Forex-novosti i prognoze od 21-05-2023

• USD/CHF is facing pressure above 0.8980 as Fed believes that US tight credit conditions are weighing on US inflation.
• US equities witnessed a sell-off as US President Joe Biden called partisan terms from Republican leaders unacceptable.
• Rising fears of US default are strengthening the US Treasury yields.

The USD/CHF pair is struggling in holding its auction above the immediate support of 0.8980 in the early Asian session. The Swiss Franc asset has retreated after a pullback move to near the psychological resistance of 0.9000.

S&P500 futures have trimmed some losses posted in early Asia, however, the risk aversion theme is still solid amid uncertainty over United States debt-ceiling talks. US equities witnessed a sell-off on Friday as US President Joe Biden called partisan terms from Republican leaders unacceptable. A big cut of 8% on overall spending initiatives in the budget by the White House is not acceptable to Democrats.

 US Biden called that Republicans want to prevent them from winning re-election in 2024. The White House is ready to cut average spending of 22% on education and law enforcement, however, a hefty 8% cut on overall spending is huge. Meanwhile, US Treasury Secretary Janet Yellen is continuously reiterating the need for a US debt-ceiling raise to avoid default on obligated payments on June 01.

The US Dollar Index (DXY) is looking to test Friday’s low around 103.00 as the Federal Reserve (Fed) is expected to keep the interest rate policy steady. Fed chair Jerome Powell cited on Friday that tight credit conditions by United States regional banks to avoid any calamity on their assets have trimmed the need for more interest rates for now.

Rising fears of US default is strengthening the US Treasury yields. The yields offered on 10-year US government bonds have jumped above 3.69%.

On the Swiss Franc front, Q1 Industrial Production data will be keenly watched. Earlier, the economic data landed at 6.1%. Inflationary pressures in the Swiss economy have softened amid increasing interest rates by the Swiss National Bank (SNB). Later this week, Swiss Employment Level data will be keenly watched.

• USD/CAD takes offers to refresh intraday low, defends the previous week’s downbeat performance.
• Loonie pair remains pressured between 100-DMA and 200-DMA.
• Bearish candlestick formation, unimpressive oscillators suggest further grinding of USD/CAD price.
• Descending resistance line from early March, two-week-old rising support line act as additional downside filters.

USD/CAD renews its intraday low near 1.3490 during early Monday morning in Europe. In doing so, The Loonie pair justifies Friday’s Doji candlestick, as well as a steady RSI (14) line and bullish MACD signals.

With this, the USD/CAD pair is likely to remain sidelined between the 100-DMA and 200-DMA, respectively near 1.3510 and 1.3480.

It’s worth noting that the Loonie pair’s downside break of 1.3480 allows it to take a chance about further bearish bias over the USD/CAD pair as it needs to cross a two-week-old upward-sloping support line, close to 1.3475 by the press time.

Following that, the USD/CAD fall towards the 1.3400 round figure and then to the yearly low of around 1.3300 can’t be ruled out.

On the flip side, a daily closing beyond the 100-DMA hurdle of around 1.3510 isn’t an open welcome to the USD/CAD bulls as a downward-sloping resistance line from March, close to 1.3550, appears a tough nut to crack for the pair buyers.

In a case where the USD/CAD manages to stay firmer beyond 1.3550, a gradual run-up toward the previous monthly low of around 1.3665 can’t be ruled out.

Overall, USD/CAD is likely to remain sidelined but the bears have upper hand of late.

USD/CAD: Daily chart

Trend: Limited downside expected

“US Treasury Secretary Janet Yellen on Sunday said June 1 remains a "hard deadline" for raising the federal debt limit, with the odds quite low that the government will collect enough revenue to bridge to June 15, when more tax receipts are due,” reported Reuters.

It’s worth noting that US Treasury Secretary Yellen spoke on NBC's "Meet the Press" program during the weekend while delivering the aforementioned comments.

Key quotes

Market implications

The news seems to have weighed on the market’s risk appetite, especially after US policymakers failed to offer any positive news during their weekend talks about stretching the debt ceiling. However, the US Dollar struggles to cheer the sour sentiment amid recent challenges to the hawkish Fed bets, especially after Chairman Jerome Powell’s mixed comments.

