Currency Pairs Market Analysis

[Solid ECN]

Japanese Yen Hits 34-Year Low as BOJ Meets

Solid ECN – On Thursday, the Japanese yen fell below 155 per dollar, reaching its lowest point in 34 years. This happened as the Bank of Japan (BOJ) began a two-day meeting to discuss its monetary policy. Although the BOJ stopped using negative interest rates in March, rates are not expected to change now.

However, investors are looking for signs that the bank might take action because the yen has weakened significantly. This weakness has hit a critical point that many believed would cause officials in Tokyo to step in.

BOJ Governor Kazuo Ueda mentioned at last week's G20 summit that the bank might increase interest rates again if the yen's drop continues to push up prices by making imports more expensive. He reiterated this possibility this week, stating that rates could rise if inflation trends towards the 2% target as predicted. On the other hand, Japan's Finance Minister Shunichi Suzuki chose not to comment on the currency levels.​

 

[Solid ECN]

Swiss Franc Recovers Amid Policy Changes and Low Inflation

The Swiss franc has stabilized around 0.91 against the USD, recovering from significant losses earlier in the year that pushed it to a six-month low. This happened due to major differences in the monetary policies anticipated for the U.S. and Switzerland. In March, Switzerland saw its lowest inflation in over two years, dropping to 1%. This supports the Swiss National Bank's (SNB) claim that inflation pressures are easing.

Amid low business confidence and falling retail sales, the SNB is expected to increase interest rates in its June meeting. After the SNB's surprising rate cut in March—the first central bank to do so amid global inflation concerns—the franc had fallen sharply.

Additionally, the lower inflation forecast has enabled the central bank to ease its support of the franc. Consequently, foreign currency reserves have grown for the third consecutive month since hitting a seven-year low in November.​

 

[Solid ECN]

Canadian Dollar Rises Amid Eased Global Tensions

Solid ECN – The Canadian dollar surged beyond 1.37 against the USD this April, bouncing back from its five-month nadir of 1.382 on April 16th. This improvement came as concerns about global risks eased with resolving tensions in the Middle East, and unimpressive US economic data weakened support for the US dollar.

In Canada, the prices of industrial products increased by 0.8% in March, aligning with forecasts and a slight dip from the prior month's revised increase of 1.1%. Furthermore, new house prices in March held steady, defying expectations of a slight rise, with the annual change in the New Housing Price Index showing a decline of 0.4%. In the US, demand for the dollar as a safe-haven asset declined following assurances from Iran of no retaliatory strikes against Israel, coupled with a slowdown in the US manufacturing and services industries that heightened anticipation of interest rate reductions.

For further clues, the focus now shifts to upcoming US economic reports, including the GDP data on Thursday and the Federal Reserve's PCE price index on Friday.​

 

[Solid ECN]

WTI Oil Stabilizes at $82 Amid Rate Cut Delays

Solid ECN – WTI crude oil prices were stable at around $83 per barrel on Thursday. This followed a decrease in prices the day before. Investors are assessing how the delayed cuts in US interest rates might affect future oil demand. There is concern that the Federal Reserve might maintain higher rates longer due to strong recent inflation and job data.

Looking forward, markets are focused on Thursday's upcoming US GDP data and the Fed's preferred PCE price index report on Friday to get more clarity. Despite this, the latest official figures revealed a significant drop in US crude inventories, which fell by 6.37 million barrels last week, surprising many who had expected an increase of 1.6 million barrels.

On another note, concerns about supply have lessened as tensions in the Middle East have reduced. Iran and Israel have indicated that they will not take further military action against each other. Also, oil tankers, previously stopped due to disruptions in the Red Sea, have resumed their deliveries. This helps ease market tightness abroad and supports countries in stocking up on oil.​

 

[Solid ECN]

Swiss Franc Stabilizes as Inflation Eases, Rate Hike Possible

The Swiss franc has stabilized at about 0.91 against the USD, recovering from significant losses earlier in the year that dropped to a six-month low. This change happened due to substantial differences in the anticipated monetary policies of the US and Switzerland. In March, Switzerland's yearly inflation rate decreased to a low of 1%, not seen in over two years, reinforcing the Swiss National Bank's (SNB) statement that inflation pressures are easing.

