Daily Forex News by XtreamForex.com

[xtreamforex26]

Euro Having Harder Time Against Both Dollar and Sterling

The University of Michigan consumer confidence for the month of May unexpectedly set the tone for last week’s trading session WS. The overall indicator fell more than expected, from 63.5 to 57.7, the lowest level since last July. However, markets focused on the prospective inflation expectations component of the report. 1-year inflation expectations fell less than hoped from 4.6% to 4.5%, while long-term (5-10 year) expectations rose from 3% to 3.2% (versus 2.9% consensus), the highest level since March 2011! Similar signs were provided by the NY Fed’s latest survey of consumer expectations (inflation expectations for 3 and 5 years rose by 0.1 percentage points) and in Europe by the ECB survey of consumer expectations.

Median expectations for 1-year and 3-year inflation EMU rose from 4.6% to 5% and from 2.4% to 2.9%, respectively. U.S. Treasuries slipped after the Michigan survey and underperformed German bunds. U.S. yields rose more than 9 basis points in the 2- to 7-year range of the curve, while longer maturities gained 5 to 8 basis points. The 2-year US yield closed just below the psychological 4% mark.

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[xtreamforex26]

Agreement On U.S Debt Ceiling Unlikely Before Last Minute

U.S. stocks started the week on a slightly positive note after weak economic data fueled expectations of a pause by the Federal Reserve (Fed), hopes of a resolution in the debt ceiling talks between Joe Biden and Kevin McCarthy, and Microsoft received EU approval to buy Activision.

However, the latter are all weak reasons to jump on an upward trend, because,

1. New York’s Empire State manufacturing index fell to -31.80 in May, while analysts had expected a drop to around -3.70. Minneapolis Fed head Kashkari, however, warned investors that the Fed will continue to raise interest rates. Bostic of the Atlanta Fed said the Fed should hold rates this year but definitely not cut them, while Goolsbee of the Chicago Fed wouldn’t promise a rate pause in June. He said he’s watching the data and remains ‘particularly vigilant about the impact of rate hikes on credit conditions.”

While a Fed rate hike in June is still off the table, activity in fed funds futures suggests investors see higher odds of a rate hike next month. The probability of a 25 basis point rate hike is now at 19%. But of course, the data and the progress of the debt ceiling talks will be key to what the Fed could and would do.

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[xtreamforex26]

US Debt Theater: Final Act?

Risk sentiment remains poor as the US couldn’t reached an agreement on its debt ceiling.

But House Speaker McCarthy hinted that an agreement is possible within days. Despite both sides being far apart, everyone knows the catastrophic consequences of an eventual US default, and no one is ready to push the US into that black hole.

Yesterday, both equities and bonds were sold off on US debt ceiling impasse, while the US dollar index remained capped at two-week highs.

On the data front, U.S. retail sales released yesterday were weaker than expected. Although the monthly numbers showed a rebound after two months of negative results, it was less than expected, and the annual numbers showed that sales growth unexpectedly slowed, falling to a disappointing 1.6% from 2.4% the previous month and well below the 4.20% forecast by analysts. Core retail sales excluding gas and autos rose more than expected, while industrial production posted a larger increase in April. However, the latest data is unlikely to persuade Fed officials to change their view that the Fed’s next move should be a pause in tightening rather than another hike.

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[xtreamforex26]

Gold Price Forecast: XAU/USD could rebound to $2,005 if 50 DMA support holds

Gold price is replicating the moves seen in Wednesday’s Asian trading, making headways for a minor recovery toward $2,000 early Thursday. The retreat in the United States Dollar (USD) and the US Treasury bond yields supports Gold price.

US Dollar steadies as US debt ceiling optimism wanes, Gold price bounces

The US Dollar is preserving a part of the previous day’s gains, although on the defensive so far this Thursday. The pullback in the US Treasury yields across the curve is capping the US Dollar upside, which is somewhat helping Gold price stay afloat. Despite the gains in the Asian indices, investors remain cautious, reflective of a minor drop in the US S&P 500 futures. Markets continue to weigh the prospects of a United States default even though the recent progress on the US debt ceiling talks

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[xtreamforex26]

EUR/USD Trying to Extend Bottoming Out

U.S. Treasuries and German bunds parted ways Friday after a combined 10 basis point rise the day before. U.S. yields still rose between 1.3and 4.8 basis points, with the belly underperforming. They easily overcame a setback in the early hours of U.S. trading when Fed Chairman Powell said credit stress could limit the need for new rate hikes. That threw a spotlight on a growing split in the FOMC. Several other Fed governors last week were far less convinced by the idea of such a pause. This also contrasts with the ECB chairman, who on Sunday called for more rate hikes: “We are not done, we are not taking a pause, based on the information I have today.” German interest rates entered the weekend down 0.5to 2.9 basis points. The chart data presented too much of a challenge for the 10-year bond (resistance 2.5%). This was also true for equities.

