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AUD/USD rally continues, Fed decision loomsThe Australian dollar continues to gain ground and is trading at 0.6795, up 0.42%. The Aussie has been red-hot in June, gaining 4.4%. Australia releases the May employment report early Thursday. The labour market has stayed solid despite aggressive rate hikes from the central bank, but there may be signs of cracks. In April, Australia shed jobs for the first time in three months, including 27,100 full-time jobs. The RBA won't be able to pause rates for an extended period unless it is convinced that the labour market is cooling down. The economy is expected to have gained 15,000 jobs in May and the unemployment rate is projected to remain at 3.7%. US headline inflation fell to 4.0% in May, down from 4.9% and the lowest level since March 2021. This was positive news, but the decline was driven by a drop in lower food and energy prices. Core CPI, which excludes food and energy, fell from 5.5% to 5.3%, a modest drop. Core CPI at its current level is not compatible with the Fed's 2% target, which will likely mean more rate hikes unless the core rate decelerates at a faster clip. The highlight of the week is the Fed rate decision later today. The markets are widely expecting a pause, which would break the streak of ten straight rate hikes. The rate decision may be a foregone conclusion, but the rate statement and Powell press conference could shed some light on what the Fed has planned next. If the Fed stresses that the current tightening cycle is not over, it could dampen risk sentiment and provide some support to the US dollar. AUD /USD is putting pressure on resistance at 0.6804. Next, there is resistance at 0.6863 0.6729 and 0.6632 are providing support
by OANDA
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GBP/USD rebounds on strong UK job numbers, US inflation dropsThe British pound has pushed higher today, courtesy of a strong employment report. In the North American session, GBP/USD is trading at 1.2592, up 0.64%. The UK labour market remains robust, and today's employment numbers were higher than expected.  The economy created 250,000 jobs, up from 182,000 crushing the consensus of 162,000. The unemployment rate dipped to 3.8%, down from 4.0% and below the consensus of 4.0%. As well, average earnings including bonuses jumped to 6.5%, above 6.1%, which was also the consensus. The hot numbers will be a major disappointment for the Bank of England, which was expecting the labour market to show signs of cooling off after 12 straight rate hikes. The jump in wages may pose the biggest concern for the BoE, as high wage growth is a key driver of inflation, which remains very high at 8.7%.  Governor Bailey testifies today before the House of Lords Economic Affairs Committee, and the committee members are likely to grill Bailey on the latest job data. US inflation has been heading lower and the trend continued today. Headline CPI for May fell from 4.9% to 4.0%, just beating the consensus of 4.1%. The core rate dipped from 5.5% to 5.3%, as expected. The Fed's tightening policy has succeeded in pushing inflation lower, but the question is whether the Fed feels that inflation is dropping fast enough. Today's inflation data has the markets buying all into a pause at Wednesday's Fed meeting. The probability of a pause has soared to 99% according to CME's FedWatch, compared to 75% prior to the inflation release. There are Fed members who favour more rate hikes and the expected non-move on Wednesday could be a "hawkish skip" in which the Fed signals that it is taking a breather but more rate hikes are coming. There is resistance at 1.2657 and 1.2734 1.2513 and 1.2436 are providing support
by OANDA
USD/CAD- Canadian dollar extends gains despite weak job dataThe Canadian dollar continues to rally. USD/CAD is trading at 1.3328 in the North American session, down 0.22% on the day. The week wrapped up with Canada's May employment report, which usually is released at the same time as the US job data, but had the spotlight to itself today. The data was a disappointment. Canada's economy shed 17,300 jobs, all of which were full-time positions. This followed an increase of 41,400 in April and missed the consensus of a gain of 23,200. The unemployment rate rose from 5.0% to 5.2%, the first rise since August 2022. The weak job numbers could signal softness in the labour market, which would have major ramifications for the Bank of Canada's rate path. The Canadian dollar lost 40 points in the aftermath of the release but quickly recovered these losses. We could see more movement from USD/CAD on Monday as the markets digest these numbers. The US labour market has shown resilience, as we saw last week with a red-hot nonfarm payroll report. Still, some cracks have appeared, such as the jump in the unemployment rate and a low participation rate. The markets are looking for signs that the labour market is cooling off and jumped all over unemployment claims, which surprised on the upside at 261,000, up from 233,000 a week earlier. A spike in one weekly report isn't all that significant, but the timing of the release close to the Fed meeting may make a Fed pause more likely, and that has sent the US dollar lower against its major rivals. Central banks continue to wrestle with high inflation, which has remained stubbornly high despite aggressive rate tightening. This week alone, the Reserve Bank of Australia and the Bank of Canada raised rates by 0.25%, surprising the markets which had expected a pause. The BoC has made clear that its "conditional pause" stance would be data-dependent and perhaps the markets should have paid more attention to the uptick in April inflation and strong GDP growth in the first quarter. The BoC highlighted both of these indicators in its rate statement as factors in its decision to hike rates, and the central bank will be keeping a close eye on economic growth and inflation ahead of the July meeting. USD/CAD is testing support at 1.3339. Below, there is support at 1.3250 1.3496 and 1.3585 are the next resistance lines
