Forecasts and signals from trader Gelaton
EUR/USD: Non-farm Payrolls won't help the dollar
FOREX Fundamental Analysis for EUR/USD on June 2, 2023Some investors think that interest in the dollar as a defensive asset is getting lower, when in fact the national debt story is long past and has no impact on the greenback. The preconditions for the EUR/USD rally were created before the deal between the Republicans and the Democrats, which made it possible to open long positions at an attractive price.Jerome Powell's new deputy Philip Jefferson spoke out about a pause in the rate hike cycle, which sent shockwaves through the financial markets. Investors even ignored the labor market report from ADP with 278 thousand new jobs.After the Fed Vice President's speech, forex trading changed positioning. It looks like only a very, very strong Non-farm Payrolls will force the Fed into an act of monetary restraint in June. The idea of a "dovish" reversal by the regulator is returning to the market.While the Fed takes a pause, the ECB decides to continue raising rates despite the CPI slowing in May from 7.0% to 6.1%. Christine Lagarde thinks it is too early to talk about a complete victory over inflation. The European regulator's policy supports buyers of the single currency.It is hard to say yet whether EUR/USD has gone into consolidation or whether the trend will change direction. We are waiting for the report on U.S. labor market, though chances for the dollar to strengthen are minimal. If the data is as forecasted, a little worse or a little better, we'll build up long positions.
Forex pair EUR/USD: FOMC is in no hurry to raise the rate
FOREX Fundamental analysis for EUR/USD on June 1, 2023Markets often run ahead of the news, which brings traders losses. Despite the lack of consensus in the FOMC on the rate hike in June, derivatives give over 60% probability of such a step, though the day before the Vice-President of the Fed Philip Jefferson quite clearly hinted at a pause in the cycle of monetary restriction, which cooled the fervor of the EUR/USD "bears" a bit.After the Eurozone inflation report showed a slowdown in prices and rising jobless rates in the U.S., the major currency risk tested a 9-week low.Pic. 1. Inflation trends in Italy and France.There is no point for the European Central Bank to depress the Eurozone economy with hawkish actions, so the regulator is likely to complete its monetary tightening cycle in July by raising the rate to 3.75%.In the United States, the number of job openings rose from 9.75 million to 10.1 million in April, which means there are 1.8 job openings per American unemployed. This is a very good number since 1951. In other words, the US labor market will not prevent the Fed from continuing to raise the federal funds rate.However, it is possible that in June the Fed will pause in its monetary restriction in order to get more data on the effectiveness of measures taken by the regulator. At any rate the Central Bank's management is in a mood to make a pause and look around, which lowers interest to the dollar in forex trading.Pic. 2. The dynamics of the supposed change of the Fed's rate.The positioning on the currency market has changed somewhat on the eve of the release of the US labor market report. While previously it was thought that a strong NFP would strengthen the dollar, now we are more expecting the pair to consolidate. We closed short positions on EUR/USD and we will look for an entry to buy at a breakout of resistances 1.0715 and 1.0735.
