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• GBP/USD trades on a stronger note near 1.2450 amid softer USD on Wednesday. 
• US flash S&P Global Manufacturing and Services PMI came in weaker than expectations in April. 
• BoE’s Pill said inflation must be squeezed out of the UK economy and cautioned against cutting too soon.

The GBP/USD pair recovers to 1.2450 on Wednesday during the early Asian session. The downbeat US April PMI data and increasing appetite for the risk-linked space exert some selling pressure on the US Dollar (USD). Later in the day, the US Durable Goods Orders and weekly Mortgage Applications will be released. 

Business activity in the United States slowed in April to a four-month low owing to lower demand, according to the S&P Global report on Tuesday. The flash Manufacturing PMI came in weaker than the expectation, dropping to 49.9 in April from 51.9 in the previous reading. Meanwhile, the Services PMI declined to 50.9 from 51.7, below the market consensus of 52.0. Finally, the Composite PMI, which tracks both the manufacturing and services sectors, fell to 50.9 in April from 52.1 in March. The Greenback has attracted some sellers in response to the US economic data.  

The Federal Reserve (Fed) officials look for signs that the economy is ebbing enough to bring inflation down further, even though the data in recent weeks showed hotter-than-expected inflation and employment readings. The US central bank will schedule the monetary policy meeting next week, and markets expect the Fed to leave its policy rate unchanged in the current 5.25%–5.50% range. Several Fed policymakers signaled at least one rate cut this year and indicated that monetary policy needs to be restrictive for longer. This, in turn, continues to lift the USD and cap the upside of GBP/USD. 

On the other hand, the speculation that the Bank of England (BoE) will cut interest rates in summer declined as the UK chief economist reiterated the need for “restrictive” monetary policy. On Tuesday, BoE Chief Economist Huw Pill said that easing in headline inflation was not enough of a reason to ease policy, adding that there were greater risks from cutting the rates too quickly, rather than too late. These comments provide some support to the Pound Sterling (GBP) against the USD.  

New Zealand's Trade Balance in NZD terms fell $-9.87 billion through the year ended in March, slightly less than the previous YoY period, which declined $-12.06 billion, a slight downside revision from the initial print of $-11.99 billion.

New Zealand's Exports rose to a 10-month high of 6.5 billion in March, lifting from the previous month's $5.79 billion (revised slightly from $5.89 billion).

New Zealand's Imports in March fell slightly, printing at $5.91 billion versus February's $6.1 billion, which was also revised slightly from $6.11 billion.

Market reaction

Reaction to New Zealand Trade Balance figures is muted as markets gear up for the early Wednesday market section in the Pacific. The NZD/USD is trading tightly near 0.5935.

About New Zealand's Trade Balance

Trade balance, released by Statistics New Zealand, is the difference between the value of country's exports and imports, over a period of year. A positive balance means that exports exceed imports, a negative ones means the opposite. Positive trade balance illustrates high competitiveness of country's economy.

• AUD/USD extends gains, influenced by disappointing S&P Global PMIs from the US, suggesting possible Fed easing.
• US Dollar weakens as Treasury yields fall and equity markets respond positively to the potential shift in Fed policy.
• Upcoming Australian CPI data could influence the Reserve Bank of Australia's policy stance.

The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table, following last week's hawkish rhetoric. The AUD/USD trades at 0.6488, up by 0.01% as Wednesday’s Asian session begins.

Aussie Dollar capitalizes softer US PMIs amid increasing Fed rate cut hopes

S&P Global revealed that manufacturing activity in the US contracted slightly to 49.9, down from 51.9 in March. The Services and Composite PMIs cling to expansionary territory, but both fell from 51.7 to 50.9 and from 52.1 to 50.9.

Following the data, US equities rose, US Treasury yields fell, and the Greenback posted losses. The US Dollar Index (DXY), which tracks the buck’s performance against the six other currencies, dropped 0.44% and stayed at 105.68.

The AUD/USD rose from daily lows around 0.6440s toward the day’s high at 0.6490.

Other data shows that New Home Sales surged to a six-month high, indicating robust demand in the housing market. However, Building Permits continued to show contraction, albeit with a slight improvement, as the initial decline of -4.3% was revised to -3.7%.

On the Aussie’s front, the Consumer Price Index (CPI) for the first quarter is expected to edge lower, from 4.1% to 3.4% YoY. On a quarterly basis, it is expected to tick higher from 0.6% to 0.8%, while monthly figures are foreseen to remain unchanged at 3.4%.

ANZ analysts commented that the Reserve Bank of Australia wouldn’t likely change their stance, noting, “Looking ahead to the next RBA Board decision on 7 May, we don’t think slightly higher inflation than the RBA is expecting will prompt a shift back to an overt tightening bias.”

AUD/USD Price Analysis: Technical outlook

From a technical perspective, the AUD/USD turned bullish in the short term, following the formation of a ‘morning star’ chart pattern, but downside risks look. Buyers need to clear the 0.6500 hurdle and surpass the confluence of the 50 and 200-day moving averages (DMAs) at 0.6527/32, which formed a ‘death cross.’ If cleared, that would extend the rally to 0.6600. On the other hand, a reversal and a daily close below 0.6440, could pave the way to re-test year-to-date (YTD) lows of 0.6362.

• The Australian Monthly Consumer Price Index is foreseen steady at 3.4% YoY in March.
• Quarterly CPI inflation is expected to have ticked higher in the first quarter of the year.
• The Reserve Bank of Australia is confident the economy would dodge a hard landing.
• The Australian Dollar is correcting higher, but is still under bears’ control. 

An Australian inflation update takes the spotlight this week ahead of critical United States (US) macroeconomic data. The Australian Bureau of Statistics (ABS) will release two different inflation gauges on Wednesday. The ABS will release the quarterly Consumer Price Index (CPI) for the first quarter of 2024 and the March Monthly CPI, an annual figure that compares price pressures over the previous twelve months. Also, the quarterly report includes the Trimmed Mean Consumer Price Index, the Reserve Bank of Australia's (RBA) favorite inflation gauge. 

The RBA met on March 18-19 and decided to keep the Cash Rate steady at 4.35%. In the accompanying statement, the Board scrapped references to possible rate hikes, triggering an Australian Dollar (AUD) sell-off. The central bank will meet again on May 6-7, and CPI figures will definitely guide such a decision. 

What to expect from Australia’s inflation rate numbers?

The ABS is expected to report that the Monthly CPI rose by 3.4% in the year to March, matching the previous annual figure reported in February. The quarterly CPI is foreseen rising 0.8% QoQ and up 3.4% YoY in the three months to March. Finally, the RBA Trimmed Mean CPI, the central bank’s preferred gauge, is expected to rise by 3.8% YoY in March against the previous reading of 4.2%.

Market players built confidence in easing price pressures but have learned the lesson: rate cuts are not a priority for policymakers. Moreover, considering authorities from most major economies, Australia included, believe they can dodge a hard landing. However, officials involved in setting the monetary policy are more worried about trimming interest rates too early than about the impact of tight monetary conditions on the economy. An exception to this rule could be the Eurozone and the European Central Bank (ECB), but that’s a story for another moment. 

Back to Australian inflation, the anticipated figures would support the RBA’s decision to hold rates and slowly pave the way for a shift in monetary policy. In the Statement on Monetary Policy released after the March meeting, policymakers stated: “Inflation is falling but is still high. It is important to bring inflation down because high inflation hurts all Australians. The Board’s interest rate decision supports the gradual return of inflation to the midpoint of our 2–3 per cent target range.”

Additionally, inflation is expected to decline to 3.2% in 2024 and continue dropping towards 2.6% by mid-2026, finally reaching the central bank’s target band of 2% to 3%. Policymakers also anticipate wage growth will peak at 4.1% in mid-2024 before gradually declining to 3.2% in June 2026. Finally, economic growth is foreseen to fall from 1.5% to 1.3% in June 2024 before gradually improving towards 2.3% by the end of 2025.

How could the Consumer Price Index report affect AUD/USD?

As usual, CPI readings will have a significant impact on the Australian Dollar (AUD) as the figures will guide the RBA's upcoming monetary policy meetings. The figures would be interpreted as how they could affect the Board's decisions. With that in mind, a higher-than-anticipated outcome would force the central bank to keep interest rates at current levels for longer. Market players do not expect higher rates, but policymakers may try to cool down expectations of soon-to-come rate cuts. Generally speaking, higher interest rates tend to provide support to the local currency. On the contrary, below-expected figures could boost rate-cut expectations, undermining demand for the Aussie. 

From a wider perspective, easing inflationary pressures should be understood as better odds for economic progress and benefit the AUD in the long run. 

Ahead of the CPI release, AUD/USD trades around 0.6450, recovering from 0.6360, the year-to-date low set this April. The US Dollar (USD) has soared on the back of risk aversion triggered by Middle East woes and decreasing odds for a US Federal Reserve’s (Fed) rate cut in June. The Greenback shed some ground at the start of the week, but its undeniable strength prevails. 

Valeria Bednarik, FXStreet Chief Analyst, says: “The AUD/USD pair offers a limited bullish potential, according to technical readings in the daily chart. The latest recovery seems corrective, given that the pair is losing upward momentum well below bearish moving averages. Furthermore, technical indicators are developing below their midlines with neutral-to-bearish slopes, suggesting AUD/USD may soon resume its slide.”

Bednarik adds: “The pair is currently battling a relevant resistance area, followed by a stronger one at around the 0.6500 threshold. An advance towards the latter won’t affect the dominant bearish case but, on the contrary, provide sellers with fresh opportunities. Near-term support levels come at 0.6400 and 0.6360, while a break below the latter exposes the 0.6320 price zone.”

• The RSI of the NZD/USD on the daily chart shows a slight recovery from the buyers.
• The hourly chart presents a more positive picture, with RSI remaining above 50, signaling increasing buying momentum.

The NZD/USD trades rose to 0.5930 in Tuesday’s session, marking a slight increase with gains of 0.17%. The currency pair continues to be guided by a long-term bearish trend. However, there is an attempt to challenge this bearish supremacy by buyers, albeit modest, and hourly indicators suggest that the momentum picked up is still weak.

On the daily chart, the Relative Strength Index (RSI) reveals a slight recovery showing a reading of 43, still within the negative territory, but suggesting a recent shift in bias among traders from negative to possibly a more positive trend. The decreasing red bars of the Moving Average Convergence Divergence (MACD) also support a weakening of the selling traction and a possible shift.

NZD/USD daily chart

The hourly Relative Strength Index (RSI) presents a more upbeat picture, remaining above the 50 level, with a recent peak close to the 70 level. The latest reading stands at 57.75, providing a boost in momentum. Concurrently, the hourly Moving Average Convergence Divergence (MACD) registers decreasing green bars, indicating weak buying traction.

NZD/USD hourly chart

In terms of the broader outlook, the NZD/USD resides in a definitive bearish stance as its latest position stays below the key Simple Moving Averages (SMA), of 20, 100, and 200-days SMA. This positioning suggests that the overall trend leans heavily towards the downside. In addition, positive signals were detected on the hourly and daily chart but those signals were not decisive buying signals as the buying momentum remains weak. Buyers must increase their efforts and reclaim the 20-day SMA to start talking.

• Crude Oil gets pulled in both directions on Tuesday.
• A misfire in US PMIs spark fresh rate cut hopes.
• Risk assets get pumped higher as markets celebrate softening US economy.

West Texas Intermediate (WTI) US Crude Oil started Tuesday on the low side, falling below $81.00 per barrel before a broad-market recovery in risk appetite dragged barrel bids into a fresh high above $83.00. US Purchasing Managers Index (PMI) figures printed much softer than expected, sparking renewed hopes of a weakening US economy forcing the US Federal Reserve (Fed) to begin cutting rates sooner than previously expected.

Crude Oil markets remain exposed to downside moves as recent geopolitical tensions ease after Iran announced it would not seek further retaliation against Israel. WTI’s recent climb sparked by ongoing fears of a Middle East conflict spilling over into an all-out war faltered near $87.00 per barrel as cooler heads prevail. 

US data is set to continue driving financial markets through the rest of the trading week. US Gross Domestic Product (GDP) figures are slated for Thursday, where investors are expecting, or hoping, for US GDP for the annualized first quarter to ease to 2.5% from the previous 3.4%. On Friday, US Personal Consumption Expenditure (PCE) Price Index inflation data will be released, which is forecast to hold steady at 0.3% MoM.

WTI technical outlook

WTI crossed $83.00 per barrel after recovering from Tuesday’s bottom bids just below $81.00. The day’s late-stage rally brought US Crude Oil prices just above the 200-hour Exponential Moving Average (EMA). 

Despite Tuesday’s late rally, US Crude Oil remains knocked off of recent gains, with WTI down around 4.5% from April’s swing highs near $87.00 per barrel. On the low side, long-term technical support sits at the 200-day EMA, holding near $79.23.

WTI hourly chart

WTI daily chart

• Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar.
• XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
• Geopolitical tensions ease somewhat, impacting Gold's role as a safe-haven asset in times of turmoil.

Gold price posted modest losses late Tuesday in the North American session after reaching a high of $2,334, sponsored by a weaker-than-expected S&P Global Purchasing Managers Index (PMI) report. Buyers haven’t been able to capitalize on the Greenback weakness, while US Treasury yields dropped from the short end to the belly of the yield curve.

XAU/USD trades at $2,323, down 0.11%. The US 10-year Treasury yield stays firm at 4.402%, while the US real yields, which correlate inversely to Gold prices, drop 0.41% to 2.192%, a tailwind for the golden metal.

Geopolitical risks, despite lingering in traders' minds, calmed following Iran’s attack on Israel and the latter’s retaliation. Data from S&P Global reignited rate cut hopes among investors following last week's hawkish rhetoric implemented by Federal Reserve (Fed) officials led by Chairman Jerome Powell. One of the most dovish members of the FOMC, Chicago Fed Austan Goolsbee, echoed his comments, adding that progress on inflation has “stalled.”

Daily digest market movers: Gold remains steady, though tilted to downside following Monday's slump

• S&P Global revealed that US business activity in the manufacturing sector shrank. This month, the Manufacturing PMI dived from 51.9 to 49.9. On the other hand, the Services and Composite Index decelerated from 51.7 and 52.1 to 50.9 in both readings.
• Other data showed that New Home Sales jumped to a six-month high, according to the US Department of Commerce, while Building Permits remained in contractionary territory despite being revised up from -4.3% to -3.7%.
• US Dollar Index (DXY), which tracks the buck’s performance against a basket of six other currencies, plunges 0.44% to 105.68.
• This week, the economic docket in the United States (US) will feature the release of the Gross Domestic Product (GDP) for the first quarter of 2024. Analysts estimate that GDP grew 2.5%, down from Q4 2023’s 3.4%.
• Also, the US Bureau of Economic Analysis would reveal the preferred inflation gauge of the Fed, the March Personal Consumption Expenditure (PCE) Price Index. A softer reading than expected could prompt Gold traders to buy the yellow metal and aim to refresh all-time highs. Otherwise, a rise in prices could underpin US Treasury yields and the Greenback, a headwind for the non-yielding metal.
• The PCE is expected to edge higher, while the Core PCE is expected to decrease from 2.8% to 2.6% YoY.
• Data from the Chicago Board of Trade (CBOT) suggests that traders expect the fed funds rate to finish 2024 at 4.955%, down from Monday's 4.99%.

