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Forex Forecast & Forex Technical Outlook for 03 June to 07 June 2024

Forex Forecast & Forex Technical Outlook for 03 June to 07 June 2024
author Written by
Rex John Walsh
author Fact checked by
Sangram Mohanta

Last Updated on June 8, 2024 by TOP FOREX BROKERS REVIEW

Markets scrutinized a limited amount of economic data throughout the week, which was truncated due to the holidays. The economy appeared to be under increasing pressure from elevated interest rates, as the headline growth rate was revised downward in the second estimate of first-quarter GDP. 

Additionally, according to the April Personal Income and Expenditure report, consumers may be reducing their expenditures as the second quarter approaches. Although the most recent inflation data failed to demonstrate the "significant progress" that the Federal Reserve is aiming for, it did indicate a deceleration in price growth, thereby keeping the door open to the possibility of interest rate reductions later this year.

Expectations for a postponement of Federal Reserve easing in response to persistently high inflation have caused benchmark Treasury yields to increase since the beginning of the year. Significantly, inflation expectations among market participants have remained comparatively stable, notwithstanding the increase in nominal yields. 

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Forex Technical Outlook for 03 June to 07 June 2024

Let’s see the list of events to look at this week:

  • ISM Manufacturing PMI on Monday
  • CHF CPI m/m on Tuesday
  • BOC Overnight Rate and BOC Rate Statement on Wednesday
  • ISM Services PMI On Wednesday
  • EUR Main Refinancing Rate on Thursday
  • US Non-Farm Employment Change on Friday
  • CAD Unemployment Rate on Friday

EUR/USD

Amidst a week of volatile trading, the EUR/USD pair could not challenge or surpass the 1.0900 level. June 3 will mark significant occurrences in the eurozone, including the final HCOB Manufacturing PMI in Germany and the broader eurozone. The labor market report for Germany is scheduled for June 4, and the final HCOB Services PMI for Germany and the eurozone is scheduled for June 5.

This week will be dominated by the final S&P Global Manufacturing PMI, Construction Spending, and ISM Manufacturing.  The ISM Services PMI will also be released. The weekly results for Initial Jobless Claims and the Balance of Trade are scheduled for release on June 6. 

The ECB's interest rate decision on June 6 will be the week's most important event. Moreover, Germany's Balance of Trade and the eurozone's revised Q1 GDP Growth Rate will be released, as well.

EUR/USD

 

The ongoing buying pressure is potent in the daily EUR/USD price, preparing for a bullish breakout from the trendline resistance. The immediate support is present at the MA wave, while the MACD signal line is in the positive zone.

A valid trendline breakout could initiate an impulsive wave in this pair, targeting the 1.1000 level. However, a downside continuation below the 1.0788 level might lower the price towards the 

GBP/USD

The Pound Sterling (GBP) recovered from losses on Friday, attaining a value of 1.2750. As April core Personal Consumption Expenditure Price Index (PCE) data for the United States failed to meet expectations, the GBP/USD pair increased. In contrast to the projected 0.3% and the preceding month's value of 0.3%, the core inflation rate exhibited a mere 0.2% increase.

The Federal Reserve's preferable measure of inflation, core PCE inflation, increased annually by 2.8%. The annual core PCE data conforming to expectations will not influence the Fed's decision to contemplate rate reductions in September. Before implementing policy normalization, Fed policymakers have underscored the importance of inflation falling on a sustained basis.

The weakened monthly inflation reading has exerted considerable downward pressure on the US dollar. The value of the US Dollar (DXY), an indicator of the dollar's strength relative to six prominent currencies, declined to approximately 104.40.

GBP/USD

 

Like the EUR/USD, the Pound also experiences buying pressure against the US Dollar Index. As a result, sideways momentum is visible above the dynamic 20-day Exponential Moving Average zone. In that case, a valid bullish continuation above the 1.2800 level could activate the bullish impulse targeting the 1.2900 psychological area.

AUD/USD

The AUD/USD pair increased to around 0.6650 as the US Dollar weakened due to the Core Personal Consumption Expenditure (PCE) Price release.

The US Dollar Index (DXY) is vulnerable, hovering around 104.65. Due to lower consumer expenditures, the US Bureau of Economic Analysis (BEA) reported a slower-than-anticipated Q1 Gross Domestic Product (GDP) growth of 1.3%. This development casts doubt on the dollar's near-term outlook.

In the meantime, robust monthly Consumer Price Index (CPI) data for April enhance the appeal of the Australian Dollar, prompting traders to reassess their initial anticipations of a rate reduction by the Reserve Bank of Australia (RBA). The yearly increase in inflation was 3.6%, surpassing both the anticipated 3.5% and the prior estimate of 3.4%.

