And on days when we don’t get any big data, it can be a little slow and uninspiring. So far today, at least we’re seeing the dollar make a decent push higher. That is helped by Treasury yields keeping a bounce at a key technical juncture as noted here. But traders are going to continue to be driven by key economic releases in the months ahead. So, let’s see what is on the agenda for next week.

• Canada April CPI report (21/05)**
• RBNZ May monetary policy decision (22/05)**
• UK April CPI report (22/05)**
• US April existing home sales (22/05)
• FOMC May meeting minutes (22/05)***
• France, Germany, Eurozone May preliminary PMIs (23/05)**
• UK May preliminary PMIs (23/05)**
• US May preliminary PMIs (23/05)**
• US weekly initial jobless claims (23/05)**
• US April new homes sales (23/05)
• UK April retail sales data (24/05)
• Canada March retail sales data (24/05)
• US April durable goods orders (24/05)

The key one to watch will be the Fed minutes, to get a better check in on their thoughts about future policy steps. That especially after having cited a lack of progress on inflation in the meeting statement here. Since then, we have seen some better developments in the data. So, it will be interesting to try and pick up some clues from there.

Meanwhile, PMI data will be in focus to gauge any further softening in the US economy. In Europe and the UK, it will be a check to see if the better performance in Q1 will continue into Q2.

That aside, do keep an eye out on the UK inflation data as well. It will be one to help settle the score on the debate about a rate cut before the summer.

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

Fundamental
Overview

The S&P 500
has been rallying almost non-stop since the FOMC meeting, and thanks to the
miss in the NFP report and the benign CPI
report the price eventually hit a new all-time high yesterday. We are currently
seeing a bit of a pullback, which is totally normal after such a strong run.
The US
jobless claims yesterday could have weighed on the risk sentiment if they were
worse than the prior reading, but instead, we got another positive release
which should keep the bullish momentum going.

S&P 500
Futures Technical Analysis – Daily Timeframe

On the daily
chart, we can see that the S&P 500 hit a new all-time high yesterday and
pulled back a bit soon after. The correction into the 4835 support
is unlikely at the moment as we would need a strong deterioration in the growth
and jobs data to reverse the bullish trend.

We can expect the
buyers to pile in more aggressively if we break above the 5336 level. The
sellers, on the other hand, might step in around these levels with a defined
risk above the high to position for the correction into the 4835 level,
although that looks unlikely at the moment.

S&P 500 Futures
Technical Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see that we have a good support zone around the 5300 level where
we can find the confluence
of the trendline
and the 38.2% Fibonacci
retracement level. Technical buyers might lean on the trendline to position
for a rally into new highs with a better risk to reward setup. The sellers, on
the other hand, will want to see the price breaking lower to position for a
drop into the 5217 swing level.

S&P 500
Futures Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that we have a minor resistance zone around the 5325 level
where the price got rejected a couple of times since yesterday. A break above
the zone should see the buyers piling in with more conviction and target a new
high.

The sellers, on
the other hand, might lean on it to position for the continuation of the
pullback into the trendline with a better risk to reward setup. The two red
lines indicate the top and bottom of the average
daily range. This is how much the market could move on any given day
barring strong catalysts.

Upcoming
Catalysts

We don’t have anything
on the calendar for today, so the market will likely consolidate into the
weekend.

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

• It would take a massive economic surprise for the ECB not to move in June
• Relatively comfortable with market pricing of rate cuts, no need to disturb that
• Rate cuts should be gradual and easiest to move at quarterly meetings when projections are released

They have been out in droves today to confirm a June rate cut. As for market pricing, it fits somewhat with what he is proposing as traders are pricing in ~71 bps of rate cuts for this year.

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

• Data released ahead of our next meeting will give clearer indication of how far along the „last mile“ we have come

The message remains the same in that they want to see more evidence that inflation persistence is easing before officially pivoting. There will be two more CPI reports before the June meeting – one next week on 22 May and the other on 19 June, just a day before the decision day.

