Articles
Pound Sterling weakens amid uncertainty ahead of US core PCE inflation
398403 June 26, 2024 23:12 FXStreet Market News
- The Pound Sterling declines against the US Dollar as investors shift focus to the US core PCE inflation data for May.
- UKÂ’s high wage inflation refrains BoE policymakers from committing to interest rate cuts.
- Uncertainty over the UKÂ’s parliamentary elections will keep the Pound Sterling on tenterhooks.
The Pound Sterling (GBP) weakens against the US Dollar (USD) in Wednesday’s New York session. The GBP/USD pair falls vertically after the recovery move stalled near the round-level resistance of 1.2700. The Cable slumps amid uncertainty ahead of the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for May, which will be published on Friday.
Investors will pay close attention to the US core PCE inflation data as it is the Federal ReserveÂ’s (Fed) preferred inflation gauge. This data will provide fresh cues about when and how far interest rates will be reduced this year. Annually, the underlying inflation data is estimated to have softened to 2.6% in May from the prior release of 2.8%, with monthly figures growing at a slower pace of 0.1% from 0.2% in April.
Currently, investors expect the Fed to kickstart its rate-cutting cycle at the September meeting and extend it further in November or December.
On the contrary, Fed policymakers continue to advocate maintaining interest rates at their current levels for longer until they get evidence that inflation will return to the desired rate of 2%. Fed officials want to see inflation declining for months to gain confidence in rate cuts and, therefore, delivering a hawkish guidance.
On Tuesday, Fed Governor Michelle Bowman supported the continuation of the current policy framework for some time to tame price pressures. She kept hopes of more rate hikes on the table if disinflation stalls or reverses. When asked about timing for rate cuts, Bowman said she doesnÂ’t see any this year.
Daily digest market movers: Pound Sterling remains on backfoot against US Dollar and Australian Dollar
- The Pound Sterling performs strongly against a majority of its peers as fears of policy divergence have intensified due to strong wage growth in the United Kingdom. However, the Pound weakens against the Australian Dollar and the USD. Australia’s monthly Consumer Price Index (CPI) rose strongly by 4.0% from expectations of 3.8% and the prior release of 3.6%, which weighed on expectations of more rate cuts by the Reserve Bank of Australia (RBA).
- Unlike the Swiss National Bank (SNB), the Bank of Canada (BoC), and the European Central Bank (ECB), which have begun their policy-easing cycle, the Bank of England (BoE) has not committed to rate cuts in the near term.
- The UKÂ’s high wage growth keeps inflation persistent in the service sector, making interest rate cuts inappropriate in the current situation. Although headline inflation has returned to the desired rate of 2%, officials see service inflation as a preferred measure for decision-making on interest rates and want it to decline for months to gain confidence in lowering borrowing rates.
- Currently, investors expect that the BoE will start reducing interest rates from the August meeting. Meanwhile, political uncertainty in the UK economy is expected to keep the Pound Sterling on its toes. Market participants expect that the opposition Labour Party has the upper hand in parliamentary elections on the Conservative Party. The first round of UK parliamentary elections will commence on July 4.Â
Pound Sterling Price Today:
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Euro.
| Â | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | Â | 0.21% | 0.12% | 0.13% | 0.08% | -0.42% | 0.15% | 0.16% |
| EUR | -0.21% | Â | -0.10% | -0.12% | -0.17% | -0.62% | -0.05% | -0.07% |
| GBP | -0.12% | 0.10% | Â | 0.00% | -0.05% | -0.52% | 0.07% | 0.05% |
| JPY | -0.13% | 0.12% | 0.00% | Â | -0.04% | -0.54% | 0.06% | 0.05% |
| CAD | -0.08% | 0.17% | 0.05% | 0.04% | Â | -0.53% | 0.09% | 0.08% |
| AUD | 0.42% | 0.62% | 0.52% | 0.54% | 0.53% | Â | 0.57% | 0.57% |
| NZD | -0.15% | 0.05% | -0.07% | -0.06% | -0.09% | -0.57% | Â | 0.00% |
| CHF | -0.16% | 0.07% | -0.05% | -0.05% | -0.08% | -0.57% | -0.00% | Â |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Technical Analysis: Pound Sterling fails to above 50-day EMA
The Pound Sterling faces pressure near 1.2700 against the US Dollar. The GBP/USD pair continues to find sellers near the 20-day Exponential Moving Average (EMA), which trades around 1.2700. Also, the Cable slides below the 50-day EMA is acting as support at around 1.2670.
