24 Jun

Commodity markets are under pressure from the US dollar growth. New geopolitical risks in the Middle East are on the agenda

By JustMarkets

At the end of Friday, the Dow Jones (US30) Index added 0.04% (+1.61% for the week), while the S&P 500 (US500) Index fell 0.16% (+0.75% for the week). The NASDAQ Technology Index (US100) closed negative 0.18% (for the week +0.39%). Weakness in chip company stocks pressured the broader market on Friday, even as S&P US PMI reports showed that the US economy continues to grow. The S&P US Manufacturing PMI for June unexpectedly rose 0.4 to 51.7, stronger than expectations of a decline to 51.0. In addition, the S&P Services PMI for June unexpectedly rose 0.3 to a two-year high of 55.1, stronger than expectations for a decline to 54.0. Stocks also declined as the quarterly expiration of options and futures occurred on Friday, prompting traders to roll over existing positions or open new ones. About $5.5 trillion of positions expired on Friday, according to options platform SpotGamma.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) was down 0.50% (for the week +0.86%), France’s CAC 40 (FR40) decreased by 0.56% (for the week +1.19%), Spain’s IBEX 35 (ES35) lost 1.15% (for the week -0.03%), and the UK’s FTSE 100 (UK100) closed negative 0.42% (for the week +1.12%). The S&P Eurozone Manufacturing PMI for June unexpectedly fell by 1.7 to a 6-month low of 45.6, weaker than expectations of a rise to 47.9. The S&P Composite PMI for June unexpectedly fell by 1.4 to 50.8, weaker than expectations for a rise to 52.5.

Friday’s dollar strength pressured commodity markets. WTI crude oil fell below $81 per barrel. Nevertheless, the market remains supported by geopolitical risks in the Middle East as Israeli forces moved further into the Gaza Strip and Yemeni Houthis carried out another attack on a ship in the Arabian Sea on June 24. Meanwhile, Israel and Lebanon’s Hezbollah stand on the brink of a new conflict. Ecuador’s state oil company, Petroecuador, also declared force majeure on some Napo heavy oil shipments due to the shutdown of a major pipeline and oil wells amid heavy rains. In addition, recent data points to a decline in US crude oil inventories amid a rebound in energy consumption.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) gained 0.40%, China’s FTSE China A50 (CHA50) fell by 1.22%, Hong Kong’s Hang Seng (HK50) gained 1.01%, and Australia’s ASX 200 (AU200) was positive 0.93%. Asian stock markets opened lower on Monday, reeling from weakness on Wall Street, as shares of Nvidia and other artificial intelligence chip makers saw heavy selling after strong gains.

Singapore’s annual inflation rate for May 2024 rose to 3.1%, exceeding market forecasts of 3.0% and accelerating from April’s 2-year low of 2.7%. The annualized core inflation rate unexpectedly came in at 3.1%, the same as in the previous two months, beating the consensus forecast of 3.0%. Monthly, CPI rose by 0.7%, the highest since February, after rising 0.1% in April.

The Australian dollar weakened below $0.665, extending recent losses as the US dollar rose on strong US business activity data that dampened expectations of an interest rate cut by the Federal Reserve. Investors are also cautiously awaiting Australian inflation data this week after the country’s central bank said it discussed the need for a rate hike at its June meeting and did not consider the case for a rate cut.

S&P 500 (US500) 5,464.62 −8.55 (−0.16%)

Dow Jones (US30) 39,150.33 +15.57 (+0.04%)

DAX (DE40) 18,163.52 −90.66 (−0.50%)

FTSE 100 (UK100) 8,237.72 −34.74 (−0.42%)

USD Index 105.83 +0.24 (+0.23%)

Important events today:
  • – New Zealand Trade Balance (q/q) at 01:45 (GMT+3);
  • – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
  • – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
  • – Canada BoC Gov Macklem Speaks at 20:45 (GMT+3);
  • – US FOMC Member Daly at 21:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
23 Jun

Why Broadcom’s (AVGO) 10-for-1 Stock Split Could Attract a New Wave of Investors

By The Ino.com Team

Broadcom Inc. (AVGO), a prominent player in the semiconductor industry, announced a 10-for-1 forward stock split set to take effect on July 15, 2024, taking advantage of a rally in its shares this year. This decision comes on the heels of an outstanding second-quarter performance, underscoring Broadcom’s strategic positioning amid the burgeoning artificial intelligence (AI) revolution.

Understanding Stock Split Mechanics and Strategic Implications for Broadcom

A stock split involves dividing each existing share into multiple shares, effectively lowering the share price proportionally while maintaining the company’s total market capitalization. In AVGO’s case, each shareholder will receive nine additional shares for every one share held, resulting in a tenfold increase in the number of outstanding shares.

The primary objective of a stock split is to make shares more affordable and accessible to a wide range of retail investors by reducing the nominal share price. Given Broadcom’s share price surpassing $1,800 recently, the split aims to address perceived affordability barriers that may have deterred investors.

