Forex Trading Library

The Week Ahead – Risk on

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GBPUSD slides as inflation in focus

Chart of GBPUSD

Cable retreats as weaker UK economic data ease the pressure to raise interest rates. An uptick in Britain’s unemployment rate combined with slowing wage growth over the past three months has slightly raised the chances of a pause at the BoE’s meeting in June. The price action reflects the market’s adjustment to the shifting odds, even though most participants still expect the central bank to hike rates by a quarter of a point to 4.75%. The upcoming CPI will be a market mover and is likely to cement the rate consensus. A soft reading may cause a correction below 1.2300. Otherwise, Sterling could bounce towards 1.2800.

NZDUSD consolidates ahead of RBNZ decision

Chart of NZDUSD

The New Zealand dollar steadies in the wake of an expansionary budget. The market sees the government’s fiscal measures towards helping those struggling with soaring living costs may contribute to the inflationary pressure. Following the RBNZ’s surprisingly hawkish stance at the last meeting, traders have revised their expectations and bet it would increase the official cash rate past the peak of 5.5%. With a forecast that the economy might dodge recession territory, the central bank may still have some headroom for its proactive monetary policy. The pair is hovering above 0.6110 and 0.6380 is the immediate resistance.

XAUUSD retreats as yields climb

Chart of XAUUSD

Bullion falls back as the US dollar recovers across the board. The market seems to be unfazed by the US debt ceiling debate dragging on, probably due to a sense of deja-vu. While the Biden administration tries to avoid a default, overall risk appetite and the direction of gold are mostly driven by the data-related narrative. Despite a mixed bag of US data recently, the economy continues to exhibit resilience and may allow the Fed to stay assertive for longer than expected. In the absence of major headlines, rising Treasury yields and dollar would provide headwinds to the precious metal. 1920 is the first support and 2080 a new peak.

NAS 100 rallies as market goes risk on

Chart of US100

The Nasdaq 100 jumps as sound US economic fundamentals drive risk appetite. Solid earnings reports from tech giants combined with decent economic data infuse a sense of stability in the market. Now that the banking stress seems to be taking a back seat, the bulls saw the calm as a window of opportunity and stepped in. Meanwhile, divergent voices within the Fed between hard line hawks and those who prefer to await further data before coming to a decision would favour Chair Jerome Powell’s initiative to pause the tightening, further offering support to the index as it rises towards 14500 with 13000 as a fresh support.

 

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