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.

USDCAD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

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.

AUDUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

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.

USDCHF

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:

  1. 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.
  2. Furthermore, the unemployment rate is expected to tick higher to 3.5%, relative to April’s 3.4% unemployment rate.
  3. 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.

Forex-Time-LogoArticle 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

Inflationary pressures are easing in Europe. Investors awaiting approval of debt ceiling bill

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.41%, and the S&P 500 Index (US500) closed lower by 0.61%. The NASDAQ Technology Index (US100) was down by 0.63% on Wednesday. Yesterday the indices were under pressure from declines in consumer and technology stocks. There is also continued uncertainty in the vote on the debt ceiling bill. Most analysts anticipate approval of the bill, but the deadline is close. The US House of Representatives voted for a bill to suspend the debt ceiling late Wednesday night.

The Federal Reserve’s interest rate hike on June 14 may depend on Friday’s jobs report (Nonfarm Payrolls). The Fed tightening by reducing the balance sheet could cause liquidity after the debt ceiling deal, and higher rates could deprive the current rally in the S&P 500 (US500) of energy. On the other hand, confirmation that the labor market is exhaling could lower long-term market interest rates, helping to offset the Fed’s quantitative tightening and provide short-term support for the S&P 500 (US500) and growth stocks.

Shares of HP Inc (HPQ) fell more than 5% after posting mixed quarterly results as revenue fell short of expectations due to lower demand for PCs. NVIDIA Corporation (NVDA) fell more than 5%, while Intel Corporation (INTC) resisted the trend, rising nearly 5% as the chipmaker talked up prospects and received a vote of confidence from Nvidia. Nvidia’s CEO said yesterday that the company could buy chips from Intel. IBM plans to replace nearly 8,000 employees with AI. Most of it will be faced by office support workers, especially in the human resources sector. IBM also announced earlier this year that it would cut 3,900 jobs for more automation and cost-cutting measures.

Stock markets in Europe were mostly down Wednesday. Germany’s DAX (DE30) fell by 1.54% yesterday, France’s CAC 40 (FR40) lost 1.54%, Spain’s IBEX 35 (ES35) decreased by 1.54%, and the British FTSE 100 (UK100) ended the day down by 1.01%.

The latest inflation data showed that consumer prices in France fell from 5.9% to 5.1% y/y, in Italy, inflation fell from 8.2% to 7.6% y/y, and in Germany, CPI fell from 7.2% to 6.1% y/y. Today, the overall Eurozone figure will be released. The Eurozone inflation figure is expected to fall from 7.0% to 6.3% y/y, and the core indicator (which excludes food and energy prices) is expected to fall slightly from 5.6% to 5.5%. But that won’t stop the European Central Bank from raising rates in June.

Oil prices hit a one-month low on Wednesday after weak production data from China, the world’s largest oil importer, raised concerns about demand growth in the second half of the year. Oil prices have fallen more than 16% since the beginning of the year as China’s sluggish economic recovery and the Federal Reserve’s tightening of monetary policy weigh on demand prospects. At the same time, rising demand ahead of summer is not currently supporting prices in any way. Crude oil inventories will be released today, and there will be an OPEC+ meeting on June 4, where there may be surprises in the form of production cuts to support prices.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) shed by 1.41% over the day, China’s FTSE China A50 (CHA50) fell by 1.72%, Hong Kong’s Hang Seng (HK50) ended Wednesday down by 1.94%, India’s NIFTY 50 (IND50) lost 0.53%, and Australia’s S&P/ASX 200 (AU200) closed negative yesterday by 1.64%.

Australian stocks were supported today by stronger-than-expected first-quarter capital spending data. The reading underscores some strength in the Australian economy as it struggles with high inflation, rising rates and slowing growth. Strong economic data also encouraged Japanese stocks as capital spending rose more than expected in the first quarter, indicating a potentially higher revision to first-quarter economic growth data.