Technical analysis: Gold price is at risk of diving beneath $2,300

After diving on Monday and forming a “bearish engulfing” chart pattern, the Gold price hit a two-week low of $2,291. However, XAU/USD buyers push prices above the $2,300 figure, but they’re not out of the woods yet. For them to stay in charge, they must lift Gold above the $2,350 psychological level, which could pave the way to challenge $2,400.

If they surpass that level, up next would be last Friday’s high of $2,417, followed by the all-time high of $2,431.

On the other hand, if XAU/USD sellers achieve a daily close below the April 15 daily low of $2,324, that would pave the way to test $2,300. A breach of the latter will expose the March 21 high at $2,222.

• The daily chart for NZD/JPY reveals continuing bullish momentum, with indicators in positive terrain.
• The hourly indicators are correcting overbought conditions.

The NZD/JPY tallied daily gains on Tuesday’s session and rose to 91.78. The pair maintains a solid footing above all main Simple Moving Averages (SMAs), which may signal additional strength despite intra-day pull-backs seen during the American session. Indicators remain strong on the daily chart but the hourly ones are losing traction as they are correcting overbought conditions.

On the daily chart, the Relative Strength Index (RSI) for the NZD/JPY has been trending positively within the positive territory. The Moving Average Convergence Divergence (MACD) histogram also displays increasing green bars, indicating bullish momentum.

NZD/JPY daily chart

On the hourly chart, the RSI shows a reading of 68 but points south which reveals that buyers seem to be taking a breather as they hit overbought conditions earlier in the session. The hourly MACD, similar to the daily chart, also prints green bars, suggesting an ongoing upward trajectory.

NZD/JPY hourly chart

Looking at the bigger picture, the NZD/JPY remains favourably positioned above its relevant Simple Moving Average (SMA) metrics, these being the 20, 100, and 200-day time horizons. However, ahead of the Asian session the pair may see further pullbacks as indicators start to lose traction on the hourly chart. One the other hand, the daily RSI and MACD remain strong and unless the bears conquer the 20-day SMA, the outlook will remain positive.

• Pound Sterling sees broad-market recovery after Services PMI beat.
• Markets shrug off a decline in the UK Manufacturing PMI.
• Japan Tokyo CPI inflation, BoJ rate call due on Friday.

The GBP/JPY pair extended gains on Tuesday, climbing towards 192.80 after an upside beat to the UK Services Purchasing Managers Index (PMI) earlier in the session. The UK Services PMI hit an eleven-month high of 54.9 for April, reversing the forecast decline to 53.0 from the previous month’s 53.1. The Pound Sterling (GBP) is gaining ground across the board as investors shrug off a miss in the Manufacturing PMI, which declined to 48.7 versus the forecast steady print of 50.3. Services comprise over 80% of the UK domestic economy compared to manufacturing’s 9.3% total output contributions.

Focus will shift to early Friday’s Tokyo Consumer Price Index (CPI) inflation print, which is expected to hold steady at 2.6%. Japan’s Tokyo CPI inflation will be followed by the Bank of Japan’s (BoJ) latest Interest Rate Decision. The BoJ’s latest Outlook Report for the first quarter is also expected around 03:00 GMT Friday. Yen traders will be looking for BoJ Governor Kazuo Ueda’s Press Conference due sometime Friday morning.

GBP/JPY technical outlook

The GBP/JPY is approaching a familiar topside technical resistance zone between 193.00 and 192.80. The Guppy has been plagued by sideways churn in the near-term as the pair cycles familiar levels in a wide range just above the 190.00 major handle.

Daily candlesticks remain trapped in April’s range, and GBP/JPY is hobbled just below nine-year highs set in March near 194.00. Despite congestion patterns, the pair remains firmly bullish, trading well north of the 200-day Exponential Moving Average (EMA) at 184.90.

GBP/JPY hourly chart

GBP/JPY daily chart

• The daily RSI signals growing buying momentum for the EUR/JPY.
• The daily MACD also shows a strengthening buying momentum.
• On the hourly chart, the same indicators reveal signs of a more immediate buyer dominance.

The EUR/JPY rose towards 165.64 on Tuesday’s session, its highest level since 2008, showcasing clear bullish signals that point to further gains. With buyers in command, the overall landscape for the pair can be viewed as bullish.

On the daily chart, the Relative Strength Index (RSI) shows an ascending trend for the, moving deep in positive terrain. Concurrently, the Moving Average Convergence Divergence (MACD) backs this outlook as its histogram displays ascending green bars, underscoring the positive momentum.

EUR/JPY daily chart

In contrast, the insight from the hourly chart provides a slightly different perspective. While the RSI also showcases an uptrend into positive territory, the current level was higher than that of the daily chart, hinting at a more immediate upward momentum. Simultaneously, the MACD on the hourly chart strengthens the bullish bias, evident from the rising green bars.

EUR/JPY hourly chart

Observing the broader view, the EUR/JPY  stands above its 20, 100, and 200-day Simple Moving Average (SMA), suggesting a strong bullish trend both in the short and long-term perspectives. Overall, bears show no signs of recovering and as bulls capture fresh multi-year highs, there are no technical signals that threaten the clear bullish trend.

• EUR/USD gains 0.40%, breaching resistance amid disappointing US manufacturing and composite indices.
• ECB's Joachim Nagel emphasizes inflation targets before any potential rate cuts despite slowing inflation.
• Upcoming economic indicators include US Durable Goods, Q1 GDP, and Eurozone business confidence reports.

During Tuesday's North American session, the Euro appreciated against the US Dollar, up by more than 0.40%, and exchanged hands above a key resistance level. Softer than expected, US economic data weighed on the Greenback, which trades with losses against most G8 currencies. The EUR/USD trades at 1.0705 after reaching a low of 1.0638.

EUR/USD climbs to 1.0705 following worse than expected US manufacturing data

Recently, Bundesbank President and European Central Bank (ECB) member Joachim Nagel stated that the ECB must be convinced that inflation heads to its 2% goal before cutting rates. This is because most ECB policymakers have opened the door to easing policy due to the slowdown in inflation.

Aside from this, data from the United States (US), revealed by S&P Global on Tuesday, showed that business activity in the manufacturing sector shrank. The Manufacturing PMI slipped from 51.9 to 49.9 this month. On the other hand, the Services and Composite Index decelerated from 51.7 and 52.1 to 50.9, in both readings.

Other data showed that New Home Sales jumped to a six-month high, according to the US Department of Commerce, while Building Permits remained in contractionary territory despite being revised up from -4.3% to -3.7%.

In the meantime, the US economy continues to outperform its peers amid 525 basis points of rate hikes by the Fed since March 2022. Next week, the Fed will meet, and interest rates are expected to remain unchanged. Last week, the Fed parade witnessed policymakers pushing against three rate cuts, with most officials expecting just two or one.

Across the pond, Eurozone HCOB PMIs were solid, with the composite index rising from March’s 50.3 to 51.4 this month, while the services edged up from 51.5 to 52.9. the outlier was the Manufacturing PMI, slipping from 46.1 to 45.6

What should be watched ahead for EUR/USD traders?

In the US, Durable Goods Orders, the Gross Domestic Product (GDP) for Q1 2024, and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure Price Index (PCE). On the Eurozone front, Germany’s Ifo Business Climate, Italy’s Business and Consumer Confidence, followed by Germany’s GfK Consumer Confidence.

EUR/USD Price Analysis: Technical outlook

From a technical standpoint, EUR/USD traders, despite reclaiming the 1.0700 figure, further downside is seen. If buyers achieve a daily close above the latter, that could pave the way to aim toward 1.0800, capped by the confluence of the 50 and 200-day moving averages (DMAs) at 1.0806/11. Otherwise, if the major prints a close beneath 1.0700, look for a retracement to 1.0600.

Increasing appetite for the risk-linked space weighed further on the US Dollar, while disheartening US PMIs also kept the currency depressed. So far, the ECB is expected to cut rates in June, while the Fed is still seen reducing its rates in September.

Here is what you need to know on Wednesday, April 24:

Further downside pressure dragged the Greenback to multi-day lows against the backdrop of broad-based gains in risky assets. On April 24, Durable Goods Orders and weekly Mortgage Applications are due across the pond.

EUR/USD climbed to fresh highs, reclaiming at the same time the area above the 1.0700 barrier. Germany’s Business Climate, tracked by the IFO Institute, will be released on April 24.

GBP/USD surpassed the 1.2400 hurdle with certain conviction, leaving behind a three-day negative streak. The CBI Industrial Trends Orders will be the sole release in the UK on April 24.

USD/JPY rose to a new 34-year high near 154.90 amidst further range-bound trading and FX intervention speculation. The Japanese calendar will be empty on April 24.

AUD/USD picked up extra upside traction and approached the key 0.6500 zone, or multi-day peaks. The Inflation Rate and the RBA’s Monthly CPI indicator are expected in Oz on April 24.

WTI added to the auspicious start to the week and rose past the $83.00 mark per barrel amidst robust prints from European PMIs, prospects for Fed rate cuts, and extra sanctions against Iranian oil.

Gold managed to rebound from multi-day lows near $2,290 per troy ounce amidst dwindling demand for safe havens and easing geopolitical effervescence. After bottoming out at three-week lows near $26.70, Silver prices regained $27.00 and above, eventually ending the session with decent gains.

• Dow Jones tests 38,500.00 as US equities climb.
• US PMIs weakened, bolstering hopes for a Fed rate trim.
• Key US GDP and PCE inflation data still on the table for the week.

The Dow Jones Industrial Average (DJIA) climbed on Tuesday after US Purchasing Managers Index (PMI) figures softened unexpectedly, bringing broad-market hopes for an earlier-than-expected rate cut from the US Federal Reserve (Fed) back to the forefront. 

The US Manufacturing PMI slid to a four-month low of 49.9 on Tuesday, slipping back from the previous 51.9. The Services PMI also declined, falling to 50.9 from 51.7. Both PMI components were expected to tick upwards to 52.0. With a softening PMI outlook, investors will watch US Gross Domestic Product (GDP) figures slated for Thursday. 

The Fed’s favored method of gauging inflation, the Personal Consumption Expenditure (PCE) Price Index, will print on Friday to round out the trading week. Equities will look for further signs of slowing in the US domestic economy to gauge the likelihood of the Fed getting pushed into a rate cut cycle than currently expected.

US GDP is currently forecast to cool off to 2.5% for the first quarter on an annualized basis, while Friday’s Core PCE Price Index is expected to hold steady at 0.3% MoM in March.

Dow Jones news

Despite broad-market gains for US equities, the Dow Jones remains tepid compared to the other mega indexes, with the DJIA gaining around seven-tenths of a percent. Of the 30 securities that comprise the Dow Jones index, nearly a third of them remain in the red on Tuesday, with Walmart Inc. (WMT) leading the losers. WMT is down around 2.5% percent on the day, trading near $58.60 per share.

Verizon Communications Inc. (VZ) is recovering from Monday’s downside, climbing nearly 3.5% to trade near $40.00 per share. VZ is followed by American Express Co. (AXP), gaining 2.5% to trade near $238.75 per share.

Dow Jones technical outlook

The Dow Jones is testing the 38,500.00 handle on Tuesday, with the day’s early low priced in at 38,206.51. The major equity index is up nearly eight-tenths of a percent on the day.

Tuesday’s upside leaves the Dow Jones on pace to close in the green for a third straight trading day as the index climbs from a near-term swing low around 37,600.00. The index is still down from March’s highs just shy of the 40,000.00 major handle, but the index is firmly bullish in the long-term. The Dow Jones is trading well above major technical support from the 200-day Exponential Moving Average (EMA) at 36,687.91.

Dow Jones five minute chart

Dow Jones daily chart

• Mexican Peso capitalized on weaker-than-expected US economic output, uptick in risk appetite.
• Upcoming mid-month inflation data in Mexico could impact Banxico's rate decisions, with expectations leaning toward easing policy.
• The Citibanamex poll shows analysts expect Banxico to hold rates unchanged in May but could resume its easing cycle in June.

The Mexican Peso stages a comeback and rallies against the US Dollar in early trading during Tuesday’s North American session. Weaker-than-expected economic data from the United States (US) and an improvement in risk appetite kept the Greenback pressured as geopolitical woes temper. The USD/MXN trades at 16.99, clocks losses of 0.81%.

Mexico’s economic docket revealed on Monday that economic activity in February 2024 improved, though it failed to boost the Peso. Traders are expecting the release of mid-month inflation figures for April, with core inflation expected to dip further, while the headline Consumer Price Index (CPI) is foreseen remaining unchanged. If the disinflation process shows signs of evolving, that could influence the Bank of Mexico (Banxico) to continue to cut rates, which remain elevated at 11.00%.

The Citibanamex Poll released on Monday suggests that most analysts expect Banxico to keep rates unchanged at the May monetary policy meeting. The consensus expects a rate cut for the June meeting, while the median estimate calls for the main reference rate to end at 10.00%, up from 9.63% previously.

Across the border, S&P Global revealed that business activity in the US edged lower, an indication that the economy is slowing down amid higher interest rates set by the Federal Reserve.

Daily digest market movers: Mexican Peso rescued by softer US S&P PMIs

• Banxico’s 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 pressures and lower imported goods. She emphasized that Banxico would remain data-dependent.
• Mexico’s March inflation figures showed that the CPI was 4.48% and 4.69% for core YoY. On a monthly basis, the CPI was 0.27% and 0.33%, respectively.
• On Monday, the National Statistics Agency (INEGI) revealed that Economic Activity rose 1.4% MoM and 4.4% YoY in the second month of the year compared to January’s 0.9% and 1.9% increases, respectively.
• Last week, the International Monetary Fund (IMF) updated its economic growth projections for Mexico, reducing the 2024 growth forecast from 2.7% to 2.4% and the 2025 forecast from 1.5% to 1.4%.
• S&P Global revealed that the US Manufacturing PMI was 49.9, below the estimates of 52, while the Services index stood at 50.9, down from the 52 expected. Therefore, the Composite PMI was down from 52.1 to 50.9.
• Market participants had priced out an interest rate cut by the Fed in June and July, sparked by hawkish comments expressed by Fed officials last week.
• Data from the Chicago Board of Trade (CBOT) suggests that traders expect fed funds rate to finish 2024 at 4.965%, down from 4.985% on Monday.

Technical analysis: Mexican Peso counterattacks as USD/MXN tumbles below 200-day SMA

The Mexican Peso regained its previous strength as shown by the USD/MXN edging below the 200-day Simple Moving Average (SMA) at 17.16, opening the door to challenge the 17.00 figure. If sellers push the exchange rate below the latter, they could test the 100-day SMA at 16.96. A breach of the latter will expose the 50-day SMA at 16.81.

On the other hand, buyers need to conquer the 200-day SMA at 17.16. Once surpassed, the next resistance level would be the January 23 high at 17.38, followed by December 5’s 17.56 and the 18.00 figure.

