Headlines:

• Dollar starts to push back after last week’s fall
• Japan finance minister reaffirms that rapid FX moves are undesirable
• BOJ governor Ueda says will not comment specifically on recent FX moves
• BOJ governor Ueda: Will guide policy appropriately to sustainably achieve price target
• Germany March industrial production -0.4% vs -0.6% m/m expected
• US MBA mortgage applications w.e. 3 May +2.6% vs -2.3% prior
• US reportedly looks to curb China’s access to AI software
• Morgan Stanley pushes back Fed rate cut forecast to September

Markets:

• USD leads, AUD and JPY lag on the day
• European equities mixed; S&P 500 futures down 0.2%
• US 10-year yields up 3.1 bps to 4.491%
• Gold up 0.1% to $2,316.08
• WTI crude down 1.2% to $77.43
• Bitcoin down 1.1% to $62,275

It was a relatively quiet session as there isn’t much on the agenda in trading today.

The dollar held steadier and is a touch higher on the day, helped out by a push above 155.00 in USD/JPY. The pair is slowly nudging higher as dip buyers keep up their conviction this week, with price up 0.5% to 155.45 currently. The 200-hour moving average at 155.50 is currently limiting gains ahead of US trading.

Besides that, the dollar is keeping a little firmer against the likes of the euro and pound. Meanwhile, AUD/USD is down 0.5% as well to 0.6563 as sellers contest a break below the 100-day moving average of 0.6577. The 200-hour moving average is also coming into play now at around 0.6560 on the day. Fall below that and the near-term bias switches to being more bearish instead.

In the equities space, US futures are taking a bit of a breather after the recent rebound. After the more tepid showing yesterday, S&P 500 futures are currently down 0.2%. In Europe though, stocks are still holding on to light gains with the UK FTSE keeping its push to fresh record highs today.

The greenback’s firmness today also owes to a slight bounce in bond yields as well on the session. 10-year Treasury yields are up roughly 3 bps as traders are still mulling over the recent economic developments since last week.

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

• Prior -2.3%
• Market index 197.1 vs 192.1 prior
• Purchase index 144.2 vs 141.7 prior
• Refinance index 477.5 vs 456.9 prior
• 30-year mortgage rate 7.18% vs 7.29% prior

That’s a slight bounce back in US mortgage applications, with both purchases and refinancing activity picking up on the week. It comes as the average rate of the most popular US home loan eases off its highest levels since November in the week before.

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

The biggest
mistake new traders make when trading the news is to look at only the so-called
“high impact” data on the economic calendar. What you see on the economic calendar
is generally the scheduled economic reports and events like inflation data,
central bank members’ speeches and so on.

There can
be also unscheduled news though that can catch you off-guard if you don’t have
a real-time news feed. Those could be leaks, breaking news reports and so on,
and they can have a strong impact on the markets.

CONTEXT IS KEY

Now,
looking at the economic calendar and thinking that only the data labelled as “high
impact” is important is wrong. There are times when the calendar will label
something as “low impact” when in reality it should be like very high. A recent
example that comes to my mind is the Japanese wage data before the BOJ meeting
in April when they raised rates.

That’s
because calendars consider only the historic volatility of the data and not the
context. The market focuses on different things based on the context. For
example, there are times when inflation reports have low impact on the market
even though they are always labelled as “high impact”.

This
generally happens when the economy is in recession or getting out of it and the
focus is mostly on growth indicators rather than inflation. On the other hand,
when we are well into the expansionary phase, the market places more emphasis
on inflation and the next central bank’s move. This is why trying to understand
where you are in the business cycle is key.

HOW TO TRADE THE NEWS

So, the way
you should look at the news is through a cause-effect point of view and mainly focusing
on growth, inflation and interest rates. Say you expect inflation to pick up forcing
the central bank to tighten monetary policy. You want the data to confirm
your views and act as a catalyst for the market to start pricing in that
change.

Generally,
you want to see the data beating or missing expectations because the bigger the
surprise, the bigger the market reaction will be. Data in line with consensus
shouldn’t trigger major market moves because it’s already expected and
basically priced in.

