GBPUSD Analysis
GBPUSD is moving in an Ascending channel and the market has reached the higher high area of the channel.
UK GDP data for the month of April shows 0.20% growth compared to March’s 0.30% contraction. -0.10% as compared to 0.10% in April according to 3M data. According to UK Chancellor Jeremy Hunt, the economy in the UK needs to expand strongly while experiencing lower inflation. By this year, inflation may be at the reading’s half.
Following a 0.3% contraction in March, the UK’s April Gross Domestic Product monthly release, which was released this Wednesday, revealed that the British economy expanded by 0.2% in April, in line with the 0.2% consensus estimate. The services index, meanwhile, registered at -0.1% 3M/3M as opposed to the 0.1% estimate and 0.1% prior. Chancellor Jeremy Hunt commented on the UK GDP data by stating that high growth needs low inflation and we must stick steadfastly to our plan to halve rate this year.
GOLD Analysis
XAUUSD Gold price is moving in the Box pattern and the market is rebounded from the horizontal support area of the pattern.
After the US CPI data for the softer May month were released yesterday, gold prices began to drift lower. MoM Printed at 4.1% compared to the previous reading of 4.9%, and Core CPI is still stuck at 5.3% compared to the expected value of 5.2% and the previous reading of 5.5%.
Following US CPI figures that damaged the US dollar and increased Treasury yields in advance of today’s Federal Open Market Committee meeting, gold has broken lower. The May headline CPI gauge came in at 0.1%, as expected, down from the previous reading of 0.4%, giving a year-over-year figure of 4.0%, just shy of expectations of 4.1% and 4.9%. Core CPI for May was 0.4% month over month, which was in line with forecasts. It was 5.3% year over year, slightly higher than the forecasted 5.2% and slightly lower than the 5.5% prior. With the May 2022 monthly read of 0.9% disappearing from the data set, a base effect can be blamed for the headline rate’s significant decline. This result may be primarily attributed to the decline in the energy component of the data, which may be seen as being affected by changes in supply rather than demand, according to the chart below.However, progress has been made in reversing the direction of inflation’s drift. However, it appears that the Fed may skip a hike at its powwow later today, despite the fact that the absolute level of price pressures continues to be problematic.
SILVER Analysis
XAGUSD Silver Price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.
The Federal Reserve’s 2% annual inflation target is still a ways off, but by the time the FOMC meets in July, they will have another set of economic data points to consider. In any case, the interest rate swaps and futures markets are pricing in no change for today but approximately a 75% chance of an increase of 25 basis points at either the July or September meetings. The increase in Treasury yields may have contributed to the overnight decline in gold prices. The 2- to 10-year portion of the curve saw the biggest gains, while the 1-year note is still close to 23-year highs. Furthermore, the core component of the inflation data may show that some stickiness for high CPI still exists. In the event that inflationary pressures continue, the Fed may start acting more hawkishly at upcoming meetings.
USDCHF Analysis
USDCHF is moving in the Descending channel and the market has fallen from the lower high area of the channel.
After US CPI data last day came in at a softer tone, the US dollar tuned to a positive tone. The FED is clear that it will postpone raising interest rates in June after CPI data cool. 2023 will see two additional 25bps rate hikes, and 2024 will see a rate cut.
In anticipation of Wednesday’s FOMC policy announcement, the market was cautious on Tuesday, which contributed to a decline in the US dollar as measured by the DXY index. The dollar index was down about 0.3% to 103.30 in late afternoon trading, but it was still well above its session lows, which were reached right after the U.S. CPI report hit the wires. The U.S. currency initially suffered as a result of traders fully discounting a pause at this week’s Fed meeting after morning U.S. economic data revealed a cooling of annual headline inflation to 4.0% in May. However, the initial reaction in the FX market quickly subsided as traders realised the institution could resume hikes in July and maintain higher rates for longer. When the US central bank releases its updated summary of economic projections along with its June decision tomorrow, we will learn more about the outlook for monetary policy. To determine how much more tightening to anticipate and whether policymakers plan to relax their stance next year, traders should closely monitor the dot plot.
