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The headline Tokyo Consumer Price Index (CPI) for April rose 1.8% YoY, compared to a 2.6% rise in the previous reading, the Statistics Bureau of Japan showed on Friday. Meanwhile, the Tokyo CPI ex Fresh Food, Energy increased 1.8% YoY versus 2.7% expected and the previous reading of 2.9% rise.

Additionally, Tokyo CPI ex Fresh Food rose 1.6% for the said month, below the market consensus of 2.4%.

Market reaction

As of writing, the USD/JPY pair was down 0.01% on the day at 155.63.

• USD/CAD remains on the defensive around 1.3655 on Friday amid the weaker USD. 
• US GDP number expanded by 1.6% on an annualized basis in Q1 2024, compared to 3.4% growth in Q4 2023.
• The weaker Canadian Retail Sales data triggered speculation that the BoC might start cutting interest rates in June. 

The USD/CAD pair extends its downside near 1.3655 on Friday during the early Asian session. The decline of the US Dollar (USD) to the two-week lows around the mid-105.00s exerts some selling pressure on the pair. Investors now shift their focus to the release of US Personal Consumption Expenditures (PCE) Price Index data, due later on Friday. 

The US economy grew at its slowest pace in nearly two years in the first quarter (Q1) of 2024 as prices rose at a faster pace, the Commerce Department revealed on Thursday. The first estimate of US Gross Domestic Product (GDP) grew by 1.6% on an annualized basis in the January-March period, compared to a 3.4% growth in Q4 2023. This reading came in below the market consensus of 2.5%. Additionally, US Personal Consumption Expenditures Prices rose at an annualized rate of 3.4% in Q1, nearly double the 1.8% pace recorded in Q4 2023. 

The weaker-than-expected GDP growth and hotter-than-expected inflation weigh on the Greenback and create a headwind for USD/CAD. The markets expect the US Federal Reserve (Fed) to begin the first rate cuts in September, with traders now pointing to just one rate cut in 2024 following the GDP data, according to the CME FedWatch tool.

On the Loonie front, the weaker Canadian Retail Sales data on Wednesday triggered speculation that the Bank of Canada (BoC) might start cutting interest rates at its next meeting in June, which might drag the Canadian Dollar (CAD) lower. Nonetheless, the rebound of crude oil prices provides some support to the CAD, as Canada is the largest crude oil exporter to the United States (US). 

• The Bank of Japan is set to hold interest rates after its first hike since 2007 in March.
• The focus will be on BoJ’s updated forecasts and Governor Kazuo Ueda’s press conference.
• The volatility around the Japanese Yen could spike on the BoJ policy announcements.

The Bank of Japan (BoJ) is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.

The BoJ hiked the interest rate for the first time in 17 years in March, lifting Japan out of the negative interest rate policy (NIRP) for the first time since 2016.

What to expect from the BoJ interest rate decision?

With a steady policy widely expected, the markets’ attention will remain on the BoJ’s quarterly inflation and growth forecasts and the probable changes in the policy statement for fresh hints on the timing of the Bank’s next rate increase.

Markets are expecting the BoJ to hike rates again this year, with odds split between the chance of a lift-off in July, or sometime in the October-December quarter, according to Reuters.

Kyodo News Agency reported on Friday, citing sources familiar with the BoJ thinking, that the Japanese central bank is mulling an upward revision to its inflation outlook for fiscal year 2024 from the current 2.4%. The bank is also seen raising its forecast for fiscal year 2025 from 1.8% to around 2.0% while forecasting Japan's core inflation to be around 2% in fiscal 2026, the sources added.

These expectations hold even as Japan’s core Consumer Price Index (CPI) – a measure excluding fresh food and energy costs closely watched by the BoJ –  moderated to 2.9% in March after increasing 3.2% in February. It was the first time since November 2022 that core inflation fell below 3%.

Easing price pressures in Japan fail to deter the BoJ’s path forward on interest rates, as the recent depreciation of the Japanese Yen (JPY) is likely to significantly push up inflation. Further, the BoJ focus remains on the potential increases in the services inflation and wages to determine the appropriate time for the next rate hike.

Japanese firms offered their biggest wage hikes in 33 years this year but the inflation-adjusted real wages have continued to decline for nearly two years.

When asked about the possibility of further rate hikes this year, in an interview with the Asahi newspaper earlier this month, BoJ Governor Kazuo Ueda said that "it's dependent on data.” "We'll adjust interest rates according to the distance towards sustainably and stably hitting 2% inflation”, Ueda added.

On Tuesday, Governor Ueda said that the BoJ will raise rates again if trend inflation accelerates toward its 2% target as expected. Japan's Weighted Median Inflation Index, a key measure of the country’s trend inflation, rose at its slowest pace in 11 months to 1.3% in March, the latest data published by the Bank of Japan (BoJ) showed on Tuesday.

Governor Ueda’s remarks imply that the central bank is shifting to a more discretionary approach in setting policy. The BoJ could remain on track to deliver another rate hike this year as it gathers more confidence that Japan will sustainably achieve its 2% price target. Therefore, the country’s trend inflation, wage growth and consumption data will hold more importance than the central bank’s quarterly inflation projections in determining the Bank’s future interest rate decisions.

Analysts at BBH preview the BoJ policy announcements, noting that “we are sticking to our view that the BoJ tightening cycle will remain very modest.  The market agrees and is pricing in only 20 bp of tightening in 2024 and 50 bp over the next two years.  Such a modest cycle would likely keep upward pressure on USD/JPY.” 

“Updated macro forecasts will be released.  Reports emerged suggesting the BoJ may raise its inflation forecast for FY2024 from 2.4% currently at this meeting.  However, March CPI data last week came in lower than expected and suggests falling price pressures, so the revision is likely to be minor,” the analysts explained.

How could the Bank of Japan interest rate decision affect USD/JPY?

If the BoJ policy statement delivers a hawkish tone, indicating that the next rate hike could be as early as July, the Japanese Yen is likely to see a fresh upswing against the US Dollar (USD). The USD/JPY pair would then initiate a corrective downtrend toward the 150.00 level.

On the other hand, if the central bank suggests that they would cautiously monitor the likelihood of achieving 2% trend inflation to gauge the next rate increase, it could be read as dovish. In such a case, the Japanese Yen could crash to a new 34-year low against the US Dollar.

It’s worth noting that the Japanese Yen tends to weaken on BoJ decision days. It has done so for eight straight and nine of the past ten meetings, per BBH Analysts.

From a technical perspective, Dhwani, Senior Analyst at FXStreet, notes: “Amid extremely overbought Relative Strength Index (RSI) conditions on the daily chart, a USD/JPY correction seems long overdue. Should a hawkish BoJ guidance spark a Japanese Yen rally, the pair will pull back sharply toward the 21-day Simple Moving Average (SMA) at 153.19. Ahead of that level, the April 23 low of 154.55 could challenge bearish commitments. If the corrective decline gains traction, USD/JPY could accelerate toward the 50-day SMA at 151.28.”

“On the flip side, the relentless vertical rise could extend toward 156.50, with buyers aiming for the 160.00 level predicted by a senior Liberal Democratic Party official to be a probable intervention point for the Japanese authorities,” Dhwani adds.

• EUR/USD whipped on Thursday after mixed US data plagued markets.
• US GDP slowed faster than expected, but PCE inflation measures warn of still-high prices.
• US PCE Price Index figures due during Friday's US market session.

EUR/USD whipsawed somewhat on Thursday, and the pair is heading into Friday's early session near 1.0730 after a back-and-forth session and complicated US data that vexed rate cut hopes.

US Gross Domestic Product (GDP) eased more than expected on Thursday, with annualized Q1 growth slowing to 1.6% compared to the previous 3.4%, and well below the forecast 2.5%. Easing growth is a boon for investors hoping for an accelerated pace of rate cuts from the Federal Reserve (Fed), but too much too fast could send negative knock-on effects throughout the US economy. 

Hopes for rate cuts were further eroded after US Personal Consumption Expenditure (PCE) inflation accelerated again in the first quarter, with Q1 PCE rising 3.4% compared to the previous quarter’s 1.7%. Still-high inflation is reducing market hopes for rate cuts, sending risk appetite into a tailspin during the US trading session before markets staged a determined but limited recovery.

Friday brings mostly low-tier European data, and markets will be turning to face US PCE Price Index figures for March as investors look for a more fine-tuned look at the US’ inflation outlook. Core MoM PCE Price Index figures in March are expected to hold steady at 0.3%, with the annualized figure forecast to tick down slightly to 2.6% from 2.8%.

EUR/USD technical outlook

EUR/USD churns just north of the 200-hour Exponential Moving Average (EMA) at 1.0690, but Euro bidders are scrambling to keep the pair propped up beyond the 1.0700 handle. A near-term supply zone is priced in between 1.0880 and 1.0860, keeping interim bullish expectations pinned to the low side.

A recent drop below the 200-day EMA at 1.0795 threatens to crimp bullish sentiment despite a technical floor priced in near 1.0600. 

EUR/USD hourly chart

EUR/USD daily chart
 

• AUD/USD steady after a 0.33% gain Thursday, spurred by US GDP and rising inflation.
• Market now expects the first Fed rate cut in November, not September, based on latest economic data.
• Investors eye upcoming Australia PPI and US Core PCE figures for more market direction.

The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518, virtually unchanged.

AUD/USD reflects continued market reaction to US data

Wall Street ended Thursday’s session with losses, which usually could’ve affected the Forex markets, but it didn’t. The US Dollar is under pressure following the release of a softer-than-expected GDP report, which, coupled with a surprise on a higher Core Personal Consumption Expenditure Price Index (PCE) on a quarterly basis, spurred investors to priced out rate cuts by the Fed.

Market pricing for the Fed's first 25 basis point (bps) rate cut was pushed back from September to November.

Other US data revealed that the labor market is still solid. There were 207 K Americans filing for unemployment claims, below estimates of 214K and the previous reading of 212 K.

AUD/USD traders sent the pair sliding towards its daily low of 0.6485 before recovering some ground. As Friday’s session begins, they will be eyeing the release of the Producer Price Index (PPI) in Australia and the US Core PCE figures on a monthly basis during the North American session.

AUD/USD Price Analysis: Technical outlook

Despite registering gain for the fourth straight day, the AUD/USD remains bearishly biased, with price action at 0.6525 below the 50 and 200-day moving averages (DMAs). If bulls gather momentum and push prices above that level, up next would be the 100-DMA at 0.6585, standing on their way to 0.6600. Conversely, further weakness could drag the pair below 0.6500. This paves the way for subsequent losses, with the next key support level at 0.6442, followed by the year-to-date (YTD) low at 0.6362.

ANZ's New Zealand Roy Morgan Consumer Confidence slipped another 4 points to 82.1 in April, declining to the indicator's lowest levels since 2008. Despite the decline, New Zealand consumer confidence remains higher than it did at the height of the pandemic.

Consumer inflation expectations eased to 4.4% from 4.5%, though housing price inflation expectations increased to 3.5% from 3.4%.

Market reaction

NZD/USD continues to trade in a tight but rough range as markets gear up for the early Friday session, stuck near the 0.5950 level.

About the ANZ Roy Morgan Consumer Confidence

The Consumer Confidence released by the ANZ is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. A high reading is seen as positive (or bullish) for the NZD, while a low reading is seen as negative (or bearish).

• The daily chart reveals a bearish bias for the NZD/USD pair underlined by its positioning below major SMAs.
• For bullish traction to take place, buyers must reclaim control over the 20-day SMA SMAs.
• Indicators on the daily chart recovered.

The NZD/USD pair stands at 0.5949, registering daily gains on Thursday’s session. The prevailing outlook, as presented on the daily chart, shows a strong bearish control as the Kiwi continues to trade below the significant Simple Moving Averages (SMAs). Minor upticks visible in the short term do not suggest a meaningful trend reversal. For a bullish revival, bears must cede control to the buyers who would then need to gain the upper hand over the key 20-day SMA to start talking.

On the daily chart, The Relative Strength Index (RSI) for the NZD/USD pair continues within a negative trend territory. However, some signals of possible market correction exist as the RSI values hint at upward momentum. Simultaneously, the Moving Average Convergence Divergence (MACD) shows rising green bars, indicating buyers are gradually edging in against the sellers, lending positive momentum to the market.

NZD/USD daily chart

Moving on to the hourly chart, the RSI also persists in a negative trend, but the latest hour displays an upswing, carrying the indicator above the 50 mark which, paired with decreasing red bars on the MACD histogram, might suggest a short-term trend reversal or correction.

NZD/USD hourly chart

Assessing the overall landscape, the NZD/USD is in a definitive downtrend, underpinned by its position below the 20, 100, and 200-day Simple Moving Averages (SMAs). This situation suggests a prolonged bearish momentum as both short-term and long-term traders are selling the pair. Thursday's price movement raises another red flag as an attempted recovery by buyers has been rejected at the 20-day SMA at the 0.5960 level, suggesting a lack of bullish conviction and the potential for further downside. With these considerations, the outlook remains tilted in favor of sellers.

• EUR/USD rises due to US GDP shortfall and elevated inflation data.
• Technical resistance near 50 and 200-day MAs at 1.0805/07; 100-DMA at 1.0848 next hurdle.
• Downside below 1.0694 could retest year's low at 1.0601, possibly extending to 1.0516.

On Thursday, the Euro rose against the US Dollar after US economic data portrayed the economy as weaker than expected. At the same time, the inflation figure prompted investors to price out the Federal Reserve's rate cuts in 2024. At the time of writing, the EUR/USD trades at 1.0729, up by 0.29%.

EUR/USD Price Analysis: Technical outlook

From a technical standpoint, the EUR/USD remains bearishly biased, but in the short term, it could test the confluence of the 50 and 200-day moving averages (DMAs) at 1.0805/07. If buyers clear that stir resistance, buyers must crack the 100-DMA at 1.0848. Subsequent gains are seen above that level, with the 1.0900 mark up next.

On the flip side, if EUR/USD sellers drag the spot price below the February 14 low of 1.0694, that would pave the way toward the year-to-date (YTD) low of 1.0601, followed by the November 1, 2023, intermediate support at 1.0516.

