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Forex Forecast & Forex Technical Outlook for 17 June 2024 to 21 June 2024

Forex Forecast & Forex Technical Outlook for 17 to 21 June 2024
author Written by
Rex John Walsh
author Fact checked by
Sangram Mohanta

Last Updated on June 25, 2024 by TOP FOREX BROKERS REVIEW

There is growing optimism that the Federal Reserve may begin to reduce rates at the September FOMC meeting due to a series of mild inflation data for May. The May CPI data, released on Wednesday, indicated that consumer prices remained unchanged for the month. This event marked the first level reading for the CPI since July 2022. The core CPI experienced a modest 0.2% increase (0.16% before rounding), the smallest monthly increase since August 2021, when food and energy were excluded.

Moreover, the Bank of Japan (BoJ) did not introduce any new concrete policy measures but suggested the possibility of further policy normalization. The Bank of Japan (BoJ) acknowledged that the virtuous cycle between wages and prices is escalating. It announced its intention to establish a comprehensive strategy for reducing the rate of its bond purchases. The BoJ will eventually increase its policy rate, although it is not expected to do so until the October meeting.

The June monetary policy meeting of the Federal Open Market Committee (FOMC) yielded few surprises. The Committee has maintained its rates at their current level. It now anticipates that inflation will be higher and there will be less relief this year than anticipated. The decision to implement one or two 25-basis point rate cuts this year remains ambiguous.

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Forex Technical Outlook from 17 June 2024 to 21 June 2024

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

  • Empire State Manufacturing Index on Monday
  • AUD Cash Rater & Rate Statement on Tuesday
  • US Retail Sales on Wednesday
  • NZD ​​GDP q/q on Thursday
  • SNB Policy Rate & Rate Statement on Thursday
  • GBP Bank Rate and Policy Summary on Thursday
  • German PMI’s on Friday

EUR/USD

In the wake of the US consumer inflation announcement two days ago, the single European currency has continued to decline, wiping out all of its gains.

It had previously fallen to just above the 1.0710 level, and there may be potential for additional decline.

As previously stated, interest rates are the central focus of all activities. Investors are closely monitoring all macroeconomic data and statements made by officials that could offer new insights into the intentions of the two primary central banks.

Last week, the European Central Bank's interest rate cut has increased the interest rate gap in favor of the US currency, which is presently the primary driver of its soft momentum.

On Wednesday, the Federal Reserve announced a reduction in inflationary pressures, which temporarily impacted the dollar by increasing wagers on the possibility of a faster interest rate cut. Nevertheless, this may occur toward the conclusion of the year, which will continue to hold the US currency in sharp focus.

EURUSD

Technically, EUR/USD trades below the crucial 100-day SMA line, while the 20-day Exponential Moving Average works as minor resistance. Moreover, the RSI moved below the 50.00 line, signaling additional downside pressure.

In that case, the EURUSD could move down and reach the near-term support at the 1.0602 level before forming a stable buying pressure.

GBP/USD

The Pound Sterling (GBP) weakened further on Friday against the US Dollar Index (DXY), which has risen to 105.40 for the second day. The impact of soft US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May has been overshadowed by the Federal Reserve's (Fed) hawkish posture on interest rates, which has driven this upward movement.

The headline PPI experienced a 0.2% monthly decline owing to weak petroleum prices in the US PPI report released on Thursday. Core producer inflation, which excludes volatile food and energy prices, remained unchanged.

The core Personal Consumption Expenditure Price Index (PCE), the Federal Reserve's preferred inflation measure, would also exhibit moderating inflationary pressures, as indicated by the cooler consumer and producer inflation reports. This has increased expectations for the Federal Reserve to implement rate reduction early. 

The 30-day Fed Funds futures pricing data, as reported by the CME FedWatch Tool, now suggest a 65% likelihood of a rate cut decision in September, a substantial increase from the 50.5% probability documented a week ago.

GBPUSD

 

Bearish exhaustion at the top is working as a major bearish signal for GBP/USD, even if the current price trades above the 100-day SMA line.

As the RSI found a ceiling and moved below the 20-day EMA, we may expect the downside momentum to extend toward the 1.2500 area. 

AUD/USD

The Australian Dollar (AUD) is experiencing a slight decline as the US Dollar strengthens due to the increased yields on US Treasury securities. Nevertheless, the AUD/USD pair tried to recoup some of losses in response to a Reuters poll of 43 economists. 

The poll indicates that the Reserve Bank of Australia (RBA) will likely maintain its interest rates in June. A substantial 90% of economists anticipate that interest rates will remain stable for the upcoming quarter, with a potential 25 basis-point decrease to 4.10% by the end of 2024. Additionally, 63% of economists anticipate that interest rates will decrease to 4.10% or lower by the end of the year, while 35% anticipate no change.

Despite economic data indicating a weakened US Producer Price Index (PPI) and higher-than-anticipated Initial Jobless Claims, the US Dollar (USD) has maintained its stability following the gains from the previous session. The Federal Open Market Committee (FOMC) policymakers have revised their outlook, now predicting only one rate reduction for the year, a decrease from the three cuts originally predicted in March. This adjustment increases the US Dollar's resilience and exerts pressure on the AUD/USD pair.