AUD/USD

 

In the AUD/USD daily price, the current price hovers sideways above the 0.6600 psychological line. Moreover, the dynamic 20 EMA acts as a support, while the negative MACD Histogram starts to lose momentum.

In that case, a bullish continuation might appear from a valid breakout from the trend line resistance and reach the 0.6850 level.

USD/JPY

Analysts predict that the USD/JPY pair will continue to be unidirectional, with the USD continuing to dominate. Any prospective declines are anticipated to result from USD weakness rather than JPY strength.

Fearing the negative repercussions of a depreciated yen on Japanese enterprises, the Japanese government has been compelled to implement extreme measures to support the currency. The Yen's relatively weak performance in April and May can be primarily attributed to the Bank of Japan's (BoJ) direct intervention in the foreign exchange markets.

According to data released last week, the Bank of Japan (BoJ) acquired a record 9.8 trillion between April 29 and May 29, intervening twice during this period—on May 2 and April 29.

USD/JPY

 

The USD/JPY price is under potent buying pressure, with no sign of intervention from the BOJ. As a result, the price keeps moving higher to the record level, creating an intraday bullish opportunity towards the 160.20 resistance level.

XAU/USD

In light of the news cycle being consumed by former President Donald Trump's criminal conviction, investors are left to wonder if the forthcoming election will deviate significantly from the status quo.

The United States electoral system is threatened with a crisis of legitimacy, which could result in a decline in confidence in U.S. financial markets and the U.S. dollar.

It astounds the media that Trump's continued popularity among voters has not been impacted by his legal issues. Indeed, Trump is ahead of incumbent Joe Biden in most swing states in the polls.

Should the election be conducted at present, the result would be too ambiguous and the contestation would be too intense to persuade followers of the defeated candidate to concede to the results.

Trump supporters contend that the New York criminal justice system, which is under the Democratic authority, is attempting to determine the outcome of the national election. There is a potential for Trump to be prohibited from conducting campaign rallies if he is incarcerated or placed under house arrest.

The extent to which a re-Trump administration would substantially alter fiscal or monetary policy remains uncertain. During his first tenure, he seldom exercised his veto power to prevent Congress from incurring deficit spending. Notwithstanding certain endeavors to exert influence over the central bank, he ultimately selected Jerome Powell, an establishment insider, to preside over the Fed—a choice he later lamented.

Investors in the stock market might be more concerned, given that Wall Street abhors ambiguity. The election may give rise to a constitutional crisis or social disturbance, both of which have the potential to precipitate an unpredictable decline in the stock market.

This year, renewed investor interest in gold has contributed to the metal reaching all-time highs. For $2,355 on the final trading day of May, gold is trading marginally below its all-time highs.

XAU/USD

 

Although the XAU/USD trades at a record high level, the recent price failed to show a continuation pattern. Instead, a divergence is formed with the MACD signal line, creating a short-term bearish signal.

In that case, a bearish continuation below the 20-day EMA line could be a potential short opportunity, aiming for the 2278.30 resistance level. However, any immediate bullish reversal above the 2365.00 level might resume the trend.

BTC/USD

The Large Transactions Volume index of IntoTheBlock indicates that institutional activity has decreased recently. This metric decreased from $67 billion to $38 billion between May 21 and May 31, suggesting that major investors are not inclined to amass Bitcoin at its present valuation.

In contrast to the Number of Large Transactions metric, the Large Transactions Volume indicator monitors transfers with a value of $100,000 or greater, excluding those that revert to the initial wallet; this feature enhances the indicator's reliability.

This indicator implies that although the immediate future of Bitcoin is not entirely certain, the long-term perspective continues to be positive.

This long-term optimism is supported by the 365-day Market Value to Realized Value (MVRV) indicator, which is currently at approximately 30%. A value of 30% signifies that investors who acquired Bitcoin within the previous year have accumulated an average gain of 30%. This indicates that investors are not likely to sell to realize a profit at this level, as it is relatively low. According to historical data, the 365-day MVRV indicator experienced triple digits at the peak of each cycle.

BTC/USD

The BTC/USD price remains within a bullish pennant pattern, backed by a valid Inverse head and Shoulder breakout. In that case, a bullish continuation, supported by the 20-day EMA, is highly possible, aiming for the 74000.00 level soon.

However, any immediate downside pressure below the 67300.00 level might extend the downside correction towards the 60158.10 level.

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