Forecasts

US Dollar Outlook Mired by Bets for Fed Rate Cut in July

Central bank policy, economic indicators, and market events.

Connect via:

Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

DXY

US Dollar Rate Talking Points

Fresh data prints coming out of the US economy may do little to heighten the appeal of the Dollar as the Federal Open Market Committee (FOMC) alters the forward guidance for monetary policy.

Fundamental Forecast for US Dollar: Bearish

The US Dollar struggles to hold its ground as the Federal Reserve largely abandons the wait-and-see approach for monetary policy, and the central bank may continue to change its tune over the coming months as “many FOMC participants now see that the case for somewhat more accommodative policy has strengthened.

The US Durable Goods Orders report may reinforce speculation for an imminent Fed rate cut as demand for large-ticket items are expected to hold flat in May, and the final revision to the US Gross Domestic Product (GDP) report may offer the USD little relief as the update is anticipated to show a minor upward revision in the growth rate.

Even though the economy shows little signs of a looming recession, it seems as though FOMC has become less data dependent and more responsive to the shift in US trade policy as the Trump administration relies on tariffs to push its agenda.

As a result, the FOMC appears to be on track to switch gears over the coming months, and a growing number of Fed officials may show a greater willingness to insulate the economy as the “apparent progress on trade turned to greater uncertainty.”

FED

It remains to be seen if the central bank will implement a rate easing cycle as eight Fed officials now project the benchmark interest rate to narrow to 1.75% to 2.00% by the end of 2019, but the current environment is likely to keep the US Dollar under pressure especially as Fed Fund futures now reflects a 100% probability for at least a 25bp rate cut at the next interest rate decision on July 31.

With that said, fresh rhetoric from Fed officials may continue to sway the near-term outlook for the US Dollar, and a batch of dovish comments from Chairman Jerome Powellmay drag on the greenback as the central bank head is to speak in front of the Council on Foreign Relations next week.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Rate Daily Chart

EURUSD

Keep in mind, the broader outlook for EURUSD is no longer tilted to the downside as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year.

With that said, EURUSD stands at risk for a larger correction as the exchange rate clears the April-high (1.1324) following the failed attempt to test the 1.1000 (78.6% expansion) handle.

More recently, the lack of momentum to close below the 1.1190 (38.2% retracement) to 1.1220 (78.6% retracement) region raises the risk for a run at the monthly-high (1.1348), but need a close above the 1.1340 (38.2% expansion) hurdle to bring the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) area on the radar.

Additional Trading Resources

For more in-depth analysis, check out the 2Q 2019 Forecast for EUR/USD

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.



Weekly Euro Forecast: Last Week of June Awaits Euro Inflation Data

News events, market reactions, and macro trends.

Connect via:

Never miss a story from Christopher Vecchio

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Christopher Vecchio

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

eurusd price forecast, eurusd technical analysis, eurusd price chart, eurusd chart, eurusd price

Fundamental Forecast for the Euro: Neutral

  • Euro gains have been largely built upon crumbling US Dollar; elsewhere, speculation that the ECB will introduce new stimulus soon has weighed on the Euro.
  • The upcoming June Eurozone inflation report is due to show that price pressures have arrested their recent decline.
  • The IG Client Sentiment Index shows that retail traders are selling the recent EURUSD rally

See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides.

Euro Rates Week in Review

The Euro finished last week broadly higher, largely thanks to the ongoing deterioration by the US Dollar. EURUSD was the best performing EUR-cross, adding 1.42% around the June Fed meeting. Elsewhere, with the EU-Swiss stock exchange accessbattle ongoing, repatriation flows are keeping the Swiss Franc afloat despite a relaxation in demand for the safe haven currencies; EURCHF was the worst performing EUR-cross, losing -0.86% last week.

Otherwise, the performances by various EUR-crosses were middling at best: EURGBP continued its gentle rise, up by 0.26% as the Tory leadership election contest reached its final stage; and EURJPY was able to add 0.28% amid gains by global equity markets.

June Euro Inflation Report Due Friday

The upcoming economic calendar for the last week of June is rather light, particularly at the front end; there are no ‘high’ rated events before Thursday. While the June German IFO survey is due on Monday and the July German GfK consumer confidence report due on Wednesday, neither are likely to leave a significant impact on Euro price action.

On Thursday, the calendar will truly come into focus for the Euro in the form of the preliminary June German inflation report. The German consumer price index is due in at 0.2% (m/m) and 1.4% (y/y), the same price pressures seen in May. Stability in inflation data from the Eurozone’s largest economy should serve as an appetizer for the main course of Eurozone economic data this week, the June Eurozone inflation report on Friday.

