Forex-novosti i prognoze od 22-05-2022

Reuters reported that ''Australia's central bank on Monday projected its A$600-billion ($423.66 billion) balance sheet would remain large for some years to come as bonds it bought under quantitative easing slowly mature and repeated it had no plans to sell its holdings early.''

The news agency was reporting on the Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent's comments who said only around A$4 billion of bonds were maturing this year, with another A$13 billion in 2023.

Key notes

''Maturities would then range from around A$35 billion to A$47 billion a year out to 2031, before tailing off by 2033, Kent told a KangaNews bond conference.''

''The A$188 billion lent to commercial banks under the Term Funding Facility, another emergency stimulus program begun in 2020, will also be paid in 2023 and 2024, further shrinking the size of the RBA's balance sheet.''

''Much of the extra cash created by the QE program is held by the banks in their exchange settlement (ES) accounts at the RBA, which currently amount to about A$439 billion.''

''This will decline as TFF loans are repaid and the RBA's bonds mature, but will likely remain larger than before the pandemic.''

''Kent said the RBA had considered running down these ES balances more quickly but had decided that could create unwanted volatility in financial markets.''

''This abundance of funding in turn means the actual overnight cash rate is trading slightly below the RBA's official target for the cash rate, though usually within 10 basis points of it.''

'"Most importantly though, the Bank will continue to be able to maintain effective control over the cash rate as it withdraws monetary policy stimulus in the period ahead,' said Kent.'

RBA in focus

All eyes are on whether the RBA will ramp up around 125bps of hikes in 2022. The data of late leaves doubts over the RBA's next move. 

The ''wage and employment data haven’t, in our view, met Governor Lowe’s threshold of there needing to be “a very strong argument” for the RBA to “deviate” from moves of 25bp in coming months,'' analysts at ANZ Bank said in a note. 

''Especially when the minutes from the May meeting highlighted that the Board meets monthly, so has 'the opportunity to review the setting of interest rates again within a relatively short period of time.'

Still, we think the option of a 40bp move will be considered at the RBA’s June meeting before a move of 25bp is chosen.''

• USD/JPY is hovering around 128.00 as the focus shifts to the US PMI data.
• A positive market mood has underpinned the risk-perceived currencies.
• Investors are keeping an eye on the US PMI data, which is due on Tuesday.

The USD/JPY pair is attempting to overstep 128.00 despite the underperformance from the US dollar index (DXY) displayed in the Asian session. The pair have been struggling to surpass Monday’s high and is likely to remain volatile as a firmer rebound in the positive market sentiment will demand more strength from the market participants.

An unexpected rise in Japan’s Consumer Price Index (CP) numbers released last week is expected to bring a potential shift in the ideology of the Bank of Japan (BOJ) on the policy structure. The Statistics Bureau of Japan reported annual Japan’s National Consumer Price Index (CPI) figure at 2.5%, significantly higher than the estimates of 1.5% and the prior print of 1.2%. Meanwhile, the core CPI that excludes food and energy prices has turned positive to 0.8% than the forecast of -0.9% and the former print of -0.7%.

A sudden rise in Japan’s inflation is not going to support a rate hike alternative as the inflation is still near the targeted levels however, the BOJ could reduce its stimulus packages, which the BOJ was using to spurt the aggregate demand in its zone earlier.

Meanwhile, the US dollar index (DXY) is losing its strength after facing hurdles at 105.00. The DXY has surrendered more than 2% and is expected to lose more amid the soaring market mood. Going forward, investors will keep the US Purchase Managers Index (PMI) on the radar.  The S&P Composite PMI is seen at 55.5 against the prior print of 56. While the preliminary estimate for the Manufacturing and Services PMI is 58 and 55.3 against the former figures of 59.2 and 55.6 respectively.

• Silver extend recovery from two-year low towards three-week-old horizontal hurdle.
• 21-DMA adds strength to the upside filter, 10-DMA restricts pullback moves.
• RSI rebound, a clear break of descending trend line from April underpin bullish bias.

Silver (XAG/USD) picks up bids to $21.85 as buyers reverse the week-start pullback, justifying the previous week’s breakout of crucial hurdles. Also keeping the metal buyers hopeful is the gradual recovery in the RSI as prices rebound during Monday’s Asian session.

It’s worth noting, however, that a confluence of the 21-DMA and horizontal area comprising multiple highs marked since early May, around $22.10-15, appears a tough nut to crack for the bulls.

In a case where XAG/USD rises past $22.15, the odds favoring further upside towards the monthly high of $23.28 can’t be ruled out. During the rise, the $23.00 threshold can act as a buffer.

Should silver buyers manage to cross the monthly peak, the early April swing low near $24.15 will be on their radars.

