As per the prior analysis, AUD/USD Price Analysis: Bulls rest up at 50% mean reversion target, the price has started to melt from the resistance of the 50% mean reversion area on the daily chart. There are now prospects of a downside continuation for the days ahead.
The price is being met by sellers at the resistance zone and should the bears commit beyond the 0.6950s, the case for a downside continuation of the broader bear trend will be strong.
From a four-hour perspective, the price has moved in on what could be a support zone, resulting in a reversion to retest the old support near 0.6990. If bears commit to there, then the path of least resistance will likely be to the downside for a fresh daily low towards 0.6750/70.Full Article
Gold spot (XAU/USD) is trading negative in the day, though it remains at familiar levels, trapped in the $1800-20 region amid the lack of a catalyst that can push the bright metal beyond its current boundaries. At the time of writing, XAU/USD is trading at $1813.69
Gold remains on the defensive, despite having a risk-off environment, which usually helps the yellow metal. However, US dollar strength overshadows XAU/USD’s prospects, as the greenback gains some 0.18% against a basket of currencies, portrayed by the US Dollar Index at 103.486. Also, on Tuesday, Federal Reserve Chair Jerome Powell said that “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that. If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.”
Meanwhile, some financial analysts believe that the Fed will struggle to achieve a soft economic landing, meaning that it could cause a recession if needed to bring inflation down. This environment could be positive for gold, but bulls have been unable to challenge the 200-DMA at around $1837, much less the $1890 level, which needs to be reclaimed if they aim to lift prices above $1900.
Analysts at TD Securities wrote in a note that “With downside momentum firming among the precious metals complex, and broad macro liquidations also weighing, we continue to see further downside potential for gold. ETF holdings have fallen for a ninth straight day while positioning analytics still argue for the potential of additional pain for gold bugs.”
Macroeconomic-wise, the US docket featured Building Permits and additional housing data, which came mixed. Building Permits rose to 1.819 million, higher than the 1.812 million foreseen, but Housing Starts increased by 1.724 million, lower than the 1.765 million estimated, beginning to show signs of the Federal Reserve tightening. Later in the day, Philadelphia’s Fed Patrick Harker will cross wires.
At the time of writing, XAU/USD is trading below the two-year-old upslope trendline, drawn from September 2018 swing lows, as depicted by the weekly chart. It’s also worth noting that the 50-week moving average (WMA) crossed under the 100-WMA, each located at $1831.76 and $1840.96, respectively, a signal of sellers’ strength entering the market.
With that said, XAU/USD’s first support would be $1800. A breach of the latter would put the YTD lows at $1780.18 in play, a level that needs to be broken by gold bears if they aim to push prices towards $1700. Once XAU/USD bears reclaim $1780.18, the last line of defense would be December 15, 2021, swing low at $1752.35, followed by $1700.
Reuters reported that Philadelphia Federal Reserve Bank President Patrick Harker on Wednesday said he expects the US central bank to deliver two more half-point rate hikes before switching to quarter-point increments until the “scourge” of inflation is beaten back.
“Going forward, if there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July,” Harker said in remarks prepared for delivery to the Mid-Size Bank Coalition of America.
“After that, I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”
While the comments have had no direct impact on markets, there is an undertone of hawkishness at the Fed that is roiling markets on Wednesday.
As a consequence, the US dollar is firmly higher on Wednesday, on pace to snap a three-session losing streak. Rising inflation has knocked sentiment following yesterday’s WSJ interview with the Federal Reserve Chair Jerome Powell who struck a more hawkish tone.Full Article
Safemoon price signals an upcoming price hike. The trade setup could produce very profitable returns if the technicals manifest.
Safemoon price displays subtle bullish cures reflected in the current price action. The Safemoon price attempts to breach through a previous degree wave four triangle. These tiny triangles usually produce very sharp retracements, which have been known to induce new bull rallies by trapping shorts sellers in the process.
Safemoon price also reflects a strong bullish optimism on the Relative Strength Index. The indicator displays the current price of $0.0005192, extending into overbought territories but with little resistance preventing a new rally. The ultimate trade setup will first be a breach through the triangle apex at $0.0006000. If the bulls can establish a rally, the price should continue rising higher. An ideal entry will be a retracement of the apex followed by bullish engulfing candles with decent volume on the 4-hour Chart.