Forex analysis and forecast for USD/JPY for today, June 1, 2023
On Thursday, USD/JPY is developing an upward correction of the two-day decline and is trading around 139.70.Today investors are waiting for the US labor market report from ADP, which is a forerunner of Non-farm Payrolls. It should be noted that these reports are not always 100% correlated, but there is usually some correlation between them. Analysts expect employment to fall from 296,000 to 170,000 for the month and the number of new jobs to fall from 253,000 to 190,000.The news about the problems with the U.S. national debt ceiling was overtaken by events, as the bill, negotiated by Democratic and Republican representatives, was approved in the House of Representatives and sent to the Senate for approval.Japan's manufacturing activity index was released this morning, slightly slipping from 50.8p to 50.6p in May.The Bank of Japan continues to test the digital yen and is considering switching from traditional banking to digital banking.Technical analysis for USD/JPY: Bollinger Bands, MACD and Stochastic OscillatorTechnical indicators and chart patterns do not show any clear-cut signals. The pair is in a correlation phase. Bollinger Bands are still directed upward while the MACD indicator is actively declining, but still in the positive range. The Stochastic Oscillator is also pointing down.If the price fixes below 138.90, we will open a short position with Take Profit at 137.50. Stop loss is set at 139.67.In case of a break above 139.67, we go long, aiming at 140.91. We place a stop loss at 138.90
EUR/USD: dollar buyers have no reason to worry
FOREX Fundamental Analysis for EURUSD on May 31, 2023The problem with the sovereign debt ceiling is resolved, the Fed plans to continue raising interest rates and rumors of a recession were exaggerated. At the same time, China's economy continues to disappoint investors and inflation in Spain has slowed to 2.9%, severely limiting the potential for ECB action. EURUSD, after a slight upward correction, returned to the downside.The head of the Federal Reserve Bank of Cleveland thinks there is no reason to pause in monetary easing, but there are enough arguments for it to continue. On the futures market, the probability of a rate hike in June has risen to 60%. Of course, some adjustment to the Fed's actions can be made by the US labor market report, but ING believes that the impact of Non-farm Payrolls on the dollar exchange rate will be minimal, unless the report is super screwed up.Pic. 1. Probability of Fed Funds Rate Change in June.Loretta Mester holds the same view. In May, the main reason for the pause in the rate hike cycle was the threat of default. Now that the potential threat has been leveled out, the Fed has no reason to change its positioning.Moreover, the agreement on the reduction of budget expenditures, according to the head of the Federal Reserve Bank of Cleveland, will eliminate a number of uncertainties and have a positive effect on GDP.Pic. 2. US Treasury bill yield dynamics.In China, the May Manufacturing Purchasing Managers Index unexpectedly collapsed from 49.2 to 48.8 pips and remains below the key level of 50 pips. China's economy is recovering at a different pace than analysts had forecast, which puts pressure on the single currency.The attention of the markets switches from the threat of default to the monetary policy of the central banks. In addition, investors are waiting for the report on Friday on the US labor market. On expectations EUR/USD may go down to 1.0665, which will be typical of the "sell on rumor, buy on news" strategy. Get ready to go short.
Forex EUR/USD: will the pair retain its uptrend?
FOREX Fundamental Analysis for EURUSD on May 30, 2023The problem with the US debt ceiling has again shaken the markets, as the bill has not yet been approved by Congress. Not all Republicans and Democrats were positive about the deal. Some of them believe that the amount of budget cuts is clearly insufficient, while others, on the contrary, claim too much change.But it is unlikely that this debate will have much of an impact on the market. The agreement is reached and it's time to put the news in the archives. The volume of liquidity is another matter. The United States Treasury account has shrunk to $39 billion, which is the lowest volume in 6 years.Dynamics of the US Treasury's cash balanceWithin 7 months, the Treasury should be issuing $1.1 trillion in notes and bonds, which will move cash from the secondary market to the primary market and support treasury yields. Of course, in the medium to long term this could have a negative impact on bank deposits, but it will support the dollar in the short term. In this regard, there is a 60% chance of a Fed rate hike at the June meeting.The Fed is once again between a hammer and anvil. If the monetary tightening cycle ends, inflation will quickly pick up and hurt the US economy. If monetary tightening continues, a recession could easily be triggered.In addition, according to the ECB study, the tightening of financial conditions in the United States is affecting the European bond market, because commodity assets are denominated in dollars, and their appreciation makes it difficult for the Eurozone economy to grow. But the policy of the European Central Bank has almost no effect on the economy of the United States.Talks about recession in Germany ruined any chance of a recovery of the EUR/USD uptrend. Now the pair's decline to 1.04 looks much more likely.The US labor market report may change the positioning in forex trading. Weak statistics will bring back optimism for the euro buyers. But it is still far away from Friday, so we keep short positions towards 1.0665.