EUR/USD Price Action – Daily Chart

• The daily RSI shows strong buying momentum for the NZD/JPY, moving deep in positive territory.
• Parallelly, the daily MACD indicates green bars on a rising tendency, suggesting growing buying traction.
• A possible market correction may be imminent, as the daily RSI reaches near-overbought conditions.
• A slight decline in the hourly indicators signals a pause in buyers' at least for Thursday’s session.

The NZD/JPY pair has shown a bullish performance, upheld by strong buying momentum over past trading sessions. Although it stands at 92.55, a high since February, signs of a potential market shift are emerging as indicators are near overbought territory.

Based on the daily chart, the Relative Strength Index (RSI) indicates increasing bullish momentum, having moved from a negative territory into positive conditions during the previous session and it resides near the 70 threshold. Concurrently, the Moving Average Convergence Divergence (MACD) shows rising green bars, indicating a developing positive momentum. Nonetheless, the RSI nearing overbought conditions provides a warning about the potential for market correction.

NZD/JPY daily chart

On the hourly chart, the RSI moved steadily upwards from a negative to a positive trend. However, recent RSI levels are slightly lower as they seem to be correcting overbought conditions noted earlier in the session.

NZD/JPY hourly chart

In a broader context, the placement of the NZD/JPY relative to its Simple Moving Average (SMA), the cross pair is trading above its 20, 100, and 200-day SMA, suggestive of an upward trajectory. This positioning supports both short-term buy opportunities and a favorable long-term outlook, affirming a sustained long-term bullishness for the NZD/JPY.

• GBP/USD gains over 0.40%, rebounding from daily lows after US Q1 economic growth underperforms expectations.
• Mixed signals from the US economy support Sterling's rise.
• Technical outlook: Key resistance at 1.2559 with potential to target April 9 high at 1.2709 if upward momentum continues.

The Pound Sterling resumed its advance against the US Dollar, climbing more than 0.40% and trading at 1.2518. During the day, the GBP/USD bounced off daily lows of 1.2450 following the release of mixed economic data from the United States. The US economy in Q1 2024 grew below estimates, which would warrant easing monetary policy. But prices edging up spurred investors' reaction to priced-out rate cuts in 2024.

GBP/USD Price Analysis: Technical outlook

The GBP/USD is aiming up sharply, though it remains bearishly biased. Although the major remains far from the latest cycle high, if buyers regain some key resistance levels, that would ultimately expose the April 9 high at 1.2709, the latest cycle high.

Therefore, the GBP/USD first resistance would be the 200-day moving average (DMA) at 1.2559. A breach of the latter will expose the 1.2600 figure, followed by the 50 and 100-DMAs, each a 1.2624 and 1.2647. Once those levels are surpassed, the April 9 high would be up next.

On the other hand, if GBP/USD slumps below 1.2500, that would keep the downtrend intact and pave the way to re-test the year-to-date (YTD) low of 1.2299.

GBP/USD Price Action – Daily Chart

• GBP/JPY inches into multi-year highs as Yen softens further.
• Odds are increasing of BoJ verbal intervention spilling over into actual intervention.
• Tokyo CPI inflation, BoJ rate call approach on Friday.

The GBP/JPY pushed into fresh multi-year highs on Thursday as the pair grinds towards the 195.00 handle. The Japanese Yen (JPY) continues to weaken across the broader FX market, prompting increasing rhetoric from the Bank of Japan (BoJ) regarding direct intervention in currency markets to shore up the beleaguered JPY. The BoJ is expected to discuss intervention on the Yen’s behalf at their latest policy meeting, slated for Friday.

Japan’s Tokyo Consumer Price Index (CPI) inflation will be printing early Friday, and markets expect Japan’s leading inflation indicator to hold steady at 2.6% for the year ended in April. Core-core Tokyo CPI inflation (headline inflation less volatile food and energy prices) is expected to tick down slightly to 2.7% over the same period from the previous 2.9%.

The BoJ’s latest Interest Rate Decision and Monetary Policy Statement are also expected early Friday, where markets will look out for signals of FXC intervention from the BoJ. Markets will also look for any announced changes to the BoJ’s bond-buying program.

A press conference headed by BoJ Governor Kazuo Ueda is expected following the BoJ’s latest rate call.

GBP/JPY technical outlook

The Guppy has accelerated out of a recent technical range to approach the 195.00 handle, and the pair knocked into a fresh multi-year high. Further bullish momentum will carry the GBP/JPY into record highs, while downside pullbacks will look for a technical floor at 192.70.

The GBP/JPY is set to close for a third straight green day, and daily candles continue to hold well above the 200-day Exponential Moving Average (EMA) at 185.08.

GBP/JPY hourly chart

GBP/JPY daily chart

• Gold prices climb following US Q1 GDP results falling below expectations.
• Sharp increase in Q1 inflation to 3.7% tempers expectations for immediate Fed rate cuts and underpins higher Treasury yields.
• Fed officials maintain cautious stance on monetary policy, echoing concerns over persistent inflation pressure.

Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States (US). GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Federal Reserve (Fed) could lower borrowing costs. However, inflation for the same period jumped sharply, which would delay interest rate cuts by the Fed.

XAU/USD trades at $2,330 after bouncing off daily lows of $2,305 amid higher US Treasury yields, courtesy of the reacceleration of inflation. As expected by analysts, the US economy would slow down in 2024, but it missed the mark by a full percentage point in the first quarter. That would keep the “soft landing” narrative in place, but underlying inflation for Q1 2024 rose by 3.7% QoQ, above estimates and crushing the 2% registered in the last quarter of 2023.

This justified Fed officials' change of stance last week. Chairman Jerome Powell gave the green light when he commented, "Recent data shows lack of further progress on inflation this year.”

Those words were echoed by a slew of policymakers, most significantly by the ultra-dovish Chicago Fed President, Austan Goolsbee, who said, “Fed's current restrictive monetary policy is appropriate.”

Daily digest market movers: Gold price climbs amid highs US yields, soft USD

• Gold advance continues even though US Treasury yields advance. The US 10-year note yield is up six basis points (bps) at 4.706%, while US real yields, which closely correlate inversely with the golden metal, are also up by the same amount, at 2.296%.
• A softer Greenback also underpins the yellow metal. The US Dollar Index (DXY) is down 0.22% at 105.59.
• US GDP for Q1 2024 expanded by 1.6% QoQ, below estimates of 2.5%, and trailed Q4 2023’s 3.4%. The core Personal Consumption Expenditure Price Index (PCE) for the same period rose 3.7%, crushing estimates of a 3.4% increase and up from 2% in the previous reading.
• In addition, the US labor market remains strong. Initial Jobless Claims for the week ending April 20 missed estimates of 214K, coming at 207K, less than the previous reading.
• Upcoming Q1 GDP data and core PCE inflation figures will provide key insights into the possible timing of the Fed's interest rate reductions. The core PCE, the Fed’s preferred measure of inflation, is expected to maintain a steady monthly growth of 0.3%. Additionally, the annual core PCE rate is anticipated to decrease to 2.6% from 2.8% in February.
• Data from the Chicago Board of Trade (CBOT) suggests that traders expect the fed funds rate to finish 2024 at 5.035%, up from 4.98% on Wednesday.

Technical analysis: Gold price hovers near $2,330 as buyers take a breather

Gold price edges up, but it’s facing resistance at $2,337, the April 24 high. A breach of the latter will expose the psychological $2,350 figure, followed by the $2,400 mark. Subsequent gains lie once that supply zone is cleared, followed by the April 19 high at $2,417, followed by the all-time high of $2,431.

On the flip side, if the XAU/USD price dips below the April 15 daily low of $2,324, that would pave the way to test $2,300. A breach of the latter would expose the April 23 low of $2,229, followed by the March 21 high at $2,222.

• The daily RSI for AUD/JPY reveals that the bulls are in charge, approaching overbought conditions.
• Despite the hourly MACD indicating a short-term dip, the RSI highlights the buyers'  dominance.
• As the cross jumped to multi-year highs, the buyers might eventually run out of gas.

The AUD/JPY exhibits substantial bullish momentum, standing at the 101.39 level and showing an encouraging 0.54% rally. The dominance of bullish trends is evident but a healthy correction might be necessary for the buyers to conquer additional ground.

On the daily chart, the Relative Strength Index (RSI) reveals a positive momentum, with the latest reading nearing the overbought condition. The Moving Average Convergence Divergence (MACD) supports this, printing green bars.

AUD/JPY daily chart

Shifting the attention to the hourly chart, the MACD paints a different picture with its red bars, signaling that in this timeframe, buyers might have already become exhausted. However, the RSI readings suggest steady, positive momentum with figures hovering above 50, apart from a brief dip to 48.

AUD/JPY hourly chart

The AUD/JPY also demonstrates a bullish stance in the broader picture as it positions itself above the 20, 100, and 200-day Simple Moving Averages (SMA). So all signals points to a clear bullish stance, but traders should be alert that if daily indicators reach overbought conditions, the pair may see some healthy downside to consolidate gains.

• Dow Jones backslides over 500 points as investors balk at inflation complications.
• US GDP eased quicker than expected, jostling risk appetite.
• Equity recovery is under way, but remains limited.

The Dow Jones hit its lowest bids in a week after US Gross Domestic Product (GDP) figures missed forecasts and US Core Personal Consumption Expenditures (PCE) inflation came in higher than expected. Slowing growth is a boon for investors seeking an accelerated path towards rate cuts from the Federal Reserve (Fed), but sticky inflation continues to vex hopes for an early Fed rate trim.

Read more: US GDP expands less that expected in Q1

US GDP for the annualized first quarter grew by 1.6%, well below the forecast decline to 2.5% from the previous 3.4%. It represents the slowest pace of GDP growth since September of 2022, but an uptick in Core PCE in Q1 kicked the legs out from beneath rate cut hopes. Q1 Core PCE rebounded to 3.7%, climbing over the previous 2.0% and overshooting the forecast 3.4%. Headline PCE inflation also overshot, printing at 3.4% versus the previous 1.8% as inflation remains hotter than investors hoped.

Dow Jones news

The Dow Jones plunged into negative territory for the week, knocking below 37,800.00 and declining over 550 points on the sour US data prints. A slow, grinding equity recovery is underway in the US trading session, but the Dow Jones remains firmly off of the day’s early peak bids near 38,450.00.

Around two-thirds of the individual securities that comprise the Dow Jones are in the red on Thursday, with International Business Machines Corp. (IMB) leading the charge down. IBM is down over 8% at the time of writing, declining to $168.77 per share. IBM is closely followed by Caterpillar Inc. (CAT), down around 6.5% on the day and trading near $340.12. The DJIA’s top gainer on Thursday is Merck & Co Inc. (MRK), climbing nearly 3% to trade into $130.63 per share.

Dow Jones technical outlook

The Dow Jones declined 1.82% top-to-bottom on Thursday, hitting a seven-day low of 37,745.54 and turning negative for the week. Despite the major equity index reclaiming nearly half of the day’s declines, the DJIA remains well back from the day’s peaks at 38,446.43.

Despite the Dow Jones on pace for a second down day in a row, the index is still firmly planted in bull country, trading well above the 200-day Exponential Moving Average (EMA) at 36,700.41.

Dow Jones five-minute chart

The continuation of the downward bias hurt the Greenback and prompted the USD Index (DXY) to recede to multi-day lows following disheartening GDP readings and higher inflation prints, all prior to Friday’s release of PCE data.

Here is what you need to know on Friday, April 26:

The USD Index (DXY) revisited the mid-105.00s amidst rising yields and the dominating appetite for the risk complex. On April 26, inflation readings measured by the PCE will be at the centre of the debate, seconded by Personal Income, Personal Spending, and the final Michigan Consumer Sentiment for the month of April.

EUR/USD advanced further north of the 1.0700 barrier amidst the persistent selling pressure around the US Dollar. There will be no data releases in the euro docket at the end of the week.

GBP/USD extended further its weekly recovery and reclaimed the area well past 1.2500 the figure. The GfK Consumer Confidence gauge is only expected on April 26.

USD/JPY maintained its bullish mood well in place and rose to fresh tops around 155.75 prior to the BoJ gathering. The BoJ meets and releases its Quarterly Outlook Report on April 26.

AUD/USD traded with gains for the fourth consecutive session and flirted once again with the key 200-day SMA near 0.6530. The Australian calendar will be empty on April 26.

Extra losses sparked the second day in a row of losses in WTI prices in response to the resurgence of demand fears and the likelihood of a tighter-for-longer Fed.

Gold advanced decently after three straight daily declines on the back of rising geopolitical jitters and higher-than-expected US inflation. Silver, in the meantime, seems to have embarked on a consolidative range underpinned by the $27.00 region so far.

• Mexican Peso depreciates by over 0.5% against US Dollar, reacting to unexpected inflation reacceleration in the US.
• US GDP growth for Q1 2024 falls short of forecasts at 1.6%, but a sharp increase in core PCE inflation to 3.7% boosts US yields.
• The rise in US yields and recalibrated Fed rate cut expectations drove USD/MXN to a weekly high of 17.38.

The Mexican Peso (MXN) fell during the North American session on Thursday, depreciating more than 0.5% against the US Dollar following the release of the Gross Domestic Product (GDP) in the United States (US) for the first quarter of 2024, which was weaker than expected. At the same time, the US Bureau of Economic Analysis (BEA) revealed that inflation for the same period increased sharply, spurring a jump in US Treasury yields, and weighed on the Mexican currency. At the time of writing, the USD/MXN trades at 17.18 after bouncing off a daily low of 17.01.

Thursday’s main driver for the Mexican Peso was US data. GDP for the first quarter missed estimates of 2.5% QoQ and expanded by 1.6%. By itself, that warranted US Dollar weakness, but digging deeper into the US BEA report, the core Personal Consumption Expenditure (PCE) price index for Q1 on a quarterly basis rose by 3.7%, higher than the expected 3.4% and up from 2%.

Market participants ditched the Mexican Peso as the USD/MXN rallied sharply, refreshing weekly highs at 17.38. US Treasury yields skyrocketed, while investors had priced out interest rate cuts by the US Federal Reserve (Fed) in 2024.

The data spooked investors of the emerging market currency. Speculation that the interest rate differential between Mexico and the US would likely shrink has spurred outflows from the Peso toward the Greenback.