AUDUSD

 

In the AUD/USD price, the recent momentum shows a sideways pressure as the rectangle pattern is visible above the 100-day SMA line.

In that case, a sell-side liquidity sweep from the Rectangle low could be a high probable long signal for this instrument. Any bullish break from the rectangle high could extend the upward pressure towards the 0.6800 level.

USD/JPY

The Bank of Japan (BoJ) maintained its interest rate at 0%, resulting in a slight decline in the Japanese Yen (JPY). This is the second consecutive meeting in which the Bank of Japan has maintained rates at their current level, following the first rate hike since 2007 in March. The central bank decided to decrease its bond purchases to increase the flexibility of long-term interest rates. At their forthcoming policy meeting, policymakers intend to establish a plan for reducing bond purchases over the next 1-2 years.

Despite the release of weaker-than-anticipated economic data on Thursday, the US Dollar Index (DXY), which gauges the value of the US Dollar (USD) against six main currencies, has increased. Initial Jobless Claims were higher than anticipated, and the US Producer Price Index (PPI) was weaker than expected. Nevertheless, the resilience of the US dollar is ascribed to the Federal Reserve's hawkish stance.

The Federal Open Market Committee (FOMC) policymakers have revised their outlook. They now anticipate only one rate reduction for the year, as opposed to the three cuts anticipated in March. This revised expectation suggests a more aggressive approach to maintaining economic stability and managing inflation, contributing to the USD's resilience. 

Investors anticipate releasing the preliminary US Michigan Consumer Sentiment index on Friday, which will offer additional information regarding consumer confidence and the broader economic prognosis.

USDJPY

 

In the daily USD/JPY price, a bullish trend continuation is visible, which has a higher possibility of taking the price at the 160.20 level. However, a downside correction is possible towards the 20-day EMA but more clues are needed to anticipate a bearish breakout.

XAU/USD

Gold remains in a familiar environment, as traders are dubious about the future direction of US interest rates due to conflicting signals. Central bankers continue to exercise caution, even though economic data indicates a disinflationary trend that could result in reduced interest rates. The opportunity cost of holding the non-yielding asset would be reduced, benefiting gold through lower interest rates. However, the timing and extent of the rate decline remain uncertain.

Further evidence of diminished inflationary pressures was provided by the disinflationary US Producer Price Index (PPI) data released on Thursday, which assesses "factory gate" price growth. This implies that the Federal Reserve (Fed) may soon contemplate reducing interest rates.

Nevertheless, this information was released after the Federal Reserve reduced its anticipated interest-rate reductions for 2024 from three to one. Additionally, Fed Chairman Jerome Powell downplayed the significance of the Consumer Price Index (CPI) data for May, which was released only a few hours earlier, and emphasized the need for a data-dependent approach in the future.

The announcement by the People's Bank of China (PBoC) to cease gold purchases between the end of April and May has also affected gold. This was the first time in 18 months that the PBoC had not increased its gold reserves, which implies the possibility of a price limit. Nevertheless, Citibank analysts emphasize that the ongoing robust consumer demand in China will increase gold prices.

Traders are anticipating the release of the preliminary Michigan Consumer Sentiment Index for June, the next significant data release from the United States, scheduled for Friday. The overall outlook for gold remains uncertain. This index will offer additional information regarding consumer confidence and the overall economic outlook.

XAUUSD

 

The XAU/SUD trades sideways, where a potential Head and Shoulders breakout with a daily candle below the 2286.70 level could be a high probable short opportunity. However, the long-term trend is bullish and can regain the momentum above the 2439.00 level without validating the H&S.

BTC/USD

The country's pro-Bitcoin president, Nayib Bukele, has suggested the establishment of private investment banks within El Salvador. If approved, these institutions will provide Bitcoin investors with improved financial services less restrictive than those offered by traditional banks.

In a post on X on June 14, the Salvadoran Ambassador to the United States, Milena Mayorga, proposed the establishment of a Bank for Private Investment (BPI) as part of El Salvador's economic plan. This institution would provide potential investors with various financing options in both dollars and bitcoin.

Max Keiser, a senior Bitcoin advisor to Bukele, stated on the same day, "President Bukele hits the ground running in his new term with new legislation establishing a Bitcoin Bank." He was referring to Ark Invest CEO Cathie Wood's prediction that El Salvador's real GDP "could scale 10-fold during the next five years," which he now believes is "more likely."

Following a decisive victory in February, Bukele commenced his second five-year presidential term just two weeks ago.

The BPI will not be subject to the same stringent regulations as traditional banks, as reported by El Mundo. These private investment banks will not be subject to any restrictions regarding their interactions with foreign banks or finance companies affiliated with their shareholders or business groups. Additionally, loan restrictions will be eliminated.

BTCUSD

 

Bitcoin (BTC/USD) trades within a bullish reaccumulation phase, from which a bullish continuation is likely. 

However, the recent price moved below the 100-day SMA line from where an immediate recovery could invalidate any bearish continuation.

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