Economic Data Puts the EUR and the GBP in Focus ahead of FED Chair Powell Testimony

Earlier in the Day:

It was another relatively quiet start to the week on the economic calendar this morning. The Kiwi dollar was in focus in the early hours.

For the Kiwi Dollar

Consumer sentiment was in focus in the early hours.

In the 2nd quarter, the Westpac Consumer Sentiment Index rose from 105.2 to 107.1.

According to the 2nd Quarter survey,

  • The Expected Conditions Index rose from 111,2 to 112.9 with the 1-year economic outlook sub-index climbing from -1.6 to 4.4.
  • There was also an improvement in the current financial situation, with the sub-index rising from -11.7 to -5.4. This was above the average of -8.5.
  • There were declines in the good time to buy and 5-year economic outlook sub-indexes, however.
  • In the 2nd quarter, the good time to buy sub-index fell from 4.2 to 2.0. The 5-year outlook index fell from 20.1 to 17.7.

The Kiwi Dollar moved from $0.69854 to $0.69888 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.16% to $0.6977.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.01% to ¥110.26 against the U.S Dollar, while the Aussie Dollar was down by 0.16% to $0.7523.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic data front. Flash consumer confidence figures for the Eurozone will be in focus late in the European session,

With little else for the markets to consider, expect market sensitivity to today’s numbers. Forecasts are EUR positive.

On Monday, ECB President Lagarde had talked of a speedier than expected economic recovery fueled by consumer spending. Weak numbers would test question the optimism…

At the time of writing, the EUR was down by 0.12% to $1.1905.

For the Pound

It’s also a relatively quiet day ahead on the economic calendar.

CBI Industrial Trend Orders for June are due out later today. With the BoE in action later in the week, we can expect some sensitivity to today’s numbers.

Away from the economic calendar, however, COVID-19 news will remain a key consideration near-term.

At the time of writing, the Pound was down by 0.21% to $1.3905.

Across the Pond

It’s a quiet day ahead on the economic calendar. Housing sector data is due out late in the day.

We don’t expect too much influence form the numbers, however.

FED Chair Powell is scheduled to deliver testimony late in the day. The markets will be looking for any deviation from last week’s hawkish stance.

At the time of writing, the Dollar Spot Index was up by 0.04% to 91. 369.

For the Loonie

It’s a particularly quiet day ahead on the economic data front. There are no material stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.14% to C$1.2380 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Holding Fib Level at .6924 Could Trigger Rally into 50% Level at .7027

The New Zealand Dollar is edging higher on Monday after last week’s steep sell-off was fueled by the Fed’s surprise hawkish stance, which weighed on risk sentiment. Global equity markets are recovering from early session weakness that may be encouraging Kiwi short-sellers to take profits.

At 10:07 GMT, the NZD/USD is trading .6970, up 0.0040 or +0.58%.

Weaker Treasury yields are also helping to underpin the New Zealand Dollar. Additionally, analysts at Goldman Sachs agreed the dollar’s gains may not be sustained, noting other central banks will need to consider policy normalization too as their economies recover from the blow of the pandemic.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6823 will signal a resumption of the downtrend.

The main trend will change to up on a move through .7316. This is highly unlikely, but due to the prolonged move down in terms of price and time, the NZD/USD may be ripe for a closing price reversal bottom.

The minor trend is also down. A trade through .7243 will change the minor trend to up. This will also shift momentum to the upside.

The NZD/USD is currently testing the lower level of a long-term retracement zone at .7027 to .6924.

The minor range is .7243 to .6923. Its 50% level at .7083 is the first potential upside target. Since the main trend is down, sellers could come in on the first test of this level.

The main range is .7316 to .6923. Its retracement zone at .7120 to .7166 is the best upside target zone.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the NZD/USD is likely to be determined by trader reaction to .6924.

Bearish Scenario

A sustained move under .6923 will indicate the presence of sellers. This could trigger a break into the November 23, 2020 main bottom at .6897. This is a potential trigger point for an acceleration to the downside with the November 11, 2020 main bottom at .6811 the next potential downside target.

Bullish Scenario

A sustained move over .6924 will signal the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into the main 50% level at .7027. Sellers could come in on the first test of this level. Overcoming it, however, could trigger a surge into the minor pivot at .7083.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Weekly Forecast – US Economic Data, Powell’s Testimony Sets the Tone

The Australian and New Zealand Dollars finished sharply lower last week after the U.S. Federal Reserve surprised investors by shifting policy from dovish to hawkish. Domestically, the Reserve Bank of Australia (RBA) minutes showed central bankers weren’t being swayed by a strengthening economy and maintained its dovish tone. Economic data out of New Zealand also failed to attract enough buyers to offset the stronger U.S. Dollar. Essentially, rising Treasury yields made the greenback a more attractive investment than the Aussie and Kiwi.

Last week, the AUD/USD settled at .7480, down 0.0233 or -2.90% and the NZD/USD finished at .6930, down 0.0197 or -2.77%.

Australia’s Central Bank Says ‘Premature’ to End Bond Buying Program

Australia’s central bank signaled last Tuesday its willingness to extend its bond purchase program next month and laid out various options for the plan with the aim of meeting its goals of boosting employment and inflation.

Minutes of the Reserve Bank of Australia’s (RBA) laid out how it might revise its bond buying campaign. A final decision is due at its meeting on July 6. Whatever the RBA decides about the bond purchase program, analysts expect it to keep the policy cash rate at a record low 0.1% for a long time to come.

“Observing that the bond purchase program had been one of the factors underpinning the accommodative conditions necessary for the economic recovery, members thought it would be premature to consider ceasing the program,” minutes of its June policy meeting showed.

New Zealand Economy Surges as Housing, Retail Drive Post-COVID Recovery

New Zealand’s economic growth swept past forecasts in the first quarter on the back of a housing boom and strong retail spending, avoiding a second recession and bringing forward expectations for tighter monetary policy.

Gross Domestic product (GDP) rose 1.6% in the three months through to March, Statistics New Zealand said last Thursday, well ahead of a Reuters poll forecast of 0.5% growth and the Reserve Bank of New Zealand’s (RBNZ) estimate of a 0.6% fall.

Federal Reserve Moves Up Its Timeline for Rate Hikes on Inflation Concerns

The Federal Reserve last Wednesday considerably raised its expectations for inflation this year and brought forward the time frame on when it will next raise interest rates, CNBC reported.

However, the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program, though Fed Chairman Jerome Powell acknowledged that officials discussed the issue at the meeting.

Weekly Forecast

Last week’s sell-off by the AUD/USD and NZD/USD may have been overdone, but we won’t know until we see trader reaction to the U.S. economic reports. Moving forward, it’s going to be all about the U.S. economic data confirming the Fed’s assessment of the strength of the economy.

Meanwhile in Australia, traders have about two weeks to figure out the RBA’s next move. Investors will be watching communications out of the central bank in the weeks ahead, starting with a speech from Governor Philip Lowe on Thursday. Assistant Governor Luci Ellis speaks at a conference on June 23 followed by a panel participation by Lowe on June 30.

Regarding the New Zealand Dollar, ANZ Bank said it was bringing forward its forecast for the central bank to hike its official cash rate to February 2022, saying “a year from now feels too far away”.

Last week’s sell-off may have been a little too much so don’t be surprised by a small rebound especially if U.S. Flash Manufacturing PMI or Flash Services PMI comes in lower-than-expected.

