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GBP/USD lower ahead of UK inflationThe British pound is lower on Tuesday. In the European session, GBP/USD is trading at 1.2739, down 0.41%. The UK releases the May inflation report on Wednesday and BoE policy makers will be hoping that inflation continues to trend lower. Inflation dropped in April to 8.7%, decelerating for a second straight month. The consensus stands at 8.4%, and the good news is that those awful readings above 10% appear to be over. On a monthly basis, inflation is expected to fall to 0.5% in May, down from 1.2% in April. Inflation appears to have peaked and is heading lower, but nobody at the Bank of England is smiling. The UK is expected to have one of the highest inflation rates in the G-20 this year at 6.9% and the BoE's 2% target is miles away. Finance Minister Sunak has set a goal of lowering inflation to 5% by the end of the year, which seems feasible if inflation continues to downtrend in the coming months. The BoE will be in the spotlight on Thursday when it makes its rate announcement. The markets have priced in a 25-basis point hike at 70%, with a 30% chance of an oversize 50-bp increase. If inflation falls as expected to 8.4% or lower, the MPC should be able to proceed with the 25-bp hike, although central banks have a tendency of surprising the money markets. In the US, it's an unusually light data calendar this week. There are no tier-1 releases on Tuesday, and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will have to clarify to lawmakers the Fed's interest rate path, as the Fed paused last week after ten straight hikes but expects to renew hiking in July. 1.2719 is under pressure in support. Next, there is support at 1.2589 There is resistance at 1.2848 and 1.2950
by OANDA
AUD/USD drifting lower ahead of RBA minutesThe Australian dollar has started the week with losses. AUD/USD is trading at 0.6848, down 0.39%. The Australian dollar gained 1.95% last week and has soared 5.2% in the month of June. The Reserve Bank of Australia releases the minutes of the June meeting on Tuesday. At the meeting, the Bank decided to raise rates by 0.25%, bringing the benchmark rate to 4.10%. This surprised the markets, which had expected the central bank to pause. Governor Lowe continued his hawkish stance after the decision, defending the interest rate as necessary since "upside risks to the inflation outlook have increased". Lowe has his hands full with sticky inflation, which rose in April from 6.3% to 6.8% y/y, above the consensus of 6.4%. The core rate fell from 6.9% to 6.5%, but this is much too high for the RBA, which has a target of 2%. The RBA has projected that inflation will not fall to 2% until mid-2025, leaving little doubt that the current rate-hike cycle is not close to wrapping up. The minutes should provide insights about the rate hike and what the central bank has planned moving forward. The RBA meets next on July 4th. The Fed is also very concerned with inflation but took a different approach, as it paused at last week's meeting after ten consecutive hikes. Fed policymakers got some good news on Friday, as UoM inflation expectations eased to 3.3% in June, down sharply from 4.2% in May and lower than the 4.1% consensus. Inflation expectations haven’t been this low since March 2021 and this is another indication that inflation is heading lower. The UoM Consumer Sentiment report climbed from 59.2 to 63.9, due to lower inflation expectations as well as the resolution of the banking crisis, according to the report. AUD /USD tested support at 0.6836 earlier. Next, there is support at 0.6729 0.6940 and 0.7004 are the next resistance lines
by OANDA
S&P 500 Daily Chart Analysis For Week of June 16, 2023Technical Analysis and Outlook: The Reignited Rally continues to move forward this week, hitting our target Outer Index Rally 4412 and, by doing so, completing Inner Index Rally 4444. This suggests a couple of trading scenarios: The unconfirmed completion by Trade Selecter, the market severity will pull back to Mean Sup 4365, followed by a solid bounce to retest the developed and confirmed by Trade Selecter Key Res 4425. The second scenario will display Spooz regrouping within the vicinity of developing Key Res and penetrating higher by targeting Outer Index Rally 4480. Trade Selecter will closely monitor any updates and share any valid confirmation with you.  (Please note that there will be no Daily Chart Analysis for the week of June 23. The next update will be on June 30). 
