Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has rallied significantly during the early hours on Monday as we continue to see a recovery. I’ll be the first to admit that I haven’t exactly been really solid with the Australian dollar as of late, because I continue to see a lot of resistance above.

However, it does look like we could very well get close to that crucial 0.6650 level, which had previously been a major resistance. I think signs of significant support are sellable events, but it’s worth noting that the last three candlesticks before the Monday session all had long wicks to the upside, suggesting that there were a lot of sellers jumping in.

So, in other words, it’s been extraordinarily resilient. The 0.6650 level above is an area that previously had been a major resistance as far as a trading range is concerned. So, it is worth paying close attention to the idea of selling exhaustion. But if we do get above the 0.6650 level, then it’s possible that the market could go looking to the 0.6825 level.

Keep in mind that the Australian dollar is highly levered to global trade and of course commodities. While the US dollar is going to be paying a lot of attention to the Federal Reserve, its interest rate policy and of course, geopolitical concerns, as the greenback is considered to be a safety currency, despite the fact that we have been so bullish, we are still basically in the same range, but it’s probably worth noting that the Australian dollar just won’t give it up. 0.6650 will determine where we go next if we get anywhere near there.

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

This article was originally posted on FX Empire

More From FXEMPIRE:

• Japanese yen has fallen sharply against the dollar, prompting speculation among traders about when the authorities might start buying the currency to support it – and why they haven’t already done so
• . According to forex trading platforms, the currency fell to a 34-year low against the dollar on Friday after the Bank of Japan indicated that financial conditions would remain easy, with losses accelerating in late trading in New York.
• The public holiday in Japan today, Monday, could reduce liquidity in forex markets and increase the risk of further sharp moves in either direction.

Recently, USD/JPY jumped to 158.44 from 154.96 in the same trading session on Friday, its best daily performance in months.

Japanese policymakers have repeatedly warned that a further and rapid depreciation of the currency will not be tolerated. In this regard, Finance Minister Shunichi Suzuki said after a Bank of Japan meeting that the government would respond appropriately to forex moves. Earlier this month, US Treasury Secretary Janet Yellen also expressed concerns about the yen’s decline, which market participants saw as laying the groundwork for intervention.

• 

Masato Kanda, a senior currency official, gave an example of a 10 yen move in a month as a rapid move. Consequently, the yen has fallen by about 7 yen per dollar over the past month, but is down more than 2% in the past week alone, and is down more than 10% since the beginning of the year.

Amid this performance, the debate about the US Federal Reserve’s interest rate cut is shifting from “when” to “if” based on inflation data. The debate around the Federal Reserve has begun to shift from how many times it should cut interest rates this year to whether to cut them at all in 2024. Moreover, with policymakers widely expected to keep US interest rates steady at their highest level in 2024, More than two decades at the conclusion of their meeting next Wednesday, much of the focus will be on any pivot in the tone of Chairman Jerome Powell’s post-meeting statement and news conference.

Also, officials are expected to announce a near-term slowdown in reducing the US Federal Reserve’s $7.4 trillion balance sheet – a move independent of any decision on interest rate timing. Policymakers have expressed the need to take a cautious approach to further returns, in the hope of avoiding market disruptions.

After worse-than-hoped US inflation reports during the first three months of the year, Powell said it would likely take “longer than expected” to become confident that inflation was moving towards the central bank’s 2% target. He added, “the central bank can keep interest rates high as long as necessary.” While the Fed’s leadership has suggested delaying US interest rate cuts, it is starting to look like a real possibility that policymakers may not cut interest rates at all this year.

USD/JPY Technical analysis and Expectations Today:

Amidst breaking through significant technical and psychological barriers, the price of the USD/JPY currency pair is on its way to test the historical psychological resistance at 160.00 in the nearest time unless there is a Japanese intervention in the forex markets at any time. It may remain stable around its current gains, which have propelled all technical indicators towards levels saturated with buying pressure until reacting to the announcement from the US Federal Reserve Bank and US job figures.

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EUR/USD Current price: 1.0712

• German inflation rose by less than anticipated in April, according to preliminary estimates.
• Market participants await US employment-related data and the Federal Reserve’s decision.
• EUR/USD lacks apparent directional strength, bullish potential limited.