S&P 500 (F) (US500) 4,179.83 −25.69 (−0.61%)

Dow Jones (US30)32,908.27 −134.51 (−0.41%)

DAX (DE40) 15,664.02 −244.89 (−1.54%)

FTSE 100 (UK100) 7,446.14 −75.93 (−1.01%)

USD Index 104.23 +0.06 (+0.06%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:50 (GMT+3);
  • – Australia Retail Sales (m/m) at 04:30 (GMT+3);
  • – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 12:30 (GMT+3);
  • – Eurozone ECB Monetary Policy Meeting Accounts at 14:30 (GMT+3);
  • – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 18:00 (GMT+3);
  • – US FOMC Member Harker Speaks at 20:00 (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
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.The Conversation

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

Amid fears of Chinese influence, the Committee on Foreign Investment in the United States has grown more powerful

By Amitrajeet A. Batabyal, Rochester Institute of Technology 

A Chinese private equity firm, Primavera Capital Group, acquired the well-known test preparation company Princeton Review and an online learning platform, Tutor.com, in May 2023.

The move, like other Chinese investments in tech and those that deal with personal information, is increasingly drawing the attention of politicians, the U.S. government and national security experts – especially as tensions rise between the U.S. and China.

What remains unclear, however, is if this seemingly routine business acquisition was reviewed by the Committee on Foreign Investment in the U.S., which has authority to examine transactions involving foreign investment. The committee is largely prohibited from publicly disclosing any information filed with it, including if it is reviewing a transaction or if one was referred for review.

While the committee is hardly a household name, its mission and expanding oversight have important implications for the U.S. economy and national security.

Government oversight

The dark grey dome of the U.S. Capitol Building against a light grey sky.
Congress strengthened the Committee on Foreign Investment’s powers, allowing it to scrutinize foreign investments in areas including cybersecurity, microelectronics and artificial intelligence.
joshua sukoff for Unsplash.com, CC BY

The Committee on Foreign Investment, a U.S. government interagency committee established in 1975 by President Gerald Ford, is tasked with studying and coordinating the implementation of policy on foreign investment in America.

Investment by foreign countries greatly benefits the U.S., supporting 10.1% of the total labor force in 2019. Yet beginning in the 1980s, the federal government grew increasingly concerned about potentially harmful effects of foreign investment in the U.S. For example, if a foreign firm gets control of sensitive technologies, it could hurt national competitive advantages or even threaten national security.

The primary objective of the committee is to review selected foreign investments and some real estate transactions by foreigners in the U.S. for their national security implications. Real estate transactions are generally scrutinized only when a transaction involves land that is either close to a military base or near an airport or seaport.

Business deals by foreign countries in the U.S. can be reviewed by the government for national security risks.
Jason Leung for Unsplash, CC BY-SA

Vetting foreign investments

In the 1980s, political concern grew about Japanese investment and, specifically, the proposed purchase by Japanese computer giant Fujitsu of chipmaker Fairchild Semiconductor. The purchase of Fairfield Semiconductor was considered a sensitive industry, with potential defense applications, and prompted Congress in 1988 to pass the Exon-Florio amendment to the Defense Production Act of 1950.

This amendment empowered the committee to not just review foreign investment deals but also to recommend rejecting them. Acting on its recommendation, a U.S. president could block a foreign transaction on “national security” grounds. For instance, in 1990, President George H. W. Bush voided the sale of MAMCO Manufacturing, which made metal parts for airplanes, to a Chinese agency, ordering the China National Aero-Technology Import & Export Corporation to divest itself of the Seattle-based company.

A teal-green schematic on a black background computer screen.
Foreign investments scrutinized by the U.S. can range from agricultural supply chains to biotechnology and quantum computing.
adi goldstein for Unsplash.com

In the context of a committee review, the term national security typically refers to foreign transactions that could cause significant outsourcing of jobs, a loss of control over agricultural supply chains, the sharing of sensitive technologies, control of a firm that satisfies defense needs, or the impairment of critical infrastructure.

Strengthening the committee

In 2006, Dubai Ports World, owned by the United Arab Emirates government, was about to gain managerial control of six U.S. ports in a major deal. Because of terrorism-related concerns, Sen. Chuck Schumer led a campaign against this proposal and the transaction was eventually called off, even though it had initially been approved by both the committee and President George W. Bush.