SP:SPX
by TradeSelecter
Central banks navigate the last stretch of the tightening cycleThis week we learnt how vital Central Bank communication is to global financial markets. The trio of central banks – The Federal Reserve (Fed), European Central Bank (ECB) and the Bank of Japan (BOJ) held their respective meetings. Each of the central banks tried to convey how they will navigate monetary policy amidst a slowing economy and avoid a hard landing. China takes small steps to shore up the recovery Even the People’s Bank of China (PBOC) surprised the markets this week, by announcing a cut in the 7-day Open Market Operations (OMO) by 10Bps to 1.9%1 which paved the way for another cut to the one-year medium term lending facility rate by 10Bps to 2.65%2. These recent developments mark a more proactive stance by Chinese policy makers in trying to tackle the Chinese slowdown in activity since the re-opening. Clearly more is needed. Policymakers are soliciting opinions from business leaders and economists on how to revitalise the economy in a number of urgent meetings3. While the Fed and ECB are trying to tame inflation, China has the opposite problem as inflation remains low. Manufacturing remains weak, exports are slowing, and credit growth is cooling. This is why it’s no surprise that the markets are prepping for a broader package of stimulus targeted towards the ailing property sector. A hawkish skip for the Fed The recent flurry of economic reports continues to show the US economy is holding up but losing steam, supporting the Fed’s approach of changing the pace of its policy tightening. The Fed kept the fed funds rate in range of 5-5.25%, by unanimous vote, in line with market expectations after 10 straight hikes dating back to March 2022. The Fed’s dot plot showed the median rate at 5.6% versus 5.1% a month back. In the summary of economic projections, the median unemployment rate forecast was revised lower from 4.5% to 4.1% by the end of 2023 while the core inflation rate was revised higher from 3.6% to 3.9% making the case for more hikes this year. This clearly was a hawkish skip. Fed Chairman Jerome Powell was careful to point out that no decision was made on a July hike, but he did say it is a live meeting, leading the market to increase the probability of a move. What surprised me the most, was that Powell said rate cuts would be a couple of years out which is at odds with the dot plot forecast of 100Bps of cuts in 2024. Senior Economist to WisdomTree Jeremy Siegel believes the Fed is done hiking and that alternative inflation metrics which incorporate real time housing inputs show inflation running at 1.4% instead of 4.1%. This is based on alternative shelter inflation calculations using Case Shiller Housing and Zillow rent annualized at 0.5% instead of the 8% that is biasing Bureau of Labor Statistics (BLS) CPI higher. ECB’s revised inflation forecasts remain at odds After raising the deposit rate by 25Bps to 3.5%, the ECB was a lot clearer than the Fed in signalling that rate hikes are almost certain next month on July 27. The ECB remains too optimistic on growth, reducing their projection for 2023 real GDP to only 0.9% (from 1% in its March projections). While I would agree with the ECB’s view that (1) mostly labour-intensive services will support economic growth over the next two years and (2) the current hump in wage inflation will show up via higher prices for these services, I remain sceptical amidst the global headwinds for manufacturing, and a slower pace of overall growth could keep inflation as high as the ECB now projects. While wages are likely to accelerate slightly above 5% in 2023, they should begin declining to 4% yoy by late 2024. We believe, if core inflation continues to recede in the coming months and the real economy grows at 0.4% in 2023, the ECB will stay put in September after a final move next month. As expected, the ECB confirmed that it will stop to reinvest proceeds from maturing bonds under its standard Asset Purchase Programme (APP) from July onwards. It won’t offer new long term liquidity injections upon the expiry of the €477Bn of a TLTRO III liquidity measure on 28 June 2023. BOJ sits tight As expected, the BOJ kept all key policy settings unchanged, including the +/-50Bps band around the zero% Japanese Government Bond JGB yield target. Since taking the helm in April 2023, BOJ Governor Kazuo Ueda has stressed the high cost of premature tightening as the economy is finally seeing green shoots toward sustainable inflation. In contrast to the ECB, the BoJ's latest assessment and outlook for the economy and inflation were also largely unchanged from their update in the April Outlook Report. The BoJ continues to note "extremely high uncertainties" surrounding economies and financial markets at home and abroad." Japanese equity markets reacted positively to the BOJ’s status quo stance on monetary policy. Looking ahead, the Fed’s potential pivot back to a hawkish mode versus the BOJ’s dovish perseverance could pave the way for further upside for Japanese equities owing to the underlying weakness in the Yen versus the US dollar. Sources 1 Bloomberg on June 13, 2023 2 Bloomberg on June 15, 2023 3 Bloomberg on June 14, 2023