The EUR/USD pair retains modest intraday gains on Monday, trading around the 1.0710 level. The US Dollar gapped higher at the weekly opening but quickly changed course amid a better market mood. Asian stock markets posted substantial gains, helping EUR/USD advance. At the same time, government bond yields retreat from their recent peaks, putting modest pressure on the USD demand.

Nevertheless, the market’s action remains restricted as investors await United States (US) employment-related figures and the Federal Reserve (Fed) monetary policy announcement spread throughout the week. The Fed is widely anticipated to keep rates on hold, while speculative interest anticipated a generally hawkish statement, given macroeconomic data suggesting slowing growth alongside persistently high inflationary pressures. On the employment front, the week will include the JOLTS Job Openings report, the ADP survey on private job creation, and the Nonfarm Payrolls (NFP) report on Friday.

Near-term, Germany released the preliminary estimate of the April Harmonized Index of Consumer Prices (HICP), which rose 2.2% YoY and 0.5% MoM, below the market expectations but higher than in March. Also, the Eurozone published April Consumer Confidence, which remained unchanged at -14.7. The American session will bring little of interest, as the US will only release the April Dallas Fed Manufacturing Business Index.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows a limited bullish potential. The pair develops below all its moving averages, with selling interest aligned around the 20 Simple Moving Average (SMA), currently at 1.0725. Technical indicators, in the meantime, seesaw within negative levels, lacking clear directional strength.

The EUR/USD pair is neutral in the near term. The 4-hour chart shows technical indicators holding around their midlines, reflecting the absence of directional interest. At the same time, a mildly bullish 20 SMA converges with a bearish 100 SMA just above the current level, with the pair unable to clear the congestion zone.

Support levels: 1.0690 1.0645 1.0600  

Resistance levels: 1.0730 1.0785 1.0810

EUR/USD Current price: 1.0712

• German inflation rose by less than anticipated in April, according to preliminary estimates.
• Market participants await US employment-related data and the Federal Reserve’s decision.
• EUR/USD lacks apparent directional strength, bullish potential limited.

The EUR/USD pair retains modest intraday gains on Monday, trading around the 1.0710 level. The US Dollar gapped higher at the weekly opening but quickly changed course amid a better market mood. Asian stock markets posted substantial gains, helping EUR/USD advance. At the same time, government bond yields retreat from their recent peaks, putting modest pressure on the USD demand.

Nevertheless, the market’s action remains restricted as investors await United States (US) employment-related figures and the Federal Reserve (Fed) monetary policy announcement spread throughout the week. The Fed is widely anticipated to keep rates on hold, while speculative interest anticipated a generally hawkish statement, given macroeconomic data suggesting slowing growth alongside persistently high inflationary pressures. On the employment front, the week will include the JOLTS Job Openings report, the ADP survey on private job creation, and the Nonfarm Payrolls (NFP) report on Friday.

Near-term, Germany released the preliminary estimate of the April Harmonized Index of Consumer Prices (HICP), which rose 2.2% YoY and 0.5% MoM, below the market expectations but higher than in March. Also, the Eurozone published April Consumer Confidence, which remained unchanged at -14.7. The American session will bring little of interest, as the US will only release the April Dallas Fed Manufacturing Business Index.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows a limited bullish potential. The pair develops below all its moving averages, with selling interest aligned around the 20 Simple Moving Average (SMA), currently at 1.0725. Technical indicators, in the meantime, seesaw within negative levels, lacking clear directional strength.

The EUR/USD pair is neutral in the near term. The 4-hour chart shows technical indicators holding around their midlines, reflecting the absence of directional interest. At the same time, a mildly bullish 20 SMA converges with a bearish 100 SMA just above the current level, with the pair unable to clear the congestion zone.

Support levels: 1.0690 1.0645 1.0600  

Resistance levels: 1.0730 1.0785 1.0810

• GBP/USD prices attempted a cautious rebound last week, but gains were capped at 1.2540 before prices quickly retreated back to support at 1.2449 and closed the week around 1.2492.
• As I mentioned previously, factors supporting the US dollar remain strong, driven by safe-haven demand and robust US economic data, which supports the Federal Reserve’s tightening path, in contrast to the Bank of England.

