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Trade Of The Week: Time For USDCAD To Breakout?

The Canadian Dollar is the second-best performer against the US dollar so far in June, gaining 1% thanks to higher oil prices and increased expectations around a BoC rate hike.

This could be another volatile week for the USDCAD as investors digest last Friday’s sizzling US jobs report and Saudi Arabia’s latest pledge to make an extra 1 million barrel-a-day supply cut in July. Taking a brief look at the technical picture, prices remain trapped within a wide range on the weekly charts with support found at 1.3250 and resistance at 1.3850.

A major breakout could be on the horizon for the USDCAD and here are 4 reasons why:

Bank of Canada rate decision

On Wednesday, June 7th, the Bank of Canada (BoC) will announce its rate decision.

The recent better than expected economic data including GDP and employment figures have supported expectations around the BoC raising rates at least one final time before 2023 concludes. Traders are currently pricing in a 41% probability of a 25-basis point rate hike on Wednesday with this jumping to 90% by July’s meeting. Should the BoC surprise markets with a rate hike in June, CAD bulls could be injected with renewed confidence.

It may be worth keeping a close eye on the unemployment rate published on Friday, June 9th which could provide fresh insight into the health of the Canadian labour force. A solid report could fuel speculation around the BoC hiking rates further – ultimately dragging the USDCAD lower as the Canadian Dollar appreciates.

Volatile oil prices

Oil prices jumped almost 5% early on Monday morning before giving back some gains after Saudi Arabia said it will cut oil production by an extra 1 million barrels per day in July.

This development has certainly added more spice to oil markets with expectations around tightening supplies potentially fuelling upside gains. Should oil bulls remain in the driving seat, this will be welcomed by the CAD which is a commodity-linked currency. However, if ongoing concerns around weak global demand cap upside gains and result in renewed weakness for oil, the CAD may be one of the first casualties.

Dollar performance

The Dollar seems to have regained its mojo after last Friday’s stronger-than-expected US jobs report supported expectations around the Fed leaving rates higher for longer.

Non-farm payrolls soared 339,000 in May, surpassing April’s 294,000 and smashing the median estimates of 195,000. However, the unemployment rate leaped to 3.7% while annual growth cooled, slowing to 4.3%. Given how we have entered the blackout period for Fed speakers, the barrage of key US data releases on Monday could dictate the dollar’s near-term outlook. If dollar strength is a key theme this week, this could push the USDCAD higher. Alternatively, a weaker dollar may drag the currency pair lower.

Technical forces

The USDCAD has found itself trapped within a very wide range over the past few months with the first layers of monthly support at 1.3250 and resistance at 1.3850.

Zooming into the daily timeframe prices are bouncing within a narrower range with resistance at 1.3650 and support at 1.3300. Bears seem to be in control after the heavy selloff that took prices below the 50, 100, and 200-day SMA. A solid breakdown and daily close below 1.3400 could encourage a decline toward 1.3300. Should prices push back above 1.3500, we could see 1.3560 and 1.3650, respectively.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News

04 Jun

Currency Speculators push Mexican Peso bullish bets to 168-week high

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday May 30th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes led by Canadian Dollar & Australian Dollar

The COT currency market speculator bets were higher this week as seven out of the eleven currency markets we cover had higher positioning while the other four markets had lower speculator contracts.

Leading the gains for the currency markets was the Canadian Dollar (18,612 contracts) with the Australian Dollar (4,955 contracts), British Pound (1,646 contracts), the US Dollar Index (1,528 contracts), the New Zealand Dollar (233 contracts) and the Swiss Franc (468 contracts) also showing positive weeks.

The currencies seeing declines in speculator bets on the week were the Japanese Yen (-15,533 contracts) with the EuroFX (-8,011 contracts), the Mexican Peso (1,062 contracts), the Brazilian Real (-1,417 contracts) and Bitcoin (-706 contracts) also registering lower bets on the week.

Speculators push Mexican Peso bullish bets to 168-week high

Highlighting the COT currency data this week is the continued gains for the Mexican peso positioning. Large speculators raised their bullish bets for the Mexican peso this week for the fifth straight week and for the seventh time out of the past ten weeks.

Peso bets have now improved by a total of +129,731 contracts since the beginning of 2023 (a total of 22 weeks), going from a total of -56,376 contracts on January 3rd to a total of +78,005 contracts this week. This rise in the speculator sentiment has pushed the current net position to the highest level in the past 168 weeks, dating all the way back to the height of the pandemic on March 10th of 2020.

The peso has been riding the tide of record high interest rates in Mexico that had risen to 11.25 percent level at the central bank meeting in March. However, the Mexican Central Bank, in their May meeting, held their rate steady and look to continue to do so for the time being with inflation subsiding in the latest data-points.

The Mexican peso exchange rate versus the US dollar has been surging higher this year with the MXN hitting a new 7-year high in this week’s trading. Overall, the peso is higher against the dollar in 2023 by approximately 15 percent and is trading at the best levels since 2016.

Data Snapshot of Forex Market Traders | Columns Legend

May-30-2023	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
USD Index	32,373	28	12,768	46	-16,260	50	3,492	55
EUR	775,142	81	165,725	82	-214,015	18	48,290	56
GBP	240,301	61	13,235	80	-15,208	24	1,973	62
JPY	243,237	75	-96,193	10	106,512	88	-10,319	32
CHF	41,354	40	-435	53	1,533	48	-1,098	54
CAD	179,871	50	-29,914	27	39,037	83	-9,123	3
AUD	204,963	94	-44,126	44	59,100	63	-14,974	16
NZD	39,507	33	-130	53	1,195	49	-1,065	37
MXN	224,395	46	78,005	100	-83,021	0	5,016	75
RUB	20,930	4	7,543	31	-7,150	69	-393	24
BRL	64,846	59	31,275	76	-35,269	21	3,994	76
Bitcoin	11,715	45	187	80	-624	0	437	23

Strength Scores led by Mexican Peso & EuroFX

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Mexican Peso (100 percent) and the EuroFX (82 percent) lead the currency markets this week. The British Pound (80 percent), Bitcoin (80 percent) and the Brazilian Real (76 percent) come in as the next highest in the weekly strength scores.

