Fundamental
Overview

The USD has been
generally under pressure since the benign US CPI report last week as the
hawkish expectations subsided and the market switched its focus from inflation
back to growth. This triggered a positive risk sentiment with risk assets like
stocks and bitcoin gaining ground. Such an environment is generally negative
for the greenback and positive for commodity currencies like the NZD.

NZDUSD Technical
Analysis – Daily Timeframe

On the daily
chart, we can see that NZDUSD broke above the trendline
following the US CPI report and consolidated around the highs. This has opened
the door for a rally into the 0.6217 swing level and should give the buyers
more conviction.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see that from a risk management perspective, the buyers will have
a much better risk to reward setup around the upward trendline where they will
also find the 50% Fibonacci
retracement level for confluence.
The sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish setup and position for a drop into the 0.60 handle.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that we’ve been stuck in a range between the 0.6095 support
and 0.6140 resistance. A break to the downside should see the sellers extending
the drop into the trendline around the 0.6070 level. On the other hand, a breakout
to the upside is unlikely today without a strong catalyst as we have the upper
limit of the average
daily range right at the resistance.

Upcoming
Catalysts

Tomorrow we have the RBNZ policy decision where the central
bank is expected to keep everything unchanged. On Thursday, we will get the
latest US PMIs and Jobless Claims figures.

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

• But inflation should only return to BOE’s target on a sustained basis in early 2025
• UK economy set for a soft landing, following the shallow recession in H2 2023
• Sees UK GDP at +0.7% after stronger than expected Q1 data (previous forecast was +0.5%)
• Sees UK GDP at +1.5% in 2025 (unchanged)

Traders are currently seeing two rate cuts for the BOE, with the first one currently baked in for August. But a move in June might be brought into consideration, subject to the UK CPI report tomorrow.

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

Fundamental
Overview

The USD has been
generally under pressure since the benign US CPI report last week as the
hawkish expectations subsided and the market switched its focus from inflation
back to growth. This triggered a positive risk sentiment with risk assets like
stocks and bitcoin gaining ground.

Such an
environment is generally negative for the greenback and positive for commodity
currencies like the AUD which should also be supported by the positive
developments in China and the RBA likely on hold into 2025.

AUDUSD Technical
Analysis – Daily Timeframe

On the daily
chart, we can see that AUDUSD last week finally broke above the key resistance
zone around the 0.6650 level. The price pulled back soon after into the resistance-turned-support
in what could end up being a “break and retest” pattern.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see that the price is consolidating at the support zone where we
can also find the confluence
of the trendline
and the 50% Fibonacci
retracement level. This is where the buyers are stepping in with a defined
risk below the trendline to position for a rally into the 0.6870 high. The
sellers, on the other hand, will want to see the price breaking lower to regain
control and push the pair into the 0.6579 level.

AUDUSD
Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that the recent price action has been mostly rangebound as
the market awaits new catalysts to push it in either direction. From a risk
management perspective, the best spot for the buyers to go long would be right
at the support zone as they will have a defined risk just below the trendline
and a great risk to reward setup to target the 0.6870 high. The sellers should
wait for a break below the trendline before considering new short positions.

Upcoming
Catalysts

This week is basically empty on the data front with the only
highlights being the Australian and US PMIs on Thursday.

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

Headlines:

• Commodities are in the spotlight as the new week gets underway
• FX stays more muted to start the session
• Fed’s Bostic: It is going to take a while before we are certain inflation is headed to 2%
• ECB’s Kazāks: It’s quite likely June will be when we start to cut rates
• BOE’s Broadbent: It is possible that a rate cut could come this summer
• Who will be Iran’s next president?

Markets:

• FX muted; NZD lags slightly
• European equities a little higher; S&P 500 futures up 0.2%
• US 10-year yields down 2.4 bps to 4.415%
• Gold up 0.7% to $2,431.50
• WTI crude down 0.4% to $79.77
• Bitcoin up 0.3% to $67,115

It was a largely quiet session with it being a bank holiday in most parts of Europe. Markets were still open though but there is a distinct lack of appetite, with major currencies extremely muted on the day.

The dollar is keeping steady but little changed overall, with not much change to take note of. The ranges for the day are also leaving a lot to be desired with most dollar pairs holding within just 25 pips. The snapshot here speaks for itself:

In the equities space, stocks are steadier as investors look to build on the winning form from last week.

But it is commodities that are stealing the spotlight to start the week, with gold racing higher to fresh record highs earlier around $2,440 levels. Price has come back down a bit to $2,431 now but the precious metal is still up 0.7% on the day.

At the same time, copper is also surging higher as futures look to hold a firm break above the $5 per pound mark. It hit a fresh record high of $5.16 earlier before holding around $5.05 now.

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

• Data on inflation has been very bumpy
• My outlook is that inflation will continue to fall this year and into next year
• But we’ve still got a ways to go
• Fed is open to all possibilities on economic path
• Risks are really balanced right now
• Our policy stance is restrictive
• Business leaders tell me that things are slowing down, but very gradually
• It will take a while for that momentum to play through in the economy

In simpler terms, he’s saying that the Fed is in no position yet to signal any pivot on rates. And when the time comes, expect them to sell the same narrative as the other major central banks ahead of them currently. That being even if they do proceed to cut once, it’s no biggie and policy is still restrictive to keep pinning inflation down.