USD/MXN Price  Action – Daily Chart

• Canadian Dollar finds room against softer Greenback post-PMI.
• Canada Retail Sales due Wednesday ahead of Thursday’s US GDP.
• Despite PMI gains, CAD upside remains limited as Crude Oil softens further.

The Canadian Dollar (CAD) stepped higher against the US Dollar (USD) after US Purchasing Managers Index (PMI) figures came in softer than expected. Easing US economic activity figures are feeding into market hopes that the US domestic economy will soften enough to encourage the US Federal Reserve (Fed) to move sooner on rate cuts.

Canada releases its latest Retail Sales figures on Wednesday, but the broader market focus will be on the US Gross Domestic Product (GDP) figures due on Thursday. The US Personal Consumption Expenditure (PCE) Price Index will print on Friday. 

Daily digest market movers: Canadian Dollar steps up on softer Greenback

• US PMIs softened unexpectedly on Tuesday. The S&P Global Manufacturing PMI came in at 49.9, dropping below the 50.0 level for the first time in four months.
• The Services PMI component also shed weight, printing at 50.9 versus the previous 51.7.
• Despite a weaker US Dollar, the Canadian Dollar is mixed against the broader major currency boards as declining Crude Oil prices hobble the CAD’s stance.
• Wednesday’s Canadian Retail Sales for February are expected to recover to 0.1% from the previous month’s -0.3%.
• Canadian Retail Sales Excluding Automobiles are expected to hold flat at 0.0% compared to January’s 0.5%.
• US annualized quarterly GDP on Thursday is forecast to tick down to 2.5% from the previous 3.4%.
• Friday’s US Core PCE Price Index for March is expected to hold steady at 0.3%.
• According to the CME’s FedWatch Tool, rate markets are pricing in a 70% chance of at least a 25 basis point rate cut from the Fed in September.

Canadian Dollar technical analysis: CAD poised for further gains, but heavy support zone looms

The Canadian Dollar was mixed on Tuesday. It gained around a fifth of a percent against the US Dollar and the Japanese Yen (JPY). On the downside, it has shed half a percent against the Pound Sterling (GBP).

The USD/CAD shed the 1.3700 handle as the Greenback backslides against the Canadian Dollar. The pair hit an intraday support zone near 1.3660, and further down is approaching a significant demand zone near 1.3600. With Tuesday’s downside momentum, the pair is on pace to close in the red for a fifth consecutive trading day.

Major support is currently priced at the 200-day Exponential Moving Average (EMA) just north of the 1.3500 handle. A resurgence of US Dollar buying could drag the USD/CAD back up to the last swing high near 1.3850.

USD/CAD hourly chart

USD/CAD daily chart

• US S&P PMI figures from April came in softer than expected and made markets dump the USD.
• Hawkish bets and high US Treasury yields may limit the downside for the USD.
• All eyes are set on PCE and GDP data on Thursday and Friday. 

The US Dollar Index (DXY) is trading softly at 105.70 tallying daily losses on Tuesday's session. The Federal Reserve (Fed) has been sending a consistently hawkish message, which might limit the Greenback’s losses as markets delay the start of the easing cycle. Investors are also keeping an eye on vital economic reports due this week, including the preliminary figures of Q1’s Gross Domestic Product (GDP) Growth Rate and the Personal Consumption Expenditures (PCE) Price Index from March to gain further insight into the economy's health. During Tuesday’s session, S&P PMIs came in lower than expected and made the USD face selling pressure.

Despite the weak PMIs, the US economy exhibits overall resilience. The Fed's stance leans hawkish, manifesting itself in reduced odds of rate cuts in the near future and not until September. PCE and GDP data later this week will likely fuel volatility in markets as they will continue shaping the expectation on the next Fed decisions.

Daily digest market movers: DXY declines following weak April S&P PMIs, hawkish bets on Fed

• The S&P Global Composite Purchasing Managers Index (PMI) fell to 50.9 in April's flash estimate, indicating slower private sector growth in the US from March's 52.1.
• The S&P Global Manufacturing PMI demonstrated a more noticeable drop from March's 51.9 to 49.9 in April, suggesting a contraction in US manufacturing sector activity.
• Similarly, April's S&P Global Services PMI decreased from 51.7 to 50.9.
• Following the consistent hawkish stance from the Federal Reserve (Fed) on US monetary policy, the first rate cut was pushed to September, but it isn't fully priced in.
• US Treasury bond yields are dwindling with the 2-year yield at 4.93%, 5-year yield at 4.61%, and 10-year yield at 4.58%. 

DXY technical analysis: DXY displays a declining momentum, overall bullish outlook holds

The indicators on the daily chart reflect contrasting outlooks. The Relative Strength Index (RSI) is on a negative slope albeit in positive territory, indicating a possible slowdown in buying momentum as the indicator slopes downwards. However, it is crucial not to overlook that it still remains in the bulls' region, suggesting some continued bullish strength.  Simultaneously, the Moving Average Convergence Divergence (MACD) shows decreasing green bars, also indicating a loss of bullish momentum as the magnitude of buyers seems to be dipping. This is a warning bell for the bulls, suggesting that they might be gradually losing ground.

Regarding the Simple Moving Averages (SMAs), they manifest a more bullish image. Despite a negative short-term outlook, the DXY is above the 20, 100, and 200-day SMAs, signifying a more positive medium to long-term perspective. It suggests that bulls still retain control in the larger picture, providing hope for a potential recovery of bullish momentum.

• GBP/USD surges over 0.65% following disappointing US economic figures.
• Technical analysis indicates a potential upward movement if GBP/USD sustains a close near 1.2440, completing a 'morning star' pattern.
• Key resistances are ahead at 1.2500 and the 200-day moving average at 1.2565; downside risks persist below 1.2400.

The Pound Sterling rallied early in the North American session, gaining more than 0.65% against the US Dollar after softer-than-expected data from the United States (US), which could spur the Federal Reserve to begin to ease policy faster than expected. The GBP/USD trades at 1.2434, after bouncing off lows hit at 1.2331.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD is still downward biased, as key resistance levels remain respected by price action. However, if the major achieves a daily close around the 1.2440 area, that will complete a ‘morning star’ candlestick chart pattern, suggesting the pair could aim higher.

In that event, the GBP/USD first resistance would be the 1.2500 psychological level. Once broken, further gains are seen, with the 200-day moving average (DMA) up next at 1.2565, ahead of 1.2600. Key resistance levels emerge at the 50-DMA at 1.2628 and the 100-DMA at 1.2649.

On the flip side, further losses are seen if the pair drops below 1.2400. A breach of the latter would pave the way to challenge the year-to-date (YTD) low of 1.2299.

GBP/USD Price Action – Daily Chart

• USD/CHF faces pressure above 0.9100 as US Dollar drops after weak S&P Global PMI data for April.
• The preliminary Manufacturing PMI falls below the 50.0 threshold.
• The Fed advocates for keeping interest rates at their current levels longer.

The USD/CHF pair faces a sell-off above the round-level support of 0.9100 in Tuesday’s early American session. The Swiss Franc asset falls as the US Dollar Index (DXY) drops to 105.80 after the S&P Global reported weak preliminary PMI data for April.

The agency reported that both Manufacturing and Services PMI missed expectations. The Manufacturing PMI slips below the 50.0 threshold that separates expansion from contraction. The factory data lands at 49.9 lower than the expectations of 52.0 and the prior reading of 51.9. The Services PMI drops to 50.9 from the consensus of 52.0 and the former reading of 51.7.

Going forward, investors will shift focus to the United States core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday.

The core PCE Price Index data is the Federal Reserve’s (Fed) preferred inflation measure. It is estimated to have grown steadily by 0.3% on a month-on-month basis, with annual inflation softening to 2.6% from 2.8% recorded in February. This will influence market expectations of Fed rate cuts, which are currently anticipated in the September meeting.

10-year US Treasury yields rise further to 4.64% as the Fed continues to argue that the current monetary policy framework is appropriate as stubbornly higher inflation in the first quarter of this year cannot be ignored.

The formation of the USD/CHF pair on a four-hour timeframe appears to be a Rising Wedge chart pattern, which indicates a limited upside and is generally followed by a breakdown move. The 20-period Exponential Moving Average (EMA) at 0.9100 glued with the Swiss Franc asset, suggesting indecisiveness among market participants.

The 14-period Relative Strength Index (RSI) shifts to the 40.00-60.00 range, indicating a consolidation ahead.

Fresh downside would appear if the asset breaks below the psychological support of 0.9000, which will expose it to March 22 low at 0.8966, followed by March 1 high at 0.8893.

In an alternate scenario, an upside move above April high of 0.9150 will drive the asset towards the round-level support of 0.9200. A breach of the latter will push the asset further to 4 October 2023 high at 0.9232.

USD/CHF four-hour chart

• Silver price is declining after touching the top of a four-year consolidation range at roughly $30.00. 
• XAG/USD has fallen to $27.00 and could decline further with support not materializing till $26.00. 

Silver (XAG/USD) price has continued to sell-off after being rejected by the top of a long-term range at just below $30.00 (green line) on April 12.

The precious metal is now in the midst of a steep decline and will probably continue lower till support materializes from the top of a smaller year-long range at $26.00.

Silver Daily Chart

The Moving Average Convergence/Divergence (MACD) momentum indicator has crossed below its signal line, indicating Silver has probably reversed its medium-term trend and is set to move even lower. The signal is improved by the fact that MACD is a more reliable indicator in markets that are not strongly trending such as that of Silver. 

Silver price will probably fall to support from the former range highs at $26.00. At that level it could base and recover. A decisive break below $26.00 would return Silver to inside its year-long range and possibly the lower trendline at roughly $23.00. 

Only a decisive break above the 2021 high of $30.07, however, would reverse the bearish picture and suggest Silver was going higher. Such a move would also signal a breakout from the whole four-year consolidation with an initial target at $32.40 where former resistance lies. 

• AUD/USD is showing technical bullish reversal signs. 
• The question is, are they enough to indicate a chance of a reversal of the trend?
• Daily, 4-hour and Weekly charts are analyzed to weigh up the evidence. 

“The trend is your friend,” traders like to say, and AUD/USD is in a downtrend overall. 

At the same time it is showing some early technical signs – here and there – that point to a possible bullish reversal. 

What are these signs and are they enough to suggest a reversal of the trend and the birth of a new bull trend in AUD/USD?

Early bullish clues?

The bullish signs are particularly clear on the short and intermediate term charts – or the 4-hour and daily timeframes. 

The AUD/USD daily chart below, used to analyze the intermediate-term trend, is showing a bullish Dragonfly Doji candlestick reversal pattern (circled) at the recent Friday April 19 lows. This was followed by a green up day on Monday, which provides added bullish confirmation. 

The inference from these candlesticks is that AUD/USD is undergoing a reversal, albeit one of short duration. 

AUD/USD Daily Chart

Also on the daily chart, the Moving Average Convergence/Divergence is converging slightly with price when comparing the February 13 low with the April 19 low. Although price is drastically lower in April, the MACD is actually slightly higher when compared to the MACD in February, suggesting a lack of bearish momentum underpins the most recent sell-off. This is sometimes an early warning sign a bear trend is ending. 

Bearish counter-arguments

There are no other signs the intermediate trend is reversing. Price is still under the three major moving averages – the 50-day, 100-day and 200-day Simple Moving Averages (SMA), which is a bearish sign. 

Nor has it broken above the April 11 high at 0.6563, the last lower high of the downtrend on the daily chart, a further requirement to be confident the trend was reversing.  

Additionally, although the sell-off in April lacks momentum it is very steep, and this steepness probably indicates more downside before the downtrend ends. 

Analyzing the short-term trend

AUD/USD’s 4-hour chart which is used to assess the short-term trend, is also showing some bullish reversal insignia, though still nothing definitive.  

AUD/USD 4-hour Chart 

The pair has risen above the last lower high of the downtrend at 0.6452 and has broken above the 50-4hr SMA. These are both quite bullish signs. 

In addition, the accompanying MACD, during the recovery from the April 19 lows, has been strongly bullish, rising more quickly than it fell over a similar timespan. This shows bullish enthusiasm and potentially institutional buyers could be participating. 

MACD has also crept above the zero line on Tuesday, adding more bullish evidence to the argument. 

AUD/USD Weekly Chart

Finally we look at the weekly chart to assess the long-term trend. This is the least-bullish looking chart of the three. 

AUD/USD looks like it has probably formed a bearish three-wave Measured Move pattern, with waves A, B and C shown labeled. If so, the pair looks to be in the middle of unfolding its C-wave. Once C is complete, price is likely to undergo a reversal or, at least, a correction.

Wave C is normally equal to the length of wave A or more conservatively a Fibonacci 0.618 ratio of A. If the latter is the case, wave C may have already completed. This would add weight to the bullish reversal thesis. 

If not, wave C probably has further to fall. Going by the patterning on the chart this looks more likely to be the case and continues to tip the balance in favor of the bearish case overall. 

"Before cutting interest rates, we must be convinced based on data that inflation will actually reach our target in a timely and sustained manner," European Central Bank (ECB) policymaker and Bundesbank Chief Joachim Nagel said on Tuesday.

"If the favourable inflation outlook from March is confirmed in the June projections and incoming data supports this outlook, we can consider a rate cut," Nagel further elaborated.

Market reaction

EUR/USD showed no immediate reaction to these comments and was last seen trading modestly higher on the day near 1.0670.

• NZD/USD falls to 0.5900 even though the US Dollar remains sideways.
• Investors await the US core PCE Price Index that will influence speculation for Fed rate cuts.
• NZD/USD consolidates in a 0.5850-0.5933 range for almost a week.

The NZD/USD pair drops to near the crucial support of 0.5900 in Tuesday’s European session while attempting to break above the immediate resistance of 0.5930. A sideways performance is anticipated from the Kiwi asset as investors await the United States core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday.

The inflation data will be keenly watched as it will provide cues about when the Federal Reserve (Fed) could start reducing interest rates. The inflation data will influence the Fed’s guidance on interest rates, which will be provided in next week’s monetary policy meeting in which key borrowing rates are widely expected to remain unchanged in the range of 5.25%-5.50%.

Market sentiment remains cheerful as investors expect that conflicts between Iran and Israel will not widen further. S&P 500 futures have posted significant gains in the London session, portraying higher investors’ risk-appetite. 10-year US Treasury yields hovers near 4.63% with eyes on US core PCE inflation data, which is expected to have grown steadily by 0.3% on a month-on-month basis.

The New Zealand Dollar drops despite improved appeal for risk-sensitive assets. Meanwhile, expectations for the Reserve Bank of New Zealand (RBNZ) reducing interest rates later in November remain firm. The speculation for the RBNZ pivoting interest rate cuts postponed for later this year after the Q1 Consumer Price Index (CPI) grew expectedly by 0.6%.

The NZD/USD pair has moved back and forth between 0.5850 and 0.5933 over the past week, suggesting a sharp volatility contraction. The 20-period Exponential Moving Average (EMA) at 0.5910 remains stuck to spot prices and exhibits indecisiveness among market participants.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a consolidation ahead.

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

On the flip side, a recovery move above March 18 high at 0.6100 will drive the pair toward March 12 low at 0.6135. A breach of the latter will drive the asset further to February 9 high around 0.6160.