SFM/USDT 4-Hour Chart
Invalidation is vital for this setup. First, the bulls must break away from the apex and then retrace. On the second breakout from the retraced apex, traders can place a stop loss at $0.0004067 and aim for the trend line at $0.0007792. If the bears can breach the $0.0004067, consider this trade setup a failure. The bears could then aim for lower targets at $0.0002746, resulting in a 40% decrease from the current Safemoon price.
The major US indices are all closing sharply lower as concerns about the economy and inflation way on values.
Target announced earnings before the open and they came in much weaker than expected as higher costs are starting to eat into the margins. The stock is ending the day down $53.55 or -24.87%. Ouch.
If transportation/employee costs are hurting Target, a company like Amazon must be really feeling the pinch. It’s shares are down $-164 today or -7.12%.
A look at the final numbers are showing:
None of the Dow 30 stocks closed positive on the day:
Verizon was the best performer at -0.14%
Other big losers on the day included:
After the close, Cisco Systems announce their earnings and revenues for the current quarter. Earnings-per-share came in at $0.87 vs. 86% estimate. Revenues came in at $12.84 billion which was lower than the $13.34 billion estimate. The stock is trading down over 11% in after-hours trading.
“When sorrows come, they come not single spies, but in battalions” – Claudius in HamletFull Article
Patrick Harker, president and CEO of the Federal Reserve Bank of Philadelphia
more to come
50bps at the next two meetings is being repeated by many Fed officials.Full Article
It’s tough to look past US retailer Target as the catalyst for the rout in markets today. The company badly missed on earnings and was down 25% in the pre-market. The problem for the company was margin compression. Sales held up but costs escalated far beyond expectations and the market is sensing that pricing will need to rise. The issue is that will push more people towards spending on staples rather than discretionary goods. It will also add to the case for central bank tightening.
Powell yesterday signaled a determination to hike until inflation is under control and with costs set to rise on the US retail side, the timeline for that has gotten longer.
There’s also a growing sense that a recession is more likely. That can become a self-fulfilling prophecy as companies scale back capex plans or downsize on staff.
In any case, once the selling started there were almost no bounces. It was a punishing move that was accompanied by a flight to safety in bonds and JPY. It was the worst day for the S&P 500 since June 2020 as tech and retail were crushed.
Economic data underscored the issue as Canadian CPI was hot — particularly on the core. In the US, housing starts modestly undershot expectations.
USD/CAD initially fell to session lows on the CPI report but the direction reversed as stock and oil fell. Crude had touched as high as $112.39 but finished $5.50 lower.
AUD, EUR and GBP all tracked the risk trade and are slated to close at the lows. UK GBP wasn’t quite as hot as feared but the knives are out for the MPC with inflation running at 9%.
There’s a growing sense that the Emperor isn’t wearing any clothes as faith falters in central bankers and politicians.
Elsewhere in FX, there was an idiosyncratic move in the Swiss franc after SNB chairman Thomas Jordan said they’re ready to act if inflation strengthens. He also warned they must be vigilant on prices. It’s the first hint that they’re ready to join the rate-hiking party. If so, it would lead the BOJ alone as the last holdout; and Japanese CPI is due on Thursday.Full Article
What you need to take care of on Thursday, May 19:
The greenback edged higher against its high-yielding rivals but eased against safe-haven currencies, reflecting the dismal market mood.
Inflation was the primary catalyst of the latest bout of risk aversion. The EU Consumer Price Index was confirmed at 7.4% YoY in April, while the UK CPI increased by 9% in the year to April. Finally, the Canadian benchmark hit 6.8%. Overheating price pressures are a drag on economic growth, already undermined by supply-chain issues and the Eastern European crisis.
Two US institutes, Wells Fargo and S&P, downwardly revised growth forecasts but expect inflation to remain high. Wall Street resumed its slump, with the three major indexes sinking in the red. The DJIA is about to close over 1,100 lower, while the S&P 500 and the Nasdaq Composite are down over 4% each.
The yield on the US 10-year Treasury note stands below 2.90%, as investors rushed into bonds’ safety.