Traders will also be watching Fed Chair Jerome Powell’s testimony on Tuesday. He can trigger another sharp break if he comes across as hawkish.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves Monetary Policy Chatter in Focus

Earlier in the Day:

It was a relatively quiet start to the week on the economic calendar this morning. The Aussie dollar was in focus in the early hours, with the Bank of China also in action this morning.

For the Aussie Dollar

Retail sales increased by 0.1% in May versus a forecasted 0.5% increase. In April, retail sales had increased by 1.1%.

According to the ABS,

  • Food retailing rose by 1.5% to lead the way, while household goods (-1.0%) and clothing, footwear, & personal accessory retailing (-1.5%) weighed.
  • Coronavirus restrictions in Victoria led to a 1.5% fall in retail sales across the state.
  • Year-on-year, sales was up 7.4% in May 2021 compared with May 2020. In April, sales had surged by 25% year-on-year.

The Aussie Dollar moved from $0.75059 to $0.75054 upon release of the figures, with the markets also awaiting the PBoC’s loan prime rate settings. At the time of writing, the Aussie Dollar was up by 0.32% to $0.7503.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.04% to ¥110.17 against the U.S Dollar, with the Kiwi Dollar up by 0.25% to $0.6953.

The Day Ahead

For the EUR

It’s a particularly quiet day ahead on the economic data front. There are no material stats due out of the Eurozone to provide the EUR with direction.

While there are no material stats to consider, ECB President Lagarde is scheduled to speak later in the day.

Any chatter on the economic outlook and monetary policy would influence.

At the time of writing, the EUR was down by 0.03% to $1.1861.

For the Pound

It’s a quiet day ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

With the BoE in action later in the week, COVID-19 news updates will influence. Rising cases of the Delta variant could further delay the government’s reopening plans in a month’s time. Much will depend upon progress on the vaccine front for the younger population.

At the time of writing, the Pound was up by 0.01% to $1.3812.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the Dollar and the broader markets with direction.

A lack of stats will leave FOMC member chatter and any news from Capitol Hill in Focus.

At the time of writing, the Dollar Spot Index was up by 0.02% to 92.248.

For the Loonie

It’s also a particularly quiet day ahead on the economic data front. There are no material stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was up by 0.08% to C$1.2455 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Factors Affecting Currency Prices

No financial marketplace comprehends as much of what is proceeding in the global trading community at any given time as foreign currency exchange, but in the end, Forex prices are a result of supply and demand forces.

The cost of one currency relative to another is constantly shifting due to the forces of supply and demand. So it is safe to say that a currency’s value is not influenced by one single force, but by several. These forces generally fall into three categories:

How Does Market Psychology Drive Forex Prices?

One of the more difficult aspects of the Forex markets to comprehend is the influence market psychology can have on the price of a currency. Since it doesn’t involve financial statements or central bank policy decisions, Forex traders have a hard time putting their fingers on it.

Sometimes it’s only the way a central bank phrased its policy statement or the tone of a speech, but Forex traders quickly turn “hawkish” or “dovish” in their sentiment and thus exert the force of market psychology on the currency markets.

Falling under the category of market psychology are the following:

Buy the rumor, sell the fact

It is the tendency for the cost of a currency to reflect the impact of a particular action before it occurs and when the anticipated event comes to pass, react in exactly the opposite direction.

Flight to Quality

Forex investors often seek the protection of a safe haven currency during times of unsettling international events. During this event, investors demand currencies perceived as stronger over their relatively weaker counterparts.

Flight to Safety

When there is clarity in the markets, investors will seek the currency offering the highest yield. This is generally known as a “risk-on” scenario. In other words, investors are willing to take on additional risk to capture a higher reward. During times of uncertainty investor sentiment may revert to a “risk-averse” mentality where they sell the higher-yielding or “risky” currencies in favor of the lower-yielding or ‘safer” currencies.

Whether because of economic or political trends, very often certain currencies move in long, pronounced trends attracting the attention of long-term cycle investors. Since there is no real business cycle or growing season affecting currency prices, certain types of investors who have the staying power look to exploit the long-term tendencies of currencies.

What are the Key Economic Influences Driving Forex Price Action?

The key economic influences driving the price action are usually disseminated by government agencies, central banks, and major private industry experts. They come in the form of regularly scheduled reports, press conferences, news releases, speeches, and news media quotes.

Falling under the category of economic influences are the following:

Economic Numbers

Although all economic numbers have some impact on the Forex markets over the short run, some numbers wield more powerful influences on the movement of the markets. These numbers typically rotate, giving each a chance to share the spotlight.

An example would be traders putting more emphasis on a GDP report than a retail sales report when overall economic growth is a major issue.  At times, a weekly jobless claims report will move a currency more than a monthly jobs report.

Under certain conditions, economic data may influence a currency more than a central bank decision. At times, a central bank may issue an unchanged policy decision, but a stronger-than-expected labor market report may drive prices higher as investors price in a possible change in policy in the near future.

The easiest way to understand this is to assume that trader tastes and preferences change.

Economic Policy

Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government’s central bank influences the supply and cost of money, which is reflected by the level of interest rates).

Government and central bank policies can often change as both tend to identify a problem then try to fix it by providing emergency fiscal stimulus (Government) or slashing interest rates (Central Banks).

These moves often take time to work through an economy, but Forex traders don’t necessarily wait for this to occur. They react to the initial move by the government or the central bank then make adjustments later.

The price action in the EUR/USD in June 2021 highlighted how central bank policy can influence a Forex pair’s direction. The single-currency plunged that month when the Federal Reserve changed its tone to hawkish by moving up the dates of its next interest rate hike. Meanwhile, the European Central Bank (ECB) held rates steady and offered no guidance as to the timing of its exit from its loose monetary policy.

Economic Conditions

Economic conditions fall into several broad categories that are usually driven by longer-term events. In other words, a bad report here and there, wouldn’t be considered an “economic condition”. However, a weak trend in employment or strong inflation figures will fall into the “economic conditions” category.

While a short-term surprise in a report may cause a day or two of volatile, counter-trend price action, longer-term trends in economic data tend to drive longer-term movement in a currency.

Economic Growth and Health

Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization, and others, detail the levels of a country’s economic growth and health.  Investors tend to demand the currencies with the best economies.

Government Budget Deficits or Surpluses

Simply stated, narrowing budget deficits are usually good for a currency’s value. Widening government budget deficits are generally bad. These reports tend to have a longer-term influence on a currency’s price. These reports usually don’t cause short-term volatility until they hit an extreme or record level.

Balance of Trade Levels and Trends

Forex investors watch balance of trade levels and trends very carefully. Surpluses and deficits are perceived as indicators of the competitiveness of a nation’s economy. Once again, these reports tend to drive the longer-term trend in a currency.

How Do Political Conditions Influence Forex Prices?

Internal, regional, and international political conditions can have a profound effect on currency prices. Political upheaval and instability can have a negative impact on a nation’s economy, while the rise of a political faction that is perceived to be fiscally responsible can have a positive effect.

One country in a region may spur positive or negative interest in a neighboring country and, in the process, affect its currency. Election results and shifts in political party power.

Why Pandemics Can Be a Source of Forex Volatility?

Forex traders have learned the hard way that a pandemic can be the source of price volatility. In 2020 when the COVID-19 pandemic hit the global economy, the playing field was leveled around the world.

With all economies tanking at the same time, all the major currencies plunged. However, traders tried to maintain the relationships between the major Forex pairs, but for a short-time, money was flowing into the U.S. Dollar for protection. We learned earlier that this was because of flight to safety, or flight to quality buying.

