The most recent economic data indicate that the U.S. economy is gradually decelerating. Despite this, consumer spending remains stable, and industrial and housing activity shows evidence of stability. In spite of the fact that we continue to anticipate a recession by the end of the year, it is undeniable that the data reveals an underlying resilience.
According to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit, household debt balances in the United States increased by $148 billion in the first quarter of 20023.
During the same period, mortgage debt increased by only $121 billion, and mortgage originations for purchases and refinancing plummeted to $324 billion, the lowest level since the second quarter of 2014. The surge in refinancing during the pandemic has slowed, but its effects will linger for some time.
In the Asian economy, China's retail sales and industrial output increased significantly in April. However, these readings were below the consensus forecast, indicating that China's recovery may be losing momentum. Meanwhile, Japan's Q1 GDP exceeded expectations with a quarterly annualized growth rate of 1.6%. Consumer expenditures and business capital expenditures both increased in April, as did the Consumer Price Index.
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Forex Technical Outlook for 22 May 2023 to 26 May 2023
Currently, the bond market anticipates a 75 basis point easing by the Federal Reserve (Fed) . This week, several members of the Federal Open Market Committee (FOMC) expressed their opinions publicly.
After the May meeting indicated a data-dependent and month-to-month approach, these policymakers' comments are essential for comprehending the Fed's future course of action. Regarding the Fed's next actions, there appears to be a lack of consensus, indicating division among FOMC voters.
Let’s see the list of events to look at this week:
- French & German Flash Manufacturing PMI on Tuesday
- The Uk Flash Manufacturing and Service PMIs on Tuesday
- RBNZ Official Cash Rate and Rate statement on Wednesday
- BOE Gov Bailey Speaks on Wednesday
- FOMC Meeting Minutes on Wednesday
- The US Prelim GDP q/q on Thursday
- The US Unemployment Claim on Thursday
- Core PCE Price Index m/m on Friday
Now move to the weekly price forecast:
As per last week’s price projection, EUR/USD extended the bearish momentum and found support at the 1.0745 level, from where a bullish recovery is seen.
In the weekly chart of EUR/USD, more clues are needed before confirming further downside pressure, but forming a new lower leg is possible. This currency pair extended the downside momentum below the 100-day SMA level, which is currently working as a resistance level at the 1.0890 level.
On the other hand, the current price is struggling to hold momentum above the flat 20-day SMA support. However, a bullish recovery is seen from the 1.0745 support, which was the 61.8% Fibonacci retracement level of the 2022 swing.
As per the momentum indicator, the weekly price trades at the 100 level without knowing the market direction. Moreover, the Relative Strength Index (RSI) is moving higher with a stable position above the neutral 50.00 line.
As Per the daily chart, the price is struggling to hold momentum above the 100-day SMA level, while the 20-day EMA is a dynamic resistance level. Other technical indicators are increasing, but the lack of momentum shows that more confirmations are needed to form a bottom.
Before considering a downside momentum, a daily candle below the 1.0745 level is needed, which could extend the momentum toward the 1.0660 level. Below this level, more downside momentum might come toward the 1.0500 to 1.0400 level.
On the upside, a bullish recovery above the 1.0900 level with a daily close could eliminate the downside possibility, increasing the price toward the 1.1000 level.
The short-term outlook in the GBP/USD pair is bullish as the current price is trading sideways within a symmetrical triangle formation. As the bulls are backing the triangle zone, an upside pressure could offer a stable trend.
This technical analysis of GBP/USD shows how the daily price is bullish as the current dynamic 50-day Moving Average is at 1.2410, working as strong support.
As bulls support the momentum, the price is more likely to increase toward the 1.2350 level, which is a crucial event level. However, breaking below the support line could create a sharp fall towards the 1.2276 level, which is working as confluence support from the 100 DMA and April 2023 low.
Investors should monitor how the price reacts on the support line, as a strong bearish breakout could extend the downside momentum toward the 1.2000 psychological level. Also, the dynamic 14-day Relative Strength Index (RSI) supports bears by holding the momentum below the 50.00 neutral line.