This comes as business optimism declines and retail sales shrink, prompting speculation that the SNB might increase interest rates in its next meeting in June. Previously, the franc fell sharply when the SNB unexpectedly cut rates in March, becoming the first major central bank to do so amid current global inflation concerns.

Additionally, with a more stable inflation forecast, the central bank has been able to reduce its support for the franc, leading to an increase in foreign currency reserves for the third consecutive month since hitting a seven-year low in November.​

 

[Solid ECN]

Euro Struggles Amid Varied Economic Signals

Solid ECN – The euro continues to struggle, hovering around $1.07, as investors examine a wide range of economic reports and their implications for the future actions of the ECB and the Federal Reserve. Recent data from the European Central Bank shows that inflation expectations dropped to their lowest point since December 2021, at 3.0%.

Furthermore, lending growth has not changed, leading analysts to believe that ECB officials may lower interest rates for the first time in June. On the other hand, the US dollar remains strong, driven by ongoing inflation concerns and robust consumer spending, indicating that the Fed may not reduce borrowing costs until at least September.​

 

[Solid ECN]

Europe's Gas Prices Drop as Demand Weakens

In early May, natural gas prices in Europe dropped to around €28.5/MWh, their lowest in nearly three weeks. This dip came as new weather forecasts predicted moderately warm and dry European conditions for the next 10 days. Consequently, the need for heating, which heavily relies on natural gas, is expected to decrease.

Moreover, strong winds are anticipated, which should boost wind power production during this period. Additionally, the natural gas supply from Norway has increased following the end of maintenance outages, ensuring a stable supply for European countries. This situation is further supported by Europe's high gas storage levels, recently recorded at 62%.

There's also optimism about the return of LNG exports from the US. Looking ahead, energy ministers from the G7 nations have decided to gradually eliminate coal power by the latter half of the next decade. This decision is likely to sustain natural gas demand in the future, although exceptions have been made for Japan and Germany.​

 

[Solid ECN]

Euro Stays at $1.07 Amid ECB and Fed Policies

Solid ECN – The euro stayed at $1.07, continuing its fall against the US dollar. This trend is driven by the belief that the European Central Bank (ECB) will adopt a gentler approach than the US Federal Reserve. Recent data reveals that inflation in the Eurozone remained at 2.4% in April, as expected. The core inflation rate, however, dropped slightly to 2.7% from 2.9%.

This supports the possibility of an interest rate cut by the ECB in June. In the first quarter, the Eurozone's economy grew by 0.3%, beating expectations of a 0.1% increase. This suggests a recovery from the slow growth seen since the end of 2022. Meanwhile, the US Federal Reserve has kept interest rates high for the sixth time. They plan to keep rates steady until they are sure inflation will consistently reach their 2% goal.​

 

[Solid ECN]

USDCNH Analysis - Holiday Impacts Yuan Trading Volumes

Solid ECN – The offshore yuan recently soared to a six-week high, surpassing 7.23 against the dollar following the U.S. Federal Reserve's decision to keep interest rates unchanged. Fed Chair Jerome Powell emphasized a shift towards easier monetary policies and ruled out further rate hikes, weakening the dollar and boosting the yuan's position in the foreign exchange markets.​

Holiday Season Slows Market Activity

Market activity was notably subdued because the Chinese markets were closed for the Labor Day holiday. This seasonal pause contributed to thinner trading volumes, temporarily dampening the usual flurry of transactions.​

Manufacturing Data Encourages Optimism

Further bolstering the yuan, a private survey showed a modest rise in Chinese manufacturing activity, with the index reaching its highest since early 2023. This increase is a positive sign of recovery in the sector. Investors await more economic reports next week, including data on services, trade, and inflation, which could provide additional market direction.​

 

[Solid ECN]

WTI Crude Stabilizes Above $79 Amid US Plans

Solid ECN – On Thursday, WTI crude oil prices settled above $79 per barrel, as there are hints that the US might plan to fill up its emergency oil stocks by purchasing oil at $79 per barrel or less. However, the prices are still near the lowest in seven weeks, falling over 5% this week.