What is the expected outlook for GBP/USD in the coming days?

In this regard, ING Bank says: “The dollar should be higher” with GBP/USD spot sticking to support at 1.25 and the dollar is expected to be stronger after strong US economic data on Thursday, ING analysts warn, expecting a late US dollar rally.

According to forex trading platforms, GBP/USD fell sharply after US consumer spending showed continued hot inflation trends in the US economy but recovered to above 1.25 before the weekend. However, ING Bank analyst Francisco Pesoll says the dollar’s weakness is not consistent with equity and fixed income markets, and he does not expect it to last long.

• 

He added, “We expect a delay in the strengthening of the US dollar after the recent upward surprise in the US personal consumption expenditures data for the first quarter of the year.”

According to forex trading, the dollar rose after the core PCE price deflator – a measure of consumer spending – rose to 3.7% on a quarterly annualized basis, three points above expectations. Spending on services grew at an annual rate of 4.0%, the fastest increase in consumer services spending since the stimulus-driven surge in 2021.

Obviously, this is not the kind of data the Fed wants to see after a rapid cycle of rate hikes, pushing markets to bet that the first-rate cut won’t come until December. The analyst added, “The dollar should be trading higher. The very short-term dollar surge against major currencies suggests that the FX market still has some tendency to give more weight to negative US data news than positive dollar news. But a delayed re-coupling with higher rates and lower stocks seems likely.”

Accordingly, ING Bank tells clients that the main FX drivers all point to dollar strength: rising Treasury yields, widening dollar swap spreads, and falling stocks. The analyst also said: “This would not be the first time the dollar has bounced back from a slight lag in rates and stocks. We think this is likely to happen today or early this week.”

If this assessment is correct, GBP/USD spot is on track for another decline below 1.25 before too long.

Technical forecasts for the GBP/USD pair today:

The GBP/USD price has formed lower highs and lower lows within a bearish channel on the 4-hour chart. Recently, the price is in the middle of a decline and is testing the 50% Fibonacci retracement level. Technically, the largest correction could reach the 61.8% level at 1.2557 near the top of the channel and the minor psychological mark. If any of the Fibonacci levels hold as a ceiling, the GBP/USD price may fall to the swing low near the 1.2300 support and the channel bottom.

At the same time, the 100 SMA falls below the 200 SMA to confirm that the overall trend remains bearish or that selling is likely to gain momentum rather than reverse. Furthermore, the 100 simple moving average also serves as dynamic resistance. The Stochastic indicator is in the overbought area and begins to head downward to indicate rising selling pressure. Also, the oscillator has a lot of room to move down, so the price can continue to follow the same approach until sellers run out. Eventually, the RSI appears to be making a top without reaching the overbought zone, indicating that sellers are eager to return.

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• The dollar yen initially pulled back a bit during the trading session on Friday as traders got out of the path of the Bank of Japan meeting.
• That being said, we have seen a complete turnaround from that pullback after the Bank of Japan stated that the depreciation of the yen is not something that they’re overly concerned about.
• I find this amazing, and quite frankly would love to know what the average Japanese person thinks, but I digress.

This flies in the face of everything that everybody had thought and it also contradicts what they had said previously, so people have jumped in and shorted the yen. Driving the dollar much higher against it. At this point, I think it’s very obvious that any pullback at this point in time is going to end up being a buying opportunity. As traders continue to look at this through the prism of trying to find value, the one hour chart as you can see, has pulled back to the ¥155 level and just took off like a rocket.

• 

Longer-Term

Longer term, I think we could go looking into the ¥160 level, although that may take some time to get there. Whether or not we continue to go straight up in the air like we have remains to be seen. But I think any remotely significant pullback you have to start scaling back in. If we were to give up the ¥155 level to the downside, it’s possible that we could go down to the ¥152 level, which is where the 50 day EMA is sitting at.

We are definitely stretched at this point, so be very cautious. You don’t want to just jump in blindly and start buying hand over fist, but you can clearly not short this market. The USD/JPY market will be interesting, considering that the market has been so strong, and likely to have a massive pullback as the momentum will eventually run out. If the market sees a massive sell off, I will certainly be interested in trying to get involved.

