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Forex Forecast & Forex Technical Outlook for 06 May 2024 to 10 May 2024

The second quarter commenced in a more subdued fashion. Although employment expanded significantly in April, adding 175,000 positions, it was the smallest increase since October. Concurrent with this below-average increase in output was a surge in the unemployment rate to 3.9%. 

Furthermore, the unforeseen increase in the Employment Cost Index indicates that inflationary pressures have leveled off. As a result, it is anticipated that the Federal Open Market Committee (FOMC) will persist in its present position over the next few months.

On the other hand, the first quarter of GDP growth in the Eurozone exceeded initial projections. Moreover, the Consumer Price Index (CPI) for April revealed additional progress towards disinflation, as the core CPI decelerated to 2.7% annually. As a result of a gradual economic recovery and a reduction in inflationary pressures, the European Central Bank might implement its policy rate cut of 25 basis points in June.

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Forex Technical Outlook for 06 May 2024 to 10 May 2024

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

  • AUD Cash Rate & Monetary Policy Statement on Tuesday
  • Official Bank Rate and Official Policy Report of Thursday
  • GBP GDP m/m on Friday
  • CAD Employment Change on Friday
  • Prelim UoM Consumer Sentiment on Friday

EUR/USD

In April, the US Dollar experienced a significant depreciation due to the weak labor demand and delayed wage growth that were disclosed by the United States Bureau of Labor Statistics (BLS). As a result, the US Dollar Index (DXY), which measures the value of the US dollar relative to significant currencies, descended to a three-week low near 104.50.

The unfavorable Nonfarm Payrolls (NFP) report fueled speculation of a September rate cut by the Federal Reserve (Fed), substantially improving market sentiment. In general, diminished labor demand and sluggish wage growth hinder consumer spending momentum, which may indicate a potential alleviation of inflationary pressures. This situation is detrimental to the US Dollar and bond yields, and it will likely strengthen the EURUSD pair by allowing the Federal Reserve to adopt a more accommodating interest rate policy.

EUR/USD

In the daily chart of EUR/USD, the overall market momentum is corrective as the recent price hovers within a descending channel. In that case, a high probable long opportunity might come after overtaking the 1.0885 swing high with a daily close.

On the other hand, an immediate bearish daily candle below the 1.0690 level might lower the price in the coming days.

GBP/USD

The GBP/USD maintained its upward trend from the previous week, albeit encountering resistance near the close of the week after surpassing the 1.2600 level.

The April ISM Services Purchasing Managers Index (PMI) data fell short of anticipated levels. In contrast to investors' expectations of an increase to 52.0, the services sector performance index, which stands at 49.4, declined below the critical threshold of 50.0. The services sector comprises a substantial portion of the economy. Inflows of new business also decreased significantly from the previous reading of 54.4 to 52.2. 

Conversely, prices paid increased to 59.2, suggesting that price pressures remain persistent. The data above provides significant insights into the health of the services sector and labor market, both critical determinants in the Federal Reserve's interest rate determinations.

The issuance of the BRC Retail Sales Monitor, which follows the S&P Global Construction PMI, will command attention on May 7. Key economic indicators, including the NIESR Monthly GDP Tracker, GDP figures, the Trade Balance, and Industrial and Manufacturing Production, are expected by the end of the week, preceding the impending BoE meeting on May 9.

GBP/USD

In the daily chart of GBP/USD, the ongoing buying pressure was found to be a barrier to trendline resistance. Moreover, the dynamic 20-day EMA acts as immediate resistance before creating a bull run.

Based on this structure, an additional buy-side push with a daily candle above the Shooting Star’s high could create a long-term bullish opportunity.

AUD/USD

The Australian Dollar (AUD) recorded its third consecutive bullish day, supported by bullish sentiment surrounding the Reserve Bank of Australia (RBA). 

According to a Reuters survey of economists, the RBA is expected to maintain its key policy rate at 4.35% for the fourth consecutive meeting on the following Tuesday. The RBA may extend this posture until the end of September. These experts anticipate only one interest rate cut this year. Furthermore, rumors have been fuelled that the RBA may delay any rate cuts in light of the recent surprising release of domestic inflation data.

In the interim, the performance of the USD against six prominent currencies is assessed by the US Dollar Index (DXY), which exhibits a lackluster trend. This trend persists despite the dovish comments expressed by US Federal Reserve Chairman Jerome Powell after the decision made on Wednesday to maintain the interest rate range at 5.25%-5.50%. As a result of Powell's denial regarding the probability of another rate increase, the USD has depreciated.

