EURUSD is moving in the Descending channel and the market has reached the lower high area of the channel
EURUSD – ECB’s Rehn: June Ideal for Monetary Policy Easing
The ECB Policy maker Olli Rehn said it is the time to rate cut in the June month due to inflation is closer to 2% target in the sustainable manner in the Euro zone. No Geopolitical risks can increase the inflation rates in Energy and Fuel costs in the Euro zone.
Olli Rehn, a prominent figure within the European Central Bank (ECB), provided insights on Monday regarding the optimal timing for implementing an interest rate cut by the central bank.
Rehn emphasized that inflation is gradually aligning with the ECB’s target of 2%. Given this sustained convergence, he asserted that June presents an opportune moment to adjust the monetary policy stance by initiating rate cuts.
However, Rehn underscored that this assessment is contingent upon certain conditions. It assumes that the ongoing disinflationary trajectory will persist without encountering any additional setbacks. Additionally, the geopolitical landscape and energy prices are factors that must remain stable for this monetary policy adjustment to proceed as envisaged.
XAUUSD – Gold Rises Amid Israel-Rafah Strikes, Safe-Haven Demand Soars
The Gold climbs to higher in the market after the Israel attacks the camp in the Rafah region of Gaza and 35 civilians were killed and most of the people get injured in this Air strike by Israel. May 28 Tomorrow, Ireland, Spain and Norway is going to take over Gaza under their control, Now fears were sustaining in the market, clashes will be higher if European entered. UBS analysts said $2600 per ounce this year end, Citi Group predicted $3000 per Ounce in 18-24 months.
XAUUSD is moving in an Ascending triangle pattern and the market has reached the higher low area of the pattern
Gold price gathers strength on Monday due to a softer US Dollar (USD) and escalating geopolitical tensions in the Middle East. In the longer term, the precious metal might be bolstered by increasing demand from central banks. However, reduced expectations of a Federal Reserve (Fed) rate cut this year and the Fed’s hawkish stance could exert selling pressure on XAU/USD, as higher interest rates make gold less attractive as a store of value.
On Monday, US banks will be closed for the Memorial Day holiday. Gold traders will look to Fed speeches on Tuesday, including those from Michelle Bowman, Loretta Mester, and Neel Kashkari. Thursday’s first reading of US Gross Domestic Product (GDP) for the first quarter will be significant, with an estimated 1.5% expansion in Q1. Stronger-than-expected data could boost the US Dollar and weigh on USD-denominated gold.
Daily Digest Market Movers:
– The Ministry of Health in Gaza reported at least 35 Palestinians killed and dozens injured from Israeli air attacks on a Rafah camp on Sunday (CNN).
– Gold price has increased by over 16% year-to-date, hitting a record high of over $2,400 per ounce in May (World Gold Council).
– US Durable Goods Orders rose by 0.7% MoM in April, better than the expected -0.8%, following a downward revision of 0.8% in March.
– The University of Michigan Consumer Sentiment Index rose to 69.1 in May from 67.4 in April, surpassing the market consensus of 67.5. One-year inflation expectations edged up to 3.3% from 3.2%, while five-year expectations eased to 3% from 3.1%.
– UBS analysts recently raised their gold price forecast to $2,600 by the end of 2024, while Citi analysts predicted gold could reach $3,000 per ounce in the next six to eighteen months.
– Gold imports to India, the world’s second-largest gold consumer, may fall nearly 20% this year as high prices prompt retail customers to exchange old jewelry for new items.
USDJPY – Bank of Japan’s Ueda Highlights Unique Challenges Ahead
The BoJ Governor Ueda said we have more unique difficulties when compared to other central banks handling inflation to control in their countries. But we move from Zero on the expectations of inflation will be higher. If no rates hiked or cuts then economy response is to do changes in the interest rates, So it is more difficult for Bank and BoJ handling rates in the monetary policy,
Bank of Japan (BoJ) Governor Kazuo Ueda addressed some of the challenges unique to the central bank during a speech on Monday. He emphasized the need for cautious progress, echoing the approaches taken by other central banks with inflation-targeting frameworks.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Key Quotes:
“We have made progress in moving away from zero and lifting inflation expectations, but we must now re-anchor them, this time at the 2% target.”
“BoJ will proceed cautiously, as do other central banks with inflation-targeting frameworks.”
“While many of the challenges we face are similar to those encountered by our counterparts, some are uniquely difficult for us.”
“The absence of significant interest rate movements poses a considerable obstacle in assessing the economy’s response to changes in interest rates.”
