hawkish remarks from Fed officials.
The S&P500 Futures reflect the mood by reversing the initial downside and moving up to 4,205, unsure of itself near the yearly high, while US Treasury bond yields struggle for direction but have been under pressure recently. A softer start to the crucial week is anticipated for the USD/CHF due to conflicting cues and a light calendar. However, for a clear indication, the May month PMIs, US debt ceiling negotiations, and Fed Minutes are important. The Fed’s preferred inflation indicator, the Core PCE Price Index, is also significant.
USD Index Analysis
USD index is moving in an Ascending channel and the market has reached the higher low area of the channel.
As doubt grows regarding US President Joe Biden and White House speaker Kevin McCarthy’s optimism on Sunday, the US dollar falls.
The deadline to prevent a US default is June 1st; negotiations will resume today. Because of concerns about a recession, US FED Powell stated that the June monthly meeting was less hawkish than usual. At the November meeting, rate cuts are anticipated by economists.
The US debt ceiling uncertainty caused the US Dollar to decline once more against the Swiss Franc, Euro, Pound Sterling, and Yen at the beginning of the week. US Vice President Joe Biden and House Speaker Kevin McCarthy are scheduled to speak again later today. The latter claimed that their phone conversation on Sunday was “productive.” To date today, Treasury yields have decreased by a few basis points across the curve, which may be a factor in the US dollar’s decline. Jerome Powell, the head of the US Federal Reserve, made comments on Friday that were possibly less hawkish than previous commentary. He claimed that the risks of making too many versus too few policy decisions are now more evenly distributed. Neel Kashkari, president of the Minneapolis Federal Reserve, also said he would be open to delaying a hike at the upcoming Federal Open Market Committee meeting in mid-June. The Fed funds target rate will be reduced by 25 basis points by November, according to interest rate markets. Even though core machine orders in Japan for March came in much lower than expected today, the yen is strengthening. Instead of rising by 0.4% as expected in March, new orders decreased by 3.9% month over month. Core machine orders decreased by -3.5% on an annual basis through the end of March, far less than the forecasted increase of 1.3%.
The USDJPY is down significantly from the 6-month high of 138.75 reached last Thursday. The prime rates for 1- and 5-year loans were maintained by the People’s Bank of China at 3.65% and 4.30%, respectively. The best APAC equity index is Hong Kong’s Hang Seng Index (HSI), which at one point increased by more than 1.5%. Although Australia’s ASX 200 is slightly in the red, the other major Asian bourses are primarily in the green. After the Australian government today announced measures to bring those debt providers under current universal credit laws, the buy now pay later (BNPL) industry is now under even closer scrutiny. The businesses must now obtain a credit licence in order to function. Gold is trading near US$ 1,980 at the time of going to print, holding onto Friday’s gains but showing little movement into the European session. Although crude oil is struggling today after surging on Friday, it is still trading in a wide range. While the Brent contract is close to US$ 75 bbl, the WTI futures contract is around US$ 71 bbl. Although there will not be many data releases today, there will be speeches from several ECB and Fed speakers.
EURUSD Analysis
EURUSD is moving in the Descending channel and the market has reached the lower high area of the channel.
Inflation in the Europe Zone is too high and has been going on for too long, according to ECB president Christine Lagarde, to bring the numbers down to our target range. I do not have predetermined numbers for inflation this year’s target because we have already completed everything on our journey to control inflation.
In an interview with the Buitenhof TV show that aired on Sunday, President of the European Central Bank (ECB) Christine Lagarde said, “I think we covered a large chunk of the journey towards taming inflation and bringing it back to our target. However, the policymaker added, “We are not finished yet, and based on the information I have right now, we are not pausing.” Lagarde added that the outlook for inflation is too grim and has been for too long. We are unable to provide what is known as forward guidance because so many things can go wrong. I do not have a specific amount in mind.
At the conclusion of the G7 Summit in Japan, US President Joe Biden stated that US-China relations will improve further in the coming days and that we will quickly resolve the restrictions’ balloons in our next meeting speech with China. China forbade US companies from exporting micron technologies to Chinese firms. Micron technologies present greater security risks, leading to the implementation of the ban.
The relationship between the US and China has been soured by this incident.
Following a row over an alleged spy balloon earlier this year that damaged relations, US President Joe Biden stated at the conclusion of the Group of Seven summit in Japan on Sunday that he anticipated relations with China to improve very soon, according to Bloomberg. After his meeting with President Xi Jinping in November of last year, Biden continued, the US’s decision to shoot down a silly balloon carrying enough spy gear for two goods cars altered the situation. On the other hand, according to a Wall Street Journal report, China is forbidding significant Chinese companies from making purchases from Micron Technology because the latter’s products pose a serious threat to national security. After reviewing Micron products, the Chinese Cyberspace Administration found significant security risks that could compromise national security. In response to China’s ban on Micron Technology, the US Commerce Department stated that we vehemently oppose limitations that lack justification.
GBPCAD Analysis
GBPCAD is moving in an Ascending channel and the market has reached the higher low area of the channel.
Right Move and BDO Survey, two UK real estate websites, claim that the increase in housing asking prices in April helped the UK economy grow significantly. UK housing prices are rising due to higher interest rates, which is good for the UK economy. Mortgage rates are consistent week to week.
According to a BDO survey, medium-sized British businesses paid more in corporation tax, which resulted in job losses and postponed business investment.
