Newsquawk Week Ahead: Highlights include RBA, BoE, BoJ SOO, Canada Jobs, UK GDP 0 (0)

Week Ahead 6th-10th May:

  • Mon: UK Bank Holiday; EZ Final Composite & Services PMIs (Apr), Sentix (May) Producer Prices (Mar).
  • Tue: RBA Announcement, EIA STEO; Swiss Unemployment (Apr), German Trade Balance (Mar), EZ Construction PMI (Apr).
  • Wed: Norges Bank H1 Financial Stability Report, Riksbank Announcement, BCB Announcement; German Industrial Output (Mar), Italian Retail Sales (Mar).
  • Thu: BoE Announcement & May MPR, BoJ Summary of Opinions (Apr), NBP Policy Announcement, Banxico Policy Announcement; Chinese Trade Balance (Apr).
  • Fri: ECB Minutes; Japanese Current Account (Mar), UK GDP Estimate (Mar), GDP Prelim. (Q1), Norwegian CPI (Apr), Canadian Employment (Apr), US Uni. of Michigan Prelim. (May), China M2 (Apr).

Note: Previews are listed in day order

RBA Announcement (Tue):

The RBA is expected to keep rates unchanged, with 36 of 37 economists surveyed by Reuters calling for the Cash Rate to be kept at 4.35%, and only one calling for a 25bps hike; money markets are pricing in a 96% chance that rates will be maintained. As a reminder, the central bank provided no major surprises at its prior meeting, where it kept rates unchanged, and reiterated that the Board remains resolute in its determination to return inflation to the target and inflation continues to moderate but remains high. The RBA said that the “Board is not ruling anything in or out on interest rates,” a slight adjustment to its previous view that “a further increase in interest rates cannot be ruled out,” though this change in language was a reiteration of a previous comment that Governor Bullock had made. The central bank also noted that higher interest rates are working to establish a more sustainable balance between aggregate demand and supply, and that the Board expects it will be some time yet before inflation is sustainably in the target range. The RBA also commented there are encouraging signs that inflation is moderating, but acknowledged that the economic outlook remains uncertain, while the minutes from the meeting revealed that there was no mention regarding the Board’ considering the option to raise rates, and that it agreed that it was difficult to either rule in or out future changes in the Cash Rate. Assistant Governor Kent also announced that the Board considered three options in March for the future system of monetary policy implementation, including maintaining the current ‘floor’ system of holding an excess of reserves that leads the Cash Rate to be close to a floor rate which is paid to banks on funds parked overnight; another option was returning to the pre-pandemic system of scarce reserves to guide the Cash Rate to the target, although the Board endorsed a third option of switching to an ample reserves system, where banks’ demands for reserves are satisfied via open market repo operations at a price near the Cash Rate Target. Nonetheless, Kent noted that the plan to change the way the it provides liquidity to the banking system, by shifting from excess reserves to an approach that provides ample liquidity through regular money market operations, will not result in any immediate changes in operations from their counterparties’ perspective, as the RBA has been running full allotment OMO repo auctions since shortly after the onset of the pandemic, as well as stressed the decision is about the plumbing underpinning the monetary system and has no implications for the current or future stance of monetary policy. The latest inflation data from Australia also suggests a policy tweak is unlikely at the upcoming meeting, with all figures printing firmer than expected; headline CPI eased to 3.6% Y/Y in Q1 (exp. 3.5%, prev. 4.1%), and the RBA’s preferred Trimmed Mean gauge eased to 4.0% Y/Y (exp. 3.8%, prev. 4.2%), and remains above the central bank’s 2-3% target. This spurred several banks to adjust their rate projections; both Westpac and CBA pushed back their RBA rate cut forecast to November from September, with CBA also arguing that the RBA may restore its hiking bias at the May meeting; Rabobank now sees the RBA hiking in August and November, and doesn’t expect any cuts this year or next.