• GBP/USD has scaled firmly above 1.2450 as the USD Index is facing pressure due to the postponement of the US debt-ceiling talks.
• The Pound Sterling to remain in action ahead of preliminary UK’s S&P PMI data.
• GBP/USD witnessed a steep fall after a breakdown of the upward-sloping trendline plotted from 1.2275.

The GBP/USD pair has climbed back above the immediate resistance of 1.2450 in the early Asian session. An absence of positive development in US debt-ceiling talks this weekend has fueled worries of a default by the US Treasury. US President Joe Biden and House of Representatives Joseph McCarthy are scheduled to meet on Monday as less than two weeks are left for US Treasury to avoid a default on obligated payments.

S&P500 futures have added decent loss in early Tokyo amid sheer volatility. The US Dollar Index (DXY) is returning back to 103.00 after a short-lived pullback move. Rising chances of a steady interest rate policy by the Federal Reserve (Fed) and volatility associated with US debt-ceiling issues have restricted the upside for the USD Index.

The Pound Sterling is to remain in action ahead of preliminary United Kingdom’s S&P PMI (May) data.  Manufacturing PMI is seen higher at 48.0 while Services PMI is expected to soften to 55.5.

GBP/USD witnessed a steep fall after a breakdown of the upward-sloping trendline plotted from April 03 low at 1.2275 on a four-hour scale. The Cable is consistently making lower highs, indicating the strength of the US Dollar bulls. Potential support is placed from April 10 low at 1.2344.

The 50-period Exponential Moving Average (EMA) at 1.2486 is acting as a barricade for the Pound Sterling bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has not shifted into the bearish range of 20.00-40.00 comfortably. An occurrence of the same will strengthen the US Dollar bulls further.

Should the asset decline below May 19 low at 1.2390, US Dollar bulls will get strengthened further and will drag the Cable toward April 10 low at 1.2344 followed by April 03 low at 1.2275.

On the flip side, a recovery move above May 09 high at 1.2640 will drive the major toward the round-level resistance at 1.2700 and 26 April 2022 high at 1.2772.

GBP/USD four-hour chart

• NZD/USD picks up bids to renew intraday high after two-week uptrend.
• US Dollar struggles amid inconclusive debt ceiling talks, mixed comments from Fed officials.
• Odds of RBNZ’s 0.25% rate hike, last week’s upbeat NZ budget keeps Kiwi buyers hopeful.
• Wednesday’s NZ Retail Sales, RBNZ become the key for NZD/USD traders ahead of Fed Minutes, US Core PCE Price Index.

NZD/USD remains on the front foot around 0.6275 as it extends the previous weekly gains despite mixed concerns about the Reserve Bank of New Zealand (RBNZ) on early Monday. In doing so, the Kiwi pair cheers the US Dollar’s retreat amid the absence of a major US debt ceiling announcement, as well as the Federal Reserve (Fed) officials’ mixed comments.

That said, the New Zealand Institute of Economic Research (NZIER) said in its latest report that the Shadow Board is divided over whether the Reserve Bank should increase the Official Cash Rate (OCR) in the May Monetary Policy Statement. However, Analysts at the ANZ stated, “We lifted our peak OCR forecast to 5.75% pre-Budget (on both soaring net migration and the fiscal outlook), and post-Budget, see additional upside risk to that. We’d also now put a 40% likelihood on a 50bp hike on Wednesday (versus 20% pre-Budget). That’s where the market has also settled for now.”

Elsewhere, Reuters mentioned that US President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, after a "productive" phone call as the president headed back to Washington,” Reuters quotes to sides. It should be noted that Republicans were less optimistic and paused the talks earlier in the weekend.

On the other hand, Federal Reserve Chairman Jerome Powell highlighted inflation fears on Friday but also stated that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. The same weighed on the hawkish Fed bets and allowed the US Dollar bulls to take a breather.

Amid these plays, Wall Street closed with minor losses and the S&P 500 Futures track the same while US Treasury bond yields grind higher.

Moving on, the NZD/USD pair traders should keep their eyes on the RBNZ interest rate decision for clear directions, especially given the mixed market view about the same. Ahead of that, New Zealand’s first quarter (Q1) 2023 Retail Sales and the US S&P PMIs for May will be important to watch. That said, the Federal Open Market Committee (FOMC) meeting minutes and the Fed’s preferred inflation gauge, namely Core Personal Consumption Expenditure (PCE) Price Index for April, will be important for the Kiwi pair traders to observe after RBNZ.