The EUR/USD pair trades around 1.0460, while GBP/USD is now at 1.2340. The AUD/USD pair plunged to 0.6960 while USD/CAD recovered the 1.2800 threshold. On the other hand, the USD/CHF fell to 0.9880 while USD/JPY trades in the 128.20 price zone.
XAUUSD was unable to attract speculative interest, now hovering around $1,816 a troy ounce. Crude oil prices edged lower, with WTI now changing hands at $106.90 a barrel.
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The EUR/JPY is plunging more than 1.50% on Wednesday, reversing Tuesday’s gains as EUR/JPY bears regained control and pushes the exchange rate below the head-and-shoulders neckline, keeping the pattern in play. At the time of writing, the EUR/JPY is trading at 134.11.
The market sentiment remains negative, carrying on from the European to the whole New York session. Also, EU economic data, particularly inflation figures, rose below than expected and in line with previous readings, easing the prospects of a hawkish European Central Bank (ECB).
In the overnight session, the EUR/JPY opened at around 136.50s and reached a daily high at 136.67 before tumbling 220-pips, breaking below the 50, 100, and 200-hour simple moving averages (SMAs), as sentiment turned sour
On Tuesday, the EUR/JPY bias shifted upwards when the cross-currency pair rallied more than 200-pips. Nevertheless, Wednesday was revenge day for EUR/JPY bears, which caused a drop of more than 220-pips during the day and kept the head-and-shoulders chart pattern in play, which was threatened by Tuesday’s price action.
Albeit the bears are in control, they are not out of the woods yet. A break below 132.65 is needed to increase the possibility of reaching the head-and-shoulders chart pattern target at 130.00.
That said, the EUR/JPY first support would be 134.00. Break below would expose the May 16 daily low at 133.74, followed by May 13 swing low at 133.09 and then the 100-day moving average (DMA) at 132.25, before exposing the 200-DMA at 131.10.
The AUD/USD pair met sellers in the 0.7040 price zone for a second consecutive day, and bulls gave up, resulting in the pair falling to 0.6959. It trades a handful of pips above the latter as Asian traders reach their desks, and is at risk of falling further. The American dollar surged particularly during US trading hours, as the market’s sentiment took a turn for the worst. The usual suspects were the culprits, as investors were concerned about slowing economic growth and persistent inflationary pressures.
Data wise, Australia published the April Westpac Leading Index, which resulted at -0.15%, down from 0.33% in the previous month. The country also reported the Q1 Wage Price Index, up a modest 0.7% in the quarter, and raising by 2.4% on an annual basis. Australia is set to report its April employment figures on Thursday. The country is expected to have added 30K positions in the month, while the unemployment rate is foreseen down to 3.9% from the current 4%
The AUD/USD pair is bearish, according to the daily chart, pulling back sharply from the 50% of its latest daily slide measured between 0.7265 and 0.6828 at 0.7045. In the mentioned time frame, technical indicators have resumed their declines within negative levels, while the 20 SMA keeps heading firmly lower far above the current level. The immediate resistance is the 38.2% retracement of the mentioned decline at around 0.7000.
The 4-hour chart shows that the pair is crossing below its 20 SMA, after meeting sellers around a bearish 100 SMA. Technical indicators have turned sharply lower and are currently within neutral readings, although hinting at substantial selling interest.
Support levels: 0.9650 0.6915 0.6870
Resistance levels: 0.7000 0.7045 0.7080Full Article
The EUR/USD pair edged lower on Wednesday, ending the day near a daily low of 1.0475. The pair pulled back from a weekly high of 1.0563 as the market’s mood took a turn for the worse mid-European session following the release of inflation figures. The EU Consumer Price Index growth was confirmed at 7.4% YoY in April, slightly below the preliminary estimate of 7.5%, although the core inflation was upwardly revised to 3.5% from 3%.
But it was not just the EU. The UK reported that the CPI increased by 9% in the year to April, while later it was the turn of Canada, which reported its annual inflation hit 6.8%. Overheating price pressures are a drag on economic growth, already undermined by supply-chain issues and the Eastern European crisis.
Stocks took it negatively, with European indexes closing in the red and Wall Street nose-diving. The Dow Jones Industrial Average shed over 1,000 points intraday amid resurgent demand for safety. The greenback made the most out of it, strengthening against most major rivals.