The Cable struggles to hold the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a consolidation ahead.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safeÂ’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Ripple CEO Brad Garlinghouse slams SEC Gary Gensler for his remarks on crypto, XRP extends losses
398400 June 26, 2024 23:09 FXStreet Market News
- Ripple CEO Brad Garlinghouse criticized SEC Chair Gensler for his statement that all crypto executives go to jail.Â
- Gensler shared his thoughts on crypto regulation and the sectorÂ’s role in the US Presidential election in a Bloomberg interview.Â
- XRP is struggling to break above resistance at $0.48 early on Wednesday.Â
Ripple (XRP) executive Brad Garlinghouse is making headlines for his statement on Securities and Exchange Commission (SEC) Gary GenslerÂ’s remarks on crypto. Gensler said crypto is a field where either the executives are in jail or awaiting extradition.Â
Garlinghouse slammed the SEC ChairÂ’s statement in a recent tweet on X. The Ripple CEO has faced a lawsuit in California that is set to go to trial for his “misleading statements” in an interview in 2017.Â
XRP is struggling under $0.48, the altcoin is trading at $0.4723, down 0.69% on Wednesday.Â
Daily digest market movers: Ripple CEO condemns Chair GenslerÂ’s statements on crypto
- Ripple CEO Brad Garlinghouse was recently in the news for a California state lawsuit against the executive that went to trial. Garlinghouse allegedly made “misleading statements,” saying he is bullish on XRP while selling millions of tokens at the same time.Â
- Garlinghouse is making headlines this time for his response to Gary GenslerÂ’s remarks in a Bloomberg interview.Â
- The SEC Chair said in the interview that, “This (crypto) is a field where the leading lights from a couple of years ago are either in jail, about to go to jail, or awaiting extradition.”
- Garlinghouse slammed the comments in a recent tweet on X:
Absolute nonsense coming from @GaryGensler today.
And this slander about “all crypto execs going to jail” from the man who completely missed FTX (and actually cozied up to SBF), and wasn’t even invited to the DOJ announcement about Binance.
If he was really “working for the… https://t.co/c3ynB5Gncl
— Brad Garlinghouse (@bgarlinghouse) June 25, 2024
- The SECÂ’s lawsuit against Ripple dates back to 2020, making it evident why the executive and the agency chair donÂ’t see eye to eye on the industry.Â
- The ongoing lawsuit and the executiveÂ’s comments are the market movers on Wednesday.Â
- XRP is struggling to break past the sticky resistance at $0.48 this week.
Technical analysis: XRP stuck under resistance at $0.48
Ripple is stuck under resistance at $0.48 for the sixth consecutive day, as seen on the daily chart. The altcoin has failed to break above the 23.6% Fibonacci retracement of its decline from the March 11 top of $0.7440 to the April 13 low of $0.4188, at $0.4955.Â
The closest support is the June 7 low of $0.4508, 5% below the current price level. The closest resistance lies at the Fair Value Gap, between $0.4825 and $0.4841.Â
The Moving Average Convergence Divergence (MACD) indicator is flashing red histogram bars under the neutral line, and the signal line has crossed above MACD. This reveals an underlying negative momentum in Ripple’s price trend. 
XRP/USDT daily chartÂ
A daily candlestick close above $0.4955 could invalidate the bearish thesis and erase the recent losses, 3.28% in the past seven days. The altcoin could then rally towards the closest resistance at $0.4825.Â
Crypto ETF FAQs
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GBP/USD Price Analysis: Pound plummets, targets 1.2600 as evening star surfaces
398398 June 26, 2024 23:06 FXStreet Market News
- GBP/USD declines after struggling at 1.2700, following weak US housing data and strong USD.