Forex analysis and forecast for USD/JPY for today, May 29, 2023
At the beginning of the new week, USD/JPY has slightly retreated from the local highs of November 23 and is trading just below the level of 140.50.The dollar enjoys a significant lead over the Yen. The Japanese currency is not supported either by the monetary policy or national statistics. Friday's Tokyo consumer price report showed a decline from 3.5% to 3.2%, while a growth of 3.9% was forecasted. Although core inflation accelerated from 3.8% to 3.9%, the Bank of Japan is unlikely to move to tighten monetary policy.At the same time, in the US, Democrats and Republicans were able to agree to extend the national debt ceiling for two more years with small cuts in non-military budget spending. In addition, Friday's report on U.S. personal income showed an increase from 0.3% to 0.4%. Spending rose from 0.1% to 0.8%. Durable Goods Orders also rose 1.1%.Technical Analysis for USD/JPYThe Bollinger Band indicator on the daily formation chart shows a moderate rise. The MACD indicator is in the positive area and holds a strong buy signal. Stochastic oscillator remains in the area of maximum values.In case of a confident breakdown followed by consolidation above the level of 140.91, we open long positions with Take Profit 143.50. Stop loss is set at 139.67.If the quote falls below support 139.67, start selling towards 138.00. Placement of a stop-loss is 140.91.
EUR/USD: US default is off
FOREX Fundamental Analysis for EURUSD on May 29, 2023Despite the fact that the Republicans and Democrats managed to reach an agreement on the national debt ceiling, the EURUSD chart has not registered any particular movement. Most likely investors understand that even a slight cut of the budget expenditures will put pressure on the economy which is already under the pressure of the Fed. Now there is nothing to stop the Fed from continuing to raise the rate, and the probability of a monetary restriction in June immediately rose to 63%, significantly increasing the risks of recession.According to the agreement between Republicans and Democrats, the non-military spending in the US budget in 2024 will remain at the level of 2023. In 2025, they could grow by no more than 1%. According to Blomberg analysts, limiting cash injections into the economy has raised the risks of an economic downturn over the next 12 months to 65%.GDP and government spending dynamics in the USThere is one more negative factor for the dollar. JP Morgan points out that the US Treasury will have to pay off $1.1 trillion in debt obligations within seven months. And the bonds come with high rates. This may intensify the reduction of bank deposits and become a new wave of banking crisis with all its consequences for the US economy. Certainly, the Fed should carefully analyze the situation before making a decision to raise the interest rate.At the same time, there is some good news for the greenback from the series "from whence one could not expect". Barclays believes that the introduction of artificial intelligence in U.S. companies will increase investor interest, which will strengthen the position of the greenback. The bank even developed a special indicator of AI correlation with the dollar rate, which now shows steady growth.It turns out that the greenback has both support and pressure factors, which makes our version of a medium-term consolidation of EUR/USD quite reasonable. If the pair does not consolidate below 1.07, the range of the horizontal channel will be 1.070-1.095. If sellers show activity, the boundaries of the consolidation area will expand to 1.065-1.090. Our forex trading strategies provide for trading in the "sideways". We will sell on growth and buy on decrease of the asset.
Forex analysis and forecast for USD/CHF for today, May 25, 2023
Asian session of Thursday passes with the advantage of USD/CHF buyers. The pair is growing and trying to break above the local highs of April 11 at 0.9065.The main theme for traders is the lingering problem with the U.S. debt ceiling. If American authorities do not come to a consensus, since June 1 they will not be able to pay their obligations, which means a technical default.In addition, investors are analyzing the minutes of the May meeting of the Fed, which do not rule out a possible pause in the cycle of rising rates at the June meeting. The regulator may take a pause to assess the effectiveness of measures taken to tighten financial conditions.Revised estimate of the US GDP in the first quarter as well as housing market's pending transactions statistics will be released today.Technical Analysis for USD/CHFOn the Daily the Bollinger Band indicator is pointing up, as well as the MACD indicator, which preserves the buy signal. Stochastic Oscillator is testing the 80% level for a break up and may enter the overbought area.After a break above the level of 0.9065, it is expected to open a buy with Take Profit at 0.9150. Stop-loss is set at 0.9000.Selling will be relevant if the pair will consolidate below support at 0.9030. The target is 0.8960. Stop-loss is set at 0.9065.