Articles

Gold Price Forecast: XAUUSD reclaims $1900 post-US PCE amid US dollar weakness

223314   April 30, 2022 01:45   FXStreet   Market News  

• The Gold Price prepared to print its first monthly loss since January 2022, down almost 1.50%.
• After European equities closed, the market sentiment shifted negatively, weighed on by US dollar profit-taking.
• Gold Price Forecast (XAUUSD): Solid support around the 100-DMA lifted prices beyond $1890.

The Gold Price grinds higher on April’s last trading session, after bouncing from weekly lows around $1890, amidst a broad US dollar weakness session, as traders book profits before month’s end. At the time of writing, XAUUSD is trading at $1909.78 a troy ounce during the North American session.

Of late, the market sentiment shifted and turned sour as US equities are recording losses. Meanwhile, Asian and European stock indices finished the week on a higher note, underpinned by Wall Street’s mood on Thursday. Meanwhile, the Fed’s favorite gauge of inflation, the Core PCE for March, heightened by 5.2% y/y, lower than the 5.3% expected by analysts, signaling that inflation could be peaking. Nevertheless, inflation is not out of the woods, and the Employment Cost Index in Q1 jumped from 1% to 1.4%, which could make the Federal Reserve’s goal of a 2% inflation target more difficult.

In the meantime, the US Dollar Index failed to get traction, following inflationary readings, sitting comfortably around 103.400, down half of the percentage point, contrarily to US Treasury yields rising. The US 10-year benchmark note aims higher six and a half basis points, up at 2.891%.

Elsewhere, recent China’s Covid-19 outbreak seems to be controlled by the health office, a signal of relief for the markets, as increased lockdowns in Shanghai cloud the global economic scenario. Additionally, the continuation of the Russia-Ukraine conflict weighs on the inflationary outlook due to the energy/oil embargo that Russia began against “unfriendly” countries.

In the week ahead, the Federal Reserve’s May monetary policy meeting looms is the month’s highlight. However, market participants will keep a close eye on PMIs to be released next week, alongside the Nonfarm Payrolls for April.

Gold Price Forecast (XAUUSD): Technical outlook

The XAUUSD daily chart shows that the yellow metal remains upward biased. Thursday’s low at $1872, which pierced the 100-day moving average (DMA) at $1878.82, was a solid support area as Gold bulls entered the market and lifted the price beyond last month’s low at $1890, reclaiming the $1900 mark.

With that said, the XAUUSD’s first resistance would be April’s 25 daily high at 1934.40. Break above would immediately expose the 50-DMA at 1939.73, followed by an upslope trendline around the $1940-50 area, and then March 24 daily high at $1966.

Key Technical Levels

Colombia National Jobless Rate in line with forecasts (12.1%) in March

223313   April 30, 2022 01:40   FXStreet   Market News  

Feed news

Dallas Fed trimmed mean PCE 3.1% vs 4.0% prior

223312   April 30, 2022 01:26   Forexlive Latest News   Market News  

• Prior was +4.0% m/m annualized
• 12 month PCE +3.7% vs +3.6%

Some large one-month drags on price that were trimmed:

• Used autos and light trucks
• Televisions
• Carpets and floor coverings

Some large one-month boosts to price that were trimmed:

• Fuel oil
• Gasoline
• Vehicle rentals
• Air transport
• Window coverings
• Hotels

Included in the trimmed mean (annualized one-month changes):

• Owner-occupied mobile homes +5.3%
• Women’s clothing +4.7%
• New autos +3.8%
• Sporting equipment -1.0%
• Health insurance +1.4%
• Hospitals +3.4%
• Life insurance +0.1%

Baker Hughes oil rig count is up three on the week two to 352

223311   April 30, 2022 01:09   Forexlive Latest News   Market News  

The weekly Baker Hughes rig count data is showing:

• Oil rigs up 3 to 552
• Natural gas rigs unchanged at 144
• Total rigs up three to 698

Crude oil prices are trading at $106.81. That’s up $1.50 on the day. The high price reached the short of $108. The low price was down at $104.54.

