Forex News

News source: FXStreet
May 24, 18:31 HKT
Oil gets some hope after big negative revisions on Durable Goods
  • Oil sinks further and falls to three-month lows near $76.00.
  • Despite geopolitical headlines, oil has kept sinking this week. 
  • The US Dollar Index trades below 105.00 and looks set to close below for this week.

Oil prices extend their decline on Friday and fall to a three-month low to levels not seen since February 26 near $76.00, erasing the previous week's gains and losing more than 4% this week. There were plenty of headlines for Crude prices to jump up on, such as Russia planning to move its borders in the Baltic Sea and fresh missile attacks from Russia into Ukraine, which could affect the supply of crude in the markets. Unfortunately, those headlines were no match for the US Federal Reserve (Fed), which is currently killing off any hopes or prospects of early interest rate cuts, that in turn would boost demand for Crude Oil. 

Meanwhile, the US Dollar Index (DXY), which tracks the performance of the US Dollar against a basket of six major currencies, has jumped back above 105.00 after the US preliminary Purchasing Managers Index (PMI) numbers for May revealed that all sectors keep expanding, with Services leading the charge. In the PMI report, the prices component showed an uptick as well, which could filter through into an already hot Consumer Price Index (CPI) release again, and would see the DXY benefit from inflow into the Greenback again. 

At the time of writing, Crude Oil (WTI) trades at $77.17 and Brent Crude at $81.37

Oil news and market movers: Downbeat Durable Goods help out

  • Oil prices are jumping after a second consecutive miss on estimes for Durable Goods and severe downward revisions for the previous numbers are giving a rate cut in September some more hope. 
  • OPEC+ (OPEC members plus other oil-producing countries)  has just confirmed to Bloomberg that it will not hold its June 2 meeting in Vienna. Countries will participate in a video conference, which could point to no big decisions or changes to be announced, making it a non-event already in advance. 
  • In addition to discussing rolling over current production cuts, the production capacity per member will be reviewed ahead of the individual targets for 2025. 
  • Mexico produced nearly 6.4% less Oil in April than a year before, according to Bloomberg News. The decline means nearly 1.56 million barrels per day less. 
  • Markets have completely discarded the possibility that the Fed will not cut interest rates before the summer, and chances for a cut thereafter are even diminishing. This kills off the assumption that a boost given by rate cuts to the US economy will not take place, and translates into more sluggish Oil demand for the rest of the year. 
  • The National Oceanic and Atmospheric Administration (NOAA) has released its 2024 hurricane forecast and sees between 17 to 25 named storms and potential hurricanes for the US hurricane season ahead. Main drivers are the warm waters with the absence of El Niño. 

Oil Technical Analysis: Fed now controls Oil prices

Oil prices are flirting with a three-month low to levels not seen since the end of February. The pivotal line in the sand is $75.27, where Oil prices are currently trading. With the outlook for more sluggish demand in the US and possibly in the rest of the world, the risk could be that more discounts need to be priced in, in order to keep demand balanced. Although a full unwind back to $68 does not look to be in the cards for now, a snoozing OPEC decision, which is not taking up more actions to underpin Oil prices, might see a $72.00 or $70.00 price tested over the summer.   

On the upside, a trifecta of Simple Moving Averages (SMA) is forming, with two of them falling in line with pivotal levels to have in mind. First up is the 100-day SMA at $78.72, which falls in line with the ascending green trend line as the first hurdle. Next, just ahead of $80.00 is the 200-day SMA at $79.57, near the pivotal blue line at $79.94. The last one is the 55-day SMA at $81.18, the target level once $80.00 got firmly broken. 

On the downside, the pivotal level at $75.27 is the last solid line that could support the decline. If this level is unable to hold, investors could expect an accelerated sell-off towards $72.00 and $70.00, erasing all gains for 2024. Further down, Oil price could test $68, the December 13 low. 

US WTI Crude Oil: Daily Chart

US WTI Crude Oil: Daily Chart

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

 

May 24, 11:06 HKT
Japanese Yen remains on backfoot amid uncertainty over BoJ's rate-hike plans
  • The Japanese Yen lost ground as Japanese CPI fell to 2.5% YoY in April from 2.7% prior.
  • The Japanese inflation remains above the 2% target, keeping the BoJ under pressure to tighten policy further.
  • The US Dollar fails to hold gains even though uncertainty over Fed reducing interest rates in September has deepened.

The Japanese Yen (JPY) remains on the backfoot in Friday's New York session after the release of softer National Consumer Price Index (CPI) data by the Statistics Bureau of Japan. The annual inflation rate dropped to 2.5% in April from 2.7% in the previous month, marking the second consecutive month of moderation but still staying above the Bank of Japan’s (BoJ) 2% target. This sustained inflation keeps pressure on the central bank to consider further policy tightening.