The preliminary June Eurozone consumer price index on Friday is due on hold at 1.2% (y/y), while the core reading (ex-energy, food, alcohol & tobacco) is set to edge higher to 0.9% from 0.8% (y/y). The floor in inflation readings is coming at a time when European Central Bank President Mario Draghi has started to talk up the possibility of increasing accommodative policy measures over the coming months.

Eurozone Inflation Expectations Remain Weak

eurozone inflation expecations, euro inflation, euro inflation expectations, inflation oil prices, oil prices

The recent rebound in energy prices has filtered through into inflation expectations. ECB President Mario Draghi’s preferred measure of inflation, the 5y5y inflation swap forwards, closed last week at 1.304%, up significantly from the yearly low set on June 17 at 1.141%. Overall, inflation expectations are little changed over the past month, with the 5y5y inflation swap forwards having closed at 1.318% on May 24.

Eurozone Economic Data Has Been Improving

An objective look at European economic data shows that conditions have improved, relatively speaking, over the past few weeks. In recent days we’ve seen the preliminary June French, German, and Eurozone PMI readings beat expectations almost uniformly: only one figure, the preliminary June Eurozone manufacturing PMI, missed forecasts; the Eurozone composite PMI improved to 52.1 from 51.8, beating the expected reading of 52. Accordingly, the Citi Economic Surprise Index for the Eurozone, a gauge of economic data momentum, increased to -1.3 by the end of last week; one month ago, it was at -21.7; three months ago, it was at -60.

EURGBP Stepping Out of the Spotlight

With the Tory leadership election down to the final two contestants, the 160,000 Tory party members will now vote over the coming month, culminating in results due in around July 22. Unless there is a surprise development, Boris Johnson is the clear favorite to become the next Tory party leader, and GBP-crosses already have this discounted into prices. Traders seeking out opportunities for EURGBP around the latest Brexit developments may be disappointed over the coming weeks.

RBNZ Meeting Wednesday; US GDP Thursday; G20 Starts Friday

As is fairly common, the last week of the month carries only a smattering of ‘high’ rated data releases that will leave a footprint beyond price action on the day of their publications. But with the US-China trade war proving to becoming a bigger and bigger threat to economies around the globe, any opportunity that traders have to glean new perspective from policymakers has a chance to be disruptive to FX markets.

On Tuesday, Fed Chair Jerome Powell will give remarks on the US economic outlook and Fed policy, which will draw interest for EURUSD given the dovish tone deployed at the June Fed meeting just last week. Staying focused on the US, the preliminary May durable goods orders report is due on Wednesday and the final Q1’19 US GDP report will be released on Thursday.

Elsewhere, the Reserve Bank of New Zealand will meet and keep its main rate on hold, but expectations are pointing to a high likelihood of more dovish policy action later this year; EURNZD could see additional volatility as rate expectations are repriced.

Finally, at the end of the week, the greatly anticipated G20 summit in Osaka, Japan will begin, featuring a summit between US President Donald Trump and Chinese president Xi Jingping. That a potential US-China trade deal could emerge should keep traders on edge over the coming days, as preparatory work by diplomats and trade negotiators could result in leaks and rumors in the run-up to the meeting in Japan.

Euro Futures See Sharp Swings in Positioning

cftc cot, cftc cot euro, euro futures, eur futures, futures positioning

Finally, looking at positioning, according to the CFTC’s COT for the week ended June 18, speculators dramatically decreased their net-short Euro positions from 86.8K to52.3K contracts, a -39.7% drop in net-short positioning. The futures market is now the least net-short is has been since February. It is worth noting that the most recent COT’s reporting period did not cover the June Fed meeting, which occurred on June 19; there will likely be another big shift in positioning in the next iteration of the COT report.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX



Japanese Yen Remains Biased Higher But Could Struggle This Week

Financial markets, economics, journalism and fundamental analysis.

Connect via:

Never miss a story from David Cottle

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Cottle

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Fundamental Japanese Yen Forecast: Neutral

  • With rising global risks comes a rising bid for the Japanese Yen
  • This isn’t going away anytime soon given the complex nature of those risks
  • But they might just back off a bit in the coming sessions

Find out what retail foreign exchange traders make of the Japanese Yen’s prospects right now, in real time, at the DailyFX Sentiment Page

The Japanese Yen and the US Dollar find themselves still very much locked in a ‘battle of the havens’ as global uncertainties economic uncertainties multiply.

It’s sobering to consider that many in the markets quite seriously hoped to see a trade deal between the US and China by the time May ended. While that always seemed like a stretch, the actual collapse in trade relations between the two global titans has been quite shocking and continues to loom over all else.

