Stuart's FX analysis

# Weekly Review : The GBP/USD pair steep decline spells for a capitulation event underway from the levels 1.2470 and 1.2448. More price decline is likely to occur, but traders should consider the bearish thesis event until 1.2502 is broken. The GBP/USD pair dropped sharply from the level of 1.2470 towards 1.2425. Now, the price is set at 1.2425. On the H1 chart, the resistance of GBP/USD pair is seen at the level of 1.2352 and 1.2502. It should be noted that volatility is very high for that the GBP/USD pair is still moving between 1.2425 and 1.2352 in coming hours. Moreover, the price spot of 1.2470 remains a significant resistance zone. Therefore, there is a possibility that the GBP/USD pair will move downside and the structure of a fall does not look corrective; in order to indicate the bearish opportunity below 1.2470, sell below 1.2470 with the first target at 1.2352 so as to test last week's bottom. Also, it should be noticed that support 1 is seen at the level of 1.2352 whi...

# Long-term perspective. The EUR/USD currency pair was traded illogically again this week. We should start with the fact that we did not see any corrections in the short or long term. Recall that for the last one and a half months, the pair has been slowly but almost without correction growing. Therefore, assuming that after 600 points up, it is necessary to step back down a bit would be logical. In the last nine months, the pair has shown growth of 1600 points and corrected only by 500, which is also very little. No macroeconomic background would unequivocally support the euro currency this week. At the beginning of the week, several speeches by ECB representatives took place, which can be interpreted in any way. Traders interpreted them "in any way," again in favor of the euro currency. The fact that the European economy has not been growing for several quarters does not bother them. The fact that the ECB may slow down the pace of monetary policy tightening next week to a...

# Canada’s GDP expected to slow in March US releases Core PCE Price Index US/CAD hits 1-month high The Canadian dollar is down sharply ahead of the North American session. In Europe, USD/CAD is trading at 1.3652, up 0.45%. Earlier, USD/CAD touched a high of 1.3668, its highest level in a month. Canada’s GDP expected to ease Canada’s economy is expected to have expanded in February by a modest 0.2%. This would be significantly lower than the 0.5% gain in January, but first quarter is expected around 2.8% y/y, which would indicate that the economy is in good shape. The IMF is projecting that Canada’s economy will expand by 1.5% in both 2023 and 2024, which would be the second-highest rate in the G7. A strong GDP release later today would be good news but could complicate things for the Bank of Canada, which will have to decide whether to pause for a second straight time at the next meeting in June. The BoC summary of discussions ahead of the April meeting, released on Wednesday,...

# Conflicting macro news flow has capped gold in a short-term range-bound movement. 1-year rolling uptrend of gold versus most major fiat currencies remains intact. Lower 10-year US Treasury real yield may provide an impetus for gold bulls. The recent movement in the price of gold has started to falter from its recent 52-week high of US$2,048 per ounce reached on 13 April 2023. So far, it has staged a pull-back of -3.8% to hit a recent low of US$1,969 and faced a bit of a struggle to trade above $2,010 which is also around its 20-day moving average. There are a couple of reasons to explain the recent bout of short-term lackluster range-bound movement. Firstly, the current pull-back in gold from its US$2,048 recent high has taken shape right below the prior significant all-time high peaks of US$2,075 (7 Aug 2020) and US$2,070 (8 Mar 2022) which translates to lingering fear in the mindset of market participants that a failed third attempt to break above its prior significant peaks m...

# USD: Be careful chasing the dollar rebound The release of quarterly earnings in the US continues to paint a better picture for American corporates, with big tech companies beating estimates yesterday. However, concerns about the US banking sector have returned after First Republic’s (NYSE:FRC) shares dropped 49% following the larger-than-expected drop in deposits and announced restructuring plans. Ultimately, a risk-off mood has prevailed, despite the overall contagion effect having been significantly more contained than in previous instances in March: The 3-month FRA-OIS spread ticked higher to 32bp, but is a far cry from the 50bp and 60bp peaks seen last month. In FX, this still translated into a fully-fledged flight to safety, with the yen outperforming and the dollar recovering ground yesterday. High-beta currencies came under pressure, particularly the Norwegian krone, which is the least liquid currency in G10 and inevitably very vulnerable to adverse swings in risk sentiment....

# As key central bank meetings draw closer, markets appear to favor European currencies to the detriment of the dollar, whose rate advantage is being eroded. The two-year EUR-USD swap rate differential is now the narrowest since August 2020, adding to EUR/USD support. Elsewhere, we expect a 700bp cut by the National Bank of Hungary today USD: Soft momentum The week has started with the market leaning again in favor of European currencies and the dollar losing some ground. The price action in short-dated bonds showed a reinforcement of European hawkish bets while the whole US Treasury yield curve inched lower. Data will be back in focus today in the US, with the Conference Board's Consumer Confidence Index expected to have flattened in April and the Richmond Fed Manufacturing Index possibly inching lower. Some housing data will also be released and should underpin the notion of ongoing pain in the real estate sector. While a 25bp hike next week by the Fed does not look under di...