Daily digest market movers: Mexican Peso depreciates as US inflation picks up

• Mexico’s inflation report on Wednesday capped the USD/MXN advance. Even though mid-month inflation rose by 4.63% YoY, above March’s reading and estimates of 4.48%, the Core readings slowed sharply to 4.39% YoY as projected, down from 4.69%. Despite being a mixed reading, core prices are beginning to cool down, depicting a clear downtrend in inflation.
• Citibanamex Survey showed that most analysts expect Banxico to hold rates unchanged at the May meeting. The median foresees a rate cut in June, while they estimate the main reference rate to end at 10.00%, up from 9.63% previously.
• Banxico Governor Victoria Rodriguez Ceja said that service inflation is not slowing as expected. She added that the Peso’s strength has helped to temper inflationary pressure and lower imported goods. She emphasized that Banxico would remain data-dependent.
• Mexico’s economy is faring well as Economic Activity expanded in February compared to January’s data. Figures increased by 1.4% MoM and 4.4% YoY in the second month of the year, up from January’s 0.9% and 1.9% expansion, respectively.
• Other data in the US showed that the labor market remains tight as Initial Jobless Claims for the week ending April 20 missed estimates of 214K, coming at 207K, less than the previous reading.
• Data from the Chicago Board of Trade (CBOT) suggests that traders expect the Fed funds rate to finish 2024 at 5.035%, up from 4.98% on Wednesday.

Technical analysis: Mexican Peso on backfoot as USD/MXN rallies toward 200-day SMA

The Mexican Peso downtrend continues as the USD/MXN has cleared the 200-day Simple Moving Average (SMA) at 17.16. The rally was capped at the January 23 swing high of 17.38. The exotic pair has retreated since then.

If USD/MXN sellers drag spot prices below the 200-day SMA, look for a retest of the 17.00 figure. Subsequent losses are seen, once cleared, with the next support being the 50-day SMA at 16.81 before challenging last year’s low of 16.62.

On the other hand, if buyers achieve a daily close above the 200-day SMA, look for another test of 17.38. A breach of the latter will expose the 18.00 figure, followed by the year-to-date (YTD) high at 17.92.

• Canadian Dollar trapped near familiar levels, gives mixed performance.
• Canada absent from the economic calendar until next week’s GDP.
• US GDP comes in soft, but PCE hints at still high inflation.

The Canadian Dollar (CAD) spread on Thursday, giving a mixed performance and sticking close to familiar technical levels after US data printed in both directions early in the US market session. US Gross Domestic Product (GDP) eased more than expected, a boon for investors looking for rate cuts from the US Federal Reserve (Fed). However, inflation continues to be a major sticking point for rate cut hopes after US Personal Consumption Expenditure (PCE) inflation climbed even higher than expected.

Canada is absent from the economic calendar for the remainder of the trading week. The next piece of useful Canadian economic data will be next Tuesday’s Canadian MoM GDP for February. Canada’s S&P Global Manufacturing Purchasing Managers Index (PMI) will also print next Wednesday.

Daily digest market movers: Canadian Dollar lacks momentum after US data fails to deliver clean picture

• Annualized US GDP for the first quarter eased to 1.6%, declining from the previous 3.4% and falling well short of the forecast of 2.5%.
• Read more: US GDP expands less that expected in Q1
• Rapidly slowing GDP is a welcome boon for investors desperate for rate cuts from Fed. However, US PCE inflation in Q1 rose to 3.7%, vaulting over forecast of 3.4% and accelerating from previous 2.0%.
• Rising inflation will keep Fed hobbled on rate cuts, markets churn on mixed print.
• Friday’s US PCE Price Index will draw additional attention after Thursday’s gloomy bellwether.
• March’s MoM US PCE Price Index is expected to hold steady at 0.3%, while the YoY figure is expected to tick down to 2.6% from 2.8%.

Technical analysis: Canadian Dollar trades steady but mixed

The Canadian Dollar (CAD) is getting pushed into the middle on Thursday, trading flat to within a quarter of a percent across the major currency board during the US market session. The CAD sees a meager tenth of a percent gain against the US Dollar (USD). The Japanese Yen (JPY) is down a quarter of a percent against the Canadian Dollar as the market’s worst-performing currency on the day.

The CAD continues to trade within a tight range near the 1.3700 handle against the US Dollar, and the USD/CAD has priced in a near-term price floor near 1.3660. A topside break is hampered by the 200-hour Exponential Moving Average (EMA) at 1.3710, and a heavy supply zone rests just below current price action below 1.3600.

USD/CAD hourly chart

USD/CAD daily chart

• US Q1 GDP reveals reduced expansion at 1.6% YoY.
• On the positive side, weekly Jobless Claims come in strong.
• Friday’s PCE data from March will dictate the pace of DXY in the short term.

The US Dollar Index (DXY) is seen trading mildly down at 105.75 on Thursday and struggling to gain more ground following its extended rally in April. The Index weakened following Gross Domestic Product (GDP) data from Q1, but losses may be limited after strong labor market data was reported during the European session.

The US economy remains resilient but is expected to grow at a slower pace due to inflation and higher interest rates. The Federal Reserve (Fed) remains firm on its stance and seems to not want to rush to start easing and market hawkish adjustments provide a cushion to the USD. Personal Consumption Expenditures (PCE) data from March will likely affect those investors’ expectations.

Daily digest market movers: DXY down after GDP data

• The Bureau of Economic Analysis’s (BEA) initial estimate revealed a 1.6% YoY annualized expansion in the US Gross Domestic Product (GDP) for January-March.
• GDP figures were below market predictions of a 2.5% annual rise, lagging behind 3.4% YoY growth in Q4 2023.
• The US Department of Labor showed a decrease of 5K in Initial Jobless Claims for the week ending April 20, resulting in a total of 207K Initial Jobless Claims.
• The weekly decline in Initial Jobless Claims surpassed market forecasts, which projected 214K claims, a clear improvement from the prior week's total of 212K.
• Regarding expectations on the Fed, markets bet on 20% odds of a June rate cut. A potential Fed rate cut in July or even September isn't fully assumed either, pointing to strong confidence in ongoing US economic performance that justifies the delay of the easing cycle.

DXY technical analysis: DXY shifts into neutral gear, bears lurk despite bullish undertones

The indicators on the daily chart portray a mixed stance for the DXY. The flat position of the Relative Strength Index (RSI) in positive territory resonates with stagnant buying momentum. Moreover, the decreasing green bars of the Moving Average Convergence Divergence (MACD) reflect a fading bullish sentiment, signaling potential weakness in the near future.

• EUR/JPY surges to levels not seen since August 2008, capitalizing on a broader Yen weakness.
• Technical indicators suggest potential for further advances after clearing resistance at 165.30, towards the 169.47 high of August 2008.
• Downside risks remain once EUR/JPY retreats below the recent high of 166.22.

The Euro rallied to a near 16-year high against the Japanese Yen, hitting levels last seen in August 2008, with the latter remaining the laggard in the FX space. Data from the United States (US) prompted investors to buy the Greenback, which sent USD/JPY to refresh multi-year highs. Therefore, the EUR/JPY followed suit and trades at 166.67, gaining more than 0.20%.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY is bullish-biased after consolidating since mid-March below the 165.30s area, previously guarded by March’s 20 high at 165.33. The uptrend resumed toward the 166.00 mark, yet once buyers cleared that hurdle, extending the move to 167.00.

Nevertheless, the EUR/JPY has retreated as buyers take a breather. The momentum its on their side, as shown by the Relative Strength Index (RSI) standing at 68.80, shy of signaling the pair is overbought.

If buyers clear 167.00, that will exacerbate a rally to challenge August’s 2008 monthly high at 169.47, ahead of the psychological 170.00 barrier.

On the other hand, if sellers drag the exchange rate below 166.22 April 24 daily high, that could open the door to sliding toward the March 20 high of 165.33. Subsequent losses beyond this support target the confluence of the Tenkan and Kijun-Sen at 164.83/64.

EUR/JPY Price Action – Daily Chart

• AUD/USD falls back down below 0.6500 after US Q1 GDP data reveals persistent price pressures. 
• The pair reverses the strong rally that has characterized price action over the past week. 
• The Fed is now seen not cutting interest rates till September whilst the consensus for the RBA is November. 

AUD/USD trades back below 0.6500 on Thursday, after peaking at 0.6539 earlier in the day. The sudden decline comes after the release of US first quarter GDP data which showed persistent price pressures within the US economy despite an overall slowdown in economic growth.  

US preliminary Gross Domestic Product Annualized rose 1.7% in Q1 which was below estimates of 2.5% and the previous quarter's 3.4% reading, according to data from the US Bureau of Economic Analysis, on Thursday. 

Yet the US Dollar noted gains across the board following the data, as a key gauge of inflation in the GDP data – the preliminary Gross Domestic Product Price Index for Q1 – showed a rise of 3.1% in prices, which was substantially higher than the 1.7% of the previous quarter. 

The GDP price index data suggests stubbornly high inflation in the US economy that will probably lead the Federal Reserve (Fed) to keep interest rates higher for longer. Higher interest rates are in turn positive for USD (negative for AUD/USD) since they attract great inflows of foreign capital. 

In addition, the higher-than-expected Core Personal Consumption Expenditures in Q1, which is also a measure of inflation, showed a 3.7% rise QoQ compared to estimates of 3.4% and a previous reading of 2.0%. 

After the release of the GDP data, a first interest-rate cut from the Federal Reserve is now not seen until September 2024, carrying a 58.2% probability. 

Other relevant data for the US Dollar showed Initial Jobless Claims falling slightly to 207K from 212K when a rise to 214K had been expected, and Pending Home Sales coming in at 3.4% in March, easily beating estimates of 0.3% and February’s 1.6%. 

AUD/USD rallied strongly on Wednesday following the release of stickier-than-expected Australian Consumer Price Index (CPI) data for Q1. 

The CPI showed a 3.6% rise in Q1 instead of the 3.4% the market had expected. The price stickiness reflected in the data suggests the Reserve Bank of Australia (RBA) will be less likely to cut interest rates in the near-term. 

The RBA is still seen as the last major G10 central bank to cut interest rates, according to analysts at Rabobank. A fact, that is providing a backdraught for AUD/USD. 

The consensus is for the RBA to cut interest rates in November, however, some analysts, such as those at TD Securities have revised that view and now do not a first rate-cut until February 2025 .

• Silver price may have formed a Bear Flag pattern on the 4-hour chart. 
• The pattern suggests a continuation of the bearish trend to targets substantially lower. 
• Support from a relic of long-term support and resistance at $25.80 is likely to provide a floor for any sell-off. 

Silver (XAG/USD) price may have formed a Bear Flag pattern on the 4-hour chart which bodes ill for the precious metal’s price going forward. 

4-hour Chart 

After forming a multiple shouldered Head and Shoulders (H&S) topping pattern at the $30.00 highs of mid-April, Silver price declined to the initial target for the pattern at $26.70. This target was the conservative estimate for the pattern, calculated by taking the height of the H&S and extrapolating the distance by its 0.618 Fibonacci ratio from the neckline underpinning the pattern lower. 

After bouncing from a temporary floor at $26.70 Silver price has consolidated forming a rectangle pattern. Taken together with the prior sharp decline the whole formation resembles a Bear Flag pattern.  

According to technical lore, the expected move down from a Bear Flag equals the length of the preceding “pole” or a Fibonacci ratio of the pole. In this case the pole is the decline that followed the completion of the H&S pattern. 

The Fibonacci 0.618 ratio of the pole on Silver, when extrapolated lower, gives a conservative target at $26.31. If Silver price falls the whole length of the pole (Fib. 1.000), however, it will reach a more "optimistic" target of $25.53. 

Tough support from a long-term upper range boundary line at $25.80, however, is likely to offer support before Silver price reaches the lower target for the Bear Flag. 

A break below the $26.69 low of April 23 would be required to confirm a breakdown of the Bear Flag towards its targets. 

• Initial Jobless Claims in the US decreased by 5,000 in the week ending April 20.
• US Dollar Index clings to modest daily gains above 105.50.

There were 207,000 initial jobless claims in the week ending April 20, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 212,000 and came in better than the market expectation of 214,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1.2% and the 4-week moving average stood at 213,250, a decrease of 1,250 from the previous week's unrevised average.

"The advance number for seasonally adjusted insured unemployment during the week ending April 13 was 1,781,000, a decrease of 15,000 from the previous week's revised level," the publication read.

Market reaction

The US Dollar Index clings to modest daily gains slightly below 106.00 after these data.

• Oil briefly spikes after US weekly EIA data showed a big decline in stockpiles. 
• WTI Oil snaps $83, but faces resistance to break back above it again. 
• The US Dollar Index retreats further, forming a bearish pattern. 

Oil prices edge up on Thursday as traders digest the US Crude Inventory release, which was taken as bullish for near-term prices. Overall, the release showed a chunky draw of 6.368 million barrels, which puts the US inventory at its lowest level since January 19 by 453.6 million barrels. This might trigger some buying from the US Energy Department in order to build up stockpiles again ahead of the next heating season. 

The US Dollar Index (DXY) has fallen in a bearish pattern. For a third day in a row, the index is posting lower highs and lower lows on the daily chart. This could point to a gruesome correction ahead, and with preliminary US Gross Domestic Product (GDP) release on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday, catalysts are enough to trigger that breakdown. 

Crude Oil (WTI) trades at $82.71 and Brent Crude at $87.11 at the time of writing.

Oil news and market movers: Restocking

• Fuel distillate Inventories (gasoil and jet fuel) at the Asian distribution hub of Singapore rose to the highest level since July 2021, according to official data released Thursday, Bloomberg reports.
• Chinese refiners are heading to Venezuela for cheap Oil. Venezuela is offering the discount after the US reimposed sanctions on the South American country.
• Some more details on the  Crude stockpile number from the Energy Information Administration (EIA):
  • US Gulf Coast refineries are processing the most crude since 2019 ahead of the summer driving season.
  • The 6.368 million barrel drawdown in US crude inventories was unexpected – consensus was for a 1.6 million barrel buildup – as refineries ramp up Oil processing following maintenance and exports pick up. 
  • US Exports ticked above 5 million barrels a day amid robust outflow to Europe. 