When you
build your idea, you need to visualise what is likely to happen in the next say
6-12 months and trade in that direction. You can time the market via technical
analysis or fundamental catalysts, but you shouldn’t focus on the present because
the present is already in the price.

CUTTING OUT THE NOISE

Every week
there are many economic indicators being released, but very few of them are
actually market moving. That’s because most of them do not change the future
expectations. You always need something that can change the future
expectations. A rule of thumb is knowing what the central bank is most focused
on and look at those indicators.

There’s also
kind of hierarchy for the country releasing the economic data. The US data is
by far the most influential one and can move all the asset classes across the
globe. As the dominant financial system in the global economy, the US business
cycle tends to be a major driver of the global business cycle as well. There’s
a reason why they say “if the US sneezes, the world catches a cold”.

In fact, if the US does well, it can create a positive risk sentiment (as long as the rest of the world is not doing too bad) and that’s when good US data may actually weaken the USD across the board.

IN SUMMARY

So, to sum up, here are some questions you should ask yourself when trading the news and fundamentals in general:

• Where are we in the business cycle?
• What is the central bank most focused on?
• What data can change the future expectations?

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

My bitcoin technical analysis video

Bitcoin technical analysis and BTCUSD price forecast: A bullish perspective for upcoming sessions

Welcome, crypto investors and traders. Today, I am delving into a detailed technical analysis of Bitcoin with the above video. With recent price movements and key technical levels, there’s an exciting opportunity for those looking to go long on Bitcoin. Let’s break down the analysis and discuss potential trading strategies.

📈 Key Resistance and Support Levels

• Critical Resistance:The pivotal level to watch is $62,195. Price reactions at this naked PoC key price level indicate significant market attention.

🟡 Trading Strategy: Going Long with Strategic Stops

• Immediate Strategy: After a slight decline over the past few days, Bitcoin presents a promising long entry point. A short stop-loss strategy is advisable to minimize risks.
• Stop-Loss Tip: Set your stop just above 1.5% of risk near the recent low at $61,356.

🔍 Technical Indicators and Patterns

• Yellow Channel: The mid-channel line serves as a minor resistance, which if broken, could signify a stronger bullish momentum.
• Purple Trendline: With three prior touch points, this trendline – see the purple line in the video above – is another importnat marker for potential price breakout to the higher side.

🚀 Potential Upside and Profit Targets

• Short-Term Target: Look to take initial profits around $63,000 and near the mid-channel line at approximately $64,660.
• Long-Term View: If the momentum continues, riding the wave up to $70,000 could yield a substantial reward, with a potential 9:1 reward-to-risk ratio.

🌟 Medium-Term Outlook

• Bullish Sentiment: The medium-term outlook remains bullish with expectations of breaking higher resistance levels in one to two consecutive attempts.
• Market Dynamics: Resistance levels often require several tests before a breakthrough; the upcoming attempt could be a decisive fourth or fifth try.

💡 Trading Tips

• Market Timing: If you’re catching this analysis a bit late, smaller timeframes may offer viable entry points. AGAIN – ENTRY AROUND The pivotal level is $62,195.
• Risk Management: Always trade within your risk tolerance and consider partial profits to secure gains.

🎯 Conclusion

While the bullish signals are not yet strong, this can be an early entry for the high risk vs reward trader. Remember that trading involves risk, and it’s crucial to approach each trade with careful consideration. Stay tuned to ForexLive.com for more updates, and as always, trade wisely and well.

Thank you for checking out ForexLive.com, and good luck in your trading endeavors!

This article was written by Itai Levitan at www.forexlive.com.

The report says that the Biden administration is eyeing a move to safeguard US AI from China, with initial plans to protect the most advanced AI models first and foremost. That will include core software of AI systems such as ChatGPT, according to the sources.

It is said that there will also be a regulatory push in order to restrict the export of proprietary or closed source AI models.

This is largely believed to be an effort to try and slow down China’s development of cutting edge technology for military purposes.

Well, I reckon the advancements in the AI space will be much faster than what regulators can keep up with. And that’s the real challenge. But we’ll see. The idea here is from the Commerce Department, which wants to oversee control of the technology so to speak.

If there are restrictions in place such as these, any developer will then have to report its AI model, plans, and test results to the Commerce Department. That’s not going to fly with new age developers, who might prefer to develop their systems elsewhere.

