Forex-novosti i prognoze od 14-05-2023

• USD/CAD remains firmer around one-week high after a hefty run-up in the last two days.
• WTI crude oil drops below $70.00 for the first time in over a week amid risk-off mood, firmer US Dollar.
• Fears emanating from US debt ceiling talks, banking sector woes weigh on Oil price, favor US Dollar.
• Canada inflation data, US Retail Sales and Fed Chair Powell’s speech should also be eyed for clear directions.

USD/CAD bulls keep the reins at the highest levels in eight days, flirting with 1.3550 amid Monday’s Asian session. In doing so, the Loonie pair buyers not only cheers the US Dollar’s run-up but also benefit from the latest slump in the Oil price, Canada’s key export item. It should be noted, however, that the cautious mood ahead of this week’s Canada inflation and US Retail Sales for April keeps the major currency pair traders on the sideline, especially amid US debt ceiling woes.

US Dollar Index (DXY) makes rounds to the highest levels in five weeks as fears of US default join the banking sector jitters to underpin the US Dollar’s haven demand. In doing so, the greenback’s gauge versus the six major currencies ignores softer US data and mixed Fed talks.

That said, the preliminary readings of the University of Michigan's (UoM) Consumer Confidence Index for May dropped to 57.7 from 63.5 prior versus 63.0 market forecasts. More interestingly, the one-year inflation expectations dropped from 4.6% to 4.5% for the said month but 5-year counterpart rose to the highest reading since 2011, from 3.0% to 3.2%.

Even so, Fed Governor Philip Jefferson and St. Louis Fed President James Bullard defend the US central bank’s current monetary policy while citing higher inflation as a major challenge.

On the other hand, US President Joe Biden signaled that Friday’s delayed talks will be held on Tuesday, which in turn might have allowed the USD/CAD to take a breather. However, the policymakers are still at loggerheads and hence a positive outcome isn’t widely expected, which in turn keeps the Loonie pair on the bull’s table.

Elsewhere, WTI crude oil remains depressed near $69.90 after falling in the last three consecutive days. The black gold bears the burden of the latest economic jitters, as well as hopes of higher Oil output from Canada as Alberta resumes Oil production after halting it due to the geopolitical problems the last week.

Against this backdrop, Wall Street closed with losses and the US Treasury bond yields managed to remain firmer while the S&P 500 Futures remain pressured, which in turn fueled the USD/CAD prices.

Moving on, Canada Wholesale Sales, Housing Starts and the US NY Empire State Manufacturing Index will decorate Monday’s economic calendar and should be watched for immediate directions. However, major attention should be given to the US debt ceiling updates, US Retail Sales and a speech from Fed Chairman Jerome Powell.

Technical analysis

A daily closing beyond the 100-DMA, around 1.3515 by the press time, directs USD/CAD bulls toward a two-month-old descending resistance line, close to 1.3590 at the latest.

• NZD/USD has shifted its auction comfortably below 0.6200 amid negative market sentiment.
• Consideration of a pause in the rate-hiking spell by other global central banks has provided the Fed a level-field playing.
• NZD/USD has registered a vertical decline and has slipped heavily below the 61.8% Fibo retracement at 0.6216.

The NZD/USD pair is showing back-and-forth action below the round-level resistance of 0.6200 in the early Tokyo session. Earlier, the Kiwi asset showed a perpendicular downside move as inventors run for the US Dollar Index (DXY) due to growing uncertainty.

The US Dollar Index (DXY) is looking for further gains above 102.73 as other global central banks are also considering a halt in the policy-tightening process to avoid further calamity, which is providing a level field to the safe-haven.

Going forward investors will remain focused on the development of United States debt-ceiling talks, which are expected on Tuesday. Further delay in raising the US borrowing cap will fuel the risk of default in obligated payments by the US Treasury.

NZD/USD has registered a vertical decline and has slipped heavily below the 61.8% Fibonacci retracement (placed from April 26 low at 0.6117 to May 11 high at 0.6385) at 0.6216 on an hourly scale. The 10-period Exponential Moving Average (EMA) at 0.6200 is acting as a barricade for the New Zealand Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00, signaling further weakness ahead.

