The United States continues to grapple with high inflation, as evidenced by the 0.4% increase in the headline and core Consumer Price Index (CPI) in April, with the three-month annualized rate for the core remaining at 5.1%. Nevertheless, the Producer Price Index and the NFIB small business survey suggest that future price growth may moderate, although consumers remain uncertain.
In other economies, the Bank of England (BoE) raised its Bank Rate by 25 basis points to 4.50% in the United Kingdom, indicating a close watch on inflation dynamics for the year. In the first quarter, the UK economy grew by 0.1% quarter-over-quarter, with household consumption remaining unchanged and investment exceeding expectations, while the services sector showed mixed results.
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Forex Technical Outlook for 15 May 2023 to 19 May 2023
Currently, the bond market anticipates a 75 basis point easing by the Federal Reserve (Fed) by the end of the year, with a 25% chance of a 300 basis point easing and a 75% chance of no easing if a negative incident occurs.
The Fed's Senior Loan Officer Opinion Survey revealed a pervasive tightening of lending standards during the first quarter and concerns about deteriorating credit quality, reduced risk tolerance, and banks' funding costs and liquidity.
The New York Fed's Consumer Expectations Survey results revealed mixed consumer sentiment, with short-term inflation expectations declining and longer-term expectations gaining.
Let’s see the list of events to look at this week:
- Empire State Manufacturing Index on Monday
- CAD Consumer Price Index on Tuesday
- US Retail Sales on Tuesday
- AUD Wage Price Index q/q on Wednesday
- BOE Gov Bailey Speaks on Wednesday
- AUD Unemployment Rate on Thursday
- The US Unemployment Claims on Thursday
- BOC Gov Macklem Speaks on Thursday
- Fed Chair Powell Speaks on Friday
Now move to the weekly price forecast:
Last week, EUR/USD showed only one bullish day among the other five days, which is the mary reason to rely on the possible bearish momentum. Also, the weekly candle came near April 2023 low, which may work as a solid bearish factor.
The bearish factor for the EUR/USD weekly chart is decisive as the Momentum Indicator showed a correction to the neutral level. Moreover, the Relative Strength Index (RSI) rebounded from the overbought area and maintained a stable position at the neutral 50.00 line.
Meanwhile, the downside pressure forms the 100 SMA resistance, while the 200 SMA is far from this zone. It is also a sign of possible dynamic support at the 1.0790 level.
On the daily chart, the downside momentum is also visible as the recent price passed 4 trading days below the dynamic 20 DMA. The longer moving average also shows some pressure to the downside, which may work as bearish exhaustion.
Based on the current weekly outlook, the 1.0800 level would be the immediate support level to look at. Breaking below this level could initiate a sharp fall in this pair.
On the upside, the 1.0980 to 1.1000 area would be the main barrier to bulls. An intense buying pressure above this zone could initiate a solid bullish trend toward the 1.1100 level.
The previous weekly outlook shows that bears have become more robust in the GBP/USD price. Sellers have eliminated the last two week’s gains and closed the latest week with a solid bearish reversal.
This technical analysis of the GBP/USD daily chart shows a strong support level at 1.2510, already broken with a bearish daily candle. Moreover, the weekly close below this zone could open more downside pressure in this pair from the emerging rising wedge pattern.
A bearish wedge pattern breakout could increase the possibility of testing the 1.2400 critical support level, and below this level, the 21 April 2023 low would be tested.
The 14-day Relative Strength Index (RSI) is above the 50.00 mid-line, signaling a possible buying pressure at any time. However, the latest daily candle is below the 20-day Exponential Moving Average, which could signal a solid bearish rally in this pair.
On the bullish recovery side, a buying pressure above the 1.2560 level is needed before aiming for the 1.2680 yearly high. Furthermore, the next target level for the buying pressure is set at 1.2750 level.
As per the last week’s forecast, AUD/USD extended the buying pressure and reached the 0.6800 critical psychological level from where bears joined the market.