Mixed signals are revealed in the most recent survey reports from the UK BDO and the British real estate website Rightmove. Nevertheless, the former mentions a rise in home asking prices as evidence of the housing market’s regaining confidence, while the latter mentions UK businesses’ plans to diversify their investments in response to a tax increase. The Bank of England’s interest rate hikes had less of an impact on asking prices for British homes in May than they had in any other month this year thanks to improved economic prospects and stable mortgage rates. In comparison to April, the average price of newly listed homes increased by 1.8%, or 6,647 pounds, exceeding the 1.0% increase that was typical for May. According to Rightmove, mortgage rates have remained consistent week to week. More conflicting data has been presented by other indicators.
Due to the increase in corporation tax that took effect last month, almost half of medium-sized British businesses intend to postpone investment plans. Businesses have complained that higher tax rates lessen their incentive to invest, which is one of the reasons economists cite for the slow growth in British productivity and living standards over the past ten years. Accountants BDO reported that 46% of companies with annual sales between 10 million and 300 million pounds said the increase in corporation tax would delay investment, while 39% said it would slow hiring or result in job losses. Based on responses from 512 businesses surveyed between March 30 and April 16, the BDO survey was conducted.
GBPNZD Analysis
GBPNZD has broken the Descending channel in downside.
According to the New Zealand Institute of Economic Research, ANZ anticipates a 25 bps rate increase at the RBNZ’s May monthly meeting this week. The RBNZ is inclined to raise the cash rate by 25 bps this week based on the inflation rate at a tighter job market.
Concerns about the Reserve Bank of New Zealand on early Monday, the New Zealand Institute of Economic Research stated in its most recent report that there is disagreement among the Shadow Board regarding whether the Reserve Bank should raise the Official Cash Rate in the May Monetary Policy Statement. But according to ANZ analysts, We increased our peak OCR forecast to 5.75% pre-Budgeton the strength of both soaring net migration and the fiscal outlook, and post-Budget, see additional upside risk to that. A 50bp increase on Wednesday would now have a 40% chance of happening. The market has also currently settled there. After a productive phone call as the president was returning to Washington, according to Reuters, US President Joe Biden and House Republican Speaker Kevin McCarthy will meet on Monday to discuss the debt ceiling. Republicans, it should be noted, were less upbeat and halted the negotiations earlier in the weekend.
RBNZ interest rate decision for clear cues, particularly given the market’s mixed reaction to the same. Prior to that, it will be crucial to keep an eye on New Zealand’s first-quarter 2023 retail sales as well as the May US S&P PMIs. After the RBNZ, it will be crucial for traders of the Kiwi pair to pay attention to the minutes of the Federal Open Market Committee meeting and the Fed’s preferred inflation indicator, the Core Personal Consumption Expenditure Price Index for April.
AUDJPY Analysis
AUDJPY is moving in an Ascending channel and the market has reached the higher low area of the channel.
Toshitake Sekine, a former chief economist at the Bank of Japan, stated that if inflation increases to 1.0% from 0.0% at the June 15–16 meeting, the Bank of Japan prefers to raise the 10-year bond yield.
If inflation levels rise to 1.0%, the Bank of Japan may change its yield target. Long-term inflation is kept at 0.0% and the interest rate at 0.05. Long-term low rates and lax policy are beneficial to the economy, and the uncertainty present in international markets will have an effect on the Japanese economy as well.
Toshitaka Sekine, a former chief economist at the Bank of Japan, stated in an interview with MNI on Monday that the central bank is likely to increase its target for the yield on the 10-year bond as soon as its meeting on June 15–16 given that it can demonstrate a rise in trend inflation rate above 1% from 0%. Although it will be very difficult to explain, the BoJ will only need to mention that the trend inflation rate increased above 1%, which will support raising the long-term target even though it stayed at around 0% for a considerable amount of time.Because the natural rate of interest in real terms is close to 0% but the trend inflation rate is not 0%, it is unreasonable for the BoJ to maintain the long-term policy target at about 0%.
If trend inflation increases to 1% while the real natural rate of interest stays close to 0%, the natural rate of interest in nominal terms will be close to 1%. This indicates that the YCC’s target needs to be changed to 1%. If the BoJ is unsure of the nominal natural interest rate’s level, it must expand the target range to account for uncertainty. The Outlook Report’s inflation predictions are astounding. According to the second viewpoint, despite the increased uncertainties, the BoJ did not alter the policy framework.
AUDCHF Analysis
AUDCHF is moving in the Box pattern and the market has reached the horizontal support area of the pattern.
With 4.3K Australian jobs lost in the previous month and 25K anticipated job creations breaking through the tight job markets, the Australian unemployment rate increased to 3.7% in April from 3.5% expected.
In order to ease the labour market, lower the wage price index, and bring the inflation rate down from 7.0%, the RBA is unlikely to raise interest rates at its upcoming meeting.
Although the Australian Dollar lost momentum last week, it was still able to make some gains heading into the weekend. The manoeuvres coming out of the US debt ceiling discussion could spark volatility. With the unemployment rate increasing to 3.7% in April as opposed to the expected and previous 3.5%, the fundamental picture for the Australian dollar slightly deteriorated last week. Australia lost -4.3k jobs in the month, which was significantly less than the 25k jobs expected to be added and the 53.0k jobs added the month before. The -27.1k full-time job losses were noteworthy. At the end of the most recent quarter, the year-over-year wage price index increased marginally from 3.3% to 3.7%, exceeding expectations of 3.6%. An improvement in the still-scarce labour market might help the RBA in its mission to bring inflation down from the uncomfortably high rate of 7.0%. Lowering the CPI, however, might be difficult if wage pressures persist. The RBA’s efforts may be hampered if public sector workers receive the pay rise they are seeking, which is a topic of discussion on the domestic front. By September, the target cash rate is expected to be eased by roughly 15 basis points, according to the interest rate futures market.
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