The S&P500 tested the February high – before the SVB collapse – but could not overcome it. European stocks closed in the green nonetheless, with the EuroStoxx50 making an attempt to reach the important resistance at 4415. This is the post-pandemic recovery and multi-year high from November 2021. The dollar took a breather after its earlier rise. EUR/USD recovered from a low of 1.076 to 1.0805. The DXY (trade-weighted dollar) eased from the highest level since mid-March (103.58) to 103.2. Sterling consolidated near the highest level since December last year. EUR/GBP settled in the upper range of 0.86.

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[xtreamforex26]

Fed’s 2 Biggest Hawks Yesterday Colored Trading

The Fed’s two biggest hawks yesterday coloured trading which until then turned out to be non-directional. Kashkari from the Minneapolis Fed said it’s a close call between a pause and a hike in June, adding that the former wouldn’t mean tightening is over per se. St. Louis Fed president Bullard called US recession worries overstated and expects some 50 bps more rate hikes sooner rather than later this year.

SF’s Daly and Atlanta’s Bostic argued for caution but their comments were largely dismissed. US yields went from losing almost 5 bps to similar-sized gains at the front end of the curve. Longer tenors also added between 3.8-4.2 bps. German yields followed suit, adding 3.1-5.2 bps with the front underperforming. ECB’s Villeroy warned about persistent underlying price pressures. Especially services inflation needs to be monitored as it is likely to become the dominant inflation source. Peripheral spreads narrowed with Greece hugely outperforming (-17 bps, to the lowest since Nov 2021) following incumbent PM Mitsotakis’s election victory last Sunday.

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[xtreamforex26]

RBNZ Monetary Policy Statement May 2023

The RBNZ tightened by 25 points to 5.5 percent and expressed confidence that this will be sufficient to bring inflation back to target. We continue to see risks that the large migration surge will ultimately require more action after July.

RBNZ Monetary Policy Statement, May 2023

The RBNZ increased the OCR as expected to 5.5 percent.

However, the big surprise was in the forward profile, in which the RBNZ strongly suggests that it is on hold from here until at least mid-2024. We see some upside risks to the RBNZ’s view, but for now see the RBNZ on hold in July, with some potential of a 25 point rise in the OCR in August.

Migration pressures are acknowledged, but the RBNZ takes a sanguine view on their impact on capacity pressures. The RBNZ’s net migration estimates are higher and imply a net 75,000 net inflow in the year to December. This is only slightly lower than Westpac’s equivalent forecast of a net 83,000 inflow (on a working-age population basis). Despite the upgrade, the RBNZ’s view is that this adds significantly to supply as well as demand. Migration is seen as having some supportive impact on house prices but by not as much as we have taken in our recent Economic Overview.

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[xtreamforex26]

Fed Minutes Depict Uncertainty Surrounding Future Rate Hikes

The minutes from the May 2-3 Federal Open Market Committee (FOMC) meeting reiterated that curtailing inflation remains the principal objective of the Fed.

On the current state of the economy, the Committee members noted that “economic activity had expanded at a modest pace in the first quarter. Nonetheless, job gains had been robust in recent months, and the unemployment rate had remained low. Inflation remained elevated. Participants agreed that the U.S. banking system was sound and resilient.”

When discussing credit conditions, participants noted that, “stress in the banking sector would, in coming quarters, likely induce banks to tighten lending standards by more than they would have in response to higher interest rates alone.” Participants noted however, that the economic impact was uncertain at this time.

On the future path of monetary policy, committee members stated that “in light of the lagged effects of cumulative tightening in monetary policy and the potential effects on the economy of a further tightening in credit conditions, the extent to which additional increases in the target range may be appropriate after this meeting had become less certain.” Several participants noted however, that if the economy progressed in line with their current projections, future rate hikes may not be warranted.