Riksbank Announcement (Wed):

In March, the Riksbank guided that “it is likely that the policy rate can be cut in May or June if inflation prospects remain favourable” from the current 4.00% level. Since the March inflation numbers came in cooler than both markets and the Riksbank forecast, support has been given to those looking for a May move. However, this view has been muddied somewhat by recent broader hawkish market repricing, evidenced by Riksbank’s Jansson stating that assuming inflation developments do not deteriorate, then the threat of a May cut will instead come “mainly from the postponement of the easing plans of other central banks.” Additionally, the SEK has continued to depreciate, having lifted above the 11.75-mark vs the Euro in recent sessions (vs below 11.50 around the March meeting). Overall, expectations are skewed towards the central bank cutting in May given the development of inflation, and the ECB also heavily flagging that it will begin easing in June; though, the hawkish-tilt from the Norges Bank and general tentative stance on easing globally means a firm call cannot be made yet. Thereafter, guidance from the MPU on future meetings will likely point to a gradual easing cycle and one that is very data- and SEK-dependent.

BCB Announcement (Wed):

The latest central bank poll revealed that analysts continue to see the Selic rate falling to 9.5% by the end of this year, and see further cuts to 9.00% by the end of 2025. The folks at JPMorgan, however, see the Selic at 10.00% by the end of this year, with three 25bps rate cuts. “We adjusted our policy rate path to account for the effects of the global financial tightening into the central bank’s reaction function,” JPM writes, adding that a new challenge emerged when the Government decided to reduce the 2025 primary target from +0.5% to 0% of GDP. “The combination of both factors probably changes the BCB’s assessment of the balance of risks and, in fact, many COPOM members seem to have acknowledged that possibility, opening the door for breaking last meeting’s forward guidance of a 50bps cut in the next meeting.” JPM looks for a 25bps cut in May; the bank says the extent and pace of the cutting cycle will still be heavily dependent on other variables (domestic inflation and GDP growth), but says fiscal and external dynamics will be important in determining the terminal policy rate.

BoE Announcement (Thu):

Analysts are unanimous in their view that the MPC will keep the Bank Rate unchanged at 5.25%, with markets assigning a circa 93% chance of such an outcome. The prior meeting saw rates left unchanged in an 8-1 vote, with Haskel and Mann moving into the hold camp, and Dhingra the lone dovish dissenter. Since the prior meeting, headline CPI has pulled back to 3.2% Y/Y from 3.4%, and the core rate slipped to 4.2% Y/Y from 4.5%, whilst services remained sticky at 6.0% Y/Y. From a growth perspective, monthly GDP stats for February came in at 0.1% M/M (vs 0.3% in January), while more timely PMI data for April saw continued resilience in the services sector, with the composite index rising to 54.0 from 52.8. In the labour market, the unemployment rate has ticked up from 3.9% to 4.2% in the three-month period to February (albeit subject to data quality concerns), and headline wage growth held steady at 5.6% Y/Y. Since the March announcement, Governor Bailey noted that the UK is “on track” to quell inflation. However, divisions on the MPC were laid bare after comments by Deputy Governor Ramsden, who is increasingly confident that “persistence in domestic inflation pressures are receding,” were followed up by remarks by Chief Economist Pill, who said that in his baseline scenario, “the time for cutting Bank Rate remains some way off.” Elsewhere, the likes of Mann, Haskel and Greene have been cautious on the prospects for near-term policy easing. Given the split of views at the BoE, the vote split will likely take the immediate focus; at the time of writing there is currently no published consensus. Thereafter, attention will likely fall on the policy statement, and whether the MPC opts to provide a dovish tweak, or scraps, its existing guidance that “policy will need to remain restrictive for sufficiently long.” Beyond the upcoming meeting, market pricing for the rest of the year continues to move in a hawkish direction, with the first 25bps cut not fully priced until September’s meeting, and a total of 43bps of loosening is being priced by year-end ¬– a substantial repricing from the six cuts that were expected at the start of the year. For the accompanying MPR, focus will be on medium-term inflation expectations, which could be revised as low as 1.5%, according to NatWest Markets.