NZD/USD four-hour chart

"The combination of little news and the passage of time have brought a bank rate cut somewhat closer," Bank of England (BoE) Chief Economist Huw Pill said on Tuesday and added: "The lack of news gives me no reason to depart from my baseline that the time for cutting bank rate remained some way off."

Key takeaways

"Caution against expectations that the Bernanke report will lead to a rapid change in how UK monetary policy is presented."

"How, when, I would vote for a bank rate cut depend crucially on how such a decision transmits to inflation, in particular along the money market yield curve."

"A cut in bank rate would not entirely undo the restrictive stance of policy."

"MPC currently needs to maintain restrictiveness in its monetary policy stance."

Market reaction

GBP/USD edged higher following these comments and was last seen rising 0.3% on the day at 1.2387.

Analysts at Rabobank share their outlook for USD/JPY ahead of the Bank of Japan's (BoJ) policy meeting later in the week.

Market will watch out for signs of any change in BoJ’s bond buying programme

"It is our house view that the Fed is likely to kick off its rate cutting cycle in September. If US economic data support this view, the USD could start to edge lower in the summer which would likely allow the JPY to find some purchase against the USD. In the meantime, the MoF will be hoping for an improvement in Japanese economic data to keep the JPY bears at bay."

"An upward revision to the BoJ’s CPI inflation forecast at this week’s policy meeting may afford a little protection to the JPY, though this would have more impact if policy-makers assess that domestically driven price pressures have risen."

"In addition to its policy rates, the market will also be watching out for signs of any change in the BoJ’s bond buying programme. If the BoJ is judged by the market as lacking any hawkish signals, downside pressure in the JPY would likely increase suggesting more pressure on the MoF to put its money where its mouth is. Our 3 month USD/JPY 148 forecast assumes that the Fed will be laying the groundwork for a September rate cut during the summer."

• USD/JPY rises to another multi-decade high amidst enthusiasm for the US Dollar. 
• US economic exceptionalism and a massive US Treasury bond sale are fueling USD buying. 
• Japanese Finmin verbal intervention warning is ignored by USD/JPY.  

USD/JPY pulls back a touch after making a new high for April – and the last 34 years – at 154.86 on Tuesday, as the US Dollar (USD) returns to favor amid continued optimism regarding the US economy. 

USD/JPY bulls deaf to Suzuki warning  

USD/JPY rallies despite Japanese Finance Minister Shunichi Suzuki warning the authorities might directly intervene to prop up the Japanese Yen (JPY) on Tuesday. Suzuki said that “the environment” is ripe for currency intervention. In addition, USD/JPY is now well above the historic intervention zone, seen as 150.00-152.00. 

Last week US Treasury Secretary Janet Yellen met with the Finance Ministers of Japan and South Korea and tacitly agreed to allow them to prop up their currencies if necessary, according to Bloomberg News.  

The slight uptick in Japanese preliminary Purchasing Manager Index (PMI) data for April, released on Tuesday, only temporarily slowed USD/JPY’s relentless climb.  

Traders now look to US S&P Global PMIs out at 13.45 GMT, for more information regarding the progress of the US economy. A higher-than-expected result will reinforce the US’s reputation for economic exceptionalism and continue USD/JPY’s uptrend. 

Massive US Treasury bond sale may underpin USD/JPY

The US government is auctioning $180 billion worth of Treasury Notes this week as the US government issues more debt. $180B is a very large amount in such a short space of time – equivalent to a quarterly allocation normally – according to Mark Cranfield of Bloomberg MLIV. 

In addition, the largest ever auction of 2-year US Treasury Notes is taking place on Tuesday. The auctions are likely to lead to higher US Treasury yields and given increased demand from foreign bond buyers, USD buying which could have a bullish impact on USD/JPY, says Cranfield. 

USD/JPY traders prepare for Friday’s BoJ meeting

Bank of Japan (BOJ) Governor Kazuo Ueda noted it was “appropriate to keep easy monetary conditions for now as underlying inflation is still below 2.0%”. Ueda cautioned “If the price trend rises toward 2.0% in line with our outlook…it will mean raising the short-term interest rate,” according to a note by private investment bank Brown Brothers Harriman (BBH).

The Bank of Japan’s (BoJ) April policy meeting takes place on Friday. It is unlikely the BoJ will increase interest rates at the meeting but there is a chance it may reduce Japanese Government Bonds (JGB), which would be viewed as hawkish, JPY positive, and bearish for USD/JPY.  

If the BoJ delivers a hawkish hold on Friday it is unlikely the Japanese authorities will intervene to prop up the Yen, according to BBH. 

“The BOJ is widely expected to keep the policy rate target at 0 to 0.10%. However, the BOJ may raise slightly its 2024 core inflation projections implying greater room to tighten policy. Indeed, Japan’s April Jibun Bank Flash Composite PMI shows private sector growth quickening at the fastest pace in eight months and price pressures intensifying,” says BBH. 

Data on the horizon

US data could further impact USD/JPY volatility during the week, with GDP on Thursday and Core Personal Consumptions – Price Index data on Friday. 

In Japan, the Statistics Bureau of Japan will release the Tokyo Consumer Price Index just hours before Friday’s BoJ meeting. 

• Gold price slips below $2,300 as fears of widening Middle East conflict wane.
• The US Dollar’s appeal improves on a strong US economic outlook.
• The Fed supports keeping interest rates higher until there is confidence that inflation will return to 2%.

Gold price (XAU/USD) extends its downside for a second consecutive day, trading slightly below the crucial support of $2,300 in Tuesday’s European session. The precious metal shifts into bearish territory as investors shrug off Middle East fears amid hopes that the conflict between Iran and Israel will not escalate further. This has improved investors’  risk appetite while safe-haven demand has waned.

The outlook of Gold turns vulnerable as an improved appeal for the US Dollar negatively impacts the dollar-denominated commodity. Investment banking firm Goldman Sachs said: “As we move into the second quarter, ongoing upgrades to already-robust US growth forecasts give the FOMC the luxury of a later and more gradual policy adjustment.” The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, hovers near 106.00.

Meanwhile, 10-year US Treasury yields trade sideways around 4.62% as the focus shifts to the US core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday. The inflation data will provide cues about the Federal Reserve’s (Fed) guidance on interest rates in the May policy meeting, in which policymakers are widely anticipated to keep them unchanged in the range of 5.25%-5.50%. The Fed’s preference for keeping interest rates higher bodes well for the US bond yields and weighs on Gold.

Daily digest market movers: Gold price weakens while US bond yields consolidate

• Gold price dips below the crucial support of $2,300 as safe-haven demand has melted amid easing Middle East tensions. The limited retaliatory attack from Israel on Isfahan against the hundreds of missiles and drones launched in their state on April 13 as well as Iran’s no plan for an immediate response indicate that both nations aren’t interested in widening the conflict.
• Apart from that, recent hawkish guidance from Federal Reserve policymakers on interest rates has also weighed on Gold. Fed policymakers see the current monetary policy framework as appropriate given that inflation has remained stubbornly higher in the first three months of this year and labor demand remains robust.
• Fed policymakers are expected to keep interest rates at their current levels until they get confidence that inflation will come down to the 2% target. Currently, traders expect that the Fed will start reducing interest rates from the September meeting. This week, investors will focus on the US core PCE Price Index data, which will influence expectations for Fed rate cuts.
• The monthly core PCE is estimated to have grown steadily by 0.3%, with annual figures decelerating to 2.6% from 2.8% in February. The core PCE is the Fed’s preferred inflation measure as it excludes volatile food and energy prices. Softer-than-expected US inflation numbers would increase expectations of early rate cuts by the Fed, which will help Gold gauge a firm footing. On the contrary, sticky or hotter-than-expected figures will likely weigh on Gold prices.
• Before the US core PCE inflation data, investors will focus on the preliminary Q1 Gross Domestic Product (GDP), which exhibits the performance of the US economy in the period. The economy is anticipated to have expanded at an annualised pace of 2.5%, slower than the 3.4% increase noted in the last quarter of 2023.

Technical Analysis: Gold price tests territory below $2,300

Gold price faces an intense sell-off after a breakdown of the Symmetrical Triangle formation on the hourly time frame. The precious metal slips below $2,300 as a downside break of the above-mentioned pattern explodes the volatility, resulting in wider ticks on the downside and heavy selling volume.

The 20-period Exponential Moving Average (EMA) at $2,317 is acting as a major barricade for the Gold price bulls. The 14-period Relative Strength Index (RSI) has delivered a range shift move from the 40.00-60.00 territory to the 20.00-40.00 region, indicating that a bearish momentum has been triggered.

Analysts at BBH share their near-term outlook for the US Dollar.

Dollar rally should continue

"The dollar is trading flat ahead of a record 2-year note auction.  DXY is trading flat near 106.087 but remains on track to test the November 1 high near 107.113."

"The dollar rally should continue as data confirm persistent inflation and robust growth in the US  This backdrop along with upcoming heavy UST supply should keep upward pressure on US yields, which would be positive for the dollar.  We believe that while market easing expectations have adjusted violently this month, there is still room to go.  When the market finally capitulates on the Fed, the dollar should gain further."

"US yields remain elevated ahead of heavy supply.  The 2-year yield is trading at 4.99% and on track to test the October high near 5.26%, while the 10-year yield is trading near 4.61% and on track to test the October high near 5.02%.  Heavy supply could help push yields higher.  Treasury auctions a total of $183 bln in 2-, 5-, and 7-year notes this week.  The first leg is today with $69 bln of 2-year notes to be auctioned.  Bid/cover ratio was 2.62 at the previous auction, while indirect bidders took 65.8%. The auctions continue tomorrow with $70 bln of 5-year notes and end Thursday with $44 bln of 7-year notes." 

• Oil jumps in the green with a double headline in favor of a Crude uptick.
• WTI Oil snaps above $82 after testing the pivotal level around $80.63 on Monday.
• The US Dollar Index ticked below 106.00 after strong Services PMIs from France, Germany and the Eurozone.

Oil prices are recovering from a small dip on Monday, which saw Crude falling towards a key pivotal level on the daily chart. The uptick on Tuesday comes on the back of US sanctions against Iran being set to become law by next week, ratcheting up tensions again. The second supportive element comes from a setback in talks between Iraq and Turkey on resuming Oil flows from Iraq’s Kurdistan fields, needing more talks to get the pipeline operational again after being closed for more than a year. 

The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, faces a retracement and dips below 106.00 on Tuesday. Its biggest contributor, the Euro, which accounts for 57.6% of the basket, goes against the Greenback. The Euro jumped higher after surprise beats for both France,  Germany and the Eurozone’s Services Purchasing Managers Index (PMI) data for April. Although the manufacturing sector is still in contraction, markets ignored that fact and sent the Euro higher on the back of the Services strong figures.

Crude Oil (WTI) trades at $82.27 and Brent Crude at $86.73 at the time of writing.

Oil news and market movers: Iraq Oil flow back in play

• The reopening of the Iraq-Turkey oil pipeline would add 500,000 barrels per day to the market. Turkey has already signalled that it is open and ready to receive flow after it had to halt the pipeline output due to earthquakes in February 2023, Bloomberg reported. 
• Iran sanctions are expected to have a muted impact on Oil prices, according to Jim Lucier from Capital Alpha Partners. Lucier pointed out that US President Joe Biden will not want to risk another increase in Oil prices, which could trigger another surge in inflation and might risk his reelection possibilities in the upcoming US elections in November. 
• At 20:30 GMT, the American Petroleum Institute (API) is set to release the weekly Crude Stockpile Changes for the week ending April 19, which is expected to rise by 1.8 million from a build of 4.09 million barrels seen the week before. 

Oil Technical Analysis: Bounce higher

Oil prices are in the green on Tuesday as markets trade at a solid equilibrium after tensions eased in the Middle East. However, the current price action remains fragile with US sanctions set to come in effect next week. Although they might not target Iranian Oil, they could trigger a redirection from Iran’s Oil towards other clients and away from the US and Europe. The Middle East remains thus at risk,  requiring a lingering premium to remain in the price action for Oil for quite some time. 

With geopolitical tensions lingering, the November 3 high at $83.34 and the $90 handle should remain as resistance 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, and a fresh 18-month high could be on the cards. 

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 US Dollar eases as the Euro’s recovery weighs on the Greenback. 
• Surprisingly upbeat PMI data from France, Germany and the Eurozone trigger substantial strength in the Euro.
• The US Dollar Index eases and snaps below 106.00. 

The US Dollar (USD)  eases on  Tuesday as the Euro rallies across the board. The move came on the back of a triple whammy in Eurozone data, with the preliminary Services component in the Purchasing Managers Index (PMI) for Germany, France and the Eurozone beating estimates and even climbing above 50, which means that the sector is no longer in contraction. This positive news for the Eurozone triggered an ample amount of Euro-strength and dragged the Dollar Index (DXY) lower, as the Euro conforms to 57.6% of the basket’s weight. 

On the economic data front, the S&P Global Purchasing Managers Index (PMI) data for the US will be released on Tuesday, which will likely be another market-moving event for the Greenback. Traders will want to see if this US Dollar exceptionalism, mainly driven by the strength of the US economy, is still ongoing and is not yet slowing down. 

Daily digest market movers: Here comes the volatility

• Preliminary French HCOB Services PMI picked up to 50.5 in April from 48.3. German HCOB Services PMI soared to 53.3 in the same month from 50.1 in March. This pushed EUR/USD up to 1.0695, despite all other segments in the PMI lagging or being still in contraction in both France and Germany. 
• Eurozone data showed that HCOB Services PMI rose to 52.9 in April from 51.5 in March, well above the expected increase to 51.8.
• The weekly US Redbook Index for the week ending April 19 is set to be released at 12:55 GMT. The previous number was 4.9% for the week ending April 12. 
• At 13:45 GMT, some fireworks are expected from the US preliminary S&P Global PMI data:
  • The Services component is expected to head to 52 in April from 51.7.
  • The Manufacturing number is expected to tick up to 52 from 51.9 in March.
  • The Composite Index was at 52.1 in March, with no forecast available for the current month.
• At 14:00 GMT, New Home Sales are expected to rise to 0.668 million in March from 0.662 million in February.
• In addition to the Home Sales data, the Richmond US Federal Reserve (Fed) Manufacturing Index for April will be released as well. Expectations are for a small increase to -7 from -11.
• The US Treasury is allocating new bonds in the market at 17:00 GMT. This one will bear a 2-year maturity. 
• In the commodity space, both Oil and Gas futures are falling as tensions in the Middle East ease.
• Equity markets are in the green, though mildly. An outlier needs to be reported:  the Hong Kong Hang Seng is down 0.70%. 
• According to the CME Group’s FedWatch Tool, expectations are further cementing that the Fed will keep its monetary policy unchanged in June, with a small 15% chance for an interest rate cut in that meeting. An initial interest rate cut from the Fed is now foreseen for September. 
• The benchmark 10-year US Treasury Note trades around 4.62%, a touch softer for this week. 

US Dollar Index Technical Analysis: Dollar exceptionalism to get confirmed

The US Dollar Index (DXY) is facing some retreat due to renewed Euro strength. The Euro accounts for 57.6% of the DXY Index composition and is thus the main driver for the index’s moves. With the US PMI data being released later in the day, markets will be able to compare the European against the American performance. Positive data could drive the US Dollar stronger and send the DXY Index back above 106.00 as traders could reassure the US is still outperforming the Eurozone. 