White sand beach in the foreground with Abu Dhabi skyscrapers in the background.
Political concern scuttled a United Arab Emirates deal to manage U.S. ports and triggered greater power for the Committee on Foreign Investment.
Damian Kamp for Unsplash.com, CC BY

In the aftermath of this controversy, lawmakers passed the Foreign Investment and National Security Act in 2007, giving Congress greater oversight of the committee to ensure that potential acquisitions were adequately reviewed. In addition, it required the committee to scrutinize all foreign investment deals in which the pertinent overseas entity is either owned or controlled by a foreign power.

National security concerns

Over time, the Committee on Foreign Investment has been given more power to reflect and act on the political and economic concerns of the U.S.

China, for example, appears to have global ambitions to replace the U.S.-led world order. As it gains geopolitical power, China has come under increased scrutiny by the U.S., with public support to get tough with China on economic issues. In response to these concerns, concrete steps have been taken by U.S. lawmakers to increase the scope of what the committee is able to do.

In 2018, President Donald Trump signed the Foreign Investment Risk Review Modernization Act, giving the committee new powers over certain types of foreign investment that affect many Chinese investors. In the two-year period after the passage of the act, transaction registrations from Chinese investors fell by 43%.

In 2022, President Joe Biden signed an executive order directing the committee to sharpen its investigation of foreign investment deals that could negatively affect cybersecurity, quantum computing, biotechnology and sensitive data. The Committee on Foreign Investment is now more powerful than it has ever been, and it is a gatekeeper on major foreign investment deals.

The U.S. is not alone in examining foreign investment deals for national security implications. In recent times, the United Kingdom, the European Union and Australia have either created or strengthened existing regulations to more carefully police foreign investment deals, particularly those originating in China.

It remains to be seen what the long-term implications of these expanding powers of the Committee on Foreign Investments in the U.S. will be.The Conversation

About the Author:

Amitrajeet A. Batabyal, Distinguished Professor, Arthur J. Gosnell Professor of Economics, & Interim Head, Department of Sustainability, Rochester Institute of Technology

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

 

Economics & Fundamentals Opinions
31 May

The cryptocurrency market digest (BTC, SUI). Overview for 31.05.2023

By RoboForex.com

The BTC on Wednesday is balancing around 27,148 USD.

While the technical trading picture of the BTC is favourable for a price increase, investors are clearly not ready to buy. This is probably due to the high correlation of the BTC with the S&P 500 index and Nasdaq indices. Markets are focused: today the House of Representatives will vote on the issue of raising the country’s public debt limits. The framework agreement has long been reached, but as long as the project is fully approved, surprises are possible.

The strong position of the US dollar is also hindering the growth of the BTC.

The support level of 26,500 USD remains in place, but it is no longer as strong as before. The next support level below it is 23,800 USD. To return to the 30,000 USD attack, the cryptocurrency needs to rise above 28,900 USD.

The capitalisation of the cryptocurrency market has dropped to 1.137 trillion USD. The share of BTC has fallen to 46.3%, while the share of ETH remains at 19.7%.

Bybit ceases operations in Canada

The Bybit cryptocurrency exchange is shutting down operations in Canada due to the sector regulations becoming too complicated. All open trades will be closed by 30 September. Earlier, Binance also announced leaving Canada.

Investors are waiting for tokens to be unblocked

Two major tokens will be unlocked this week. This will happen on the Optimism and Sui crypto networks. Today 387 million coins worth 590 million USD will be released on the Ethereum Layer 2 Optimism network. The tokens are to be split between the main participants and investors. On 3 June, there will be an unlock on the Sui Layer 1 blockchain. Here, 61 million tokens worth 62 million USD will be released. This will increase the current supply of the coin by 13%.

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.

Cryptocurrencies Financial News
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.

Forex-Time-LogoArticle 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
31 May

Australia has seen a sharp rise in inflation. Chinese PMI data disappointed investors

By JustMarkets

The Dow Jones index (US30) decreased by 0.15% at the close of the stock market yesterday, while the S&P 500 index (US500) closed at its opening price. The NASDAQ Technology Index (US100) was up 0.32% on Tuesday.