USDCHF – maintains upward trend above 0.9150, monitors Middle East geopolitical tensions
The Israel attacked today in Rafah region and killed 35 Palestinians, this news creates fears in the Middle east and makes support for safe haven currency Swiss Franc against counter pairs. The Middle east tension continues to escalate with non-stop war between Israel and Gaza.
USDCHF is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
The USD/CHF pair exhibits strength, hovering around the 0.9150 mark during the early hours of European trading on Monday. This resilience in the pair is partly attributed to the anticipation that the US Federal Reserve (Fed) will initiate interest rate cuts starting from its September meeting, providing a supportive backdrop for the US Dollar (USD) and lifting the pair’s value. Investors are also keeping a close watch on Swiss National Bank’s (SNB) Chairman Thomas Jordan’s scheduled speech on Tuesday, which could offer fresh insights ahead of the release of Switzerland’s Gross Domestic Product (GDP) data for the first quarter.
The hawkish sentiment expressed by Fed policymakers continues to bolster the Greenback. They have reiterated their commitment to maintaining higher borrowing costs for an extended period, especially in the face of persistently elevated inflation figures, which have consistently exceeded the Fed’s 2% target.
Moreover, stronger-than-expected US economic data released on Friday has fueled speculation of a potential delay in the Fed’s easing cycle for the remainder of the year. Notably, US Durable Goods Orders surpassed expectations, rising by 0.7% month-on-month in April, following a downward revision in March figures. Concurrently, the University of Michigan Consumer Sentiment Index, although showing a slight dip to 69.1 in May from April’s 67.4, still outperformed the anticipated 67.5 reading.
On the Swiss front, CNN reported early Monday that Israeli air attacks on a camp in Rafah for displaced people on Sunday resulted in at least 35 Palestinians killed and dozens more injured, as stated by the Ministry of Health in Gaza. Given the sensitive geopolitical situation in the Middle East, market participants remain vigilant regarding any escalation in tensions, as such developments could spur safe-haven demand, bolstering the Swiss Franc (CHF) and potentially posing challenges for the USD/CHF pair.
USDCAD – finds support around 1.3650, potential reversal due to strong BoC rate-cut expectations
The Canada retail sales for the month of March declined to -0.20% when compared to -0.10% in the previous month. So Rate cuts from BoC is expected in June 05th meeting next month. This news created downturn Canadian Dollar against counter pairs.
USDCAD is moving in the Descending channel and the market has fallen from the lower high area of the channel
The Canadian dollar, often referred to as the Loonie, is grappling with directionality as the US dollar stabilizes amidst the holiday mood prevailing in the United States due to Memorial Day.
On Friday, the Loonie experienced significant selling pressure, primarily driven by weakness in the US dollar. Despite expectations that the Federal Reserve (Fed) will maintain interest rates within the range of 5.25% to 5.50% during its September meeting, the US Dollar Index (DXY) plummeted to 104.70. The sentiment among investors is that there is just over a 50% likelihood of the Fed keeping interest rates unchanged, a probability that has increased from 38% recorded the previous week. This shift in market sentiment came after the release of the unexpectedly robust preliminary US Purchasing Managers Index (PMI) report for May.
Conversely, the outlook for the Canadian dollar remains precarious, with weak domestic spending increasing the likelihood of a rate cut by the Bank of Canada (BoC) in its forthcoming monetary policy meeting on June 5th.
Recent data from Statistics Canada revealed a 0.2% decline in monthly Retail Sales for March, surpassing the previous month’s 0.1% contraction. This marks the third consecutive month of decline, indicating that households are grappling with the repercussions of the BoC’s elevated interest rates. The persistent softness in household spending and ongoing easing in price pressures underscore the necessity for the BoC to revert to a policy normalization stance.
USD INDEX – USD retreats ahead of PCE and GDP data next week
The US Dollar moving higher after the US consumer durable Goods order came at 0.70% in the April month and this week US Core PCE index and Q1 GDP is scheduled. The FED members are repeated rate hold speeches makes US Dollar stronger in the market.
USD INDEX is moving in the Box pattern and the market has fallen from the resistance area of the pattern
Throughout this week, the United States has reported robust domestic economic indicators, including rising preliminary May Purchasing Managers’ Index (PMI) figures reported by S&P Global. Additionally, strong Durable Goods Orders and Jobless Claims figures were reported, hinting at a potential continuation of the US Dollar’s recovery. However, despite these positive fundamentals, the DXY Index faces resistance at the 20-day Simple Moving Average and feels the effects of selling pressure.