by OANDA
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EUR/USD falls to 5-week low as inflation easesThe euro has edged higher on Thursday, trading at 1.0708, up 0.19%. The currency remains under pressure as the US dollar is flexing some muscles. On Wednesday, EUR/USD touched a low of 1.0635, its lowest level since March 20. There are clear signs of disinflation in the eurozone, as rising interest rates have dampened economic activity. Spain and France reported sharp drops in inflation in April, and Germany has followed suit, with inflation dropping from 7.6% in April to 6.3% in May. This was lower than the consensus of 6.8%. In the eurozone, inflation fell from 7% to 6.1%, below the consensus of 6.3%. Inflation has eased as energy prices have fallen sharply, with food prices also dropping. Most importantly, eurozone core inflation fell to 5.3%, down from 5.6% and below the consensus of 5.5%. The ECB is focussed on the core rate, which excludes energy and food prices. The drop in the core inflation in April will add support for the ECB to take a pause in rate hikes, as early as the July meeting. The US House of Representatives approved the debt ceiling deal on Wednesday. The measure sailed through, by a vote of 314-117. The Senate is expected to vote on the bill later this week, with the government forecast to hit the debt ceiling by June 5th. On the employment front, JOLTS Job Openings rose to 10.1 million, above the upwardly revised prior reading of 9.7 million and the consensus of 94 million. This is another indication that the labour market remains very strong and if the nonfarm payrolls release on Friday is solid, the Fed may have to continue raising rates. Fed members are divided on whether to pause or hike at the June 14th meeting, and Fed swap futures are pricing in a 67% chance of a 0.25% hike at the meeting. There is resistance at 1.0753 and 1.0804 1.0675 and 1.0624 are providing support
by OANDA
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GBP/USD ends slide, employment report nextGDP/USD has started the week in positive territory, after a two-day slide that saw the pound lose 1.5%. In the North American session, GBP/USD is trading at 1.2514, up 0.54%. On the economic calendar, it's a fairly quiet start to the week. There are no releases out of the UK. In the US, the Empire State Manufacturing Index slid to -31.8, versus 10.8 prior and an estimate of -2.5 points. This was the lowest level in three years and pointed to a sharp contraction. Orders and inventories fell sharply, and the report was another indication of the sorry state of the manufacturing sector. The US releases retail sales on Tuesday, with the markets expecting an improvement in the April data. The headline reading is expected to improve to 0.7%, up from -0.6%, and the core rate is projected to rise to 0.4%, up from -0.4%. If the data is within expectations, it would indicate that consumers are still spending, despite a drop in consumer confidence. Friday's GDP release pointed to a UK economy in trouble. March GDP came in at -0.3%, and Q1 growth posted a meagre gain of 0.1%. The economy might manage to avoid a recession, but the BoE is projecting practically zero growth in 2023. The labour market has remained robust in the UK, despite the weak economy and the bite of rising interest rates. However, cracks are appearing - unemployment claims rose by 28,200 in April, and are expected to rise by 31,200 in the April report, which will be released on Tuesday. The Bank of England will be keeping a close eye on wage growth, a driver of inflation. The estimate for average earnings including bonuses for January-March stands at 5.8%, versus 5.9% in the previous release. GBP/USD is putting pressure on resistance at 1.2524. The next resistance line is 1.2604 1.2369 and 1.2289 are the next support levels
by OANDA