BoJ SOO (Thu):

Participants will digest the Summary of Opinions from the April meeting for clues on the central bank’s monetary policy trajectory. At that meeting, the BoJ maintained its policy settings, as widely expected, holding short-term interest rates at between 0.0-0.1%, and although it dropped its reference from the statement that it currently buys about JPY 6tln worth of JGBs per month, it said that it will conduct JGB, commercial paper and corporate bond buying in line with the decision in March (and later maintained sizes for May). The lack of surprises by the BoJ spurred a dovish reaction given that markets were bracing for a potential signal from the central bank on reducing JGB purchases, owing to recent suggestions in a report from the local press agency Jiji. Furthermore, the BoJ refrained from any major ramp-up in rhetoric regarding currency weakness as it stated that they must be vigilant to FX and market moves and their impact on the economy and prices but also commented that no excessive behaviour is seen in Japan’s asset market and financial institutions‘ practices. At the post-meeting presser, Governor Ueda emphasised data dependency, and that easy financial conditions will be maintained for the time being, while a weak JPY was thus far not having a big impact on trend inflation. Elsewhere, Ueda made no comments on recent FX moves.

Chinese Trade Balance (Thu):

In March, the trade balance was in a surplus of CNY 415.86bln, with Exports -7.5% Y/Y and Imports -1.9% Y/Y. The decline in exports was primarily due to a high base effect. Capital Economics suggested at the time that, when accounting for export prices and seasonality, export volumes reached a new high. Desks noted that the fall in export prices, which have now stabilised, and the trade-weighted appreciation of the yuan are likely to be challenges for future export growth. Analysts also highlight that the timing of holidays for the March data, and the fact that 2024 is a leap year affected the export data, with March having two fewer working days compared to the previous year. Imports last month also declined amid a high base effect. Nonetheless, economists expect a rebound in imports in the coming months, supported by fiscal stimulus likely to enhance construction activity and demand for industrial commodities.

Banxico Announcement (Thu):

The central bank Deputy Governor Heath in April said rates would likely be on hold for longer than markets expect, as services inflation needs to still show a clear downward trend, something he sees as a possibility in H2 after the elections and rounds of government spending. That said, Heath sees 2-4 rate reductions in the six remaining confabs this year, with the number dependent on whether the year-end inflation target can be met. Heath does not think policymakers will discuss a rate cut at the May meeting, adding that in the near-term, decisions will be influenced by what the Fed does, but added that he was more concerned about domestic pressures on inflation than the Fed’s signalling on rates.

ECB Minutes (Fri):

As expected, the ECB opted to stand pat on rates once again. The policy statement reaffirmed guidance that rates will be kept sufficiently restrictive for sufficiently long. Policymakers did not pre-commit to a particular rate path, but added to its statement a line that if the Governing Council was to gain further confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction. The ECB stopped short of explicitly mentioning June, given its previous errors in pre-announcing policy, however, the updated guidance was perceived as a green light to expect a cut at the next meeting. In the follow-up press conference, when questioned about a potential rate cut in June, President Lagarde reiterated that the central bank will have a lot more data by the time of the June meeting. In terms of the unanimity of the announcement, Lagarde said that “a few” dissenters felt “sufficiently confident” about altering policy at the meeting, however, they ultimately rallied around the consensus. This could potentially be in-fitting with source reporting in the wake of that meeting, which suggested some policymakers floated the idea of a second cut in July to win over a small group still pushing for an April start – any further details here will be of interest. Elsewhere, when questioned on the hawkish Fed repricing, Lagarde stressed the ECB’s independence on policymaking. Following the meeting, sources said policymakers still expected to cut rates in June, but some think the case for pausing at the following meeting was becoming stronger given a continued rebound in US inflation, energy and geopolitics. The sources added that doves are looking for cuts in June and July amid a benign labour market. Remarking that the July decision was not explicitly debated, however, some policymakers argued that a delayed start to the Fed’s own cutting cycle warranted caution from the ECB. Any colour on this debate will be of use to the market, albeit, as is often the case, the account of the meeting will be deemed as stale in some quarters.

UK GDP (Fri):

March’s data is expected to show another month of modest expansion from February’s 0.1% M/M print, a development which follows a relatively strong 0.3% reading in January, and means that the UK is likely to bounce out of the technical recession that it fell into at the end of 2023. Q1 growth is forecast at around 0.4% Q/Q (prev. -0.3%). The data will be welcomed politically, and provide some possibility of PM Sunak turning the media narrative away from the poor local election results and potential leadership challenges. For the BoE, the print provides scope to continue its “Table Mountain approach”, though its influence is limited as the Bank remains firmly focused on inflation and wages. As a reminder, the BoE’s May MPR will be published the day before the GDP numbers.

