. Daily Forex Analysis - JPY, and AUD Decline Amid Hawkish Fed and Weak Economic Data

Daily Forex Analysis – JPY, and AUD Decline Amid Hawkish Fed and Weak Economic Data

Daily Forex Analysis – JPY, and AUD Decline Amid Hawkish Fed and Weak Economic Data

24 May 2024

Introduction

EUR/USD extends its decline to 1.0800 amid Fed-ECB policy divergence. The Euro loses traction against the Dollar due to upbeat US PMI data and hawkish Fed comments. Speculation of ECB rate cuts weighs on the Euro. Meanwhile, the Pound Sterling dips below 1.2700 on weak UK Retail Sales, and the Japanese Yen continues to lose ground following softer CPI data. The Australian Dollar also edges lower amid stronger US Dollar and concerns over inflation expectations.

Markets In Focus Today – EUR/USD

EUR/USD extends the decline to 1.0800 on Fed-ECB divergence.

EUR/USD loses traction near 1.0808 in Friday’s early Asian session. The upbeat US PMI data and the Fed’s hawkish comments support the Greenback. Traders raise their bets on the ECB rate cuts in June, weighing on the Euro. The EUR/USD pair extends the decline around 1.0808 during the early European session on Friday. The recovery of the US Dollar (USD) broadly, backed by the stronger US PMI data drags the major pair lower. The German Gross Domestic Product (GDP) for the first quarter (Q1) is due on Friday. The quarterly GDP is projected to grow 0.2% QoQ, while the annual GDP is estimated to contract 0.2% YoY in Q1. Across the pond, the growing speculation that the European Central Bank (ECB) will start cutting the interest rate before the Fed exerts some selling pressure on the EUR.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0824 | Positive Crossover | Bullish
  • MA 20 : 1.0802 | Positive Crossover | Bullish
  • MA 50 : 1.0790 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.0840 | Negative Crossover | Bearish
  • MA 20 : 1.0790 | Positive Crossover | Bullish
  • MA 50 : 1.0775 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 55.5372 | Buy Zone | Bullish

Stochastic   Oscillator : 5.41 | Sell Zone | Negative

Resistance   And Support Levels :

  • R1 : 1.0826 R2 : 1.0893
  • S1 : 1.0609 S2 : 1.0542

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.0812 | Take Profit : 1.0883 | Stop Loss : 1.0772

GBP/USD

Pound Sterling dips further below 1.2700 on weak UK Retail Sales.

The Pound Sterling falls sharply to 1.2670 as UK Retail Sales contracted at a faster pace than expected.Weak UK Retail Sales data for April suggests a soft inflation outlook.The US Dollar strengthens after upbeat US preliminary PMI report for May.The Pound Sterling (GBP) extends its downside to 1.2670 against the US Dollar (USD) in Friday’s London session after failing to keep above the round figure of 1.2700. The GBP/USD pair has come under pressure as the United Kingdom (UK) Office for National Statistics (ONS) has reported a sharp decline in the Retail Sales data for April and the US Dollar extended recovery. The ONS has shown that monthly Retail Sales declined at a faster pace of 2.3%. Investors forecasted the economic data to have declined by 0.4% from the prior reading of -0.2%, revised negative from a stagnant performance. Annual Retail Sales contracted by 2.7% after expanding at a pace of 0.4% in March, downward revised from 0.8%. Economists expected a decline by 0.2%.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2668 | Positive Crossover | Bullish
  • MA 20 : 1.2623 | Positive Crossover | Bullish
  • MA 50 : 1.2599 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.2673 | Positive Crossover | Bullish
  • MA 20 : 1.2599 | Positive Crossover | Bullish
  • MA 50 : 1.2579 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 63.4316 | Buy Zone | Bullish

Stochastic   Oscillator : 3.59 | Sell Zone | Negative

Resistance   And Support Levels :

  • R1 : 1.2657 R2 : 1.2754
  • S1 : 1.2345 S2 : 1.2248

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.2646 | Take Profit : 1.2726 | Stop Loss : 1.2594

USD/JPY

Japanese Yen extends losses, while US Dollar remains stable ahead of Consumer Sentiment.