GBP/JPY set to end week subdued just above 163.00 as focus turns to next week’s BoE meeting

223310   April 30, 2022 00:35   FXStreet   Market News  

• It’s been a quiet session for GBP/JPY, with the pair just above 163.00 but capped by its 21DMA.
• GBP/JPY still looks set to end the week lower by roughly 1.1%, as UK growth concerns outweighed the dovish BoJ.

It’s been a quiet session for GBP/JPY, with the pair nudging slightly higher back above the 163.00 level, but with the upside remaining contained for a second session running by the 21-Day Moving Average, which currently sits at 163.40. Global yields have risen on Friday, wth recent upside in US yields as a result of evidence of stronger than expected wage growth in Q1 of this year, thus preventing the yen from mounting a comeback.

Nonetheless, after Thursday’s post-dovish BoJ meeting battering, the yen bears seem fatigued and content to see out the week in subdued fashion. Despite recent yen weakness that has seen GBP/JPY bounce over 2.0% from earlier sub-160.00 weekly lows, the pair still looks set to end the week lower by roughly 1.1%.

UK growth fears as evidence build of economic weakness amid the country’s worst cost-of-living squeeze in a decade were front and centre this week. While the BoE is expected to raise interest rates by a further 25 bps next week, the bank is expected to further moderate its tone on the need for further interest rate hikes amid growing concern about the economy.

This shift in expectations was attributed as a key driver behind this week’s broad GBP weakness. Aside from next week’s BoE meeting, bond yields and risk appetite will remain key drivers of the pair. While rising fears about global growth and recent weakness in risk appetite argue for GBP/JPY to continue pulling back next week, if hawkish central banks spark further upside in global bond yields (the Fed is going to lift interest rates by 50 bps next week), that could further weaken the yen’s appeal.

GBP/USD: Bearish fundamentals remain in place but selloff overdone – MUFG

223309   April 30, 2022 00:17   FXStreet   Market News  

Analysts at MUFG Bank, point out the GBP/USD pair has weakened sharply after breaking below the 1.3000-level. They consider the pound became deeply oversold and weakness has overshot short-term fundamental drivers increasing the likelihood of a temporary relief rally.

Key Quotes:

“Unsurprisingly technical indicators are signalling that the GBP is now heavily oversold against the USD in the near -term which increases the likelihood of a temporary relief rally. The 14-day RSI has reached its low est level since March 2020. At the same time, our short-term regression model is signalling that cable has overshot fundamental drivers to the downside.”

“In light of the building risks for a sharper slow down for the UK economy as the cost of living crisis takes more of a toll on activity, we expect the BoE to maintain a more cautious outlook over the need for further tightening as it finely balances upside risks to inflation against downside risks to growth when setting policy. It should favour the BoE sticking to smaller 25bps hikes at upcoming policy meetings. The UK rate market is pricing in 25bps hikes at all six remaining MPC meetings this year. GBP weakness w ould be reinforced if the BoE signals that rate hikes could be paused sooner in response to weaker growth.”

“The fundamental outlook continues to favour further GBP weakness. A cautious message from the BoE should support a weaker GBP in the week ahead. The main risk is that the GBP is already heavily oversold.”
 

USD/CAD jumps to 1.2820 as US dollar recovers strength

223308   April 30, 2022 00:12   FXStreet   Market News  

• USD/CAD resumes upside despite upbeat Canadian GDP data.
• US dollar recovers from correction as US yields move higher.
• Consumer income and spending data from the US surpass expectations.

The USD/CAD printed fresh daily highs on Friday during the American session above 1.2800. It rebounded from three-day lows it hit earlier after Canadian data at 1.2718.

Dollar surges again

On Friday, the greenback was correcting lower across the board, but it turned to the upside, particularly against commodity currencies. The DXY is still down for the day, but now by 0.45%, off lows.

The US dollar started to recover after the personal consumption and personal spending report that showed larger-than-expected increases. The same report showed no surprises in the Core PCE. The Chicago PMI dropped from 62.9 to 58.5 and the Consumer Sentiment Index from the University of Michigan declined to 65.2.