- Technical outlook shows bearish momentum with an ‘evening star’ pattern and RSI indicating further downside.
- Key support levels are the 50-DMA at 1.2636, 1.2600, and 200-DMA at 1.2555.
- For a bullish reversal, GBP/USD needs to surpass 1.2700 and clear resistance at 1.2730/40.
The Pound Sterling lost ground versus the Greenback on Wednesday following the release of US housing data, which highlights the sector’s weakness, yet the buck trades at around 8-week highs, as shown by the US Dollar Index (DXY). The GBP/USD trades at 1.2642, down 0.34%.
GBP/USD Price Analysis: Technical outlook
In Tuesday’s article, I wrote, “The pair formed a ‘bullish piercing’ pattern, hinting that traders could challenge the next resistance seen at 1.2700, yet buyers remain reluctant to lift the GBP/USD towards that level.”
The GBP/USD was unable to reach 1.2700 and has broken below Tuesday’s low of 1.2670, printing a new weekly low of 1.2627, after a three-candlestick chart pattern ‘evening star’ emerged.
Momentum supports sellers, as shown by the Relative Strength Index (RSI), which remains bearish and aims lower.
Therefore, the GBP/USD path of least resistance is downwards. It will face the next support level at the 50-DMA at 1.2636. Once that area is surpassed, the psychological 1.2600 mark will follow, ahead of the 200-DMA at 1.2555.
For a bullish continuation, traders must claim 1.2700 and clear a previous support trendline turned resistance at around 1.2730/40.
GBP/USD Price Action – Daily Chart
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| Â | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | Â | 0.30% | 0.47% | 0.59% | 0.25% | -0.06% | 0.58% | 0.29% |
| EUR | -0.30% | Â | 0.16% | 0.27% | -0.08% | -0.35% | 0.29% | -0.01% |
| GBP | -0.47% | -0.16% | Â | 0.10% | -0.23% | -0.52% | 0.15% | -0.21% |
| JPY | -0.59% | -0.27% | -0.10% | Â | -0.34% | -0.65% | 0.01% | -0.32% |
| CAD | -0.25% | 0.08% | 0.23% | 0.34% | Â | -0.34% | 0.35% | 0.02% |
| AUD | 0.06% | 0.35% | 0.52% | 0.65% | 0.34% | Â | 0.65% | 0.35% |
| NZD | -0.58% | -0.29% | -0.15% | -0.01% | -0.35% | -0.65% | Â | -0.33% |
| CHF | -0.29% | 0.01% | 0.21% | 0.32% | -0.02% | -0.35% | 0.33% | Â |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Japanese Yen nosedives further after Kanda’s bleak response
398397 June 26, 2024 23:05 FXStreet Market News
- The Japanese Yen trades above 160.50 against the US Dollar.