Technical analysis

Unless crossing a horizontal area comprising multiple tops marked since early February, around 0.6385-90, NZD/USD bulls remain off the table. 

“The Shadow Board is divided over whether the Reserve Bank should increase the Official Cash Rate (OCR) in the May Monetary Policy Statement,” said the New Zealand Institute of Economic Research (NZIER) in its latest report. The update becomes important for the NZD/USD traders ahead of this week’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting announcements.

Key quotes

NZD/USD rises

Despite the mixed conclusion from NZIER, NZD/USD picks up bids to refresh intraday high near 0.6275 amid hawkish RBNZ expectations, as well as the US Dollar pullback amid fears of no US debt ceiling deal.

• EUR/USD has displayed a strong recovery from 1.0800 as US dent-ceiling negotiations were postponed further.
• US Biden-McCarthy talks will continue on Monday as prior partisan terms from Republicans were considered ‘unacceptable’.
• The ECB will be courageous to take the decisions needed to bring inflation back to 2%.

The EUR/USD pair has shown a sharp recovery from near the round-level support of 1.0800 in the early Tokyo session. The major currency pair has shown resilience around 1.0800 as the US debt-ceiling talks didn’t display positive developments on the weekend.

US President Joe Biden and House of Representatives Joseph McCarthy will meet again on Monday to discuss a bipartisan deal against as prior partisan terms from Republicans were considered as ‘unacceptable’. The White House is not interested in cutting the whole budget spending wrath by 8%.

S&P500 further generated losses in early Asia. Negative sentiment for US equities recorded on Friday have carry-forwarded on Monday as investors are worried that US President Joe Biden would be forced to execute his 14^th Amendment right to safeguard the United States economy from a default.

The US Dollar Index (DXY) has retreated after a less-confident pullback to near 103.20 as uncertainty linked to the US borrowing cap raise is escalating dramatically. Apart from that, dovish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell also weighs pressure on the USD Index. Fed’s Powell said on Friday that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. He further added, "Our policy rate may not need to rise as much as it would have otherwise.”

On the Eurozone front, more interest rate hikes are needed to tame stubborn inflation. European Central Bank (ECB) President Christine Lagarde said on Friday, “ECB will be courageous to take the decisions needed to bring inflation back to 2%.” ECB Lagarde has already confirmed that more than one interest rate hike is appropriate to ease inflationary pressures.

Investors should note that Eurozone inflation rebounded to 7% in April as the recent fall in food prices has been offset by higher energy and services prices.

• Gold price licks its wounds after two-week downtrend, defends Friday’s corrective bounce.
• Firmer United States data, Treasury bond yields favor US Dollar and weigh on XAU/USD amid hawkish Federal Reserve bets.
• US debt ceiling talks remain inconclusive but Biden Official appears confident.
• US PMIs, Core PCE Price Index and FOMC Minues are also important for the Gold price directions.

Gold price (XAU/USD) picks up bids to extend Friday’s corrective bounce off a seven-week low as it benefits from the United States debt ceiling drama, as well as mixed comments from Federal Reserve (Fed) Chairman Jerome Powell, ahead of the key data/events. That said, the yellow metal dropped in the last two consecutive trading weeks while ending Friday on a positive note amid a pullback in the US Dollar.

It’s worth noting that the recent rebound in the XAU/USD remains elusive as the USD cheers hawkish Fed bets and the United States policymakers are hopeful of avoiding the US default. Also, a likely improvement in this week’s Purchasing Managers’ Index (PMI) and Fed’s favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for April, challenges the Gold price.

Gold price justifies haven status as United States default, Federal Reserve Minutes loom

Gold price recently benefits from the market’s uncertainty about the United States debt ceiling extension. The reason could be linked to the absence of any major announcements from the US policymakers. “US President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, after a "productive" phone call as the president headed back to Washington,” Reuters quotes to sides. It should be noted that Republicans were less optimistic and paused the talks earlier in the weekend.

On the other hand, Federal Reserve Chairman Jerome Powell highlighted inflation fears on Friday but also stated that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. The same weighed on the hawkish Fed bets and allowed the US Dollar bulls to take a breather, which in turn favored the Gold price to recover ahead of the key data/events.