On the downside, the Japanese Yen (10 percent) comes in at the lowest strength levels currently and is in Extreme-Bearish territory (below 20 percent). The next lowest strength scores are the Canadian Dollar (27 percent), the Australian Dollar (44 percent) and the US Dollar Index (46 percent).

Strength Statistics:
US Dollar Index (46.2 percent) vs US Dollar Index previous week (43.7 percent)
EuroFX (82.3 percent) vs EuroFX previous week (85.3 percent)
British Pound Sterling (80.4 percent) vs British Pound Sterling previous week (79.0 percent)
Japanese Yen (9.6 percent) vs Japanese Yen previous week (19.2 percent)
Swiss Franc (53.5 percent) vs Swiss Franc previous week (52.2 percent)
Canadian Dollar (26.7 percent) vs Canadian Dollar previous week (9.3 percent)
Australian Dollar (43.9 percent) vs Australian Dollar previous week (39.3 percent)
New Zealand Dollar (53.2 percent) vs New Zealand Dollar previous week (52.6 percent)
Mexican Peso (100.0 percent) vs Mexican Peso previous week (99.3 percent)
Brazilian Real (75.6 percent) vs Brazilian Real previous week (77.4 percent)
Bitcoin (80.2 percent) vs Bitcoin previous week (92.5 percent)

Brazilian Real & Canadian Dollar top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Brazilian Real (22 percent) and the Canadian Dollar (15 percent) lead the past six weeks trends for the currencies. The Mexican Peso (15 percent), the Bitcoin (12 percent) and the Swiss Franc (11 percent) are the next highest positive movers in the latest trends data.

The Japanese Yen (-24 percent) leads the downside trend scores currently with the Australian Dollar (-2 percent), EuroFX (1 percent) and the US Dollar Index (4 percent) following next with lower trend scores.

Strength Trend Statistics:
US Dollar Index (3.8 percent) vs US Dollar Index previous week (-3.4 percent)
EuroFX (0.5 percent) vs EuroFX previous week (4.0 percent)
British Pound Sterling (10.2 percent) vs British Pound Sterling previous week (12.0 percent)
Japanese Yen (-24.2 percent) vs Japanese Yen previous week (-14.4 percent)
Swiss Franc (11.3 percent) vs Swiss Franc previous week (15.4 percent)
Canadian Dollar (15.2 percent) vs Canadian Dollar previous week (7.5 percent)
Australian Dollar (-1.6 percent) vs Australian Dollar previous week (-10.3 percent)
New Zealand Dollar (10.2 percent) vs New Zealand Dollar previous week (11.2 percent)
Mexican Peso (15.4 percent) vs Mexican Peso previous week (11.6 percent)
Brazilian Real (22.5 percent) vs Brazilian Real previous week (25.1 percent)
Bitcoin (11.8 percent) vs Bitcoin previous week (35.1 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

The US Dollar Index large speculator standing this week came in at a net position of 12,768 contracts in the data reported through Tuesday. This was a weekly increase of 1,528 contracts from the previous week which had a total of 11,240 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.2 percent. The commercials are Bearish with a score of 49.9 percent and the small traders (not shown in chart) are Bullish with a score of 54.7 percent.

US DOLLAR INDEX Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	73.9	2.5	18.3
– Percent of Open Interest Shorts:	34.5	52.8	7.5
– Net Position:	12,768	-16,260	3,492
– Gross Longs:	23,927	819	5,936
– Gross Shorts:	11,159	17,079	2,444
– Long to Short Ratio:	2.1 to 1	0.0 to 1	2.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	46.2	49.9	54.7
– Strength Index Reading (3 Year Range):	Bearish	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	3.8	-6.8	22.4

Euro Currency Futures:

The Euro Currency large speculator standing this week came in at a net position of 165,725 contracts in the data reported through Tuesday. This was a weekly decrease of -8,011 contracts from the previous week which had a total of 173,736 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 82.3 percent. The commercials are Bearish-Extreme with a score of 18.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.0 percent.

EURO Currency Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	31.2	53.7	12.1
– Percent of Open Interest Shorts:	9.8	81.3	5.9
– Net Position:	165,725	-214,015	48,290
– Gross Longs:	241,817	415,872	93,836
– Gross Shorts:	76,092	629,887	45,546
– Long to Short Ratio:	3.2 to 1	0.7 to 1	2.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	82.3	18.2	56.0
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	0.5	-0.2	-1.0

British Pound Sterling Futures:

The British Pound Sterling large speculator standing this week came in at a net position of 13,235 contracts in the data reported through Tuesday. This was a weekly increase of 1,646 contracts from the previous week which had a total of 11,589 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 80.4 percent. The commercials are Bearish with a score of 23.8 percent and the small traders (not shown in chart) are Bullish with a score of 61.9 percent.

BRITISH POUND Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	29.3	51.6	12.3
– Percent of Open Interest Shorts:	23.8	57.9	11.5
– Net Position:	13,235	-15,208	1,973
– Gross Longs:	70,320	124,002	29,613
– Gross Shorts:	57,085	139,210	27,640
– Long to Short Ratio:	1.2 to 1	0.9 to 1	1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	80.4	23.8	61.9
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	10.2	-4.9	-9.3

Japanese Yen Futures:

The Japanese Yen large speculator standing this week came in at a net position of -96,193 contracts in the data reported through Tuesday. This was a weekly lowering of -15,533 contracts from the previous week which had a total of -80,660 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 9.6 percent. The commercials are Bullish-Extreme with a score of 87.6 percent and the small traders (not shown in chart) are Bearish with a score of 32.5 percent.