The USD/CAD bottomed after Canadian GDP data showed an increase of 1.1% in February, above the 0.8% of market consensus. “With February’s upside surprise and solid flash estimate for March, Q1 GDP is now tracking well above BoC projections at 5.6%. This will add more pressure for the Bank to return policy to neutral, and while we continue to see a high bar for 75bps, we look for a 50bp hike in June and July”, said analysts at TD Securities.

Later in the day, USD/CAD bounced to the upside on the dollar’s strength and printed a fresh daily high at 1.2820. The pair is hovering around 1.2800, headed toward the fifth weekly gain in a row.

Technical levels

Canada: Q1 number now seems much stronger than expected – CIBC

223307   April 30, 2022 00:05   FXStreet   Market News  

Canadian GDP rose at a 1.1% rate in February, above the 0.8% expected, according to a report released on Friday. Analysts at CIBC, point out that the Bank of Canada now has even more ammunition to justify a non-standard 50 bp interest rate hike at the next meeting, and likely the one thereafter.

Key Quotes: 

“After hitting the fast lane in February, advance data suggests growth eased to a steadier pace in March. The 1.1% gain in February was even larger than the consensus and advance estimate (+0.8%), and was followed by a steadier, but still solid, 0.5% gain in March. This puts Q1 as a whole on track for a 5.6% annualized growth rate, well above the 3% forecast contained within the Bank of Canada’s latest MPR.”

“The Canadian economy continues to surprise and the Q1 number now seems much stronger than expected. This would put our annual forecast at around 4%, all else equal, a few ticks higher than our last projection. However, we’ve seen on occasion big gaps between these monthly data on GDP by industry data and the subsequent quarterly GDP figures, which are measured by the sources of expenditures, most notably in Q2 2021. We continue to expect a deceleration in growth over the balance of the year as impact of high inflation and rate hikes put a squeeze on Canadians’ spending power and slow the housing market.”

“With another strong release in hand, the Bank has even more ammunition to justify a non-standard 50 bp interest rate hike at the next meeting, and likely the one thereafter. However, with growth likely to slow in the second half of the year and inflation poised to decelerate, we still think that the path higher for interest rates won’t be as steep as financial markets are currently expecting, and we still see a peak of 2.5% reached in early 2023.”

US: Consumer income is growing, but not as fast as inflation – Wells Fargo

223306   April 30, 2022 00:05   FXStreet   Market News  

Data released on Friday showed persanal income rose 0.5% in March and a 1% increase in personal spending. Consumers had to dip into savings to pull it off, but not only did real personal expenditures rise in March, revisions lifted real February spending into positive territory as well, noted analysts at Wells Fargo.

Key Quotes: 

“In the wake of yesterday’s negative GDP print, the additional detail from today’s March personal income and spending report point to consumer spending growth that is outpacing the fastest inflation in decades.”

“Overall personal income rose 0.5% in March with broad-based gains across major components of income. But once adjusting for higher prices during the month—the PCE deflator rose 0.9% in April—real disposable income told a slightly different story, sliding 0.4% from a month earlier. Upward revisions to prior months’ data lifted the level of real disposable income by about $70 billion and turned income growth positive in February. Still, the trend is clear with real disposable income down in ten out of the past twelve months, leaving income about 4% below the level implied by its pre-pandemic trend.”

“As persistently high inflation has weighed on overall income growth, households have had to make tough decisions around purchasing patterns and increasingly rely on their balance sheets to fund spending. The personal saving rate slid to 6.2% in March, which not only marks a fresh cycle low but marks the lowest monthly rate at which households have saved at in almost nine years.”

“For now at least, consumers have been able to absorb the worst price hikes in decades by dialing back saving, a trend that likely will continue in the months ahead amid persistently high prices and slowing income growth but isn’t sustainable over the medium-to-longer term.”
 

European shares ending with gains to end the trading day.