The increased accessibility can broaden AVGO’s investor base, potentially stimulating demand for its shares. Consequently, a higher number of outstanding shares resulting from the stock split typically leads to higher trading volumes. This enhanced liquidity can benefit both existing and new investors, allowing for easier entry and exit from positions.

Comparison with NVIDIA’s Recent Similar Move

Broadcom’s stock split mirrors a similar move by NVIDIA Corporation (NVDA), its rival in the AI hardware market. With more individual investors gaining access to Nvidia’s shares post-split, which came into effect at the close of trading on June 7, increased trading activity and demand were observed, potentially driving share prices higher.

NVIDIA’s stock is trading above its 50-day and 200-day moving averages of $99.28 and $68.61, respectively. NVDA’s successful split this month was preceded by significant market gains, highlighting the strategic timing of Broadcom’s decision to capitalize on investor sentiment surrounding the AI and semiconductor sectors.

Historically, stock splits are viewed as a bullish signal. According to data from BofA research, total returns for companies announcing stock splits are about 25% in the 12 months after a stock split compared to 12% gains for the S&P 500 index.

Broadcom’s Unprecedented Growth Amid the AI Boom

With a $839.05 billion market cap, AVGO is a technology leader that develops and supplies semiconductor and infrastructure software solutions. The company manufactures sophisticated networking chips for handling vast amounts of data used by AI applications such as OpenAI’s ChatGPT, positioning it as one of the beneficiaries of increased enterprise investments in the boom.

According to Grand View Research, the global AI market is projected to reach $1.81 trillion by 2030, growing at a CAGR of 36.6% during the forecast period (2024-2030). As AI continues to revolutionize industry verticals, including automotive, healthcare, retail, finance, and manufacturing, chipmakers like Broadcom are at the forefront, providing the essential chips that power AI applications.

Broadcom’s second-quarter results were primarily driven by AI demand and VMware. For the quarter that ended May 5, 2024, AVGO’s net revenue increased 43% year-over-year to $12.49 billion. Its revenue surpassed the consensus estimate of $12.01 billion. Revenue from its AI products was a record $3.10 billion during the quarter. Broadcom reported triple-digit revenue growth in the Infrastructure Software segment to $5.29 billion as enterprises increasingly adopted the VMware software stack to build their private clouds.

AVGO’s gross margin grew 27.2% from the year-ago value to $7.78 billion. Its non-GAAP operating income rose 32% year-over-year to $7.15 billion. Furthermore, the company’s non-GAAP net income came in at $5.39 billion or $10.96 per share, up 20.2% and 6.2% year-over-year, respectively. Its EPS exceeded the analysts’ expectations of $10.84.

Also, the company’s adjusted EBITDA grew 30.6% from the prior year’s quarter to $7.43 billion. It reported a free cash flow, excluding restructuring and integration, of $4.45 billion, up 18% year-over-year. As of May 5, 2024, AVGO’s cash and cash equivalents were $9.81 billion.

After an outstanding financial performance, Broadcom raised its fiscal year 2024 guidance. The company expects full-year revenue of nearly $51 billion. Its adjusted EBITDA is expected to be approximately 61% of projected revenue.

Favorable Analyst Estimates

Analysts expect AVGO’s revenue for the third quarter (ending July 2024) to grow 45.6% year-over-year to $12.92 billion. The consensus EPS estimate of $12.11 for the current quarter indicates a 14.9% year-over-year increase. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

For the fiscal year ending October 2024, Street expects Broadcom’s revenue and EPS to grow 43.4% and 13% year-over-year to $43.37 billion and $47.74, respectively. In addition, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 15.3% and 25.6% from the previous year to $59.22 billion and $59.95, respectively.

Bottom Line

As AI continues to revolutionize several sectors, chipmakers such as Broadcom are at the forefront, offering essential semiconductor and infrastructure software solutions powering this technology. Driven by robust AI demand and VMware, AVGO reported solid second-quarter performance, exceeding analysts’ estimates for revenue and earnings.

The management expressed confidence in the company’s growth prospects by raising the company’s fiscal year 2024 guidance for revenue to $51 billion and adjusted EBITDA to 61% of revenue. Moreover, AVGO’s strong financial health enabled it to approve a quarterly dividend of $5.25 per share, payable on June 28, 2024.

The company pays an annual dividend of $21 per share, which translates to a yield of 1.17% on the current share price, while its four-year average dividend yield is 2.69%. Its dividend payouts have grown at CAGRs of 12.9% and 17.5% over the past three and five years, respectively. Broadcom also raised its dividend payouts for 13 consecutive years.

In the last quarterly earnings release, AVGO announced a ten-for-one forward stock split of its common stock, making ownership of Broadcom stock more accessible to investors. The company’s decision to execute a stock split represents a strategic move to enhance shareholder value and broaden investor participation.

By making its shares more accessible and increasing liquidity, Broadcom positions itself to attract a diverse array of investors keen on capitalizing on the AI-driven semiconductor boom. The stock split is a pivotal catalyst that could propel AVGO’s growth trajectory forward, cementing its status as a critical player in the evolving tech industry.