On the upside, the high of April 16 at 106.52 is the level to beat. 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, the first important level is 105.88, a pivotal level since March 2023 (acting as a resistance at that moment and working as a support in November). Further down, 105.12 and 104.60 should also act as support ahead of the 55-day and the 200-day Simple Moving Averages (SMAs) at 104.17 and 103.91, respectively.

• The Mexican Peso trades mixed as global Purchasing Manager Indices (PMI) for April are released. 
• Mexican Economic Activity data failed to inject much volatility into the Peso on Monday. 
• The short-term uptrend looks vulnerable to breakdown. 

The Mexican Peso (MXN) is trading mixed on Tuesday after plummeting temporarily at the end of last week, but then reverting to mean after fears of an escalation in the conflict in the Middle East abated. 

Mexican Peso shrugs off macro data

The Mexican Peso did not gain much traction on Monday despite the release of better-than-expected macroeconomic data for February. Economic Activity rose 1.4% MoM and 4.4% YoY in the second month of the year compared to January’s 0.9% and 1.9% increases, respectively, according to data from the Instituto Nacional de Estadistica, Geografia e Informatica (INEGI). 

Other news relevant to MXN included comments from Banxico Governor Victoria Rodriguez Ceja, who said that services inflation is not showing a clear downward trend. 

Rodriguez Ceja added that the Mexican Peso’s strength has, at times, helped contain inflation by lowering the cost of imported goods. 

Her comments reinforce the view that the central bank will be data dependent in its approach to monetary policy going forward. 

In March, Banxico cut interest rates by 0.25% for the first time in three years after inflation showed progress lower. The minutes of the meeting, however, showed a lack of conviction about whether inflation had fallen in a sustainable fashion. This suggested another cut at their next meeting in May is not guaranteed.

Mexican mid-month inflation data for April, out on Wednesday, could adjust expectations for the Banxico’s policy approach going forward. 

Mid-month inflation in March stood at 4.48% for headline and 4.69% for core YoY, and 0.27% and 0.33%, respectively, on a monthly basis. 

A higher-than-previous result is likely to further lower the probability of the central bank following up the March rate cut with another cut in the near term, and vice versa for a lower-than-previous result. 

Interest rates are a major driver of Forex markets. Higher interest rates appreciate a currency by attracting more inflows of foreign capital and the opposite for lower interest rates. 

Tuesday also sees the release of key global macroeconomic data in the form of April Purchasing Manager Indices (PMI) for most major economies (although Mexico’s PMIs are not scheduled for release until May 2). 

Eurozone PMIs have already been released and showed mixed results, with gains in Services but a deeper-than-forecast decline in Manufacturing PMI.

S&P Global PMIs for the US are scheduled for release at 13:45 GMT and could inject volatility into markets, especially for the most heavily traded MXN pair the USD/MXN.   

Technical Analysis: USD/MXN short-term uptrend vulnerable

USD/MXN continues to trade below a major trendline for the long-term downtrend, despite briefly breaking above the line last week during the highly volatile reaction to the Israel-Iran conflict.  

The brief piercing of the trendline and spike higher reversed the short-term and intermediate-term downtrends but not the longer-term trend, which remains bearish.  

USD/MXN 4-hour Chart 

A closer look at the 4-hour chart shows that the new short-term uptrend is vulnerable. A break below Monday’s 17.01 swing low would bring the short-term uptrend into doubt. 

The Moving Average Convergence/Divergence (MACD) has crossed its signal line, giving a sell signal and is falling in line with price, overall painting a bearish picture.  

If a pullback persists, support from the 100-day SMA at 16.96 followed by the 50-day SMA at 16.82 is likely to provide a foothold for the backsliding price. 

A decisive break above the trendline at roughly 17.45 would provide bullish reconfirmation and activate an upside target at roughly 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.

Bank of England (BoE) policymaker Jonathan Haskel said on Tuesday that the “persistence of inflation will be influenced by labor market tightness.”

“UK labor market tightness has been falling rather slowly,” Haskel added.

Market reaction

GBP/USD defends gains near 1.2360 after the BoE commentary, up 0.10% on the day, as of writing.

• EUR/JPY received support after the release of moderate German PMI data on Tuesday.
• ECB Vice President Luis de Guindos announced that the central bank intends to reduce interest rates in June.
• The Japanese Yen faces obstacles as the BoJ indicated no rush to implement monetary policy measures.

EUR/JPY cross extends its winning streak for the third successive session, hovering around 165.20 during the European trading hours on Tuesday. The Euro gains ground on mixed Purchasing Managers Index (PMI) data from Germany and the Eurozone released on Tuesday.

In April, the initial Eurozone Manufacturing PMI dipped to 45.6, falling short of expectations for an increase to 46.5 from the previous 46.1. However, the Services PMI exhibited strength, reaching 52.9, surpassing the estimated 51.8 and the prior 51.5. The Composite PMI for April showed improvement with a reading of 51.4, exceeding both the previous 50.3 and the anticipated 50.8.

Earlier on Tuesday, the Euro advanced after the release of mixed German PMI data. April's preliminary German Manufacturing PMI rose to 42.2, slightly below the expected 42.8 but up from March's 41.9, marking a two-month high. Services PMI also saw significant improvement, reaching 53.3, surpassing the market's expectation of 50.6 and reaching a fresh ten-month high.

The Japanese Yen (JPY) is encountering hurdles stemming from the widening yield gap between Japan and numerous other key nations. This trend prompts traders to borrow JPY and allocate funds to higher-yielding assets abroad. The Bank of Japan (BoJ) signaled that it is taking a cautious approach regarding policy normalization, indicating no rush to implement such measures.

Furthermore, according to Reuters, Bank of Japan (BoJ) Governor Kazuo Ueda reiterated on Tuesday that the central bank stands ready to increase interest rates if trend inflation progresses towards its 2% target, aligning with its projections. Ueda also noted the challenge of predicting the optimal timeframe for the BoJ to accumulate adequate data before contemplating a policy adjustment.

• GBP/JPY gains some positive traction in reaction to the upbeat UK Services PMI.
• A positive risk tone undermines the safe-haven JPY and further lends support.
• Intervention fears might cap the upside for the cross ahead of the BoJ on Friday.

The GBP/JPY cross attracts some dip-buying near the 190.85-190.80 region on Tuesday and climbs to a fresh daily peak during the first half of the European session. Spot prices currently trade around the 191.60 area and look to build on the overnight bounce from a one-week low.

The British Pound (GBP) gets a goodish lift following the better-than-expected release of the flash UK Services PMI, which rose to 54.9 in April from the previous month's final reading of 53.1. Apart from this, a modest US Dollar (USD) downtick, to a larger extent, overshadows an unexpected contraction in the UK manufacturing sector and turns out to be a key factor acting as a tailwind for the GBP/JPY cross.

The Japanese Yen (JPY), on the other hand, continues with its relative underperformance in the wake of the Bank of Japan's (BoJ) cautious approach towards further policy tightening. Furthermore, hopes that the Iran-Israel conflict will not escalate further remain supportive of a generally positive risk tone, which further seems to undermine the safe-haven JPY and lends additional support to the GBP/JPY cross.

Traders, meanwhile, remain on alert in the wake of speculations that Japanese authorities will intervene to prop up the domestic currency. This is holding back the JPY bears from placing aggressive bets ahead of the crucial BoJ policy decision on Friday. In the meantime, speculations about more aggressive policy easing by the Bank of England (BoE) might further contribute to capping gains for the GBP/JPY cross.

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $26.85 per troy ounce, down 1.27% from the $27.20 it cost on Monday.

Silver prices have increased by 5.42% 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 85.78 on Tuesday, up from 85.57 on Monday.

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 corrects further amid Middle East de-escalation

• Silver price on Comex extends its downside near $26.95 on Tuesday. 
• The easing fear of wider tensions in the Middle East improves market sentiment.
• Iranian Foreign Minister Hossein Amirabdollahian stated on Friday that Iran does not plan to respond to Israel’s retaliatory strike, while Israeli authorities remained mostly silent. 
• Reduced Fed rate cut speculation boosts the USD and drags the white metal lower. 
• The chance of a June cut has fallen to 15%, and the odds of a July cut have dropped below 45%. A September cut is not fully priced in, with the probability falling below 70%, according to the CME FedWatch Tool. 

(An automation tool was used in creating this post.)

• EUR/GBP received downward pressure after the mixed UK PMI data released on Tuesday.
• ECB Vice President Luis de Guindos stated that the central bank plans to lower interest rates in June.
• UK Services PMI improved to 54.9 in April, against the expected 53.0 and 53.1 prior.

The EUR/GBP cross pared its daily gains, trading lower around 0.8620 in European hours on Tuesday. After mixed Purchasing Managers Index (PMI) figures from the United Kingdom (UK) and the Eurozone, the currency cross lost ground. The preliminary S&P Global/CIPS UK Manufacturing PMI declined to 48.7 against the expectations of remaining constant at the reading of 50.3 in April. While Services PMI increased to 54.9 against the expected reading of 53.0 and 53.1 prior. Composite PMI increased to 54.0 from the previous reading of 52.8.

In April, the preliminary Eurozone Manufacturing PMI fell to 45.6, disappointing against the anticipated improvement to 46.5 from the previous 46.1. However, the Services PMI showed strength, reaching 52.9 compared to the estimated 51.8 and the prior 51.5. The Composite PMI for April exhibited an improved reading of 51.4, surpassing both the previous 50.3 and the expected 50.8.

Following the release of mixed German PMI data, the Euro gained ground. April's preliminary German Manufacturing PMI climbed to 42.2, slightly below the expected 42.8 but up from March's 41.9, marking a two-month high. Services PMI also saw a notable improvement, reaching 53.3, surpassing the market's expectation of 50.6 and hitting a fresh ten-month high. The Composite Output Index for April stood at 50.5, exceeding both the expected 48.6 and March's 47.7, also reaching a ten-month high.

According to Reuters, European Central Bank (ECB) Vice President Luis de Guindos stated in a newspaper interview that the ECB plans to lower interest rates in June. However, he stressed the necessity of prudence regarding future actions and the importance of considering signals from the US Federal Reserve (Fed).

On the United Kingdom’s (UK) side, interest rate futures indicate full pricing for a quarter-point rate cut by the Bank of England in August, with expectations of two rate cuts by the end of the year. This increasing speculation about rate cuts by the BoE is putting downward pressure on the Pound Sterling (GBP).

• UK Manufacturing PMI contracted to 48.7 in April, missing estimates of 50.3.
• Services PMI in the UK rose sharply to 54.9 in April.
• GBP/USD holds higher ground near 1.2370 after mixed UK business PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell sharply from 50.3 in March to 48.7 in April, missing the estimated 50.3 reading.

Meanwhile, the Preliminary UK Services Business Activity Index jumped to 54.9 in April, beating the market consensus of 53.0. The previous figure stood at 53.1.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Early PMI survey data for April indicate that the UK economy's recovery from recession last year continued to gain momentum. ‘

“Improved growth in the service sector offset a renewed downturn in manufacturing to propel overall business growth to the fastest for nearly a year, indicating that GDP is rising at a quarterly rate of 0.4% after a 0.3% gain in the first quarter,” Chris added.

FX implications

GBP/USD is extending the advance toward 1.2400 following the mixed UK PMI data. The pair is adding 0.28% on the day to trade at 1.2383, as of writing.

• USD/CAD struggles to hold the 1.3700 support as the US Dollar edges down.
• US bond yields consolidate as investors focus on US core PCE Price Index data.
• BoC’s rate cut prospects remain strong as Canada’s inflation softens significantly in March.

The USD/CAD pair remains feeble near the round-level support of 1.3700 in Tuesday’s European session. The Loonie asset comes under pressure as the US Dollar drops amid improvement in the risk appetite of the market participants.

S&P 500 futures have posted some gains in the London session. The appeal for risky assets improves as investors see no further escalation in Middle East conflict on an immediate basis. 10-year US Treasury yields consolidate around 4.63% as investors shift focus to the United States core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday. The US Dollar Index (DXY) edges down to 105.96.

The underlying inflation data will significantly influence market expectations to Federal Reserve (Fed) rate cuts, which traders anticipate from the September meeting. The annual core PCE Price Index is forecasted to have softened to 2.6% from 2.8% in February with monthly inflation increasing steadily by 0.3%.

Meanwhile, the Canadian Dollar has consistently performed better against the US Dollar since the last trading sessions. The Canadian Dollar could weaken as investors see the Bank of Canada (BoC) starting to reduce interest rates earlier amid easing price pressures. BoC’s preferred inflation measure that excludes eight volatile items softened to 2% in March, allowing policymakers to discuss rate cuts.

USD/CAD faced sharp selling pressure last week after a rally stalled near 1.3850. The asset rallied after a breakout of the Ascending Triangle chart pattern formed on a daily timeframe. The 20-day Exponential Moving Average (EMA) near 1.3674 will be a major support area for the US Dollar bulls.

The 14-period Relative Strength Index (RSI) returns to the 40.00-60.00 range, which indicates that bullish momentum has concluded for now while the upside bias is still intact.

Going forward, a mean-reversion move to near the 20-day EMA around 1.3674 will offer a buying opportunity to market participants. Investors would find resistance near the 22 November 2023, high at 1.3766, followed by the round-level resistance of 1.3800.

In an alternate scenario, a breakdown below April 9 low around 1.3547 will expose the asset to the psychological support of 1.3500 and March 21 low around 1.3456.

USD/CAD daily chart

• The Pound Sterling drops to near 1.2300 as the BoE is expected to start reducing interest rates from August.
• The S&P Global/CIPS UK preliminary PMI data for April will provide guidance on the economic outlook.
• Two BoE policymakers are lined up to speak as investors seek clues about the interest-rate outlook.

The Pound Sterling (GBP) remains vulnerable at around 1.2300 in Monday’s London session. The GBP/USD is under pressure as the US Dollar (USD) holds strength on expectations that the US Federal Reserve (Fed) will maintain interest rates at their current levels for longer. 

United States Consumer Price Index (CPI) has turned out hotter-than-expected in the first three months of the year and the county’s economic outlook is strong, suggesting that current interest rate framework is appropriate. 

The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, is slightly positive above the crucial support of 106.00. Meanwhile, investors will shift focus to the core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Friday. The monthly core PCE Price Index is estimated to grow steadily by 0.3%. Annually, the underlying inflation data is expected to soften to 2.6% from 2.8% in February.

On the United Kingdom front, investors await the S&P Global/CIPS preliminary PMI data for April, which will be published at 08:30 GMT. The Manufacturing PMI is expected to expand steadily by 50.3. The Services PMI is estimated to have declined slightly to 53.0 from 53.1.  