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

For a while there it seemed like the dollar was the hot commodity in the last few months. Inflation seemed stickier and the US economy was faring much better than the rest. Essentially, it was the case of being the cleanest shirt among the dirty laundry.

It felt like the BOJ acted too late. As for the ECB, BOE, and BOC, they had economic worries to consider towards the end of last year. In Switzerland, the SNB surprised with an early rate cut. And China worries had dampened the optimism surrounding the aussie and kiwi. But a lot of that has changed over the last one month or so.

The BOJ is well, still stuck in the mud as they face a fight against the inflation clock. But Q1 data shows that the situation in the Eurozone, UK, and Canada may not be that bad. Although, all three are facing possible rate cuts going into the summer. However, the difference now is that the Fed may join them a little after that after some question marks about stickier inflation and a hot economy. And in Australia, we’re seeing stickier inflation push back hopes of an RBA rate cut later in the year.

So, what are traders saying about all this in terms of central bank pricing? Let’s take a look at how the rate cut odds are shaping up.

• US Federal Reserve: First -25 bps in November (September at ~82%); 44 bps of rate cuts for the year
• European Central Bank: First -25 bps in June; 55 bps of rate cuts for the year
• Bank of England: First -25 bps in August (~95%); 55 bps of rate cuts for the year
• Swiss National Bank: Second -25 bps in September (June at ~74%); 33 bps of rate cuts for the year
• Bank of Canada: First -25 bps in July; 54 bps of rate cuts for the year
• Reserve Bank of Australia: No rate cuts this year; 10 bps priced in only
• Reserve Bank of New Zealand: First -25 bps in October (~91%); 45 bps of rate cuts for the year

If you recall back to December last year and January this year here, it’s a massive change to the landscape.

Of course, the Bank of Japan is on its own as they are hoping to try and raise rates once again. The can seems to be kicked down the road from July to September now. They might just have missed the boat big time on this one.

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

Fundamental
Overview

Crude oil has been
falling steadily since topping around the $87.50 level following the mutual
retaliations between Iran and Israel. The drop has been kind of a
head-scratcher though as there are global growth expectations amid China and
other major central banks policy easing, improving PMIs and OPEC+ extending the
voluntary production cuts until the end of the year.

The death of Iranian
President Raisi doesn’t change anything for the market as quoting the Supreme
Leader Ayatollah Ali Khamenei “there won’t be any disruption to the country’s
affairs”. In the big picture, crude oil is still trading in a 70-90 range, so
there’s nothing exciting going on, but in the short-term it should remain supported
unless there is a latent slowing down in demand.

Crude Oil Technical
Analysis – Daily Timeframe

On the daily
chart, we can see that crude oil probed below the trendline
several times but failed to extend the drop into new lows. The market got stuck
in a consolidation just beneath the key $80 level and we will likely need a
catalyst to get things going again.

Crude Oil
Technical Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see more clearly the key resistance
zone around the $80 level and we can also see that we have a downward trendline
adding extra confluence
to the barrier. This is where the sellers keep stepping in with a defined risk
above the resistance to position for a drop into new lows. The buyers, on the
other hand, will need a breakout to the upside to start targeting an extension
to the $84.50 level next.

Crude Oil
Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that the rangebound price action doesn’t offer much trading opportunities.
From a risk management perspective, the best spot for the sellers to enter
short positions is around the resistance, while the buyers might want to wait
for the support around the $77 level. Nevertheless, a breakout to the upside is
likely to increase the bullish momentum and trigger a rally into the $84.50
level.

Upcoming
Catalysts

This week is pretty empty on the data front with the only
highlight being the US PMIs on Thursday where weak data might weigh on crude
oil while strong figures could give it a boost.

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

One of the first
questions beginner traders ask is what currency pair to trade. Unfortunately,
there’s lots of misinformation around and most of the time the advice they get
is to trade the most volatile pairs because they can make more money.

That’s of course
incorrect because the more volatile a pair is, the bigger your stop loss should
be to avoid being stopped out prematurely. In fact, professional traders adapt
their stop losses based on the volatility of the instrument. They don’t have a
fixed stop loss for everything.

The real answer
lies in the fundamentals. If you expect a currency to be strong and another to
be weak, then you select the relative pair and buy the stronger currency against
the weaker one. You don’t need to trade 5 or 10 pairs if you have conviction on
just one. Your job is not to trade, but to make money. You can make a lot of
money on just one single pair.

This way not only
you increase your chances of success, but you will also have cleaner moves.
Take for example the EUR/GBP pair. It’s been ranging for months because there’s
not been a real divergence between the ECB and BoE.

On the other hand,
if you look at the EUR/JPY pair you will see that there’s been a steady uptrend
as global growth expectations and the hawkish repricing in interest rates continued to fuel the upside.