USD/CAD extends slide ahead of job reportsThe Canadian dollar continues to rally today and has climbed 120 points since Tuesday. Earlier in the day, USD/CAD touched a low of 1.3490, its lowest level since April 21st. The markets will be treated to key employment numbers on both sides of the border later today. Canada is expected to have added 20,000 new jobs in April, following 34,700 in March. This would be the lowest reading in four months and would be a clear sign that the labour market is weakening as interest rate hikes make their effect felt on the economy. In the US, nonfarm payrolls for April could move the dial on the US dollar ahead of the weekend. The markets are braced for a drop to 179,000, following 236,000 in March. There is a growing feeling that the labour market, which is been surprisingly resilient to relentless rate hikes, is showing cracks. Unemployment claims jumped to 242,000, up from a downwardly revised 229,000 and above the consensus of 240,000. Business optimism remains weak and that could translate into less hiring. If nonfarm payrolls fall to 180,000 or less, I would expect to see the US dollar lose ground, on expectations that the Fed may ease policy. The Fed's rate hike of 25 basis points this week may have been the end of the current rate-hike cycle, in which the Fed has raised rates 10 consecutive times. Fed Chair Powell hinted that the Fed could pause rates as soon as June, although he reminded his listeners that the battle against inflation was far from over and didn't close the door on further hikes. The markets are betting on a pause in June, with a probability of 99%, according to the CME Group. Powell said that given the inflation outlook, rate cuts were not on the table. The markets don't buy it and have priced in a rate cut at around 50% in July and a whopping 88% in September, according to the CME Group. USD/CAD tested support at 1.3492 earlier. Next, there is support at 1.3435 1.3580 and 1.3637 are the next resistance lines
by OANDA
New Zealand Dollar higher ahead of employment dataNZD/USD is considerably higher on Tuesday, trading at 0.6203, up 0.57%. Earlier, NZD/USD rose as high as 0.6218, its highest level since April 19th. New Zealand's labour market has remained robust, despite relentless tightening from the Reserve Bank of New Zealand, which has raised rates to 5.25%. We'll get a look at first-quarter employment numbers later today, with the markets expecting solid numbers. The unemployment rate is projected to come in at 3.5%, a touch above the 3.4% rate in Q4 of 2022. Employment change is expected at 0.4%, following a Q4 read of 0.2%. The RBNZ would like to see the labour market weaken in order to hasten the fall of inflation, which remains its number one priority. The central bank will also release the Financial Stability Report later today, which will provide insights into the Bank's take on inflation and growth. Investors will be looking for hints on rate policy, with the RBNZ meeting next on May 24th. Policy makers would like to pause rates and provide households with a bit of relief, but that will depend on the data, including inflation expectations which will be released next week. The Fed meets on Wednesday and a 25-basis point hike is widely expected, with a 93% probability according to the CME Group. The banking crisis, which reappeared with First Republic Bank's shares plunging, is off the radar for now after JP Morgan agreed to purchase First Republic's assets. Still, credit conditions have tightened, which is estimated to be equivalent to a Fed hike of 25 or perhaps 50 basis points. That fallout is unlikely to prevent a Fed hike on Wednesday but could well lead the Fed to wind up its current tightening cycle earlier than anticipated. NZD/USD tested resistance at 0.6209 earlier today. Above, there is resistance at 0.6332 0.6133 and 0.6072 are the next support levels
by OANDA
GBP/USD - Pound rebounds as wage growth remains high, CPI expectThe UK employment report for March was a mixed bag. The number of unemployed persons jumped by 28,200, after a decline of 18,000 in February and higher than the estimate of -11,800. The unemployment rate nudged higher from 3.7% to 3.8%. These numbers, which point to a slight weakening in the labour market, were overshadowed by a jump in wage growth. Average earnings excluding bonuses hit 6.6% y/y in the three months through February, versus the revised upwards January read of 6.6% and the estimate of 6.2%. Wage growth remains stubbornly high, despite the Bank of England's steep tightening and that has to be a key concern for Bailey & Company. As wages continue to accelerate, the concern of a wages/price spiral remains very real and supports another rate hike at the May meeting. Inflation rose in February to 10.4%, up from 10.1%, and Wednesday's inflation report will be a crucial report card for the BoE. If inflation doesn't fall below 10% (the forecast stands at 9.8%), it's hard to see how the BoE can ease up on its relentless rate hikes. The wage growth numbers were enough for Goldman Sachs to upwardly revise its rate expectations for May from a hold to a 25 basis-point hike. The UK's uncertain economic landscape has become cloudier as hundreds of thousands of public sector workers are striking or planning to strike due to wage concerns. Workers have seen their real income fall as inflation has been at double-digit levels. The government has called for wage restraint in its battle to curb inflation, but strikers won't be in the mood to compromise as long as wages fail to keep pace with inflation. GBP/USD tested resistance at 1.2436 earlier in the day. The next resistance line is 1.2526 There is support at 1.2325 and 1.2235