FRED:FEDFUNDS
by aneekaguptaWTE
EUR/USD surges after ECB rate hikeEUR/USD is trading at 1.0948 in Europe, almost unchanged on the day. On Thursday, the euro surged 1.05% in the aftermath of the ECB rate hike. The ECB raised rates by 25 basis points on Thursday, bringing the benchmark rate to 3.50%, the highest level since 2001. The markets were not surprised by the move but ECB President Lagarde's hawkish comments following the rate announcement may have surprised some and the euro responded with massive gains. In her press conference, Lagarde said that barring a material change, it was "very likely" that the ECB would continue raising rates in July. Lagarde dampened any thoughts of a pause, even though the eurozone economy remains fragile and growth is expected to be weak. Headline inflation has been falling sharply in the eurozone, as energy prices have fallen. This is positive news, but the ECB is more concerned about core inflation, which is a better gauge of where inflation is headed. The core rate, which excludes energy prices, has been stickier than expected. Inflation has also cooled due to the ECB's rate tightening, but the current rate of 6.1% is far too high for the central bank, which is likely to hike again in July. The Federal Reserve dramatic decision on Wednesday contained two important aspects. First, the Fed took a breather and held rates after 10 straight rate increases. Second, the Fed signalled that the pause did not indicate the end of the current rate-tightening cycle, as the Fed was projecting two more hikes in the second half of the year. Fed Chair Powell reiterated in his press conference that the inflation battle "has a long way to go" and there is every indication that Powell will keep hammering away with rate hikes until inflation falls to the 2% target. There is resistance at 1.1050 and 1.1147 1.0922 and 1.0854 are providing support
by OANDA
12/06/23 Weekly outlookLast weeks high: $27401.2 Last weeks low: $26363.7 Midpoint: $25326.2 A massive week in the markets this week: Tuesday - US inflation data to be released tomorrow (Inflation rate YoY, MoM and core inflation YoY.) Wednesday - PPI MoM, FED interest decision, FOMC economic projections & FED conference. Thursday - Initial jobless claims & US retail sales All these events happening so closely together signals huge volatility to be expected. This coupled with the SEC news the crypto space is balancing on a knife edge. We've already seen alts bleed extensively but BTC and even ETH have yet to seen similar sell-offs. Perhaps we will see it this week. As it stands price is near last weeks low, with the incoming volatility I think we can safely assume that price will break lower, it's a question of how far below it will go.
by ProR35
$DXY - 'ABC' Waves Completed - The Dollar Index TVC:DXY seems to have completed Wave C of its A-B-C Elliot Waves Correction, today on ECONOMICS:USINTR Fed's announcement. TVC:DXY must hold the lows of Wave C at 102.6 and 1 level of Fibb' Zone, otherwise, its macro downtrend from 114 High will be printing another Bearish Lower High This, however, would be a fantastic opportunity for The Financial Markets to explode more on their uptrend resumptions . TRADE SAFE *** NOTE that this is not Financial Advice ! Please do your own research and consult your Financial Advisor before partaking in any trading activity based solely on this Idea .
TVC:DXY
by Mr_J__fx
Potential DXY Crash: Anticipating a Substantial Drop to $25I'm eyeing a significant decline in the U.S. Dollar Index (DXY) from its current level around 103, down to 25, driven by escalating inflation, competition from Bitcoin and gold, and the influence of BRICS nations. Should this substantial DXY drop materialize, it would likely benefit commodities, emerging markets, export-oriented economies, cryptocurrencies, and gold due to the inverse relationship they share with the dollar's value. The recurrent raising of the debt ceiling exacerbates the country's debt load, potentially weakening trust in the U.S. government's ability to service its debt, which in turn could significantly devalue the dollar. Inflation: If the dollar drops that much, it could lead to inflation or even hyperinflation. The cost of goods and services could rise, which would decrease the purchasing power of the average American. Interest Rates: To combat inflation, the Federal Reserve may increase interest rates. Higher interest rates can make it more expensive to borrow money for things like mortgages or student loans, which could affect the average American's ability to finance major purchases or manage their debts.