Given the resiliency of the American economy and core inflation’s persistence, the dot plot may include one or even two additional 25 bp rate hikes for 2023 and may not include any rate reductions through 2024. Short-dated nominal yields are probably going to be skewed upward by this hawkish scenario, driving the U.S. dollar sharply higher in the short term. All bets are off, however, if the Federal Reserve decides against projecting any additional rate increases beyond what it predicted in March and leaves the door open to a less restrictive stance in 2023. The result should be very negative for yields and the dollar.
Switzerland’s main government websites, including parliament and the federal administration, have recently been hit by a distributed denial-of-service (DDoS) attack claimed by the NoName group. authorities said on Tuesday that a pro-Russian hacking group had increased its cyberattacks against Switzerland. hackers claimed to have taken down several major websites, including the one for Geneva Airport.
EURJPY Analysis
EURJPY is moving in an Ascending channel and the market has fallen from the higher high area of the channel.
This week, the ECB is predicted to increase by 25bps to 4.00% from the previous reading of 3.75%. German GDP already registered negative growth in both quarters and declared a technical downturn. Additionally, in CY 2023, the GDP is negative in the Euro region. Rate increases are still required from policymakers to combat inflation at a lower level.
After a minor correction in the late Asian session to near 151.00, the EUR/JPY pair has found some support. Investors are anticipating further interest rate increases from the European Central Bank, so the cross has maintained its bullish trajectory from the previous few trading sessions. Interest rates have already risen to 3.75% under ECB President Christine Lagarde’s extensive policy-tightening cycle over the previous nine months. Additionally, a further increase of 25 basis points (bps) is anticipated by the market, bringing interest rates to 4%. The ECB policymakers believe that the current monetary policy is not sufficiently restrictive to endanger the growth of the common continent even though the inflation in the Eurozone is more than three times the required inflation. The Eurozone’s economic outlook, however, paints a different picture. Technically, a recession is when the Gross Domestic Product figures show a decline for two consecutive quarters. And taking into account how a recession is defined reveals that the German economy has already declared one after posting a decline in GDP.
EURCHF Analysis
EURCHF has broken the Descending channel in upside.
Additionally, the final GDP reading for the Eurozone for the first quarter of CY2023, showed a decline. Investors are confident that the Bank of Japan (BoJ) will not change its interest rate decision this Friday, so the Japanese Yen is struggling to hold its ground in the meantime. As current inflationary pressures are motivated by higher import prices, constant monetary stimulus is necessary to drive wages and overall demand to spur in-house inflation.
GBPCHF Analysis
GBPCHF is moving in the Box pattern and the market has reached the resistance area of the pattern.
Manufacturing output data for April came in at -0.30% MoM versus -0.20% expected and 0.70% in the month of March, which was lower than expected according to UK Industrial and Manufacturing data released today. Compared to expectations of -1.7%, total industrial output decreased by 1.9% in April. The UK’s trade balance figures exceeded expectations; for the month of March, it was GBP -14.996 billion as opposed to GBP -16.356 billion the previous month.
According to the most recent UK industrial and manufacturing production data released by the Office for National Statistics on Wednesday, the industrial sector activity lost its recovery traction in April. Total industrial output came in at -0.3% MoM, down from -0.1% expected and 0.7% last, while manufacturing output was at -0.3% MoM, down from -0.2% expected and 0.7% last.
The UK Manufacturing Production data for April came in at -0.9% on an annual basis, which was in line with expectations. In contrast to the -1.7% forecast and the previous reading of -2.0%, total industrial output decreased by 1.9% in the fourth month of the year. Separately, figures for the UK’s goods trade balance were released; in March, they came in at GBP-14.996 billion, falling short of expectations of GBP-16.50 billion and GBP-16.356 billion last month. In March, the overall trade balance (non-EU) was GBP-5.035 billion, down from GBP-5.458 billion in February.
CADCHF Analysis
CADCHF is moving in the Descending channel and the market has reached the lower high area of the channel.
Due to the US having SPR reserves that are 33% lower than they were a year ago and printed at 353 million barrels reserve, the Canadian Dollar continues to trade higher against Counter pair currencies. A modest increase in oil demand will support Canadian exports and revenues.