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AUD/USD - Australian dollar jumps on sizzling jobs reportAustralia posted a blowout employment report today, giving the Australian dollar a strong boost. The economy created 53,000 new jobs in March, after a downwardly revised 63,600 a month earlier. This crushed the estimate of 20,000 and especially impressed as full-time employment increased by 72,000 (part-time decreased by 19,200). Unemployment was unchanged at 3.5%, below the forecast of 3.6%. What can we expect from the RBA? The central bank paused in March for the first time in the current rate-tightening cycle and Governor Lowe made clear that another pause was data-dependent. The next meeting is on May 2nd and the odds of a pause have eased to 78%, compared to 94% before the employment release. Australia releases the March inflation report less than a week prior to the meeting, and if inflation is higher than expected, the RBA will have to consider a 25-basis point increase in order to cool down the job market and inflation. The recent bank crisis, which roiled the global financial markets, appears to have eased. Still, the extent of the fallout of the collapse of four US banks and Credit Suisse is not yet clear, and central banks need to give consideration to the crisis in mind as they determine their rate path. RBA Deputy Governor Bullock addressed this issue on Wednesday, saying the RBA had considered a pause well before the bank crisis, and the bank decided on the non-move in order to protect job gains and to take into account lags in rate policy. Bullock maintained that there were no signs that the bank crisis had caused a tightening in financial conditions in Australia. There is resistance at 0.6897 and 0.6791 AUD/USD tested support below 0.6700 earlier today. The next support level is 0.6608
by OANDA
USD/CAD shrugs despite strong Canadian job numbersIt could be a busy day for the US dollar, with the release of nonfarm payrolls later today. Canada posted a strong employment report on Thursday, as employment change and unemployment were better than expected. In the European session, USD/CAD is trading at 1.3501, up 0.07%. All eyes are on US nonfarm payrolls, with a consensus estimate of 240,000 for March, following a reading of 311,000 thousand in February. This week's employment releases have been weaker than expected, raising concerns that the robust US labour market is starting to slip. JOLTS Jobs Openings and ADP Employment Change and unemployment claims all missed expectations, and last week's unemployment claims reading was revised sharply upwards. Will nonfarm payrolls follow the pattern and disappoint? If so, we could see a strong reaction from the markets, and the US dollar could lose ground due to speculation that the Fed might have to take a pause. The Fed has been able to relentlessly raise rates in large part due to the tight labour market, and if job creation shows cracks, it will be difficult for Fed policy makers to justify another rate hike at the May meeting. Canada released its March employment report on Thursday, and the numbers were solid. The economy added 34,700 jobs, crushing the consensus estimate of 7,500 and above the February reading of 21,800. Unemployment was unchanged at 5.0%, a drop below the forecast of 5.1%. Wage growth eased, however, slowing from 5.4% to 5.2%. The Ivey PMI also pointed to strong growth, climbing to 58.2 in March, up sharply from 51.6 prior and above the consensus estimate of 56.1 points. The labour market remains surprisingly resilient, even with the Bank of Canada's aggressive rate-tightening cycle. The Bank of Canada paused rates in March, for the first time since the current cycle started in March 2022. Governor Macklem has said that future rate decisions will depend on the data. The BoC meets on April 12th and will have to decide if the economy has cooled enough to warrant another pause. USD/CAD faces resistance at 1.3590 and 1.3673 1.3436 and 1.3353 are providing support
by OANDA
Australian dollar climbs on strong employment dataThe Australian dollar has taken investors on a roller-coaster ride this week, reflective of the gyrations we're seeing in the financial markets. In the North American session, AUD/USD is trading at 0.6656, up 0.56%. Australia's employment report for February was stronger than expected. The economy produced 64,600 news jobs, after a decline of 10,900 in January. This beat the estimate of 48,500. What was especially encouraging was that full-time jobs rose by 74,900, with part-time positions declining by 10,300. The unemployment rate fell to 3.5%, its lowest level in almost 50 years, down from 3.7% and below the estimate of 3.6%. The tightness in the labour market has allowed the RBA to aggressively tighten, with ten straight rate hikes since April 2022. Inflation slowed to 7.4% in January, down from 8.4% in December, so the rate hikes are having an effect on curbing inflation. Still, it will be a long road back to the inflation target of around 2%. The central bank is leaning to taking a pause at the April meeting and leaving the cash rate at 3.60%. Major central banks are moving away from continued tightening and the RBA will have to take that into account, as well as the Silicon Valley Bank crisis which has investors on edge about contagion spreading. Central banks have to be cautious with all the market turmoil, for fear that additional tightening would make a global recession more likely. Market pricing of rate moves has been gyrating like a yo-yo, and currently there is a 10% chance that the RBA will cut rates by 25 basis points at the April meeting. Just a month ago, the markets expected rates to peak at 4.1% in August. The SVB crisis has completely shifted pricing and the markets are currently expecting rates to fall to 3.35% by August.On There was more good news as Australian consumer inflation expectations for March ticked lower to 5.0%, down from 5.1% and below the forecast of 5.4%. AUD/USD is testing support at 0.6639. Below, there is support at 0.6508 0.6713 and 0.6844 are the next resistance lines