Going forward, a breakdown of May 12 low at 0.6182 will further drag the asset toward May’s low at 0.6160 followed by April 26 low at 0.6117.

In an alternate scenario, a recovery move above 61% Fibo retracement at 0.6216 would strengthen the New Zealand Dollar. An occurrence of the same will allow the Kiwi asset to move higher towards 50% and 38.2% Fibo retracements at 0.6248 and 0.6280 respectively.

NZD/USD hourly chart

“The Bank of England (BoE) is preparing to water down changes to its post-crisis rulebook after lenders warned plans to raise bank buffers will strangle small businesses and harm the economy,” said The Telegraph during the weekend.

“It is understood that regulators are examining ways to lower the burden on banks when the UK adopts new international capital rules from 2025,” adds the news.

The news also states that the BoE is also considering grandfathering existing loan arrangements and adopting a common sense approach towards risk that high street banks say will tie-up less money on balance sheets that they will use to boost the economy.

Additionally, Reuters quotes a survey to unveil a news on Monday stating, “British public sector employers plan the biggest pay increases in over a decade and private sector deals are set to remain high, potentially adding to worries at the Bank of England.”

The news also adds that the Chartered Institute of Personnel Development (CIPD) said expected median pay settlements in the public sector for the coming 12 months rose to 3.3%, up from 2% in the previous three months, and the highest level since records started in 2012.

Elsewhere, UK Treasury Secretary and Chancellor Jeremy Hunt said that consumers and companies need to be able to access their money quickly in an event of a bank collapse.

“We're doing a review of what might be necessary,” UK’s Hunt adds.

The policymaker also termed inflation as the biggest risk to the UK inflation.

Also read: GBP/USD Price Analysis: Cable bears eye further downside towards 50-DMA

Reuters came out with the statements from Fed Governor Philip Jefferson and St. Louis Fed President James Bullard during the weekend, who spoke at a monetary policy conference at the Hoover Institution on Friday. While both the policymakers tried to defend the current monetary actions of the US Federal Reserve (Fed), their inflation outlook keeps the US Dollar buyers hopeful.

Key statements from Fed’s Jefferson

Important comments from Fed’s Bullard

Also read: EUR/USD licks its wounds around 1.0850 with eyes on EU economic projections, US debt ceiling talks

• GBP/USD holds lower grounds after breaking key supports and snapping two-week uptrend.
• Bearish MACD signals, steady RSI line keeps Cable bears hopeful.
• 50-DMA can prod the Pound Sterling sellers before horizontal area comprising levels marked since late March.
• 21-DMA adds strength to 1.2510 immediate resistance, bulls need validation from 1.2600 to retake control.

GBP/USD remains pressured around mid-1.2400s during early Monday, after posting the biggest weekly loss since late January in the last. In doing so, the Cable pair remains on the bear’s radar as it stays below the key support lines, now resistances, amid an absence of price-positive oscillators.

That said, bearish signals from the MACD and a steady RSI (14) allow the Cable bears to extend the previous week’s downside break of the key support lines stretched from March. Also keeping the GBP/USD bears hopeful is the quote’s sustained trading below the 21-DMA.

With this, the Pound Sterling appears well-set to decline further toward the 50-DMA support of near 1.2375.

However, a horizontal area comprising multiple levels marked since late March, around 1.2340, appears a tough nut to crack for the GBP/USD bears afterward, which if broken won’t hesitate to drag the quote towards the 1.2200 support comprising early March high and late March low.

On the contrary, a convergence of the 21-DMA and an upward-sloping trend line from March 24, around 1.2510 at the latest, restricts immediate recovery of the GBP/USD pair.

Following that, a two-month-old support-turned-resistance line near 1.2600 will be the key as a break of which could allow the Pound Sterling bulls to retake control.

GBP/USD: Daily chart

Trend: Further downside expected

• Gold price is showing signs of a decline in volatility as the focus shifts to US borrowing cap negotiations.
• Further softening of US CPI and PPI and rise in jobless claims make a fresh proposal for a pause in Fed’s aggressive rate hike spell.
• The overall market mood is negative amid a delay in US debt-ceiling talks.