Currently, investors are preoccupied with the April US employment data, which includes Average Hourly Earnings, Nonfarm Payrolls, and the ISM Services PMI, which is scheduled for release later on Friday. These announcements are expected to offer additional perspectives on the condition of the United States economy.

AUD/USD

In the AUD/USD daily chart, the recent price shows a bullish recovery from the dynamic 20-day EMA, supported by the sell-side liquidity sweep at the 0.6442 swing low.

In that case, an upward continuation is potent in this pair, where a daily candle above 0.6650 could increase the possibility of reaching the 0.6800 level.

USD/JPY

The Japanese Yen (JPY) is positioned to experience one of the most prosperous weeks recorded for the US Dollar. Since last Friday at approximately 160.00, a sequence of confirmed and unconfirmed interventions has caused the USD/JPY pair to decline to around 153.00. As the situation gains clarity, conjecture emerges regarding the longevity of these interventions' effects and their potential to maintain the USD/JPY exchange rate at present or diminished levels.

Meanwhile, near 105.00, the DXY US Dollar Index, which pits the USD against a basket of six major currencies, needs help in sustaining its value due to market participants exercising prudence to prevent unanticipated Japanese interventions. Nevertheless, the recent depreciation of the US dollar may give USD purchasers a favorable circumstance to enter the market and exploit a positive trajectory. Despite the USDJPY falling below 152.00 due to weaker-than-anticipated US Nonfarm Payrolls data, USD bulls still show considerable interest in purchasing the dip at these levels.

USD/JPY

In the daily chart of USD/JPY, the recent price shows bearish exhaustion at the top, from where a decent downside recovery has come. Moreover, the daily candle below the 153.58 level suggested a confluence of bearish factors, which might lower the price even below the 150.00 psychological level.

On the other hand, an immediate buying pressure with a daily candle above the 156.00 level might alter the current bearish trend.

XAU/USD

The price of gold initially increased on Friday following the release of the US NFP report, which disclosed that 175,000 new workers entered the labor force in April. As the Bureau of Labor Statistics reported, this figure fell short of the anticipated 243,000 and the revised 315,000 from the previous month.

Average Hourly Earnings also decelerated, increasing by 0.2% month-over-month and 3.9% annually, respectively, in contrast to the anticipated increases of 0.3% and 4.0%. The observed decrease in earnings growth indicates a reduction in inflationary pressures, which may heighten the probability that the Federal Reserve (Fed) will accelerate its interest rate reductions. The expectation of decreased interest rates exerts pressure on the US Dollar (USD), resulting in a decline of capital inflows in the US Dollar Index (DXY).

In addition, additional data released on Friday revealed that the US ISM Services PMI for April fell to 49.4, significantly lower than the anticipated increase to 52.0 from the previous 51.4. The services sector's importance regarding interest rates arises from its correlation with substantial wage inflation, which can impact determinations regarding interest rates.

XAU/USD

XAU/USD remained sideways for a considerable time, creating a pennant pattern where a valid bullish breakout could resume the trend at any time.

Investors should closely monitor how the price trades at the 2353.41 swing high as a bullish daily candle above this line could validate the long opportunity, targeting the 2480.00 level.

The alternative trading approach is to look for a bearish opportunity after having a stable market below the dynamic 20-day EMA.

BTC/USDT

The Bitcoin and Ethereum options markets exhibited a favorable trend last Friday, according to data compiled by the intelligence tracker Greeks.live. 

Greeks.live analysts have identified rare Bitcoin call options that have not been observed in a substantial period. Significantly, calls expiring in September and December at $65,000 each were targeted; each call offered a dividend of 93 BTC, equivalent to around $3.35 million.

The call option holder is authorized to purchase the underlying security at a prearranged price during a designated period. Hence, bullish sentiment is indicated by $65,000 call options that expire in September and December, indicating that options traders expect the asset's price to increase substantially before the expiration date.

Another noteworthy transaction is a September call ratio spread strategy, in which an options trader purchased 600 BTC and sold 1,200 BTC at a net premium of 45 BTC. This strategy required purchasing one call for $60,000 and selling two calls for $90,000.

BTC/USDT

The recent daily BTC/USD price shows extensive selling pressure below the dynamic 20-day EMA level. However, the price is likely to form a bottom, as shown in the MACD Histogram, which might create an upward signal.

In that case, investors should closely monitor how the price trades above the dynamic 20 EMA line, as a daily candle above the 64710.64 level could resume the bullish trend.

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