The uncertain outcome of the debt ceiling agreement has rendered the near-term economic outlook uncertain. Recent data indicate, however, that the actual economy is exhibiting resilience. Stabilization in new home sales and orders for durable products, as well as an unexpected increase in real personal spending, are positive indicators.
The FOMC considers the natural rate of interest when determining an appropriate level of interest rates to combat inflation. Estimations of this rate have resumed this month after a brief hiatus during the pandemic's volatile period. According to these estimates, the era of low natural interest rates continues.
In the UK, the Bank of England's policymakers were taken aback by the April consumer price index in the United Kingdom. Although headline inflation paused and energy prices fell, the decline was less than anticipated.
As a result, we now anticipate that the Bank of England will raise its policy rate on both June 22 and August 3. We have marginally increased our global growth forecast as a result of the ongoing improvement in economic activity. Nevertheless, there are indications that the global economic development outlook for this year may have reached a plateau.
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Forex Technical Outlook for 29 May 2023 to 02 June 2023
The coming trading days are going to be eventful as investors will experience the monthly shift with a lot of high-impact releases.
The Non-farm payroll would be the main event to look at but there are a lot more in the basket.
Let’s see the list of events to look at this week:
- CB Consumer Confidence on Tuesday
- RBA Gov Lowe Speaks on Wednesday
- AUD CPI y/y on Wednesday
- German Prelim CPI m/m on Wednesday
- CAD GDP m/m on Wednesday
- JOLTS Job Openings on Wednesday
- ADP Non-Farm Employment Change on Thursday
- ISM Manufacturing PMI on Thursday
- Average Hourly Earnings m/m on Friday
- Non-Farm Employment Change on Friday
Now move to the weekly price forecast:
As per last week’s price projection, EUR/USD extended the downside momentum, where the latest weekly close is a sign of further bearish momentum.
This technical analysis of the EUR/USD shows how the price trades below the 61.8% Fibonacci Retracement level from the 2022 swing. It is a clear sign of a valid bearish trend, which may extend the momentum in the coming days.
As per the weekly price, the pair is developing its position below all moving averages, where the current 20-day Moving Average level is flat, working as a dynamic resistance.
In the meantime, the 100 SMA level started coming closer to the price, indicating increased selling pressure in the market. The Momentum Indicator also crossed below the 100 level, while the current RSI level is closer to the 50.00 neutral line.
In the bearish case, the daily market trend is potent, while other technical indicators are negative, with a modest downside possibility. A valid break with a D1 candle below the 1.0700 level could find the 1.0660 level as the next support level, but below this zone, the next level is at the 1.0500 area.
On the other hand, a strong recovery above the 1.0800 level is needed before aiming for the 1.0900 level.
The downward pressure is clear in the GBP/USD price. Based on last week’s analysis, a stable momentum below the 20 day EMA level with a Symmetrical Triangle breakout opened a strong short opportunity.
This technical analysis shows a potential downside pressure in the GBP/USD price on the short-term basis. The 14-day Relative Strength Index (RSI) is steady below the neutral line with a more downside possibility.
The downside momentum was influenced by the potential correction and downside traction after breaking below the 50-day MA level at the 1.2435 area.
Before forming more downside pressure, a stable bearish D1 candle is needed below the 1.2287 or 100-day SMA level. In that case, the next target level would be at the 24 March low at 1.2190 level before approaching the 1.2000 level.
Conversely, a stable buyers’ accumulation is needed above the .12435 level, which will invalidate the downside momentum.
Based on this, the 1.2400 level would be critical for bears; the 1.2493 level would be the next target above these zones.
As per the last week’s price projection, AUD/USD extended the bearish pressure, while the recent channel breakout opened further downside possibilities.
This technical analysis of the AUD/USD shows how the price remained stable below the dynamic 20 Exponential Moving Average level while the broader market outlook is bearish.
Within the downside pressure, the recent channel breakout with a bearish daily candle below it could further confirm the upcoming bearish pressure in this pair.
In the indicator window, the current RSI is below the 50.00 line, aiming for testing the 30.00 oversold level.
Based on this outlook, a minor upside correction is pending, but the overall outlook is bearish. The first target of the selling pressure is the 0.6425 level, which is the 161.8% Fibonacci Extension from the recent channel’s range.
Bulls control the price in the USD/JPY pair, where the price is more likely to fill the imbalance left on 10 November 2022.
This technical analysis shows how bulls are strong in this currency pair. Although there is a gap between the price and dynamic 20-day EMA, the broader outlook would be bullish.
The key price level for USD/JPY is the existing inefficiency on 10 November 2022, which will likely fill up in the coming days.
The indicator window reached the overbought zone, which signaled a strong bullish trend. In this scenario, minor downside pressure is pending in this pair, but the upside momentum is valid until bears are taking over the 20 EMA level.
On the upside, the next resistance is at the 142.47 level, which would be the next target. However, a break below the 138.44 level would be an alarming sign for bulls.
Gold remained steady below the psychological 2000.00 level and April 2023 open, allowing bears to grab the momentum. As the weekly close is still on the sellers’ side, we may expect the downside momentum to extend.
In the XAU/USD daily chart, the recent price came below the 1950.00 level, the 23.6% Fibonacci Retracement level from the latest uptrend. Besides, the 14-day Relative Strength Index remains below the 50.00 line, indicating a strong bearish trend.
On the bearish side, the 100-Day SMA level works as confluence support at the 1935.00 static level. Therefore, a bearish daily candle below this level could grab sellers' attention in this pair, where the major target level is the psychological 1900.00 level.
On the other hand, buyers may regain momentum as this week will be the month's last trading week, where profit trading is pending. Before flipping the current situation, a bullish daily candle and a stable price above the 1950.00 level are needed. In that case, more upside pressure may come, where the ultimate aim is to test the 1980.00 and 2000.00 levels.
As a result of the US core Personal Consumption Expenditures (PCE) inflation data for April that exceeded expectations, the price of Bitcoin fell.
This unanticipated occurrence prompted a knee-jerk reaction from market participants, resulting in increased selling pressure on the asset and its subsequent decline below $26,400. The Bitcoin price was able to recover and revert to its pre-data levels within minutes of the release of the data.
The core PCE figures support the notion of "sticky inflation," thereby increasing the likelihood of additional interest rate increases by the US Federal Reserve.
In contrast to earlier expectations of rate cuts by the US Federal Reserve, the higher-than-anticipated US core PCE inflation rate of 0.4% MoM and 4.7% YoY has fueled rumors of an imminent interest rate increase.
As a result of escalating selling pressure, it is anticipated that Bitcoin's ascent to its bullish target of 30,000.00 will be delayed. The trading environment is not as favorable for risk assets as envisaged by traders, and tighter market conditions may increase Bitcoin and Ethereum sales.
Bitcoin's price is currently experiencing a downward trend due to the publication of US PCE inflation data. This asset may find support for the coming trading days at the 25,651.00 level.
The current BTC price is below three long-term Exponential Moving Averages: the 10, 50, and 100, which are located at 26,446.00, 26,440.00, and 26,473.00, respectively.
As there are no indications of inflation abating in the near future, investors will likely reallocate capital to alternative sectors and seek refuge in safe havens.
Suppose Bitcoin and Ethereum prices experience transient gains. In that case, it is anticipated that they will be short-lived, as a more substantial and protracted decline will likely test the resilience of risk assets.
The Non-farm payroll is the most important event to look at this week as it will provide a clue about the upcoming FOMC meeting in June. Also, the monthly shift will be another event and investors might find a stable trend after these events.