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In today’s assessment of the GBP/USD pair, the price stands at $1.25263, reflecting a gain of 0.45%. Key price levels indicate a pivot point at $1.25228, with immediate resistance at $1.25786, followed by $1.26401 and $1.27087. Conversely, support levels are identified at $1.24742, $1.24163, and $1.23656.

Technical indicators reveal the 50-day Exponential Moving Average at $1.24722 and the 200-day EMA at $1.25522. The pair maintains a bullish trajectory above the pivot point of $1.25228; however, a breach below this level could initiate a significant selling trend.

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

April 28, 2024 – Written by David Woodsmith

STORY LINK Pound to Dollar Week Ahead Forecast: “Further GBP Weakness in Coming Weeks”

Foreign exchange strategists at HSBC forecast the Pound to Dollar (GBP/USD) exchange rate to slide back below 1.24 in the near-term outlook.

According to the bank; “We look for further GBP weakness ahead in the coming weeks. We expect this USD strength to persist, albeit in a more grinding fashion over the next month with attendant downside for GBP-USD.”

It added; “We also see scope for independent GBP weakness given the more cautious pricing in the market around the likely timing of BoE easing.

HSBC added; “The May BoE meeting could be an important stage-setter for a possible June easing where only 10bp are priced in. We also see scope for rate cuts to be deeper by year-end than is currently priced into the market.”

The bank notes GBP/USD support levels at 1.2256, 1.2200 and 1.2144.

GBP/USD posted a net gain for the week, but failed to hold the 1.2500 level.

MUFG commented on the GBP/USD recovery; “With a BoE rate cut in June still a possibility we would be surprised to see much follow through from this GBP buying although the pick-up in growth in Europe is likely a factor that will curtail US dollar buying at stronger levels. Even moderately better growth in Europe will likely limit dollar appreciation going forward.”

BoE expectations remained a key factor during the week and will become even more important ahead of the May 9th meeting. Chief Economist Pill stated that there had been progress on inflation but added that; “the time for cutting Bank Rate remained some way off.”

Pill’s comments dampened expectations that there will be majority support for a near-term rate cut and curbed bearish Pound sentiment.

The Pound also drew some support from equity markets during the week with the FTSE 100 index posting fresh record highs.

Federal Reserve guidance will be crucial at next week’s policy meeting.

Markets are now pricing in only just over a 10% chance of a June rate cut while the chances of a July cut have dipped to around 30%.

There was an element of divergence within the US data during the week.

According to the flash estimate, GDP growth slowed to an annualised rate of 1.6% for the first quarter from 3.4% previously and below consensus forecasts of 2.5%.

The PMI data was also weaker than expected with a slowdown in manufacturing and services-sector activity.

The survey also reported a decline in employment, contrary to reports from the monthly employment reports.

The inflation data, however, was stronger than expected with a core PCE prices reading of 3.7% compared with expectations of 3.4%.

JP Morgan commented; “On inflation, we reiterate our view that improving and broadening global economic growth raises the risk that inflation will be sustained and broaden as a problem for both central banks and markets.”

The data triggered fresh concerns over inflation trends, although there was also an element of concerns over the combination of stubborn inflation and weaker activity (stagflation).

According to MUFG; “There were plenty of reports citing stagflation concerns that could undermine confidence in the US if the data continues to slow. We are not in the camp of stagflation and still see US CPI moving lower but over the short-term if US activity weakens further the concerns over stagflation will likely increase.”

Berenberg commented; “We currently see no reason for the Fed to lower interest rates soon. The underlying fundamentals still point to a healthy economy, the labour market is tight, and the disinflation process stalled lately.”

MUFG also noted that the political footprint will grow and sees a potential push for a weaker dollar if Trump wins the November Presidential election. It commented; “Politico quotes some of Trump’s economic advisers as seriously studying ways to encourage other key countries to strengthen their own currencies or to face tariffs instead.”

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Economists forecast the Index to increase from -14.4 to -11.0 in April. Better-than-expected numbers could raise expectations of the US economy to avoid a recession. Nevertheless, the numbers are unlikely to influence the Fed interest rate trajectory.