‘All else’ includes plenty of other likely snags too, from the endless drama of Brexit to the clear fragmentation of European politics. China’s economy is in an unwelcome spotlight too, with its manufacturing sector revealed to have contracted once more in May after just two months of recovery.

No wonder then that assets perceived to offer safety in times of high risk should be sought and the Japanese Yen has been winning that haven fight.

USD/JPY has retreated quite sharply from the recent peaks scaled in late April. From the standpoint of technical analysis Yen bulls do look a little exhausted as a new trading week gets under way. With that in mind it may take some real bad news to bolster the general flight to safety and move USD/JPY meaningfully lower in the short term, even if more falls look all-too-likely further out.

There are a few possible triggers coming up in a week rich with important economic events. Australia’s central bank will give its monetary policy decision on Tuesday and is widely expected to instigate the first reduction in record-low interest rates since late 2016. Should it do so, riskier assets than the Yen might get an initial fillip at its expense, but this seems unlikely to last in the general atmosphere of uncertainty. The European Central Bank will also give a policy statement and, while it is not expected to act, it is hard to see how that organization can sound anything other then extremely cautious about the Eurozone’s prospects.

The week will end with official US employment numbers. This crucial series remains among the global economy’s few clear bright spots. Any outcome close to the 195,000 new non-farm jobs expected for May will probably see a measure of reassurance creep back in to trading.

All in all, this may be a week in which Japanese Yen struggles for further gains, but that prognosis assumes as-expected data outcomes and no nasty surprises out of left field. The latter is obviously a brave assumption in this market. Still, it’s a neutral call this week. Just.

USDJPY

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!



GBP Eyeing G-20 Summit, UK GDP After BoE Sends Chilling Message

Political economy, economic and market themes.

Connect via:

Never miss a story from Dimitri Zabelin

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Dimitri Zabelin

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

GBPUSD

GBP FUNDAMENTAL FORECAST: NEUTRAL

  • GBP will be closely watching UK GDP, G-20 summit
  • BoE commentary on Brexit, growth risks sends chills
  • Race for Prime Minister continues – Johnson ahead

See our free guide to learn how to use economic news in your trading strategy!

GBP traders will have a lot to watch out for next week ahead of the publication of UK GDP data and the G-20 summit in Osaka, Japan. Market participants all over the world will be closely watching the event in light of the meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, who will be having “extended” talks on trade.

Last week, a Bank of England decision to hold the benchmark interest rate at 0.75 percent was accompanied by foreboding language from Governor Mark Carney – as forecasted. In addition to alluding to growing downside risks and a worsened global outlook due to trade wars, he also warned that the perceived risk of a no-deal Brexit had risen. Furthermore, expectations for growth in Q2 were revised from 0.2 percent to 0.0 percent.

GDP data will now likely solicit more attention across the board in light of the Bank’s economic re-assessment. The utterance on the US-China trade war and its impact on BoE monetary policy may apply further pressure to GBP-crosses ahead of the summit. This will also be the last major overseas meeting former Prime Minister Theresa May will be attending following her decision to resign last month.

If trade negotiations between Trump and Xi go well – or at least not poorly – GBPUSD may get a boost if market participants are injected with more confidence. Conversely, if talks go south, a bout of risk aversion may place a premium on liquidity and send investors flocking to the US Dollar. In this scenario, Cable may find itself under pressure.

Meanwhile, the race for Prime Minister in the UK continues. The most recent round of voting has eliminated all candidates apart from Foreign Secretary Jeremy Hunt and former Secretary Boris Johnson. The most recent ballot had the latter garner 160 votes, while the former obtained less than half of that with a tally of 77. The winner will be announced on the week of July 22. Until then, anxious GBP traders will simply have to wait.

Brexit Timeline

Brexit

GBP TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter



Gold Weekly Forecast: A Perfect Storm of Rates and Risk

Fundamental analysis and financial markets.

Connect via:

Never miss a story from Nick Cawley

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Nick Cawley

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

XAUUSD

Gold Talking Points

  • Low inflation, low interest rates and increased risk, a gold bulls dream.
  • If the next resistance level is broken convincingly, gold may push back to $1,500/oz.+

Q2 2019 Gold Forecast and Top Trading Opportunity

Fundamental Forecast for the Gold: Neutral

The fundamental outlook for gold next week is neutral but for the medium-term prices are likely to move higher. The neutral forecast for the w/c June 24 is predicated on the velocity of this week’s move – up 5.9% at one stage low-to-high - which needs to be tempered before the bullish momentum resumes. The market is also extremely overbought using the daily CCI indicator.