The Loonie pair cheers recovery in WTI crude oil, Canada’s main export, as well as hopes that there will not be a rate hike from the US central bank. While consolidating ahead of the Fed, WTI crude oil manages to pare its weekly loss, which was the third in a row. The expectation that US oil demand will increase as the world’s largest economy loses steam while continuing to use the Strategic Petroleum Reserves (SPR) to control energy prices also helps black gold buyers maintain their firmness. It is important to note that the US SPR is down 33% from levels from a year ago, printing a level of 353 million barrels in the most recent update. The US Dollar Index, on the other hand, has declined from an intraday high to 103.30 by press time, remaining indecisive at the lowest levels in three weeks. As a result, the market’s dovish expectations for the US Federal Reserve hurt the greenback’s index against the six major currencies.
AUDUSD Analysis
AUDUSD is moving in the Box pattern and the market has reached the resistance area of the pattern.
The recent reduction in lending rates by the People’s Bank of China from 2.0% to 1.9% is excellent news for the Australian dollar as Australia-China trade relations are improving on both the export and import fronts. Australian Dollar did not change as a result of the soft US CPI data. The FED meeting today will determine how the Australian Dollar will perform against other currency pairs.
After resetting the monthly high the day before, AUDUSD exhibits the typical pre-Fed anxiety as it dribbles around 0.6770 in the early hours of Wednesday. Despite this, the Australian dollar rose to a five-week high before falling back from 0.6806 as the pair welcomed negative US inflation data and the previous day’s stronger sentiment. The market’s anticipation that the Fed hawks will not readily resign presents a challenge for buyers of the Aussie pair lately. Following the initial corrective bounce, mixed May inflation data from the US weighed on the US Dollar. Despite this, the headline Consumer Price Index (CPI) declines to 0.1% MoM and 4.0% YoY, which is more than anticipated and below previous releases. The Core CPI, also known as the CPI ex-Food & Energy, matches monthly forecasts of 0.4% and annual forecasts of 5.3%. It is important to note that the US headline CPI fell to its lowest level since March 2021, supporting the market’s expectation of a hawkish pause from the US Federal Reserve. This should have put pressure on the US Dollar and allowed the AUDUSD to steadily rise. Despite this, the FedWatch Tool from the CME predicts a greater than 70% chance that the US Federal Reserve (Fed) will not raise interest rates during today’s monetary policy meeting. As a result, the US Dollar Index fell to its lowest points in three weeks, dragging down the price of gold before rebounding off 103.05.
Aside from the US inflation and Fed worries, the People’s Bank of China’s rate cut also helped AUD/USD buyers be content because of the strong ties between Australia and China. In doing so, the pair traders disregarded conflicting domestic data as well as concerns over the Reserve Bank of Australia’s limited ability to push interest rates even further north. Wall Street encouraged pessimistic US inflation and hoped for no rate hike from the Fed while portraying the mood, but US Treasury bond yields remained firmer. Despite this, the yield on US 10-year Treasury bonds increased to a 13-day high of 3.83%, while the yield on the two-year bond reached its highest point in three months at 4.70% before falling to 4.67% in the final hours. In the near future, the recently firmer yields will combine with the disappointing US inflation to encourage AUDUSD bulls. Therefore, even though the Fed’s status quo is all but a given, pair traders will pay attention to the chairman Jerome Powell’s press conference, dot-plot, and economic forecasts released by the US central bank in order to get clear direction.
NZDUSD Analysis
NZDUSD is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern.
According to the IMF, the tight monetary policies are causing the New Zealand economy to slow down. Fiscal policies should limit other worthwhile spending while providing recovery from the effects of floods and cyclones. Although monetary policies are helping to reduce inflation, it is still higher in New Zealand.
The International Monetary Fund noted that New Zealand’s economy is currently experiencing a necessary, policy-induced slowdown following the strong post-pandemic recovery in its Staff Concluding Statement of the 2023 Article IV Mission for New Zealand. As monetary tightening takes hold, New Zealand is likely to continue slowing in the near future. Although it is decreasing, inflation will still be high for a while. Excessive demand and one-time factors have led to a significant decline in the current account balance. Restrictive bias should still be present in macroeconomic policies. Prioritising the recovery from the floods and cyclone while limiting other discretionary spending should be the goal of fiscal policy. The appropriate stance for monetary policy should be one that aims to achieve target inflation. With sufficient capital and liquidity levels, the financial industry is still strong.
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