TVC:DXYShort
by MichaelBsul
7
Signs for a looming recessionInvestigating the 2008 recession, with specific regards to Interest Rates and Inflation. We can observe a similar pattern occur here. Should history rhyme, we will see at least some more months of bullish price action before the top is set. From there, months of slow decline, before bearish acceleration kicks in - deflation. Correlative projection puts the top in April 2024, however I have reason to believe that it will happen earlier this time, sometime this year. Reason being, is that the dynamic is different. There is a lot more leverage and this isn't about a housing market. The USD is being ditched as world reserve currency. Generally, the price increases that we should see in the coming months, would pale in comparison to the price decreases that we will see later. Invest wisely, and stay safe.
SP:SPXShort
by Alien_Algorithms
AUD/USD rally continues, Fed decision loomsThe Australian dollar continues to gain ground and is trading at 0.6795, up 0.42%. The Aussie has been red-hot in June, gaining 4.4%. Australia releases the May employment report early Thursday. The labour market has stayed solid despite aggressive rate hikes from the central bank, but there may be signs of cracks. In April, Australia shed jobs for the first time in three months, including 27,100 full-time jobs. The RBA won't be able to pause rates for an extended period unless it is convinced that the labour market is cooling down. The economy is expected to have gained 15,000 jobs in May and the unemployment rate is projected to remain at 3.7%. US headline inflation fell to 4.0% in May, down from 4.9% and the lowest level since March 2021. This was positive news, but the decline was driven by a drop in lower food and energy prices. Core CPI, which excludes food and energy, fell from 5.5% to 5.3%, a modest drop. Core CPI at its current level is not compatible with the Fed's 2% target, which will likely mean more rate hikes unless the core rate decelerates at a faster clip. The highlight of the week is the Fed rate decision later today. The markets are widely expecting a pause, which would break the streak of ten straight rate hikes. The rate decision may be a foregone conclusion, but the rate statement and Powell press conference could shed some light on what the Fed has planned next. If the Fed stresses that the current tightening cycle is not over, it could dampen risk sentiment and provide some support to the US dollar. AUD /USD is putting pressure on resistance at 0.6804. Next, there is resistance at 0.6863 0.6729 and 0.6632 are providing support
by OANDA
1
Charts Show Market Expects Fed to Pause but Big Resistance AheadTraders, Over 90% of the market is currently pricing in a FED rate pause tomorrow, but beware, the market often moves towards the point of maximum pain. My charts are showing we are at a critical point of resistance as I type this post. The bulls are going to have to conquer 4,370 and confirm it on the daily to convince me that the they are not out of steam just yet. From my perspective and the way I am reading this chart, is that the market may be in for a bit of a surprise pullback here. The blow-off top that I predicted well over a year ago is still currently underway and, IMO, will continue. But the market never goes to any future price point in a straight line. We are due for a pullback. I am not saying this will occur. I am only suggesting that a bit of caution is still very much warranted for the remainder of this week. Here's a look at a schedule of significant events that have or will yet occur and may cause volatility: Tuesday: • US CPI Data • Hinman Docs Become Public • SEC's Coinbase Rulemaking Response • Binance US Hearing Wednesday: • US PPI Data • FOMC Meeting Thursday: • US Jobless Claims • US Retail Sales Data Take care, Stew
U
by stewdamus
5
GBP/USD rebounds on strong UK job numbers, US inflation dropsThe British pound has pushed higher today, courtesy of a strong employment report. In the North American session, GBP/USD is trading at 1.2592, up 0.64%. The UK labour market remains robust, and today's employment numbers were higher than expected.  The economy created 250,000 jobs, up from 182,000 crushing the consensus of 162,000. The unemployment rate dipped to 3.8%, down from 4.0% and below the consensus of 4.0%. As well, average earnings including bonuses jumped to 6.5%, above 6.1%, which was also the consensus. The hot numbers will be a major disappointment for the Bank of England, which was expecting the labour market to show signs of cooling off after 12 straight rate hikes. The jump in wages may pose the biggest concern for the BoE, as high wage growth is a key driver of inflation, which remains very high at 8.7%.  