Oil Technical Analysis: US shooting itself in the foot 

Oil prices are set for some buying pressure with US refiners and traders getting ready for the summer season. That always coincides with a lot of travel, be it via airspace (flights) or car (gasoline). With the recent chunky drawdown and nearly lowest level for the year in Crude stockpiles, refiners might ramp up prices. 

With geopolitical tensions lingering and the US crude stockpile in low levels, the November 3 high at $83.34 and the $90 handle are the first key levels on the upside. One small barrier in the way is $89.64, the peak from October 20. In case of further escalating tensions, expect even September’s peak at $94 to become a possibility. 

On the downside, the October 6 low at $80.63 is the next candidate as a pivotal support level. Below that level, the 55-day and the 200-day Simple Moving Averages (SMAs) at $80.37 and $79.67 should halt any further downturn. 

US WTI Crude Oil: Daily Chart

• The USD/JPY extends its uptrend despite verbal intervention from the Minister of Finance. 
• The wide differential between US and Japanese interest rates is seen as a major factor contributing to the rise. 
• The idea that a lot is already priced into the US Dollar could limit USD/JPY upside.

The USD/JPY trades higher on Thursday, rising into the mid 155.00s, on the back of a recent step-rise in US Treasury Bond yields as the pair shrugs off yet more verbal intervention from the Japanese Finance Minister (MOF) Sunichi Suzuki. 

USD/JPY is pressured higher by the wide differential between US and Japanese interest rates, with the US Federal Reserve (Fed) setting the Fed Funds Rate at 5.25% - 5-50% and the Bank of Japan (BoJ) its cash rate at 0.0% - 0.1%. The huge advantage of parking capital in US Dollars (USD) compared to Japanese Yen (JPY) is a constant bullish factor for USD/JPY. 

In a statement to Parliament on Thursday, Sunichi Suzuki reiterated the tired phrase that the Finance Ministry would be “watching FX market closely” and “will take appropriate measures” if the Yen depreciates further. Yet his attempts at verbal intervention seem to be losing force with each repetition as the pair pushed higher regardless. Analysts remain skeptical about the impact even of direct intervention on the pair. 

“Even actual interventions, if they came, would hardly make a lasting impression on the market, because the MOF's firepower is limited,” says Antje Praefcke, FX Analyst at Commerzbank. 

For any lasting effect on the valuation of the Yen, the MOF’s interventions would have to be accompanied by interest rate hikes from the BoJ. 

“..interventions would have to be flanked by a credible monetary policy on the part of the BoJ, i.e. a regular cycle of interest rate hikes, in order to be convincing, otherwise they would just be "leaning against the wind" anyway. However, since we do not believe in a rate hike cycle, we simply lack the arguments for a rising JPY,” says Praefcke. 

BoJ meeting on the radar

Approaching quickly down the road is the next BoJ policy meeting which is scheduled for 3.00 GMT on Friday morning, but the market does not expect a change in policy so soon after the BoJ hiked interest rates in March. At most Ueda and his team are expected to raise their inflation forecasts. 

“The BOJ may raise slightly its 2024 core inflation projections implying greater room to tighten policy and can offer JPY near-term support,” says Brown Brothers Harriman (BBH) in a report. 

Core inflation (ex fresh food) in March tracked at 2.6% versus the 2.4% forecast by the BoJ and “core of core” inflation (ex fresh food and energy) at 2.9% versus the 1.9% forecast by the bank. 

Tokyo Consumer Price Index (CPI) data, released a few hours prior to the BoJ meeting, could impact deliberations, if it varies substantially from consensus. However, the overall view is that the BoJ is unlikely to actually alter policy much given trend inflation remains below its 2.0% target. 

“We are sticking to our view that the BOJ tightening cycle will be modest because underlying inflation in Japan is trending lower. The swap market implies 25 bps of rate hikes in 2024 and 50 bps over the next two years,” says BBH.

US Dollar “already has a lot priced in” – Commerzbank

USD/JPY may be limited in its scope for upside, however, by the fact USD “already has a lot priced in”, according to analysts at Commerzbank. 

This is particularly in regards to the acute shift in market expectations regarding the future course of interest rates in the US.

Since the Federal Reserve’s (Fed) March meeting markets have consistently pushed back the date when the Fed is expected to begin cutting interest rates. 

This recalibration of the future path of interest rates has now been fully priced in, according to Commerzbank’s Praefcke, and in the absence of more catalysts, makes USD more vulnerable to “bad news” than “good news”. 

“..a lot is already priced into the Dollar, such as a soft landing of the economy or a Fed that will only cut the key interest rate much later than previously thought,” says Praefcke. 

“It is becoming increasingly difficult for the Dollar to benefit from facts and figures that underpin this expectation (a delay in future rate cuts); on the contrary, it tends to react sensitively when the market has doubts about its current expectation in the face of not-so-good data. The Dollar is gradually running out of steam, although it is currently the undisputed most popular currency and is likely to remain so,” adds the analyst. 

If her view is valid it could color the FX market reaction to US first quarter GDP data out on Thursday. Even a better-than-expected result may not push USD/JPY that much higher, whilst a weaker-than-expected result could see the pair drop back more substantially.

• NZD/USD rises to 0.5960 as US Dollar exhibits a weak footing ahead of US Q1 GDP data.
• The consensus shows that the US economy expanded by 2.5% in the January-March period.
• The New Zealand Dollar moves higher on improved demand for risk-perceived currencies.

The NZD/USD pair extends its winning streak for the fourth trading session on Thursday. The Kiwi asset movers higher to 0.5960 as the US Dollar falls further amid concerns over United States economic outlook due to a sharp decline in new business inflows in April, showed by S&P Global preliminary PMI report. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, drops to 10-day low near 105.50.

Downside move in the US Dollar has improved demand for risk-sensitive currencies. However, the market sentiment remains uncertain as investors turn attention to the preliminary US Q1 GDP data, which will be published at 12:30 GMT. The US economy is projected to have grown at a moderate pace of 2.5% against 3.4% growth witnessed in the final quarter of the last year.

Going forward, investors will also watch the US core Personal Consumption Expenditure Price Index (PCE) data for March, which is a Fed’s preferred inflation measure. The inflation measures is estimated to have grown steadily by 0.3% on a month-on-month basis. This will influence speculation for Federal reserve (Fed) rate cuts, which are currently anticipated from the September meeting.

NZD/USD trades close to the upper-end of the inventory adjustment phase in which Kiwi positions are exchanged between institutional investors and retail participants. It is difficult to designate the phase as “accumulation” or “distribution” before a decisive break. The Kiwi asset is expected to deliver a decisive move after the release of the US Q1 GDP data.

Upward-sloping 20-period Exponential Moving Average (EMA) at 0.5947 signifies a bullish near-term appeal for the New Zealand Dollar.

The 14-period Relative Strength Index (RSI) rises above 60.00, suggesting a fresh upside momentum has been triggered.

Further upside above the psychological resistance of 0.6000 will drive the asset towards April 4 high around 0.6050 and the round-level resistance of 0.6100.

On the contrary, a fresh downside would appear if the asset breaks below April 16 low at 0.5860. This would drag the asset toward 8 September 2023 low at 0.5847, followed by the round-level support of 0.5900

NZD/USD hourly chart

• Gold price holds above $2,300 as the US Dollar drops ahead of preliminary US Q1 GDP data.
• The Fed may maintain the “higher for longer” interest rates argument even if GDP growth remains slower than expected.
• The easing of tensions in the Middle East has improved the demand for risky assets.

Gold price (XAU/USD) remains well-supported above the crucial support of $2,300 in Thursday’s European session. The precious metal finds some bids as the US Dollar falls further amid concerns over higher interest rates by the Federal Reserve (Fed), which have impacted economic activity as shown by the S&P Global preliminary PMI report for April.

The near-term outlook for Gold remains weak as Fed policymakers see no urgency for rate cuts due to higher inflationary pressures and tight labor market conditions. Also, safe-haven demand has weakened due to waning fears of widening Middle East conflict.

Meanwhile, upcoming US macro data such as Q1 Gross Domestic Product (GDP) and the core Personal Consumption Expenditure Price Index (PCE) data for March will guide the next move in the Gold price. A significant change in the above-mentioned economic indicators will likely force traders to reassess expectations for the timing of Fed rate cuts. Currently, financial markets anticipate the first cut in September.

Daily digest market movers: Gold price aims for firm footing ahead of US data

• Gold price edges higher above $2,320 as the US Dollar extends its correction. The US Dollar faces selling pressure as weak preliminary PMI numbers for April raised concerns over the US economic outlook. The survey signalled that new business inflows in April fell for the first time in six months.
• Investors will turn their attention to the US Q1 GDP data, a key indicator of the country’s economic performance. The consensus points to a moderate 2.5% expansion, cooling from the 3.4% growth in 2023’s last quarter. Though the world’s largest economy is expected to experience a slower growth rate, growth is expected to be the strongest among the Group of Seven (G7) economies.
• Although it refers to the period from January to March, an upbeat GDP growth rate would set a positive undertone for the US economic outlook and would allow Federal Reserve policymakers to keep the monetary policy stance restrictive for a longer period. This situation would help the US Dollar, and likely weigh on Gold. On the contrary  US Dollar is not expected to be hit much by slower-than-expected GDP growth as it is unlikely to scrap the speculation for the Fed to achieve the so-called soft landing, in which the central bank achieves price stability without triggering a recession.
• The week is full of volatile events as the core PCE inflation data will follow the Q1 GDP data – the Fed’s preferred inflation measure – for March, which will be published on Friday. Core PCE inflation is expected to have grown steadily by 0.3% on month, with annual figures softening to 2.6% from the 2.8% recorded in February.
• The underlying inflation data will significantly influence the Fed’s interest rate outlook ahead of its next meeting on May 1. In the May policy meeting, the Fed is widely anticipated to keep interest rates unchanged in the range of 5.25%-5.50%.

Technical Analysis: Gold price trades above $2,300

Gold price turns sideways above the round-level support of $2,300 ahead of crucial US data. The 20-day Exponential Moving Average (EMA) at $2,314 provides support to the precious metal, suggesting that the near-term upside remains intact.

On the downside, a three-week low near $2,265 and March 21 high at $2,223 will be major support zones for the Gold price.

The 14-period Relative Strength Index (RSI) falls below 60.00, suggesting that a bullish momentum is weakening. However, the upside bias is intact until the RSI sustains above 40.00.

• The US Dollar is further losing its shine in early Thursday trading. 
• Markets are fretting over US GDP and Jobless Claims data. 
• The US Dollar Index enters trades in a bearish pattern, potentially signalling more downside ahead. 

The US Dollar (USD) is receiving another hit on Thursday and doesn’t seem to need much more to fall against the canvas with a KO. The biggest reason behind the recent decline is the downbeat start of the earnings season in the US. Traders are starting to get worried about the string of earnings that paint a very mixed picture about the economy after META’s results were not well received. These reports come along with announcements of layoffs, adding to signs that the era of job tightness might be coming to an end. 

On the economic data front, there is plenty of data to dive into on Thursday ahead of the earnings from Alphabet and Microsoft. The main data point is the preliminary US Gross Domestic Product (GDP)  release for Q1. The main focus will be on the headline GDP and the Personal Consumption Expenditure (PCE) component. As per every week, the Jobless Claims are to be released as well, and will get an increased priority in coming weeks to see if those announced layoffs during recent earnings are materialising. 

Daily digest market movers: GDP could be the last element before a correction

• A big slew of data is set to be released at 12:30 GMT:
  • Weekly Jobless Claims:
    • Initial Claims for the week ending on April 19 are expected to head to 214,000 from 212,000.
    • Continuing Jobless Claims for the week ending on April 12 are expected to shrink to 1.810 million from 1.812 million.
  • US Gross Domestic Product preliminary reading for Q1:
    • Headline GDP is expected to shrink to 2.5% from 3.4%.
    • Headline PCE was previously at 1.8%, with no forecast available.
    • Core PCE is seen rising to 3.4% from 2%.
    • GDP Price Index was at 1.7% in Q4 of 2023, with no forecast pencilled in. 
    • Wholesale Inventories are set to decline further to 0.2% in March from 0.5%.
• Monthly Pending Home Sales are expected to increase by 0.3% in March against the previous reading of 1.6%.
• The Kansas Fed Manufacturing Activity for April is set to be published at 14:30 GMT. The previous figure for  March was at -9, with no forecast available for April data.
• Equities are looking unstable on Thursday, with Asian equities mixed. Japan closed in the red, with more than 1% losses. In Europe, both the German Dax and broader Stoxx 50 are in the red by 0.5%. Ahead of the US opening bell, the Nasdaq futures are down over 1%.
• The CME Fedwatch Tool suggests there is an 83.1% probability that June will still see no change to the Federal Reserve's feds fund rate. . Odds of a rate cut are broadly at 50%-50% for July, while for September the tool shows a 70% chance that rates will be lower than current levels.
• The benchmark 10-year US Treasury Note trades around 4.64% and keeps lingering around this level.

US Dollar Index Technical Analysis: Is this a turnaround?

The US Dollar Index (DXY) is forming a bearish pattern which often preceds a substantial correction in prices. For a third day in a row, lower highs and lower lows are being printed on the daily chart. This points to relentless selling and builds up pressure for more downside, which can only be halted by strong pivotal support levels. 

On the upside, 105.88 (a pivotal level since March 2023) needs to be recovered again before targeting the April 16 high at 106.52. Further up and above the 107.00 round level, the DXY index could meet resistance at 107.35, the October 3 high. 

On the downside, 105.12 and 104.60 should act as support ahead of the 55-day and the 200-day Simple Moving Averages (SMAs) at 104.37 and 104.07, respectively. If those levels are unable to hold, the 100-day SMA near 103.70 is the next best candidate. 

• The Mexican Peso falls as market sentiment turns negative. 
• Equities are down after Meta shares tumbled on Q2 guidance and rising Middle East tensions. 
• The Peso loses ground against the Euro after Bund yields spike on Bundesbank president’s comments.   

The Mexican Peso (MXN), which is especially sensitive to risk aversion, trades overall lower on Thursday after weakening on souring market sentiment and rising geopolitical tensions. Still, the Peso is holding up against the US Dollar (USD), which sees renewed weakness ahead of the release of key US macroeconomic data.  