Most central banks and governments made the same moves – drastically lower rates and flood the financial markets with tremendous amounts of cash.

As conditions changed and economies began to settle and reopen, trading conditions improved, but now traders were more focused on GDP growth, rising inflation increased factory activity, but most importantly, domestic interest rates.

Interest Rate Differential Ultimately Determines a Currency’s Strength

All of the factors mentioned earlier in the article are great for identifying short-term volatility and long-term trends, but ultimately, it all comes down to the interest rate differential or the difference in government bond yields. It’s the interest rate differential that drives the Forex price action and makes one currency more attractive than another.

As economic conditions improve, government bond yields tend to rise. The yields in the most improving economies tend to move up faster than others. Since money seeks the highest yield, investors will buy the currency with the most attractive yield.

The most glaring confirmation of how the interest rate differentional drives a currency is in the USD/JPY Forex pair.

In mid-2021, the U.S. Federal Reserve announced it was moving closer to raising interest rates, while the Bank of Japan announced it was considering additional stimulus. In the U.S., yields rose on the news, widening the spread between U.S. Government bond yields and Japanese Government bond yields, this made the U.S. Dollar a more attractive investment.

The Week Ahead – Economic Data and Monetary Policy to Keep the Markets Busy

On the Macro

It’s a quieter week ahead on the economic calendar, with 49 stats in focus in the week ending 25th June. In the week prior, 61 stats had been in focus.

For the Dollar:

Private sector PMIs for June are due out on Wednesday. Expect the services PMI to be the key driver.

The focus will then shift to core durable goods orders and jobless claims figures on Thursday.

At the end of the week, inflation and personal spending numbers wrap things up.

Other stats include finalized 1st quarter GDP numbers, durable goods orders, and finalized consumer sentiment figures. These should have a muted impact on the Dollar, however.

On the monetary policy front, FED Chair Powell testimony will draw interest on Tuesday. FOMC member chatter will also need monitoring in the week.

In the week, the Dollar ended the week up by 2.32% to 92.225.

For the EUR:

It’s a busier week on the economic data front.

Early in the week, consumer confidence figures for the Eurozone will be in focus on Tuesday.

The market attention will then shift to prelim private sector PMIs for France, Germany, and the Eurozone are due out on Wednesday.

Expect plenty of interest in the numbers. Following some weak stats from Germany, however, Germany’s manufacturing PMI will likely have a greater impact on the day.

Through the remainder of the week, the German economy remains in focus.

Business confidence and consumer confidence figures are due out on Thursday and Friday.

From the ECB, President Lagarde is scheduled to speak on Monday, with the ECB Economic Bulletin due out on Thursday.

Both will provide the EUR with direction in the week.

The EUR ended the week down by 2.50% to $1.1863.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

CBI Industrial Trend Orders are due out on Tuesday ahead of prelim private sector PMIs on Wednesday.

Expect the UK’s services PMI to be the key driver.

The main event of the week, however, is the BoE monetary policy decision.

Dissent or hawkish chatter would be needed to give the Pound a boost following the government’s delay on fully reopening the UK.

Away from the economic calendar, COVID-19 news updates will also be in focus. We have seen the Pound struggle of late, as a result of a spike in new Delta strain cases.

The Pound ended the week down by 2.45% to $1.3810.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Retail sales figures are due out on Wednesday. With little else for the markets to consider in the week, expect plenty of influence from the numbers.

Crude oil inventory numbers will also influence mid-week.

The Loonie ended the week down 3.15% to C$1.2465 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead.

Prelim retail sales figures for May will be in focus on Monday. With no other stats to consider in the week, a larger than expected rise in sales would deliver support.

The Aussie Dollar ended the week down by 3.36% to $0.7479.

For the Kiwi Dollar:

It’s also a quiet week ahead.

Trade data for the 1st quarter will provide direction. The markets will have to wait until Friday for the numbers, however.

The Kiwi Dollar ended the week down by 3.85% to $0.6936.

For the Japanese Yen:

Prelim private sector PMI numbers for June will be in focus on Wednesday. Expect both the services and manufacturing PMIs to draw interest.

The focus will then shift to inflation figures due out on Friday. We don’t expect the numbers to have a material impact on the Yen, however.

The Japanese Yen fell by 0.60% to ¥110.21 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to influence market risk sentiment.

While there are no stats to consider, the PBoC will set its Loan Prime Rates on Monday. Any increase in LPRs would catch the markets off-guard.

The Chinese Yuan ended the week down by 0.90% to CNY6.4531 against the U.S Dollar.

Geo-Politics

While there are no major risks to consider on the geopolitical risk front, the markets will need to look out for any rhetoric in the wake of the Iranian Presidential Election. There’s also China, Russia, and North Korea to keep an eye on…

The Weekly Wrap – A Hawkish FED Delivers for the Dollar Bulls

The Stats

It was a busier week on the economic calendar, in the week ending 18th June.

A total of 61 stats were monitored, which was up from 45 stats in the week prior.

Of the 61 stats, 25 came in ahead forecasts, with 26 economic indicators coming up short of forecasts. There were 10 stats that were in line with forecasts in the week.

Looking at the numbers, 26 of the stats reflected an upward trend from previous figures. Of the remaining 35 stats, 26 reflected a deterioration from previous.

For the Greenback, the FOMC policy decision and projections were the key drivers. In the week ending 18th June, the Dollar Spot Index rallied by 2.32% to 92.225. In the previous week, the Dollar had risen by 0.46% to 90.5550.

Out of the U.S

It was a busy start to the week.

Retail sales and wholesale inflation figures drew plenty of attention on Tuesday.

It was a mixed set of numbers, however.

While wholesale inflationary pressures picked up in May, retail sales hit reverse in May.

Industrial production and NY Empire State manufacturing numbers also delivered mixed results on the day.

While industrial production rose further in May, the NY Empire State Manufacturing Index fell from 24.3 to 17.4 in June.

In the 2nd half of the week, jobless claims and Philly FED Manufacturing PMI numbers were in focus.

In June, the Philly FED Manufacturing PMI fell from 31.5 to 30.7 versus a forecasted 31.0.

While the headline index declined, the employment sub-index was on the rise. The sub-index increased from 19.3 to 30.7.

Jobless claims figures disappointed, however.

In the week ending 11th June, initial jobless claims rose from 375k to 412k. Economists had forecast a decline to 359k.

While the stats did draw attention, the FOMC monetary policy decision, press conference, and economic projections were the key drivers in the week.

A more hawkish than expected outlook on the economy and interest rates led to a Dollar rally.

In the equity markets, the NASDAQ slipped by 0.28%, with the Dow and the S&P500 saw falling by 3.45 % and by 1.91% respectively.

Out of the UK

It was a busier week, with employment, inflation, and retail sales in focus.

The stats were skewed to the positive mid-week.

In April, the unemployment rate slipped from 4.8% to 4.7%, with claimant counts falling by 92.6k in May. In April, claimant counts had fallen by 55.8k.

On Wednesday, inflation figures also pointed to a pickup in inflationary pressures. The UK’s annual rate of inflation accelerated from 1.5% to 2.1%, taking inflation beyond the BoE’s objective.

At the end of the week, retail sales figures disappointed, however, ahead of the coming week’s BoE monetary policy decision.

In May, retail sales fell by 1.4%, with core retail sales sliding by 2.1%. Economist had forecast increases of 1.6% and 1.5% respectively.