As the current market structure is highly corrective, the price is likelier to test the bottom of the range before showing any buying pressure.
This technical analysis of AUD/USD shows a substantial consolidation where the current price is trading below the dynamic 20 DMA level.
The current RSI level showed a downside pressure in the indicator window by moving below the 50.00 neutral line.
Based on the daily outlook, AUD/USD downside pressure is potent and can influence bears to test the 0.6572 key support level. Moreover, breaking below the 0.6570 level could initiate a sharp bearish trend toward the 0.6320 level in this pair.
The first bullish sign might come from the bullish recovery above the dynamic 20 DMA, which could increase the price toward the 0.6800 level.
USD/JPY passed a corrective week, where the exiting trendline support is still valid. As the last week’s downside pressure failed to break the trendline support, we may expect a bullish reversal toward the predestined target level.
This technical analysis shows the daily price of USD/JPY, where the current market is bullish, supported by an ascending trendline. Although sufficient retail liquidity might be present below the trend line support, other technical indicators show a buy signal.
The current price is bullish in the dynamic 20 EMA as the current dynamic level works as a support. Moreover, the current RSI shows a rebound from the 50.00 line toward the upside.
Based on this outlook, the primary aim of this apri is to look for long trades only as long as bulls hold the price above the 133.70 level. The buying pressure could extend towards the 138.00 area.
Breaking below the 133.70 level would initiate a strong bearish pressure, which can push the price down toward the 130.00 psychological level.
As per the previous weekly forecast, XAU/USD showed intense buying pressure from the beginning of the previous week but failed to hold the momentum at the end.
As a result, bears joined the market and initiated several intraday swing lows, which may result in a definite bearish trend for the coming days. However, the broader outlook is still bullish, and more evidence is needed before opening any short position.
The daily chart of XAU/USD showed multiple long wicked candles on the upside, which is an early sign of the possible downside pressure. However, the higher timeframe price action is still bullish, and more clues are needed before considering it a strong bearish trend.
The 14-day Relative Strength Index (RSI) shows a corrective momentum at the 50.00 level, while the dynamic 20-day EMA is closer to the price.
The psychological 2000.00 level strongly supports the coming trading days. A bearish daily candle below this level could offer a decent short opportunity, where the target is to test the 1975.00 support level.
However, the broader market context of this pair is still bullish and has a stable price above the 2030.00 level could increase the price towards the 2050.00 and even 2080.00 level.
A rating agency, S&P Global, suggests that crypto assets may serve as a hedge against inflation; however, a lengthier history of the cryptocurrency market is required to prove this theory.
The New York State legislature is debating a bill that would legalize using dollar-pegged stablecoins to post bonds for defendants.
Former SEC official John Reed Stark has urged US financial regulators to prohibit crypto-related firms from offering Tether (USDT) stablecoins, arguing that the issuer of USDT stablecoins could be the next domino to collapse.
In the event of a US government debt default, Circle, the issuer of the USDC stablecoin, has discontinued the use of US Treasury securities maturing after May 31.
The global cryptocurrency market has lost 3.2% of its value over the past trading days, dragged mainly by Bitcoin. Also, the fear and Greed index for the crypto market fell to 49.00 level, which is a neutral area.
Last week, BTC/USDT price fell below the 50-day Moving Average level, initiating the first sign of a deeper correction. Later on, a further drop was seen on Friday, as the price fell below the 61.8% Fibonacci Retracement level from the March rally.
The recent downside pressure and a bearish daily candle below the 26919.00 resistance level opened the downside possibility toward the 22000.00 level. However, a recovery above the dynamic 20 DMA level might resume the bullish trend, where the ultimate target is to test the 34,000.00 level.
The US Dollar’s strength is seen against the basket of currencies, which might incur a strong selling pressure on EURUSD and GBPUSD. However, the long-term selling pressure might need support from the Retails Sales and other fundamental data.