This decline comes amid the possibility of a ceasefire between Israel and Hamas and a rise in US oil supplies. Egypt is taking the lead in restarting peace talks between Israel and Hamas, which might prevent a bigger conflict in the area. According to the EIA, US oil inventories unexpectedly increased by 7.3 million barrels last week, against forecasts of a 2.3 million barrel drop.

Additionally, US oil production surged to 13.15 million barrels per day in February, up from 12.58 million the prior month. This increase is the most significant monthly rise in over three years.​

 

[Solid ECN]

Bitcoin Analysis: Resistance Turned Support Insight

Solid ECN–Bitcoin trades in the bearish channel, as shown in the BTCUSD daily chart. Bears managed to close below the $59,598 resistance and are stabilizing the price below this level. As of writing, the BTCUSD pair trades near the broken resistance, which now acts as support.

From a technical standpoint, the trend remains bearish, and Bitcoin might dip to $50,940 in the subsequent selling pressure. For the scenario to come into play, the price should stay below the median line of the Bollinger band.

Conversely, if the BTCUSD price closes above the support at $59,559, the consolidation phase would extend further to the upper band of the flag.​

 

[Solid ECN]

Gold Prices Steady as Investors Wait

Solid ECN – Gold prices remained stable at around $2,300 per ounce this Friday, marking the lowest level in four weeks. Investors are maintaining caution as they await the release of the US non-farm payroll data later today. This significant economic indicator will provide insights into the Federal Reserve's future monetary policy decisions.​

Federal Reserve and Economic Indicators

The Federal Reserve opted to keep interest rates unchanged last Wednesday, indicating a possible inclination toward future rate reductions. However, concerns over recent disappointing inflation figures might delay these cuts. Moreover, the stable number of new unemployment claims last week suggests a tight labor market, which is likely to bolster the economy throughout the second quarter.
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Geopolitical Developments Impacting Gold

Easing geopolitical tensions in the Middle East, particularly the growing optimism for a ceasefire agreement between Israel and Hamas brokered by Egypt, has also influenced gold prices. As a result, the precious metal is set to register a 1.6% decline this week, marking its second consecutive weekly drop.​

 

[Solid ECN]

NZDUSD - Awaiting RBA's Impact on NZ Policy

Solid ECN – The New Zealand dollar, commonly referred to as the NZD, has seen a notable increase, surpassing the $0.59 mark. This resurgence comes after a period of losses earlier in the week. The uplift was triggered by a retreat in the US dollar, which occurred following the Federal Reserve's decision to maintain current interest rates.

Adding to the momentum, Fed Chair Jerome Powell indicated that further rate hikes were unlikely, reinforcing the central bank's current stance towards easing monetary policy.​

Economic Signals in New Zealand

Recent economic data from New Zealand has shown some concerning trends, with the unemployment rate climbing to 4.3% in the first quarter of the year. This is the highest it has been in three years and surpassed economists' forecasts. Such figures hint at a possible shift in monetary strategy, potentially prompting the Reserve Bank of New Zealand (RBNZ) to lower interest rates earlier than the US Federal Reserve.​

Anticipation for RBA's Decision

As the market digests New Zealand's unfolding economic indicators, attention is now turning towards the Reserve Bank of Australia's (RBA) upcoming policy announcement.

The decision is keenly awaited as it could have significant implications for New Zealand's monetary policy direction. Investors and economists alike are closely watching, with many predicting a rate cut by the fourth quarter. However, opinions vary, with some forecasts suggesting stable rates until 2025.​