Adding further downward pressure on the Pound was a continued rise in the Delta variant of the coronavirus.

In the week, the Pound slid by 2.45% to end the week at $1.3810. In the week prior, the Pound had fallen by 0.35% to $1.4107.

The FTSE100 ended the week down by 1.63%, reversing a 0.92% rise from the previous week.

Out of the Eurozone

It was a quieter week.

Industrial production, trade data, and wage growth figures for the Eurozone were in focus.

It was a mixed set of numbers for the EUR.

While industrial production rose by more than expected in April, the Eurozone’s trade surplus narrowed markedly, with wage growth also slowing significantly in the 1st quarter.

The stats had a relatively muted impact on the EUR, however, with the markets focused on the FED in the week.

Late in the week, finalized inflation and wholesale inflation figures for the Eurozone and Germany also failed to materially move the dial.

In May, the annual rate of inflation accelerated from 1.6% to 2.0%, which was in line with prelim numbers. Consumer prices increased by 0.3% in the month of May, which was also in line with prelim figures. In April, consumer prices had risen by 0.6%.

In Germany, the annual rate of wholesale inflation jumped from 5.2% to 7.2% in May. Month-on-month, the producer price index rose by 1.5%, following a 0.8% increase in April.

For the week, the EUR slid by 2.50% to $1.1863. In the week prior, the EUR had fallen by 0.48% to $1.2108.

The CAC40 ended the week down by 0.48%, with the DAX30 and the EuroStoxx600 falling by 1.56% and by 1.19% respectively.

For the Loonie

It was a quiet week. Manufacturing sales figures for April disappointed on Monday. Sales fell by 2.1%, partially reversing a 3.5% jump from March.

Mid-week, inflation figures were skewed to the positive, however. Canada’s annual core rate of inflation accelerated from 2.3% to 2.8% in May.

In the month of May, both core consumer prices and consumer prices were also on the rise.

Other stats in the week included housing sector data and wholesale sales figures that had a muted impact on the Loonie.

In the week ending 18th June, the Loonie slumped by 3.15% to C$1.2465. In the week prior, the Loonie had fallen by 0.61% to C$1.2158.

Elsewhere

It was a particularly bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 18th June, the Aussie Dollar tumbled by 3.36% to $0.7479, with the Kiwi Dollar sliding by 3.85% to $0.6936.

For the Aussie Dollar

It was a quiet week. Employment figures for May were the key stats of the week.

The numbers were positive, with full employment jumping by 97.5k in May, supporting a 115.2k rise in employment.

In spite of a 0.3 percentage point increase in the participation rate, the unemployment rate fell from 5.5% to 5.1%.

While the stats were skewed to the positive, the RBA meeting minutes from Tuesday pressured the Aussie.

The Board stood by its outlook on monetary policy and a likely hold cash rates until 2024 at the earliest.

Following the FOMC’s hawkish outlook on monetary policy, monetary policy divergence sank the Aussie.

For the Kiwi Dollar

It was a relatively quiet week.

GDP numbers for the 1st quarter provided the Kiwi Dollar with much-needed support at the end of the week.

In the 1st quarter, New Zealands’s economy expanded by 1.6%, recovering from a 1.0% contraction from the 4th quarter of last year. Economists had forecast more modest growth of just 0.5%.

The stats were not enough to shift sentiment towards RBNZ monetary policy, however.

For the Japanese Yen

It was a busier week.

Early in the week, finalized industrial production figures for April impressed. In April, industrial production increased by 2.9%, coming in ahead of a prelim 2.5%. Production had rise by 1.7% in March.

Mid-week, trade data failed to meet forecasts, however.

Exports were up by 49.6% in May, year-on-year, falling short of a forecasted 51.3% jump.

Japan’s trade balance slid from a ¥253.1bn surplus to a ¥187.1bn deficit.

In spite of the fall Japan’s trade balance into a deficit, there were marked increases in exports to the U.S, China, and to Western Europe.

At the end of the week, inflation figures for May failed to move the dial. This was in spite of a pickup in inflationary pressure. The annual rate of core inflation accelerated from -0.1% to 0.1% in May.

On the monetary policy front, the BoJ was also in action at the end of the week. There were no major surprises, however.

The Japanese Yen fell by 0.63% to ¥110.210 against the U.S Dollar. In the week prior, the Yen had fallen by 0.13% to ¥109.66.

Out of China

Industrial production, fixed asset investment, and retail sales figures for May were in focus mid-week.

Once more the stats were skewed to the negative, with weaker year-on-year growth than forecasted and than seen in the month prior.

Industrial production was up by 8.8 in May, which was down from a 9.8% increase in April.

Retail sales was up 12.4%, which was down from 17.7% in April, with fixed asset investments up 15.4%. Fixed asset investments had been up by 19.9% year-on-year in April.

In the week ending 18th June, the Chinese Yuan fell by 0.90% to CNY6.4531. In the week prior, the Yuan had fallen by 0.05% to CNY6.3988.

The CSI300 and the Hang Seng ended the week down by 2.34% and by 0.14% respectively.

Fed-Fuelled Dollar Rises as Bears Make for Exits

The dollar index, which tracks the greenback against six major currencies, was up 0.37% at 92.213, its highest since mid-April. That puts the index on pace for a weekly gain of nearly 2%, its best weekly jump in about 14 months.

The jolt to foreign exchanges was triggered on Wednesday by Fed forecasts showing 13 of the 18-person policy board saw rates rising in 2023, versus only six previously, with the median board member tipping two hikes in 2023.

Investors’ risk appetite took another hit after St. Louis Federal Reserve President James Bullard said on Friday that the U.S. central bank’s shift this week toward a faster tightening of monetary policy was a “natural” response to economic growth and particularly inflation moving quicker than expected as the country reopens from the coronavirus pandemic.

“I think this is a direct echo of the 2013 taper tantrum. You are seeing a perceived shift in the Fed’s reaction function driving investors into the safety of the U.S. dollar,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

With investors pricing in a sooner-than-expected tapering of extraordinary U.S. monetary stimulus, the euro and the yen have come under selling pressure over the last few trading sessions.

“Essentially, the entire world was short the dollar going into this, everyone from speculative traders to corporates to investors,” Schamotta said.

“You are seeing a wholesale unwind here,” he said.

The unwind of sizeable bearish bets against the dollar is expected to provide support for the greenback in coming days, investors said.

Goldman Sachs Asset Management’s head of currency, Arnab Nilim, who had been short the U.S. currency headed into the June Fed meeting, told Reuters he has reduced the position and expects the U.S. dollar to perform well, especially against the low-yielding currencies.

With a dovish European Central Bank seemingly far behind the Fed in the monetary policy cycle, traders will be reluctant to buy euros against dollars.

“The U.S. central bank is one step ahead and as a result USD is likely to remain well supported against the EUR,” Commerzbank strategists said in their daily note.

With equity markets hurting, the Australian dollar – seen as a proxy for risk appetite – was down 0.68% at 0.74995, its lowest since December 2020..

Sterling extended its fall against the U.S. dollar on Friday, dropping below $1.39, hurt by the Fed’s hawkish surprise and an unexpected fall in Britain’s retail sales.

