Employers added 253K positions in April, resulting in a 3.4% decrease in the unemployment rate. The ISM services index increased to 51.9 in the same month that the ISM manufacturing index increased to 47.0. However, job openings decreased to 9.6 million in March, and non-farm productivity fell 2.7% in the first quarter while unit labor costs rose 6.0%.
Other international central banks were also active in addition to the Federal Reserve's rate increase. The European Central Bank increased its policy rate by 25 basis points to 3.25 percent and hinted at further tightening, while Norway's central bank did the same. The Reserve Bank of Australia also astonished market participants by increasing interest rates by 25 basis points to 3.85%.
Wednesday, as anticipated, the Federal Open Market Committee increased the target range for the federal funds rate by 25 basis points to 5.00%–5.25%, potentially ending the current tightening cycle. The Federal Open Market Committee (FOMC) did not commit to another rate hike on June 14, and its next action will depend on the economy's performance.
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Forex Technical Outlook for 08 May 2023 to 12 May 2023
Due to the debt ceiling constraint, Treasury Secretary Janet Yellen warned on Monday that the Treasury might be unable to satisfy all of the government's obligations by early June. Investors in Treasury bills appear to be aware of the political impasse surrounding the nation's debt ceiling.
Let’s see the list of events to look at this week:
- The US CPI on Wednesday
- BOE Monetary Policy Report on Thursday
- US Core PPI of Thursday
- NZD Inflation Expectations q/q on Friday
- The UK GDP m/m on Friday
- Prelim UoM Consumer Sentiment
Now move to the weekly price forecast:
The EUR/USD closed the week with an indecision candle on the weekly chart. After multiple attempts to break above the 1.1100 level, EUR failed to grab buyers' attention despite the broader weakness in the US Dollar Index.
This technical analysis shows how the EUR/USD price changed during the week, with a consolidation at the 1 year high.
Although the weekly price weakens bulls, the possibility of forming a new bearish trend is out of the picture. The current price trades above the dynamic 100 SMA, while the 20 DMA is a confluence support. The current Relative Strength Index (RSI) in the momentum indicator shows an overbought condition with a minor bearish slope.
The daily chart shows a neutral momentum as the price struggles to hold the bullish momentum at the 20 SMA level. In the momentum indicator, the current price level shows a recovery from the 100 level, but the downside correction is yet to confirm.
The RSI level reached a positive level, influenced by the recent correction, which needs more clues before forming a bearish trend.
As per the current context, the price might find support at the 1.0940 level, before testing the 1.0830 level. Moreover, the third target level for the downside pressure is at 1.0745 level, which is the 61.8% Fibo Retracement level of the 2022 swing.
On the upside, a bullish break above the 1.1040 level could extend the pressure toward the 1.1100 psychological level before testing the 1.1160 level.
Although there was a holiday-thinned trading day, the Sterling showed a strong interest by bulls by taking the GBP/USD price to a fresh yearly high.
The US Dollar Index (DXY) passed another week of losses as the Federal Reserve came dovish even with a rate hike. Investors should focus closely on the upcoming BoE meeting and US CPI release before anticipating the future market direction.
This technical analysis shows how the GBP/USD price formed a bullish symmetrical triangle formation last week, with a further bullish trend continuation signal. Besides the strong bullish price pattern, stable market momentum is visible above the 1.2600 key psychological level, which may boost the buying momentum.
In the indicator window, the 14-day RSI shows bullish pressure as the reading shows a stable point above the 50.00 neutral line. As a result, bulls have a higher possibility that the price could extend the upside pressure above the 1.2660 level.
On the downside, bears might find the 1.2470 level as critical support, whereas the 21 DMA could work as a confluence support.
After the weekly opening, a downside correction might push the price to test the 1.2425 level, while a deeper discount with a daily close below the 1.2400 level might extend the momentum at the 1.2360 area.
The AUD/USD price showed strong buying pressure after the US job report release, supported by the troubled stock market and recent turmoil in the US banking function.
The weekly candle recovered the last week’s loss with a strong recovery, which is a primary sign that bulls might extend the momentum in the coming days.
This technical analysis shows the daily price of AUD/USD, where the 200-day Exponential Moving Average is at the 0.6788 level, which could be a solid barrier to bulls.
The current Relative Strength Index (RSI) shows upward momentum in the indicator window. Before validating the bullish signal from the RSI, investors should find the price above the 0.6771 level before targeting the 200 EMA resistance.
For the coming trading days, validation from the RSI could increase the possibility of testing the 0.6800 psychological level. It would open rooms for testing the 0.6919 level, which is the 21 February 2023 high.
After reaching the 133.50 key support level, USD/JPY rebounded strongly with upbeat US Non-farm Payroll data. It is a sign of a safe haven. However, the broader context is still bearish as it trades below the May 2023 opening price, which could limit the gain at any time.
This technical analysis of the USD/JPY daily chart, the 50-day EMA, is at the 133.85 level, which signals a neutral momentum in the medium-term direction. However, a bullish daily candle close above the 134.85 level could offer a decent bullish trading opportunity.
On the upside, bulls might find the 135.00 level as the key resistance level, but clearing this level would increase the target point to the 136.00 level.
The current RSI is at the neutral level in the indicator window, but the last three days' change indicates a solid buying pressure.
However, a break below the 134.00 level with a daily candle close could lower the price toward the 133.85 support level before reaching the 133.00 area.
The daily price of Gold reached a record high after the latest FOMC, influenced by the dovish tone of the Fed regarding the economic slowdown and bank crisis.
However, a decline was seen after the Non-farm Payroll release, but no sign of exhaustion is seen to determine a trend reversal. The current job data and central bank sentiments are towards the buyers’ side, so more clues might come from the US inflation report.
In the XAU/USD weekly chart, there is a spike with a referral to the existing range, which increases the possibility of a stronger downside correction. However, a strong support level is visible at the 1970.00 level, which needs to be breached before relying on the liquidity sweep. However, breaking below this level might extend the loss toward the 1950.00 and 1910.00 levels in the coming days.
An upside recovery with a D1 candle close above the 2020.00 level for bulls might invalidate the bearish possibility and extend the existing buying momentum. In that case, more buying pressure may come, where the ultimate target is to test the 2100.00 psychological level.
The recent increase of 25 basis points in interest rates by the Federal Reserve has further strained the U.S. economy. As more institutions continue to fail, people's faith in the Federal Reserve and fiat currency will likely erode, leading them to seek out hard assets such as gold or Bitcoin.
The premise of the bull market rally in 2023 is that it is a consequence of the failure of prominent institutions such as Signature, Silicon Valley Bank, and others. This week alone, JP Morgan has acquired First Republic Bank, and other US regional banks such as Western Alliance and Zions Bancorp have experienced significant sell-offs due to financial difficulties.
Despite the slowing of the uptrend's momentum, which has resulted in a consolidation in Bitcoin's price, things are likely to continue if the appropriate catalyst initiates a panic buying of BTC.
Bitcoin's price has fluctuated between 29,247.00 and 41,273.00 at the lower limit of the bearish breaker for the past four weeks. This has resulted in a lack of direction among BTC merchants, as the trading range narrows and the market becomes somewhat monotonous.
However, investors should be aware of the possibility that Bitcoin's price will rise until it reaches 35,260.00, the midpoint of the bearish breaker. In an extremely bullish scenario, the breaker's upper limit of 41,273.00 could be retested.
After finding the market sentiment from the US employment, it is time to see how the CPI shows where the economy is heading.