Daily digest market movers: Pound Sterling edges down while US Dollar exhibits strength

• The Pound Sterling refreshes a five-month low near the round-level support of 1.2300 as investors see the Bank of England (BoE) pivoting to interest rate cuts sooner than the Fed. Last week, BoE Deputy Governor Dave Ramsden said that United Kingdom inflation will decline faster than expected and will return to the 2% target in May.
• Dave Ramsden said: “Over the last few months, I have become more confident in the evidence that risks to persistence in domestic inflation pressures are receding, helped by improved inflation dynamics," Reuters reported. He added that inflation might prove weaker than BoE’s latest projections.
• Ramsden’s soft guidance on the inflation outlook has prompted expectations that the BoE will start reducing interest rates earlier than previously expected. LSEG's (BOEWATCH) now prices 28 basis points (bps) of rate cuts in August and 56 bps in December versus 22 bps and 51 bps, respectively, at Friday's close, Reuters reported.
• Market expectations for the BoE’s May policy meeting will be guided by commentaries from policymakers, as inflation data for the same month will be released after the interest rate decision. In Tuesday’s session, the speeches from BoE policymakers Jonathan Haskel and Huw Pill will be in focus. 
• In March’s monetary policy meeting, Haskel, who remained a hawk, surprisingly voted for keeping interest rates unchanged at 5.25%. In early April, Haskel commented that rate cuts should be "a long way off." He added that the decline in the headline inflation is good news but the BoE cares more about the persistent and theerlying inflation, the Financial Times reported. High inflation in the UK economy has been majorly driven by persistent inflation in the service sector, which is fuelled by strong wage growth. In March, the annual Service inflation decelerated slightly to 6.0% from 6.1%. 

Technical Analysis: Pound Sterling trades close to five-month low near 1.2300

The Pound Sterling printed a fresh five-month low near 1.2300 on Monday. The GBP/USD pair extends its losing spell for fourth trading session on Tuesday as a breakdown of the Head and Shoulder chart pattern formed on a daily timeframe has weakened the near-term outlook.

Declining 20-day and 50-day Exponential Moving Averages (EMAs) at 1.2525 and 1.2600, respectively, indicate that the long-term outlook is bearish.

The 14-period Relative Strength Index (RSI) oscillates in the range of 20.00-40.00, indicating a strong bearish momentum. 

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

Gold price stood at 71,357 Indian Rupees (INR) per 10 grams, down INR 1,354 compared with the INR 72,711 it cost on Monday.

As for futures contracts, Gold prices decreased to INR 70,500 per 10 gms from INR 71,197 per 10 gms.

Prices for Silver futures contracts decreased to INR 79,571 per kg from INR 80,579 per kg.

Global Market Movers: Comex Gold price weighed down by easing MidEast tensions, hawkish Fed bets

• Iran signaled that it has no plans to retaliate against the Israeli limited-scale missile strike on Friday, which, in turn, drives flows away from the safe-haven Comex Gold price for the second straight day on Tuesday.
• Stronger-than-expected US payrolls data along with the hotter consumer price inflation and hawkish comments from Federal Reserve officials, forced investors to scale back their bets for US interest rate cuts.
• The current market pricing suggests that the Fed could start its rate-cutting cycle in September and deliver only 34 basis points, or less than two rate cuts in 2024 as compared to three projected by the central bank. 
• The yield on the benchmark 10-year US government bond holds steady just below a five-month high touched last week and continues to act as a tailwind for the US Dollar, further exerting pressure on the XAU/USD. 
• Concerns about slowing global economic growth support prospects for synchronized interest-rate cuts by most major central banks in the second half of this year, which, in turn, could lend support to the commodity.
• Traders look to the flash global PMI prints on Tuesday, which, along with the Advance US Q1 GDP report and the US Personal Consumption Expenditures (PCE) Price Index later this week, should provide a fresh impetus. 

(An automation tool was used in creating this post.)

• Eurozone Manufacturing PMI fell to 45.6 in April, missing 46.5 consensus.
• Bloc’s Services PMI climbed to 52.9 in April vs. 51.8 forecast.
• EUR/USD eases from near 1.0700 after German, Eurozone PMI data.

The Eurozone manufacturing sector activity contraction unexpectedly deepened while the services sector continued to expand in April, according to the data from the HCOB's latest purchasing managers index survey released on Tuesday.

The Eurozone Manufacturing Purchasing Managers Index (PMI) came in at 45.6 in April, down from the 46.1 reading in March, lower than the market consensus of 46.5. The index tripped to a four-month low.

The bloc’s Services PMI rose to 52.9 in April from 51.5 in March, hitting a fresh eleven-month high and trumping the market expectations of 51.8.

The HCOB Eurozone PMI Composite increased to 51.4 in April vs. 50.8 expected and March’s 50.3 print. The index also reached a new nine-month top.

EUR/USD reaction to the Eurozone PMI data

EUR/USD is paring back gains toward 1.0650 after mixed Eurozone PMIs. The spot is still up 0.19% on the day to 1.0675, at the press time.

(This story was corrected on April 23 at 8:13 GMT to say that "the spot is still up 0.19% on the day to 1.0675," not 1.0875.)

• S&P Global PMIs are expected to indicate business activity in the US continued to expand in April.
• Manufacturing and Services output are seen advancing at a moderate pace. 
• EUR/USD holds above 1.0600, near-term bearish bias remains intact. 

S&P Global will release the flash estimates of the United States (US) Purchasing Managers Indexes (PMIs) for April on Tuesday, a survey that measures business activity throughout the month. The report is divided into services and manufacturing output and compiled in a final figure, the Composite PMI. 

The economic activity in the US private sector expanded at a moderating pace in March, with the S&P Global Composite PMI edging lower to 52.1 from 52.5 in February. The Services PMI declined to 51.7 from 52.3 in this period, while the Manufacturing PMI fell to 51.9 from 52.2.
Commenting on the survey's findings, “further expansions of both manufacturing and service sector output in March helped close off the US economy’s strongest quarter since the second quarter of last year," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"The survey data point to another quarter of robust GDP growth accompanied by sustained hiring as companies continue to report new order growth," Williamson added. “A steepening rise in costs, combined with strengthened pricing power amid the recent upturn in demand, meant inflationary pressures gathered pace again in March." 

What to expect from the next S&P Global PMI report?

S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity. Any reading above 50 signals economic activity is growing, while an indicator below this threshold suggests contraction.

Since the beginning of the year, the two main highlights of the US economy have been robust activity and stubborn inflation. Hence, market participants have shifted their expectations toward an extended delay in the Federal Reserve’s (Fed) policy pivot towards rate cuts. Earlier in the year, investors were forecasting the Fed to lower the policy rate as early as March. Employment, activity and inflation data in the first quarter of 2024 largely surprised to the upside and caused investors to reassess the US central bank’s policy outlook. According to the CME FedWatch Tool, markets currently price in a 65% probability that the Fed will lower the policy rate in September.

Flash PMI data for April are expected to confirm that the US economy preserved its strength to start the second quarter. Comments regarding the input costs could also point to ongoing inflationary pressures.

When will April flash US S&P Global PMIs be released and how could they affect EUR/USD?

The S&P Global PMI report will be released on Tuesday at 13:45 GMT. Ahead of the event, the US Dollar (USD) stays resilient against its rivals. The USD Index (DXY), which tracks the USD’s performance against a basket of six major currencies, seems to have entered into a consolidation phase after setting a five-month high above 106.00 in the previous week, boosted by hawkish Fed commentary and risk aversion.

Unless either the Manufacturing or the Services PMI unexpectedly drops below 50 and shows a contraction in the sector’s activity, the USD could hold its ground. If the publication highlights a downturn in private sector’s employment, or a softening in input costs, the USD could come under selling pressure even if headline PMIs hold above 50.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for EUR/USD:

“The Relative Strength Index (RSI) indicator on the daily chart stays below 40, suggesting that EUR/USD has more room on the downside before it turns technically oversold.”

“On the upside, 1.0700 (static level) aligns as interim resistance before 1.0750, where the 20-day Simple Moving Average (SMA) is located. A daily close above this level could attract technical buyers and open the door for an extended recovery toward the 200-day SMA at 1.0820. On the other hand, supports are located at 1.0600 (static level), 1.0500 (psychological level, static level) and 1.0450 (October 3 low).”

European Central Bank (ECB) Vice President Luis de Guindos said on Tuesday that “barring any surprises, the June rate cut is a 'fait accompli'.”

Additional quotes

Market reaction

At the time of writing, EUR/USD has stalled its latest uptick below 1.0700, as markets digest the latest ECB commentary ahead of the Eurozone PMI data.

• Germany’s Manufacturing PMI rose to 42.2 in April vs. 42.8 forecast.
• Services PMI for the German economy advanced to 53.3 in April vs. 50.6 estimate.
• EUR/USD jumps toward 1.0700 after mixed German PMIs.

Germany’s manufacturing sector contraction eased less-than-expected in April while the services sector outperformed, the preliminary business activity report published by the HCOB survey showed Tuesday.

The HCOB Manufacturing PMI in the Eurozone’s economic powerhouse rose to 42.2 this month, compared with the 42.8 estimate and March’s 41.9. The index hit the highest level in two months.

Meanwhile, Services PMI jumped from 50.1 in March to 53.3 in April, beating the expected 50.6 reading by a wide margin in the reported period. The measure reached a fresh ten-month top.

The HCOB Preliminary German Composite Output Index stood at 50.5 in April vs. 48.6 expected and 47.7 booked in March. The gauge also clinched a ten-month high.

FX implications

EUR/USD is picking up fresh bids toward 1.0700 following mixed German data, currently trading 0.34% higher on the day at 1.0687.

Here is what you need to know on Tuesday, April 23:

Major currency pair fluctuate in relatively tight channels early Tuesday as investors await key data releases. S&P Global will publish preliminary April Manufacturing and Services PMI data for the Eurozone, the UK and the US later in the day. The US economic docket will also feature New Home Sales data for March.

The US Dollar (USD) Index, which tracks the USD's performance against a basket of six major currencies, closed the first day of the week virtually unchanged. Following a mixed opening to the day, Wall Street's main indexes gained traction and registered strong daily gains, making it difficult for the USD to gather strength. The USD Index extends its sideways grind slightly above 106.00 early Tuesday and US stock index futures trade flat. Meanwhile, the benchmark 10-year US Treasury bond yield fluctuates above 4.6% after posting small losses on Monday.

The data from Australia showed in the Asian session that the Judo Bank Manufacturing PMI improved to 49.9 in April's flash estimate from 47.3 in March. The Services PMI edged slightly lower to 54.2 from 54.4 in the same period. After closing in positive territory on Monday, AUD/USD showed no reaction to these and entered a consolidation phase at around 0.6450.

Australian Dollar stays calm amid a firmer US Dollar, PMI eyed.

EUR/USD continues to move up and down in a narrow range at around 1.0650 following Monday's indecisive action. HCOB Composite PMI in Germany rose to 50.5 in early April from 47.7 in March.

GBP/USD remained under bearish pressure and touched a multi-month low of 1.2300 before staging a modest rebound in the American session on Monday. The pair was last seen trading slightly below 1.2350.

USD/JPY ended the first trading day of the week virtually unchanged. The pair remains stuck in an extremely tight channel slightly below 155.00 early Tuesday. 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. Commenting on the policy outlook, "our basic stance is that we will look at moves in trend inflation to achieve our price goal, and take a data-dependent approach in setting policy," Bank of Japan (BoJ) Governor Kazuo Ueda said.

Gold staged a deep correction on Monday and registered its biggest one-day loss of the year, falling over 2.5%. XAU/USD stays under persistent bearish pressure early Tuesday and declines toward $2,300.

• EUR/USD trades in a range in the mid 1.0600s ahead of key PMI data for the US and Eurozone. 
• The pair has formed a Bear Flag price pattern suggesting the potential for a steep decline. 

EUR/USD extends its holding pattern of the last few days, trading in the mid 1.0600s on Tuesday, prior to the release of potentially market-moving purchasing manager survey data. 

Preliminary Purchasing Manager Indexes (PMI) for April in both the United States and Europe are scheduled for release later in the day and could impact the exchange rate.   

EUR/USD: Traders await Purchasing Manager data 

EUR/USD could potentially experience volatility after the release of HCOB PMIs for the Eurozone followed by S&P Global PMIs for America, during the US session. 

The HCOB Composite PMI for the Eurozone is forecast to rise to 50.8 from 50.3 in March, the HCOB Manufacturing PMI to 46.5 from 46.1 and the HCOB Services PMI to 51.8 from 51.5. 

The S&P Global Manufacturing PMI for the US in April is forecast to rise to 52.0 from 51.9 and Services to 52.0 from 51.7. 

A PMI figure above 50 is indicative of growth in the sector; below 50 contraction. If any of the data show higher-than-expected readings, they could benefit the respective currencies and vice versa for lower-than-forecast results. 

Of particular interest to currency traders will be Services PMIs since sticky inflation in the sector has been a major contributor to inflation, especially in the US. 

Continued high inflation in the US is viewed as likely to keep interest rates relatively elevated in the United States compared to Europe. The expectation of higher borrowing costs for longer in the US has been bolstering the US Dollar (USD) since higher interest rates attract greater capital inflows. 

In addition, later in the day, the US will also see the release of New Home Sales data for March and the Richmond Fed Manufacturing Index for April.

Technical Analysis: EUR/USD forms a Bear Flag

EUR/USD is trading in a rectangular range at roughly the same level as the 100-week Simple Moving Average (SMA). 

Taken together with the steep decline that preceded the rectangle, the whole formation resembles a Bear Flag price pattern, which has bearish connotations. 

EUR/USD 4-hour Chart

A break below the 1.0601 April 16 low would signal a probable activation of the Bear Flag and the start of a decline. 

According to technical lore, the expected move out of a Bear Flag usually equals the length of the “pole” or steep decline preceding the box-like formation of the flag square, or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower provides the most reliable conservative target. This gives a price objective at 1.0503.  After that, the next concrete target is at 1.0446 – the October 2023 low. A fall of equal length to the pole would take EUR/USD  down to 1.0403. 

The Relative Strength Index (RSI) has exited oversold conditions, indicating renewed potential for more downside. 

For bulls, resistance at around 1.0700 will need to be overcome to have any hope of recovery. After that, the April 2 swing low at 1.0725 provides the next upside target, followed by 1.0800, where a cluster of major Moving Averages coils.

• USD/CHF gains ground near 0.9125 on the risk-on mood in Tuesday’s early European session. 
• The hawkish comments from the Fed lift the Greenback and create a tailwind for USD/CHF. 
• The ongoing geopolitical tensions in the Middle East might boost safe-haven assets like the Swiss Franc. 

The USD/CHF pair trades on a stronger note for the second consecutive day around 0.9125 during the early European session on Tuesday. The risk-on environment amid easing fears of wider tensions in the Middle East provides some support to the US Dollar (USD). Investors await the US preliminary S&P Global Purchasing Managers Index (PMI) data for April on Tuesday for fresh impetus. 

The Fed Bank of Chicago revealed on Monday that the National Activity Index improved to 0.15 in March from 0.09 in the previous reading. However, the data had little to no impact on the Greenback after the release. The hawkish remarks from US Federal Reserve (Fed) policymakers triggered the expectation that the US central bank would delay the rate cut, which boosts the USD against the Swiss Franc (CHF). 

The US preliminary Gross Domestic Product Annualized for the first quarter (Q1) and March’s Personal Consumption Expenditures Price Index (PCE) later this week will be closely watched events and might offer some hints about the possibility of policy easing by the Fed. In case the reports show upbeat data, this could boost the USD and cap the pair’s upside.