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

Headlines:

• A slight setback for the aussie on the RBA decision
• RBA leaves cash rate unchanged at 4.35%, as expected
• RBA’s Bullock: Rates are at the right level to get inflation back to target
• RBA’s Bullock: We might have to hike rates if inflation takes markedly longer to fall
• BOJ governor Ueda says had regular exchange of views with Japan PM Kishida
• Japan business federation chairman says USD/JPY above 150 is too much
• Eurozone March retail sales +0.8% vs +0.7% m/m expected
• Germany March industrial orders -0.4% vs +0.4% m/m expected
• Germany March trade balance €22.3 billion vs €22.2 billion expected
• Germany April construction PMI 37.5 vs 38.3 prior
• France March trade balance -€5.5 billion vs -€5.2 billion prior
• UK April construction PMI 53.0 vs 50.2 expected
• UK April Halifax house prices +0.1% vs -1.0% m/m prior

Markets:

• NZD and USD lead, JPY lags on the day
• European equities higher; S&P 500 futures flat
• US 10-ear yields down 2.6 bps to 4.463%
• Gold down 0.3% to $2,315.42
• WTI crude down 0.3% to $78.24
• Bitcoin up 0.9% to $63,848

The RBA policy decision was the main highlight in the handover from Asia to Europe today. The central bank did not produce a hawkish tilt, keeping a more or less similar stance to March. They did continue to leave the door open for rate hikes though, so that is limiting any major fallout in the aussie.

AUD/USD fell from 0.6625 to 0.6600 on the decision before easing slightly more to 0.6590 amid a steadier dollar. But the pair is now trading back to 0.6605, down 0.3% on the day.

Meanwhile, USD/JPY was hovering around 154.60 after rising in Asia trading before slipping to 154.00 during the session. The pair did bounce back though, now seen around 154.40-50 levels – up 0.4% on the day.

Besides that, the dollar held steadier in general throughout with little else to work with. EUR/USD is stuck within a 20 pips range, keeping little changed at 1.0760 levels mostly. Then, GBP/USD is down 0.2% to 1.2540 and USD/CAD up 0.1% to 1.3680 on the day.

In the equities space, European stocks are benefiting further from the Wall Street rally yesterday. But US futures are more muted, keeping flattish as we look towards US trading later.

In other markets, bond yields are staying in retreat while gold is also marked down slightly amid more of a push and pull this week for the precious metal.

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

The S&P 500
has been rising steadily since last week due to a more dovish than expected
FOMC decision where the Fed decided to signal a bigger QT taper beginning in
June and the Fed Chair Powell pushing back repeatedly against rate hike
expectations. Moreover, the data on Friday
showed that the Fed might indeed just keep rates higher for longer as job and
wage growth soften. All of the above is supportive for the market in the short
term as the hawkish positioning unwinds a bit.

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

On the daily
chart, we can see that the bigger correction into the 4834 level might have
been invalidated for the time being. The S&P 500 bounced around the 5000
level as we got two positive catalysts from the FOMC decision and the softer US
NFP data. The path of least resistance remains to the upside with new all-time
highs in sight.

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

On the 1 hour
chart, we can see that the price broke out to the upside following the softer
US NFP report and after a retest of the 5120 zone, continued higher with the
buyers piling in with more conviction. If we get a pullback, the 5167 level
might be the first support for a dip-buying opportunity.

Upcoming
Catalysts

This week is pretty bare on the data front with just the US
Jobless Claims on Thursday and the University of Michigan Consumer Sentiment
survey on Friday being the only notable releases. It’s unlikely that they will
change the market’s expectations that much, so the price action might remain
tentative heading into the US CPI next week, although the bias should remain
bullish.

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

The turnaround came as traders are starting to digest a more dovish Fed outlook since last week. We’ve gone from seven rate cuts priced in to start the year down to one rate cut, before moving towards two rate cuts now. To be more exact, Fed funds futures are reflecting ~45 bps worth of rate cuts currently for 2024. It was roughly 31 bps just at the start of last week.

And that has helped to keep a modest bid in bonds, with Treasury yields now down to its lowest in a month. So, have we reached the peak in yields for this year?