JAPANESE YEN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	16.7	68.6	12.0
– Percent of Open Interest Shorts:	56.3	24.8	16.3
– Net Position:	-96,193	106,512	-10,319
– Gross Longs:	40,736	166,931	29,299
– Gross Shorts:	136,929	60,419	39,618
– Long to Short Ratio:	0.3 to 1	2.8 to 1	0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	9.6	87.6	32.5
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-24.2	21.9	-11.3

Swiss Franc Futures:

The Swiss Franc large speculator standing this week came in at a net position of -435 contracts in the data reported through Tuesday. This was a weekly lift of 468 contracts from the previous week which had a total of -903 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.5 percent. The commercials are Bearish with a score of 47.5 percent and the small traders (not shown in chart) are Bullish with a score of 53.8 percent.

SWISS FRANC Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	20.5	44.9	32.7
– Percent of Open Interest Shorts:	21.6	41.2	35.3
– Net Position:	-435	1,533	-1,098
– Gross Longs:	8,482	18,560	13,516
– Gross Shorts:	8,917	17,027	14,614
– Long to Short Ratio:	1.0 to 1	1.1 to 1	0.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	53.5	47.5	53.8
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	11.3	-3.1	-8.2

Canadian Dollar Futures:

The Canadian Dollar large speculator standing this week came in at a net position of -29,914 contracts in the data reported through Tuesday. This was a weekly boost of 18,612 contracts from the previous week which had a total of -48,526 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.7 percent. The commercials are Bullish-Extreme with a score of 82.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 2.5 percent.

CANADIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	20.9	59.6	15.2
– Percent of Open Interest Shorts:	37.5	37.9	20.3
– Net Position:	-29,914	39,037	-9,123
– Gross Longs:	37,619	107,243	27,430
– Gross Shorts:	67,533	68,206	36,553
– Long to Short Ratio:	0.6 to 1	1.6 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	26.7	82.7	2.5
– Strength Index Reading (3 Year Range):	Bearish	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	15.2	-2.1	-29.2

Australian Dollar Futures:

The Australian Dollar large speculator standing this week came in at a net position of -44,126 contracts in the data reported through Tuesday. This was a weekly lift of 4,955 contracts from the previous week which had a total of -49,081 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.9 percent. The commercials are Bullish with a score of 63.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.9 percent.

AUSTRALIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	33.6	53.4	9.5
– Percent of Open Interest Shorts:	55.2	24.6	16.8
– Net Position:	-44,126	59,100	-14,974
– Gross Longs:	68,969	109,462	19,509
– Gross Shorts:	113,095	50,362	34,483
– Long to Short Ratio:	0.6 to 1	2.2 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	43.9	63.0	15.9
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-1.6	6.4	-16.5

New Zealand Dollar Futures:

The New Zealand Dollar large speculator standing this week came in at a net position of -130 contracts in the data reported through Tuesday. This was a weekly boost of 233 contracts from the previous week which had a total of -363 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.2 percent. The commercials are Bearish with a score of 49.3 percent and the small traders (not shown in chart) are Bearish with a score of 37.3 percent.

NEW ZEALAND DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	40.7	47.1	9.3
– Percent of Open Interest Shorts:	41.0	44.1	12.0
– Net Position:	-130	1,195	-1,065
– Gross Longs:	16,081	18,608	3,670
– Gross Shorts:	16,211	17,413	4,735
– Long to Short Ratio:	1.0 to 1	1.1 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	53.2	49.3	37.3
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	10.2	-5.9	-14.9

Mexican Peso Futures:

The Mexican Peso large speculator standing this week came in at a net position of 78,005 contracts in the data reported through Tuesday. This was a weekly rise of 1,062 contracts from the previous week which had a total of 76,943 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish with a score of 75.3 percent.

MEXICAN PESO Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	51.5	44.1	3.5
– Percent of Open Interest Shorts:	16.7	81.1	1.3
– Net Position:	78,005	-83,021	5,016
– Gross Longs:	115,535	98,971	7,942
– Gross Shorts:	37,530	181,992	2,926
– Long to Short Ratio:	3.1 to 1	0.5 to 1	2.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	100.0	0.0	75.3
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	15.4	-14.9	3.4

Brazilian Real Futures:

The Brazilian Real large speculator standing this week came in at a net position of 31,275 contracts in the data reported through Tuesday. This was a weekly lowering of -1,417 contracts from the previous week which had a total of 32,692 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.6 percent. The commercials are Bearish with a score of 21.3 percent and the small traders (not shown in chart) are Bullish with a score of 75.8 percent.

BRAZIL REAL Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	54.3	29.1	15.4
– Percent of Open Interest Shorts:	6.1	83.5	9.3
– Net Position:	31,275	-35,269	3,994
– Gross Longs:	35,223	18,861	9,998
– Gross Shorts:	3,948	54,130	6,004
– Long to Short Ratio:	8.9 to 1	0.3 to 1	1.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	75.6	21.3	75.8
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	22.5	-25.2	22.4

Bitcoin Futures:

The Bitcoin large speculator standing this week came in at a net position of 187 contracts in the data reported through Tuesday. This was a weekly fall of -706 contracts from the previous week which had a total of 893 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 80.2 percent. The commercials are Bearish with a score of 35.2 percent and the small traders (not shown in chart) are Bearish with a score of 22.9 percent.