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[xtreamforex26]

US PCE Deflators and Durable Goods Orders Scheduled

UK bonds crashed for a second day straight with yields adding 10.6-19.2 bps across the curve. UK money markets discount an additional 100 bps tightening by December following the big upside CPI surprise Wednesday morning. Sterling initially revisited YtD highs but unable to force a break higher, technical return action kicked in. EUR/GBP eventually closed narrowly above 0.87. Bonds in the US and Germany slid as well with huge underperformance of the former. US yields ripped between 0.9 (30-y) and 15.6 (2-y) bps higher. Second-tier but above-consensus data including weekly jobless claims spurred the move with recessionary along with financial stability concerns easing. Markets even fully priced in a July rate hike. Optimism about US negotiators reaching a debt ceiling deal also helped sentiment. A two-year suspension in return for spending cuts is on the table. German yields followed from a distance. Changes varied from +3.7 to 6.2 bps with the belly underperforming the wings and the 10-y yield testing the 2.53% resistance area. ECB’s Nagel, Knot and Villeroy hit the wires on a hawkish note. The US dollar performed strongly, even as Wall Street posted gains up to 1.7% (Nasdaq, Nvidia-sparked rally). EUR/USD closed around important support of 1.0727. The trade-weighted index took a look beyond 104.089 resistance to close at 104.25 – the highest since mid-March. USD/JPY ventured north of 140 for the first time since November last year.

The Asian session this morning is a quiet one. Aside from Tokyo CPI (see below) there’s little news. Speaker of the House McCarthy vowed to continue working until a debt ceiling deal is reached. We wouldn’t be surprised if they’d strike one during the weekend. In the run-up, we still have US PCE deflators and durable goods orders scheduled for release today. The former are the Fed’s preferred inflation gauge and seen accelerating from 4.2% to 4.3% on a 0.3% m/m pace for the headline. Core PCE should come in at an unchanged 4.6% (0.3% m/m). An outcome in line with expectations probably is enough to sustain the current bond yield trend, be it on a less blistering pace. The technical charts offer help as well with the US 2-y and 10-y yield surpassing 4.50% and 3.80% levels respectively. A weekly close above that level would be a major plus. This also goes for the DXY dollar closing above 104.089 level and EUR/USD sub 1.0727. Both levels are being tested as we write. UK April retail sales this morning surprised to the upside, with the core gauge double the 0.4% that was expected. It comes with a downward revision of the March figure though. EUR/GBP in a first reaction barely budges. The 0.87 big figure for the time being survives.

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[broforex51]

https://charts.mql5.com/36/208/audcad-h1-riston-capital-ltd.png

 

AUDCAD today as we see here, the price is going bearish, so it is good if you open sell position when the price breaks support area at 0.6033 with potential target up to 50 pips below

[xtreamforex26]

Forex and Cryptocurrency Forecast

EUR/USD: Dollar Awaits U.S. Bankruptcy

The dollar has been rising since May 4. Last week, on May 26, the DXY Index reached 104.34. It hasn’t been this high since mid-March 2023. What is driving the U.S. currency up and, consequently, pushing the EUR/USD pair down? According to analysts at Commerzbank, “the absolute calmness in the options market suggests that the driving force behind the EUR/USD exchange rate is monetary policy considerations rather than ongoing U.S. debt ceiling negotiations.” It is worth noting that the probability of a rate hike at the June 14 FOMC (Federal Open Market Committee) meeting increased throughout May. At the beginning of the month, the likelihood of a rate increase was close to 0%, but by the end of the month, it reached 50%. It turns out that the U.S. economy is holding up very well compared to other economies, and the deterioration in lending has not been as severe or rapid as initially feared.

Of course, 50% is far from 100%. Moreover, the FOMC published the minutes of its latest meeting on Wednesday, May 24, and the key phrase regarding the possibility of additional tightening of monetary policy was absent. The document also revealed divergent opinions among committee members regarding further rate hikes. However, despite this, the flight to safety in anticipation of a potential U.S. default continued to support the dollar.

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[xtreamforex26]

One Step Closer to Debt Ceiling Deal – And a Fed Hike

The holiday shortened trading week starts tense but on an optimistic note as US President Joe Biden and House Speaker Kevin McCarthy finally reached an agreement to raise the debt ceiling. The deal must get approval in a congressional vote on Wednesday.

US Treasury Secretary Janet Yellen warned that the Treasury will be running out of money in about a week, by June 5th.

Presently, it feels like investors are confident that the US debt ceiling will be raised. The kneejerk reaction to a debt ceiling deal will be positive but gains could remain short-lived as most of the deal is already priced in, and the end of the det ceiling crisis means that the US treasury will issue $1 trillion debt to service its existing debt, pay its bills and start refilling the Treasury’s General Account, which fell to below $50billion last week, whereas the balance should be normally around $500bn. This means that the US Treasury will be sucking around half a trillion dollars from the market very shortly. We don’t know at what speed at which the market liquidity will drain, but we know that it will drain.