Norwegian CPI (Fri):

Last month inflation came in a touch lower than the Norges Bank forecast, a dynamic SEB believes will continue. As such even though the May MPU had a hawkish-twist the desk continues to look for two 25bps cuts in 2024. For April, CPI-ATE is expected to once again come in below the Norges Bank’s forecast (which is at 4.5% Y/Y); as a reminder, March’s print was 4.5% vs Norges Bank’s 4.7% expectation. Given that inflation has been surprising to the downside in recent months, the central bank will likely tweak its CPI-ATE views at its June MPR and, assuming this dynamic continues, focus will centre more around the growth/wage narrative, particularly given language from the May MPU.

Canadian Employment (Fri):

BoC governor Macklem this week said that the Canadian labour market has come into better balance, and the adjustment to higher rates had been relatively smooth. He warned that the unemployment rate may tick up, but the BoC still does not see an economic recession. The BoC is focused on inflation, and wants to see that the recent decline in cost pressures is sustainable, though believes the annual rate of inflation will be close to 2.9% Y/Y for the next several months, in part, due to rising gasoline prices; and even when the BoC begins cutting rates reductions will be gradual.

This article originally appeared on Newsquawk

This article was written by Newsquawk Analysis at www.forexlive.com.

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Forexlive Americas FX news wrap 3 May: US jobs report weaker than expectations this month. 0 (0)

The US employment data for the month of March came in less than expectations at 175K vs 243K estimate. The prior month was revised higher to 315K from 303K previously reported. The unemployment rate did take up to 3.9% from 3.8% while average hourly earnings came in at 3.9% YoY, the lowest level since 2021. The average workweek also dipped to 34.3 from 34.4 last month.

Information jobs fell -8kProfessional and business services showed a decline for the month of -4K. Other relatively weak sectors included Government (+8K), financial activities(6K), leisure and hospitality (+ 5K) and construction (+9K).

Goods-producing jobs only added 14K while private service producing jobs added 153K led by a 95K rise in education and health.

The data is just for one month. The Fed Chair hinted after the Fed meeting that it would need to take a slowing in the US job market to help convince the Fed that growth and inflation was likely to ease further. The Fed Chair this week did speak a little less hawkishly then expectations saying that a hike was not likely (for now at least). There was worry of the Fed moving toward a more symmetrical policy stance.

The report today allowed for a sigh of relief, but will need to be followed by signs that inflation is abating and that job growth is indeed coming off the burner.

Later today, the ISM Non-Manufacturing prices paid component did not help as it rose to 59.2 from 53.4 last month. Report on CPI and PPI later this month will be of importance once again.

In other news, the muzzle on other Fed officials was taken off today with Fed Gov. Bowman and Chicago Fed Pres. Goolsbee both speaking after the US jobs report.

Federal Reserve Governor Michelle Bowman (more of a hawk) lamented on the complexity of managing inflation and interest rates amidst varying economic indicators. She emphasized that while inflation is expected to decrease with current interest rates, the Federal Reserve remains open to further rate increases if inflationary trends do not improve or if they worsen.

Bowman pointed out several potential risks that could negatively affect economic forecasts, including uncertainties about whether improvements on the supply side will continue to help reduce inflation. Additionally, factors such as strong consumer demand, higher immigration, and a tight labor market could persistently drive up core services inflation. She also noted that any fiscal stimulus might boost consumer demand further, complicating efforts to control inflation.

Despite challenges posed by significant data revisions in recent years, Bowman highlighted the flexibility of monetary policy, stressing that it is not on a predetermined path and that decisions will be tailored to the latest economic data.. She reaffirmed the importance of restoring price stability to support long-term employment goals.

Later, Federal Reserve official Austan Goolsbee expressed confidence that the economy is not overheating, as evidenced by job reports resembling pre-COVID conditions. Goolsbee acknowledged a temporary inflation spike earlier in the year but suggested that consistent job growth without overheating could indicate the economy is stable. He also noted the need to reevaluate the job market dynamics in light of higher immigration rates and the absence of supply chain bottlenecks, which had previously been a concern. Additionally, feedback from manufacturing business contacts suggests a stable economic environment.

Goolsbee emphasized the importance of balancing restrictive monetary policies to avoid negatively impacting employment, indicating that the Federal Reserve is carefully monitoring these developments to ensure they align with long-term economic stability and inflation control.