In a report released on June 16, William Stein from Truist Financial maintained a Buy rating on AVGO, with a price target of $2,045. Further, Oppenheimer’s Rick Schafer increased the price target on Broadcom from $1,500 to $2,000 while maintaining a Buy rating on the stock.

In addition to Oppenheimer’s rating update, other analysts adjusted their price targets for AVGO. Goldman Sachs’ Toshiya Hari raised the price target from $1,550 to $1,850 and maintained a Strong Buy rating. Also, JP Morgan’s Harlan Sur raised the price target from $1,700 to $2,000 and maintained a Strong Buy rating on the stock.

In conclusion, for investors eyeing opportunities in the dynamic intersection of AI and semiconductor sectors, Broadcom’s ten-for-one stock split presents a compelling avenue to consider, backed by sound fundamentals and strategic foresight.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Why Broadcom’s (AVGO) 10-for-1 Stock Split Could Attract a New Wave of Investors

Opinions Stock Market News
22 Jun

FX, Stocks, Commodities, Cryptos… Learn How to Know When This Key Price Pattern is Over (Video)

By Elliott Wave International

“12345-ABC.” That’s a basic Elliott wave pattern in a nutshell. That “12345” is a so-called impulse, and it’s a key price pattern to know, because impulses point in the direction of the larger trend. In this clip from a recent Trader’s Classroom lesson, host Favio Poci shows you step-by-step how to spot an impulse and know when it’s likely over. (Market in focus: EUR/CHF, but you can apply this to any liquid market.)

Continue Your Education on Impulse Waves with this FREE Online Course!

For a very limited time, you can get free access to our online course, “How to Spot and Capitalize on Impulse Waves.” ($99 value)

In about 1 hour, you’ll learn:

  1. “What do I look for?” — just what, exactly, should you look for on a price chart? See an easy way to spot an impulse wave.
  2. “What does it tell me?” — Impulse waves are great at showing you the direction of the larger trend (which, as you know, is “your friend”!)
  3. “Are there variations?” — Most impulse waves are simple, but some are… well, different. You’ll see how to quickly distinguish one from another.

Start Watching Now

This article was syndicated by Elliott Wave International and was originally published under the headline FX, Stocks, Commodities, Cryptos… Learn How to Know When This Key Price Pattern is Over (Video). EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Opinions Stock Market News
21 Jun

DELL and NVDA are jointly building an artificial intelligence factory. SNB cuts rate for the second time in a row

By JustMarkets

At the end of yesterday, the Dow Jones (US30) Index was up 0.77%, while the S&P 500 (US500) Index decreased by 0.25%. The NASDAQ Technology Index (US100) closed negative 0.79%. Stocks initially went up on Thursday, with the S&P 500 and Nasdaq 100 setting new record highs amid gains in chipmaker stocks. Chipmakers initially rose Thursday after Dell Technologies (DELL) CEO tweeted that his company is building an artificial intelligence factory with Nvidia (NVDA) to power Elon Musk’s xAI’s Grok supercomputer. However, a 5% drop in Qualcomm (QCOM) shares triggered a prolonged liquidation in chip stocks, negatively impacting the broader market.

Minneapolis Fed President Kashkari said it will probably take a year or two for the US to return to an inflation rate of 2%, suggesting he favors keeping interest rates on hold for longer. Weekly US initial jobless claims fell by 5,000 to 238,000, indicating a weaker labor market than expected at 235,000. US housing starts in May unexpectedly fell by 5.5% m/m to a 4-year low of 1.277 million, weaker than expectations for a rise to 1.370 million. May building permits, an indicator of future construction, unexpectedly fell by -3.8% m/m to a nearly 4-year low of 1.386 million, weaker than expectations for a rise to 1.450 million. Markets estimate the odds of a 25 bps rate cut at 10% at the next FOMC meeting on July 30-31 and 60% at the next meeting on September 17-18.

Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) rose 1.03%, France’s CAC 40 (FR40) closed 1.34% higher, Spain’s IBEX 35 (ES35) added 0.94%, and the UK’s FTSE 100 (UK100) closed positive 0.82%.

Eurozone new car registrations for May fell 3.0% y/y to 912,000. Eurozone Consumer Confidence for June rose by 0.3 to a 2-1/3 year high of 14.0, weaker than expectations of 13.8. May German PPI was unchanged m/m and fell by 2.2% y/y, weaker than expectations of 0.1% m/m and 2.0% y/y.

As expected, the Bank of England (BoE) left the bank rate unchanged at 5.25% on Thursday, with seven officials voting to keep the rate unchanged and two voting to cut it. The BoE said the decision not to cut rates was “finely balanced,” suggesting policymakers may be open to a rate cut in the coming months. UK retail sales rose by 2.9% month-on-month in May 2024, recovering from an upwardly revised 1.8% decline in April and well above forecasts for a 1.5% rise. That’s the biggest increase in four months.