BITCOIN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	77.2	2.1	10.1
– Percent of Open Interest Shorts:	75.6	7.5	6.3
– Net Position:	187	-624	437
– Gross Longs:	9,040	251	1,178
– Gross Shorts:	8,853	875	741
– Long to Short Ratio:	1.0 to 1	0.3 to 1	1.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	80.2	35.2	22.9
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	11.8	-18.8	-5.2

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

03 Jun

Speculator Extremes: Live Cattle, Cocoa, Lean Hogs, Wheat & Brent top Bull/Bear Leaders

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on May 30th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

Bloomberg Commodity Index

The Bloomberg Commodity Index speculator position comes in as the most bullish extreme standing this week. The Bloomberg Commodity Index speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 8.5 this week. The overall net speculator position was a total of -1,668 net contracts this week with a change of 9 contracts in the weekly speculator bets.

Cocoa Futures

The Cocoa Futures speculator position comes next in the extreme standings this week. The Cocoa Futures speculator level is now at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score was 7.5 this week. The speculator position registered 65,573 net contracts this week with a weekly edge higher of 199 contracts in speculator bets.

Mexican Peso

The Mexican Peso speculator position comes in third this week in the extreme standings. The Mexican Peso speculator level resides at a 100.0 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 15.4 this week. The overall speculator position was 78,005 net contracts this week with a rise of 1,062 contracts in the weekly speculator bets.

3-Month Secured Overnight Financing Rate

The 3-Month Secured Overnight Financing Rate speculator position comes up number four in the extreme standings this week. The 3-Month Secured Overnight Financing Rate speculator level is at a 98.0 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 54.2 this week. The overall speculator position was 43,222 net contracts this week with a jump of 144,765 contracts in the speculator bets.

Live Cattle

The Live Cattle speculator position rounds out the top five in this week’s bullish extreme standings. The Live Cattle speculator level sits at a 91.8 percent score of its 3-year range. The six-week trend for the speculator strength score was -0.8 this week.

The speculator position was 101,378 net contracts this week with a small decline of -269 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Lean Hogs

The Lean Hogs speculator position comes in as the most bearish extreme standing this week. The Lean Hogs speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -7.4 this week. The overall speculator position was -36,114 net contracts this week with a dip of -2,262 contracts in the speculator bets.

Soybean Oil

The Soybean Oil speculator position comes in next for the most bearish extreme standing on the week. The Soybean Oil speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -12.6 this week. The speculator position was -31,248 net contracts this week with a shortfall of -3,385 contracts in the weekly speculator bets.

Wheat

The Wheat speculator position comes in as third most bearish extreme standing of the week. The Wheat speculator level resides at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -16.7 this week. The overall speculator position was -93,996 net contracts this week with a decline of -7,677 contracts in the speculator bets.

Brent Oil

The Brent Oil speculator position comes in as this week’s fourth most bearish extreme standing. The Brent Oil speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -21.4 this week. The speculator position was -53,294 net contracts this week with a drop of -5,488 contracts in the weekly speculator bets.

10-Year Note

Finally, the 10-Year Note speculator position comes in as the fifth most bearish extreme standing for this week. The 10-Year Note speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -16.5 this week. The speculator position was -850,421 net contracts this week with a decrease of -78,783 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

COT Updates Forex and Currency News investing Opinions

02 Jun

War in Ukraine might give the Chinese yuan the boost it needs to become a major global currency – and be a serious contender against the US dollar

By Tuugi Chuluun, Loyola University Maryland

The Chinese economy’s sheer size and rapid growth are impressive.

China maintained one of the highest economic growth rates in the world for more than a quarter of a century, helping lift over 800 million people out of poverty in just a few decades. The country is the largest exporter in the world and the most important trading partner of Japan, Germany, Brazil and many other countries. It has the second-largest economy after the U.S., based on the market exchange rate, and the largest based on purchasing power.

And yet the yuan still lags as a major global currency. The war in Ukraine, which started in February 2022, may change that.

As a professor of finance and expert on international finance, I understand how this geopolitical conflict may put China’s currency on the next phase of its path to becoming a global currency – and prompt the onset of the decline of the U.S. dollar from its current dominance.

Chinese yuan’s slow progress

China has long wanted to make the yuan a global force and has mounted significant efforts to do so in recent years.

For example, the Chinese government launched the Cross-Border Interbank Payments System, or CIPS, in 2015 to facilitate cross-border payments in yuan. Three years later, in 2018, it launched the world’s first yuan-denominated crude oil futures contracts to allow exporters to sell oil in yuan.

China has also emerged perhaps as the world’s largest creditor, with the government and state-controlled enterprises extending loans to dozens of developing countries. And China is developing a digital yuan as one of the world’s first central bank digital currencies. Even the trading hours for the yuan were recently extended on the mainland.

Thanks to these efforts, the yuan is now the fifth-most-traded currency in the world. That is a phenomenal rise from its 35th place in 2001. The yuan is also the fifth-most-actively used currency for global payments as of April 2023, up from 30th place in early 2011.

Rankings can be misleading, though. The yuan’s average trading volume is still less than a 10th of the U.S. dollar’s. Moreover, almost all trading was against the U.S. dollar, with little trading against other currencies.

And when it comes to global payments, the actual share of the yuan is a mere 2.3%, compared with 42.7% for the dollar and 31.7% for the euro. The yuan also constituted less than 3% of the world foreign exchange reserves at the end of 2022, compared with 58% for the dollar and 20% for the euro.

US dollar’s dominance questioned

The U.S. dollar has reigned supreme as the dominant global currency for decades – and concern about how that benefits the U.S. and potentially hurts emerging markets is not new.

The value of the U.S. dollar appreciated significantly against most other currencies in 2022 as the Federal Reserve hiked interest rates. This had negative consequences for residents of almost any country that borrows in dollars, pays for imports in dollars, or buys wheat, oil or other commodities priced in dollars, as these transactions became more expensive.

After Russia invaded Ukraine in early 2022, the U.S. and its Western allies put sanctions on Russia, including cutting Russia’s access to the global dollar-based payments system known as the Society for Worldwide Interbank Financial Telecommunication, or SWIFT. That clearly displayed how the dollar can be weaponized.