Mexican Peso hit by negative risk sentiment 

The Mexican Peso is losing ground due to a broad dip in market sentiment. Equities are down by 0.66% overnight and Meta’s stock tumbled 15% in after-hours trading on Wednesday despite better-than-expected earnings. The stock’s decline was put down to the company’s Q2 profit guidance, which came in at the lower end of projections, according to analysts at Deutsche Bank. 

The Peso may also have been impacted by a notch-rise in geopolitical tensions, after Israel said they had struck around 40 Hezbollah targets in Lebanon. 

“Currently, investors don’t appear as concerned as they were last week after Iran’s strikes…However, there are still nerves about the prospect of a further escalation, and the Israeli shekel (-0.26% against the US Dollar) lost ground after the headlines came through,” the Deutsche team wrote in a note on Thursday morning. 

Mexican Peso weakens versus Euro 

The Mexican Peso is down against the Euro on Thursday after benchmark German Bund yields spiked higher following comments from the President of the Bundesbank and European Central Bank (ECB) governing council member, Joachim Nagel.

Nagel said, on Wednesday, that although the ECB would still probably go ahead with a rate cut in June, further cuts down the road might not follow. 

Continued stubborn wage-related inflation in the services sector was the main bugbear, said Nagel, who added that until inflation had come down in a sustainable manner the ECB could not commit to a “pre-commit to a particular rate path.” 

Mexican Peso limps higher vs. US Dollar

The Mexican Peso (MXN) limps higher against the US Dollar (USD) in early trading on Thursday after a volatile midweek that saw the Peso eventually lose to the Greenback following better-than-expected US Durable Goods Orders on Wednesday. 

The US Census Bureau revealed that Durable Goods Orders in the United States increased 2.6% MoM in March, up from a 0.7% rise previously, and beating estimates of 2.5%. The data provided something of an antidote to the poor performance of US Manufacturing and Services PMI data released on Tuesday.

USD/MXN traders will now look to preliminary US Q1 GDP data out at 12:30 GMT for guidance. If the data shows continued strong growth in the US economy, it could help restore the image of US exceptionalism that has helped propel the Greenback higher in most pairs over recent weeks. 

Technical Analysis: USD/MXN corrects in short-term downtrend 

USD/MXN corrects in its short-term downtrend but more weakness is probably eventually on the cards.  

USD/MXN 4-hour Chart 

A break below Wednesday’s swing low at 16.91 would confirm further downside to the next key support level at April 17 low at 16.86, where a major Moving Average sits, providing dynamic support on a higher time frame chart. A decisive break below 16.86 could usher in further weakness to 16.50 and then the April 9 low at 16.26.

On the other side, a decisive break above the major trendline for the long-term downtrend at roughly 17.45 will be required to change the trend back to bullish, and activate an upside target at around 18.15. 

A decisive break would be one characterized by a longer-than-average green daily candlestick that pierces above the trendline and closes near its high, or three green candlesticks in a row that pierce above the level.

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $27.39 per troy ounce, up 0.84% from the $27.16 it cost on Wednesday.

Silver prices have increased by 7.54% since the beginning of the year.

The Gold/Silver ratio, which shows the number of troy ounces of Silver needed to equal the value of one troy ounce of Gold, stood at 84.93 on Thursday, down from 85.26 on Wednesday.

Investors might use this ratio to determine the relative valuation of Gold and Silver. Some may consider a high ratio as an indicator that Silver is undervalued – or Gold is overvalued – and might buy Silver or sell Gold accordingly. Conversely, a low ratio might suggest that Gold is undervalued relative to Silver.

Global Market Movers: Comex Silver price finds buyers near $27 as Dollar drops ahead of US data

• Silver price bounces back as US Dollar drops ahead of US Q1 GDP data.
• Weak S&P Global US preliminary PMI report for April casts doubts over the UK’s economic outlook.
• The US core PCE inflation data will significantly influence the Fed’s interest rate outlook.
• Further, the US Dollar will be tested on the grounds of Q1 preliminary Gross Domestic Product (GDP) data, which will be published on Thursday at 12:30 GMT.
• The US Dollar could see a big reaction to the US data flow, significantly impacting the USD-denominated Silver price.

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• USD/CAD loses ground due to improving risk appetite.
• The US Dollar depreciates following the subdued US Treasury yields.
• The lower Canadian Retail Sales figures have fueled speculation that the BoC might opt to reduce interest rates in June.

USD/CAD pares its recent gains registered in the previous session, trading around 1.3670 during the European hours on Thursday. The improving risk appetite weakens the US Dollar (USD), undermining the USD/CAD pair.

The US Dollar Index (DXY), which measures the US Dollar (USD) against six major currencies, edging lower to near 105.60, down by 0.23%, by the press time on Thursday. The decline in the US Treasury yields, following mixed manufacturing data from the United States (US), put pressure on the Greenback.

According to the US Department of Commerce's report on Wednesday, US Durable Goods Orders surged by 2.6% month-over-month (MoM) in March, surpassing the previous reading of 0.7% and beating the estimated 2.5%. This marked the largest monthly increase in durable goods orders since last November, driven primarily by strong demand for transport equipment. Meanwhile, core goods, excluding transportation, only increased by 0.2% MoM, falling short of the expected 0.3%.

On Thursday, the preliminary Gross Domestic Product Annualized (Q1) data for the United States (US) is scheduled to be released, with expectations of a slowdown in the growth rate. These GDP figures will provide insights into the strength of the US economy and could potentially influence future actions by the Federal Reserve (Fed).

The Canadian Dollar (CAD) struggled after lower-than-expected Retail Sales data was released on Wednesday. This has sparked speculation that the Bank of Canada (BoC) may consider cutting interest rates at its next meeting in June. This sentiment may weigh on the Loonie Dollar (CAD).

Gold prices rose in India on Thursday, according to data from India's Multi Commodity Exchange (MCX).

Gold price stood at 71,911 Indian Rupees (INR) per 10 grams, up INR 125 compared with the INR 71,786 it cost on Wednesday.

As for futures contracts, Gold prices increased to INR 71,144 per 10 gms from INR 71,050 per 10 gms.

Prices for Silver futures contracts increased to INR 82,568 per kg from INR 82,234 per kg.

Global Market Movers: Comex Gold price rebounds amid weaker USD and softer risk tone

• Investors await key US economic data for clarity about the timing when the Federal Reserve will start cutting rates, leading to subdued range-bound price action around the Comex Gold price for the second straight day on Thursday.
• The first estimate, or the Advance US GDP report is due for release later today and is expected to show that the world's largest economy grew by 2.5% annualized pace during the first quarter as compared to the 3.4% previous.
• The focus will then shift to the Fed's preferred inflation gauge – the core Personal Consumption Expenditures (PCE) Price Index – on Friday, which will play a key role in determining the near-term trajectory for the XAU/USD. 
• The US Census Bureau reported on Wednesday that Durable Goods Orders climbed 2.6% in March as compared to the previous month's downwardly revised 0.7% increase, while new orders excluding transportation rose 0.2%.
• This comes on the back of strong US consumer inflation figures and hawkish remarks by Fed officials, reaffirming bets that the central bank will not begin its rate-cutting cycle before September and capping the non-yielding metal.
• The global risk sentiment remains supported by easing concerns about a further escalation of geopolitical tensions in the Middle East, which is seen as another factor acting as a headwind for the safe-haven precious metal. 
• The US Dollar bulls seem reluctant to place aggressive bets and remain on the defensive ahead of important macro releases, offering some support to the XAU/USD and limiting any meaningful downside for now. 

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• GBP/JPY attracts strong follow-through buying for the third successive day on Thursday.
• The lack of decisive action and the BoJ’s uncertain rate outlook weigh heavily on the JPY.
• A modest USD downtick benefits the GBP and also contributes to the positive momentum.

The GBP/JPY cross gains strong positive traction for the third straight day on Thursday and spikes to the 195.00 neighborhood, or its highest level since August 2015 during the first half of the European session. 

Despite the recent verbal warnings by Japanese authorities, the lack of any decisive action and the Bank of Japan's (BoJ) cautious approach towards further policy tightening continues to weigh heavily on the Japanese Yen (JPY). This, along with a goodish pickup in demand for the British Pound (GBP), bolstered by a modest US Dollar (USD) weakness, turn out to be key factors that provide a strong boost to the GBP/JPY cross. 

The upward trajectory could further be attributed to technical buying following the overnight breakout through the 192.80-192.85 supply zone and a subsequent strength beyond the previous YTD peak, around the 193.50-193.55 region. Hence, it remains to be seen if the bullish run is backed by genuine buying or turns out to be a stop run as the market focus now shifts to the crucial BoJ decision, scheduled to be announced on Friday.

In the meantime, a mildly softer tone around the equity markets could offer some support to the safe-haven JPY. Apart from this, bets that the Bank of England (BoE) could start cutting interest rates, as early as June, might act as a headwind for the GBP. Heading into the key central bank event risk, the fundamental backdrop warrants some caution before positioning for a further appreciating move for the GBP/JPY cross.

“The risks to economic growth remain tilted to the downside,” the European Central Bank’s (ECB) Economic Bulletin showed on Thursday.

Additional takeaways

The Governing Council’s future decisions will ensure that the key ECB interest rates will stay sufficiently restrictive for as long as necessary.

 In any event, the Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, and it is not pre-committing to a particular rate path.

Inflation is expected to fluctuate around current levels in the coming months and to then decline to the 2% target next year.

Growth could be lower if the effects of monetary policy turn out stronger than expected.

• EUR/GBP extends losing streak on growing expectations of BoE delaying rate cuts.
• The gains in the UK 10-year yield enhanced the hawkish expectations for the BoE’s stance on monetary policy.
• ECB's Schnabel noted that the last phase of reaching Eurozone inflation of 2% could be challenging.

The EUR/GBP cross continues to lose ground for the third consecutive session, trading around 0.8570 during the European session on Thursday. The Pound Sterling (GBP) is finding support as the markets anticipate that the Bank of England (BoE) will likely wait until the next quarter to lower borrowing costs, according to median forecasts in a Reuters poll.

Reuters reported on Tuesday that Bank of England Chief Economist Huw Pill said that interest rate cuts are still some way off, even though the passage of time and an absence of negative news on inflation have brought them closer.

The 10-year yield on United Kingdom (UK) government Gilts hovers around 4.31%, nearing five-month highs. The hawkish expectations for the BoE have been amplified by a fresh increase in bond supply by the UK government. Lingering concerns about sticky inflation, coupled with a surprisingly robust domestic Purchasing Managers Index (PMI), have pushed back expectations of the first BoE rate cut.

In Europe, European Central Bank (ECB) policymakers are adhering to plans to lower interest rates this year. ECB President Christine Lagarde stated on Monday that the central bank might decrease its deposit rate from a record-high 4% in June but has kept its options open for further measures, per Reuters report. The dovish stance of the ECB is exerting some selling pressure on the Euro (EUR) and creating headwinds for the EUR/GBP cross.

Furthermore, ECB board member Isabel Schnabel said at a conference on Thursday that the final stage of achieving Eurozone inflation of 2% may encounter obstacles, with erosion in productivity and high service costs posing clear risks. Schnabel highlighted a consensus emerging that the journey to achieving the inflation target could be quite challenging, with services inflation being a significant concern.

On the data front, the German GfK Consumer Confidence Survey for May recorded a reading of -24.2, better than the expected -25.9 and the prior figure of -27.3. German consumer sentiment is anticipated to improve in the coming months, largely supported by better income expectations. UK Consumer Confidence data is scheduled for release on Friday, with expectations of a slight improvement in April.

• Silver price bounces back as US Dollar drops ahead of US Q1 GDP data.
• Weak S&P Global US preliminary PMI report for April casts doubts over the UK’s economic outlook.
• The US core PCE inflation data will significantly influence the Fed’s interest rate outlook.

Silver Price (XAG/USD) finds interim support near $27 in Thursday’s European session after facing a sharp sell-off in the past week. The white metal discovers some buying interest as the US Dollar edges down.

The US Dollar Index (DXY) corrects to near 105.60 after the S&P Global United States preliminary PMI for April reported that the inflow of new business fell for the first time in six months, which raised doubts over a strong economic outlook. However, the broader-term outlook of the US Dollar has not faded yet as Federal Reserve (Fed) policymakers have been emphasizing maintaining the current policy framework for a longer period, considering strong labour demand and stubbornly higher inflation data.

Going forward, the US Dollar will be tested on the grounds of Q1 preliminary Gross Domestic Product (GDP) data, which will be published at 12:30 GMT. The US economy is estimated to have expanded by 2.5%, at a slower pace than the 3.5% growth recorded in the last quarter of 2023. A strong US GDP data would improve speculation for a soft landing by the Fed. The soft landing is a situation in which the central bank achieves price stability without triggering a recession.

10-year US Treasury yields trade close to 4.65% exhibiting consolidation ahead of the US core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday. The underlying inflation data will significantly influence market expectations about when the Fed will start reducing interest rates. Higher bond yields negatively impact the appeal of non-yielding assets, such as Silver, by increasing the cost of holding an investment in it.

Silver technical analysis

Silver price corrects to near March 2022 high near $27.00 after failing to extend upside above the crucial resistance of $30.00. The near-term appeal for Silver remains strong as the 20-week Exponential Moving Average (EMA) at $25.00 is sloping higher.

The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a firm bullish momentum.

Silver weekly chart

European Central Bank (ECB) executive board member Isabel Schnabel said in her scheduled appearance on Thursday that the “biggest concern is clearly services inflation."

Additional comments

"There is a consensus emerging that we may be facing a quite bumpy last mile.”

"The more concerning part is productivity growth."

“We've had negative productivity growth now over several quarters."'

Meanwhile, ECB Policymaker Madis Muller said that “I'm not comfortable starting with back-to-back cuts.”

Market reaction

EUR/USD is holding higher ground near 1.0725, unfazed by the above comments. The pair is up 0.25% on the day.

• EUR/USD extends its recovery as mixed US data weighs on the US Dollar. 
• The US Dollar may also now already have “a lot priced in” according to analysts at Commerzbank. 
• The short-term trend could now be bullish on the 4-hour chart. 

EUR/USD sherpa-treks higher on Thursday, with a foothold now above 1.0700 as it continues its labored recovery from the 1.0601 April lows. Recent mixed US data has tarnished the image of the US economy, undermining the supremacy of the US Dollar (USD), whilst the Euro (EUR) holds firm on strong services-sector data. 