The manufacturing sector contributes less than 30% to the US economy.

However, US labor market data and service sector PMI numbers will influence investor bets on a September Fed interest rate trajectory. The US Jobs Report and ISM Services PMI are out on Friday (May 3).

Before the reports, the markets can recalibrate their expectations of H2 2024 Fed rate cuts on Wednesday (May 1). The FOMC interest rate decision and press conference will warrant investor attention.

After the better-than-expected US Personal Income and Expenditures Report, the markets remain divided about a September Fed rate cut. According to the CME FedWatch Tool, the probability of the Fed leaving interest rates at 5.50% stood at 41.8% today, up from 31.6% on April 19.

Short-term Forecast

Near-term trends for the USD/JPY hinge on the Bank of Japan and the Japanese government. Hawkish chatter from the BoJ and intervention threats from the Japanese government could pressure the USD/JPY. However, investors should consider US labor market data and the FOMC press conference.

USD/JPY Price Action

Daily Chart

The USD/JPY sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

A USD/JPY break above the April 26 high of 158.437 would support a move to the 160 handle.

Bank of Japan commentary, Japanese government intervention threats, and the Dallas Fed Manufacturing Index need consideration.

Conversely, a USD/JPY drop below the 157.5 handle could support a fall toward the 50-day EMA and the 151.685 support level.

The 14-day RSI at 86.40 shows the USD/JPY in overbought territory. Selling pressure may intensify if the USD/JPY approaches the April 26 high of 158.437.

April 28, 2024 – Written by David Woodsmith

STORY LINK Pound to Dollar Week Ahead Forecast: Below 1.24 Over Next Few weeks?

Over the next few weeks, foreign exchange analysts at HSBC expect that the Pound to Dollar (GBP/USD) exchange rate will slide back below 1.24.

According to the bank; “We look for further GBP weakness ahead in the coming weeks. We expect this USD strength to persist, albeit in a more grinding fashion over the next month with attendant downside for GBP-USD.”

It added; “We also see scope for independent GBP weakness given the more cautious pricing in the market around the likely timing of BoE easing.

HSBC added; “The May BoE meeting could be an important stage-setter for a possible June easing where only 10bp are priced in. We also see scope for rate cuts to be deeper by year-end than is currently priced into the market.”

The bank notes GBP/USD support levels at 1.2256, 1.2200 and 1.2144.

GBP/USD posted a net gain for the week, but failed to hold the 1.2500 level.

MUFG commented on the GBP/USD recovery; “With a BoE rate cut in June still a possibility we would be surprised to see much follow through from this GBP buying although the pick-up in growth in Europe is likely a factor that will curtail US dollar buying at stronger levels. Even moderately better growth in Europe will likely limit dollar appreciation going forward.”

BoE expectations remained a key factor during the week and will become even more important ahead of the May 9th meeting. Chief Economist Pill stated that there had been progress on inflation but added that; “the time for cutting Bank Rate remained some way off.”

Pill’s comments dampened expectations that there will be majority support for a near-term rate cut and curbed bearish Pound sentiment.

The Pound also drew some support from equity markets during the week with the FTSE 100 index posting fresh record highs.

Federal Reserve guidance will be crucial at next week’s policy meeting.

Markets are now pricing in only just over a 10% chance of a June rate cut while the chances of a July cut have dipped to around 30%.

There was an element of divergence within the US data during the week.

According to the flash estimate, GDP growth slowed to an annualised rate of 1.6% for the first quarter from 3.4% previously and below consensus forecasts of 2.5%.

The PMI data was also weaker than expected with a slowdown in manufacturing and services-sector activity.

The survey also reported a decline in employment, contrary to reports from the monthly employment reports.

The inflation data, however, was stronger than expected with a core PCE prices reading of 3.7% compared with expectations of 3.4%.

JP Morgan commented; “On inflation, we reiterate our view that improving and broadening global economic growth raises the risk that inflation will be sustained and broaden as a problem for both central banks and markets.”

The data triggered fresh concerns over inflation trends, although there was also an element of concerns over the combination of stubborn inflation and weaker activity (stagflation).