On the contrary, pullback moves remain elusive beyond the 10-DMA level of $21.54.

Even if the quote drops below the 10-DMA, the $21.00 round figure and the $20.00 psychological magnet will be crucial challenges for the XAG/USD bears before prospering further.

Silver: Daily chart

Trend: Further upside expected

• GBP/USD bulls are taking on the bears at key daily resistance. 
• Bulls eye a deeper correction of weekly bearish impulse. 

GBP/USD is on the way towards the weekly supply area in a 38.2% Fibonacci retracement of the weekly bearish impulse. The following illustrates the bullish bias for the meanwhile on lower time frames although bears will be looking to take advantage of a discounted price with determination for a downside extension towards 1.2075. 

GBP/USD weekly chart

From the weekly perspective, the bulls are in control within the correction that has so far yet to breach the 1.2530s and the 38.2% Fibo. The bears are attempting to guard the 1.25 areas as follows:

GBP/USD daily chart

If the bulls manage to break the current resistance, there is little that stands in the way to the 1.2650s.  If the bulls manage to break there, then the path will be opened for a run towards the 1.30s and prior support. 

• USD/CAD remains pressured around daily low after snapping seven-week uptrend.
• Oil prices struggle to justify escalation in geopolitical fears, optimism in China.
• US dollar stays on the back foot amid firmer sentiment, less support for 75 bps rate hike move.
• Monthly PMIs, Canada Retail Sales and FOMC Minutes are the week’s key events.

USD/CAD eyes further losses as bears attack the 1.2800 threshold during the initial Asian session on Monday. In doing so, the Loonie pair pays little heed to a pullback in oil prices, Canada’s main export, while also cheering the softer US dollar, amid a mostly quiet session.

WTI crude oil prices print the first daily negative in three, down 0.70% around $109.15 by the press time, even as the Russia-Ukraine crisis escalates. The reason for the black gold’s latest weakness could be linked to Germany and Italy’s approval of Russia gas payment, getting the nod from Brussels, as well as global oil producers’ rejection of the more output cut than already discussed.

On the other hand, the US Dollar Index (DXY) flashed the biggest weekly loss since January, not to forget snapping a six-week uptrend, as market players seemed to have bored with the 50 bps rate hike comments from the Fed policymakers, including Chairman Jerome Powell. Also keeping the greenback under pressure was the latest headline economics that flashed mixed numbers. It should be noted that the hawkish comments from the European Central Bank (ECB) have recently gained major attention and exerted additional downside pressure on the greenback.

Furthermore, Shanghai’s gradual unlocking and the mainland’s reduction in the covid cases, as well as the virus-led deaths, underpin optimism at the Antipodeans, due to China’s status as the world’s largest industrial player.

Amid these plays, Wall Street closed mixed but the S&P 500 Futures print mild gains by the press tie. Further, the US 10-year Treasury yields remain softer around 2.78 at the latest and weigh on the US dollar.

That said, USD/CAD traders may rely on the risk catalysts and oil prices for immediate directions but major attention will be given to this week’s PMIs and Minutes of the latest Federal Open Market Committee (FOMC) for clear directions. At home, Canada’s Retail Sales will also be important to watch as the Bank of Canada (BOC) remains hawkish.

Technical analysis

USD/CAD holds onto the previous week’s downside break of an upward sloping trend line from late April as well as the 21-DMA, respectively around 1.3050 and 1.2875, which in turn directs the sellers towards a confluence of the 50-DMA and 100-DMA, surrounding 1.2700.

• EUR/USD is looking to sustain above 1.0600 amid positive market sentiment.
• Mounting inflationary pressures in the eurozone have raised the odds of a rate hike by the ECB.
• In today’s session focus will remain on the Eurogroup meeting.

The EUR/USD pair has continued its consolidation move in the Asian session which is covering a narrow range of 1.0545-1.0600. The asset has remained in the grip of bulls last week after sensing a responsive buying action last week after printing a low of 1.0350 last week. A firmer rebound in the risk on impulse has underpinned the risk-perceived currencies.

The shared currency bulls got buying traction last week after the street started raising bets on a rate hike announcement by the European Central Bank. The Euro’s Harmonized Index of Consumer Price (HICP) landed at 7.4%, constant with the prior figures. However, the sustainability of the inflationary pressures at elevated levels is raising concerns for the counter. Rising inflationary pressures in times when the eurozone is facing the heat of the Ukraine crisis may force the ECB to paddle up their rate hike cycle.

In today's session, investors will keep an eye on the Eurogroup meeting, which may discuss the embargo on Russian oil imports. A few nations such as Germany which were opposing the sooner prohibition of Russian oil have withdrawn their opposition and have arranged their dependency on other oil imports alternatives.

