Last week was filled with trading opportunities: the US dollar gave up large parts of its gains from the prior week, the JPY sank to a 34-year low amid intervention by the Bank of Japan, and stock markets turned higher. This week, the USD might be able to reclaim some of its lost ground, while stock indices are at risk of corrections, and the question on everyone’s mind: will the Bank of Japan be able to keep the JPY from free falling?
On the economic front, the world economy experienced an unexpected slowdown last week, as indicated by the PMI manufacturing figures. The figures for EU dropped from 46.1 to 45.6, for the UK from 50.3 to 48.7, and for the US from 51.9 to 49.9, signalling a coordinated contraction in the manufacturing sector.
The US GDP figures for Q1 2024 were disappointing, with the actual increase of 1.6% falling significantly short of the anticipated 2.5% and the previous quarter’s 3.4%. The primary factor behind this lower growth was the strong dollar, which has been adversely affecting exports.
Despite these discouraging data, the initial jobless claims were slightly positive, at 207k, a slight improvement from the previous figure of 212k. However, the consumer price figures in Australia were less favourable, recording a quarterly change of 1%, higher than the expected 0.8% and the previous quarter's 0.6%. In the US, core PCE annual inflation remained steady at 2.8%, higher than the expected 2.7%. With high inflation, the Fed's first-rate cut is anticipated in November.
As we move into the new week, several bank holidays are scheduled worldwide, in Europe, China, and Japan, which may increase market volatility due to low liquidity. On Tuesday, we will focus on the crucial Euro area inflation figures, which are expected to remain steady at 2.4%. This will help us understand if the ECB will proceed with its June rate cut.
New Zealand's latest unemployment figures are projected to rise slightly from 4% to 4.3%. On Wednesday, we have the ADP employment change and the ISM Manufacturing Index, which is expected to decrease from 50.3 to 50.1 slightly. The day will conclude with the Federal Reserve's rate meeting, where no changes to interest rates are anticipated.
However, there may be hints about adjustments to the pace of quantitative tightening. The week will end on Friday with the Non-farm payrolls; last month's figure was 303,000 new jobs, but this month is expected to decrease to 243,000, while the unemployment rate is projected to remain steady at 3.8%. The manufacturing ISM services index is also expected to increase slightly from 51.4 to 52 at 15:00 London time.
EUR/USD
The short-term trend that has been dominating since April 16 lifted the price above the trend-defining level we highlighted last week. However, as the week came to an end, EUR/USD came under pressure, and a break to Friday’s low of 1.0671 might send the price to the April 16 low of 1.06. It would also make 1.0762 the new trend-defining level, with the price being bearish below it.
4-hour chart
GBP/USD
The price traded back to the breakdown point of the 125-day-old rectangle pattern we have covered here. However, the price did not close above this crucial April 10 high of 1.2581, and the pattern remains in play. The next support levels are 1.2427, followed by 1.2333 and 1.2248.
Daily chart
USD/JPY
Last week, we said that the trend suggested further gains if the price traded above 153.38. The price dipped as low as 154.49 before adding 574 pips and reaching 160.21. As we head into the new week, the trend will remain upwards above 154.37.
4-hour chart
Brent crude oil (BRENT)
Prices maintain a bullish trend, and the price increased from the 83.45 – 85.69 range. The trend remains bullish as we head into the new week, and if the price dips into the 84.22 to 86.41 range, we anticipate the trend and risk-to-reward ratio to lure the buyers out once more.
12-hour chart
XAUUSD
Gold prices dipped more than expected, but the trend remains bullish above $2225.
6-hour chart
Nasdaq 100 (NAS100)
The Nasdaq 10 rose last week, but the price is now facing strong resistance in the 17765.30 to 17883.04 range, with a push above this range possibly lifting the price even higher. Until we breach this range we might see lower prices.
4-hour chart
BTCUSD
BTC remains trapped in a descending triangle pattern, and a break to $59,156 could trigger further losses. However, as long as we trade above this level, the price will likely trade sideways and might drift towards the upper end of the pattern around the 70K-71.5K mark, with a push above this level, resuming the uptrend.
12-hour chart
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