With Russia largely cut off from international financial markets, it stepped up its trade with China. Russia began receiving payments for coal and gas in yuan, and Moscow increased the yuan holdings in its foreign currency reserves. Russian companies like Rosneft issued bonds denominated in yuan. According to Bloomberg, the yuan is now the most-traded currency in Russia.

Other countries took notice of Russia’s increasing use of the yuan and saw an opportunity to decrease their own dependency on the dollar.

Bangladesh is now paying Russia in yuan for the construction of a nuclear power station. France is accepting payment in yuan for liquefied natural gas bought from China’s state-owned oil company. A Brazilian bank controlled by a Chinese state bank is becoming the first Latin American bank to participate directly in China’s payments system, CIPS. Iraq wants to pay for imports from China in yuan, and even Tesco, the British retailer, wants to pay for its Chinese imported goods in yuan.

The combined dollar amount of these transactions is still relatively small, but the shift to yuan is significant.

Yuan still not freely available

China keeps a tight grip on money coming in and out of the country. Such capital controls and limited transparency in Chinese financial markets mean China still lacks the deep and free financial markets that are required to make the yuan a major global currency.

For the yuan to achieve a truly global standing, it needs to be freely available for cross-border investment and not just serve as a payment medium to accommodate trade.

But the war in Ukraine may have just made it feasible for the yuan to eventually join the ranks of the dollar and the euro – even if the volume isn’t there yet. And any U.S. policy decisions that weaken the reputation and strength of U.S. institutions – such as the recent drama over raising the debt ceiling, which brought the government to the brink of default – will accelerate the rise of the yuan and decline of the dollar.

About the Author:

Tuugi Chuluun, Associate Professor of Finance, Loyola University Maryland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Forex and Currency News Opinions

01 Jun

Japanese Candlesticks Analysis 01.06.2023 (USDCAD, AUDUSD, USDCHF)

By RoboForex.com

USDCAD, “US Dollar vs Canadian Dollar”

On H4, the currency pair has formed a Hanging Man reversal pattern. Currently, the instrument is going by the reversal signal in a descending wave. The decline target might be 1.3510. Next, the price could break the level and continue the downtrend. However, the quotes could correct to 1.3635 before falling.

AUDUSD, “Australian Dollar vs US Dollar”

On H4, the pair has formed an Inverted Hammer reversal pattern. Currently, the instrument is going by the reversal signal in an ascending wave. The correction target might be 0.6550. Upon testing the resistance, the quotes might rebound from it and go on developing the downtrend. However, the price could drop to 0.6425 without testing the resistance.

USDCHF, “US Dollar vs Swiss Franc”

On H4, near the resistance level, the pair has formed a Sandwich reversal pattern. Currently, the instrument is going by the reversal signal in a descending wave. The correction target might be 0.9080. Upon testing the resistance, the price could rebound from it and go on with the uptrend. However, the quotes might rise to 0.9175 without pulling back to the support level.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News

01 Jun

EURUSD attempts slight recovery

By ForexTime

The world’s most-traded FX pair is attempting to pare some of yesterday’s declines.

EURUSD’s move higher at the time of writing is in spite of the just-released Eurozone inflation data for May, as measured by the consumer price index (CPI), arguing for greater declines for the bloc’s currency.

6.1% rise compared to May 2022 (year-on-year), which is lower than the market’s forecast of 6.3%, and also slower than April’s 7% year-on-year figure.
Unchanged CPI (0%) month-on-month (May 2023 vs. April 2023), which is less than the market’s forecasted 0.2% month-on-month rise, and also lower than April’s 0.6% month-on-month rise (April 2023 vs. March 2023).
Core CPI (excluding more volatile food and energy prices) rose 5.2% in May year-on-year, lower than the market’s forecast of 5.5% and also lower than April’s 5.6% year-on-year advance.

Traders largely ignored today’s headline Eurozone inflation data, given that markets had already reacted to yesterday’s (Wednesday, May 31st) inflation prints out of Germany and France – the Eurozone’s two largest economies.

How does the Eurozone inflation data affect the Euro?

Generally, slower-than-expected inflation would lessen the need for the European Central Bank (ECB) to keep hiking its benchmark interest rate aggressively.

And a currency softens at the thought of interest rates not moving higher.

Markets expectations for those ECB interest rate adjustments have hardly shifted in recent weeks.

Markets still predict two more 25bp rate hikes by the ECB between now through September.

But the all-important difference between US and eurozone yields has widened recently and boosted the greenback, which in turn dragged EURUSD lower.

After all, the euro has already taken the brunt of the dollar buying with EUR/USD falling just shy of 3% last month.

EUR/USD dropped to a ten-week low at 1.06352 yesterday before attempting to pare some of its losses at the time of writing.

A decisive loss of support around 1.07 could see more downside for the world’s most popular currency major.

The recent declines in EURUSD appears to have all but nullified the prospects for a rebound, as suggested in our latest Trade of the Week (published on Mondays).

But the week isn’t over yet.

The remaining hope for a EURUSD rebound, albeit likely a limited one, rests on how Friday’s US nonfarm payrolls report pans out:

Economists are forecasting that 195,000 new jobs were added to the US economy in May, which would be its lowest tally since before the pandemic.
Furthermore, the unemployment rate is expected to tick higher to 3.5%, relative to April’s 3.4% unemployment rate.
Also, wage growth in May is expected to slow to 0.3% compared to April 2023 (month-on-month), which would be notably slower than April’s 0.5 month-on-month advance (compared to March 2023).