The Goldilocks-ish data today did help to propel US stocks sharply higher, US yields lower and the USD lower.

Looking at the closing levels for stocks, with the three major indices all rising by over 1% (and the NASDAQ nearly 2%). The Russell 2000 index of small-cap stocks rose by just under 1% (0.97%).

  • Dow Industrial Average average rose 1.18%
  • S&P index rose 1.26%
  • NASDAQ index rose 1.99%
  • Russell 2000 rose 0.97%

All the major indices rose for the week with the NASDAQ up 1.43% and the Russell 2000 up 1.68% leading the way.

In the US debt market, yields were lower but off their lowest levels at the close>

  • 2-year yield 4.805% after trading as high as 5.046% this week. For the week, the 2-year yield fell -18.0 basis points
  • 10 year yield 4.497% after trading as high as 4.695% this week. For the week, the 10 year yield fell -15.5 basis points.
  • 30-year yield 4.660% after trading as high as 4.800% this week. For the week the 30-year yield fell -11.0 basis points

Today in the Forex market, the NZD and the AUD were the strongest of the majors on risk-on flows. The CAD and the USD were the weakest of the major currencies.

For the trading week the DXY index fell -0.958%

Versus the majors, the USD fell:

  • -0.63% versus the EUR
  • -0.45% versus the GBP
  • -3.38% versus the JPY
  • -1.03% versus the CHF
  • -1.18% versus the AUD, and
  • -1.24% versus the NZD

The greenback was up 0.12% versus the CAD this week

Things quiet down next week as the earning calendar gets lighter. Only Nvidia on May 22 is a potential large market mover.

On the events and economic release calendar:

  • Reserve Bank of Australia interest rate decision on Tuesday. No change expected
  • US 10 year note auction on Wednesday
  • Bank of England rate decision on Thursday. No change expected
  • US 30 year bond auction on Thursday
  • UK GDP on Friday
  • Canada employment statistics on Friday
  • US Michigan consumer sentiment preliminary on Friday

This article was written by Greg Michalowski at www.forexlive.com.

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Major US indices close higher for the day and the week 0 (0)

The 3 major US stock indices closed higher today and this week. The gains were led by the NASDAQ on both measures.

A summary of the day shows:

  • Dow Industrial Average rose 450.02 points or 1.18% at 38675.69
  • S&P index rose 63.61 points or 1.26% at 5127.80
  • NASDAQ index rose 315.37 points or 1.99% at 16156.33

For the trading week:

  • Dow Industrial Average average rose 1.14%
  • S&P index rose 0.55%
  • NASDAQ index rose 1.43%

Looking at the small-cap Russell 2000, it rose 0.97% for the day, and also closed higher for the week by 1.684%.

Looking at the daily chart of the S&P index, it is closing just below its 50-day moving average at 5129.98. Getting above that moving average is needed to increase the bullish bias from a technical perspective (see chart below).

For the NASDAQ index, it get above its 50-day moving average today and stayed above that moving average. That is more bullish technically.

For the trading week what major stocks had great weeks?

  • Beyond Meat +26.56% (they announce earnings next week)
  • Moderna, +15.77%
  • Trump Media +15.38% (that despite the issuance of a more stock that was given to former Pres. Trump.)
  • Amgen, +15.32%
  • Snap +11.68%
  • Pfizer +9.61%
  • Roblox, +9.08% (they announce next week).
  • Qualcomm +8.44% (they announced earnings this week)
  • Apple +8.30%
  • Tesla +7.64%
  • Boeing, +7.50%
  • Shopify 4.40% (they announce next week)
  • Celcius 3.76% (they announce next week)
  • Amazon, +3.69%
  • Palantir (they announce next week)

This article was written by Greg Michalowski at www.forexlive.com.

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What key earnings are on the calendar for the week starting May 6 0 (0)

Most of the large cap stocks have now announced their earnings with Apple being the latest. Nevertheless, the biggest one of all (at least in this cycle) is ahead with Nvidia still on the calendar to announce, but not until May 22nd.

Although most of the large influencers are now done, what are the some of the major releases next week?