Gold price (XAU/USD) is showing signs of contraction in volatility after a broader recovery to near $2,010.00 in the early Tokyo session. The precious metal is expected to remain on tenterhooks as investors are keenly focusing on the US borrowing cap negotiations between the White House and top Republican leader early this week.

S&P500 ended Friday’s session on a mild bearish note amid a delay in the approval of a higher US Treasury debt-ceiling as negotiations were postponed further. Reuters reported that the Congressional Budget Office warned on Friday that the United States faced a "significant risk" of defaulting on payment obligations within the first two weeks of June without raising the government's $31.4 trillion debt ceiling, adding that payment operations will remain uncertain throughout May.

Meanwhile, evidence that the Federal Reserve (Fed) will pause its aggressive interest rate hikes regime is rising as after softening of United States inflation, the US Producer Price Index (PPI) report posted the smallest rise in two years, and weekly jobless claims have soared dramatically. However, the US Dollar Index (DXY) has still risen sharply to 102.70 and is eyeing more upside as other global central banks are also approaching a soft landing of their rate-hiking spell to safeguard their economy from further damage.

Gold technical analysis

Gold price is auctioning in a Rising Channel chart pattern on a four-hour scale. The upper portion of the aforementioned chart pattern is plotted from March 20 high at $2,009.88 while the lower portion is placed from March 22 low at $1,934.34.

On a broader note, the 20-period Exponential Moving Average (EMA) at $2,020.00 is overlapping the asset price, indicating a lackluster approach.

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, signaling signs of sideways performance ahead.

Gold four-hour chart

European Central Bank (ECB) officials crossed wires during the weekend and flashed mixed signals about the bloc’s monetary policy and it’s next moves.

Among them, ECB Vice President Luis de Guindos told an Italian newspaper that ECB interest rate hikes are in their final stretch. The policymaker also warned that higher borrowing costs could put stress on banks' asset quality, even if indicators so far remain healthy.

Key comments from de Guindos

Additionally, ECB policymaker Peter Kazimir said, “ECB may need to raise interest rates longer than previously thought to help tame inflationary pressures.”

More comments from ECB’s Kazimir

Also read: EUR/USD licks its wounds around 1.0850 with eyes on EU economic projections, US debt ceiling talks

“Leaders of the Group of Seven (G7) nations plan to tighten sanctions on Russia at their summit in Japan this week, with steps aimed at energy and exports aiding Moscow's war effort,” said officials with direct knowledge of the discussions per Reuters.

Additional news

Market implications

Although the market’s current attention is on the US debt ceiling talks, Russia’s dislike for the Western pressure may add to the market’s sour sentiment in case the G7 plans to add to Moscow’s hardships.

Also read: Forex Today: Despite all, Dollar ends week stronger

“US President Joe Biden said he expects to meet with Congressional leaders Tuesday for talks on a plan to raise the nation's debt limit and avoid a catastrophic default,” reported Reuters early Monday in Asia.

The news also adds that US President Biden said he is optimistic about the talks while adding, “I still plan to go to Japan on Wednesday.”

Reuters also reported that US President Biden had been scheduled to meet with lawmakers on Friday but the meeting was postponed.

FX implications

Given the fresh optimism about the US debt ceiling talks, the news prods the previous risk-off mood and allows the US Dollar bulls to take a breather. However, the likely difference among the policymakers’ seem to keep the sentiment mixed, which in turn weigh on the EUR/USD price, steady near 1.0855 by the press time.

Also read: EUR/USD licks its wounds around 1.0850 with eyes on EU economic projections, US debt ceiling talks

• EUR/USD steadies at five-week low after posting the biggest weekly loss since September 2022.
• Hawkish ECB speak, softer US data fail to impress Euro buyers as US debt ceiling, banking woes underpin US Dollar demand.
• EU Economic Projections, Final readings of inflation and NY Empire State Manufacturing Index eyed for intraday moves.
• US President Joe Biden hints at Tuesday’s debt ceiling talk, Fed Chair Powell’s speech on Friday eyed too.