223305   April 29, 2022 23:45   Forexlive Latest News   Market News  

The major European indices are closing higher on the day. A snapshot of the provisional closes are showing:

• German DAX, +0.7%
• France’s CAC, +0.25%
• UK’s FTSE 100, +0.4%
• Spain’s Ibex, +0.9%
• Italy’s FTSE MIB +0.75%

For the trading week, the major indices are down modestly lower with the exception of the UK FTSE 100 :

• German DAX, -0.4%
• France’s CAC, -0.75%
• UK’s FTSE 100 +0.3%
• Spain’s Ibex, -0.75%
• Italy’s FTSE MIB, -0.2%

USD/JPY retreats from multi-decade-highs and meanders around 129.80s

223303   April 29, 2022 23:45   FXStreet   Market News  

• The USD/JPY is set to record its biggest monthly gain since November 2016 so far, up 6.70%.
• The market mood is mixed, as European stock indices rose while US equities fell.
• USD/JPY Price Forecast: Though it remains upward biased, it is in a correction.

The USD/JPY pullbacks from two-decade highs during April’s last trading day and edges lower some 0.52%, amid broad US dollar weakness, courtesy of traders booking profits ahead of next week’s Federal Reserve monetary policy meeting. At around 129.80, the USD/JPY is set to finish the month with hefty gains close to 7%, the greenback’s most significant gains since November 2016.

Mixed sentiment and US dollar weakness, a headwind for the USD/JPY

Sentiment shifted to a mixed one, as European equities rise while US ones fall. The Fed’s favorite gauge for inflation, the Core Personal Consumption Expenditure (PCE) for March, rose by 5.2% y/y, lower than the 5.3% foreseen, a sign that inflation might be peaking. However, analysts of ING in a note wrote that “even if supply chains improve and we see geopolitical tensions ease a little, we doubt this inflation measure will be below 4% before early next year.”

Also, the Bank of Japan’s (BoJ) commitment to its ultra-loose monetary policy weighed on the JPY throughout the week. The BoJ kept rates unchanged on Thursday and reiterated that it would buy an unlimited amount of 10-year JGBs at a fixed 0.25% rate. The BoJ’s expressed that they will ease policy without hesitations as needed with an eye on pandemic impact.

Meanwhile, China’s Covid-19 worries wane as its health agency emphasized its commitment to COVID zero, but instead would optimize its response. Also, further economic stimulus from Beijing on COVID affected industries and small firms improved the market mood.

Also read: USD/JPY Weekly Forecast: The fallacy of devaluation or the BoJ is out of ideas

Elsewhere, the recent Ukraine-Russia developments have taken a backseat so far. However, Ukraine’s President Zelenskyy said that Kyiv is ready for immediate negotiations for evacuation from the Azonstal plant.

In the meantime, the US Dollar Index, a measurement of the greenback’s value against a basket of its peers, retraces 0.44%, sitting at 103.215, a reflection of profit-taking and month-end flows. Contrarily to the previously mentioned, the 10-year benchmark note rate sits at 2.904%, up almost eight basis points from yesterday’s close.

Therefore, the USD/JPY is ongoing through a correction on Friday. However, financial analysts speculate that the FOMC’s May meeting could be a “buy the rumor, sell the fact” event due to the steeper rally posted by the greenback. USD/JPY traders might need to be aware of it because a deeper correction might be on the cards.

USD/JPY Price Forecast: Technical outlook

The USD/JPY remains upward biased, despite Friday’s fall. For the USD/JPY pair to shift to a neutral bias, a daily close below 129.40 is needed, which could threaten to drag prices towards April’s 27 swing low at 126.94. Nevertheless, that scenario is unlikely to happen unless a fundamental shift from Japanese authorities could boost the JPY.

Upwards, the USD/JPY first resistance would be 130.00. A break above would expose 131.00, followed by the multi-decade-high around 131.25. On the other hand, the USD/JPY’s first support would be 129.00. A breach of the latter would expose April’s 129.40 daily high, followed by April’s 28 daily low at 128.33.