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

Headlines:

• Dollar holds steadier as yields nudge back up a little
• What are the main events to look out for today?
• Fed’s Williams: Doesn’t see need for a rate cut in the near-term
• ECB’s de Cos: Every indicator points towards a first rate cut in June
• ECB’s Centeno: We have the expectation to start rate cuts in June
• Italy April final CPI +0.8% vs +0.9% y/y prelim
• China will always be a good friend and partner of mutual trust with Russia, says Xi
• Putin says partnership with China is an example of how relations should work

Markets:

• USD and JPY lead, AUD lags on the day
• European equities mildly lower; S&P 500 futures up 0.1%
• US 10-year yields down 1 bps to 4.346%
• Gold down 0.1% to $2,382.71
• WTI crude up 0.1% to $78.70
• Bitcoin up 0.3% to $66,181

There was no post-CPI follow through as markets took on a more tentative mood in European morning trade.

The dollar is sitting a little higher on the day, helped by a nudge higher in Treasury yields. 10-year yields fell to 4.31% early on but are now pushing back up above 4.34%, holding above its 200-day moving average of 4.33%. It’s a key juncture for bonds, as traders wait on the US weekly jobless claims next.

USD/JPY in particular recovered by 100 pips in a move from 153.90 to 154.90 currently. Meanwhile, EUR/USD and GBP/USD are both down 0.2% to 1.0864 and 1.2655 respectively.

As risk trades also did not see any follow through, the commodity currencies are also feeling a bit more shy for now. AUD/USD is down 0.3% to 0.6670, not helped by a softer Australian jobs report earlier. USD/CAD is up 0.2% to 1.3633, steadily gaining from a low of 1.3590 earlier in the day.

In the equities space, European indices are more tentative while US futures are also sitting little changed. That’s not helping much with the overall mood as we look to the session ahead.

It’s now over to see if the weekly jobless claims will spring up any surprises or if we are on the verge of a turnaround Thursday moment.

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

What is a Forex swap?

Swap
is a commission charged for carrying open positions overnight to the next
trading day in the Forex market. The exact moment when the swap is withdrawn
from your trading account depends on your broker. Most brokers charge it most
often between 11 p.m. and 12 a.m. server time.

The
Forex market is over-the-counter and non-deliverable, meaning you are not the
owner of the trading asset. In order not to cause the need for calculations,
the system automatically closes an open position on the current trading day and
opens it on the next one. Such closing is considered conditional, as the
position is carried over, and the swap is charged.

Depending
on the value of the swap and the position, the swap can be negative or
positive. In other words, you will either have to pay a commission or be paid a
commission for holding an open position overnight. This is because the margin
system used in Forex trading allows you to use the additional capital the
broker provides. You borrow funds to open a position from your broker.

There
is an opinion among traders that the Forex swap is nothing but a broker’s
commission. However, this is not true. Let’s find out how swaps work in the
Forex market.

How do swaps work in the Forex
market?

Every
time you open a position, you make two transactions: buying one and selling
another currency in a currency pair. So, you are essentially borrowing that
money to sell one of the currencies and need to pay interest on the borrowed
amount. However, in doing so, the currency you buy will earn you interest.

If
the base interest rate on the currency you buy is higher than the currency you
sell, you can earn interest on the difference in rates for carrying an open
position to the next day. However, given the broker’s markup, regardless of the
direction of the open position (buying or selling), you will have to pay a
commission.

Thus,
the value of a swap depends on the market and the instrument you are trading.
For example, the swap on the same EURUSD and USDJPY positions will differ.

The
value of swap varies depending on:

●
online broker

●
type of the position—Buy or Sell

●
type of the asset

●
number of days the position
remains open

●
nominal value of the position
(number of lots).

Why is there a triple swap?

Sometimes,
a swap is charged for holding an open position over the weekend, even if you
did not have it on Saturday and Sunday. Such a fee is called a triple swap.
Since the markets are closed on weekends, the triple swap was invented to
compensate for this and is charged either on Fridays or Wednesdays, depending
on the specific market.

This
is because orders are settled on the Forex market on the second working day
from the trade date (T+2). Since the value date falls on a weekend, the
transfer is made for three days at once (on Monday). Therefore, from Wednesday
to Thursday (at 12 a.m.), the swap is charged for the past weekend and
Wednesday.

In
other words, if you hold your position overnight when the triple swap is
applied, your order will be charged three times the standard swap.

Are there swap-free accounts?

To
make trading more convenient and accessible, many brokers have introduced the
concept of swap-free accounts.

Swap-free
accounts relieve the trader from the need to constantly monitor the size of
accounting rates on currencies in a currency pair, make trading more
straightforward, and allow taking into account in advance the commission for
the transfer of positions when calculating the financial result of planned
transactions. It is also relevant for those clients who cannot use swaps due to
religious beliefs. This determines the second name of this type of
account—Islamic accounts.