by OANDA
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AUD/USD falls ahead of employment reportThe Australian dollar, which has posted strong gains early in the week, has run into a wall on Wednesday. In the European session, AUD/USD is trading at 0.6638, down 0.66%. Australia releases the February employment report on Thursday (Australia time). Job growth is expected to rebound, with a consensus of 48,500 after a soft January read of -11,500. The unemployment rate is expected to tick lower to 3.6%, down from 3.7%. The Reserve Bank of Australia will be watching closely, as a robust labour market has enabled the central bank to continue its tightening - the Bank raised rates last week by 25 basis points, a 10th straight hike which brought the cash rate to 3.60%. The good news is that the end of the tightening cycle could be near, with the markets pricing in a pause at the April meeting. Consumers and businesses are weary of rising interest rates and confidence indicators do not paint an optimistic picture. Along with the job data, Australia releases consumer inflation expectations for March. The markets are braced for the indicator to rise to 5.4%, after a 5.1% gain in February. Inflation expectations is a key inflation gauge as it can set the direction of actual inflation, and the RBA will not be happy if inflation expectations accelerate. There is an uneasy calm in the air as the dust begins to settle after the Silicon Valley Bank collapse. The sky is not falling, not even above US bank towers, as regional bank stocks have rebounded. The US inflation release on Tuesday delivered as expected, with both the headline and core CPI readings matching the estimates. Headline CPI fell to 6.0%, down from 6.4%, while the core rate ticked lower to 5.5%, down from 5.6%. Inflation is cooling but we're not seeing the disinflation process that the markets were celebrating only a few weeks ago. AUD/USD is testing support at 0.6639. Below, there is support at 0.6508 0.6713 and 0.6844 are the next resistance lines
by OANDA
AUD/USD sinks on hawkish LoweIt has been a disastrous session for AUD/USD, which has plunged 1.26% and is trading at 0.6899. RBA Governor Philip Lowe faced a grilling from Australian lawmakers earlier. Higher rates and high inflation have caused a cost-of-living crisis and the RBA has been heavily criticised for the sharp rate-tightening cycle. Lowe confirmed that more rate hikes were on the way due to the need to curb inflation. Lowe warned that the battle against inflation was paramount, saying high inflation could lead to an increase in inflation expectations which would result in higher rates and more unemployment. Inflation is running at 7.8%, the highest level in over 40 years, which Lowe said was "way too high". Australia will release employment data on Thursday. The economy is estimated to have created 20,000 new jobs in January, following a decline of 14,600. The US will release January retail sales later today. Headline retail sales is expected to rebound with a 1.8% gain while core retail sales is forecast to rise 1.1%. Both releases came in at -1.1% in December, so a strong showing would be bullish for the US dollar. The markets have been dovish about the Fed's rate policy on the assumption that the economy is weakening, but the blowout employment report and an inflation release that was higher than expected have forced investors to rethink expectations that the Fed will pivot and cut rates later this year. A strong retail sales report would support the Fed's hawkish stance of "higher for lower" and possibly a higher terminal rate than previously expected. AUD/USD is testing support at 0.6962. Below, there is support at 0.6846 0.7036 and 0.7143 are the next resistance lines
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ECB raises rates but euro fallsThe euro is catching its breath on Friday after some sharp swings over the past two days. EUR/USD is trading quietly at the 1.09 line. This week's central bank rate announcements sent the euro on a roller-coaster ride. The Fed's 25-basis point hike pushed the euro higher by 1.16%, while the ECB hike of 50-bp sent the euro down by 0.76%. The end result is that the euro is back to where it started the week, just below the 1.09 line. The Fed rate decision sent the US dollar broadly lower, as investors were heartened by Jerome Powell saying that the disinflation process had begun and that he expected another couple of rate hikes before the current rate-hike cycle wrapped up. The markets are expecting inflation to fall faster than the Fed is thinking and are counting on some rate cuts this year, even though Powell said yesterday that he does not expect to cut rates this year. The markets were looking for a dovish bend to Powell's remarks and once they found it, stocks went up and the US dollar went down. The ECB meeting came a day after the Fed decision, and