Gold One-Hour Timeframe w/c June 17, 2019

XAU

This week both the European Central Bank (ECB) and the US Federal Reserve (FED) confirmed recent market thinking, that interest rates are going to move, and stay, lower for longer as growth and price pressures remain longer-term concerns. ECB President Mario Draghi said on Tuesday that all monetary tools remain at his disposal, mentioning lower rates and a potential re-start of the quantitative easing program, while Fed Chair Jerome Powell pointed to a 0.25% rate cut in July with one or potentially two more interest rate cuts this year. Lower interest rates however are here to stay, boosting the positive medium-term outlook, while inflation will likely remain stubbornly low for a long time. Against this backdrop, gold comes into its own as an asset class, especially with the US dollar weakening alongside lowered interest-rate expectations.

In addition, gold received a strong safe-haven bid as tensions between the US and Iran ratcheted higher over the course of the week, culminating in US President Trump ordering strikes on Iranian targets before pulling the order.

Professional traders would have enjoyed the week with the latest CFTC Commitment of Traders Report (CoT) showing gold long positions increasing further.

XAU

The Predictive Power of the CoT Report

The DailyFX Economic Calendar covers all market moving data releases and events.

The daily chart shows that gold touched its highest level in around six years this week, opening the way for further moves higher. The next level of resistance is at $1,433/oz. before an old gap created back on a bear candle in April 2013 comes into play between $1,495/oz. and $1,540/oz. The CCI indicator, mentioned earlier, highlights the risk of a short-term pull-back.

Gold Daily Price Chart (May 2018 – June 21, 2019) – CCI Indicator Extreme Overbought Territory

XAU

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on the Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.



Canadian Dollar May Be Torn Between Upbeat Local and US Econ Data

Classic technical analysis, macro and economic themes.

Connect via:

Never miss a story from Daniel Dubrovsky

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Daniel Dubrovsky

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

CAD Price Chart

Canadian Dollar Fundamental Forecast: Neutral

  • Canadian Dollar gained as relatively dovish Fed boosted stocks and crude oil prices
  • Focus next week shifts to economic data with US-China trade deal pushed back for now
  • Both local and US economic data may beat estimates, S&P 500 might struggle to rise

Have a question about what’s in store for Canadian Dollar next week? Join a DailyFX Trading Q&A Webinar to ask it live!

The Canadian Dollar rose this past week as a relatively dovish Fed sunk the US Dollar, boosted stocks and crude oil prices. At home, the Loonie didn’t spend much time noticing a better-than-expected GDP report. Despite the beat in the YoY rate for November 2018 (1.7% versus 1.6% expected), growth was at its slowest in two years. The MoM one contracted 0.1% which was in-line with estimates.

Probabilities of a Bank of Canada hike simultaneously dropped after the cautious tone from the FOMC meeting. Overnight index swaps were pricing in a 15.9% chance of a BoC hike by July 2019, down from almost 40% confidence at the beginning of this past week. Yet, the Loonie still stood relatively strong, which speaks directly to what it was focusing in the interim: sentiment.

There has been a noticeably strong inverse correlation between USD/CAD and both the S&P 500 and crude oil since October. The latter two have spent most of January recovering as markets grew doubtful of a hawkish Federal Reserve and optimistic about a deal between the US and China to end the trade war. With an outcome on the latter being pushed back for the “near future”, the focus shifts to economic data.

After all, both the Fed and the BoC are quite data-dependent and arguably the most hawkish of the major central banks (albeit that has diminished somewhat as of late). Next week contains Canadian employment data. Economic statistics out of the country has been tending to outperform relative to economists’ expectations, opening the door to an upside surprise.

The same also holds true in the United States. As such, the first estimate of Q4 GDP and PCE core (the Fed’s preferred measure of inflation) may also surprise better. With that in mind, the Canadian Dollar fundamental forecast will look neutral. On a side note, the S&P 500 and market sentiment could be running out of room to keep rallying which may reverse gains in oil prices and bode ill for CAD down the road.

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Other Weekly Fundamental Forecasts:

Australian Dollar Forecast - Australian Dollar Could Wilt If Focus Returns To Interest Rates



Australian Dollar Still Mired But Could Ride Fed’s Risk Wave Higher

Financial markets, economics, journalism and fundamental analysis.