On the other hand, a bullish flip above the 20 DMA is needed before aiming for the 1.2546 level. If the price breaks above this line with a daily close, investors might see the 1.2600 level to be tested.
As per the previous weekly outlook, bears are in action but failed to breach the 0.6573 key support level, which could limit the downside momentum.
This technical analysis shows a strong bullish liquidity sweep at the 0.6805 level from where the existing downside pressure is present.
The rectangle pattern is still valid in the daily chart, from where a breakout is needed before forming a stable trend.
The current dynamic 20-day Exponential moving average is above the price, while the current RSI is below the 50.00 line. However, the recent significant low of 0.6573 level is still protected, which needs to be violated by bears before forming a sharp fall toward the 0.6400 level.
As per the last week’s projection, the bullish trend continuation showed a potential buying opportunity in the USD/JPY price, which is still valid for the coming trading days.
This technical analysis indicates how the bullish trend continuation opportunity is called traders. However, the upside breaks, and a new swing high above the 137.78 level could limit the gain before forming another higher high.
In the daily chart, the dynamic 20 EMA is below the price, while the RSI is supportive of bulls. In that case, any downside correction and a bullish rejection from a near-term support level could offer a decent buying opportunity.
However, massive selling pressure from the 137.78 level with a bearish daily candle below the 137.00 level could increase the possibility of breaking below the trend line support to grab retail liquidities.
As per last week’s price projection, XAU/USD extended the low below the dynamic 20 DMA and static 2000.00 support from where a 450 pips downside correction is seen. However, the price failed to hold the weekly candle below the 1950.00 level, which may limit the downside momentum.
This technical analysis of XAU/USD shows how the price is trading at the key support level. The current price action shows a limited possibility of bearish pressure due to having several support levels as a barrier.
The current Relative Strength Index (RSI) shows an upside pressure in the weekly price, heading to the 70.00 overbought zone. The momentum indicator also supports bullish, while the immediate support level is spotted at the 1950.00 level.
Before extending the loss, bears should form a daily candle close below the 1950.00 level. However, a close below this level might extend the downside pressure toward the 1920.00 to 1930.00 areas. A weekly candle close below this level would extend the loss further toward the 1880.00 level.
On last Friday, a decent recovery was seen above the 1975.00 level, eliminating the downside pressure as a short-term correction. More upside pressure with a daily close above the 2005.00 level would resume the existing bullish momentum towards the record high area.
Bitcoin on-chain metrics provide insight into the sentiment of investors. According to the 30-day Market Value to Realized Value (MVRV) paradigm, Bitcoin has not yet reached its lowest point.
The MVRV model assesses the average profit or loss of BTC buyers over the past year. According to Santiment's research, a value below -10% indicates that short-term investors are experiencing losses and are likely to sell.
The Bitcoin price has reversed whenever the 30-day MVRV has reached levels between -10% and -18%. The MVRV is currently around -4.12%, indicating that additional corrective waves will likely emerge shortly.
In addition, Active Addresses have declined significantly since April 2023. The decrease in the metric from 306 billion to 160 billion indicates a decline in the number of active users.
Blockchain technology evolves, leading to new use cases and potentially reducing the number of active addresses. It indicates a significant decline in Bitcoin network conjecture.
Consequently, the bullish thesis would be invalidated if the Bitcoin price continued to decline and broke below the 22,591.00 support level. In such a case, Bitcoin will likely revisit the low point from November 7 at the 15,487.00 level.
BTC/USDT has yielded almost a 9-0% gain from the 2023 rally, but it shows a bullish continuation opportunity in the recent chart.
The weekly price shows how the price is stuck at the bearish breaker, at the 29,591.00 level. Moreover, the Fear Value Gap (FVG) from the 25,591.00 to 26,591.00 area could be strong support above the 24,300 level.
As per the current price action, bulls could form a strong recovery from the aforementioned FVG, but a lower time frame confirmation is needed before opening a long position.
In the indicator window, the current RSI and Awesome Oscillator are about the neutral line, indicating an upward pressure in the main chart.
The US Dollar’s strength has become questionable in the latest trading session. Now investors should monitor the price action carefully before aiming for a stable trend.