Monday, May 6

  • Berckshire Hathaway
  • Palantir *
  • Lucid *

Tuesday, May 7

  • Walt Disney
  • celsius
  • Crocs
  • Ferrari
  • BP
  • Rivian *
  • Upstart *
  • Wynn *
  • Lyft*
  • Twilio *
  • Toast *

Wednesday, May 8

  • Uber
  • Shopify
  • Toyota
  • Arm Holding *
  • AirBNB *
  • Beyond Meat *

Thursday, May 9

  • Roblox
  • Warner Bros. discovery
  • Marathon oil
  • Unity Software

This article was written by Greg Michalowski at www.forexlive.com.

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Oil falls $5.50 on the week as a head-and-shoulders pattern forms 0 (0)

May is normally the strongest month for crude oil but it certainly hasn’t started out that way.

WTI crude fell another 57-cents today to bring the weekly decline to $5.50 in five straight days of selling. The weekly chart is set to post the lowest close since the week ending March 8 while the daily chart has traced out a head-and-shoulders top.

The measured target of the move is $74.

Some of the geopolitical risks are coming out of oil with reports that a ceasefire in Gaza is possible this weekend. There’s also a report about a security deal between the US and Saudi Arabia. You have to wonder if part of that deal would involve bringing back some barrels ahead of the US election.

Talk has begun to circulate about the June 1 OPEC+ decision on extending quotas beyond the end of June. The consenus is for no change and that’s what the early leaks show but it’s still very early and OPEC is tough to predict. The chance of more barrels will lead to some position squaring among longs, which have gotten a bit crowded on the way up.

Finally, economic growth signals are mixed. Today’s non-farm payrolls data and softer ISM services show the US could be slowing but at the same time there are mounting signs that China’s economy is picking up.

This article was written by Adam Button at www.forexlive.com.

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What are the Fed odds looking like ahead of the US jobs report? 0 (0)

As a whole for this year, traders are now looking at 40 bps worth of rate cuts. That is a step up from earlier this week, where it was roughly 31 bps. As for the timing of the first rate cut, a 25 bps move is now fully priced in for November at least. The odds of a move in September are at ~78% currently and that will be the one to watch.

The US jobs report will be the first key hurdle today followed by the ISM services PMI. Those will be two key drivers that will influence the Fed pricing above.

A move in June and July can be safely ruled out at this stage. So, all eyes will be on whether the Fed will have enough to work with to start acting in September. And if not, we’ll have to see if they might act in November instead.

In the bigger picture, I still think it’s too early to be moving on the data we’re getting today. It’s only May and what matters more will be the next few inflation data releases.

But Powell did say that they are watching for any weakness in the labour market closely. As such, the unemployment rate and the wages numbers might be the more crucial points to focus on later.

This article was written by Justin Low at www.forexlive.com.

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S&P 500 E-mini futures technical analysis 0 (0)

The S&P 500 has been consolidating around the 5000-5100 range for more than two weeks now with the market awaiting the key US data as it’s getting more and more wary of the inflation risk that could lead to more tightening. The more dovish than expected Fed’s decision and Powell’s press conference led to a short term spike that got faded soon after as the focus shifted towards the US data.

Now, the big rally in Q1 was supported by rate cuts expectations and a reacceleration in economic activity that led to positive risk sentiment all around. These expectations started to collide with inflation risks after the third consecutive hot US CPI report and a hawkish repricing in interest rates expectations.

The market might keep on going up as long as the Fed remains unwilling to tighten further, but that will need to be supported by benign economic data and less inflationary risks. The first test will come today with the release of the US NFP report and the ISM Services PMI. The next will come in two weeks with the release of the US CPI on May 15th.

S&P 500 E-mini Futures Technical Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500 topped more or less with the latest US CPI release and corrected into the 5000 level with geopolitical events exacerbating the selloff. We have a good support zone around the 4835 level where we can also find the confluence of the 38.2% Fibonacci retracement level. If the market falls into that zone, it would effectively erase the entire Q1 rally. That’s also where the buyers will start to pile in more aggressively, while the sellers will look for a further break lower to target the trendline around the 4600 level.

S&P 500 E-mini Futures Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the rangebound price action of the last two weeks. We have a strong resistance around the 5120 level and a short term support around the 5040 level. The data today will likely trigger a breakout on either side, so buckle up!