Don’t select a pair just because of the volatility
because more volatility doesn’t mean more profits. You should filter the pairs
based on the fundamentals because that’s what will drive the currencies up or
down.

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

UPCOMING EVENTS:

• Monday: PBoC
  LPR, Fed’s Waller.
• Tuesday: RBA
  Meeting Minutes, Canada CPI.
• Wednesday: RBNZ
  Policy Decision, UK CPI, FOMC Minutes.
• Thursday: New
  Zealand Q1 Retail Sales, Australia/Japan/Eurozone/UK/US Flash PMIs, Eurozone
  Negotiated Q1 Wage Growth, US Jobless Claims.
• Friday: Japan
  CPI, UK Retail Sales, Canada Retail Sales, US Durable Goods Orders.

Monday

The PBoC is expected to leave the 1-year
and 5-year LPR rates unchanged at 3.45% and 3.95% respectively. Last week, the
central bank maintained the MLF
rate unchanged at 2.50%, which is generally a reliable precursor for a
change in the LPR rates. We got some mixed economic data recently but overall
it looks like the PBoC doesn’t have an urgent reason to ease policy further.

Tuesday

The Canadian CPI Y/Y is expected at 2.8%
vs. 2.9% prior,
while the M/M figure is seen at 0.5% vs. 0.6% prior. The focus will be on
the underlying inflation measures though as that’s what the BoC cares most
about. The Trimmed-Mean CPI Y/Y is expected at 2.9% vs. 3.1% prior, while
the Median CPI Y/Y is seen at 2.7% vs. 2.8% prior. Such readings or even lower should
give the BoC enough confidence to deliver the first rate cut in June as they
would be within their 1-3% target band.

Wednesday

The RBNZ is expected to keep the Official
Cash Rate (OCR) unchanged at 5.50%. The central bank has limited tolerance for
an increase in the time to achieve its 1-3% inflation target. The latest Q1
CPI
report showed inflation easing further, while the labour
market report saw another uptick in the unemployment rate and job losses in
the first quarter. The market expects the RBNZ to ease policy in August while
the central bank continues to repeat that it doesn’t expect to normalise policy
before 2025.

The UK CPI Y/Y is expected at 2.1% vs. 3.2%
prior, while the Core CPI Y/Y is seen at 3.7% vs. 4.2% prior. The BoE is
mostly focused on services inflation, so that’s what will have the major impact
on market’s expectations. As a reminder, we will have another CPI report
before the next BoE meeting, but if this week’s inflation data comes out good,
the market will likely price in higher chances for a June rate cut already.

The FOMC Minutes isn’t generally such a great
market-moving release because the market already knows what to expect
and it becomes stale by the time it’s out as more data gets released in the
meantime. I would have expected it to be market-moving this time around because
the Fed could have refrained from mentioning the QT tapering at the last
meeting but include it in the Minutes. Since they already communicated the
tapering at the last decision, I can’t see the Minutes being a such a big deal.

Thursday

The Eurozone Negotiated Q1 Wage Growth is
what the ECB has been waiting for months to give it more confidence on the inflation
outlook. The data is unlikely to change their plan to deliver the first rate
cut in June since they telegraphed it so hard in the meantime that it would
be a real bad look to backtrack at this point. Nonetheless, it might shape
the market’s expectations for the number of rate cuts for the rest of the
year.

Thursday will also be the Flash PMIs Day
for many advanced economies with the greatest focus as usual on the Eurozone,
UK and especially the US PMIs:

• Eurozone Manufacturing
  PMI 46.6 expected vs. 45.7 prior.
• Eurozone Services PMI
  53.5 expected vs. 53.3 prior.
• UK Manufacturing PMI 49.2
  expected vs. 49.1 prior.
• UK Services PMI 54.8
  expected vs. 55.0 prior.
• US Manufacturing PMI no
  consensus vs. 50.0 prior.
• US Services PMI 51.5 expected
  vs. 51.3 prior.

The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s
a timelier indicator on the state of the labour market. This is because
disinflation to the Fed’s target is more likely with a weakening labour market.
A resilient labour
market though could make the achievement of the target more difficult.

Initial
Claims keep on hovering around cycle lows, while Continuing Claims remain firm
around the 1800K level. This week Initial Claims are expected at 220K vs. 222K prior,
while there is no consensus at the time of writing for Continuing Claims
although the prior release showed an increase to 1794K vs. 1785K expected and
1781K prior.

Friday

The Japanese Core CPI Y/Y is
expected at 2.2% vs. 2.6% prior, while there’s no consensus for the Headline
and the Core-Core figures at the time of writing. This report generally isn’t
market-moving because we get to see the Tokyo
CPI weeks in advance, which is a leading indicator for the National CPI
figures. Anyway, surprises could have an impact on the market, but it looks
increasingly likely that the BoJ won’t be able to hike rates further in this
cycle.

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

I was lucky enough to head to the Finance Magnates Africa Summit last year and I’ll be headed there again this week. It’s a great event that brings together the industry and retail traders in Johannesburg.

I will be speaking there and meeting with many friends and traders. If you’re in the area, please come by. Sign up for the free event here.

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