EUR/USD rises as US data mixed

EUR/USD began its recovery on Tuesday after preliminary US PMI data for April showed an unexpected cooling in business activity, suggesting the economy was beginning to feel the burden of higher interest rates. 

On Wednesday, the US Census Bureau revealed that Durable Goods Orders in the United States increased 2.6% MoM in March, up from a 0.7% rise previously, and beating estimates of 2.5%. Core goods, which exclude transportation, increased by 0.2% MoM, an improvement over February's 0.1% increase, but short of the 0.3% projected.

Whilst the Durable Goods data was positive, it failed to move USD. This could be because it is viewed as a volatile series or, as some now think, because a lot is already priced into the Dollar, making it less sensitive to positive data. 

“A lot is already priced into the Dollar” – Commerzbank 

EUR/USD’s recovery may be due to the US Dollar having priced in a lot, in particular the acute shift in market expectations regarding the future course of interest rates, according to Analysts at Commerzbank. 

Since the Federal Reserve’s (Fed) March meeting markets have consistently pushed back the date by when the Fed is likely to begin cutting interest rates – higher interest rates attract more foreign capital inflows and are thus positive for the US Dollar. 

This recalibration of the future path of interest rates has now been fully priced in, according to Antje Praefcke, FX Analyst at Commerzbank, and in the absence of more catalysts, makes USD more vulnerable to “bad news” than “good news”. 

“In my opinion, the market's reaction (USD falling this week) shows that a lot is already priced into the Dollar, such as a soft landing of the economy or a Fed that will only cut the key interest rate much later than previously thought,” says Praefcke. 

The US Dollar having “priced in a lot” is why it reacted more to the poor US PMI data on Tuesday than the positive US Durable Goods Order data on Wednesday. 

“It is becoming increasingly difficult for the Dollar to benefit from facts and figures that underpin this expectation (a delay in future rate cuts); on the contrary, it tends to react sensitively when the market has doubts about its current expectation in the face of not-so-good data. The Dollar is gradually running out of steam, although it is currently the undisputed most popular currency and is likely to remain so,” adds the Analyst. 

EUR/USD rises due to services-sector effect

The Euro (EUR), meanwhile, stabilizes as strong Services PMI data stokes services-sector inflation expectations. This is seen potentially reigning in the European Central Bank (ECB) as it forges ahead with cutting interest rates. 

Although a June rate cut is probably still a “fait accomplis”, according to Luis de Guindos, the Vice President of the ECB, his colleague at the ECB, Bundesbank President Joachim Nagel was more cautious on Wednesday. 

Nagel said, “Services inflation remains high, driven by continued strong wage growth,” and until inflation fell in a sustainable manner he could not “pre-commit to a particular rate path.”

Technical Analysis: EUR/USD breaks out of short-term range

EUR/USD has broken out of the rectangular range it was trading in on the 4-hour chart by piercing above the ceiling at 1.0700. 

It is now less certain EUR/USD is forming a Bear Flag price pattern, which has become deformed by the breakout. 

EUR/USD 4-hour Chart

There is an argument for the short-term trend now being bullish and therefore suggestive of more gains in the pair. Resistance from a previous lower high on April 11 gives an initial target at 1.0757. Then the 50-day and 200-day Simple Moving Averages (SMA) on the daily chart (not shown) are likely to resist at 1.0807.

On the other hand a break below the 1.0601 April 16 low would revive the Bear Flag hypothesis. 

According to technical lore, the expected move down from a Bear Flag equals the length of the preceding “pole” or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower gives a conservative target at 1.0503. The next concrete target is at 1.0448 – the October 2023 low. A fall of equal length to the pole would take EUR/USD to 1.0403.

• The Pound Sterling rises to 1.2500 on multiple tailwinds.
• BoE Governor Andrew Bailey expects a sharp drop in April’s inflation.
• The US Dollar remains under pressure ahead of US Q1 GDP and core PCE Inflation data.

The Pound Sterling (GBP) advances to near the psychological resistance of 1.2500 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair capitalizes on expectations of an improvement in the United Kingdom’s economic outlook and a decline in the US Dollar.

Investors’ confidence in the UK economy's outlook improved after the preliminary PMI report from S&P Global/CIPS for April showed that new business volumes increased across the private sector as a whole. The agency also reported that the rate of growth of overall activity was the strongest since May 2023. However, the expansion was centred on the service sector, as manufacturers saw a moderate downturn in order books.

Despite the recent upturn, downside risks to Pound Sterling remain high as investors expect the Bank of England (BoE) will pivot to interest-rate cuts before the Federal Reserve (Fed) does so. Last week, BoE Governor Andrew Bailey said: “I expect next month's inflation number will show quite a strong drop.” Bailey added that Oil prices haven't leaped as much as expected and that the effect of the Middle-East conflict “is less than feared.”

Daily digest market movers: Pound Sterling prints a fresh 10-day high

• The Pound Sterling extends its upside above Wednesday’s high at 1.2470 against the US Dollar. The recent United States preliminary PMI report has raised doubts over the strong economic outlook of the economy. Meanwhile, similar data for the UK presented a recovery in overall private-sector activity fueled by the Services sector.
• The US PMI report showed on Tuesday that surprisingly both the Manufacturing and Services PMI were down from the prior readings. The Manufacturing PMI even fell below the 50.0 threshold, signalling a contraction. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “The US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April. Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened concern about the outlook. 
• Despite the downbeat PMI figures, the speculation for the Federal Reserve beginning to lower interest rates from the September meeting remains firm. Going forward, investors will focus on the Q1 preliminary Gross Domestic Product (GDP) and the core Personal Consumption Expenditure Price Index (PCE) data for March. 
• The Q1 US GDP data, which will be published at 12:30 GMT, is expected to show that the economy expanded at a slower rate of 2.5% compared with the 3.4% growth recorded in the last quarter of 2023. The GDP data is a lagging indicator of the economic performance of an economy. A high GDP exhibits strong demand from consumers and higher production levels by firms, which are generally translated into high inflationary pressures. This will force the Fed to keep interest rates restrictive for a longer period.
• For more clarity over Fed’s rate-cut timing, investors will wait for the core PCE inflation data for March, to be published on Friday. The underlying inflation data is estimated to have grown steadily by 0.3% on month, with annual figures softening to 2.6% from the 2.8% recorded in February.

Technical Analysis: Pound Sterling climbs to 1.2500

The Pound Sterling extends its recovery to the crucial resistance of 1.2500 against the US Dollar. The GBP/USD pair moves sharply higher after finding strong buying interest near a five-month low of around 1.2300. The near-term outlook of the Cable is still bearish as the 20-day Exponential Moving Average (EMA) at 1.2509 is declining.

The 14-period Relative Strength Index (RSI) rebounds above 40.00, suggesting that a bearish momentum has concluded for now. However, the bearish bias remains intact.

Here is what you need to know on Thursday, April 25:

The US Dollar (USD) stays under modest selling pressure on Thursday as investors gear up for key data releases. The US Bureau of Economic Analysis will publish the first estimate of the annualized Gross Domestic Product (GDP) growth for the first quarter and the Department of Labor will release the weekly Initial Jobless Claims data. 

Following Tuesday's sharp decline, the USD Index registered small losses on Wednesday, supported by the upbeat Durable Goods Orders data for March. Additionally, the cautious market stance further helped the currency stay resilient against its risk-sensitive rivals. Early Thursday, the USD Index stays in negative territory and edges lower toward 105.50. The US economy is forecast to grow at an annual rate of 2.5% in Q1, following the 3.4% expansion recorded in the last quarter of 2023. Meanwhile, US stock index futures stretch lower in the European morning and the 10-year US yield continues to fluctuate above 4.6%.

EUR/USD gained traction and climbed to its highest level in nearly two weeks above 1.0720 after closing virtually unchanged on Monday. Several European Central Bank (ECB) policymakers will be delivering speeches throughout the day.

GBP/USD closed the second consecutive day in positive territory on Wednesday and continued to push higher in the early European session on Thursday. The pair was last seen trading within a few pips of 1.2500.

USD/JPY broke above 155.00 and reached its highest level in several decades above 155.50. The Bank of Japan (BoJ) will announce monetary policy decisions during the Asian trading hours on Friday.

Japanese Yen struggles near multi-decade low ahead of US GDP; looks to BoJ on Friday.

Gold (XAU/USD) closed with marginal losses on Wednesday. After edging lower toward $2,300 in the Asian session on Thursday, XAU/USD staged a rebound and was last seen trading above $2,320.

Gold price remains confined in a range, $2,300 holds the key for bulls ahead of US GDP.

• The United States Gross Domestic Product is seen expanding at an annualized rate of 2.5% in Q1.
• The current resilience of the US economy bolsters the case for a soft landing. 
• Markets now see the US Federal Reserve starting its easing cycle in September.

The US Bureau of Economic Analysis (BEA) will publish the first estimate of the US Gross Domestic Product (GDP) for the January-March period on Thursday. The report is expected to show an economic expansion of 2.5% after growing at an annualized pace of 3.4% during the prior quarter.

Forecasting US Gross Domestic Product: Deciphering the Numbers

Thursday's economic agenda in the US features the unveiling of the initial GDP report for the first quarter, set to be disclosed at 12:30 GMT. Analysts anticipate that the first assessment will reveal a 2.5% growth rate for the world's largest economy in the January–March period, a moderately robust pace, albeit markedly slower than the 3.4% expansion recorded in the preceding quarter. 

From the latest release of the BEA: “Real GDP increased 2.5 percent in 2023 (from the 2022 annual level to the 2023 annual level), compared with an increase of 1.9 percent in 2022. The increase in real GDP in 2023 primarily reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending that were partly offset by decreases in residential fixed investment and private inventory investment. Imports decreased”.

Market participants will also pay close attention to the GDP Price Index (GDP Deflator), which represents the average change in prices of all new, domestically produced final goods and services in an economy over a specific period, typically a year or a quarter. It essentially reflects the inflation or deflation rate within an economy. During the last quarter of 2023, the GDP Price Index rose by 1.7% and is now seen rising by 3.0%.

Furthermore, the Atlanta Fed GDPNow real GDP estimate for Q1 also props up the case for a solid performance of the US economy during that period.

According to analysts at TD Securities: “GDP growth likely modestly cooled to start the year, but to a still firm pace following two stronger expansions at 4.9% and 3.4% q/q annualized rate (AR) in Q3 and Q4 of last year, respectively. Growth in final domestic sales was likely firmer in 24Q1 than the headline would suggest (TD: 2.8% q/q AR), as we look for net trade & inventories to modestly dent still solid consumer spending.”

When is the GDP print released, and how can it affect the USD?

The US GDP report will be published at 12:30 GMT on Thursday. Meanwhile, the Greenback seems to have embarked on a consolidative phase ahead of the first estimate of US Q1 GDP as well as the inflation tracked by the Personal Consumption Expenditures Price Index (PCE) due on Friday.

Meanwhile, the macroeconomic outlook remains consistent with growing anticipation among market participants of the US Federal Reserve's (Fed) first interest rate reduction in September. On this, CME Group’s FedWatch Tool sees the probability of a lower interest rate at around 70%, up from nearly 3% a month ago.

Still around the commencement of the Fed’s easing cycle, Atlanta Federal Reserve Bank President Raphael Bostic predicted US inflation would reach 2% more gradually than previously predicted but did not rush to cut rates. New York Federal Reserve Bank President John Williams emphasized that the Fed's decisions are based on positive data and the strength of the economy, adding that the Fed may adjust if higher rates are needed. Fed Governor Michelle Bowman suggests that efforts to reduce inflation may have hit a snag, leaving uncertainty about interest rates' ability to return to the bank's target. Finally, in his latest comments, Fed Chairman Jerome Powell showed no rush to start reducing interest rates, matching the broad-based rate setters’ views.

A sneak peek ahead of the results

Stronger-than-anticipated GDP growth in the first quarter could bolster expectations that the Fed will delay the start of its easing programme, probably until September or December, which should in turn morph into further strength in the US Dollar (USD). The Greenback is also expected to hold its ground in the case of a higher GDP Price Deflator.

Alternatively, an abrupt change of heart around the US Dollar and, hence, a challenge to the current markets’ bets for a rate cut later in the year, should require an unexpectedly worse-than-estimated print, which appears quite unlikely for the time being.

Techs on the US Dollar Index (DXY)

Pablo Piovano, Senior Analyst at FXStreet, notes: “In case the bullish sentiment gathers steam, the USD Index (DXY) could confront the so-far 2024 top at 106.51 (April 16). Surpassing this level could encourage market participants to embark on a potential visit to the November peak at 107.11 (November 1), just ahead of the 2023 high at 107.34 (October 3).”

Pablo adds: “If we look in the opposite direction, the April bottom at 103.88 (April 9) remains underpinned by the 200-day Simple Moving Average (SMA) at 103.99, and this area is expected to offer decent contention. The breakdown of this region exposes a drop to the 100-day SMA at 103.67 prior to the March low at 102.35 (March 8).”

• EUR/JPY gains traction near 166.85 on Thursday, the highest level since 2008. 
• The cross keeps the bullish vibe, with the overbought RSI condition.
• The first resistance level will emerge at 166.82; the initial support level is located at 165.35.

The EUR/JPY cross trades in positive territory for the fifth consecutive day during the early European trading hours on Thursday. The cross edges higher to 166.85, its highest level since 2008. The Tokyo April Consumer Price Index (CPI) will be due on Friday ahead of the Bank of Japan (BoJ) interest rate decision. The markets expect the Japanese central bank to leave its policy rate and bond purchase amounts unchanged since BoJ raised interest rates in March for the first time since 2007. The divergence in rates between Japan and the Eurozone is the key factor that weighs the Japanese Yen (JPY) against the Euro (EUR). 

Technically, EUR/JPY maintains the bullish stance unchanged on the four-hour chart as the cross is above the 50-period and 100-period Exponential Moving Averages (EMA) with an upward slope. The Relative Strength Index (RSI) holds in bullish territory above 70. However, the overbought RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term EUR/JPY appreciation.