Governor Bailey testifies today before the House of Lords Economic Affairs Committee, and the committee members are likely to grill Bailey on the latest job data. US inflation has been heading lower and the trend continued today. Headline CPI for May fell from 4.9% to 4.0%, just beating the consensus of 4.1%. The core rate dipped from 5.5% to 5.3%, as expected. The Fed's tightening policy has succeeded in pushing inflation lower, but the question is whether the Fed feels that inflation is dropping fast enough. Today's inflation data has the markets buying all into a pause at Wednesday's Fed meeting. The probability of a pause has soared to 99% according to CME's FedWatch, compared to 75% prior to the inflation release. There are Fed members who favour more rate hikes and the expected non-move on Wednesday could be a "hawkish skip" in which the Fed signals that it is taking a breather but more rate hikes are coming. There is resistance at 1.2657 and 1.2734 1.2513 and 1.2436 are providing support
by OANDA
Natural Gas - Set to Fly High with the Dollar?Weekly Long Position on AMEX:BOIL A new major low was observed in this market on May 30th The security of interest is $NYMEX:NG1!. Using a leveraged product AMEX:BOIL to gain exposure to a potential short-term movement, as a continuation of a long-term trend. See below the chart of $NYMEX:NG1!. Commodities, equities, and other assets priced in US Dollars are subject to relative foreign-exchange changes, as realisation of risk is highly complex in globalised markets. The price of NYMEX:NG1! represents some relationship to an almost infinite supply of financial products, as capital moves around the interconnected world. For example, Iran is not apart of SWIFT and must exchange assets to engage in trade with other nations. Their crude oil is paid for in gold. However the 'zero-risk' benchmark for both these commodity products, NYMEX:CL1! and COMEX:GC1! , are priced in US Dollars. As the relative strength of the US Dollar fluctuates, asset prices too will fluctuate even without alteration to any of the fundamental dynamics of the market in question. Martin Armstrong has established himself the foremost expert on 'Capital Flow Analysis'. See below the chart of COMEX:GC1! , FX:USDCHF , ECONOMICS:USCPI Important to note is the lack of direct correlation between Gold priced in US Dollars, and US Dollar domestic inflation (CPI). Contrary to the assertion of many analysts, gold responds directly to sovereign-related risk. The 'relative-value' of gold at the time of each major high reflects price discovery across all asset classes, though we can only view one time-price continuum on a chart. With that in mind, see below the chart of TVC:DXY and a few commodities. All these markets demonstrate various correlations to one another, there is a general trend that can be observed. As the capital flows persisting from Feb 2022 onwards reflect a shifting global investment outlook, towards high-quality assets. Over the course of the last few financial crises, the safe place for capital was US sovereign debt, in the form of Treasuries. As the plumbing of the two-tier global banking system is operated by the US Federal Reserve, highly liquid money markets keep the USD afloat in times of financial stress. However, this has not always been the case. During the Great Depression, the contraction of capital (deflation) was so severe that physical, paper US Dollars were the global asset of choice for security. Capital formation could continue once the price of gold was un-pegged from the dollar, to properly reflect price discovery in the newly minted global economy. Energy markets have become particularly chaotic over the last 16 months, as Russia plays an important role, particularly in Europe where a network of pipelines has become a security issue. Heavy sanctions have been placed on Russia, as well as an outright ban of a large quantity of its exports. Russia, having control over Ukraine's direct access to the ocean, has returned the favour. Resulting in a disruption in markets from wheat, and lumber, to gold and neon. With the Nordstream projects in critical condition, Europe's energy fragility should be of great concern, both domestically and to its allies. Among the sanctions, is a 'price cap' on the price of crude oil for export at $60/barrel. See chart of NYMEX light crude, and European brent