The risk-off move hit crypto currencies as well, with bitcoin failing to get a lift from the news that Spanish bank BBVA would open a bitcoin trading service to all private banking clients in Switzerland. Bitcoin was down 7.0% at $35,451.09.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Julien Ponthus and Tom Westbrook; Editing by Catherine Evans, Andrea Ricci and Jonathan Oatis)

 

The Bank of Japan and UK Retail Sales Put the Yen and the Pound in Focus

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. The Japanese Yen was in focus in the early hours, with the Bank of Japan in action later this morning.

For the Japanese Yen

Inflation figures were in focus this morning.

In May, inflationary pressure returned, with the annual core rate of inflation accelerating from -0.1% to 0.1%, which was in line with forecasts.

The annual rate of inflation picked up from -0.4% to 0.1%.

The Japanese Yen moved from ¥110.273 to ¥110.307 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.08% to ¥110.30 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.01% to $0.7551, while the Kiwi Dollar was up by 0.06% to $0.7009.

The Day Ahead

For the EUR

It’s a particularly quiet day ahead on the economic data front. There are no material stats due out of the Eurozone to provide the EUR with direction.

At the time of writing, the EUR was up by 0.01% to $1.1908.

For the Pound

It’s a busier day ahead on the economic calendar.

Retail sales figures for May are due out later this morning. With the BoE in action next week, expect Pound sensitivity to today’s stats.

At the time of writing, the Pound was up by 0.09% to $1.3934.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the Dollar and the broader markets with direction.

A lack of stats will leave FOMC member chatter and any news from Capitol Hill in Focus.

At the time of writing, the Dollar Spot Index was flat at 91.889.

For the Loonie

It’s also a particularly quiet day ahead on the economic data front. There are no material stats due out to provide the Loonie with direction, leaving the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was up by 0.11% to C$1.2345 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Surges to Two-Month High on Fed Rate-Hike Projection

On Wednesday, Fed officials projected an accelerated timetable for rate increases, began talks on how to end emergency bond-buying, and said the COVID-19 pandemic was no longer a core constraint on U.S. commerce.

A majority of 11 Fed officials penciled in at least two quarter-point rate increases for 2023, adding they would keep policy supportive for now to encourage a labor market recovery.

The dollar index, which tracks the greenback against six major currencies, was up 0.53% at 91.892, its highest since mid April. On Wednesday, the dollar surged nearly 1%, its largest daily percentage gain since March 2020.

“Coming into the Fed meeting we felt there was a risk of a more hawkish outcome which could drive some USD strength if it came to happen,” said Chuck Tomes, associate portfolio manager at Manulife Asset Management in Boston.

“Because of that, we did put some protection on in case of that happening,” he said.

Still, Tomes said he sees the dollar rangebound to weaker over the longer term.

The Fed’s new projection prompted some, including Goldman Sachs and Deutsche Bank, to abandon calls to short the dollar.

“We continue to forecast broad U.S. Dollar weakness, driven by the currency’s high valuation and a broadening global economic recovery,” analysts at Goldman Sachs wrote in a note on Wednesday.

“However, more hawkish Fed expectations and the ongoing tapering debate look likely to be a headwind to Dollar shorts over the near term,” said the analysts, closing their recommendation to go long the euro against the dollar.

The Australian dollar – seen as a proxy for risk appetite – was down 0.72% at 0.75545, its lowest since April 1..

Australia also had upbeat data, with job creation beating expectations in May and unemployment diving to pre-pandemic lows.

The dollar was 0.77% higher against the Norwegian crown after Norway’s central bank kept its key interest rate unchanged as expected, but said an increase was likely in September and steepened its trajectory of subsequent rate rises as the economy recovers from the effects of COVID-19.

The stronger dollar sent sterling below $1.40 to a fresh 5-week low.

Elsewhere, bitcoin was trading at $37,769.48, little changed on the day.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft; editing by John Stonestreet, Robert Birsel, Raissa Kasolowsky and David Gregorio)

 

Analysis: As Fed Wakes Sleeping Dollar, Jolted Bears May Bolster Gains

The dollar was on track for its biggest two-day percentage increase against a basket of major currencies in 15 months on Thursday and stands at its highest level since mid-April, a day after the central bank shifted its first projected rate increase into 2023 in the face of surging inflation.

Betting against the dollar has been a popular trade for months, as the Fed’s insistence that it would maintain its ultra-dovish stance despite rising inflation drove the currency to a near 3-year low earlier this year.

The slightly hawkish shift in Wednesday’s statement appears to be changing that calculus: the prospect of a sooner-than-expected rise in U.S. rates boosts the dollar’s attractiveness to yield-seeking investors over currencies such as the euro and yen. Both Goldman Sachs and Deutsche Bank, for instance, after the Fed meeting recommended investors cut their bets on the euro rising against the buck.

“I think FX markets have finally awoken to the idea of earlier normalization from the Fed,” said Simon Harvey, senior FX market analyst at Monex Europe.

Large bets against the U.S. currency may accelerate the recent move if the threat of more gains pushes investors to reverse their bearish positions. Net bets against the dollar in futures markets stood at nearly $18 billion last week, a three-month high, according to data from the CFTC.

“In the coming weeks and months, the short-dollar thesis that has been so dominant and popular for much of the past year will be severely tested,” said Stephen Jen, portfolio manager at hedge fund Eurizon SLJ.

Momtchil Pojarliev, head of currencies at BNP Asset Management in New York, bought the dollar against the Japanese yen after the Fed meeting.

“The Fed has been patient, but we all know the Fed is going (to turn hawkish) at some point,” he said. “I didn’t think that it was going to be now.”

Because of the dollar’s central position in the global financial system, its fluctuations tend to ripple through a wide range of assets.

A stronger dollar tends to weigh on the balance sheets of U.S. multinationals, making it less favorable for them to change foreign earnings back into their home currency.

A rising greenback could also help tame a blistering rally in commodity prices that has helped boost inflation this year, as many raw materials are priced in dollars and become less affordable to foreign investors when the buck appreciates.

“With our view of rising rates, risky assets and equities will have difficulties,” said Kaspar Hense, a portfolio manager at Bluebay Asset Management, which oversees $60 billion. Hense went short the euro after Wednesday’s Fed meeting.

Some market participants, however, are maintaining their bearish views on the dollar, noting that the Fed’s easy money policies, which include the purchase of $120 billion a month in Treasuries, remain in effect. Other central banks are likely to follow the Fed’s lead in slowly normalizing monetary policy, potentially narrowing the gap in rates between the U.S. and other economies.

Goldman Sachs believes a global recovery will weaken the dollar over the longer term, while a report published by Societe Generale on Thursday showed a year-end price target of $1.27 for the euro, from $1.19 on Thursday.

“Clearly there has been technical, fundamental damage to the bearish dollar story, but I would like to see how the dust settles before determining if the dollar bear story is behind us,” said Paresh Upadhyaya, director of currency strategy and portfolio manager for Amundi Pioneer Asset Management.

“Now a lot of it is going to hinge on… what do other G10 and emerging market central banks do in response.”

Upadhyaya reduced his short dollar position heading into the Fed meeting but believes the currency will eventually head lower. Harvey, of Monex Europe, wants to see whether the next few weeks’ data will bolster the case for a stronger-than- expected recovery.

Others, however, think there could be room for more dollar gains.