- Traders are testing the Japanese government, which might not take action until Friday.Â
- The US Dollar Index pops higher after some hawkish Fed comments.Â
The Japanese Yen (JPY) is retreating further and faces over 5% devaluation against the US Dollar since the Japanese government’s latest intervention back in May. The trigger for the US Dollar strength comes from relentless hawkish comments from US Federal Reserve (Fed) official Michelle Bowman, who said that current conditions are not appropriate to start cutting interest rates and that she even considers another rate hike before starting to cut. This feeds the US Dollar, making it strong enough to snap above 160.00 against the Yen and testing the Japanese government’s line in the sand before facing interventions.Â
Breaking: Japanese Yen drops to multi-decade lows against US Dollar, eyes on BoJ
Meanwhile, the DXY US Dollar Index – which gauges the value of the US Dollar (USD) against a basket of six foreign currencies – is stronger with the help from the depreciation of the Japanese Yen. The other heavyweight in the basket, the Euro, is not helping either as uncertainty builds up ahead of the French snap elections on Sunday and German consumer confidence deteriorates further. This gives the DXY a boost from outside help even though the Greenback looks overvalued seeing recent economic data.Â
Daily digest market movers: Watch out for any reaction
- At 13:15 GMT Vice Minister of Finance for International  Affairs from the Japanese Ministry of Finance Masato Kanda said that the government is looking at the FX markets with a high level of urgency and that appropriate steps will be taken when needed.Â
- Gareth Berry, the FX and Rates strategist from Macquarie, is expecting the USD/JPY pair to fall to 120.00. This squeeze lower is expected to happen in the next 18 months, Bloomberg reports.Â
- Head of sales and trading business at Mitsubishi UFJ Trust and Banking Corporation Takafumi Onodera noted that the Japanese authorities will not intervene until FridayÂ’s US Personal Consumption Expenditures (PCE) print. A stronger-than-expected report could spur volatility and send the Yen hurtling toward 163.00 against the US Dollar, spurring officials to make a “rate check” or intervene during a period of thin liquidity. Rate checks warn traders that authorities may be preparing to step in to support the Yen.Â
- At 11:00 GMT, the Mortgage Bankers Association (MBA) has released the weekly Mortgage Application numbers for the week ending on June 21. Mortgage applications rose by 0.9% the previous week and came in at 0.8% for this week.
- At 14:00 GMT, New Home Sales data for May will come out. Analysts expect sales to increase slightly to 640,000 from AprilÂ’s 634,000.Â
- The US Treasury will allot a 5-year Note in the markets at 17:00 GMT.Â
- The Federal ReserveÂ’s Bank Stress Test report will come out at 20:30 GMT.Â
- Equities are giving up their early recovery with both European and US indices smacking down as this Dollar strength is not being favored by investors.Â
- The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 57.9% for a 25-basis-point cut. A rate pause stands at a 35.9% chance, while a 50-basis-point rate cut has a slim 6.2% possibility.Â
- The Overnight indexed Swap curve for Japan shows a 56.6% chance for a rate hike on July 31, and a smaller 49.6% chance for a hike on September 20.Â
- The US 10-year benchmark rate trades near the weekly high at 4.27%.
- The benchmark 10-year Japan Treasury Note (JGB) trades around 1.023%, breaking above 1% for the first time since June.Â
USD/JPY Technical Analysis: Oil on the fire
The USD/JPY pair is flashing red warning lights as price action overheats too much. The best evidence is the Relative Strength Index (RSI), which is close to overbought conditions in the daily chart. The magic 160.00 level, where Japanese authorities intervened last time, has already been crossed. Do not expect a snap reaction immediately, as authorities will want to see if US data on Thursday and Friday could trigger some easing without sticking their neck out and intervening. On the upside, the 163.00 level could be tested on stronger US data in the coming days, while, on the downside, 151.95 is again the pivotal support to watch.Â
(This story was corrected on June 26, 12:19 GMT, to say that the Japanese Yen printed multi-decade low versus the Dollar, not high.)Â
Bank of Japan FAQs
DXY: Almost touches 106.00 – DBS
398396 June 26, 2024 23:02 FXStreet Market News
Markets turn their attention to FridayÂ’s US PCE deflator, DBS analyst Philip Wee notes.
All eyes are on FridayÂ’s US PCE deflator
“The Dollar Index (DXY) rose 0.2% to 105.63 overnight but stayed in the 105.10-105.90 range set after the Federal Reserve meeting on June 12. At the moment of writing, DXY was almost touching 106.00 (+0.36%).”
“The same trading behaviour was also evident in the US Treasury 10Y yield, which firmed 1.6 bps to 4.25%, inside a 4.20-4.30% range for the comparable period.”
“All eyes will be on Friday’s US PCE deflator, which is expected to mirror the fall in CPI inflation a fortnight ago. Additionally, the Fed’s recent concern over the US unemployment rate rising to 4% in May has not gone unnoticed.”