As for the US, the country published April Building Permits, down 3.2% MoM, and Housing Starts for the same month, which declined by 0.2%, both missing the market’s expectations and further exacerbating the dismal mood.
On Thursday, the European Central Bank will release the minutes of its latest meeting, while the EU will publish the March Current Account and Construction Output for the same month. The US will release April’s Existing Home Sales.
The EUR/USD pair seems to have completed its bullish correction and is on its way to resuming its decline. The daily chart shows that the pair retreated after testing a firmly bearish 20 SMA, while technical indicators have lost their bullish strength. The Momentum is currently consolidating around its midline, while the RSI has already resumed its decline, now at 39.
The 4-hour chart shows that the pair fell after repeatedly failing to overcome a bearish 100 SMA and is now around a mildly-bullish 20 SMA. Technical indicators have retreated from overbought levels, with the Momentum flat at around 100 and the RSI heading south at around 48, hinting at a bearish continuation in the upcoming sessions.
Support levels: 1.0470 1.0430 1.0390
Resistance levels: 1.0520 1.0575 1.0620Full Article
At 158.20, GBP/JPY is down some 2% at the time of writing as risk appetite fades due to concerns about the outlook for global economic growth and rising inflation that has knocked sentiment. The moves in markets could be a delayed reaction to Tuesday’s rhetoric from the US Federal Reserve Chair Jerome Powell who amplified a strong hawkish tone.
Powell pledged the US central bank would ratchet up interest rates as high as needed, including taking rates above neutral, in order to cap runaway inflation that he said threatened the foundation of the economy. The initial reaction was a firmer US dollar and risk-off in financial markets, but the moves were soon pared and the US benchmarks rallied to fresh highs on the day.
However, the mood has been soured on Wednesday on Wall Street. The retailer, Target, reported that higher-than-expected costs ate into its quarterly earnings. The stock fell over 25% and was tracking its worst day since the Black Monday crash on Oct. 19, 1987, highlighting worries about the US economy after the retailer became the latest victim of surging prices.
Interest-rate sensitive mega-cap growth stocks added to the declines on Wall Street and pulled the S&P 500 and Nasdaq lower. Tesla Inc lost 7.5%, Nvidia and Amazon both lost more than 6% and Apple and Microsoft each fell over 4%. Consequently, US Treasury yields have fallen as investors pile into safety, leading to a rout in risk assets. This in turn has put a bid into the yen, sinking GBP/JPY to a low of 158.11 in recent trade.
Meanwhile, the pound is also feeling the heat, losing over 1% vs. the US dollar despite the stronger than expected UK labour data released the prior day that has raised the prospect that the Bank of England may have to go further with policy tightening to rein in inflationary pressures.
However, as analysts at Rabobank argued, ”while a strong labour market is a good reflection of economic health, it is not good news for everyone insofar as higher interest rates will compound the impact of the cost of living crisis for many lower-income households.”
”We continue to view the medium-term outlook for risk appetite as vulnerable and don’t view GBP/USD as being out of the woods,” the analysts at Rabobank argued.
As for Japan’s economy, Wednesday’s release of Japanese preliminary Q1 Gross Domestic Product data was better than expected although it still showed a -0.2% QoQ contraction which highlights the continued vulnerability of the Japanese economy and justifies the central bank’s continued support from both fiscal and monetary fronts.
”While better Japanese current account data and a bout of short-covering have pushed USD/JPY away from its recent highs, we continue to see the potential for further upside over the summer as the Fed continues to hike rates. Assuming an improvement in Japanese economic data, speculation of a potential alteration to the BoJ’s YCC policy has the potential to rein back USD/JPY into the autumn,” the analysts at Rabobank explained.
This week’s inflation data will be important for the yen. Japanese April Consumer Price Inflation is expected to show a headline rate of 2.5% YoY. The analysts at Rabobank, however, explain that underlying inflation is expected at a much softer +0.7% YoY a snapback from the deflationary -0.7% YoY released the previous month. ”Comments from ex-BoJ board member Sakurai have suggested that if inflation were to hold above the 1% y/y area, there may be room for the BoJ to tweak its YCC policy in the autumn.”Full Article