On the other hand, the ongoing geopolitical tensions in the Middle East might boost safe-haven flows, benefiting the CHF. Apart from this, the Swiss ZEW Survey for April will be released on Wednesday. On Friday, Swiss National Bank (SNB) Chairman Jordan's speech will be in the spotlight. 

• Silver price extends its downside near $26.95 on Tuesday. 
• The easing fear of wider tensions in the Middle East improves market sentiment.
• Reduced Fed rate cut speculation boosts the USD and drags the white metal lower. 

Silver price (XAG/USD) trades on a softer note for the second consecutive day around $26.95 on Tuesday during the early European session. The easing fear of wider Middle East tensions improves market sentiment and creates a headwind for the precious metal. Traders prefer to wait on the sidelines ahead of the US preliminary S&P Global Purchasing Managers Index (PMI) data for April, due later on Tuesday. 

The silver price drifts sharply lower to nearly three-week lows as concerns about a potential broader conflict in the Middle East fade, leading traders to reduce their precious metal positions and favour riskier assets. Iranian Foreign Minister Hossein Amirabdollahian stated on Friday that Iran does not plan to respond to Israel’s retaliatory strike, while Israeli authorities remained mostly silent. The absence of public statements afterward tends to imply that both sides are attempting to ease tensions. 

Additionally, the lower expectation for interest rate cuts from the US Federal Reserve (Fed) amid the robust. US economic data and hawkish stances from policymakers provide some support to the US Dollar (USD) and weigh on the US Dollar-denominated silver. New York Fed President John Williams noted that he doesn't feel urgency to cut interest rates, given the strength of the economy. Meanwhile, Chicago Fed President Austan Goolsbee stated that the Fed's current restrictive monetary policy is appropriate due to the robust US economic data. 

It’s worth noting that the higher-for-longer US rate narrative might dampen demand for white metal, a non-interest-bearing asset. The chance of a June cut has fallen to 15%, and the odds of a July cut have dropped below 45%. A September cut is not fully priced in, with the probability falling below 70%, according to the CME FedWatch Tool. 

• EUR/USD remains tepid around the major level amid a bearish sentiment.
• A breach below the 1.0600 level may lead the pair toward November’s low at 1.0517.
• The nine-day EMA at 1.0675 appears as the immediate barrier.

EUR/USD remains lackluster during the Asian trading hours on Tuesday, hovering near 1.0650. From a technical perspective, analysis suggests a bearish sentiment for the pair as it struggles below the pullback resistance at the 1.0695 level. The 14-day Relative Strength Index (RSI) also remains below the 50 mark.

Moreover, the lagging indicator, Moving Average Convergence Divergence (MACD), indicates weakness for the EUR/USD pair as it resides below the centerline and the signal line. Key support for the pair could be found around the psychological level of 1.0600.

A breach below this level may exert downward pressure on the pair, leading it towards the region around the major support level of 1.0550, followed by November’s low at 1.0517.

On the upside, the immediate barrier for the EUR/USD pair could be the nine-day Exponential Moving Average (EMA) at 1.0675. A breakthrough above this level could lead the pair to reach the 1.0695 level, aligning with the 23.6% Fibonacci retracement level drawn between 1.0981 and 1.0606.

Further resistance aligns with the psychological level of 1.0700. A breakthrough above this region could potentially strengthen the recovery sentiment for the pair.

EUR/USD: Daily Chart

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.

The rise in the weighted median inflation rate followed a 1.4% increase in February, the BoJ data showed.

Speaking on the policy outlook, BoJ Governor Kazuo Ueda said earlier this Tuesday that “our basic stance is that we will look at moves in trend inflation to achieve our price goal, and take a data-dependent approach in setting policy.”

Market reaction

Slowing trend inflation measure could pour cold water on the next BoJ rate hike bets, as USD/JPY reverts toward the multi-decade highs of 154.85 reached during early Asian hours.

FX option expiries for Apr 23 NY cut at 10:00 Eastern Time, via DTCC, can be found below

- EUR/USD: EUR amounts

• 1.0600 979m
• 1.0650 1.2b

- USD/JPY: USD amounts                     

• 150.00 935m
• 153.00 1.3b
• 155.00 770m

- AUD/USD: AUD amounts

• 0.6420 1.6b
• 0.6630 1.4b

- USD/CAD: USD amounts       

• 1.3500 505m
• 1.3775 330m

- NZD/USD: NZD amounts

• 0.5900 341m
• 0.6100 311m

• NZD/USD remains firmer, possibly reflecting an improved risk appetite following the easing tensions between Israel and Iran.
• The hawkish sentiment surrounding the Fed’s rates trajectory in June could bolster the US Dollar.
• China Securities Journal suggested that the PBoC might lower the MLF rate to decrease funding costs.

The NZD/USD pair moves slightly lower to near 0.5920 during the Asian session on Tuesday. The New Zealand Dollar (NZD) found support from an improved risk appetite, bolstering the NZD/USD pair. This positive shift follows reduced geopolitical tensions in the Middle East, as highlighted by an Iranian official's recent statement indicating no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters.

However, the upside potential for the NZD/USD pair appears to be capped due to a hawkish sentiment surrounding the Federal Reserve's (Fed) interest rate outlook for June. According to the CME FedWatch Tool, the probability of interest rates remaining unchanged in the June meeting has increased to 84.4%, up from the previous week's 78.7%.

Furthermore, comments from Federal Reserve officials suggest a more hawkish stance regarding the trajectory of interest rates in June, potentially strengthening the US Dollar (USD). According to a Bloomberg report, Chicago Fed President Austan Goolsbee stated on Friday that progress on inflation had "stalled," and the Federal Reserve's current restrictive monetary policy is suitable. Additionally, Reuters reported that Atlanta Fed President Raphael Bostic indicated that the US central bank would abstain from cutting interest rates until the end of the year.

On Tuesday, the China Securities Journal suggested the possibility of the People's Bank of China (PBoC) lowering the Medium-term Lending Facility (MLF) rate on May 15 to reduce funding costs. Given the strong trade relationship between China and New Zealand, such a move could potentially impact New Zealand's market and consequently affect the Kiwi Dollar.

Market participants will likely monitor New Zealand's monthly Trade Balance NZD data for March on Wednesday, followed by ANZ-Roy Morgan Consumer Confidence on Friday. In the United States (US), attention will be on the S&P Global Purchasing Managers Index (PMI) on Tuesday, with expectations of improvements in both the manufacturing and services sectors for April.

• GBP/USD holds steady on Tuesday amid subdued USD demand, albeit lacks bullish conviction.
• The divergent Fed-BoE policy expectations turn out to be a key factor acting as a headwind.
• The technical setup suggests that the path of least resistance for the pair is to the downside.

The GBP/USD pair struggles to capitalize on the overnight bounce from the 1.2300 mark, or its lowest level since November 14 and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around mid-1.2300s, nearly unchanged for the day, and remain at the mercy of the US Dollar (USD) price dynamics.

Receding fears about a wider Middle East conflict remain supportive of a generally positive risk tone, which is seen undermining the safe-haven buck and lending some support to the GBP/USD pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer amid sticky inflation continues to act as a tailwind for the Greenback. Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) further contribute to capping the upside for the pair.

From a technical perspective, the recent breakdown through the 1.2540-1.2535 horizontal support and descending trend-channel support near the 1.2400 mark was seen as a fresh trigger for bearish traders. That said, the Relative Strength Index (RSI) on the daily chart is flashing oversold conditions. This makes it prudent to wait for some consolidation or a modest recovery before positioning for further losses. Nevertheless, the GBP/USD pair seems vulnerable to extending the downtrend from the YTD peak touched in March.

In the meantime, any meaningful recovery is likely to confront stiff resistance near the 1.2400 support breakpoint, which if cleared might trigger a short-covering rally and lift spot prices to the 1.2465-1.2470 region. The momentum could get extended further, though is more likely to remain capped near the 1.2500 psychological mark. The latter should act as a key pivotal point, above which the GBP/USD pair could surpass the 1.2535-1.2540 support-turned-resistance and aim to reclaim the 1.2600 round figure.

On the flip side, the overnight swing low, around the 1.2300 mark, now seems to protect the immediate downside. Some follow-through selling will reaffirm the negative bias and drag the GBP/USD pair to the next relevant support near the 1.2245 region en route to the 1.2200 round figure and the 1.2135 zone.

GBP/USD daily chart

• Gold price drifts lower for the second successive day amid receding geopolitical tensions. 
• Reduced Fed rate cut bets continue to underpin the USD and contribute to the downfall.
• The fundamental backdrop warrants some caution before placing aggressive bearish bets.

Gold price (XAU/USD) plunged over 2% on Monday and registered its biggest daily loss since June 13, 2022, amid receding fears about a wider Middle East conflict, which dented demand for traditional safe-haven assets. Apart from this, reduced bets for interest rate cuts by the Federal Reserve (Fed) drag the non-yielding yellow metal to sub-$2,300 levels, or over a two-week low during the Asian session on Tuesday. 

With the latest leg down, the Gold price has corrected over 5% from the all-time peak touched earlier this month. Any further decline, however, seems limited in the wake of speculation that major central banks will cut interest rates this year. Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of this week's key US macro releases, starting with the flash PMIs on Tuesday.

The focus, meanwhile, remains glued to the Advance US Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index, scheduled for Thursday and Friday, respectively. The crucial data will play a key role in influencing expectations about the Fed's future policy decisions and drive the US Dollar (USD) demand, which, in turn, should provide some meaningful impetus to the Gold price. 

Daily Digest Market Movers: Gold price is weighed down by easing fears of a wider conflict in the Middle East

• Iran signaled that it has no plans to retaliate against the Israeli limited-scale missile strike on Friday, which, in turn, drives flows away from the safe-haven Gold price for the second straight day on Tuesday.
• Stronger-than-expected US payrolls data, along with the hotter consumer price inflation and hawkish comments from Federal Reserve officials, forced investors to scale back their bets for US interest rate cuts.
• The current market pricing suggests that the Fed could start its rate-cutting cycle in September and deliver only 34 basis points, or less than two rate cuts in 2024 as compared to three projected by the central bank. 
• The yield on the benchmark 10-year US government bond holds steady just below a five-month high touched last week and continues to act as a tailwind for the US Dollar, further exerting pressure on the XAU/USD. 
• Concerns about slowing global economic growth support prospects for synchronized interest-rate cuts by most major central banks in the second half of this year, which, in turn, could lend support to the commodity.
• Traders look to the flash global PMI prints on Tuesday, which, along with the Advance US Q1 GDP report and the US Personal Consumption Expenditures (PCE) Price Index later this week, should provide a fresh impetus. 

Technical Analysis: Gold price seems vulnerable below 23.6% Fibo., bears await acceptance below $2,300 mark

From a technical perspective, a sustained break and acceptance below the 23.6% Fibonacci retracement level of the February-April rally support prospects for a further intraday depreciating move. That said, oscillators on the daily chart – though they have been losing traction – are still holding in the positive territory and warrant some caution for bearish traders. Hence, it will be prudent to wait for some follow-through selling below the $2,300 mark before positioning for deeper losses. The Gold price might then slide to the $2,260-2,255 area, or the 38.2% Fibo. level, before dropping to the $2,225 intermediate support en route to the $2,200-2,190 confluence, comprising the 50% Fibo. level and the 50-day Simple Moving Average (SMA). 

On the flip side, any attempted recovery might now confront immediate resistance near the $2,325 region. A sustained move beyond, however, should allow the Gold price to accelerate the momentum towards the $2,350-2,355 intermediate hurdle en route to 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 be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent blowout rally witnessed over the past two months or so.

• Indian Rupee holds positive ground on Tuesday amid equity inflows, USD sales, and lower oil prices. 
• A hawkish repricing of US Fed rate-cut expectations might cap the pair’s downside. 
• Market players await the preliminary India’s HSBC PMI for April, due on Tuesday.

The Indian Rupee (INR) gains ground on Tuesday, backed by likely equity inflows and US Dollar (USD) sales from state-run banks. Additionally, the recovery of the INR is bolstered by the decline in oil prices as the fear of a wider Middle East war fades. Nonetheless, the upside of local currency is likely to be a temporary relief as a hawkish repricing of US Federal Reserve (Fed) rate cut expectations will continue to lift the USD, Arnob Biswas, head of foreign exchange research at SMC Global Securities, said.

Investors will monitor India’s preliminary HSBC Purchasing Managers Index (PMI) for April on Tuesday. On the USD’s front, the S&P Global PMI for April will be released later in the day. On Friday, the final reading of the US March Personal Consumption Expenditures Price Index (PCE) will take center stage. Stronger-than-expected US economic data might trigger speculation that the Fed will delay the rate cut cycle and boost the Greenback. 

Daily Digest Market Movers: The Indian Rupee rebounds amid lower crude oil prices

• Brent crude oil prices dropped 0.7% to $86.70 a barrel on Monday. Indian stocks climbed, with the main indices, BSE Sensex and Nifty 50, rising by almost 0.8% and 0.9%, respectively.
• Continuing the economic growth momentum of 7% in 2024–25 and beyond is possible due to favorable monsoons, increased agricultural production, and enhanced global commerce, said RBI Monetary Policy Committee (MPC) member Shashanka Bhide on Monday.
• The International Monetary Fund (IMF) raised India's growth projection to 6.8% for 2024 from its January forecast of 6.5%, while the Asian Development Bank (ADB) also raised India's GDP growth forecast for the current fiscal year to 7% from 6.7% earlier.
• Strong growth is allowing India’s policymakers to maintain interest rates higher for longer to ensure inflation is lowered in a durable manner, according to the minutes of the RBI monetary policy meeting.
• The Chicago Fed National Activity Index improved to 0.15 in March from 0.09 in the previous reading, according to the Fed Bank of Chicago. 

Technical analysis: USD/INR remains bullish in the longer term

The Indian Rupee trades weaker on the day. USD/INR keeps the bullish stance unchanged on the daily timeframe as the pair holds above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) hovers around the 50.00 midline, suggesting that further consolidation cannot be ruled out before positioning for any near-term USD/INR depreciation.

The first upside barrier for the pair will emerge near a high of April 15 at 83.50. The next hurdle is located at an all-time high of 83.72. Stronger bullish momentum might even take the pair for an upside break to the 84.00 psychological level. On the other hand, the initial support level is seen around a low of April 11 at 83.30. A fresh round of sell-off will pave the way to the 100-day EMA at 83.12, followed by a low of January 15 at 82.78. 

• The Australian Dollar appreciates, possibly due to improved risk sentiment amid de-escalated tensions in the Middle East.
• Australia's Judo Bank Composite PMI signaled a swift expansion in the Australian private sector during the second quarter.
• The US Dollar remains subdued despite the elevated US Treasury yields.

The Australian Dollar (AUD) continues its upward trajectory for the second consecutive session on Tuesday, buoyed by improved risk appetite. This positive sentiment follows a relaxation of geopolitical tensions in the Middle East, as indicated by an Iranian official's statement last week, suggesting no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters.