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[xtreamforex26]

What if Russia Didn’t Follow OPEC’s Output Cuts?

The US 2-year yield fell sharply, while the S&P500 ended flat after hitting a fresh high since last summer on optimism that the US will finally agree to raise the debt ceiling.

The House will vote today to decide whether the debt limit bill gets approved at time to get a Senate approval by next Monday deadline.

The deal between Biden and McCarthy freezes discretionary spending for the next two years, which excludes weighty plans like Medicare or social care, and will only have a minor impact on around $20 trillion budget deficit projected for the next decade. Frozen spending means a spending cut in real terms as long as inflation remains high. The higher the inflation, the higher the spending cut in real terms.

But the problem is that at least 20 conservative Republicans of the House rejected Kevin McCarthy’s compromise on debt ceiling, saying that spending cuts are not enough. One hardcore Republican, Dan Bishop of North Carolina, threatened to vote to oust McCarthy because he ‘capitulated’ to Democrats. Democrats, on the other hand, are not fully happy either as they don’t want to freeze or to cut spending.

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[xtreamforex26]

US and Taiwan Set to Sign the First Deal Under a New Trade Talks Framework

Core bonds enjoyed another solid bid yesterday, further unwinding ‘hawkish sentiment’ that reigned since mid-May. Chinese inspired risk-off and softer than expected national CPI data from Germany (HICP 6.3% Y/Y from 7.6%) and France (6.0% from 6.9M%) supported the move. Italian inflation (8.1% from 8.7%, but 7.5% expected) didn’t suffice for bond investors to change tactics.

That said, German/European yields already reached intra-day lows early in the session, settling in a sideways pattern later. In the end, German yields lost between 3.8 bps (30-y) and 7.8 bps (5-y). US yields joined the broad bond market rebound, but the intraday pattern was a bit more choppy. Eco data were mixed with an awful Chicago PMI (40.4 from 48.6) and an unexpected rise in US April job openings (10 103k vs 9400k expected).

While seen as important input for the Fed, JOLTS didn’t stop the decline in yields. Fed speak was at least partially to blame. Fed’s Harker and Jefferson both supported the idea of a Fed pause/skip in the rate hike cycle to assess incoming data before deciding about the extent of further policy firming. Market expectations on a June Fed hike dropped below 50%. US yields declined between 5.2 bps (5-y) and 2.9 bps (30-y).

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[xtreamforex26]

EUR/USD: Planning for Friday’s NFP Volatility

EUR/USD started June with a 100-pip rally after a volatile end to May.

Given the selloff we saw last month, a retracement in early June was to be expected, although I did think a 1.0600 retest might come first.

So what should we watch ahead of Friday’s non-farm payroll (NFP)?

The first level I’m watching is 1.0760, as the euro didn’t give us a convincing break on Thursday, leaving it intact as resistance.

We saw something similar from the US Dollar Index (DXY) in relation to the 103.50 yearly open I’ve discussed at length.

So as of now, the dollar is still above critical support, and the EURUSD is below resistance.

But instead of expecting a reversal immediately from these levels, Friday’s NFP volatility could produce a few long wicks to trade next week.

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[xtreamforex26]

XAU/USD bears approach $1,930 support on upbeat US Dollar

Gold Price (XAU/USD) stays on the bear’s radar for the second consecutive day as the precious metal renews intraday low near $1,945, extending the post-NFP losses amid to early Monday amid firmer US Dollar and the Treasury bond yields.

That said, the US Dollar Index (DXY) prints mild gains around 104.12 as it keeps the previous day’s recovery from a one-week low amid Monday’s sluggish Asian session. In doing so, the greenback’s gauge versus the six major currencies cheers the market’s fears of higher Federal Reserve (Fed) rates and the US-China tension, not to forget the fresh war headlines surrounding Russia and Ukraine.

Apart from that, an increase in the odds supporting June’s 0.25% Fed rate hike and a reduction in the market’s bets of a Fed rate cut in 2023 also seem to favor the US Dollar and yields, which in turn exerts downside pressure on the Gold price amid a sluggish start to the week. It’s worth noting that Friday’s Nonfarm Payrolls (NFP) surprised markets with a strong outcome and renewed hawkish concerns about the US central bank. That said, the US-China tension about Taiwan joins the headlines suggesting a heavy battle between Russia and Ukraine also weighs on the sentiment and allows the DXY to remain firmer, which in turn favors the Gold sellers.