The Swiss franc weakened by nearly 0.5% to nearly 0.89 per US dollar after the Swiss National Bank (SNB) cut its key interest rate by 25 bps to 1.25% for the second consecutive meeting. Policymakers noted a reduction in underlying inflationary pressures to keep monetary conditions accommodative. Swiss inflation was 1.4% in May.

WTI crude oil prices held above $81 a barrel on Friday and rose more than 3% for the week, posting a second consecutive weekly gain as lower US crude inventories and escalating conflict in the Middle East boosted oil prices. Data released on Thursday showed US crude inventories fell by 2.547 million barrels last week, beating forecasts for a 2 million barrel decline.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.16%, China’s FTSE China A50 (CHA50) was down 0.26%, Hong Kong’s Hang Seng (HK50) lost 0.52% on Thursday, and Australia’s ASX 200 (AU200) was little changed for the day. In China, local indices continue to decline for the sixth consecutive week as an uneven economic recovery and a lack of strong political support dampen investor sentiment. Earlier this week, the People’s Bank of China (PBoC) left key lending rates unchanged despite market pressure for further policy easing.

Japan’s core consumer price index, which excludes fresh food but includes fuel costs, rose by 2.5% year-on-year in May 2024, up from April’s 3-month low of 2.2% and marking the first increase since February amid a surge in energy prices, particularly electricity, as the government scrapped subsidies altogether. Meanwhile, the US Treasury Department added Japan to a list of countries monitored as currency manipulators.

S&P 500 (US500) 5,473.17 −13.86 (−0.25%)

Dow Jones (US30) 39,134.76 +299.90 (+0.77%)

DAX (DE40) 18,254.18 +186.27 (+1.03%)

FTSE 100 (UK100) 8,272.46 +67.35 (+0.82%)

USD Index 105.65 +0.40 (+0.38%)

Important events today:
  • – Australia Manufacturing PMI (m/m) at 02:00 (GMT+3);
  • – Australia Services PMI (m/m) at 02:00 (GMT+3);
  • – Japan National Core Consumer Price Index at 02:30 (GMT+3);
  • – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
  • – Japan Services PMI (m/m) at 03:30 (GMT+3);
  • – UK Retail Sales (m/m) at 09:00 (GMT+3);
  • – German Manufacturing PMI (m/m) at 10:30 (GMT+3);
  • – German Services PMI (m/m) at 10:30 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – Canada Retail Sales (m/m) at 15:30 (GMT+3);
  • – US Manufacturing PMI (m/m) at 16:45 (GMT+3);
  • – US Services PMI (m/m) at 16:45 (GMT+3);
  • – US Existing Home Sales (m/m) at 17:00 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
21 Jun

The yen is falling again: the devaluation scenario remains the main one

By RoboForex Analytical Department

The Japanese yen is weakening against the US dollar again. The USD/JPY pair is rising to 158.97.

The currency pair is now again close to the levels when the Bank of Japan and the country’s authorities conducted currency interventions. Japan’s top currency diplomat, Masato Kanda, stated that the government is prepared to take measures against speculative movements of the national currency.

Among the significant news items, attention is drawn to the information that the US has added Japan to the list of countries being monitored for currency manipulation.

Following its regular committee meeting last week, the Bank of Japan refused to agree on reducing large-scale bond purchases. It plans to present a plan to wind down such a program at a meeting in July. The market interpreted this decision in different ways, but mostly negatively.

Inflation in Japan rose from 2.5% in April to 2.8% year-on-year in May, the maximum value since February of this year. The core consumer price index accelerated to 2.5% year-on-year despite being 2.2% earlier. Meanwhile, the forecast was not met and stood at 2.6%.

Technical analysis of USD/JPY

On the H4 USD/JPY chart, the market has achieved a wave of growth to 158.80. Today, a consolidation range is forming around this level. With the exit from this range downwards, we will consider a correction to the level of 158.40. An upward exit will open the potential for a growth wave to 159.35, the main target. This scenario is technically confirmed by the MACD indicator. Its signal line is above the zero level and is directed strictly upwards.

On the H1 USD/JPY chart, the market continues to develop a consolidation range around 158.80. With the exit down, we will consider the development of the correction towards at least 158.40. After the completion of this correction, we expect the beginning of a new growth structure to the level of 159.35. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is below level 50 and is preparing to decline to level 20.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Financial News Forex and Currency News
21 Jun

Week Ahead: Yen headed for intervention “danger zone”?

By ForexTime

  • JPY is worst-performing G10 currency vs. USD in 1H24
  • USDJPY’s 160 price area triggered largest-ever JPY intervention in late-April
  • Besides intervention risk, traders watching Friday’s US/Japan inflation data
  • Bloomberg model: 77% chance of 156.69-160.58 trading range next week

 

The Yen is returning closer towards its 34-year low against the US dollar.

This widely-traded FX pair posted its 6th straight day of gains, with the Yen set for its longest losing streak against the US dollar since March.

Already the Yen is set to wrap up the first half of 2024 with the title of worst-performing G10 currency against the US dollar, by a mile.

 

Why is the Yen so weak?