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EUR/USD: Waiting for the election rally – DBS
398395 June 26, 2024 22:56 FXStreet Market News
EUR/USD is trading sideways within a 1.0660-1.0760 range unable to decide its direction ahead of the first round of FranceÂ’s snap election on June 30, DBS analyst Philip Wee notes.
Euro trading sideways ahead of the inevitable
“EUR/USD is in a 1.0660-1.0760 range, awaiting the first round of France’s snap election on June 30. Assuming none of the parties win an outright majority, a second round will be held on July 7. The polls suggest President Emmanuel Macron’s party will not secure an outright or relative majority.”
“The far-right National Rally leader, Jordan Bardella, said he would not become Prime Minister without an outright majority. Hence, France is looking at a “cohabitation” with Bardella as Prime Minister and Macron as President or political paralysis.”Â
“The European Central Bank (ECB) will probably play down EU break-up risks at its Forum on Central Banking in Sintra next week. The ECB and the other global central banks will probably be closely aligned in their plans to navigate a data-dependent path toward removing top-level restrictions on rates for the rest of this year.”
Â
Mexican Peso depreciates ahead of Banxico meeting
398393 June 26, 2024 22:35 FXStreet Market News
- The Mexican Peso drifts lower on the eve of the Bank of Mexico policy meeting.Â
- The overwhelming majority of economists donÂ’t expect the Banxico to cut interest rates.Â
- USD/MXN forms a bullish two-bar reversal pattern and could correct higher.Â
The Mexican Peso (MXN) falls in its most traded pairs on Wednesday ahead of the key event on the radar for the Peso: the Bank of Mexico (Banxico) monetary policy meeting on Thursday.Â
At the time of writing, one US Dollar (USD) buys 18.19Â Mexican Pesos, EUR/MXN is trading at 19.44, and GBP/MXN at 23.00.
Mexican Peso eases ahead of Banxico meeting
The Mexican Peso eases ahead of the Banxico policy meeting on Thursday, although the overwhelming majority of economists expect the central bank to maintain its policy interest rate at its current 11.00% level.
The high interest-rate differential between Mexico and most major economies is advantageous for the Mexican Peso as it attracts greater capital inflows. Deciding not to cut interest rates, therefore, would be considered bullish for the Peso.Â
According to a Bloomberg survey of economists, 23 of the 25 expect Banxico to hold tight. A recent survey by Mexican lender Citibanamex showed most respondents also expected Banxico to leave rates unchanged at 11.00% at the June meeting – although they did expect a cut in August.
“Banco de Mexico meets Thursday and is expected to keep rates steady at 11.0%,” Dr. Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman (BBH), said in a note on Tuesday. “Recent weakness in MXN is an upside risk to inflation and will keep the bank cautious. The swaps curve has adjusted higher since the May meeting and is pricing in only 75 bp of easing over the next 12 months vs. 125 bp at the start of May,” he added.Â
RabobankÂ’s Senior Strategist Christian Lawrence had expected Banxico to cut interest rates by 0.25% at the June meeting. However, he changed his opinion in light of the sharp devaluation of the Mexican Peso since the election, which “has acted as a de facto cut,” says Lawrence.Â
Economists at Standard Chartered see imported inflation from the post-election depreciation in the Mexican Peso as preventing Banxico from pressing the trigger on rate cuts, supporting the Peso in the process.Â
“We now expect Banco de México (Banxico) to stay on hold instead of cutting by 25bps at its 27 June meeting, amid sharp currency depreciation driven by elevated political noise and fiscal uncertainty,” says the bank.Â
Technical Analysis: Two-bar reversal could signal recovery for USD/MXNÂ
USD/MXN forms a two-bar reversal pattern (shaded rectangle in the chart below) which is a fairly reliable indicator of a short-term reversal in the trend.Â
If Wednesday ends as a green day, it will enhance the signal from the two-bar reversal and suggest a continuation higher, although the distance such a corrective move might go is indeterminate.