EUR/USD seesaws around 1.0850 after losing heavily again the US Dollar in the last week, posting the biggest weekly fall in 8.5 months. In doing so, the Euro pair fails to cheer hawkish European Central Bank (ECB) Officials’ comments, as well as softer US data, amid the greenback’s haven demand, mainly due to the US debt ceiling deadlock.

Recently US President Joe Biden signaled that Friday’s delayed talks will be held on Tuesday, which in turn might have allowed the EUR/USD bears to take a breather. However, the policymakers are still at loggerheads and hence a positive outcome isn’t widely expected, which in turn keeps the Euro pair on the bear’s table.

On Friday, the preliminary readings of the University of Michigan's (UoM) Consumer Confidence Index for May dropped to 57.7 from 63.5 prior versus 63.0 market forecasts. More interestingly, the one-year inflation expectations dropped from 4.6% to 4.5% for the said month but 5-year counterpart rose to the highest reading since 2011, from 3.0% to 3.2%.

On the other hand, “The latest interest rate hike won't be the last as it needs to ensure the current wave of inflation comes to an end,” said European Central Bank (ECB) policymaker and Bundesbank Chief Joachim Nagel on Friday while speaking on the sidelines of a Group of Seven (G7) meeting in Japan.

During the weekend, multiple Federal Reserve (Fed) and ECB policymakers spoke on the sidelined of the G7 and the majority of them seem to defend the hawkish play despite suggesting no major rate hike signals.

It’s worth noting that Friday’s postponement of the US policymakers’ meeting on the debt ceiling joined downbeat US data to propel the risk-off mood and propelled the US Dollar. With this, Wall Street closed with losses and the US Treasury bond yields managed to remain firmer, which in turn favored the US Dollar Index (DXY) bulls.

Moving on, the European Commission’s (EC) quarterly economic projections and final readings of April’s Eurozone inflation data, as well as the US NY Empire State Manufacturing Index for May, will be eyed for immediate directions. However, major attention will be given to the US debt ceiling updates for clear directions. Also important will be the Fed talks ahead of US Retail Sales and a speech from Fed Chairman Jerome Powell.

Technical analysis

A daily closing below 1.0880 support confluence comprising an 8.5-month-old ascending support line and 50-DMA, now immediate resistance keeps EUR/USD bears hopeful.

• AUD/USD is expected to continue its downside journey below 0.6640 amid the risk-off mood.
• Investors are worried that political dispute over raising US Treasury’s debt ceiling could fuel fears of a recession in the US.
• Monthly US Retail sales data is seen expanding by 0.7% vs. a contraction of 0.6%.

The AUD/USD pair is making efforts for keeping the auction above the immediate support of 0.6440 in the early Asian session. The Aussie asset is expected to continue its downside journey as investors believe that the Federal Reserve (Fed) will raise interest rates further despite softening of United States inflation.

S&P500 faced selling pressure on Friday as investors are worried that a political dispute over raising US Treasury’s debt ceiling could fuel fears of a recession in the US. The overall mood is quite risk-averse and investors are pouring funds into the US Dollar Index (DXY).

The USD Index recorded significant gains last week as investors believe that the US labor market is still solid and it will keep inflationary pressures steady ahead. Reuters reported 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range consistent with a market not generating too much inflation. However, rising weekly Initial Jobless Claims are depicting a different story. Weekly jobless claims for the week ending May 05 soared to 264K, significantly higher than the estimates of 245K.

Going forward, investors will keep an eye on Tuesday’s Retail Sales data (April). Monthly Retail sales data is seen expanding by 0.7% vs. a contraction of 0.6%. A recovery in retail demand would escalate fears of further interest rate hikes from the Fed.

On the Australian Dollar front, investors are awaiting the release of the Reserve Bank of Australia (RBA) minutes. Investors should note that RBA Governor Philip Lowe unexpectedly raised interest rates by 25 basis points (bps) to 3.85%. The RBA believed that the current monetary policy is not sufficiently restrictive to tame stubborn inflation.