On the same line, Minneapolis Federal Reserve Bank President Neel Kashkari ruled out market expectations that the Fed is done hiking interest rates in an interview with the Wall Street Journal (WSJ). The policymaker also said that he could support holding interest rates steady at the Fed’s next meeting.

It should be noted that the market’s bets of a 0.25% Fed rate hike in June have recently increased and the calls for a rate cut in 2023 have gone down due to the last week’s upbeat United States economics and hawkish comments from the Federal Reserve (Fed) officials. As a result, the Gold price dropped in the last week, apart from witnessing a bounce on Friday. Additionally helping the XAU/USD could be the latest retreat in the US Dollar and the looming fear of US default amid mixed messages from the US policymakers, as stated above.

Multiple catalysts to watch for XAU/USD directions

While the Gold traders are more concerned with the US debt ceiling announcements and the Federal Open Market Committee (FOMC) meeting minutes, preliminary readings of the May month Purchasing Managers Indexes (PMIs) and the Federal Reserve’s favorite inflation gauge will also be important to watch for immediate XAU/USD directions.

Given the recently firmer US data and hawkish Fed talks, any improvement in the US PMIs and/or Core PCE Price Index for April may exert downside pressure on the Gold price. However, it all depends upon how well the US policymakers manage to tackle the impending default fears.

Also read: Gold Price Weekly Forecast: XAU/USD loses more than the $2,000 mark

Gold price technical analysis

Despite positing the consecutive second weekly loss, the Gold price closed positive on Friday, grinding higher of late.

That said, the Gold price recovery also takes clues from the Relative Strength Index (RSI) line, placed at 14, as it rebounds from the oversold territory. Adding strength to the upside bias are the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator.

It’s worth noting, however, that a 13-day-old descending resistance line, close to $1,998, precedes the 200-bar Simple Moving Average (SMA), near $2,005 by the press time, to restrict the short-term upside of the XAU/USD.

Following that, the previous support line from mid-March, around $2,016-17, appears the key for the Gold buyers to cross to retake control. Even so, April’s high near $2,049 and the $2,050 round figure, may prod the XAU/USD upside ahead of directing the metal buyers towards the previous yearly high near $2,070 and the recently flashed record high around $2,080.

On the flip side, the last weekly low of around $1,950 holds the key to the Gold bear’s entry.

Even so, the 50.0% and 61.8% Fibonacci retracement level of the Gold price upside from March to May, around $1,943 and $1,911 in that order, can act as an extra filter towards the south.

Overall, the Gold price remains on the bear’s radar below $2,017 even if a short-term recovery is expected.

Gold price: Four-hour chart

Trend: Limited recovery expected

• AUD/USD is looking further upside above 0.6650 as US debt-ceiling negotiations have been postponed to Monday.
• US President Joe Biden called the partisan offer from House of Speaker Joseph McCarthy ‘unacceptable’.
• The PBoC is expected to remain dovish as the Chinese economy is on the path to economic recovery.

The AUD/USD pair is making efforts for climbing above the immediate resistance of 0.6650 in the early Asian session. The Aussie asset is expected to witness further upside above 0.6650 as investors are worried that the US debt ceiling raise issues are going through their worst phases.

S&P500 witnessed some sell-off on Friday after US President Joe Biden called the bipartisan offer from House of Speaker Joseph McCarthy ‘unacceptable’. Republican leaders demanded a wide wrath of 8% spending cuts against approval of a raise in the US borrowing cap. US President Joe Biden is ready to do an average cut of 22% in education and some law enforcement programs.

The overall market mood has turned shady and is biased now. US equities are expected to remain under pressure as fears of a default by the US Treasury are escalating. The Federal government won’t’ be able to make obligated payments on June 01, which will result in chaos in financial markets and a sharp spike in interest rates.

Meanwhile, the US Dollar Index (DXY) corrected sharply on Friday to near 103.00. Further uncertainty is widely anticipated as US debt-ceiling negotiations will be continued further on Monday as US Biden will be back from its G7 trip to Japan.

On the Australian Dollar front, investors are awaiting the interest rate decision by the People’s Bank of China (PBoC). The central bank is expected to remain dovish as the Chinese economy is on the path of economic recovery. It is worth noting that Australia is the leading trading partner of China and supporting monetary policy by the PBoC will also support the Australian Dollar.