USDJPY’s stunning ascent has been primarily driven by the surprise reluctance by both the US and Japanese central banks to change their policy stances:

  • The Bank of Japan has not been as quick to HIKE interest rates so far this year
  • The US Federal Reserve has not been as quick to CUT interest rates so far this year
Recall that a currency tends to weaken when its country’s interest rates are lower than its peers, and vice versa.

This persistent policy divergence has resulted in a still-wide spread between US Treasury yields and their Japanese counterparts, which greatly favours USD demand over JPY.

In other words …

With Japan’s interest rates staying lower-for-longer, while the Fed’s benchmark rates remain higher for longer, that has resulted in a resilient US Dollar and a weaker Japanese Yen, i.e. soaring USDJPY.

 

What should traders look out for?

Traders, especially Yen bears, are entering the final trading week of 1H24 with memories from end-April, which was the last time USDJPY was seen around these current levels.

Starting April 26th, the Japanese government had spent a record US$62.2 billion to defend its currency.

That record intervention contributed to USDJPY’s largest one-day price swing since 2022, as the FX pair breached 160, only to plummet to as low as 154.52.

That was a painful lesson for Yen bears (those hoping that USDJPY can move higher), although another showdown appears to be shaping up.

Hence, if we do see another round of intervention on the Yen, that could translate into massive profits for Yen bulls (those hoping for lower USDJPY).

 

Beyond the threat of another round of government intervention, the coming week also features scheduled events that could rock USDJPY:

Monday, June 24

  • NZD: New Zealand May trade balance
  • JPY: BoJ Summary of Opinions
  • SG20 index: Singapore May CPI
  • TWN index: Taiwan May unemployment, industrial production
  • GER40 index: Germany June IFO business climate
  • US30 index: Speech by San Francisco Fed President Mary Daly

Tuesday, June 25

  • AU200 index: Australia June consumer confidence
  • CAD: Canada CPI
  • USD index: US June consumer confidence; speeches by Fed Governors Lisa Cook and Michelle Bowman

Wednesday, June 26

  • AUD: Australia May CPI
  • GER40 index: Germany July consumer confidence

Thursday, June 27

  • JP225 index: Japan May retail sales
  • CNH: China May industrial profits
  • TRY: Turkey rate decision
  • SEK: Sweden rate decision
  • EU50 index: Eurozone June economic confidence
  • USD: US weekly initial jobless claims; 1Q GDP (final)
  • Nike earnings
  • Biden vs. Trump: US Presidential election debate

Friday, June 28

  • JPY: Tokyo June CPI; May jobless rate and industrial production
  • EUR: Germany June unemployment; France June CPI
  • GBP: UK 1Q GDP (final)
  • USD index: US May PCE deflators, personal income and spending; June consumer sentiment (final)

 

 

USDJPY set for freaky Friday?

Two events out of either side of the Pacific may hold greater potential to rock USDJPY on the final trading day of 1H24:

 

1) Tokyo June consumer price index (CPI)

Here’s what economists expect:

  • CPI year-on-year (June 2024 vs. June 2023): 2.3%
    If so, that would be slightly higher than May’s 2.2% year-on-year figure.
  • CPI year-on-year (excluding fresh food): 2.0%
    If so, that would be slightly higher than May’s 1.9% year-on-year figure.
  • CPI year-on-year (excluding fresh food and energy): 1.6%
    If so, that would be slightly higher than May’s 1.7% year-on-year figure.

Over the past 12 months, the 6 hours after these Tokyo CPI releases had seen upwards moves for USDJPY as much as 0.38%, or declines as much as 0.3%.

 

 

2) US May PCE Deflators

(this is the Fed’s preferred measure of inflation)

Here’s what economists expect:

  • PCE Deflator month-on-month (June 2024 vs. May 2024): 0.0%
    If so, that would be a notable drop from May’s 0.3% month-on-month figure.
  • PCE Deflator year-on-year (June 2024 vs. June 2023): 2.6%
    If so, that would be slightly lower than May’s 2.7% year-on-year figure.
  • PCE Core Deflator month-on-month (excluding food and energy prices): 0.1%
    If so, that would be slightly lower from May’s 0.2% month-on-month figure.
  • PCE Core Deflator year-on-year (excluding food and energy): 2.6%
    If so, that would be lower than May’s 2.8% year-on-year figure.

Over the past 12 months, the 6 hours after these US PCE Deflators had seen upwards moves for USDJPY as much as 1%, or declines as much as 0.35%.

 

 

POTENTIAL SCENARIOS:

  • USDJPY may fall if we see higher-than-expected Tokyo inflation (which is a frontrunner to the National CPI due later) which could allow the Bank of Japan to hike rates – a thought which should prompt a stronger Yen.On the US dollar side of the USDJPY equation, lower-than-expected US inflation might pave the way for the Fed to lower interest rates this year – potentially prompting the US dollar to weaken.