Well, higher yields wasn’t supposed to be part of the script to begin with. So, to see 10-year yields hit 4.70% at the end of last month was already a big win for bond sellers. But not everyone is abandoning that view as of yet, even with the recent poor US data. The bond king himself is arguing for yields to move to 5% next, rather than 4%.

That being said, there’s a good argument as well that we could see yields cool in the months ahead.

As things stand, economic data is paramount and is a key driver of market sentiment. We’ve already got a taste of how quickly things can change from the softer US data last week. And if that keeps up, especially with softer labour market conditions, it could compel traders to consider more rate cuts so long as inflation doesn’t run much hotter from here.

That said, the oversupply in Treasuries was already a key factor driving yields higher last year. And that might come into play again, should we see economic data take more of a backseat that is.

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

The USD weakened
across the board recently due to a more dovish than expected FOMC decision last
week where the Fed decided to signal a bigger QT taper beginning in June and
the Fed Chair Powell pushing back repeatedly against rate hike expectations.
Moreover, the data on Friday showed that the Fed might indeed just keep rates
higher for longer as job and wage growth soften.

The JPY, on the
other hand, doesn’t have much fundamental support as the BoJ might not be able
to lift interest rates again given the easing inflation rates, although there
might be some short-term support from hawkish messages around the reduction of
the QE programme. All else being equal, the USDJPY pair should remain in an
uptrend both from the Fed’s higher for longer stance and global growth
expectations.

USDJPY
Technical Analysis – Daily Timeframe

On the daily
chart, we can see that USDJPY bounced on the strong support zone around the 152.00 handle where we had the confluence of the trendline and the 61.8% Fibonacci
retracement
level. The buyers bought the dip offered by the miss in the US NFP report as
that didn’t change much for the bigger picture. The sellers don’t have much to
work with at the moment, so they might want to wait for the price to break
below the trendline and the strong support around the 152.00 handle before piling
in more aggressively and target the 146.00 handle.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that the pair has now basically reached the key resistance
zone around the 155.00 handle. The price is tentatively breaking above the trendline although
we will likely need an extension above the 155.00 handle to trigger a stronger
rally. That’s when we can expect the buyers to pile in with more conviction and
target the 160.00 handle. The sellers might start stepping in around these
levels to position for a break below the trendline with a better risk to reward
setup but there’s not much at the moment that can give them support.

Upcoming
Catalysts

This week is pretty bare on the data front with just the
Japanese wage data and the US Jobless Claims on Thursday and the University of
Michigan Consumer Sentiment survey on Friday being the only notable releases.
It’s unlikely that they will change the market’s expectations that much, so the
price action might remain tentative heading into the US CPI next week, although
the bias should remain bullish.

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

This is clearly one of the most boring weeks so far as the lack of key economic data is keeping the FX markets in tight ranges. The only notable releases will be the US jobless claims on Thursday and the University of Michigan consumer sentiment survey on Friday, but they are unlikely to change anything for the market unless we see big surprises.

We have also many Fed speakers throughout the week but again they are unlikely to change the market’s pricing, on the contrary, they might tone down their language after the recent US NFP report. This leaves us waiting for the US CPI report next week which is going to be a big market-mover.

There is no consensus at the moment but a miss will likely trigger a bigger reaction than a beat in light of the recent softening in the labour market data. In fact, now that is pretty clear that the bar for a rate hike is VERY high, the market will probably need something more than just a high CPI print. Falling wage growth and softening labour market shouldn’t lead to a sustained re-acceleration in inflation, although it might remain higher for longer, in which case the Fed looks to be comfortable to just hold rates steady.

Moreover, higher input price inflation as seen in the ISM PMIs could have the reverse effect this time and instead of being passed on to consumers, businesses might find other ways to decrease costs, which could translate in more layoffs. Some leading labour market indicators like the Conference Board Employment Trends Index (ETI) have been signalling softening in the labour market for quite some time.

We had some fun trading the repricing in interest rates expectations in Q1 2024 as the market went too far with the seven rate cuts expected for 2024 at the beginning of the year. Now that we reached kind of a balance between two and one rate cut, we will need something more to trigger another sustained trend.

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