# The US dollar is mostly lower, led by the Swiss franc and euro. However, despite softer US rates and a victory for the LDP in local Japanese elections, the yen is trading with a softer bias. Japanese stocks recovered from the pre-weekend profit-taking seen after the Nikkei make new highs for the year. Most other large bourses in the region except Taiwan and India also moved lower. Note that China's CSI 300 fell for the fourth consecutive session and the first back-to-back loss of more than 1% of the year. Europe's Stoxx 600 is flat. It rose last week for fifth consecutive weekly advance. US futures are trading with a lower bias. European benchmark yields are slightly softer, while the US 10-year Treasury yield is off a little more than 3 bp to slip below 3.54%. European two-year yields are mostly 1-2 bp higher, while two-year US Treasury yield is off 3 bp to 4.15%. Recall that last week, the US 2-year yield reached 4.28%, the highest level since mid-March. Gold is little c...

# As April draws to a close, the systemic stress in the banking sector continues to subside, and the market is turning its attention to likely rate hikes by Federal Reserve and European Central Bank in early May. Although, as in March, the market sees the May hike to 5.25% to be the last Fed hike. Before the bank stress, the swap market had been leaning toward a 5.75% terminal rate. It is still early to fully appreciate the magnitude and duration of the tightening in lending standards. Yet, to assume that it is worth 50 bp of Fed tightening seems premature. Given the still robust labor market, elevated service prices, and more than an 8% depreciation of the dollar on a trade-weighted basis over the past six months, would suggest the risk of another hike after the May meeting. That seems more likely than a rate cut in Q3 as the Fed funds futures market is discounting. The Bank of Japan meeting, the first under new management, draws attention. Yet officials have shown a sense of urgen...

# Long-term perspective. The EUR/USD currency pair again traded somewhat illogically this week. The correction never began, although the pair remained excessively overbought all this time, and its last growth wave was unjustified. Nevertheless, the market still does not consider selling options, so the pair grows or remains very high. From a technical point of view, on the 24-hour TF, the price is above the important 50.0% Fibonacci level, but there is no confidence that growth will continue now. As we already mentioned, the pair is overbought, and the European currency has no growth factors. Of course, the market can buy any pair or instrument without factors; who can forbid it? However, in this case, we can only guess when this movement will end. Or try to anticipate it and its completion using technical analysis. There were almost no fundamental or macroeconomic events this week. However, all the most important data concerned the British pound, which paid little attention to them...

# Consumer price inflation in Japan is in no hurry to slow down. In March, prices rose 3.2% y/y, compared with 3.3% in February and an expected 2.6%.   Japan Core CPI hits another multi year record The core price index excludes food and energy but has not yet peaked, reaching 3.8% y/y from 3.5% the previous month. The last time core inflation was this high in Japan was in 1981. Worse, this index has risen by 0.6% in just one month without any visible slowdown, as we see in most developed countries.   However, the situation calls for patience rather than immediate intervention. The Corporate Goods Price index slowed to 7.2% YoY in March, down from 8.3% in February and a peak of 10.6% in December. We will see the Corporate Service Price Index next Tuesday, but the February pace was 1.8%, well within the inflation target. USDJPY has returned to the upside   For forex traders, higher-than-expected inflation is often a reason to buy currencies (in our case, sell U...

# Equities are mostly lower, while bonds have risen. The dollar is trading in narrow ranges and mixed against the G10 currencies and emerging markets. Most Asian bourses were lower. The Nikkei (though not the Topix) and Hong Kong were the chief exceptions. Europe's Stoxx 600 is off for the second consecutive day, in what looks like the first back-to-back loss since early this month. US equity futures are lower, with the NASDAQ, which eked out a small gain yesterday, is off more than 1% to lead the indices lower. European benchmark 10-year yields are mostly off 1-3 basis points. The 10-year US Treasury yield is down a couple of basis points to almost 3.56%. The US 2-year yield is off almost 4 bp to 4.20%. The dollar is trading quietly, mostly within yesterday's ranges. Softer than expected New Zealand Q1 CPI has helped drag the Kiwi about 0.5% lower to lead the decliners today. The Swiss franc has edged up by around 0.2% and solidifies its top-ranking performance among the G...

# Inflation remains a major concern for central banks and recent data highlights how far there is to go, something policymakers will be hoping changes very soon. A major headache for the Bank of England There’s no getting away from another rate hike from the BoE next month after inflation unexpectedly remained above 10% in March. This followed the labour market report on Tuesday which showed wages also remaining stubbornly higher, a combination that will make justifying not hiking very difficult for the central bank. While inflation is still expected to fall sharply over the course of the year, likely beginning over the next couple of months, it won’t come soon enough to give the MPC something to point towards to warrant ending the tightening cycle. The fact that the economy has also avoided a recession and could do so again this year could also support demand and cast doubt over the level of decline in inflation that was expected, supporting the case for more hikes. Markets are f...