 

  • USDJPY may rise if we see lower-than-expected Tokyo inflation, which could further deter the Bank of Japan to hike rates – a thought which should prompt an even weaker Yen.On the US dollar side of the USDJPY equation, higher-than-expected US inflation might further delay the expected Fed rate cuts for later this year – potentially prompting a stronger US dollar.

 

 

Key levels

POTENTIAL RESISTANCE

  • 160.00
    The closer USDJPY moves towards this psychologically-important number, the louder the echoes of April’s intervention may haunt traders.Though to be clear, Japanese government officials have often warned that it’s the magnitude of the move, rather than a specific number, that invokes intervention.

Hence, an only gradual break above 160 may well prolong this battle between Yen bears and the Japanese government.

 

POTENTIAL SUPPORT

  • 158.427 – 157.80 region
    If traders grow wary of the intervention threat, that may prompt some profit-taking and push USDJPY back towards recent peaks-turned-support
  • 21-day SMA
  • 156.787: mid-May cycle high

 

According to the Bloomberg FX forecast model, there’s a 77% chance that USDJPY will trade between 156.69 – 160.58 before we enter July.

Forex-Time-LogoArticle by ForexTime

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

Forex and Currency News Opinions
20 Jun

The pound froze ahead of the Bank of England meeting: what will the Central Bank decide?

By RoboForex Analytical Department

The GBP/USD pair is balancing around 1.2709 on Thursday, after the British pound rose in price against the US dollar for three consecutive days and finally paused.

The Bank of England will convene for its regular meeting today, at which the regulator will review all the collected statistics and decide on the interest rate level. The prevailing forecast suggests the rate will remain unchanged at 5.25% per annum. However, other options are always possible.

It will be interesting to see how the BoE will assess its success in fighting inflation. The UK consumer price index slowed to 2.0% in May from 2.3% earlier. In comparison, the indicator increased by 0.3% month-over-month, as in April, while an increase of 0.4% m/m was expected.

It can be said with confidence that the inflation trend has developed positively. It is now essential that the Bank of England also notices and applies this.

The BoE may be able to reduce the rate at least twice in 2024. The business sector, industry, and retail are ready for this.

Technical analysis of GBP/USD

On the H4 GBP/USD chart, the first impulse of decline to the level of 1.2656 has been executed. Today, the market is forming a correction to the level of 1.2760. After reaching this level, we will consider the beginning of a decline to 1.2670. With the breakdown of this level, the potential of the wave will open to the level of 1.2576, a local target. Further, a correction wave to 1.2670 is possible (testing from below). Then, we will consider the beginning of a wave of decline to 1.2486, the main target. Technically, this scenario is confirmed by the MACD indicator. Its signal line is below the zero mark and continues developing the decline structure to new lows.

On the H1 GBP/USD chart, a correction wave was performed to 1.2739, and the decline structure to 1.2692 is forming today. After working out this level, let’s consider the growth probability towards 1.2760. At this point, the correction potential will be exhausted. After the correction is completed, we will consider the beginning of a new wave of decline to 1.2670. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is below the zero level and continues to decline to the level of 20.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Financial News Forex and Currency News
20 Jun

PBoC left interest rates unchanged. New Zealand has left the recession territory

By JustMarkets

At the end of the day yesterday, the Dow Jones Index (US30) gained 0.15%, and the S&P 500 Index (US500) gained 0.25%. The NASDAQ Technology Index (US100) closed positive 0.17%. Volatility on the indices was extremely low due to the bank holiday weekend in the US.

The Canadian dollar traded near 1.37 per US dollar, rebounding from a five-week low of 1.376 recorded on June 7, amid a weaker US dollar and increased foreign exchange inflows. The Canadian currency is also under pressure from rising debt levels and recent comments from Bank of Canada Governor Tiff Macklem about the possibility of further rate cuts, which could put further pressure on the loonie.

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) decreased by 0.35%, the French CAC 40 (FR40) closed down 0.77%, the Spanish IBEX 35 (ES35) lost 0.10%, the British FTSE 100 (UK100) closed positive 0.17%.

In the Eurozone, market participants actively follow France’s political situation. Legislative elections are scheduled for June 30 and July 7, and the far-right Rassemblement National, which proposes measures such as cutting sales taxes and lowering the retirement age, is leading in the polls. As a result, France’s risk premium and bond yields rose sharply as investors began to worry about possible increases in government spending that could worsen France’s financial health. Meanwhile, Le Pen told Le Figaro that she is “respectful” of institutions and, if she wins, will not try to oust Macron in an attempt to appeal to moderates and investors.

Oil prices held near seven-week highs as geopolitical issues in the Middle East heightened supply concerns. Investors are cautiously awaiting today’s US oil inventories report from the Energy Information Administration, which has been postponed a day due to a national holiday.

Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) gained 0.23%, China’s FTSE China A50 (CHA50) declined 0.09%, Hong Kong’s Hang Seng (HK50) gained 2.87%, and Australia’s ASX 200 (AU200) was negative 0.11%.