GBP/USD Weekly Forecast: In search of a bottom, with eyes on Fed and BOE

223300   April 29, 2022 23:40   FXStreet   Market News  

• GBP/USD battered to 21-month lows just above 1.2400.
• The US dollar index surged to its highest level in 20 years.
• Cable could see a technical rebound ahead of the Fed and BOE decisions.

There was no reprieve for GBP bulls, as the previous week’s selling spiral gathered steam and smashed GBP/USD to its lowest level since July 2020 at 1.2410. King dollar reigned supreme amid heightening volatility within the G10 fx space throughout the week. The monetary policy divergence between the Fed and BOE will remain the main underlying theme ahead of policy announcements and US Nonfarm Payrolls.

GBP/USD: A brutal week

GBP/USD set off the week on the wrong footing, extending Friday’s 200 pip meltdown below the 1.3000 level. Over the week, the currency pair lost roughly 2.5% and hit 21-month lows, as the US dollar was on a rampage amid varied factors and a relatively better market mood. The US dollar index reached its highest in 20-years just shy of the 104.00 level.

In the absence of any first-tier economic releases from the UK, the major remained at the mercy of dollar price action. The greenback remained the most sought-after currency, as aggressive Fed rate hike expectations shot through the roof, with the CME’s FedWatch tool showing a 96.5% probability of a 50 bps rate hike in May and a 85% chance of a 50 bps June lift-off.

Further, China’s covid lockdowns extended into Beijing while the Shanghai-reopening hopes faltered on a fresh uptick in infections. Chinese lockdowns-induced supply chain constraints raised concerns over global growth prospects, while Europe battled an energy crisis, in the face of the Russia-Ukraine war. In times of uncertainty and market unrest, investors took refuge in the ultimate safe-haven, the dollar. Additionally, the dovish BOJ policy outcome triggered a massive slump in the yen, which powered the unrelenting dollar upsurge.

Meanwhile, the divergence between the Fed and BOE also remained in play and kept GBP bulls at bay. Although a 1.4% contraction in the US economy in the first quarter of 2021 prompted a profit-taking decline in the buck heading into the weekly close. This helped the pound breathe a sigh of relief but it remains to be seen if the GBP/USD recovery has additional legs.

Week ahead: The Fed, BOE and NFP

The first week of May is likely to be the most eventful and busy week of the month, loaded with the critical Fed and BOE interest rate decisions midweek while the US NFP release will come out on Friday.

On Monday, light trading will likely persist in GBP/USD, as Chinese and the UK markets remain closed in observance of Labor Day. Therefore, thin liquidity could exaggerate moves, aiding the turnaround in cable. The US ISM and S&P Global Manufacturing PMIs, however, could offer some incentives.

Tuesday’s UK S&P Global Final Manufacturing PMI and US JOLTS Job Openings will have little to no impact on the pair, as the Fed meeting commences. The US ADP employment data due on Wednesday will be largely ignored, as the Fed decision and Chair Jerome Powell’s press conference will hog the limelight. Fed and BOE expectations will have a significant influence on the pair ahead of policy announcement.

The US central bank is seen raising interest rates by 50 bps, lifting the target range to 0.75%-1%. In contrast, the BOE will hike the key rate by 25 bps to 1%. The forward guidance on monetary policy, as well as, on the inflation and growth outlook from both the central banks will hold the key for a fresh direction in GBP/USD.

Markets will have little time to settle the dust over the central banks’ events, as US employment data for April will drop in on Friday. The American employment sector remains solid and will continue to justify the hawkish Fed outlook.  

GBP/USD: Technical outlook

Despite edging higher on Friday, the Relative Strength Index (RSI) indicator on the daily chart stays below 30, suggesting that GBP/USD has more room on the upside to correct its oversold conditions. 1.2600 (Fibonacci 23.6% retracement of the weekly decline) aligns as initial resistance. If that level turns into support, the next recovery targets could be seen at 1.2700 (Fibonacci 38.2% retracement) and 1.2780 (Fibonacci 50% retracement).

In case the pair comes under bearish pressure and makes a daily close below 1.2410 (21-month low touched on April 28), additional losses toward 1.2300 (static level from June 2020) and 1.2160 (static level) could be witnessed.