On the dollar front, the US dollar index (DXY) has slipped below 103.00 in the early Asian trade and is expected to log more losses on positive market sentiment. The safe-haven assets are losing their appeal amid a firmer rebound in the global equities.

• NZD/USD grinds higher following the first weekly gain in eight.
• NZIER unveils that majority of RBNZ shadow board members expect a half-point increase.
• Softer USD joins mixed sentiment, improvement in China’s covid conditions to favor bulls.
• RBNZ is likely to announce 50 bps rate hike on Wednesday, PMIs, FOMC Minutes are also crucial for clear directions.

NZD/USD holds onto the previous week’s recovery moves from a two-year low as NZIER reveals major support for the RBNZ’s 0.50% rate hike among shadow board members. Adding to the Kiwi pair’s rebound is the broad US dollar weakness and slightly upbeat risk appetite. That said, the Kiwi pair picks up bids to 0.6410 during the initial hours of Monday’s Asian session.

The NZ Institute of Economic Research (NZIER) came out with an update on the shadow board members’ expectations for this week’s Reserve Bank of New Zealand (RBNZ) rate increase. The economic institute mentioned, “The majority view amongst Shadow Board members was that the Official Cash Rate (OCR) should be increased by 50 basis points (bps) at the May meeting.”

Given the statements from NZIER being mostly in-line with the market expectations, which seems also priced-in, the NZD/USD remains firmer, while also cheering the US dollar pullback from a multi-year high, as well as optimism at China.

The US Dollar Index (DXY) flashed the biggest weekly loss since January, not to forget snapping a six-week uptrend, as market players seemed to have bored with the 50 bps rate hike comments from the Fed policymakers, including Chairman Jerome Powell. Also keeping the greenback under pressure was the latest headline economics that flashed mixed numbers.

Elsewhere, Shanghai’s gradual unlocking and the mainland’s reduction in the covid cases, as well as the virus-led deaths, underpin optimism at the Antipodeans, due to China’s status as the world’s largest industrial player.

The market sentiment could be witnessed in downbeat US Treasury yields and the slow grind of equities in the US.

Moving on, New Zealand Retail Sales for Q1, scheduled for publishing on Tuesday, appears to be the last signal for forecasting the RBNZ moves. However, the 50 bps move has been widely-chattered and hence any surprise will become more interesting to watch for wild moves. Additionally, the Fed’s repeated signals for a 50 bps rate increase and China’s sustained recovery from the covid may help the NZD/USD to extend the latest rebound.

Technical analysis

NZD/USD floats above a seven-week-old descending resistance line, now support around 0.6385, as buyers await sustained trading beyond the previous week’s peak of 0.6415 ahead of targeting the monthly high of 0.6568.

Meanwhile, the one-week-old ascending trend line and the 10-DMA restrict the short-term downside of the pair around 0.6350 and 0.6330 respectively.

The Reserve Bank of New Zealand will be a major feature of forex markets this week and ''there is a wide range of views within the Shadow Board over how much the Reserve Bank should increase interest rates, particularly for the coming year. The majority view amongst Shadow Board members was that the Official Cash Rate (OCR) should be increased by 50 basis points at the May meeting. However, there was a divergence in views on how much the OCR should be increased beyond the May meeting. This wide range of views reflects both different concerns held by the Shadow Board members compounded by the large degree of uncertainty over the economic outlook over the coming year.''

Analysts at TD Securities explained that the ''both Consumer Price Index inflation (6.9% YoY) and sectoral core inflation (4.2% YoY) were elevated in the first quarter and hint at the urgency needed from the RBNZ to constraint inflation expectations. The Bank seems content with its 'stitch in time' approach to policy and didn’t push back on market pricing which leads us to conclude that the Bank will go ahead with another 50bps hike.''

• Gold price is likely to advance higher towards $1,850.00 amid broader weakness in the DXY.
• The odds of a jumbo rate hike by the Fed are progressing quickly.
• The DXY has surrendered more than 2% from its 19-year high.

Gold price (XAU/USD) is expected to carry forward its bullish move in the Asian session recorded on Friday. The precious metal delivered a strong rebound last week after sensing significant bids below the psychological support of $1,800.00. A gradual upside approach by the gold bulls was witnessed right from the initial response of the market participants.

The optimism came in the bright metal despite the progressing odds of a 50 basis point (bps) by the Federal Reserve (Fed) in June. The Fed is determined to absorb liquidity from the market as inflation fears are heightened and are needed to be taken care of.