The first upside barrier for the cross will emerge near the upper boundary of the Bollinger Band at 166.82. The next hurdle is seen at the 167.00 psychological level. A bullish breakout above this level will see a rally to a yearly high of 2007 at 168.95, en route to an all-time high of 169.78 in July 2008.

On the flip side, the initial support level for the cross is located near a high of March 20 at 165.35. Further south, the next contention level to watch is the 50-period EMA at 165.11, followed by the 100-period EMA at 164.62. A breach of this level will see a drop to the lower limit of the Bollinger Band at 164.30.  

EUR/JPY four-hour chart

FX option expiries for Apr 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below

- EUR/USD: EUR amounts

• 1.0595 390m
• 1.0640 1.2b
• 1.0650 990m
• 1.0700 750m
• 1.0750 767m
• 1.0760 642m
• 1.0800 689m
• 1.0850 839m

- GBP/USD: GBP amounts     

• 1.2410 400m
• 1.2500 432m

- USD/JPY: USD amounts                     

• 153.00 1.7b
• 154.00 1.2b
• 155.00 1.9b
• 155.25 441m
• 155.85 1.2b

- AUD/USD: AUD amounts

• 0.6430 559m
• 0.6635 505m

- USD/CAD: USD amounts       

• 1.3650 379m
• 1.3750 457m

• EUR/USD could approach the 21-day EMA at 1.0727.
• A break below 1.0700 could lead the pair toward the major support of 1.0650 and April’s low at 1.0601.
• A breach above the major level of 1.0695 suggests a weakening of bearish sentiment.

EUR/USD recovers its recent losses registered in the previous session, trading around 1.0710 during the Asian session on Thursday. From a technical standpoint, analysis suggests a weakening of bearish sentiment for the pair as it has surpassed the major level of 1.0695 and the psychological level of 1.0700.

Additionally, the lagging indicator Moving Average Convergence Divergence (MACD) indicates a shift in momentum for the EUR/USD pair, as it is positioned below the centerline but above the signal line. However, the 14-day Relative Strength Index (RSI) remains below the 50-mark, indicating a continuation of bearish momentum.

Key support for the EUR/USD pair is likely to be found around the psychological level of 1.0700. A breach below this level could apply downward pressure on the pair, potentially leading it toward the region surrounding the major support level of 1.0650. Further support may be identified around April’s low at 1.0601, which aligns with the psychological level of 1.0600.

On the upside, the immediate barrier for the pair could be the 21-day Exponential Moving Average (EMA) at 1.0727. A breakthrough above this level could propel the pair towards the 38.2% Fibonacci retracement level at 1.0749, which is drawn between the levels of 1.0981 and 1.0606, coinciding with the major level of 1.0750.

EUR/USD: Daily Chart

• USD/CHF drifts lower to 0.9145 on the softer US Dollar on Thursday. 
• The hawkish tone of the US Fed has lifted the USD, creating a tailwind for the pair. 
• Switzerland’s ZEW Survey Expectations rose to 17.6 in April, compared to 11.5 prior.

The USD/CHF pair trades on a weaker note near 0.9145 during the early European session on Thursday. Traders seem to prefer to wait on the sidelines ahead of the release of the US preliminary Gross Domestic Product (GDP) Annualized for the first quarter (Q1) later in the day. In the meantime, any development surrounding escalating tensions in the Middle East might boost safe-haven assets like the Swiss Franc (CHF). 

The US Federal Reserve's (Fed) policymakers agreed with the central bank’s position to remain on hold. The hawkish tone of the Fed has provided some support to the Greenback in recent weeks. However, investors have doubts about exactly when monetary policy easing will come. The US GDP growth number might offer some hints about how the US economy performs in Q1 of 2024. 

The first estimated US GDP growth number is estimated to grow at a 2.5% annualized pace during the first quarter, compared to the previous reading of 3.4%. In case the report shows stronger-than-expected data, this might trigger speculation that the US Fed will delay the rate cut cycle, which might lift the US Dollar (USD). 

On Wednesday, data released from the Centre for European Economic Research showed that Switzerland’s ZEW Survey Expectations improved to 17.6 in April compared to 11.5 in the previous reading. Apart from this, the ongoing geopolitical tensions in the Middle East might lift the CHF, a traditional safe-haven currency, and drag the USD/CHF lower. 

• NZD/USD gains momentum as investors express optimism regarding the de-escalation of tensions between Israel and Iran.
• The higher US Treasury yields could help in limiting the losses of the US Dollar.
• US GDP Annualized (Q1) is expected to grow at a slower rate in the first quarter.

The NZD/USD pair moves in the positive direction, trading around 0.5940 during the Asian session on Thursday. The risk-sensitive New Zealand Dollar (NZD) gains momentum as risk appetite improves. Investors are optimistic about the resolution of conflicts between Iran and Israel, following a statement by an Iranian official suggesting no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters.

The China Securities Journal reported on Tuesday that the People's Bank of China (PBoC) plans to reduce the Medium-term Lending Facility (MLF) rate to decrease funding costs during the next MLF rate setting scheduled for May 15. Lower MLF rates in China could stimulate economic activity and boost consumer spending, which may lead to increased demand for New Zealand goods and services in the Chinese market.

The US Dollar Index (DXY), which measures the US Dollar (USD) against six major currencies, depreciated following mixed manufacturing data from the United States (US). However, the Greenback's losses were somewhat offset by slight gains in US Treasury yields.

According to the US Department of Commerce's report on Wednesday, US Durable Goods Orders rose 2.6% month-over-month (MoM) in March, surpassing the previous reading of 0.7% and beating the estimated 2.5%. However, core goods, excluding transportation, increased 0.2% MoM, falling short of the expected 0.3%.

On Thursday, the preliminary Gross Domestic Product Annualized (Q1) data for the United States (US) is set to be released, with expectations of a growth rate slowdown. These GDP figures will offer insights into the strength of the US economy and could influence future actions by the Federal Reserve (Fed).

• GBP/USD struggles to attract follow-through buying and trades in a narrow range on Thursday.
• Reduced Fed rate cut bets and speculations about more aggressive BoE easing act as a headwind.
• The technical setup warrants some caution before positioning for any further appreciating move.

The GBP/USD pair consolidates its strong recovery gains registered over the past two days, from the 1.2300 mark or the YTD low set earlier this week and oscillates in a range during the Asian session on Thursday. Spot prices currently trade near the 1.2465 region, unchanged for the day as traders await more cues about the Federal Reserve's (Fed) rate-cut path before placing fresh directional bets. 

Hence, the focus will remain glued to important US macro data – the Advance Q1 GDP report later today and the Personal Consumption Expenditures (PCE) Price Index on Friday. In the meantime, expectations that the Fed will delay cutting interest rates in the wake of sticky inflation continue to act as a tailwind for the US Dollar (USD). Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) undermine demand for the British Pound (GBP) and act as a headwind for the GBP/USD pair. 

From a technical perspective, acceptance above the 23.6% Fibonacci retracement level of the March-April downfall favors bullish traders and supports prospects for a further appreciating move. Hence, some follow-through strength beyond the 1.2500 psychological mark, en route to the 1.2530-1.2535 region or the 38.2% Fibo. level, looks like a distinct possibility. That said, oscillators on the daily chart are still holding in the negative territory, suggesting that the latter should act as a headwind and cap the upside for the GBP/USD pair. 

On the flip side, the 1.2425 area now seems to protect the immediate downside ahead of the 1.2400 round figure. Some follow-through selling could drag the GBP/USD pair back towards the 1.2350 intermediate support en route to the 1.2300 mark, or the YTD low touched on Tuesday. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for an extension of the recent downtrend from the March swing high. Spot prices might then slide to the 1.2245 area before dropping to the 1.2200 mark.

GBP/USD daily chart

• Gold price remains confined in a narrow band for the second straight day on Thursday.
• Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity.
• Traders now await key US macro data before positioning for the near-term trajectory.

Gold price (XAU/USD) extends its consolidative price move above the $2,300 mark during the Asian session on Thursday as traders more cues about the Federal Reserve's (Fed) rate-cut path before placing fresh directional bets. Hence, the focus will remain glued to key US macro data – the Advance Q1 GDP report due later today and the Personal Consumption Expenditures (PCE) Price Index on Friday. This will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the commodity.
In the meantime, the recent hawkish remarks by several Fed officials suggested that the central bank is in no rush to cut interest rates.

Moreover, stronger US consumer inflation figures forced investors to scale back their expectations about the timing of the first rate cut to September and downsize the number of rate cuts in 2024. This keeps the US Treasury bond yields elevated and acts as a headwind for the non-yielding Gold price. Apart from this, easing concerns about a major escalation of the Middle East crisis continues to cap the safe-haven XAU/USD. 

Daily Digest Market Movers: Gold price struggles to gain traction amid hawkish Fed expectations

• Investors await key US economic data for clarity about the timing when the Federal Reserve will start cutting rates, leading to subdued range-bound price action around the Gold price for the second straight day on Thursday.
• The first estimate, or the Advance US GDP report is due for release later today and is expected to show that the world's largest economy grew by 2.5% annualized pace during the first quarter as compared to the 3.4% previous.
• The focus will then shift to the Fed's preferred inflation gauge – the core Personal Consumption Expenditures (PCE) Price Index – on Friday, which will play a key role in determining the near-term trajectory for the XAU/USD. 
• The US Census Bureau reported on Wednesday that Durable Goods Orders climbed 2.6% in March as compared to the previous month's downwardly revised 0.7% increase, while new orders excluding transportation rose 0.2%.
• This comes on the back of strong US consumer inflation figures and hawkish remarks by Fed officials, reaffirming bets that the central bank will not begin its rate-cutting cycle before September and capping the non-yielding metal.
• The global risk sentiment remains supported by easing concerns about a further escalation of geopolitical tensions in the Middle East, which is seen as another factor acting as a headwind for the safe-haven precious metal. 
• The US Dollar bulls seem reluctant to place aggressive bets and remain on the defensive ahead of important macro releases, offering some support to the XAU/USD and limiting any meaningful downside for now. 

Technical Analysis: Gold price bears need to wait for acceptance below $2,300 before placing fresh bets

From a technical perspective, the Gold price now seems to have found acceptance below the 23.6% Fibonacci retracement level of the February-April rally, albeit showing some resilience below the $2,300 mark earlier this week. Moreover, oscillators on the daily chart – though have been losing traction – are still holding in the positive territory. Hence, it will be prudent to wait for some follow-through selling below the $2,300-2,290 area, or over a two-week low touched on Tuesday, before positioning for an extension of the recent pullback from the all-time peak. The subsequent downfall has the potential to drag the XAU/USD to the $2,260-2,255 area, or the 38.2% Fibo. level, en route to the $2,225 intermediate support and the $2,200-2,190 confluence, comprising the 50% Fibo. level and the 50-day Simple Moving Average (SMA). 

On the flip side, immediate resistance is pegged near the $2,325 area ahead of the overnight swing high, the $2,337-2,338 zone. A sustained move beyond could allow the Gold price to test the next relevant hurdle near the $2,350-2,355 region and climb further towards the $2,380 supply zone. This is closely followed by the $2,400 round figure and the all-time peak, near the $2,431-2,432 area, which if cleared will set the stage for an extension of the recent blowout rally witnessed over the past two months or so.

• The Australian Dollar gains ground as the stronger CPI enhances hawkish sentiment regarding the RBA monetary policy stance.
• The Australian Dollar strengthens in response to the higher 10-year yield on Australian government bonds.
• The gains in US Treasury yields could limit the losses of the US Dollar.

The Australian Dollar (AUD) edges higher for the fourth consecutive session on Thursday. The Australian Dollar (AUD) gained traction against the US Dollar (USD) following the release of robust Australian Consumer Price Index (CPI) figures on Wednesday. Additionally, the easing tensions in the Middle East have created a positive market sentiment, favoring risk-sensitive currencies like the AUD and consequently supporting the AUD/USD pair.

The Australian Dollar gains ground following the higher 10-year yield on Australian government bonds, which has surged above 4.49%, approaching five-month highs. This increase in yield is attributed to the growing expectations of a more hawkish stance from the Reserve Bank of Australia (RBA) regarding its interest rate trajectory.

The US Dollar Index (DXY), which gauges the US Dollar (USD) against six major currencies, downticks, possibly influenced by improved risk appetite. However, the modest gains in US Treasury yields could mitigate the losses of the Greenback.

The preliminary Gross Domestic Product Annualized (Q1) from the United States (US) is scheduled to be released on Thursday, with expectations of a slowdown in the growth rate. The GDP figures will provide insights into the strength of the US economy and may indicate the Federal Reserve (Fed)'s future actions. If the report reveals higher-than-expected figures, it could spark speculation that the Fed will postpone its rate cut cycle.

Daily Digest Market Movers: Australian Dollar appreciates after hotter CPI data

• Luci Ellis, the chief economist at Westpac and former Assistant Governor (Economic) at the Reserve Bank of Australia, notes that inflation slightly exceeded expectations in the March quarter. Westpac anticipates that the Board will keep interest rates unchanged in May and has adjusted their forecasted date for the first rate cut from September to November this year.
• Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecast of 3.4% for Q1 and 4.1% prior.
• Australia’s Monthly Consumer Price Index (YoY) rose to 3.5% in March, against the market expectations and the previous reading of 3.4%.
• The S&P Global US Composite PMI decreased in April, indicating only a modest expansion in the nation's private sector. This was the weakest expansion since December. Activity saw slower growth rates in both the manufacturing and service sectors, with expansions easing to three- and five-month lows, respectively.
• In April 2024, the Judo Bank Australia Composite Output Index rose, marking the third consecutive month of expansion in the Australian private sector and the fastest pace since April 2022. Although the service sector primarily drove business activity growth, the rate of decline in manufacturing output slowed to its lowest level in eight months.
• The China Securities Journal indicated on Tuesday that the People's Bank of China (PBoC) plans to reduce the Medium-term Lending Facility (MLF) rate in an effort to decrease funding costs. The next MLF rate setting is scheduled for May 15. This move might potentially benefit Australian exports to China, considering the strong trade ties between the two nations.