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[xtreamforex26]

GBP/USD struggles to surpass 1.2450, upside seems favored despite hawkish Fed bets improve

The GBP/USD pair has witnessed delicate barricades after climbing to near 1.2450 in the early European session. The Cable is expected to remain on tenterhooks as the USD Dollar Index (DXY) has attempted a recovery after dropping to near 103.81. More downside for the US Dollar Index (DXY) seems solid as the United States economy is moving towards recession.

S&P500 futures have taken nominal gains in the European session, portraying a mild recovery in the risk appetite of the market participants. US equities witnessed some selling pressure on Monday after the United States Institute of Supply Management (ISM) agency reported weaker-than-anticipated Services PMI data. The demand for US government bonds has retreated. The 10-year US Treasury yields have jumped to near 3.71%.

On Tuesday, US ISM Services PMI managed to dodge the 50.0 threshold that bifurcates expansion from the contraction phase. The Service PMI for May landed lower at 50.3 than the expectation of 51.5. This indicates that the economic indicator has hardly defended the contraction phase and expansion in service activity was extremely mild.

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[xtreamforex26]

Weak Chinese Trade Data Add to Growth Worries

German Bunds outperformed US Treasuries during European trading hours following an unexpectedly strong decrease of inflation expectations in the ECB’s April Consumer Expectations Survey. The divergence between the two became even larger as US Treasuries started underperforming (especially at the front end the curve) during the US session. The move started after the US Treasury announced plans to boost the size of its coming bills sales: $60bn for the 4-week tenor (+$25bn), $50bn for the 8-week tenor (+$35bn) and $46bn for the 17-week auction (+$2bn).

Since the debt ceiling has been raised, the US Treasury is rapidly trying to replenish its depleted general account with the Fed which shrank to its lowest level since 2017. In coming weeks/months, sizes at the longer tenors will be upped as well with the bigger question being whether this will drain more liquidity in times of Fed rate hikes and QT or whether it will just trigger a shift in investor allocation from one cash instrument to the other. Daily changes on the US curve ranged between +1.3 bps (2-yr) and -4.2 bps (30-yr). Minutes before the market close, US Treasuries managed to erase a large part of the intraday losses in a strange, inexplicable, short squeeze. German yields closed the session up to 4 bps lower at the front end and broadly stable at the very long end. Loss of interest rate support at the front end pulled EUR/USD back below 1.07 to close at 1.0693.                            
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[xtreamforex26]

Dow Jones Versus the Nasdaq 100 Amid Rising Government Bond Yields

The blue-chip-oriented Dow Jones gained cautiously on Wednesday while the tech-heavy Nasdaq 100 sank 1.75% in the worst single-day drop since April 25th. In fact, the Nasdaq/Dow ratio plunged 2.02%, marking the worst 24-hour period since October 27th, which was over 7 months ago. What explains this divergent dynamic and is it a concern for sentiment going forward?

Tech’s underperformance coincided with a strong day for developed countries’ 10-year government bond yields. An average of key nations (such as the United States, Canada, and Australia) soared 3.78% on Wednesday. That was the best single-day gain since December 20th. As we were reminded last year, growth-oriented companies face increasingly difficult challenges in a rising rate climate.

The surge in government bond yields follows two key events that are related: unexpected interest rate hikes from the Reserve Bank of Australia and Bank of Canada. The former was earlier this week while the latter occurred over the past 24 hours. These events served as not just a reminder that the fight against inflation is not done, but that other major central banks, such as the Fed, could yet follow.

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[xtreamforex26]

21 hours ago, xtreamforex26 said:

USD/CAD at Risk on Hawkish BoC but Fed May Be a Spoiler

The Canadian dollar has appreciated sharply against the U.S. dollar since late May. The chart below shows how USD/CAD has fallen more than 2.0% over the past two weeks, with the pair now trading near C$1.3350 and steadily approaching its 2023 lows.

Bank of Canada’s surprising decision to raise interest rates at its June meeting after pausing its hiking campaign in January has reinforced recent FX dynamics, acting as another positive driver for the Loonie.

BoC’s aggressive stance could continue to put downward pressure on USD/CAD in the near term, especially if traders boost bets on further tightening in response to the central bank’s view that “monetary policy is not sufficiently restrictive” to bring inflation down to the 2.0% target.                                                                                                                                                                
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