Shorting the dollar “has been a popular trade for both discretionary and systematic managers,” said David Gorton, chief investment officer at hedge fund DG Partners. The “hawkish surprise from the Fed has perhaps exposed just how extended some of those short positions were.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal Ahmed in New York and Saikat Chatterjee in London; Additional reporting by Maiya Keidan and Gertrude Chavez-Dreyfuss; Editing by Ira Iosebashvili and Dan Grebler)

 

AUD/USD Forex Technical Analysis – Sellers Appear to Be Targeting April Bottom at .7532

The Australian Dollar is edging lower on Thursday as investors react to the dovish tone of the Reserve Bank (RBA) from its minutes released earlier in the week and the hawkish tone of Federal Reserve in yesterday’s monetary policy statement.

At 09:40 GMT, the AUD/USD is trading .7603, down 0.0007 or -0.10%.

Simply stated, the RBA and the Fed are moving in opposite directions which is shifting the strength to the U.S. Dollar.

In other news, traders are showing little reaction to a stronger-than-expected employment change and better-than-expected unemployment rate.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through yesterday’s low earlier in the session signals a resumption of the downtrend. The next downside target is the April 13 main bottom at .7586, followed by the April 1 main bottom at .7532. A trade through .7776 will change the main trend to up.

The short-term range is .7532 to .7891. The AUD/USD is currently trading on the weak side of its retracement zone at .7669 to .7712, making it resistance.

The main range is .8007 to .7532. This zone is also resistance. Furthermore, it is controlling the longer-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to .7610.

Bearish Scenario

A sustained move under .7610 will indicate the presence of sellers. The first downside target is the main bottom at .7586. Taking out this level could trigger an acceleration into the April 1 main bottom at .7532.

Bullish Scenario

A sustained move over .7610 will signal the presence of buyers. If this move is able to create enough upside momentum then look for a short-covering rally into the short-term Fibonacci level at .7669.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and the Greenback in the Spotlight

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action this morning.

For the Kiwi Dollar

GDP numbers were in focus in the early hours.

In the 1st quarter, the economy grew by 1.6%, quarter-on-quarter, coming in ahead of a forecasted 0.5% expansion. In the 4th quarter of last year, the economy had contracted by 1.0%.

According to NZ Stats, the services industry, which accounts for two thirds of the economy, delivered the largest contribution.

The Kiwi Dollar moved from $0.70551 to $0.70753 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.61% to $0.7094.

For the Aussie Dollar

Employment figures were in focus.

In May, employment increased by 115.2k in May, reversing a 30.6k decline from April. Economists had forecast a more modest 30.0k rise.

Full employment increased by 97.5k following a 33.8k rise in April.

As a result of the pickup in hiring, the unemployment rate fell from 5.5% to 5.1%. Economists had forecast for the unemployment rate to hold steady at 5.5%.

According to the ABS,

  • The number of unemployed fell by 53k to 701k.
  • While the unemployment rate fell to 5.1%, the participation rate increased 0.3 percentage points to 66.2%. This was close to a historical high of 66.3% seen back in March 2021.

The Aussie Dollar moved from $0.76269 to $0.76290 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.32% to $0.7634.

Elsewhere

Through the early hours, the Japanese Yen was up by 0.05% to ¥110.65 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic data front. Finalized inflation figures for the Eurozone are due out later today.

Stats in line with prelim numbers should deliver EUR support though the upside will likely be limited. The ECB continues to see inflation as transitory, removing near-term influence on monetary policy.

At the time of writing, the EUR was up by 0.03% to $1.9999.

For the Pound

It’s a particularly quiet day ahead on the economic calendar.

There are no material stats to provide the Pound with direction.

Updates on government plans to ease remaining restrictions will remain a key driver.

At the time of writing, the Pound was up by 0.04% to $1.3993.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. Key stats include Philly FED Manufacturing numbers and the weekly jobless claim figures.

Barring particularly dire manufacturing numbers expect the weekly initial jobless claims to have the greatest impact on the Dollar.

Away from the economic calendar, FOMC member chatter and news from Capitol Hill will also need monitoring.

At the time of writing, the Dollar Spot Index was up by 0.29% to 91.396.

For the Loonie

It’s a relatively quiet day ahead on the economic data front. Foreign securities purchases for April are due out later today.

We don’t expect the numbers to influence, however, leaving the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.01% to C$1.2278 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Strengthens Over .7130, Weakens Under .7085

The New Zealand Dollar is inching higher early Wednesday on position-squaring ahead of the U.S. Federal Reserve’s monetary policy announcements at 18:00 GMT. The move follows a sharp break the previous session that drove the kiwi to its lowest level since April 14.

The Fed’s two-day meeting was set to end on Wednesday and it is due to issue a policy statement afterward. So far Fed officials, led by Chair Jerome Powell, have said rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time.

Recent economic data has raised concerns that price pressure could force an earlier stimulus withdrawal. This has been helping drive the U.S. Dollar higher against the New Zealand Dollar.

At 01:37 GMT, the NZD/USD is trading .7128, up 0.0004 or +0.05%.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Tuesday when sellers took out the last main bottom at .7115. A move through .7316 will change the main trend to up. This is highly unlikely, however, due to the prolonged move down in terms of price and time, the NZD/USD may be ripe for a closing price reversal bottom.

The minor trend is also down. A trade through .7243 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is .6943 to .7316. The NZD/USD is currently testing its retracement zone at .7130 to .7085.

The main range is .7465 to .6943. Its retracement zone at .7204 to .7266 is resistance. It’s also controlling the near-term direction of the NZD/USD.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the short-term 50% level at .7130.

Bearish Scenario

A sustained move under .7129 will indicate the presence of sellers. This could trigger a break through .7105 and into the short-term Fibonacci level at .7085. This is a potential trigger point for an acceleration to the downside with a long-term 50% level at .7027 the next likely downside target.

Bullish Scenario

A sustained move over .7130 will signal the presence of buyers. The first upside target is a minor pivot at .7174, followed by the main 50% level at .7204.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data from China and the UK to Distract the Markets Ahead of the FED

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Kiwi Dollar and the Japanese Yen were in action this morning, with economic data from China in focus later this morning.

For the Kiwi Dollar

Current account figures were out in the early hours.

In the 1st quarter, the current account deficit widened from NZ$2.70bn to NZ$2.90bn, quarter-on-quarter. Economists had forecast a narrowing to NZ$2.23bn.

Year-on-year, the current account deficit widened from NZ$2.55bn to NZ$7.24bn. Economists had forecast a widening to NZ$6.68bn.

The Kiwi Dollar moved from $0.71205 to $0.71215 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.13% to $0.7130.

For the Japanese Yen

Trade data and core machinery orders were in focus this morning.

In April, core machinery orders increased by 0.6%, month-on-month, following a 3.7% rise in March. Economists had forecast a 2.7% rise.

Year-on-year, core machinery orders were up by 6.5% versus a forecasted 8.0% increase. In March, core machinery orders had been down by 2.0% year-on-year.

More significantly, however, Japan’s trade balance slumped from a ¥253.1bn surplus to a ¥187.1bn deficit in May. Economists had forecast a deficit of ¥91.2bn. Exports rose by 49.6%, year-on-year, versus a forecasted 51.3% rise. In April, exports had been up by 38.0%.

According to figures released by the  Ministry of Finance,

  • Exports to China jumped by 23.6%, with exports to Australia and NZ surging by 115.3%.
  • Exports to the U.S surged by 87.9%, with exports to Western Europe up 69.9%.
  • Year-on-year, imports increased by 27.9% in May, which was up from 12.8% in April.

The Japanese Yen moved from ¥110.088 to ¥110.093 upon release of the figures. Through the early hours, the Japanese Yen was down by 0.02% to ¥110.10 against the U.S Dollar.