Potential scenarios:

If there are more signs of slowing hiring momentum in the world’s largest economy’s labour market (lower-than-190k headline NFP number / higher-than-3.5% unemployment rate / lower-than 0.3% month-on-month wage growth), that could weaken the US dollar while offering relief for EURUSD.
Such a reaction would be based on the notion that a weakening US jobs market would lessen the need for the Fed to trigger another rate hike.
However, the US dollar may strengthen and drag EURUSD lower if the US jobs market continues to demonstrate its resilience (higher-than-200k headline NFP number / lower-than-3.5% unemployment rate / higher-than 0.3% month-on-month wage growth)
A stronger-than-expected showing by the US jobs market may allow the Fed to hike once more this summer, if not in June then perhaps in July. And such prospects then likely to embolden dollar bulls.

When are markets expecting the next Fed rate hike?

The chances of a June hike according to futures markets had risen from less than zero at the start of May to nearly 60% on Tuesday (hence the US dollar’s rebound).

However, those odds have been halved to around 35% at the time of writing.

But the idea that the FOMC will “skip” a June hike and hold rates steady in a couple of weeks’ time is gaining traction, and the idea has been backed up by recent Fedspeak, barring a sizzling red hot jobs report on Friday of course.

As long as markets are allowed to believe there’s still one more Fed rate hike in the pipeline, that should keep the US dollar supported in the interim, while weighing on the rest of the FX universe.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News

01 Jun

Meet the EU’s answer to crypto: the e-euro

By Iordanis Kalaitzoglou, Audencia

In a bid to play catch up with technology companies and younger generations of consumers, central banks are finally starting to take digital currencies seriously. Countries such as Sweden, China, and India have establish pilot digital currencies – respectively, the e-krona, e-yuan and e-rupee – via their central banks. In the finance sector, these are known as central bank digital currencies (CBDCs).

The purpose, scale and status of such efforts vary considerably. In Sweden, the goal is to investigate the potential transition from banknotes to a digital currency, and the e-krona remains in the starting blocks. In China, the “digital renminbi” started to roll out in 2020, and its goal is to allow the state to better control the retail economy. India launched an e-rupee pilot in 2022 and its purpose is to facilitate a broad range of transactions. Meanwhile, the United States is exploring the potential repercussions of establishing its own digital currency.

Along the same lines, the European Union is currently toying with the idea of launching its own digital currency, the e-euro. As the European Central Bank (ECB) explains, it would provide a digital alternative to existing payment methods with the goal of increasing the security and stability of the EU’s monetary system. The e-euro would be held in digital wallets, with transactions facilitated by the use of blockchain.

A crucial difference between the e-euro (a CBDC) and cryptocurrencies is that its overall quantity – the number in circulation – would not be capped. Because bitcoins and other cryptocurrencies aren’t issued by central banks, the number in circulation is limited by the fact that creating new ones requires “mining”, an energy-intensive process that involves solving extremely complicated math problems. Not the case with the e-euro, as it would be regulated by the European Central Bank and be linked directly to the euro itself – there will be no exchange rate, it would simply be the euro in another format.

While there is a superficial similarity between the e-euro and “stablecoins” – cryptocurrencies whose value is pegged to a major currency – the e-euro would be issued and controlled from a public entity. This will ensure stability in valuations and regulation.

EU consumers are familiar making payments with traditional coins and bills, but soon they could be joined by an ‘e-euro”.
Christian Dubovan/Unsplash

The case in favour

The 1 million euro question is why is the ECB would consider a digital currency. While we all have a centuries-long familiarity with physical currencies, digital ones have some advantages:

Less resource intensive. A central bank digital currency doesn’t require printing, validation, circulation, monitoring and replacement, and thus would have a considerably lower ecological footprint. That it will be issued rather than mined adds to its energy efficiency. The International Monetary Fund estimates that a CBDC’s payment system for clearance and settlement could use hundreds of thousand of times less energy than physical currencies and cryptocurrencies while maintaining low transaction costs.
Increased banking access. Because a digital euro would be directly managed by central banks, it would eliminate the need for intermediaries such as private financial institutions. It thus has the potential to reduce economic exclusion, such as in the cases of “the unbanked” – low-income people without bank accounts. The ECB would create and sustain the required infrastructure, making the e-euro available to all. For example, while private institutions would require a minimum credibility score to open an account, governments could facilitate access to money by opening digital wallets as part of a social policy agenda.
Economic sovereignty. It can protect the euro from competing CBDC and other cryptocurrencies and thus defend Europe’s economic sovereignty. It will also allow governments to monitor transactions and so reduce tax avoidance and money laundering .

Where a digital currency leaves central and commercial banks

Given the potential advantages of central bank digital currencies, what is holding countries back? Everything depends on how CBDCs are be designed and implemented, and some challenges that might overshadow any potential.

Pushing back against private digital currencies. Imagine a world where private digital currencies like bitcoin or Facebook’s libra become the means for a substantial share of world’s financial transactions. In this world, the value of the means of exchange would be entirely determined by supply and demand or by the private venture – for example, Facebook itself. The introduction of CBDCs would enable central banks to determine the value of money itself and thus help ensure their country’s monetary sovereignty. People will still be able to choose between national currencies or those supported by private firms, but with the e-euro, Europe will at least be on an equal footing.
Balancing security and privacy The basic principle of tangible money is anonymity. In its cash format, money can be exchanged for goods or services without necessarily disclosing one’s identity with every transaction. A fully secure digital currency would require that all transaction information be reported to the authorities, while a fully private one disclose no information. The former would give too much power to central authorities, while the latter would encourage tax avoidance and other nefarious behaviour. The traceability of blockchain can assist in tracking back the full financial history, but should the identity of the actor be public information? The e-euro is likely to operate in a semi-anonymous format to preserve a balance between security and privacy.
More stability, less speculation. The initial idea of digital currencies was that they would become decentralized means of exchange, governed by the forces of supply and demand. However, they shortly became speculative assets, subject to vertiginous spikes and brutal crashes. Instead, a major currency should reflect the conditions of the real economy rather than speculation about its future state.