The New Zealand dollar rose against the US dollar thanks to stronger-than-expected first-quarter GDP data. New Zealand’s economy grew by 0.2% in the first quarter compared to 0% in the previous quarter, beating expectations. On an annualized basis, GDP increased by 0.3% in the first quarter, compared to a contraction of 0.2% in the previous quarter. The strengthening GDP growth suggests that New Zealand is out of recession. In addition, the weakening US dollar has also helped the kiwi strengthen as the recent weak US retail sales report has increased the likelihood that the Federal Reserve (Fed) will cut interest rates in the coming months.

The offshore yuan fell to 7.28 per dollar, hitting its lowest level in more than seven months, following the central bank’s decision to set a much weaker official discount rate. The People’s Bank of China set the average rate at 7.1192 per dollar, the weakest since November 2023 and the biggest one-day move since April 16. Meanwhile, earlier on Thursday, the People’s Bank of China (PBoC) left key lending rates unchanged at the June fixing, matching market expectations. The 1-year prime rate (LPR) was left at 3.45% and the 5-year LPR at 3.95% after a record 25 basis points cut in February. Both rates are at historic lows, reflecting the fragile economic recovery and reinforcing calls for additional support measures from Beijing.

S&P 500 (US500) 5,496.80 +1.13 (+0.02%)

Dow Jones (US30) 38,818.90 -55.0 (-0.14%)

DAX (DE40) 18,067.91 −64.06 (−0.35%)

FTSE 100 (UK100) 8,205.11 +13.82 (+0.17%)

USD Index 105.24 −0.02 (−0.02%)

Important events today:
  • – New Zealand QDP (q/q) at 01:45 (GMT+3);
  • – China PBoC Loan Prime Rate (m/m) at 04:15 (GMT+3);
  • – German Producer Price Index (m/m) at 09:00 (GMT+3);
  • – Switzerland Trade Balance (m/m) at 09:00 (GMT+3);
  • – Switzerland SNB Interest Rate Decision at 10:30 (GMT+3);
  • – Switzerland SNB Monetary Policy Assessment at 10:30 (GMT+3);
  • – Switzerland SNB Press Conference at 11:00 (GMT+3);
  • – Norway NB Interest Rate Decision at 11:00 (GMT+3);
  • – UK BoE Interest Rate Decision at 14:00 (GMT+3);
  • – UK BoE MPC Meeting Minutes at 14:30 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 18:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
19 Jun

Quantum computers are like kaleidoscopes – why unusual metaphors help illustrate science and technology

By Sorin Adam Matei, Purdue University 

Quantum computing is like Forrest Gump’s box of chocolates: You never know what you’re gonna get. Quantum phenomena – the behavior of matter and energy at the atomic and subatomic levels – are not definite, one thing or another. They are opaque clouds of possibility or, more precisely, probabilities. When someone observes a quantum system, it loses its quantum-ness and “collapses” into a definite state.

Quantum phenomena are mysterious and often counterintuitive. This makes quantum computing difficult to understand. People naturally reach for the familiar to attempt to explain the unfamiliar, and for quantum computing this usually means using traditional binary computing as a metaphor. But explaining quantum computing this way leads to major conceptual confusion, because at a base level the two are entirely different animals.

This problem highlights the often mistaken belief that common metaphors are more useful than exotic ones when explaining new technologies. Sometimes the opposite approach is more useful. The freshness of the metaphor should match the novelty of the discovery.

The uniqueness of quantum computers calls for an unusual metaphor. As a communications researcher who studies technology, I believe that quantum computers can be better understood as kaleidoscopes.

This image could give you a better grasp of how quantum computers work.
Crystal A Murray/Flickr, CC BY-NC-SA

Digital certainty vs. quantum probabilities

The gap between understanding classical and quantum computers is a wide chasm. Classical computers store and process information via transistors, which are electronic devices that take binary, deterministic states: one or zero, yes or no. Quantum computers, in contrast, handle information probabilistically at the atomic and subatomic levels.

Classical computers use the flow of electricity to sequentially open and close gates to record or manipulate information. Information flows through circuits, triggering actions through a series of switches that record information as ones and zeros. Using binary math, bits are the foundation of all things digital, from the apps on your phone to the account records at your bank and the Wi-Fi signals bouncing around your home.

In contrast, quantum computers use changes in the quantum states of atoms, ions, electrons or photons. Quantum computers link, or entangle, multiple quantum particles so that changes to one affect all the others. They then introduce interference patterns, like multiple stones tossed into a pond at the same time. Some waves combine to create higher peaks, while some waves and troughs combine to cancel each other out. Carefully calibrated interference patterns guide the quantum computer toward the solution of a problem.

Physicist Katie Mack explains quantum probability.

Achieving a quantum leap, conceptually

The term “bit” is a metaphor. The word suggests that during calculations, a computer can break up large values into tiny ones – bits of information – which electronic devices such as transistors can more easily process.

Using metaphors like this has a cost, though. They are not perfect. Metaphors are incomplete comparisons that transfer knowledge from something people know well to something they are working to understand. The bit metaphor ignores that the binary method does not deal with many types of different bits at once, as common sense might suggest. Instead, all bits are the same.