The leading Republican in Congress, Kevin McCarthy, on Tuesday urged his party to support a bipartisan deal to raise the $31.4 trillion US debt ceiling and avert a catastrophic default ahead of a procedural vote. Both Democratic President Joe Biden and House Speaker McCarthy predicted that they would get enough votes to pass the legislation by June 5. Despite the progress, several Republicans said they would resist the deal.

The news of the debt ceiling agreement still leaves uncertainty about the prospects for US creditworthiness. Analysts believe that despite positive progress toward a deal, there is a high probability that Fitch Ratings will downgrade the US credit rating. During the previous debt ceiling crisis in 2011, Standard & Poor’s rating agency downgraded US’s highest “AAA” rating one notch days after the debt ceiling agreement, citing insufficient steps to fix the country’s financial situation.

The US consumer confidence fell to a six-month low in May. The Conference Board consumer confidence index this month fell to 102.3, its lowest level since last November, from an upwardly revised 103.7 in April. Consumers were less optimistic about the labour market, with the share of those who think jobs are “plentiful” falling to its lowest level since April 2021 and the share of those who think jobs are “hard to get” rising to a six-month-high.

Stock markets in Europe were mostly down on Tuesday. Germany’s DAX (DE30) decreased by 0.27% yesterday, France’s CAC 40 (FR 40) lost 1.29% yesterday, Spain’s IBEX 35 (ES35) fell by 0.18%, and the British FTSE 100 (UK100) ended the day down 1.38%.

Spain’s inflation rate declined from 4.1% to 3.2% yearly. France and Italy will release inflation data today, followed by the overall Eurozone figure tomorrow. Inflationary pressures in the region are expected to continue to ease.

Oil fell 4% yesterday due to concerns over Fed action on rates and OPEC’s production decision. Crude oil prices fell amid growing speculation that the Federal Reserve will raise rates in June. But before the Fed meeting, OPEC+ countries will meet on June 4. Tensions between Saudi Arabia and Russia are rising as Moscow continues to pump huge amounts of cheaper oil into the market, undermining Riyadh’s efforts to maintain energy prices.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 0.30% on the day, China’s FTSE China A50 (CHA50) fell by 0.32%, Hong Kong’s Hang Seng (HK50) added 0.24% on Tuesday, India’s NIFTY 50 (IND50) increased by 0.19%, and Australia’s S&P/ASX 200 (AU200) was negative 0.11% on the day.

Activity in China’s manufacturing sector declined for the second month in a row in May, raising further questions about the country’s economic recovery. Weak demand and slowing capital investment put pressure on the country’s biggest economic engines. The manufacturing PMI fell to 48.8 from 51.4, a reading below 50 indicating contraction. The service sector remained above 50 but declined from 56.4 to 54.5 for the month. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indices fell 1% and 0.6%, respectively, after the news, with the blue-chip index reaching its lowest level in six months. It should be noted that China is also struggling with a resurgence of COVID-19 cases, with some officials warning that the number of cases could peak by the end of June.

In Australia, consumer prices rose much more than expected in April, prompting markets to consider a greater chance of further rate hikes. On an annualized basis, the CPI rose from 6.3% to 6.8%. Governor Lowe said Wednesday that Australia’s Central Bank will do all it can to get inflation under control, warning households to prepare for trouble ahead while risks of higher inflation persist. The RBA predicts that overall inflation will return to the top of the bank’s 2-3% target by mid-2025, which will be slower than in many other countries.

S&P 500 (F) (US500) 4,205.59 +0.14 (+0.03%)

Dow Jones (US30)33,042.85 −50.49 (−0.15%)

DAX (DE40) 15,908.91 −43.82 (−0.27%)

FTSE 100 (UK100) 7,522.07 −105.13 (−1.38%)

USD Index 104.07 −0.14 (−0.13%)

Important events for today:
  • – Australia RBA Governor Lowe Speaks at 02:00 (GMT+3);
  • – Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
  • – Japan Industrial Production (m/m) at 02:50 (GMT+3);
  • – Japan Retail Sales (m/m) at 02:50 (GMT+3);
  • – Australia Consumer Price Index (m/m) at 04:30 (GMT+3);
  • – China Manufacturing PMI (m/m) at 04:30 (GMT+3);
  • – China non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
  • – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
  • – ECB Financial Stability Review at 11:00 (GMT+3);
  • – German Consumer Price Index (m/m) at 15:00 (GMT+3);
  • – Canada GDP (q/q) at 15:30 (GMT+3);
  • – US FOMC Member Bowman Speaks at 15:50 (GMT+3);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
  • – Switzerland SNB Chairman Jordan Speaks 18:05 (GMT+3);
  • – US FOMC Member Harker Speaks at 20:00 (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
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.