Amid the backdrop of robust economic indicators, the Federal Reserve (Fed) has maintained a cautious stance on premature easing, which will limit any downward movement of the US Dollar. In the upcoming week, investors will be closely watching the release of April’s Personal Consumption Expenditures (PCE), which is the Fed’s preferred gauge of inflation. This data release could potentially alter the central bank’s messaging and influence market sentiment towards the US Dollar.
In the daily digest of market movers, it’s noted that despite signs of economic resilience in the US, the DXY Index sees red. Notably, Durable Goods Orders in the US increased by 0.7% in April, following a steep downward revision of March’s figures to 0.8%. April’s reading exceeded market predictions, which anticipated a drop of 0.8%. Excluding transportation, there was a 0.4% rise in new orders, while new orders remained nearly unchanged when defense was excluded.
The Fed continues to be mindful of premature easing, with Fed members implying that the limitation on the policy rate will persist for an extended period. Market probabilities for a rate cut in the upcoming meetings stand at around 50% in September and 85% in November, with a cut being priced in by December.
GBPUSD – climbs close to 1.2750 despite reduced Fed rate cut prospects
The UK retail sales for the April month came at -2.3% MoM decline when compared to -0.40% decrease in the last month, -2.7% YoY in the April month when compared to -0.20% decline in the last month. This retail sales declines makes tempered for BoE to rate cuts in the June month itself.
GBPUSD is moving in the Symmetrical triangle pattern and the market has reached the top area of the pattern
It’s important to note that both the UK and US markets will be closed on Monday, with the UK observing the Spring Bank Holiday and the US observing the Memorial Day bank holiday.
The release of the University of Michigan’s 5-year Consumer Inflation Expectations for May on Friday showed a slight easing to 3.0%, falling below the forecasted 3.1%. Despite a positive revision of the Consumer Sentiment Index to 69.1 from a preliminary reading of 67.4, it marked the lowest level in six months. These figures likely contributed to bolstering investors‘ sentiment regarding potential Federal Reserve rate cuts, consequently weakening the US Dollar and supporting the GBP/USD pair.
The CME FedWatch Tool indicates a decreased probability of the Federal Reserve implementing a 25 basis-point rate cut in September, dropping to 44.9% from 49.0% the previous week.
In the United Kingdom, traders have reacted to lower-than-expected Retail Sales data released on Friday. April witnessed a significant 2.3% decline in the monthly volume of sales by retailers, surpassing the expected 0.4% downturn. Annually, sales decreased by 2.7%, compared to the forecasted 0.2% decrease. Additionally, GfK Consumer Confidence softened to a reading of -17 in May, slightly better than the anticipated -18 reading and the previous -19.
Moreover, the UK’s annual inflation rate has moderated, nearing the Bank of England’s 2% target. This moderation has dampened expectations of a rate cut in June among investors, potentially providing additional support for the Pound Sterling.
AUDUSD – Aussie Dollar Holds Steady Ahead of Retail Sales Data
The Australian Dollar moved up after the China announced US$47 Billion has to invest in the Semiconductor industry. China also send Fighter jets across Taiwan Islands and fears sustaining in the market. The inflation expectations for the One year is came at 4.1% in the May month Poll versus 4.6% expected in the April month.
AUDUSD is moving in the Descending channel and the market has reached the lower high area of the channel
The Australian Dollar (AUD) continued its upward trajectory against the US Dollar (USD) on Monday, marking its second consecutive session of gains. This movement was driven by an overall improvement in market risk appetite, despite fading expectations for Federal Reserve interest rate cuts. Market participants are now eagerly awaiting the release of Australia’s Retail Sales data on Tuesday, with forecasts indicating a potential growth of 0.3% in April, rebounding from the previous month’s decline of 0.4%.
The recent minutes from the Reserve Bank of Australia (RBA) meeting hinted at the challenges faced by the board in forecasting future changes in the cash rate. Additionally, acknowledgment of recent data trends suggests a higher likelihood of inflation persisting above the RBA’s target range of 2-3% for an extended period. These factors may contribute to further gains for the Australian Dollar.
In contrast, the US Dollar (USD) weakened following the release of the University of Michigan’s 5-year Consumer Inflation Expectations for May, which came in slightly below expectations at 3.0%. Despite an upward revision in the Consumer Sentiment Index, sentiment surrounding potential Federal Reserve rate cuts remains strong.