the rate hike of 50-bp was expected. Still, the euro fell sharply, perhaps due to a confusing message from the ECB. On the one hand, in its policy statement, the central bank signalled another 50 bp hike in March and kept the door open for additional hikes after March. At the same time, ECB President Lagarde said in a press conference that rate moves would be determined on a "meeting by meeting" basis seemed to veer away from the message in the policy statement. The ECB continues to have trouble communicating with the markets, which will only add to market volatility as investors try to figure out the central bank's plans. The week wraps up with the US employment report. The Fed has said that the strength of the labour market is a key factor in its rate policy, so today's release could have a strong impact on the movement of the US dollar. Nonfarm payrolls fell from 256,000 to 223,000 in December and the downturn is expected to continue, with an estimate of 190,000 for January. The ADP payroll report showed a decline in December, but unemployment claims and JOLT job openings both moved higher, making it difficult to predict what we'll get from nonfarm payrolls. The markets will also be keeping a close look at hourly earnings and the unemployment rate. 1.0921 is a weak resistance line, followed by 1.1034 There is support at 1.0878 and 1.0826
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NZD/USD steady ahead of employment releaseThe New Zealand dollar has edged lower on Tuesday. In the North American session, NZD/USD is trading at 0.6462, down 0.10%. New Zealand releases the Q4 employment report later today. Unemployment is expected to tick lower to 3.2%, following a 3.3% reading in the third quarter. This would mark the lowest unemployment rate in over four decades. Employment change is projected to have climbed 0.7% in Q4, after a 1.3% gain in Q3. What will be particularly interesting is wage growth, which has been robust and may have jumped as much as 9% y/y in the private sector. Wage growth has been contributing to high inflation, which the Reserve Bank of New Zealand is determined to bring down. Inflation was unchanged at 7.2% in the fourth quarter, more than three times the central bank's target of 2%. The Federal Reserve concludes its 2-day meeting on Wednesday, and a 25-bp increase is priced at close to 100%. This doesn't preclude volatility in the currency markets, as a hawkish stance from the Fed, either in the rate statement or in comments from Jerome Powell, could provide a boost to the US dollar. The markets continue to talk about a rate cut late in the year due to the weakening US economy, but the markets could be in for a nasty surprise if the Fed reiterates its hawkish stance that rates will remain high until inflation is subdued. What the Fed has in mind after tomorrow's rate hike is not clear and investors will be hoping that the meeting will provide some clarity on that front. 0.6446 is a weak support line. The next support level is 0.6365 There is resistance at 0.6485 and 0.6532
by OANDA
USD/JPY dips as Tokyo Core CPI risesThe Japanese yen is in positive territory on Friday. In the European session, USD/JPY is trading at 129.76, down 0.33%. Inflation indicators in Japan continue to head northwards. Tokyo Core CPI rose to 4.3% y/y in January, up from 3.9% in December and ahead of the consensus of 4.2%. This is the highest level in 42 years, but what is more worrying for the Bank of Japan is that the indicator has exceeded the central bank's target of 2% for the eighth straight month. The increase was broad-based, with food and fuel prices the main contributors to the increase. The Tokyo Core CPI reading follows other inflation indicators which have hit decades-high levels, adding pressure on the BoJ to exit its stimulus programme. The BoJ insists that inflation will peak at 3% in March. but this view seems over-optimistic, given the trend we're seeing from inflation data. BOJ Governor Kuroda has said he will maintain the Bank's ultra-loose policy until wages increase, which would indicate that inflation is driven by domestic demand rather than cost-push factors. Kuroda winds up his term in April, and the new Governor could decide to tighten policy, which would boost the yen. US GDP climbed 2.9% y/y in Q4, down from 3.2% in Q3 but still a respectable clip. Will the US be able to avoid a recession? The answer isn't clear, as the economic data shows a mixed picture. The employment market remains robust and overall growth has been positive. Manufacturing and Services PMIs continue to show that these sectors are contracting and housing has been especially weak, as lowered Q4 GDP by about 1.3%. Much will depend on the strength of consumer spending, which accounts for some 68% of GDP. Consumer spending rose 2.1% in Q4, down slightly from 2.3% in the third quarter. However, the December release is worrying, as consumer spending declined by 1.1%. If this trend continues, it seems likely that the US economy will tip into a recession. There is resistance at 130.89 and 131.69 129.46 and 128.40 are providing support