Out of China

Industrial production, retail sales, fixed asset investment, and unemployment figures are due out. Expect the industrial production and retail sales figures to garner the greatest interest.

At the time of writing, the Aussie Dollar was up by 0.03% to $0.7689.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. 1st quarter wage growth figures for the Eurozone are due out later today.

Barring particularly dire numbers, however, we don’t expect the numbers to have too much impact on the EUR.

The markets will be looking ahead to the FED’s monetary policy decision and projections late in the day. With the ECB doves in control for now, we could see monetary policy divergence weigh on the EUR.

At the time of writing, the EUR was down by 0.03% to $1.2122.

For the Pound

It’s a relatively quiet day ahead on the economic calendar.

Inflation figures for May are due out later this morning. With little else for the markets to consider, expect the numbers to influence.

A delay in the full reopening of the UK may have eased some pressure on the BoE. A marked pickup in inflationary pressure could fuel speculation of a near-term move, however.

At the time of writing, the Pound was down by 0.02% to $1.4081.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. Key stats include building permit and housing start figures from the housing sector. Import and export price index figures are also due out.

With the FED in action later in the day, however, don’t expect the numbers to have much impact on the Greenback.

Near-term direction will be hinged on FED chatter vis-à-vis any tapering and the latest projections… How FED Chair Powell delivers any shift in stance will be key during the press conference.

At the time of writing, the Dollar Spot Index was up by 0.01% to 90.548.

For the Loonie

It’s a busy day ahead on the economic data front. Inflation figures for May are due out along with wholesale sales figures for April.

Expect the inflation figures to have the greatest influence on the Loonie.

Crude oil inventory numbers will also provide direction along with this morning’s economic data from China.

At the time of writing, the Loonie was flat at C$1.2184 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

A Busy Economic Calendar Puts the EUR, the Pound, and the Greenback in Focus

Earlier in the Day:

It was another quiet start to the day on the economic calendar this morning. The Aussie Dollar was in action this morning.

For the Aussie Dollar

House price figures and the RBA meeting minutes were in focus this morning.

In the 1st quarter, house prices increased by 5.4% year-on-year, coming up short of a forecasted 5.5% rise. House prices had been up by 3.0% in the 4th quarter of last year.

Salient points from the RBA meeting minutes included:

  • Inflation and wage pressures remained subdued, despite the strong recovery in the economy and employment.
  • Borrowing rates for households and businesses on outstanding loans had continued to drift lower and were also at historical lows.
  • The Bank’s policy package had contributed to a lower exchange rate than would otherwise have been the case.
  • Monetary policy would likely need to remain highly accommodative for some time yet.
  • Government bond purchases discussed and the Board would decide upon future purchases at the July meet that comes ahead of the completion of the second $100 billion of purchases in early September.
  • Options include:
    • Ceasing purchasing bonds in September.
    • Repeating $100 billion of purchases for another 6-months.
    • Scaling back the amount purchased or spread the purchases over a longer period of time.
    • Move to a more frequent review of bond purchases, based on the flow of data and the economic outlook.
  • The Board would not increase the cash rate until actual inflation is sustainably within the 2-3% target range. For this to occur, wages growth would need to be materially higher than it currently is.
  • This would require significant gains in employment and a sustained return to a tight labor market.
  • Members view these conditions unlikely until 2024 at the earliest.

The Aussie Dollar moved from $0.77111 to $0.77027 upon release of the figures and the minutes. At the time of writing, the Aussie Dollar was down by 0.13% to $0.7702.

Elsewhere

Through the early hours, the Japanese Yen was flat ¥110.07 against the U.S Dollar, while the Kiwi Dollar was down by 0.14% to $0.7134.

The Day Ahead

For the EUR

It’s a busy day ahead on the economic data front. Finalized inflation figures for Germany, France, and Italy are due out along with trade data for the Eurozone.

Barring marked revisions from prelims, however, we would expect the trade data for April to have greater influence.

At the time of writing, the EUR was down by 0.02% to $1.2117.

For the Pound

It’s a busy day ahead on the economic calendar.

Employment figures are due out later this morning. Expect April’s unemployment rate and May’s claimant count to have the greatest impact on the Pound.

Away from the economic calendar, greater certainty over the timing of the UK’s full reopening is going to be needed to support the Pound.

At the time of writing, the Pound was down by 0.07% to $1.4102.

Across the Pond

It’s a busy day ahead on the economic calendar. Key stats include retail sales, wholesale inflation, and industrial production figures.

Following the marked pickup in inflationary pressures, expect the retail sales figures to be key.

Other stats due out include inventory figures for April and the NY Empire State Manufacturing Index numbers for June. Barring particularly dire numbers, however, these should have limited impact on the Dollar and broader market risk sentiment.

At the time of writing, the Dollar Spot Index was flat at to 90.520.

For the Loonie

It’s a quiet day ahead on the economic data front. Housing sector data is due out later today.

We don’t expect the numbers to have much influence on the Loonie, however, leaving the Loonie in the hands of market risk sentiment.

At the time of writing, the Loonie was down by 0.02% to C$1.2147 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Testing Short-term Retracement Zone at .7129 to .7085

The New Zealand Dollar is edging higher early Monday on relatively low volume after finding support inside a short-term retracement zone the previous session. The Kiwi closed lower last week despite a drop in U.S. Treasury yields as investors piled into the U.S. Dollar ahead of key monetary policy announcements from the U.S. Federal Reserve on Wednesday.

At 05:58 GMT, the NZD/USD is trading .7146, up 0.0019 or +0.26%.

On Thursday, traders will get the chance to respond to the latest New Zealand GDP figures. Traders are pricing in a 0.5% gain versus a -1.0% previous read.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7115 will reaffirm the downtrend. A trade through .7316 will change the main trend to up. This is highly unlikely, but do to the prolonged move down in terms of price and time since the last main top on May 26, the NZD/USD may be ripe for a closing price reversal bottom.

The minor trend is also down. A trade through .7243 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is .6943 to .7316. Its retracement zone at .7129 to .7085 stopped the selling at .7116 on June 11.

The main range is .7465 to .6943. Its retracement zone at .7204 to .7266 is resistance. The lower or 50% level at .7204 stopped the buying three times last week.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Monday is likely to be determined by trader reaction to the short-term 50% level at .7129.

Bullish Scenario

A sustained move over .7130 will indicate the presence of buyers. If this move is able to drive up the momentum this week then look for the rally to extend into the main 50% level at .7204.

Bearish Scenario

A sustained move under .7129 will signal the presence of sellers. Taking out the next main bottom at .7115 will indicate the selling is getting stronger with the short-term Fibonacci level at .7085 the next target. This is a potential trigger point for an acceleration to the downside with .7027 another target.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data and Central Bank Chatter Put the EUR, the Loonie, and the Pound in Focus

Earlier in the Day:

It was a quiet start to the week on the economic calendar this morning, with Australian and China markets closed today. Later this morning, the Japanese Yen will be in action, however.

For the Japanese Yen

Through the early hours, the Japanese Yen was down by 0.10% to ¥109.77 against the U.S Dollar. Later this morning, finalized industrial production figures for April are due out.

Barring any marked revisions, however, we don’t expect the numbers to influence.

According to prelim figures, industrial production increased by 2.5%, month-on-month. In March, production had risen by 1.7%.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.10% to $0.7700, while the Kiwi Dollar was up by 0.13% to $0.7139.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. April industrial production figures for the Eurozone are due out later today.