 

 

Forex-Time-LogoArticle 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

Relations between the US and China continue to deteriorate. The economic outlook for the Eurozone is weakening

By JustMarkets

Famous investor Warren Buffett does not believe that Congress will be unable to raise the debt ceiling and the country will default. He compared the current standoff among lawmakers to the previous one, calling such a clash “an idiotic waste of time” and calling for a complete repeal of the borrowing limit. The CEO of Berkshire Hathaway (BRKb) said limiting the borrowing ceiling never made sense because the country’s creditworthiness is growing as it grows economically.

Cathie Wood, manager of the exchange-traded fund ARK Innovation (ARKK), said Monday evening that Nvidia Corporation (NVDA) is overvalued and that Tesla Inc (TSLA) could benefit much more from recent advances in artificial intelligence. In particular, electric car maker Tesla is the “most obvious” beneficiary of recent advances in artificial intelligence, Wood said, citing the firm’s pursuit of autonomous driving technology.

Stock markets in Europe traded flat Monday. Germany’s DAX (DE30) decreased by 0.20% yesterday, France’s CAC 40 (FR40) fell by 0.21% yesterday, Spain’s IBEX 35 (ES35) lost 0.12%, and the British FTSE 100 (UK100) was not trading yesterday.

Bank of America (BoA) is cautious about the outlook for the Euro Area. Europe’s economic data is getting progressively worse. Along with a possible reduction in risk from the debt ceiling, the situation could lead to an even stronger dollar and a lower euro in the short term.

European stocks declined in trading on Monday due to losses in technology companies and bank stocks. The STOXX 600 pan-European index closed down 0.1% after recording its strongest one-day gain in nearly two months on Friday.

Spanish Prime Minister Pedro Sanchez unexpectedly announced an early national election, and his main rival declared his goal of becoming the country’s next leader after leftist parties were defeated in regional elections.

The credit agency Standard and Poor’s notified France of a possible downgrade.

Oil prices rose in weakly volatile trading on Monday. But on Tuesday, oil started to decline again. Concerns about further interest rate hikes by the Federal Reserve and a slowdown in economic growth largely offset optimism about an increase in the US government debt ceiling. The main focus of oil traders now is the OPEC+ meeting on June 4.

Asian markets traded yesterday without a single dynamic. Japan’s Nikkei 225 (JP225) gained 1.03%, China’s FTSE China A50 (CHA50) was 0.49% lower, Hong Kong’s Hang Seng (HK50) fell by 1.04% lower on Monday, India’s NIFTY 50 (IND50) gained 0.54%, and Australia’s S&P/ASX 200 (AU200) was 0.87% higher on the day.

Most Asian stock indices fell on Tuesday as optimism over a deal to raise the US debt ceiling was offset by fears of worsening relations between Beijing and Washington amid renewed trade and political sanctions disputes. China’s CSI 300 index fell to a five-month low after China rejected a request for a meeting between US Defense Secretary Lloyd Austin and Chinese Defense Minister Li Shanfu at a forum in Singapore later this week. The deterioration in relations between the two countries also comes amid waning optimism about China’s economic recovery this year, with attention now focused mainly on the May manufacturing and service sector activity figures due Wednesday.

S&P 500 (F) (US500) 4,205.45 0.0 (0.0%)

Dow Jones (US30)33,093.34 0 (0%)

DAX (DE40) 15,952.73 −31.24 (−0.20%)

FTSE 100 (UK100) 7,627.20 +56.33 (0.74%)

USD Index 104.28 +0.08 +0.07%

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
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