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USD/CAD eyes retail salesThe Canadian dollar is unchanged on Friday, trading at 1.3466 in the European session. We could see some volatility in the North American session, as Canada releases retail sales. The markets are bracing for a downturn in retail sales for November, with a forecast of -0.5% m/m for the headline figure and -0.4% for the core rate. This follows a strong report in October, as the headline reading was 1.4% and core retail sales at 1.7%. If the releases are as expected or lower, it could be a rough day for the Canadian dollar. Today's retail sales release is the final major event prior to the Bank of Canada's meeting on January 25th. The markets have priced in a 25-bp increase, but a hold is also a possibility, especially with December inflation falling to 6.3%, down from 6.8%. The BoC has raised rates by some 400 basis points in the current rate-tightening cycle, which began in March 2022. Similar to the market outlook on the Fed's rate policy, there is significant speculation that the BoC could wind up its tightening at the first meeting of 2023 and then keep rates on hold. The BoC has said that future hikes will be determined by economic data, and there are signs of strength in the economy despite the Bank's aggressive rate policy. GDP expanded by 2.9% in Q3 which was stronger than expected and job growth sparkled in December, with over 100,000 new jobs. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. 1.3455 is a weak support line, followed by 1.3328 1.3582 and 1.3707 are the next resistance lines
by OANDA
AUD/USD slides after soft Aussie job reportThe Australian dollar has extended its slide on Thursday. AUD/USD is trading at 0.6884 in Europe, down 0.82%. Australia's December employment report was weaker than expected, sending the Australian dollar sharply lower. The headline reading showed a loss of 14,600 in total employment, which may have soured investors. The release wasn't all that bad, as full-time jobs showed gains of 17,600, with part-time positions falling by 32,200. The unemployment rate remained at 3.5%, but this was a notch higher than the forecast of 3.4%. On the inflation front, recent releases point to inflation moving higher. November CPI rose to 7.3%, up from 6.9%, and the Melbourne Institute Inflation Expectations climbed to 5.6%, up from 5.2%. We'll get a look at the all-important quarterly inflation reading next week. Inflation came in at 1.8% q/q in Q3, and an acceleration in Q4 would force the Reserve Bank of Australia to consider raising rates higher and for longer than it had anticipated. The cash rate is currently at 3.10%, and I expect the RBA will raise it to 3.50% or a bit higher, which means we are looking at further rate hikes early in the year. The US dollar seems to take a hit every time there is a soft US release, and this week has had its share of weak data. The Empire State Manufacturing Index sank to -32.9, while headline and core retail sales both fell by -1.1%. PPI came in at -0.5%. All three releases were weaker than the November readings and missed the forecasts, indicating that cracks are appearing across the US economy, as the bite of higher rates is being felt. The markets are clinging to the belief that softer numbers will force the Fed to ease up on its pace of rate hikes and possibly end the current rate-cycle after a 25-bp increase in February. The Fed has done its best to dispel speculation that it will pivot, but I expect the US dollar to lose ground if key releases are weaker than expected. AUD/USD is testing support at 0.6893. Below, there is support at 0.6810 0.6944 and 0.7027 are the next resistance lines
by OANDA
USD/CAD eyes Canada, US job reportsThe Canadian dollar has edged lower on Friday. In the European session, USD/CAD is trading at 1.3620, up 0.36%. The first week of the new year has been busy. The Canadian dollar sparkled on Wednesday and climbed 1.4%, but has since pared most of those gains. Canada and the US will wrap up the week with the December employment reports, which could mean some volatility in the North American session. Canada's job creation in recent months has not impressed, with the exception of a massive gain of 108,300 in October. This was followed by a marginal gain of 10,100 in November, and December is expected to be even smaller, with an estimate of 8,000. The unemployment rate is forecast to inch higher to 5.2%, up from 5.1%. Canada also releases Ivey PMI, which has been stagnant over the past two months, just above the 50.0 threshold which separates contraction from expansion. The PMI is projected to drop to 51.0 for December, down from 51.4 in November. In the US, the focus will be on nonfarm payrolls and wage growth. Unemployment claims and other employment indicators show that the labour market remains resilient and there is a strong demand for workers despite a slowing economy. The ADP employment report, although not considered a reliable precursor to NFP, jumped to 235,000 in December, crushing the previous reading of 127,000 and the estimate of 150,000. The markets expect NFP to move in the opposite direction, with an estimate of 200,000, down from 263,000 in November. A soft NFP release would be an indication that the labour market may finally be weakening. For the Fed, this would be good news, as it believes that the labor market must soften in order for inflation to fall. For the markets, always hoping for a dovish pivot, a weak NFP would likely raise speculation that the Fed may be close to winding up its current tightening cycle, and this could translate into the US dollar losing ground. USD/CAD is putting pressure on resistance at 1.3628. Above, there is resistance at 1.3709 There is support at 1.3546 and 1.3476