The probability of a 25 basis-point rate cut by the Federal Reserve in September, as indicated by the CME FedWatch Tool, has decreased slightly. However, with the US market closed on Monday due to the Memorial Day bank holiday, further developments may unfold in the coming days.
In the broader market context, China’s launch of a US$47 billion state-backed fund aimed at bolstering its semiconductor industry could impact economic dynamics, considering the significant trade partnership between China and Australia. Additionally, positive movements were observed in the ASX 200 Index, with most sectors recovering losses from the previous week, aligning with gains seen on Wall Street.
Moreover, recent economic indicators, such as the US Census Bureau’s Durable Goods Orders report and the S&P Global US Composite PMI, point towards mixed signals in the global economy. Geopolitical tensions in the Asia-Pacific region, highlighted by reports of military activities in the Taiwan Strait, add another layer of uncertainty that could influence market sentiment in Australia.
NZDUSD – May Reach 0.6150 as USD Stays Weak
The RBNZ Governor Orr said rate hikes in the near term is data dependent approach and inflation is far away from our 2% target. RBZN Deputy Governor Chris Hawkesby said rate cut is not happened in this year,rate should be sustained in the 5.50% region until inflation goes down in the end of 2025.
NZDUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
This rise in the pair can be attributed to the weakening of the US Dollar (USD), driven by improved market risk appetite following the release of softer University of Michigan’s 5-year Consumer Inflation Expectations for May on Friday.
The University of Michigan’s 5-year Consumer Inflation Expectations for May eased slightly to 3.0%, falling below the forecasted 3.1%. Despite a slight increase in the Consumer Sentiment Index to 69.1 from a preliminary reading of 67.4, it still marked the lowest level in six months. These figures likely contributed to investors’ sentiment regarding potential rate cuts by the Federal Reserve.
The US Dollar Index (DXY), which measures the USD against six other major currencies, is trading near 104.70 at the time of writing. On Friday, the Greenback weakened due to the decline in the 10-year US Treasury yield, which stood at 4.46%.
Meanwhile, the New Zealand Dollar (Kiwi) remains supported by the hawkish stance of the Reserve Bank of New Zealand (RBNZ). The central bank has raised its forecast for the peak in interest rates and postponed the timing for any potential rate cuts. Keeping its cash rate at a 15-year high of 5.5%, the RBNZ indicated the necessity of maintaining restrictive policy for a longer duration to ensure inflation returns to the target range of 1-3%.
In a recent interview with Bloomberg, RBNZ Governor Adrian Orr played down the possibility of another interest rate hike, suggesting that the central bank would only tighten policy further if necessary to manage inflation expectations. Additionally, RBNZ Deputy Governor Christian Hawkesby emphasized that “cutting interest rates is not part of the near-term discussion.”
CRUDE OIL – WTI holds steady above $77.50 on boosted risk appetite
The Iran announced the Oil production is going to increase in the June month from 3.6Million Barrels perday to 4 Million Barrels perday. This data showing increase in the Supply of Oil market and push down the Oilprices in the market. Saudi Arabia announced share sales of Saudi Aramco company worth of $10 billion for reinvesting in the Oil production field.
XTIUSD Crude oil price is moving in the Descending channel and the market has rebounded from the lower low area of the channel
West Texas Intermediate (WTI) crude oil prices are on the rise, currently hovering around $77.70 per barrel in the Asian trading session on Monday. This uptick is attributed to a resurgence in overall market risk appetite, driven by investors’ anticipation of a potential interest rate cut by the Federal Reserve (Fed) in September.
Last Friday, the University of Michigan’s 5-year Consumer Inflation Expectations for May eased slightly to 3.0%, below the forecasted 3.1%. This dip in inflation expectations has bolstered investor sentiment regarding the likelihood of rate cuts by the Fed.
However, Fed officials have tempered expectations for rate cuts, emphasizing the need for more evidence that inflation will eventually decline to its target of 2% annual price growth. The prolonged period of elevated interest rates negatively impacts the US economic outlook and diminishes demand for oil.
Meanwhile, Reuters reported on Sunday, citing Iran’s Tasnim news agency, that an economic council led by Iran’s interim president Mohammad Mokhber has approved a plan to increase the country’s oil output from 3.6 million barrels per day (bpd) to 4 million bpd. This news could potentially add to global oil supply.
Furthermore, Saudi Arabia is gearing up for a multi-billion-dollar share sale in energy giant Aramco, with plans to raise approximately $10 billion as early as June. This offering, one of the region’s largest stock deals, is expected to list shares in Riyadh through a fully marketed offering, signaling continued activity and interest in the energy sector.
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