The Australian Dollar receives a slight boost following the release of Australia's Judo Bank Purchasing Managers Index (PMI) data on Tuesday. The Composite PMI surged to a 24-month high of 53.6 in April, an improvement from the previous month's 53.3. This signals a swift expansion in the Australian private sector during the second quarter, with significant growth propelled by the services sector.

The US Dollar Index (DXY), which gauges the US Dollar (USD) against six major currencies, faces pressure despite the elevated US Treasury yields. The likelihood of interest rates remaining unchanged in the June meeting has risen to 84.4%, up from the previous week's 78.7%, according to the CME FedWatch Tool. Additionally, comments from Federal Reserve officials hint at a more hawkish stance regarding the trajectory of interest rates in June.

Investors are expected to closely monitor the US S&P Global Purchasing Managers Index (PMI) on Tuesday. Market sentiment suggests anticipation of improvements in both the manufacturing and services sectors for April. On Wednesday, attention will shift to the Australian Monthly Consumer Price Index and quarterly RBA Trimmed Mean CPI data.

Daily Digest Market Movers: Australian Dollar holds ground after PMI data

• In April, Australia's Judo Bank Manufacturing PMI surged to an eight-month high of 49.9, contrasting with March's 47.3. However, the Services PMI dipped to a two-month low of 54.2, down from the previous reading of 54.4.
• The weekly ANZ-Roy Morgan Australian Consumer Confidence declined by 3.2 points to hit its lowest level this year at 80.3, compared to the previous reading of 83.5. ANZ highlighted decreases in both economic and financial subindices. Confidence waned across various housing cohorts, with renters experiencing a notable decline.
• On Tuesday, the China Securities Journal suggested that there's a possibility the People's Bank of China (PBoC) might lower the Medium-term Lending Facility (MLF) rate on May 15 to decrease funding costs. Such a move could potentially impact the Australian market, given the robust trade relationship between China and Australia.
• The People's Bank of China maintained its Loan Prime Rates (LPR) at 3.45% on Monday. The LPR serves as a crucial benchmark rate for Chinese banks when determining the interest rates for loans offered to their clients. Given the significant economic ties between China and Australia, any changes in Chinese monetary policy have the potential to impact the Australian market.
• The Chinese Ministry of Commerce has announced a new tariff on US goods. Specifically, China has imposed a duty of 43.5% on imports of propionic acid from the United States. This chemical is extensively utilized in various sectors, including food, feed, pesticides, and medical applications, as per Reuters.
• According to a Bloomberg report, Chicago Fed President Austan Goolsbee remarked on Friday that progress on inflation had "stalled," and the Federal Reserve's current restrictive monetary policy is appropriate. Meanwhile, Reuters reported that Atlanta Fed President Raphael Bostic stated that the US central bank would refrain from cutting interest rates until the end of the year.

Technical Analysis: Australian Dollar moves above the major level of 0.6450

The Australian Dollar trades around 0.6460 on Tuesday. The pair tests the pullback resistance near 0.6456. A breakthrough above this level could potentially enhance the sentiment for the pair. However, the 14-day Relative Strength Index (RSI) remains below the 50-level, indicating a bearish sentiment. Immediate support could be found at the major level of 0.6450, followed by the psychological level of 0.6400. If the latter is breached, it might exert pressure on the AUD/USD pair to revisit April’s low of 0.6362, followed by the major level of 0.6350.

On the upside, the AUD/USD pair could target the psychological level of 0.6500 and endeavor to breach into the symmetrical channel, potentially supporting a bullish sentiment. The upper boundary of the channel could pose a resistance barrier around the 0.6639 level.

AUD/USD: Daily Chart

Bank of Japan (BoJ) Governor Kazuo Ueda commented on the Japanese wage negotiations and their implication on the central bank’s policy this Tuesday.

Key quotes

Market reaction

USD/JPY sticks to lows near 154.70 following these comments, down 0.08% on the day.

• AUD/JPY consolidates with a positive sentiment due to the eased geopolitical tensions in the Middle East.
• Australia's Judo Bank Composite PMI indicated a rapid expansion in the Australian private sector during Q2.
• The Japanese Yen encounters challenges as the yield gap widens between Japan and other major countries.

AUD/JPY maintains stability on Tuesday following gains in the previous session. The prevailing optimistic mood may lend support to the Australian Dollar (AUD), underpinning the AUD/JPY cross, potentially influenced by a relaxed geopolitical climate in the Middle East.

Australia's Judo Bank Composite Purchasing Managers Index (PMI) surged to a 24-month high of 53.6 in April, marking an improvement from the previous month's 53.3. This signals an accelerated expansion in the Australian private sector during the second quarter, with notable growth driven by the services sector.

The Japanese Yen (JPY) faces challenges due to the expanding yield gap between Japan and many other major countries, prompting traders to borrow JPY and invest in higher-yielding assets elsewhere.

Additionally, dovish comments from Bank of Japan (BoJ) Governor Kazuo Ueda on Friday added to the pressure on the Yen. According to Reuters, Ueda emphasized the necessity for the BoJ to maintain accommodative monetary policies in the foreseeable future due to underlying inflation remaining "somewhat below" the 2% target.

Daily Digest Market Movers: AUD/JPY consolidates with an improved risk sentiment

• Australia's Judo Bank Manufacturing PMI rose to an eight-month high of 49.9 in April, compared to March's 47.3. Services PMI declined to a 2-month low of 54.2 compared to the previous reading of 54.4.
• The weekly ANZ-Roy Morgan Australian Consumer Confidence declined by 3.2 points to reach its lowest level this year at 80.3, down from the previous reading of 83.5. ANZ noted that both economic and financial subindices experienced decreases. Confidence dropped across various housing cohorts, with renters being particularly affected.
• Japan’s Jibun Bank Manufacturing PMI improved to 49.9 in April, compared to the expected reading of 48.0 and 48.2 prior. Meanwhile, Services PMI rose to 54.6 from the previous reading of 54.1.
• On Tuesday, the China Securities Journal reported that there remains a possibility that the People's Bank of China (PBoC) will decrease the Medium-term Lending Facility (MLF) rate, aiming to lower funding costs. The next MLF rate setting is scheduled for May 15. This decision could potentially influence the Australian market, given the close trade relationship between the two countries.
• The People's Bank of China maintained its Loan Prime Rates (LPR) at 3.45% on Monday. The LPR functions as a benchmark rate for Chinese banks in setting interest rates for loans extended to their clients.
• On Monday, the Chinese Ministry of Commerce announced a new tariff on US goods. Specifically, China has imposed a duty of 43.5% on imports of propionic acid from the United States. This chemical is extensively utilized in various sectors, including food, feed, pesticides, and medical applications, as per Reuters report.
• According to a Westpac report, while the RBA signaled that rates are unlikely to be raised further, greater confidence in the inflation outlook is required before contemplating the possibility of rate cuts.
• Traders are expected to closely monitor the upcoming Monthly Consumer Price Index and quarterly RBA Trimmed Mean CPI data from Australia on Wednesday.

Technical Analysis: AUD/JPY holds position around the level of 100.00

The AUD/JPY trades around 99.90 on Tuesday. The cross remains above the significant support level of 99.65, coupled with the 14-day Relative Strength Index (RSI) persisting above the 50 level, indicating an evolving bullish sentiment. The immediate barrier appears at the psychological level of 100.00, following the major level of 100.50 and April’s high of 100.81. A break above this region could lead the AUD/JPY cross to test the upper boundary of the ascending channel.

On the downside, the AUD/JPY cross could find immediate support at the psychological level of 99.50. A break below this level could lead the pair to approach the psychological level of 99.00. A break below this level could push the pair to test the lower boundary of the ascending channel and a major level of 98.50.

AUD/JPY: Daily Chart

Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that the Japanese central bank doesn’t have any preset idea on the timing, or pace of future rate hikes, adding that future monetary policy guidance will depend on economy, price, market development at the time, per Reuters. 

Key quotes

Market reaction

The USD/JPY pair is trading at 154.75, losing 0.06% on the day at the time of writing.

• The Japanese Yen draws some support from the possibility of a government intervention.
• The divergent BoJ-Fed expectations and easing Middle East tensions cap the safe-haven JPY.
• Traders also seem reluctant ahead of the key US macro data and BoJ meeting later this week.

The Japanese Yen (JPY) ticks higher against its American counterpart during the Asian session on Tuesday and recovers a major part of the previous day's losses to a fresh 34-year low, though any meaningful recovery still seems elusive. Investors remain on alert amid speculations that Japanese authorities will intervene to prop up the domestic currency, which, in turn, is seen lending some support to the JPY. The upside potential, however, seems limited in the wake of expectations that the difference in rates between the US and Japan will stay wide for some time.

The Bank of Japan (BoJ) has indicated that it is in no rush in terms of policy normalization and is expected to wait until October before hiking interest rates again. In contrast, investors have been paring back their bets about interest rate cuts by the Federal Reserve (Fed) amid sticky inflation. Hawkish Fed expectations, meanwhile, remain supportive of elevated US Treasury bond yields and continue to underpin the US Dollar (USD). Apart from this, cooling Middle East tensions should cap gains for the safe-haven JPY and act as a tailwind for the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen might struggle to attract buyers amid BoJ's uncertain rate outlook

• Japan's Finance Minister Shunichi Suzuki, along with other policymakers, said that they are watching currency moves closely and will respond as needed, providing some respite to the Japanese Yen.
• The flash PMIs released from Japan on Tuesday showed that overall business activity improved substantially at the beginning of the second quarter, albeit did little to impress the JPY bulls.
• The au Jibun Bank Japan Manufacturing PMI moved closer to breaking back into expansionary territory and improved from 48.2 to 49.9 in April – marking the strongest reading since June 2023.
• The gauge for the services sector came in at 54.6 for the reported month as compared to 54.1 in March, suggesting that demand remained strong despite weakness in other aspects of the economy.
• Following last month’s historic decision to end the negative rate policy and Yield Curve Control (YCC) program, the Bank of Japan is expected to keep its short-term interest target unchanged on Friday.
• Moreover, the BoJ is anticipated to adopt a data-dependent approach in deciding the next interest rate hike amid uncertainties on whether wage hikes will broaden and drive up consumer prices.
• Investors pushed back their expectations about the timing of the first rate cut by the Federal Reserve to September and downsized the number of rate-cuts this year to less than two amid sticky inflation.
• Adding to this, the recent hawkish remarks by FOMC members allow the US Dollar to stand tall near its highest level since November touched last week and act as a tailwind for the USD/JPY pair.
• Traders now look to the flash US PMIs for some impetus, though the focus remains on the Advance US Q1 GDP on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday.

Technical Analysis: USD/JPY needs to consolidate before the next leg up, 155.00 hold the key for bullish traders

From a technical perspective, the Relative Strength Index (RSI) is still flashing overbought conditions on the daily chart and holding back the USD/JPY pair from placing fresh bets. Any further slide, however, is more likely to attract some dip-buyers near the 154.35-154.30 region. This should help limit the downside for spot prices near the 154.00 mark, which if broken might expose last Friday's swing low, around the 153.60-153.55 zone. The next relevant support is pegged near the 153.25-153.20 area and the 153.00 mark. A convincing break below the latter could prompt aggressive technical selling and drag the pair to the 152.50 intermediate support en route to a short-term trading range resistance breakpoint near the 152.00 round figure.

On the flip side, the multi-decade high, around the 154.85 region touched on Monday, followed by the 155.00 psychological mark, could act as an immediate hurdle. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for an extension of a well-established appreciating trend from the March monthly swing low.

• USD/CAD trades in negative territory for the fifth consecutive day around 1.3695 on Tuesday. 
• The high-for-longer US rate narrative might boost the USD and cap the pair’s downside. 
• Canadian Industrial Produce Prices dropped by 0.8% MoM in March compared to a rise of 1.1% prior, in line with the consensus. 

The USD/CAD pair extends its downside near 1.3695 despite lower crude oil prices. However, the downside of the pair might be capped by strong US economic data and the Fed’s hawkish comments. Investors will keep an eye on the US S&P Global Purchasing Managers Index (PMI) ahead of US Gross Domestic Product (GDP) and US Core Personal Consumption Expenditures (PCE) later this week. 

Many Fed policymakers agreed with the idea of keeping borrowing costs at the current level, given the slow and bumpy progress on inflation and the robust US economy. New York Fed President John Williams said he doesn't feel urgency to cut interest rates, given the strength of the economy. Chicago Fed Austan Goolsbee stated that the Fed's current restrictive monetary policy is appropriate due to the robust US economic data. The high-for-longer rate narrative in the USD might lift the greenback against its rivals. The Core US PCE might offer some hints about the further confirmation that progress against inflation has stalled.

On the Loonie front, data released from Statistics Canada revealed that Canadian Industrial Produce Prices were in line with market expectations, easing by 0.8% MoM in March from the previous month’s 1.1% (revised upward from 0.7%). Meanwhile, the decline of WTI prices exerts some selling pressure as Canada is the largest oil exporter to the United States. Canada’s Retail Sales will be released on Thursday, which is estimated to improve to 0.1% MoM in February from a decrease of 0.3% in January. 

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1059 as compared to the previous day's fix of 7.1043 and 7.2437 Reuters estimates.

Japanese Finance Minister Shunichi Suzuki offered some verbal intervention on Tuesday. Suzuki said that the Japanese government is ready to respond appropriately to excessive foreign exchange (FX) moves, adding that he will closely watch FX moves with a high sense of urgency. 

Key quotes

Market reaction 

At the time of writing, USD/JPY is trading 0.06% lower on the day to trade at 154.75. 

• WTI loses momentum to nearly one-month lows of $82.00 on Tuesday.
• Easing tensions between Israel and Iran limits the WTI’s downside. 
• A large build in the US stockpile in recent weeks and a hawkish Fed weigh on the black gold.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $82.00 on Tuesday. The black gold edges lower on the day as the concerns about a wider Middle East war fade. Later on Tuesday, oil traders will take more cues from the preliminary US S&P Global Purchasing Managers Index (PMI) data for April and the API Weekly Crude Oil Stock report. 

Iranian Foreign Minister Hossein Amirabdollahian said on Friday that Iran does not plan to respond to Israel’s retaliatory strike launched, while Israeli authorities remained mostly silent. The absence of public statements afterward tends to imply that both sides are attempting to ease tensions. WTI prices drop to nearly monthly low as Israel's retaliatory attack on Iran was smaller than had been feared. However, any escalating tensions between Israel and Iran could limit the WTI’s downside from its lower price levels. 

The increase in US crude oil inventories in recent weeks surpassed expectations, which exerts downward pressure on WTI prices. Furthermore, the hawkish remarks from the Federal Reserve (Fed) have led to a strong US Dollar (USD) 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. Chicago Fed Austan Goolsbee said last week that with the strength of the labour market and elevated inflation, he believes the Fed's current restrictive monetary policy is appropriate, per Reuters. 

On the other hand, hope for Chinese demand might offer some relief to WTI prices as China is the world's biggest oil importer. The Chinese government aims to accomplish this with the help of fiscal and monetary stimulus measures to lift the economy. ANZ economists expected China's economy to grow 4.9% in 2024, up from 4.2% previously. However, the Chinese property sector remains fragile and it has been a major drag on China's economy. Any negative sign about China’s economy could weigh on the WTI prices.