So is the e-euro something that we need or want? This depends on how it will be designed and regulated. For this particular venture, given the complexity of EU regulation, the devil is in the details.

About the Author:

Iordanis Kalaitzoglou, Ascociate Professor in Finance, Audencia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Forex and Currency News Opinions

31 May

Why is the US dollar stronger today?

By ForexTime

The USD Index has punched its way to a fresh two-month high, and is on course for its largest monthly gain (2.8%) since September 2022.

NOTE: The USD Index tracks how the US dollar is performing against a basket of six different G10 currencies, including the euro, British Pound, and Japanese Yen.

Also, the US dollar has strengthened against all of its G10 peers today:

Here are 3 reasons why the dollar bulls (those hoping prices will move higher) are having a wonderful Wednesday:

1) China’s weaker-than-expected data prompted demand for safe haven dollar

Earlier today, China revealed that its purchasing managers’ index (PMI) for its manufacturing sector (think of factories) and non-manufacturing sector (think of services) both came in below market expectations.

Hence, markets got spooked on signs that the recovery in the world’s second largest economy is not on solid footing, especially as fears of a recession abound.

And when investors are traders are fearful, they flock to safe haven assets which help protect one’s wealth in times of great fear and uncertainty.

With the US dollar long been seen as a traditional safe haven, no surprise that China’s wobbly recovery in turn drove the US dollar higher.

2) Germany and France’s lower-than-expected inflation data weakened the euro, in a further boost for USD

First, some important notes:

Germany and France are the two largest economies in the Eurozone.
The European Central Bank (ECB) has been hiking interest rates aggressively to bring inflation down from its record high.
A currency softens at the thought of interest rates not moving higher.
The euro is the largest component of the USD Index, with the former accounting for 57.6% – more than half – of the benchmark index.

With all of the above in mind, today’s announcements that inflation in the Eurozone’s two largest economies are slowing down further, that suggests that the ECB has less reasons to keep hiking its benchmark rates much further.

And in this zero-sum game that is the FX markets, with the Euro (more than half of the USD index) weakening at the thought of a less-aggressive ECB, that allowed the US dollar to punch higher!

Furthermore, and this brings us back to reason #1, the Eurozone is very dependent on the Chinese economy. The Eurozone economy will feel the effects of a slowdown in the Chinese economy.

Hence, there was less demand for the euro today in light of China’s weaker-than-expected PMI data, which in turn bolstered the US dollar.

3) US debt-ceiling deal moving closer to Congress approval, restoring faith in dollar

Later today, the US House of Representatives (the lower body of Congress) is set to vote on the tentative deal to raise the US debt ceiling.

This tentative deal, struck between US President Joe Biden (Democrat) and Speaker Kevin McCarthy (Republican) over the weekend, would ensure that the US government can issue more debt to get the cash it needs to keep paying its bills.

Otherwise, failure to raise the debt ceiling (allow the US government to issue more debt), would trigger a catastrophic default by the US government for the first time in history!

Although this tentative deal faces a race against time in requiring approval before the June 5th deadline, markets are hoping that the deal will be approved, thus restoring faith in US assets including the US dollar.

Technical Perspective: Where to possibly next for the USD index?

Potential upside scenario:

At the time of writing, this index is facing immediate resistance around the 104.60 region, which had also resisted bulls on January 3rd and February 17th earlier this year.

A daily close above this 104.60 level could set the USD Index on course for these key levels:

Potential near-term resistance:

105.00 (psychologically-important handle).
105.105 (March 15th high)
105.27 – 105.41 (early Jan- late Feb highs)

Bullish technical crossover?

The US dollar may also draw a bullish cue from the fact that its 21-day simple moving average (SMA) has crossed above its 100-day counterpart.

The last time this technical event (21-day SMA crossed above 100-day SMA) happened was in mid-2021.

After that last bullish episode, the USD Index then went on a 15-month winning streak that culminated in a 23% climb.

Though to be clear, it’s a lot harder to imagine the US dollar going on another 20+% climb from here, given the macro headwinds facing the US economy as well as expectations that the Fed will lower interest rates in 2024.

Potential downside scenario:

However, if the US dollar’s upwards momentum fails to hold over the immediate future, bears (those hoping prices will move lower) would be eager to test these key levels:

Potential near-term support:

103.8 (intraday lows during recent consolidation)
103.4 – 103.6

Technical pullback soon?

Also, note in the chart at the top of this article, that the USDInd’s 14-day relative strength index (RSI) has broken above the 70 threshold which denotes “overbought conditions”.

In the prior instance of this technical event (RSI breaking above 70) back in late February, the USD Index then fell by about 4.4% over the following seven weeks.

Dollar tends to fall in June over past 30 years

It remains to be seen whether the USD Index can reverse the downtrend that’s in place, having posted a series of lower highs and lower lows since late September 2022.

Although dollar bulls are enjoying their time in the sun currently, history may be against them.

Since 1993, the month of June has averaged a monthly drop of 0.27%.

And with the US debt ceiling drama set to be extended into the new month, coupled with a highly-anticipated Federal Reserve meeting due in a couple of weeks …

time will tell whether dollar bulls will still be basking in the sunshine by this time next month.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News

30 May

NZDJPY D1 – The bears are stirring

By ForexTime

The NZDJPY bulls on the D1 time frame have been making higher tops and bottoms since the beginning of May.

A last higher top was reached when the price bounced off a weekly resistance level on 23 May at 87.304.

A closer look at the Momentum Oscillator reveals negative divergence between point “a” and “b” when comparing the tops at 86.173 and 87.304.

This could have alerted technical traders that the bears might be stirring and getting ready to challenge the bullish reign.