According to MUFG; “There were plenty of reports citing stagflation concerns that could undermine confidence in the US if the data continues to slow. We are not in the camp of stagflation and still see US CPI moving lower but over the short-term if US activity weakens further the concerns over stagflation will likely increase.”

Berenberg commented; “We currently see no reason for the Fed to lower interest rates soon. The underlying fundamentals still point to a healthy economy, the labour market is tight, and the disinflation process stalled lately.”

MUFG also noted that the political footprint will grow and sees a potential push for a weaker dollar if Trump wins the November Presidential election. It commented; “Politico quotes some of Trump’s economic advisers as seriously studying ways to encourage other key countries to strengthen their own currencies or to face tariffs instead.”

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April 28, 2024 – Written by Frank Davies

STORY LINK Euro to Dollar Exchange Rate Forecast Lowered to 1.05 at Goldman Sachs

Goldman Sachs has lowered its 6-month Euro to Dollar (EUR/USD) exchange rate forecast to 1.05 from 1.10 previously.

Other investment banks expect a firm dollar, but consider that a EUR/USD slide to parity is less likely due to evidence of a recovery in the Euro-Zone economy.

Although EUR/USD edged higher during the week it failed to hold above 1.07 and settled around 1.0680.

According to Goldman; “Dollar assets could continue to offer superior total returns that would boost demand for the currency.”

It added; “While we still anticipate that more balanced growth will weigh on the strong Dollar over time, and policymakers will surely take recent currency moves into account to limit further Dollar strength, our revised forecasts reflect our view that eventual depreciation has been downgraded and delayed.”

Markets are even more confident that the Federal Reserve will not be able to sanction an early cut interest rates.

In this context, there has been greater attention on the medium-term outlook.

The US growth-related data was weaker than expected during the week with third-quarter annualised GDP growth at 1.6% from 3.4% the previous quarter and below consensus forecasts of 2.5%. During the week, there was fresh speculation that Trump, if elected in November would push for a weaker dollar.

MUFG expects little immediate impact, but added; “However, doubts could grow about that if Trump was to pursue a more explicit weak currency policy.”

MUFG also noted the potential for political pressure on the Fed; “The ‘elephant in the room’ so to speak in focusing on FX policies is of course the Fed and if complaints about the dollar’s strength are to grow it will inevitably lead to increased criticism by Trump of Fed Chair Powell and makes it even more likely that Trump would replace Powell with someone more aligned to policies that would lead to dollar depreciation.”

It added; “Increased politicisation of the US dollar with the dollar at these more elevated levels will certainly act to reduce speculative dollar buying at stronger and stronger levels.”

The April German IFO index strengthened for the third successive month which helped trigger a stronger assessment of the German economy.

Evidence of a Euro-Zone recovery would have potential currency-market implications, especially if it coincides with evidence of a weaker US economy.

MUFG commented; “If the improving surveys are backed up by hard evidence of a pick-up in growth in Q2 that could help to provide more support for the EUR heading into the 2H of this year. In these circumstances, it will become more challenging for EUR/USD to keep moving lower as it moves closer to the lows from last autumn between 1.0400 and 1.0500.”

It added; “Unlike last year, the reversal of the negative energy price shock in Europe should help to prevent the pair from moving even closer to parity.”

Socgen also noted the potential for a change in the current market narrative; “the market is left with nagging doubts about two key economic themes – the dire situation of the German economy thanks to the war in Ukraine, higher gas prices and a weaker Chinese economy; and US exceptionalism.

US PMI business confidence data was weaker than expected.

Socgen commented; “The continued strength of the US economy has been more surprising and has been the driver of dollar strength and Fed re-pricing. Today’s data may only tell us that the situation in Europe is improving, and slowly at that. But the data and reaction do highlight the markets’ sensitivity to any news that points to a change in the ‘US is awesome, Germany is rubbish’ story that has dominated FX and rates markets.”

Credit Agricole; “given that the US rates markets are pricing in less than two rate cuts this year, we believe that it would take a rather strong inflation print to push market expectations even further in favour of a less dovish Fed stance.”

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TAGS: Euro Dollar Forecasts