Connect via:

Never miss a story from David Cottle

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Cottle

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

AUDUSD

Fundamental Australian Dollar Forecast: Bullish

  • The Australian Dollar has gained with others as the Fed’s dovishness hit the greenback
  • The RBA for its part is still arguably less dovish than the market
  • This week might well see AUD/USD gains hold

Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page

The Australian Dollar made gains last week, inspired by central bank commentary from the both sides of the AUD/USD pair.

The US Federal Reserve left its monetary settings alone but did nothing to disabuse futures-market participants betting on a July interest rate cut. This caused a surge in bearish Dollar plays across the traded-currency complex, with the Aussie benefitting despite what was at face value even more dovish commentary from its own central bank.

Speaking in Adelaide Reserve Bank of Australia Governor Philip Lowe said that expectations of another cut in the record low 1.25% Official Cash Rate were ‘no unreasonable.’ This is explicit talk indeed from a central banker. However, Lowe also pointed again to the limits of monetary policy’s effectiveness in a world were rates have been at historic lows for some years. In doing so he was perhaps, once again, less dovish than the Australian Dollar market overall. Of course, the RBA will attempt to fulfil its inflation mandate and, while pricing power remains weak, lower rates will remain an option. But, given Australia’s roaring consumer debt levels, the bar to reductions beyond a single further quarter point move may yet be higher than the market thinks.

The coming week offers very little in the way of first-tier Australian economic news. Two RBA speakers, including Mr. Lowe are on tap. If they stick to the current script and give the market little reason to price in more than a single near-term rate cut, the Australian Dollar market is likely to remain focused on the US Dollar’s fortunes.

To be clear, a quieter week need not portend any great turnaround in the overall bearish backdrop still very much in place for AUD/USD. But it might extend battered Aussie bulls’ time of respite until, as it certainly will, focus returns to the currency’s own abject lack of policy support.

It’s a cautiously bullish call this week, rooted entirely in global risk appetite.

AUDUSD

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!



NZD/USD Looks Vulnerable. How Dovish Will the RBNZ Turn Next Week?

Classic technical analysis, macro and economic themes.

Connect via:

Never miss a story from Daniel Dubrovsky

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Daniel Dubrovsky

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

NZD

New Zealand Dollar Fundamental Forecast: Bearish

  • New Zealand Dollar depreciated as sentiment soured, jobs report boosted RBNZ rate cut bets
  • Next week contains first RBNZ rate decision since November, much has happened since then
  • The RBNZmay echo dovishness and concerns from other central banks, but by how much?

We just released our 4Q forecast for equities, which may impact NZD, in the DailyFX Trading Guides page

The pro-risk New Zealand Dollar turned lower last week along with a downturn in sentiment which saw the Dow Jones Industrial produce a bearish reversal pattern. Pessimism in markets occurred with worrying news regarding the US-China trade war front. US President Donald Trump noted that it is unlikely he will be meeting China’s President, Xi Jinping, before a deadline which – if passed - could trigger an increase in tariffs (March 1).

Arguably, the largest contributor to the decline in NZD/USD was a disappointing local jobs report however. The unemployment rate shot higher from 3.9% to 4.3% in Q4 2018 while the country added jobs at the slowest pace since Q1 2016. Looking at the chart below, RBNZ rate cut bets increased as the New Zealand Dollar weakened.

nzdusd

With that in mind, all eyes next week will be on the first Reserve Bank of New Zealand rate decision since November. A lot has happened since then. Most notably, the majority of developed central banks downgraded their views regarding economic projections. The most sudden shift to a more dovish stance came from the Fed as it went from expecting three hikes this year to perhaps none at all.

Closer to home, the Reserve Bank of Australia still held on to its neutral outlook on rates which initially boosted the Australian Dollar. However, Governor Philip Lowe then noted that they are no longer favoring a hike as their next move. This sent the Aussie Dollar collapsing and gives us a rather good idea of what could happen in the week ahead.

Unlike the RBA, the RBNZ has a more balanced view on monetary policy in the first place. Governor Adrian Orr noted back in November that they are not taking cuts off the table. He also noted that they envisioned rates rising perhaps in the third quarter of 2020 as it raised inflation expectations. With that in mind, the question here is how dovish will the RBNZ appear relative to expectations?

Overnight index swaps are pricing in about a 42% chance of a cut as soon as June 2019. If the central bank downgrades their economic projections but still surprises markets with leaving the door open to a hike, it could end up boosting the New Zealand Dollar. This is like what we saw with the Bank of England this past week. Keep in mind that Mr. Orr will then speak an hour after the interest rate decision. Cautious commentary that echoes the dovishness from other central banks could add weakness to Kiwi Dollar, making for a volatile day.

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Could Take Some Rest On The Road Lower



Advertisement
Advertisement
Advertisement