Meanwhile, last week, the US dollar index (DXY) witnessed a steep fall after failing to sustain around the fresh 19-year high at 105.00. The DXY eased more than 2% from its recent highs. This week investors’ focus will remain on the release of the Fed Open Market Committee (FOMC), which is due on Friday. This will provides insights on the strategic planning by the Fed behind the announcement of the 50 bps by the Fed policymakers.

Gold technical analysis

On an hourly scale, XAU/USD is moving higher after sensing support from the critical support placed at $1,836.63. The critical resistance of $1,836.63 has turned into a support for the asset. The 50-period Exponential Moving Average (EMA) AT $1,836.65 has been significant support for the counter. Meanwhile, the Relative Strength Index (RSI) is attempting to break above the 60.00. This will trigger the gold pulls and will drive the asset higher.

Gold hourly chart

• AUD/USD is testing a critical resistance on the daily chart.
• The bears are lurking at a 50% mean reversion resistance level. 

AUD/USD is a compelling scenario from a technical standpoint. As per the prior series of analyses, AUD/USD Price Analysis: Bears take charge, carving out the path to a new daily low, while below resistance on the daily chart, there is a bias to the downside. 

AUD/USD daily chart

The above illustrates a bearish bias. The price is bounded by support and resistance but a break of support would be expected to confirm the downside towards the 0.6700 area. 

However, the four-hour chart offers a number of potential scenarios, as follows:

AUD/USD H4

The price could be on the verge of a break of the dynamic trendline resistance and horizontal resistance which could lead to a breakout of the wedge pattern that is in formation, contrary to the downside bias. A rising wedge pattern such as this is actually a bearish formation:

The scenario above is a fakeout of the dominant trendline resistance, while below, the bears are committing to within the trendline resistance. 

Reuters reported on the weekend that Shanghai's central Jingan district, a key commercial area of the Chinese financial hub, will require all supermarkets and shops to shut and residents to stay home until at least Tuesday.

''The district plans to carry out COVID mass testing from Sunday until Tuesday, it said on its official WeChat account.

The use of all exit permits previously given to residents that allowed them to leave their homes will be suspended, the district added without saying why.''

The markets will potentially regard this move as a risk which could weigh on risk appetite and the sentiment would be expected to pull on equities, undoing some of the rallies from Friday. Consequently, this would be expected to hamstring high beta currencies such as the AUD in particular. 

Asian stock markets rallied on Friday, after China's central bank announced a rate cut, and as traders bargain-hunted following Thursday sell-offs. Hong Kong, Shanghai, and Tokyo all finished in the green, as did other regional exchanges.

Markets will be walking on Monday to a new government in Australia, whose new leaders are yet to be sworn in following the Labor Party's victory Saturday.

In what is a seismic shift in its politics, the Aussie currency traders will be weighing the implications for markets following almost a decade of conservative leaders and voters that are fed up with the two-party system. Voters have turned their back on the ruling coalition, instead are now backing those who campaigned for more action on climate change, greater gender equality and political integrity.

''The impact of the outcome will most likely be felt the most in fiscal policy, as Shadow Treasurer Chalmers has promised greater spending if Labor returns to power,'' analysts at Brown Brothers Harriman argued. 

However, the main focus for the Aussie currency is on the central bank. Data of late likely has not met the governor's threshold of there needing to be “a very strong argument” for the RBA to “deviate” from moves of 25bp in coming months, analysts at ANZ Bank said. 

''Still, we think the option of a 40bp move will be considered at the RBA’s June meeting before a move of 25bp is chosen.''

For the week ahead, Chris Kent, Assistant Governor (Financial Markets), will speak at the Kanganews DCM Summit on 23 May, while Luci Ellis, Assistant Governor (Economic), will speak at the UDIA National Conference on 25 May.

Bloomberg reported that European Central Bank President Christine Lagarde said the first increase in interest rates in more than a decade may come in July but downplayed the idea of a half-point move amid concerns about economic expansion. She joins a growing number of ECB policymakers calling for a July hike after inflation hit 7.5 per cent in the eurozone last month.

Most other major central banks have already raised borrowing costs but the ECB, which had fought too low inflation for a decade, is still driving cash into the system via bond purchases. 

Meanwhile, the Nederlandsche Bank Governor Knot broke ranks to talk about a 50bp rate hike in July, but otherwise, the story is pretty clear, analysts at Societe Generale say. ''The June ECB meeting will make clear that rates are rising in July. Meanwhile, consumer confidence remains depressed, but activity data are still resilient.''

EUR/USD carves out near-term base

As for the single currency, EUR/USD has reinforced its defense of key support from the 1.0341 low of 2017. With daily MACD holding having turned higher, analysts at Credit Suisse remain of the view a near-term base is forming, with a break above 1.0642 needed to confirm.