The smallest unit of a quantum computer is called the quantum bit, or qubit. But transferring the bit metaphor to quantum computing is even less adequate than using it for classical computing. Transferring a metaphor from one use to another blunts its effect.

The prevalent explanation of quantum computing is that while classical computers can store or process only a zero or one in a transistor or other computational unit, quantum computers supposedly store and handle both zero and one and other values in between at the same time through the process of superposition.

Superposition, however, does not store one or zero or any other number simultaneously. There is only an expectation that the values might be zero or one at the end of the computation. This quantum probability is the polar opposite of the binary method of storing information.

Driven by quantum science’s uncertainty principle, the probability that a qubit stores a one or zero is like Schroedinger’s cat, which can be either dead or alive, depending on when you observe it. But the two different values do not exist simultaneously during superposition. They exist only as probabilities, and an observer cannot determine when or how frequently those values existed before the observation ended the superposition.

Leaving behind these challenges to using traditional binary computing metaphors means embracing new metaphors to explain quantum computing.

Peering into kaleidoscopes

The kaleidoscope metaphor is particularly apt to explain quantum processes. Kaleidoscopes can create infinitely diverse yet orderly patterns using a limited number of colored glass beads, mirror-dividing walls and light. Rotating the kaleidoscope enhances the effect, generating an infinitely variable spectacle of fleeting colors and shapes.

The shapes not only change but can’t be reversed. If you turn the kaleidoscope in the opposite direction, the imagery will generally remain the same, but the exact composition of each shape or even their structures will vary as the beads randomly mingle with each other. In other words, while the beads, light and mirrors could replicate some patterns shown before, these are never absolutely the same.

If you don’t have a kaleidoscope handy, this video is a good substitute.

Using the kaleidoscope metaphor, the solution a quantum computer provides – the final pattern – depends on when you stop the computing process. Quantum computing isn’t about guessing the state of any given particle but using mathematical models of how the interaction among many particles in various states creates patterns, called quantum correlations.

Each final pattern is the answer to a problem posed to the quantum computer, and what you get in a quantum computing operation is a probability that a certain configuration will result.

New metaphors for new worlds

Metaphors make the unknown manageable, approachable and discoverable. Approximating the meaning of a surprising object or phenomenon by extending an existing metaphor is a method that is as old as calling the edge of an ax its “bit” and its flat end its “butt.” The two metaphors take something we understand from everyday life very well, applying it to a technology that needs a specialized explanation of what it does. Calling the cutting edge of an ax a “bit” suggestively indicates what it does, adding the nuance that it changes the object it is applied to. When an ax shapes or splits a piece of wood, it takes a “bite” from it.

Metaphors, however, do much more than provide convenient labels and explanations of new processes. The words people use to describe new concepts change over time, expanding and taking on a life of their own.

When encountering dramatically different ideas, technologies or scientific phenomena, it’s important to use fresh and striking terms as windows to open the mind and increase understanding. Scientists and engineers seeking to explain new concepts would do well to seek out originality and master metaphors – in other words, to think about words the way poets do.The Conversation

About the Author:

Sorin Adam Matei, Associate Dean for Research, Purdue University

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

Opinions Programming
19 Jun

The New Zealand dollar faces growth challenges

By RoboForex Analytical Department

The NZD/USD pair declined to 0.6135 on Wednesday, despite the New Zealand dollar performing much better in the previous session. It rose in response to the fall of the US dollar, which was triggered by weaker-than-expected US retail sales data. These results increased bets on an imminent reduction in the cost of lending by the Federal Reserve System. This caused the USD to retreat, allowing other currencies to rise.

Today, Paul Conway, the chief economist of the Reserve Bank of New Zealand, announced that the process of returning inflation to the target is progressing well. The ongoing softening of the employment sector is releasing spare capacity in the economy, likely leading to a further reduction in inflationary pressure in the economic system.

At the same time, Conway noted that the inflation reduction process may not follow the predicted timeline. An extended period of maintaining a restrictive monetary policy is necessary to achieve a lasting result, a crucial step to ensure the goal is met. The market’s attention will now shift to the upcoming Q1 GDP statistics. The data may reflect a fairly modest increase, which could hurt the NZD.

Technical analysis of NZD/USD

On the H4 NZD/USD chart, the market executed a wave of decline to the level of 0.6097 and a correction to the level of 0.6148. Today, we expect another downward trend to 0.6075, the first goal. After reaching this level, a correction to 0.6140 is possible (testing from below). Next, we will consider a new wave of decline to 0.6028, the local target. This scenario is technically confirmed by the MACD indicator, as its signal line is below the zero mark. An update of the lows is expected.

On the H1 NZD/USD chart, a correction has formed to 0.6148 (testing from below). Today, we expect a decrease to 0.6111. The breakdown of this level will open the potential for a downward trend to 0.6075. Technically, this scenario is also confirmed by the Stochastic oscillator. Its signal line is below the 50 mark, and another decline to the level of 20 is expected.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Financial News Forex and Currency News
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