Charged
daily, the swap fee accumulates over time, making trading less favourable. To
enhance the investment opportunities of its customers, Octa has decided to
remove swap fees for all types of trading accounts. These fees will no longer
prevent traders from using medium- and long-term strategies in the financial
market. Now, they can keep that position open for as long as they see fit and
with no swap cost.

About Octa

Octa is an
international broker that has been providing online trading services worldwide
since 2011. It offers commission-free access to financial markets and various
services already utilised by clients from 180 countries with more than 42
million trading accounts. Free educational webinars, articles, and analytical
tools they provide help clients reach their investment goals.

The company is involved in a comprehensive network
of charitable and humanitarian initiatives, including the improvement of
educational infrastructure and short-notice relief projects supporting local
communities.

Octa has also won over 70 awards since its
foundation, including the ‚Best Educational Broker 2023‘ award from Global
Forex Awards and the ‚Best Global Broker Asia 2022‘ award from International
Business Magazine.

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

• Prefers a gradual rate cut path
• Inflation is falling and it is a sustained fall
• Decisions are taken meeting by meeting

Nothing surprising as Centeno just confirms a rate cut in June for starters.

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

Headlines:

• The pressure is on for the dollar with CPI in focus
• Bond yields feeling heavy ahead of key US data later
• ECB’s Müller: A June rate cut is very probable
• ECB’s Rehn: Rates can be cut if confidence on inflation progress continues to strengthen
• France April final CPI +2.2% vs +2.2% y/y prelim
• Eurozone Q1 GDP second estimate +0.3% vs +0.3% q/q prelim
• Eurozone March industrial production +0.6% vs +0.5% m/m expected
• US MBA mortgage applications w.e. 10 May +0.5% vs +2.6% prior

Markets:

• JPY leads, USD lags on the day
• European equities slightly higher; S&P 500 futures flat
• US 10-year yields down 3.1 bps to 4.413%
• Gold up 0.2% to $2,363.02
• WTI crude down 0.7% to $77.50
• Bitcoin up 1.3% to $62,445

It was a quieter session as markets are prepping for the US CPI showdown later in the day. Alongside that release, we will also get US retail sales so it is going to be a blockbuster event on the data front in US trading.

For now though, the dollar is taking on a more defensive positioning with yields also trending lower. As 10-year yields are down by over 3 bps to 4.413%, that is dragging the greenback lower across the board as well.

USD/JPY in particular fell off from 156.20 to 155.60 and is holding thereabouts now, down 0.5% on the day. European currencies are just mildly higher against the dollar but the antipodeans are keeping gains since Asia trading. AUD/USD is up 0.2% to 0.6640 and NZD/USD up 0.4% to 0.6060 currently.

In the equities space, European indices are keeping the optimism even as US futures are feeling rather muted. That’s a sign risk trades are not perking up just yet, but we’ll see what the main event later will bring.

We’re about 30 minutes away now. Strap yourselves in. It’s going to be an action-packed one in the session ahead.

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

Yesterday, the USD
weakened across the board following the US
PPI release where the data came in line with expectations. The reaction
showed that the market is eager to buy risk assets and that even little signs of better
inflation figures can trigger a positive risk sentiment.

This will be
important to remember in light of today’s US CPI report where in line or soft
figures will likely lead to more USD selling and strong risk-on sentiment.
Conversely, hot readings might have the opposite effect with the USD bid across
the board.

On the daily chart, we can see that USDCAD fell back to the key support zone around the 1.36 handle where we can find the confluence of the trendline and the 61.8% fibonacci retracement level. This is where the buyers have been piling in to position for a rally back into the cycle highs. The sellers will need a break to the downside supported by the fundamentals to reverse the trend and start targeting the 1.34 handle. The US CPI report today will likely set the trend for the next few weeks.

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

• Prior +2.6%
• Market index 198.1 vs 197.1 prior
• Purchase index 141.7 vs 144.2 prior
• Refinance index 499.9 vs 477.5 prior
• 30-year mortgage rate 7.08% vs 7.18% prior

Mortgage applications were at the margin higher in the past week, owing much to a jump in refinancing activity. That was offset by a fall in purchases activity, as the rate of the most popular US home loan eases slightly by 10 bps.

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