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Forex Forecast & Forex Technical Outlook for 27 May 2024 to 31 May 2024

Forex Forecast & Forex Technical Outlook for 27 May 2024 to 31 May 2024
author Written by
Rex John Walsh
author Fact checked by
Sangram Mohanta

Last Updated on June 2, 2024 by TOP FOREX BROKERS REVIEW

The escalation of mortgage rates in April led to a decline in homebuying activity. Conversely, orders for durable products surpassed initial projections, suggesting a more robust manufacturing industry.

As reported in price news last week, underlying inflation in Canada decelerated further than expected, influencing the plan to reduce interest rates in June. On the contrary, the deceleration of inflation in the United Kingdom fell short of initial expectations, thereby indicating that the Bank of England might postpone the implementation of an initial rate cut until August or later. 

Furthermore, the May composite PMI data for the United Kingdom and the Eurozone remained in expansionary territory, suggesting that recoveries exhibited a gradual and consistent improvement over the year.

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Forex Technical Outlook for 27 May 2024 to 31 May 2024

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

  • BOJ Gov Ueda Speaks on Monday
  • CB Consumer Confidence on Tuesday
  • AUD CPI y/y on Wednesday
  • German Prelim CPI m/m on Wednesday
  • The US Prelim GDP q/q on Thursday
  • CAD GDP m/m on Friday
  • Core PCE Price Index on Friday

EUR/USD

The EUR/USD pair maintained its corrective trend near 1.0808, propelled by a comprehensive resurgence in the US Dollar (USD) after more optimistic US PMI data. It is expected that the forthcoming disclosure of Germany's Gross Domestic Product (GDP) for the initial quarter (Q1) will reflect a quarterly expansion of 0.2% and an annual contraction of 0.2%.

The USD acquired strength on Thursday after releasing positive US economic data. The US S&P Global Flash Composite Purchasing Managers Index (PMI) reached its highest level in May 2022, rising to 54.4 from 51.3 in April. The Services PMI increased from 51.3 in April to 50.9 in May, while the Manufacturing PMI rose from 50.0 in April to 50.9 in May. Both indicators exceeded the expectations of the market. Furthermore, for the week ending May 18, weekly Initial Jobless Claims decreased to 215,000, compared to 223,000 the week prior, which was also below the consensus estimate of 220,000.

In the interim, the EUR is under pressure due to mounting speculation that the European Central Bank (ECB) will reduce interest rates before the Federal Reserve. Christine Lagarde, president of the European Central Bank, conveyed assurance that inflation in the Eurozone is under control, implying that a rate cut is probable the following month.

EUR/USD

 

In the EUR/USD daily chart, the current price hovers above the dynamic 20-day EMA but faces resistance from a falling trendline. As the buying pressure is supported by the rising RSI, a valid bullish breakout from the trendline resistance could validate the long signal toward the 1.0941 resistance level.

GBP/USD

Last week, the Pound Sterling (GBP) and the US Dollar (USD) exchanged minor gains, with the GBPUSD pair surpassing 1.2750 for the first time in two months.

Notwithstanding its robust commencement to the week, the Pound Sterling encountered challenges in the face of a resurging US Dollar, ultimately accumulating moderate gains and perpetuating the preceding week's ascent.

The central theme of this week was the diminishing anticipation of interest rate cuts by the Federal Reserve (Fed) and the Bank of England (BoE). This was partially mitigated by renewed demand for the US Dollar, which tempered optimism surrounding the British Pound.

As expectations of a June rate cut by the BoE were dampened by the delayed decline in UK inflation, GBPUSD reached a two-month high of 1.2762. In contrast, cautious remarks from Fed officials and ardent sentiments expressed in the minutes of the May Fed meeting countered expectations of aggressive rate cuts, reviving demand for the US Dollar and instigating a decline in the GBPUSD pair.

In April, the ONS reported a monthly decline in retail sales of 2.3%, compared to expectations of -0.4% and March's -0.2%. Notwithstanding this, the Pound Sterling managed to maintain its value above 1.2700, as the USD was unable to sustain its strength heading into the weekend due to improving risk sentiment.

GBP/USD

 

In the daily chart of GBP/USD, the recent price showed a buying pressure above the dynamic 20-day EMA line. Moreover, the rising RSI line above the 50.00 level with a confluence of bullish pressure from the 100 day SMA could extend the gain towards the 1.2828 resistance level. 

However, a failure to break this line with a daily close below the 20 DMA could initiate a downside correction.

AUD/USD

On Friday, the Australian Dollar (AUD) extended its consecutive four-session losing trend, presumably attributable to risk aversion. As the US Dollar (USD) strengthened on hawkish expectations that the Federal Reserve (Fed) will sustain higher policy rates for an extended period, the AUD/USD pair declined.