Confirmation of this was in the form of strong bearish candles with the market breaking through the 15 Simple Moving Average and the Momentum Oscillator dipping into bearish territory.

A possible critical support level formed near the 34 Simple Moving Average when a lower bottom was recorded on 25 May at 84.446.

The bulls then tried to regain the upper hand, but a lower top formed on 29 May at 85.338.

If the bears break through the critical support level at 84.446, then three possible price targets can be set from there.

Attaching the Fibonacci tool to the lower bottom 84.446 and dragging it to the resistance level at 85.338, the following targets can be determined:

83.895 (161.8%)
83.003 (261.8%)
81.559 (423.6%)

If the resistance level at 85.338 is challenged and broken, the current scenario is not valid any longer.

As long as support overcomes demand and market sentiment stays negative, the outlook for the NZDJPY on the D1 time frame will remain bearish.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News

30 May

Trade of the Week: EURUSD set for rebound?

By ForexTime

The euro has weakened against the US dollar by about 2.7% so far this month, as we see out the final days of May.

Could June herald better fortunes for EURUSD?

The first 2 days of the new month will feature some tier-1 events on either side of the Atlantic that may jolt global FX markets:

(1) Thursday, June 1: Eurozone May CPI

What markets want to know:

If higher-than-expected inflation would in turn force the European Central Bank (ECB) to persist with more rate hikes.

And if so, that should prompt a recovery in EURUSD.

Market expectations:

The Eurozone’s headline inflation, as measured by the consumer price index (CPI), is forecasted to come in at 6.3%.

If so, that would be notably lower than April’s 7% figure.

Otherwise, a lower-than-expected CPI print on Thursday may ease bets surrounding ECB rate hikes, with such prospects then likely to translate into more euro declines in the CPI’s aftermath.

(2) Friday, June 2: US May nonfarm payrolls data

What markets want to know:

If there’s enough “destruction” in the US jobs market to allow the Fed to ease up on its rate hikes.

If so, that should lead to a weaker US dollar and a higher EURUSD.

Market expectations:

Economists are forecasting that 190,000 new jobs were added to the US economy in May, which would be its lowest tally since before the pandemic.
Furthermore, the unemployment rate is expected to tick higher to 3.5%, relative to April’s 3.4% unemployment rate.
Also, wage growth in May is expected to slow to 0.3% compared to April 2023 (month-on-month), which would be notably slower than April’s 0.5 month-on-month advance (compared to March 2023).

However, the US dollar may strengthen and drag EURUSD lower if the US jobs market continues to demonstrate its resilience.

Such resilience may be derived from either a higher-than-expected NFP headline number / lower-than-3.5% unemployment rate / faster-than-expected wage growth.

(3) All of this week: US debt ceiling developments

What markets want to know:

Whether the US Congress can approve a deal before the June 5th deadline to avert a catastrophic default.

If so, EURUSD could fall further as faith is restored in US assets and the dollar.

Market expectations:

Republicans and Democrats are in a race against time to pass the tentative deal that was reached over this past weekend between US President Joe Biden (Democrat) and House Speaker Kevin McCarthy (Republican).

Both sounded optimistic that they would garner enough support from their respective party members.

Otherwise, failure to raise the debt ceiling before the US government runs out of cash would all but seal a recession for the world’s largest economy.

EURUSD tends to climb in June

Beyond the macroeconomic events listed above, euro bulls (those hoping EUR will move higher) will also be hoping that history will be on their side once more.

Since the euro’s launch in 1999, EURUSD has posted its third-highest monthly advance on average in June:

June = average monthly climb of 0.34%
April = average monthly climb of 0.45%
December = average monthly climb of 1.50%

Euro bulls will be hoping that such seasonality could restore the bloc currency’s year-to-date gains.

At the time of writing, EURUSD has only climbed by a paltry 0.09% so far this year, and is precariously close to completely snuffing out its year-to-date gains over the immediate future.

From a technical perspective …

The formation of a long-legged doji candle on the daily charts last Friday (May 26th) may signal that EURUSD could see a trend reversal soon.
To be fair, that reversal did play out earlier today (Monday, May 29th), only for EURUSD to unwind its early morning gains in a session likely with thinned-out liquidity given the UK/US extended weekend.

Also, further declines in EURUSD may see its 14-day relative strength index (RSI) break below the 30 threshold that denotes oversold conditions.
Such a technical event (RSI crossing below 30) may trigger a technical rebound for EURUSD.

Should these technical signals fail, traders may have to rely on fundamental forces to trigger a reversal in the euro’s fortunes.

This week’s forecasted range

From current levels, Bloomberg’s FX model points to a 75% chance that EURUSD will trade within the 1.0610 – 1.0833 range over the next one-week period.

Furthermore, analyst expectations are concentrated towards the upper end of that range.

Key levels

Potential Support:

1.07018 (intraday low on Friday’s doji candle)
1.06556 (mid-February cycle low)
1.06106 (38.2% Fibonacci retracement level from EURUSD’s long-term downtrend; also lower limit of Bloomberg model’s forecasted range)

Potential Resistance:

1.07587 (intraday high on Friday’s doji candle)
100-day simple moving average (SMA)
1.0833 (upper limit of Bloomberg model’s forecasted range)

Ultimately, the world’s most-traded FX pair appears to have enough reasons to make potentially outsized moves this week.

And depending on how these fundamental and technical forces play out, they should present trading opportunities for investors and traders across global financial markets.

Article by ForexTime

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Risk Disclosure: Foreign Currency trading and trading on margin carries a high level of risk and can result in loss of part or all of your investment. Due to the level of risk and market volatility, Foreign Currency trading may not be suitable for all investors and you should not invest money you cannot afford to lose. Before deciding to invest in the foreign currency exchange market you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign currency exchange trading, and seek advice from an independent financial advisor should you have any doubts.

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