crude. For those not aware, these represent relatively "raw" product exchanged on global markets. Crude must be refined to produce products like gasoline, diesel, lubricants, etc. As with any attempt to artificially manipulate the price of an asset, this presents arbitrage opportunity. Since December when this was imposed, China and India have reportedly been buying Russian crude, refining and exporting it. Russia has spent years purging US Dollar exposure from its energy markets, as war in the Middle East has steadily grown tension between the two powers. Foreign exchange markets are very sensitive to volatility, and can respond unpredictably to major shifts in trend. The consequences of capital moving around the globe quickly can be devastating, see FX_IDC:USDRUB , TVC:US10Y , and TVC:MOVE the US bond market volatility index, compared. All markets must respond to price action, as real risk remains deeply concealed. All while this is going on, global shipping has become significantly more expensive. Meaning the logistical element of global energy markets has become very convoluted. From cheap oil sitting on tankers, to arbitrage of diesel products, to ships transferring oil between one another to conceal Russian oil, to leveraged oil ETFs, the dynamics of NYMEX:CL1! have become almost unfathomably complicated. So to return to NYMEX:NG1! , the value of this product lies in simplicity. The current price can only be assumed to properly reflect global monetary conditions, as a dramatic correction can be observed. The art of business, is buying what nobody wants and selling it when everyone wants it. So much focus in finance at the moment is pointed towards the Federal Reserve and its attempted manipulations of the interest rate on US Dollars. Why this is taking place however, is a subject that has avoided capturing attention. The Federal Reserve is attempting to combat WAR INFLATION by creating deflation domestically, supported by capital flows from abroad. Flight to quality will take place independent of any institutional power, by offering a higher rate of return on Treasuries the Fed is more likely to be able to reduce its balance sheet, and support NATO's war efforts. In order to pay troops, send equipment offshore and make loans to Ukraine, capital must leave the borders of the United States, to the sum of trillions, creating massive inflation globally. So to clarify, global capital is fleeing towards the United States. However, the only sources of capital formation in the United States are financialization, and war. Stagflation, thought to be impossible, has returned to the world. As such, equity and asset prices can continue to rise, without actually rising in relative value globally, since the same will occur in the sum of tanks, aircraft, etc, moved around the world. A zero-sum game. The fact of the matter is that the world is going to need natural gas - and a lot of it at that. The current domestic investment climate can't adequately adjust for this, the dominant psychological trends in markets push capital down paths which are facilitated by political means, for example 'Environmentally Safe Governance'. Exploration of gas reserves and extraction of energy products has become very unpopular in the last decade, to the unfortunate dismay of anyone who hopes to drive car or live in a heated home in the next decade. Of note, that besides the US and Canada the largest producers and exporters of natural gas are apart of, or close to the influence of BRICS. Any global conflict which takes place, will first manifest itself in global financial markets, and there is lengthy historical precedent for this. Europe, which has its gas supplied from abroad is completely exposed to market energy prices, as well as the logistical risk of actually supplying said gas. A precarious position to be in, as war knocks on their door. Immediately after Russia's invasion of Ukraine, the world saw a vision of the future flicker as gasoline prices skyrocketed. Reality as we know it in the industrialised depends on simple global logistics, and cheap energy prices. Both of these constructs are crumbling very quickly, and cannot be resolved until a settlement is made between Ukraine and Russia. Money printing and sanctions cannot make more natural gas appear, nor get it across the ocean cheaply. I propose a trade on AMEX:BOIL , to gain exposure to volatility in Natural Gas markets. Lines of support/resistance represent the arbitrary price points I suggest may be relevant, and can be used for entry/exit and position management.