by OANDA
Recession on the Horizon - FOMC and LayoffsYesterday, the FOMC confirmed the backing of higher interest rates for longer. The market reacted negatively signaling negative sentiment on rate expectations for the following quarters. Federal Reserve official, Neel Kashkari, who often has the most dovish views on market anticipation stated that inflation may have peaked but sees interest rates rising higher for the next few meetings. He sees the FED raising rates by a whole percentage point from the current level of 4.25%-4.5% to 5.4% (MarketWatch, Jan. 5). The inflation fight is not over yet, and it remains sticky despite all the economic weakening observed. In a previous thesis where I challenged the US economy about a year ago, I warn of massive layoffs in 2023 despite most analysts and the Fed saying otherwise. Meta and Tesla have already laid off thousands of employees just months ago. Today, large layoffs in tech are happening with Salesforce: “layoff about 10% of its employees, the company also says it will close some offices as part of its recruiting plan, but it is still unclear if any of the bay area offices will be impacted, undertaking major cost cuts in a challenging economy.” (CNBC, Jan. 5). Amazon Chief Executive Andy informed his employees that the number of layoffs in the company has now been increased to more than 18000 roles (ArabianBusiness, Jan. 5). Other firms are cost cutting, most cutting employee benefits. It is just a matter of when or not we are going to see higher unemployment rates in 2023. The most obvious fundamental reason for these layoffs and cost cuts is the fact that all these companies responded to the “bubble” fueled by stimulus and extensive quantitative easing. As a response, the Fed is raising interest higher, and tightening the monetary policy and we see the equity evaluation of these companies dropping significantly. Eventually, that demand is gone, and these companies are left with thousands of employees hired in response to a "fake" demand, over-hired. As equity evaluation is going down, they have to improve the margins by laying off employees and reducing expenses since revenue is going down. I see another reason for large layoffs, perhaps, a more IMPORTANT and IMMEDIATE aspect. Salesforce admitted business activities going down, demand slowing, and growth staggering, however, their stock went higher because they laid off employees, reducing their expenses. On paper, it shows higher margins, and thus, the stock reacted positively. What can become a norm during this economic environment is that we see more companies, especially in the tech industry which saw major lows, employing this technic by raising their stock prices with restructuring and engaging in mass layoffs. My plan of limiting my exposure to risks has not changed. I am holding a majority in cash and short-term government bonds. Looking to increase exposure to my trading in gold when the US 10-Year Real Rates falls from the inverse correlation between the two. Reminder: Higher real yields = expensive to hold gold when compared to other yielding investments such as fixed income, thus the inverse correlation on the charts. This is for personal recording but feel free to comment and argue.
NYSE:CRMShort
by ssavi
Aussie slides on Fed hawkishnessThe Australian dollar is sharply lower on Thursday. In North American trade, AUD/USD is trading at 0.6755, down 1.58%. Australia's robust labour market continues to impress, with a stellar performance in November. The economy created 64,000 new jobs, above the October reading of 32,000 and blowing away the consensus of 19,000. The unemployment rate was unchanged at 3.4%. There was more good news as the Melbourne Institute's Inflation Expectations fell to 5.2%, down from 6.0% previously and below the consensus of 5.7%. The reading has been overshadowed by the employment report and the Fed rate meeting, but is an indication that stubborn inflation is falling. The Reserve Bank of Australia doesn't meet until February and a lot can happen until then, but as things stand now, we can expect a fourth straight hike of 25 basis points at the next meeting. The Federal Reserve has been talking hawkish for months, but the markets haven't been listening all that well. Soft inflation reports and a better-than expected nonfarm payrolls had the markets convinced that the Fed was poised to wind up its current rate cycle, which sent equities higher and the US dollar sharply lower. Investors were subject to a cold shower on Wednesday as the Fed sounded much more hawkish than the markets had anticipated. Policy makers shrugged off the recent declines in inflation, instead focusing on strong job gains and the high level of inflation. The Fed plans to maintain a restrictive policy into 2023 in order to continue the battle with inflation, and it's clear that the current tightening cycle will continue for some time. The hawkish performance sent risk apprehension higher and boosted the US dollar. AUD/USD is testing support at 0.6772. The next support level is at 0.6693 There is resistance at 0.6875 and 0.6954
by OANDA