The dollar starts the week strong; Meeting of the Fed, the SNB, the BoE and the BoJ
The dollar rallied broadly at the start of the week as risk aversion spreads into the Asian session. But the yen is not benefiting much this time around as the rally has lost momentum. Commodity currencies are also weak with the Euro. The Swiss franc and the British pound are slightly better than the others, but remain weak against the greenback. Upcoming meetings of the four major central banks would shape the next moves, at least until the end of the first half.
Technically, the break of the AUD/USD support at 0.7034 should confirm that the rebound from 0.6828 has ended at 0.7282. A larger downtrend from 0.8006 may be ready to resume down to 0.6828 low. Similarly, the NZD/USD rebound from 0.6215 is also expected to end at 0.6575, after rejection by the 55-day EMA. The focus will be on any downward acceleration towards 0.6215, and beyond, as well as AUD/USD.
In Asia, at the time of writing, the Nikkei is down -3.13%. Hong Kong’s HSI index is down -2.81%. China Shanghai SSE is down -1.11%. The Singapore Strait Times is down -0.62%. Japan’s 10-year JGB yield is up from 0.0066 to 0.261.
NZIER lowers New Zealand GDP forecast, raises inflation
In the new NZIER Consensus Forecast, growth projections for the forecast horizon have been revised down while inflation projections have been revised up. NZIER noted “increasing headwinds” for the New Zealand economy, including “continued disruptions to the global supply chain as countries continue to grapple with COVID-19, the war in Ukraine and rising interest rate”. The higher inflation outlook reflects “expectations that high inflation will remain persistent”.
In the June survey (compared to the March survey):
- 2022/23 GDP growth at 2.9% (revised down from 3.6%).
- 2023/24 GDP growth at 1.9% (instead of 2.7%).
- 2024/25 GDP growth at 2.1% (instead of 2.5%).
- CPI 2022/23 at 4.1% (instead of 3.5%).
- CPI 2023/24 at 2.6% (instead of 2.5%).
- CPI 2024/25 at 2.4% (instead of 2.3%).
Bitcoin and Ethereum in Freefall Again on Celsius Network News
Cryptocurrencies were in freefall again after news broke that Celsius Network, one of the largest crypto lenders, suspended withdrawals, trades and transfers on its platform. In the background, bitcoin and ethereum were already under pressure last week, as risk sentiments intensified after data showed a reacceleration in consumer inflation in the United States.
The break of the 25083 support in bitcoin suggests that the medium-term downtrend is ready to resume. The 20k handle is the next target but could indeed drop to a projection as low as 61.8% from 48226 to 25083 from 32686 to 15258. The overall outlook will remain bearish as long as 32368 resistance holds even on a strong reprise.
Ethereum also extends the downtrend from 4863. The 1000 handle is the next target, but it could drop to a 100% projection from 4683 to 2157 from 3577 to 870. The outlook will remain bearish as long as the support at 1674 will turn resistance. recovery case.
Meeting of the Fed, the SNB, the BoE and the BoJ
Four central banks will meet this week. The Fed is expected to continue with its plan to hike 50 basis points per meeting and raise the fed funds rate to 1.25-1.50%. As the CPI reaccelerated to a new 40-year high in May, the focus will be on how this is reflected in the new economic projections and the dot chart. Back in only 7 of the 16 FOMC members were the interest rate above 2% by the end of 2022. The balance would likely shift more to the hawks.
The SNB is expected to keep its interest rate unchanged at -0.75% for now. But with inflation at its highest level in 14 years and, more importantly, the ECB’s pre-commitment to the hike in July and September, there is talk that the SNB could take a small step this week. . A 25bp rise to -0.50%, less negative, cannot be completely ruled out.
The BoE is expected to raise interest rates by 25 basis points to 1.25%. But opinions are also divided. The government’s plan to cut taxes and ease household energy bills allows the BoE to act more broadly. Still, the central bank might still want to wait for the next monetary policy report before changing the pace.
The BoJ should remain faithful. But the government and the central bank have expressed deep concerns about the rapid depreciation of the yen. The markets would expect something from the BoJ to stabilize it.
On the data front, the UK calendar is busy with GDP, employment and retail sales. The US calendar will feature PPI and retail sales. Germany ZEW, business confidence and employment in Australia and a slew of data from China will also be monitored. Here are some highlights of the week:
- Monday: BSI manufacturing in Japan; UK GDP, production, trade balance, NIESR GDP estimate.
- Tuesday: Australia NAB Business Confidence; Germany ZEW, IPC final; employment in the UK; manufacturing sales in Canada; American PPI.
- Wednesday: Machinery orders in Japan, tertiary industry index; China industrial production, retail sales, capital investment; Swiss economic forecasts from SECO, PPI; Euro zone industrial production, trade balance; Housing starts in Canada; US Retail Sales, Empire State Manufacturing, Import Prices, Business Inventories, NAHB Housing Index, FOMC Rate Decision.
- Thursday: New Zealand GDP; Employment in Australia; Japan’s trade balance; SNB tariff decision; BoE rate decision; Wholesale sales in Canada; Unemployment insurance claims, housing starts and building permits in the United States, Philly Fed survey.
- Friday: BusinessNZ New Zealand Manufacturing Index; BoJ Rate Decision; UK retail sales; Italy’s trade balance; Euro zone CPI final; Canada IPPI and IPMB; American industrial production.
USD/JPY Daily Outlook
Daily Pivots: (S1) 133.71; (P) 134.09; (R1) 134.82; After…
USD/JPY’s rally has resumed after brief consolidations and the intraday bias is back to the upside. The current uptrend should be for a 61.8% projection from 114.40 to 131.34 from 126.35 to 136.81. The firm break will target a 100% projection at 143.29. On the downside, minor support below 133.17 will first turn the neutral intraday bias and bring consolidations, before setting up another rise.
Overall, the current rally is seen as part of the long-term uptrend from 75.56 (2011 low). The next target is a 100% projection from 75.56 (2011 low) to 125.85 (2015 high) from 98.97 to 149.26, which is close to 147.68 (2015 high). 1998). This will remain the preferred case as long as the support at 126.35 holds.
Economic Indicators Update
|23:50||JPY||BSI index of large manufacturing industries Q/Q Q2||-9.9||-4.2||-7.6|
|06:00||GBP||GDP M/M Apr||0.20%||-0.10%|
|06:00||GBP||3M Service Index/3M Apr||0.40%||0.40%|
|06:00||GBP||Manufacturing production M/M Apr||0.20%||-0.20%|
|06:00||GBP||Manufacturing production Y/Y Apr||1.80%||1.90%|
|06:00||GBP||Industrial production H/M Apr||0.20%||-0.20%|
|06:00||GBP||Industrial production A/A Apr||0.50%||0.70%|
|06:00||GBP||Goods Trade Balance (GBP) Apr.||-20.3B||-23.9B|
|13:00||GBP||NIESR GDP Estimate (3M) May||0.60%||0.30%|