USD/MXN Daily ChartÂ
One possible level USD/MXN could rally up to is the June 18 low at 18.30.Â
At the same time, the short-term trend remains bearish, leaving the pair at risk of a recapitulation lower.Â
A break below 17.87 (June 24 low) would invalidate the two-bar pattern and probably result in a continuation of the short-term downtrend to a target at 17.71 (a low made in the 4-hour chart on June 4), followed by 17.54 if stronger, the June 4 swing low.Â
The direction of the long and intermediate-term trends remains in doubt.Â
Economic Indicator
Central Bank Interest Rate
The Bank of Mexico announces a key interest rate which affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. Â Generally speaking, if the central bank is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the Mexican Peso.
Next release: Thu Jun 27, 2024 19:00
Frequency: Irregular
Consensus: 11%
Previous: 11%
Source: Banxico
United States EIA Crude Oil Stocks Change above forecasts (-3M) in June 21: Actual (3.591M)
398391 June 26, 2024 22:33 FXStreet Market News
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Supply risks reduce the demand for Oil – TDS
398390 June 26, 2024 22:29 FXStreet Market News
Oil markets are now succumbing to a reversal of systematic flows, TDS Senior Commodity Strategist Ryan McKay notes.
The upside is likely capped for WTI
“Commodity Trading Advisors (CTAs) could remain modest buyers in the short-term in Brent crude, but WTI would need to see prices rally back above $82.50/bbl to renew upside flows.”
“However, we are not anticipating another rout in prices as supply risks are back in focus with tensions building in the Middle East between Israel and Lebanon, while further ship attacks in the Red Sea reignite concerns.”
“A renewed increase in our energy supply risk indicator can support price action in the near term, but ultimately, we still argue the upside is likely capped by increasing global supply and potential OPEC+ increases, which put 2025 balances in question.”
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NZD/USD Price Analysis: Posts fresh monthly low after Double Top breakdown
398388 June 26, 2024 22:26 FXStreet Market News
- NZD/USD refreshes monthly low near 0.6076 as the Fed’s hawkish remarks strengthen the US Dollar’s appeal.
- Fed Bowman sees interest rates remaining steady for the entire year.
- A Double Top breakdown weakens the New Zealand Dollar.
The NZD/USD pair posts a fresh monthly low near 0.6076 in WednesdayÂ’s New York session. The Kiwi asset faces intense selling pressure after breaking below the crucial support of 0.6100. The pair weakens as the US Dollar (USD) strengthens due to the Federal ReserveÂ’s (Fed) hawkish remarks on the interest rate outlook.
Fed officials advocate for maintaining interest rates steady until they get evidence that inflation will return to the desired rate of 2%. On Tuesday, Fed Governor Michelle Bowman pushed hopes for rate cuts to next year and warned of further policy tightening if the disinflation process stalls or reverses.
Meanwhile, the CME FedWatch tool shows that traders see the central bank choosing the September meeting as the earliest point to start unwinding the restrictive policy framework.
On the Kiwi front, the Reserve Bank of New Zealand (RBNZ) is expected to keep its Official Cash Rate (OCR) steady at 5.5% for the entire year. The NZ inflation has been declining consistently from last five quarters but is still double the required rate of 2%.
NZD/USD delivers a breakdown of the Double Top chart pattern formed in a four-hour timeframe. The breakdown of the above-mentioned chart pattern triggered after a downside move below the swing low plotted from June 10 low near 0.6100, which results in a bearish reversal.
The 50-period Exponential Moving Average (EMA) near 0.6125 continues to act as a major barricade for the New Zealand Dollar bulls.
The 14-period Relative Strength Index (RSI) falls below 40.00. Should the bearish momentum trigger the oscillator established below the same?
Investors would use a pullback move to near 0.6100 as a selling opportunity for targets near April 4 high around 0.6050 and the psychological support of 0.6000.
On the contrary, a reversal move above June 12 high of 0.6222, which will expose the asset January 15 high near 0.6250, followed by January 12 high near 0.6280.
NZD/USD four-hour chart
Economic Indicator
Consumer Price Index ex Food & Energy (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.