# The EUR/USD pair retreated for a second straight day on Monday, sliding below the crucial 1.1000 level. Despite the lack of significant data releases, the US dollar remains strong against its competitors, thanks to bullish bets on the Federal Reserve. At the time of writing, the EUR/USD pair is trading at 1.0923, 0.63% below its opening price, while the DXY Index is trading at the 102.10 area, recording a 0.54% daily gain. Fed officials have been hitting the wires, boosting hawkish expectations and US yields. The WIRP tool shows that the odds of a 25 bp hike in May rose to nearly 90% from around 70% a week ago. At the same time, small odds of another 25 bp hike in June are back on the table. Against this backdrop, the 10-year note yield rose to 3.60%, the highest level since late March, while the 2-year rate climbed to 4.20%. Caution among investors is also helping the greenback, pushing Wall Street indexes into the red at the beginning of the week. However, equities managed to r...

# US retail sales decelerate sharply in May US bank earnings were solid Markets have priced a May rate hike at 80% AUD/USD steady after swings of over 1% late last week The Australian dollar has steadied on Monday, trading just above the 0.67 level. We could see further movement from the Aussie early on Tuesday, as China releases GDP. Aussie sinks after strong US earnings, Fed speak The markets received another clear sign on Friday that the US economy is slowing, after a disappointing March retail sales report. Headline retail sales fell by 1% and the core rate by 0.8%, worse than expected and marking a second straight decline for both. A soft US retail sales report is usually a recipe for US dollar weakness, but that wasn’t the case on Friday, as AUD/USD fell by 1%. The US dollar received a boost from strong earnings results, higher inflation expectations and some hawkish Fed speak. Bank earnings impressed on Friday, with strong results from JP Morgan, Citigroup and Wells Far...

# Opinion: Going up to 700, abnd later probably to 800. See analysis video. In this article, we will explore wheat futures technical analysis and provide a price forecast based on current market trends. We'll also discuss potential trading strategies and risk management for those interested in wheat-related assets. Wheat futures breakout of an ascending wedge on the 4-hour time frame Next probable target: 700 round number Potential retest and entry points for investors and traders Longer-term price movements and possible targets Wheat Futures Technical Analysis: Breakout of Ascending Wedge A recent technical analysis on the 4-hour time frame shows that wheat futures (ZW) have broken out of an ascending wedge. This bullish pattern suggests that the next probable target for ZW could be the 700 round number. Possible Retest and Entry Points Investors and traders may want to time their entries with a possible retest of the descending wedge, while being aware that it might...

# The EUR/USD lost ground on Friday, trimming weekly gains as the U.S. dollar rose across the board amid the deterioration in risk sentiment. Still, the pair scored the fourth weekly advance in a row and the sixth gain out of the last seven weeks. At the time of writing, the EUR/USD pair is trading at the 1.0995 area, 0.46% below its opening price. Comments from Fed officials fueled the recovery of the greenback. FOMC member Christopher Waller said that the central bank has not made much progress on the inflation goal and argued rates need to rise further. Meanwhile, Chicago Fed President Austan Goolsbee noted that “a mild recession is definitively on the table as a possibility.” Meanwhile, U.S. data came in mixed, with retail sales dropping more than expected by 1% in March. Data from the UoM showed that the April sentiment index came in at 63.5, above the consensus of 62, while the 5-year inflation expectations stood at 2.9%. Against this backdrop, U.S. bond yields were on the r...

# Testing the 1.27974 (call it 1.2800) area GBPUSD falls to trendline support In a previous post on the GBPUSD, we discussed the breaking of the converged 100/200 moving averages and the swing area down to 1.24208 in GBPUSD . A further decline would target the upward sloping trendline and Wednesday's low near 1.23974. Currently, the pair is testing this low and the trendline, with the recent low reaching 1.23985. There is a pause in the downward momentum. If buyers enter the market at this point, they would want to see the price move back above the 1.24208 level for reassurance. However, a break below 1.23974 would be disappointing and likely lead to further downside probing/selling. The next target area for the pair lies between 1.2343 and 1.2360. Key barometer being tested. Will the support do its job and hold support now? Trading analysis offered by RobotFX and Flex EA . Source #Unknown

# New Zealand Manufacturing PMI declines in March US retail sales expected to decline in March NZD/USD is trading quietly around the 0.6300 line New Zealand manufacturing declines New Zealand wrapped up the week on a sour note, as Manufacturing PMI for March slipped to 48.1, after a downwardly revised 51.7 in February and below the estimate of 51.0. A reading above 50.0 indicates expansion; below 50.0 indicates contraction. The manufacturing sector has been struggling across the globe due to weak economic conditions and supply chain issues, and the market reaction to the weak release was muted. Inflation remains the Reserve Bank of New Zealand’s number one priority. The central bank has taken off the gloves and has been very aggressive, including a 50-basis point hike last week which completely blindsided the markets. The benchmark cash rate is currently at 5.25%, but inflation remains stubbornly high at 7.2%. The markets are bracing for inflation to rise to 7.5% for the first qu...