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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Federal Reserve Holds Interest Rates 0 (0)

The
recent decision by the Federal Open Market Committee (FOMC) to keep interest
rates steady has ignited a wave of speculation in financial markets.

Federal Reserve Chair, Jay Powell, provided insights into the current state of
the US economy and its trajectory. However, market reactions have been
characterized by initial unease, followed by fluctuating sentiments, reflecting
ongoing uncertainty regarding the implications of the Fed’s stance.

The
decision to maintain rates at 5.5% was accompanied by a cautionary note from
Fed policymakers, highlighting the persistent challenge of inflation. Despite
efforts to curb price growth, the Fed acknowledged limited progress in recent
months. Consequently, the central bank intends to closely monitor economic data
to determine future policy adjustments, including the possibility of rate cuts
or maintaining the current elevated levels.

In
response to the news DXY tumbled early on Thursday, diving below
106.00 to a session low of 105.44, though it’s been making solid progress
across the forex board this week, exerting pressure on rival currencies such as
the euro and the Japanese yen.

Meanwhile,
Bitcoin
experienced a notable decline
following Powell’s remarks. The
cryptocurrency depreciated by 7% within a single trading session, illustrating
its sensitivity to market sentiment and policy developments. Nonetheless,
Bitcoin has shown signs of recovery, hovering around $59,000 per coin at this
writing.

Similarly,
gold prices faced downward pressure. Spot gold fell 0.9% at $2,297.39 per
ounce.

As a
non-yielding asset, gold’s appeal diminishes in a high-interest-rate
environment, contrasting with the income-generating nature of the US dollar.
Consequently, investors may reassess their asset allocation strategies,
favoring dollar-denominated assets over gold.

The
decline in gold prices follows a period of heightened volatility, during which
the precious metal surged to record highs in April. Factors such as geopolitical tensions and inflation concerns
propelled gold’s ascent. However, the recent pullback reflects shifting market
dynamics and evolving investor preferences.

Looking
ahead, market participants eagerly anticipate the release of the US non-farm payrolls report for further
insights into the US economy health. The outcome of this report is poised to
influence market sentiment and shape future decisions by policymakers.

This article was written by FL Contributors at www.forexlive.com.

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Making money in trading is easy 0 (0)

If you go and ask any successful trader or investor what’s the most important thing in trading, he/she will tell you that it’s capital preservation. In fact, the hardest part in the markets is not making money, it’s being able to keep it, and over the long term increase it.

How many times have you made profits just to give them back to the market the next day, week or month? That can be very frustrating and lead to even more mistakes that eventually end in blowouts.

Now, there’s no secret formula that will give you the ability to keep the money you make and never give it back because losses are a natural part of trading. There are some advices that can help though.

One of the most important thing is to select only the trades where you have a very high conviction. Those trades where you can see almost everything stacked in your favour. When you find those opportunities, you won’t feel any fear of pulling the trigger or even risking more money. You won’t even feel the pressure of taking the trade off if the price starts to pull back.

How many times you had a trade going and at the first pullback you took the trade off leaving money on the table? That happens a lot, and even if it’s natural, most of the time it’s caused by inexperience and emotion-led mistakes.

That’s why conviction is important. The best traders/investors in the world don’t risk the same amount of money on any given trade. They size their trades based on their conviction in a particular idea.

Can you find those trades with technical analysis only? The answer is no. Technical analysis is just a risk management tool. It just shows you what happened in the past, not what might happen in the future. And the markets move based on future expectations.

You should know what moves the asset you are trading, the economic cycle you are in, the risk sentiment regime and so on. But when you really see the ball, go for it.

Will you find those opportunities often? Hell no, and that’s why you should maximise your returns when you find them. You might be thinking „that looks boring“. Yes, it is. Good trading is not fun. There is a trick though to maintain the discipline to wait for good trading opportunities while also increase the number of them: trading different asset classes.

This way not only you will find more opportunities, but you will also have a broad fundamental picture which might give you even more conviction in some ideas.

Lastly, keep learning, keep reading, keep increasing your experience. Don’t fear mistakes or failures, because they will be the best lessons. People study for years to become lawyers, doctors and so on. Trading is no different. You are joining an arena full of smart and experience poeple, so be prepared for it.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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