The Japanese Yen lost ground as Japanese CPI fell to 2.5% YoY in April from 2.7% prior.The Japanese inflation remains above the 2% target, keeping the BoJ under pressure to tighten policy further.The US Dollar gained ground as stronger US PMI data reinforced that the Fed may maintain higher rates for longer.The Japanese Yen (JPY) continued its decline on Friday after the release of softer National Consumer Price Index (CPI) data by the Statistics Bureau of Japan. The annual inflation rate dropped to 2.5% in April from 2.7% in the previous month, marking the second consecutive month of moderation but still staying above the Bank of Japan’s (BoJ) 2% target. This sustained inflation keeps pressure on the central bank to consider further policy tightening. The Bank of Japan has emphasized that a virtuous cycle of sustained, stable achievement of its 2% price target, along with strong wage growth, is essential for normalizing policy. Meanwhile, investors expect that the persistent weakness of the JPY might compel the BOJ to advance its next interest rate hike to mitigate the impact on the cost of living, according to Reuters.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 156.2266 | Positive Crossover | Bullish
  • MA 20 : 155.6571 | Positive Crossover | Bullish
  • MA 50 : 153.9756 | Positive Crossover | Bullish

Simple :

  • MA 10 : 156.1429 | Positive Crossover | Bullish
  • MA 20 : 155.5647 | Positive Crossover | Bullish
  • MA 50 : 153.8802 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 61.7999 | Buy Zone | Bullish

Stochastic   Oscillator : 98.06 | Buy Zone | Positive

Resistance   And Support Levels :

  • R1 : 159.8369 R2 : 162.0561
  • S1 : 152.6531 S2 : 150.4339

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 156.59 | Take Profit : 157.95 | Stop Loss : 155.94

AUD/USD

Australian Dollar edges lower amid stronger US Dollar, Consumer Sentiment eyed.

The Australian Dollar continues to lose ground after the higher-than-expected US PMI data.Australian equities faced pressure due to the lower commodity prices amid hawkish sentiment surrounding the Fed.The US Dollar gains ground as the Fed expects to maintain higher policy rates for longer.The Australian Dollar (AUD) continues its losing streak for the fourth successive session on Friday, possibly driven by risk aversion. The AUD/USD pair experiences downside as the US Dollar (USD) advances on hawkish sentiment surrounding the Federal Reserve (Fed) of maintaining higher policy rates for an extended period. The Australian Dollar came under pressure as the Consumer Inflation Expectation of future inflation over the next 12 months fell to 4.1% in May from 4.6% in April, marking the lowest level since October 2021. This has increased the risk of inflation remaining above the target for an extended period. The latest Reserve Bank of Australia (RBA) meeting minutes showed that the policymakers agreed that it was challenging to either rule in or rule out future changes in the cash rate.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6628 | Negative Crossover | Bearish
  • MA 20 : 0.6608 | Negative Crossover | Bearish
  • MA 50 : 0.6576 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6645 | Negative Crossover | Bearish
  • MA 20 : 0.6610 | Negative Crossover | Bearish
  • MA 50 : 0.6553 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 51.3803 | Buy Zone | Bullish

Stochastic   Oscillator : 32.7995 | Sell Zone | Negative

Resistance   And Support Levels :

  • R1 : 0.6602 R2 : 0.6668
  • S1 : 0.6386 S2 : 0.6320

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 0.6585 | Take Profit : 0.6653 | Stop Loss : 0.6548

Elsewhere In The Forex Market

USD/CHF up 0.04% to 0.9146, The NZD/USD up 0.03% to 0.6101. The EUR/GBP up 0.01% at 0.8524. EUR/AUD up 0.09% at 1.6385. AUD/NZD down 0.05% at 1.0826, The USD/CNY up 0.05% at 7.2445, AUD/SEK up 0.21% at 7.0953, at the time of writing.

Key Economic Events & Data Release Today:

(GBP) Retail Sales (MoM) (Apr) Forecast –0.5%, Previous –0.2% at 02:00. (EUR) German GDP (QoQ) (Q1) Forecast 0.2%, Previous –0.3% at 02:00. (CAD) Manufacturing Sales (MoM) Previous –2.1% at 08:30. (USD) Durable Goods Orders (MoM) (Apr) Forecast –0.9%, Previous 2.6% at 08:30. (CAD) Core Retail Sales (MoM) (Mar) Forecast –0.1%, Previous –0.1% at 08:30.