Consumer Inflation Expectations for the following 12 months fell to 4.1% in May from 4.6% in April, the lowest level since October 2021, exerting pressure on the AUD. This exacerbated apprehensions that inflation might persist above the target level for an extended duration. According to the minutes of the most recent meeting of the Reserve Bank of Australia (RBA), policymakers needed help in conclusively stipulating or precluding future adjustments to the cash rate.

The USD extended its gains following releasing Purchasing Managers Index (PMI) data from the United States on Thursday that exceeded expectations. This information increased Treasury yield concerns that interest rates would remain elevated for an extended period. Furthermore, the most recent minutes of the Federal Open Market Committee (FOMC) revealed that policymakers at the Fed were concerned about the prolonged stagnation of inflation at the beginning of 2024, which was slower than expected.

AUD/USD

 

In the daily chart of AUD/USD, a bullish break of structure is visible above the 0.6644 level. Moreover, a downside correction is visible after making a new high, where the most recent price trades bullish from the dynamic 20 day EMA.

In that case, a bullish rebound is possible as long as the price trades above the dynamic 100 day SMA line. However, a downside correction with a bearish daily candle below the 0.6556 low could eliminate the bullish pressure at any time.

USD/JPY

The Japanese Yen (JPY) continued its decline after the Statistics Bureau of Japan published weaker National Consumer Price Index (CPI) data. April witnessed a decline in the annual inflation rate from 2.7% in January to 2.5%, representing the second consecutive month of moderation. 

Despite this, the rate still exceeds the 2% target the Bank of Japan (BoJ) set. The ongoing inflation places the central bank under continued pressure to contemplate additional policy tightening.

Prior to policy normalization, the Bank of Japan emphasized the criticality of attaining a stable, sustained 2% inflation rate and robust wage growth. Investors, meanwhile, anticipate that the BOJ may accelerate its next interest rate hike to mitigate the impact on the cost of living as the ongoing weakness of the JPY persists, according to Reuters.

USD/JPY

 

USD/JPY keeps pushing higher, with no sign of sellers’ presence in the recent price. The internal low formation below the 20 day EMA with an immediate rebound could be a potential long opportunity in this pair.

XAU/USD

Gold (XAU/USD) found a temporary floor amid its recent sell-off, trading about a quarter of a percent higher at around $2,340. This uptick is driven by a mix of market and geopolitical concerns, leading investors to turn to gold for its safe-haven appeal.

Geopolitical tensions have escalated with China conducting a second day of war games around Taiwan and Ireland, Norway, and Spain recognizing the independent state of Palestine. These developments have unsettled markets, boosting demand for gold.

On Thursday, a series of unexpectedly strong US economic data weighed on the price of gold. The higher-than-expected preliminary US Purchasing Managers Index (PMI) data for May, particularly in the Services sector, suggested persistent inflation pressures. This reduced expectations for early interest-rate cuts by the Federal Reserve (Fed), which negatively impacts non-yielding assets like gold by increasing the opportunity cost of holding them.

Additionally, the relatively high price of gold may be dampening demand in India. According to Reuters, imports have fallen as high prices encourage retail customers to exchange old jewelry for new products.

XAU/USD

 

A potential divergence formation RSI provides a primary bearish signal for the XAUUSD price. As a result, the daily candle came below the 20 day EMA, with a downside possibility towards the dynamic 100 day SMA line as a mean reversion.

On the other hand, a bullish rebound from the 2278.13 level could be a potential long signal, targeting the 2500.00 level.

BTC/USDT

For the third day in a row, the total capitalization of cryptocurrencies has remained stable at approximately $2.6 trillion. Bitcoin has yet to surpass $70,000, which has dampened market enthusiasm. Bitcoin has experienced a 0.3% decline over the previous twenty-four hours, whereas Ethereum has gained 0.6%.

While resuming the SEC's dialogue with corporations could potentially indicate a policy shift, certain analysts suspect that the regulator's actions are motivated by politics. Assuming the spot Ethereum-ETFs are approved, Solana (SOL) may emerge as the subsequent cryptocurrency to introduce exchange-traded funds, according to Matrixport.

Additionally, Uniswap, a decentralized exchange, has urged the SEC to reevaluate its litigation, citing the agency's irrational behavior and feeble legal arguments. Unswap has declared its intention to litigate the regulator in a court of law.

Gary Gensler, the chairman of the SEC, has warned that a proposed House bill that would exempt digital assets from the definition of securities could expose investors to risk.

BTC/USDT

In the BTC/USD daily chart, the inverse Head and Shoulders continuation signal continued pushing the price higher, where the most recent price trades above the 67310.50 static support.

As the dynamic 100 day SMA and 20 day EMA remain below the current, we may expect the buying pressure to extend towards the 80000.00 psychological line.

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