Following some disappointing production figures from France and Germany, a weak set of numbers would pin the EUR back.

At the time of writing, the EUR was down by 0.07% to $1.2101.

For the Pound

It’s a particularly quiet day ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of government plans vis-à-vis remaining COVID-19 restrictions and updates from the G7 Summit.

On the monetary policy front, BoE Gov. Bailey is due to speak late in the day and could move the dial…

At the time of writing, the Pound was up by 0.04% to $1.4113.

Across the Pond

It’s also a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the Dollar with direction.

The lack of stats will leave the Greenback in the hands of market sentiment towards this week’s FOMC meet.

At the time of writing, the Dollar Spot Index was up by 0.02% to 90.576.

For the Loonie

It’s a quiet day ahead on the economic data front. Manufacturing sales figures for April are due out late in the day.

With little else to focus on, we can expect some influence from the numbers.

Ultimately, however, market risk sentiment will be the key driver at the start of the week.

At the time of writing, the Loonie was down by 0.01% to C$1.2159 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Federal Reserve Decisions Likely to Set Early Tone

The Australian and New Zealand Dollars finished sharply lower last week against the U.S. Dollar as investors bet interest rates would stay lower for longer in Australia and New Zealand, a day after currency markets shrugged off another surge in U.S. consumer inflation as likely to be temporary.

Last week, the AUD/USD settled at .7703, down 0.0041 or -0.53% and the NZD/USD closed at .7128, down 0.0084 or -1.16%.

Reopening US Economy Heats Up Consumer Inflation; Labor Market Recovery Gaining Traction

U.S. consumer prices rose solidly in May, leading to the biggest annual increase in nearly 13 years as a reopening economy boosted demand for travel-related services, while a global semiconductor shortage drove up prices for used motor vehicles.

The pandemic’s easing grip on the economy was also underscored by other data from the Labor Department on Thursday showing the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months.

The consumer price index increased 0.6% last month after surging 0.8% in April, which was the largest gain since June 2009. In the 12 months through May, the CPI accelerated 5.0%. That was the biggest year-on-year increase since August 2008 and followed a 4.2% rise in April. Economists polled by Reuters had forecast the CPI rising 0.4% in May and vaulting 4.7% year-on-year.

Core inflation increased 0.7% after soaring 0.9% in April. It was boosted by a 7.3% rise in used cars and truck prices. New vehicle prices also increased strongly. The core CPI shot up 3.8% in the 12 months through May, the largest increase since June 1992.

In another report last Thursday, the Labor Department said initial claims for state unemployment benefits fell 9,000 to a seasonally adjusted 376,000 for the week ended June 5. That was the lowest since mid-March 2020 when the first wave of COVID-19 infections barreled through the country, leading to closures of nonessential businesses.

Weekly Outlook

The Fed’s two-day policy meeting will likely dominate investor behavior in the risky Australian and New Zealand Dollar’s this week. Although the central bank is not expected to take any action, its forecasts for interest rates, inflation and the economy could move the greenback, Aussie and Kiwi.

Fed Chairman Jerome Powell speaks to the press after the central bank issues its statement at 18:00 GMT on Wednesday, June 16. He is expected to affirm the Fed’s commitment to easy policy. However, concerns over inflation and how the Fed could react is likely to influence market direction, especially after a hotter-than-expected consumer inflation reading for May was reported last Thursday, CNBC reported.

In Australia, investors will get the opportunity to react to a speech by RBA Governor Philip Lowe on June 17, shortly before the release of reports on Employment Change and Unemployment Rate. The Employment Change report is expected to show the economy added 30.5K new jobs, offsetting last month’s dismal -30.6K reading. The Unemployment Rate is expected to remain steady at 5.5%.

In New Zealand, the quarterly GDP report is expected to come in at 0.5%, up from the previously reported -1.0%. Although the economy is growing, the news is not expected to change Reserve Bank monetary policy. Last month, the central bank signaled a possible rate hike in September 2022.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – A Busier Economic Calendar and the FED to Keep the Markets Busy

On the Macro

It’s a busier week ahead on the economic calendar, with 60 stats in focus in the week ending 18th June. In the week prior, 45 stats had been in focus.

For the Dollar:

Early in the week, Wholesale inflation and retail sales figures will be in focus.

While inflation figures remain a key area of interest, retail sales will likely be the main focal point.

On Thursday, Philly FED Manufacturing and weekly jobless claim figures will also influence.

Other stats include industrial production, housing sector data, and manufacturing numbers out of NY State. We don’t expect these to have too much influence in the week, however.

On the monetary policy front, it will be the FED’s June monetary policy decision that will be the main event.

The markets are expecting discussions on a tapering to the asset purchasing program to begin. Will there be talk of a shift in sentiment towards interest rates? The projections will hold the key.

In the week, the Dollar ended the week up by 0.46% to 90.555.

For the EUR:

It’s a relatively quiet week on the economic data front.

Eurozone industrial production, trade, and wage growth figures are due out Monday through Wednesday.

With little else for the markets to consider, we can expect the numbers to influence.

Finalized inflation figures for May are also due out for France, Germany, Italy, and the Eurozone.

Barring marked revisions to prelim figures, however, the numbers should have limited impact on the EUR.

The EUR ended the week down by 0.48% to $1.2108.

For the Pound:

It’s a busier week ahead on the economic calendar.

Employment figures are due out on Tuesday. Expect claimant counts and the unemployment rate to be the key numbers.

On Wednesday, inflation figures will also influence ahead of retail sales figures on Friday.

Impressive numbers will fuel speculation of a near-term move by the BoE. Much will depend upon the government’s reopening plans, however.

On the monetary policy front, BoE Gov. Bailey is scheduled to speak in the week. Expect any forward guidance to influence.

The Pound ended the week down by 0.35% to $1.4107.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

At the start of the week, manufacturing sales figures are due out ahead of inflation figures on Wednesday.

Expect the inflation figures to be key.

Crude oil inventory numbers will also influence mid-week.

The Loonie ended the week down 0.61% to C$1.2158 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week ahead.

Employment figures for May are due out on Thursday. The numbers remain key, with the RBA unwilling to make a move until the slack is removed. Weak numbers would certainly test support levels.

On the monetary policy front, the RBA meeting minutes early in the week will provide direction.

The Aussie Dollar ended the week down by 0.40% to $0.7708.

For the Kiwi Dollar:

It’s also a quiet week ahead.

1st quarter current account and GDP numbers are due out.

Expect the GDP number on Thursday to be key.

Economic data from China will also influence early in the week.

The Kiwi Dollar ended the week down by 1.16% to $0.7130.

For the Japanese Yen:

Finalized industrial production figures are due out at the start of the week. Expect any marked revisions to influence ahead of trade data on Wednesday.

Inflation figures on Friday should have a muted impact, with the BoJ in action at the end of the week.

The Japanese Yen fell by 0.13% to ¥109.66 against the U.S Dollar.

Out of China

Industrial production, retail sales, and fixed asset investments will be in focus.

Following disappointing numbers for April, the markets will be looking for improvement. Weaker numbers would test support for riskier assets on Wednesday.

The Chinese Yuan ended the week down by 0.05% to CNY6.3988 against the U.S Dollar.

Geo-Politics

There are no major risks to consider in the week ahead. Key takeaways from the G7 will likely influence, however.

As always, however, the markets will need to continue monitoring chatter from Capitol Hill and Beijing.

The Iranian presidential election is in the week ahead…