Technical Analysis: Australian Dollar hovers above the psychological level of 0.6500

The Australian Dollar trades around 0.6510 on Thursday. The pair is hovering above the lower boundary of a symmetrical triangle pattern. A further gain could lead to a bullish sentiment, with the pair potentially targeting the psychological level of 0.6600 and aiming for the upper boundary of the triangle near 0.6639. Additionally, the 14-day Relative Strength Index (RSI) is above the 50-level, supporting this bullish outlook.

On the downside, immediate support is expected around the psychological level of 0.6500. A break below this level may lead to further downside momentum, with the next significant support region around 0.6456. The AUD/USD pair may find further support at April’s low of 0.6362.

AUD/USD: Daily Chart

• Indian Rupee trades with mild negative bias on Thursday. 
• The INR’s downside might be capped, owing to a further decline in crude oil prices. 
• Market players will closely monitor the US preliminary GDP growth number for the first quarter (Q1).

Indian Rupee (INR) extends its downside on Thursday despite the decline of the US Dollar (USD). The growing speculation that the US Federal Reserve (Fed) will delay interest rate cuts boosts the Greenback against its rivals. Nonetheless, the upside of the pair might be limited due to a further decline in crude oil prices amid easing tensions about a wider fallout between Iran and Israel.

Investors will closely monitor the US preliminary Gross Domestic Product (GDP) Annualized for the first quarter (Q1). The report could offer a clue of how strongly the US economy is growing and point to the Fed's next move. On Friday, the final reading of the US March Personal Consumption Expenditures Price Index (PCE) will be a closely watched event. Apart from this, India’s general election, which started on 19 April and will run until 1 June, will be in the spotlight. 

Daily Digest Market Movers: The Indian Rupee remains vulnerable at the start of the election

• In mid-April, India’s foreign exchange reserves stood at USD 564.5 billion (+48 billion over a year), equating to more than 7.6 months of goods and services imports.
• The Indian rupee remains stable at the start of the election period, holding up better than other Asian currencies so far. Since the start of April, it has only depreciated by 0.6% against the US Dollar.
• The Indian economy needs to grow at a rate of 8–10% per annum over the next decade to reap the demographic dividend, according to the Reserve Bank of India (RBI) monthly bulletin.
• The main economic challenge for the Indian government after the election is unemployment, according to economists polled by Reuters, who forecast India to expand at a solid 6.5% this fiscal year.
• The US Durable Goods Orders improved 2.6% MoM or $7.3 billion, to $283.4 billion in March, compared to the 0.7% increase (revised from 1.4%) in February. The increase in overall orders was the biggest since November 2023
• Durable Goods Orders ex Transportation rose by 0.2% MoM in March, while new orders excluding defense rose 2.3% MoM in the same period. Both figures came in below the consensus. 

Technical analysis: USD/INR keeps the bullish vibe in the longer term

The Indian Rupee trades on a softer note on the day. USD/INR maintains the positive outlook unchanged on the daily timeframe as the pair is above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) hovers around the 50.00 midlines, suggesting that further consolidation is favorable for the time being. 

The first upside barrier for USD/INR will emerge at 83.50 (high of April 15). Any follow-through buying above this level will expose 83.72 (an all-time high), en route to 84.00 (round figure). On the other hand, the confluence of the 100-day EMA and a low of April 10 near the 83.10–83.15 zone. The additional downside filter to watch is 82.78 (low of January 15), followed by 82.65 (low of March 16).  

• The Japanese Yen continues losing ground amid the divergent BoJ-Fed policy expectations.
• The recent intervention warnings by Japanese authorities do little to provide any respite.
• Traders now look to the US Q1 GDP report for some impetus ahead of the BoJ on Friday.

The Japanese Yen (JPY) extends its weakening trend further below the 155.00 psychological mark and drops to the lowest level since June 1990 against its American counterpart during the Asian session on Thursday. The wide interest-rate differential between Japan and the United States (US) is seen as a key factor that continues to undermine the JPY. The move, however, fuels the risk of a potential intervention by Japanese authorities, which, in turn, might hold back the JPY bears from placing fresh bets. Traders might also prefer to move to the sidelines ahead of the crucial Bank of Japan (BoJ) monetary policy decision on Friday.

The Japanese central bank is widely expected to leave policy settings, and bond purchase amounts unchanged after raising interest rates in March for the first time since 2007. In contrast, investors seem convinced that the Federal Reserve (Fed) may delay cutting interest rates in the wake of still sticky inflation, which remains supportive of elevated US Treasury bond yields and acts as a tailwind for the US Dollar (USD). This, in turn, suggests that the path of least resistance for the USD/JPY pair remains to the upside. 

Daily Digest Market Movers: Japanese Yen bears not ready to give up despite intervention warnings

Expectations that the difference in interest rates between the US and Japan will stay wide drag the Japanese Yen to a fresh multi-decade low on Thursday, fueling speculation about possible intervention by Japanese authorities.
Japanese officials have repeatedly warned that they will take necessary action to address excessive moves in the yen if needed and have emphasized a focus on the pace of the currency’s depreciation rather than a precise price level. 
Moreover, Bank of Japan Governor Kazuo Ueda has said the central bank may hike rates again if the fall in the domestic currency significantly pushes up inflation, which might hold back the JPY bears from placing fresh bets.
Japan's Liberal Democratic Party (LDP) executive, Takao Ochi, said on Wednesday that the JPY's fall towards the 160 against its American counterpart may be deemed excessive and could prompt policymakers to consider some action. 
Japan's Finance Minister Shunichi Suzuki refrained from commenting on specific FX levels, while Chief Cabinet Secretary Yoshimasa Hayashi reiterated that it is important for currencies to move in a stable manner reflecting fundamentals.
Investors keenly await the outcome of the highly-anticipated two-day BoJ policy meeting on Friday for cues on when the central bank will raise interest rates again, which, in turn, will determine the near-term trajectory for the JPY.
The US Census Bureau reported on Wednesday that Durable Goods Orders increased by 2.6% in March as compared to the previous month's downwardly revised 0.7% rise, while new orders excluding transportation rose 0.2%
This comes on the back of strong US consumer inflation figures and reaffirmed expectations that the Federal Reserve will not begin its rate-cutting cycle before September, which acts as a tailwind for the US Dollar and the USD/JPY pair. 
Traders now look forward to the release of the Advance US GDP report, which is expected to show that growth in the world's largest economy slowed to a 2.5% annualized pace during the first quarter of 2024 from the 3.4% previous. 
Apart from this, the US Personal Consumption Expenditures (PCE) Price Index on Friday will be looked upon for cues about the Fed's rate-cut path and determining the next leg of a directional move for the buck and the currency pair. 

Technical Analysis: USD/JPY could consolidate before the next leg up towards the 156.00 mark

From a technical perspective, the overnight breakout through a short-term trading range and a subsequent strength beyond the 155.00 mark could be seen as a fresh trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart remains in the overbought territory, warranting some caution amid intervention fears and ahead of the BoJ event risk. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg of a positive move. Nevertheless, the USD/JPY pair seems poised to prolong its recent well-established uptrend from the March swing low and aim to conquer the 156.00 round figure.

On the flip side, any meaningful corrective slide is likely to attract fresh buyers and remain limited near the 154.90-154.85 region. This is followed by the 154.55-154.45 support zone, which, if broken, might prompt some technical selling and drag the USD/JPY pair to the 154.00 round-figure mark. The downward trajectory could extend further towards last Friday's low, around the 153.60-153.55 area.

Japan’s Chief Cabinet Secretary Yishimasa Hayashi said on Thursday that he “won't comment on forex levels or forex intervention” but he “will be ready to take full response.”

Additional comments

Market reaction

USD/JPY is testing multi-decade highs near 155.50 despite the Japanese verbal intervention, up 0.04% on the day.

• AUD/JPY continues its winning streak after the stronger Australian CPI was released on Wednesday.
• Australia’s 10-year government bond yield has surged to 4.49% near five-month highs on waning expectations of the RBA rate cuts.
• The Japanese Yen continues to depreciate as the BoJ is expected to abstain from implementing rate hikes on Friday.

AUD/JPY edges higher for the fourth consecutive session on Thursday. The Australian Dollar (AUD) found support following the release of Australian Consumer Price Index (CPI) data on Wednesday, which exceeded expectations. This development hints at a potentially hawkish stance for the Reserve Bank of Australia’s (RBA) monetary policy, bolstering the AUD and subsequently supporting the AUD/JPY pair.

Australia’s 10-year government bond yield has surged above 4.49%, nearing five-month highs, as robust domestic inflation figures have strengthened expectations of the RBA delaying interest rate cuts. Moreover, easing tensions in the Middle East has fostered a positive market sentiment, benefiting risk-sensitive currencies like the AUD.

The Japanese Yen (JPY) continues to depreciate ahead of the upcoming release of the Bank of Japan’s (BoJ) Monetary Policy Statement scheduled for Friday. It's widely anticipated that the BoJ will abstain from implementing rate hikes in this meeting.

According to reports from Nikkei, the BoJ is likely to deliberate on the "impact of accelerating Yen depreciation," indicating that the central bank may intervene in the foreign exchange markets if the JPY weakens.

Daily Digest Market Movers: AUD/JPY appreciates on hawkish sentiment surrounding RBA

• According to Luci Ellis, Westpac's chief economist and former Assistant Governor (Economic) at the Reserve Bank of Australia, inflation slightly surpassed expectations in the March quarter. They anticipate the Board will maintain interest rates in May and have revised the projected date for the initial rate reduction from September to November this year.
• Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecasted 3.4% for Q1 and 4.1% prior.
• Australia’s Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.
• On Tuesday, Australia's Judo Bank Composite Purchasing Managers Index (PMI) surged to a 24-month high, indicating an improvement from the previous month. While the Manufacturing PMI reached an eight-month high, the Services PMI declined to a two-month low. This has bolstered the hawkish sentiment for the RBA’s stance on its interest rate trajectory.
• According to the Japan Times, the proportion of Japanese companies intending to increase their pay scales reached 70.7%, marking a rise of 6.3 percentage points from the previous year. Additionally, the number of companies planning to implement pay-scale hikes and regular pay increases totaling 5% or more amounted to 36.5%, nearly doubling from the previous year. This could provide support for the Yen.
• Reuters reported that Bank of Japan (BoJ) Governor Kazuo Ueda reiterated on Tuesday that the central bank would raise interest rates again if trend inflation accelerates toward its 2% target, in line with its forecast. Ueda also said that it is hard to predict in advance the ideal timeframe for the Bank of Japan (BoJ) to gather sufficient data before considering a policy change.
• The Tokyo Consumer Price Index (CPI) for the year ended April is scheduled to be released during the early Friday session in Japan.

Technical Analysis: AUD/JPY moves above the psychological level of 101.00

The AUD/JPY trades around 101.10 on Thursday, edging towards the upper boundary of the daily ascending channel after surpassing April’s high of 100.81. Moreover, the 14-day Relative Strength Index (RSI) is trending above the 50-level, indicating a bullish sentiment. The immediate resistance is seen at the major level of 101.50.

In case of a downside movement, immediate support for the AUD/JPY pair could be found at the psychological level of 101.00, followed by the major support level of 100.81. A breach below this level might lead to a further decline toward the support level of 99.65, followed by the lower boundary of the ascending channel around the level of 99.00.

AUD/JPY: Daily Chart

• WTI edges lower to $82.45 on Thursday as the fear of wider war in the Middle East eased. 
• Higher bets that the US Fed will delay rate cuts support the Greenback. 
• US commercial crude stockpiles last week fell by 6.368 million barrels, the largest drawdown since mid-January. 

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $82.45 on Thursday. The black gold edges lower as the fear over wider conflict in the Middle East fades. Additionally, the hawkish tone from the Federal Reserve (Fed) boosts the US dollar (USD) and caps the upside of black gold. 

Perceived de-escalation between Iran and Israel, and the flow of oil from the Middle East, which has not been interrupted by conflict in the region, dragged the WTI prices lower in the last few sessions. However, any sign of rising tensions in the Middle East and stricter sanctions against Iran might cap the downside of the WTI price. 
 
Furthermore, the growing speculation that the US Federal Reserve (Fed will delay the interest rate provides some support to the Greenback and acts as a headwind for the black gold price. It’s worth noting that a strong dollar makes oil more expensive for holders of other currencies. Several US Fed officials noted that rate cuts aren’t coming in the coming months as inflation remains stickier than expected. 

On the other hand. The US commercial crude stockpiles for the week ending April 19 fell by 6.368 million barrels from the previous reading of 2.735 million barrels built. This reading registered the largest drawdown since mid-January, according to data from the Energy Information Administration. 

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1058 as compared to the previous day's fix of 7.1048 and 7.2472 Reuters estimates.

• EUR/USD posts modest gains near 1.0700 on the weaker USD on Thursday. 
• US Durable Goods Orders increased by 2.6% MoM in March vs. 0.7% prior; Core Goods rose by 0.2% MoM, worse than expected. 
• The dovish stance of the ECB, which sticks to plans to cut interest rates this year, weighs on the Euro.
• Traders will monitor the release of US Q1 GDP growth number data.

The EUR/USD pair hovers around the 1.0700 psychological level on Thursday during the early Asian session. The modest uptick of the major pair is supported by the softer US Dollar (USD). Later in the day, Germany’s GfK Consumer Confidence Survey for April will be released. Additionally, the US preliminary Gross Domestic Product (GDP) growth number will be due. 

The US Department of Commerce revealed on Wednesday that Durable Goods Orders in the United States increased 2.6% MoM in March from a 0.7% rise in the previous reading, beating the estimation of 2.5%. Core goods, which excluded transportation, rose by 0.2% MoM, missing the expectation of 0.3%. 

The release of US GDP for the first quarter could offer clues of how strong the economy is growing and point to the Fed's next move. If the report shows stronger-than-expected data, this might trigger speculation that the Fed will delay the rate cut cycle and boost the Greenback. Markets have priced in nearly 70% odds that the US Federal Reserve (Fed) will cut its benchmark rate in September, according to the CME FedWatch tool,

Across the pond, the European Central Bank (ECB) policymakers stick to plans to cut interest rates this year, even though elevated US inflation might delay a pivot to looser policy by the Fed. The ECB President Christine Lagarde suggested that the central bank may cut its deposit rate from a record-high 4% in June, but has kept its options open for further action. The dovish stance of the ECB exerts some selling pressure on the Euro (EUR) and creates a headwind for the EUR/USD pair.