AMEX:BOILLong
by FPS_Denny
USD/CAD- Canadian dollar extends gains despite weak job dataThe Canadian dollar continues to rally. USD/CAD is trading at 1.3328 in the North American session, down 0.22% on the day. The week wrapped up with Canada's May employment report, which usually is released at the same time as the US job data, but had the spotlight to itself today. The data was a disappointment. Canada's economy shed 17,300 jobs, all of which were full-time positions. This followed an increase of 41,400 in April and missed the consensus of a gain of 23,200. The unemployment rate rose from 5.0% to 5.2%, the first rise since August 2022. The weak job numbers could signal softness in the labour market, which would have major ramifications for the Bank of Canada's rate path. The Canadian dollar lost 40 points in the aftermath of the release but quickly recovered these losses. We could see more movement from USD/CAD on Monday as the markets digest these numbers. The US labour market has shown resilience, as we saw last week with a red-hot nonfarm payroll report. Still, some cracks have appeared, such as the jump in the unemployment rate and a low participation rate. The markets are looking for signs that the labour market is cooling off and jumped all over unemployment claims, which surprised on the upside at 261,000, up from 233,000 a week earlier. A spike in one weekly report isn't all that significant, but the timing of the release close to the Fed meeting may make a Fed pause more likely, and that has sent the US dollar lower against its major rivals. Central banks continue to wrestle with high inflation, which has remained stubbornly high despite aggressive rate tightening. This week alone, the Reserve Bank of Australia and the Bank of Canada raised rates by 0.25%, surprising the markets which had expected a pause. The BoC has made clear that its "conditional pause" stance would be data-dependent and perhaps the markets should have paid more attention to the uptick in April inflation and strong GDP growth in the first quarter. The BoC highlighted both of these indicators in its rate statement as factors in its decision to hike rates, and the central bank will be keeping a close eye on economic growth and inflation ahead of the July meeting. USD/CAD is testing support at 1.3339. Below, there is support at 1.3250 1.3496 and 1.3585 are the next resistance lines
by OANDA
1
AUD/USD hits one-month high, Chinese inflation eyedThe Australian dollar has bounced back on Thursday after losing ground on Wednesday. AUD/USD is trading at 0.6681, up 0.42% on the day. The Australian dollar touched a high of 0.6690 on Wednesday, its highest level in a month. The RBA surprised the markets with a rate hike on Wednesday, noting that inflation had unexpectedly risen in April and GDP in the first quarter was higher than the RBA had predicted. The RBA statement said that more tightening might be needed "to ensure that inflation returns to target in a reasonable timeframe". Lowe was even more candid in remarks at a public engagement on Wednesday, saying that the Bank has been patient in the battle to get inflation back to the 2-3% target "but our patience has a limit and the risks are testing that limit.” Lowe appeared to be referring to the upside risk in inflation, and he could be hinting at a "higher and longer" stance with rate policy until inflation returns closer to target. Inflation has peaked, but at the current level of 7%, Lowe may be sending a message that inflation is falling far too slowly and he's prepared to keep raising rates, even if this results in a hard landing for the economy. China will release inflation data on Friday. Inflation is projected to rise to 0.3% in May, up from 0.1% in April. An improvement from the April reading would reduce concerns that China could be facing disinflation and may have to respond by cutting interest rates. On Wednesday, China released soft trade data, which showed exports fell by 7.5%. This has raised doubts about China's economic recovery. The Australian dollar, which is highly sensitive to Chinese data, lost ground following the release. AUD/USD continues to test resistance at 0.6677. Above, there is resistance at 0.6749 There is support at 0.6568 and 0.6496
by OANDA
Canadian dollar calm ahead of BoC rate announcementThe Canadian dollar is unchanged, trading at 1.3400 in the North American session. The Bank of Canada meets later today, and the money markets are expecting another pause, which would leave the benchmark rate at 4.5%. The BoC's rate-tightening cycle has been on a "conditional pause", which is another way of saying that rate decisions are data-dependent, especially on inflation and employment reports. The Bank has kept rates on hold since March and is expected to follow suit today, but there have been signals that the rate-hike cycle may not be over. First, April inflation report surprised on the upside after it ticked upwards to 4.4%, up from 4.3% annually, and rose from 0.3% to 0.7% month-to-month. The upswing will be of concern to BoC policy makers, as the central bank is intent on wrestling inflation back to the 2% target. The second concern is GDP, which hit 3.1% y/y in the first quarter, beating the BoC's forecast of 2.3% growth. Consumer spending has been stronger than anticipated, as many households have sizeable savings from the pandemic which they are spending now that the economy has reopened. BoC policy makers are concerned about the rise in inflation and GDP, and we could see hints about future rate hikes even if the Bank opts to pause at today's meeting. The Fed meets next week and with a blackout period in place on Fed public engagements, the markets are hunting for clues. Market pricing has been on a roller-coaster as divisions within the Fed over rate policy have made it difficult to determine what the Fed has planned. Currently, the markets are predicting a 78% chance of a pause, which would mark the first hold in rates after 10 straight rate increases. 1.3375 is a weak support line, followed by 1.3250 1.3496 and 1.3585 are the next resistance lines
by OANDA