The Bank of Japan has emphasized that a virtuous cycle of sustained, stable achievement of its 2% price target, along with strong wage growth, is essential for normalizing policy. Meanwhile, investors expect that the persistent weakness of the JPY might compel the BOJ to advance its next interest rate hike to mitigate the impact on the cost of living, according to Reuters.

US Dollar (USD) falls sharply despite hawkish sentiment surrounding the Federal Reserve (Fed) with the intention to maintain higher policy rates for an extended period. This sentiment is reinforced by the higher-than-expected United States (US) Purchasing Managers Index (PMI) data that was released on Thursday.

Daily Digest Market Movers: Japanese Yen extends losses as soft CPI raises concerns over BoJ plans of tightening policy further

  • Japan’s Core CPI (YoY), which excludes fresh food but includes fuel costs, rose 2.2% in April as expected, slowing for the second straight month, as compared to March’s reading of 2.6%.
  • The S&P Global US Composite PMI jumped to 54.4 in May, from 51.3 in April, reaching its highest point since April 2022 and surpassing market expectations of 51.1. The Service PMI climbed to 54.8, reflecting the largest output growth in a year, while the Manufacturing PMI edged up to 50.9.
  • According to the CME FedWatch Tool, the probability of the Federal Reserve reducing interest rates in September has declined to 49% from 51% a day earlier.
  • The Bank of Japan announced on Thursday that it left the amount of Japanese government bonds (JGB) unchanged compared to the previous operation. Over a month ago, the BoJ trimmed the amount of 5-10 years it bought in a scheduled operation.
  • Tensions are escalating following Lai Ching-te's assumption of office as Taiwan's new president. Chinese state media reports indicate that China has deployed numerous fighter jets and conducted simulated strikes in the Taiwan Strait and around groups of Taiwan-controlled islands, per Reuters.
  • Japan’s Manufacturing Purchasing Managers Index (PMI), released on Thursday by Jibun Bank and S&P Global, rose to 50.5 in May from April’s 49.6, surpassing market expectations of 49.7. This marks the first growth since May 2023. Meanwhile, the Services PMI fell to 53.6 from the previous 54.3, still indicating the fastest expansion in eight months.
  • Japan’s 10-year government bond yield surpassed 1% this week for the first time since May 2013, fueled by traders' increasing bets that the Bank of Japan would tighten policy further in 2024.

Technical Analysis: USD/JPY aims to establish above 157.00

The USD/JPY pair trades close to 157.00. A rising wedge pattern on the daily chart suggests a potential bearish reversal as the pair approaches the wedge’s tip. Despite this, the 14-day Relative Strength Index (RSI) remains above 50, indicating continued bullish momentum. A decline below this level would signify a shift in momentum.

The USD/JPY pair might retest the upper boundary of the rising wedge at approximately 157.20. If it breaks above this level, the pair could advance toward the recent high of 160.32.

On the downside, the nine-day Exponential Moving Average (EMA) at 156.33 seems to appear as immediate support, followed by the lower threshold of the rising wedge and a psychological level of 156.00. A break below this level could exert downward pressure on the USD/JPY pair, potentially moving it toward the throwback support at 151.86.

USD/JPY: Daily Chart

Japanese Yen price today

The table below shows the percentage change of the Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Euro.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.06% -0.03% -0.04% 0.00% 0.04% 0.00% 0.07%
EUR 0.05%   0.03% 0.02% 0.08% 0.11% 0.07% 0.12%
GBP 0.03% -0.02%   0.00% 0.05% 0.11% 0.05% 0.08%
CAD 0.03% -0.01% -0.01%   0.04% 0.09% 0.04% 0.08%
AUD 0.01% -0.06% -0.04% -0.05%   0.04% -0.01% 0.07%
JPY -0.06% -0.12% -0.10% -0.08% -0.08%   -0.03% -0.01%
NZD 0.00% -0.05% -0.05% -0.04% 0.01% 0.04%   0.04%
CHF -0.06% -0.08% -0.09% -0.11% -0.05% 0.00% -0.07%  

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Bank of Japan FAQs

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.

The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.

A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.

 

May 24, 16:16 HKT
Gold recovers after sell-off on increased safe-haven demand
  • Gold has cushioned its decline as investors seek it out for its safe-haven qualities on Friday. 
  • Mounting geopolitical risks from multiple hotspots – China, Gaza and Ukraine – are sending investors fleeing for safety. 
  • Stronger-than-expected US data on Thursday sent Gold into a downward spiral as higher interest rates become normalized. 

Gold (XAU/USD) puts in a temporary floor under the recent sell-off on Friday, trading a quarter of a percent higher at around the $2,340s, as a combination of market and geopolitical concerns lead investors to seek solace in its safe-haven qualities. 

Gold retrenches on geopolitical concerns

The news that China has started a second day of war games around Taiwan, as well as the decision by Ireland, Norway and Spain to recognise the independent state of Palestine, have ratcheted up geopolitical tensions and impacted markets, helping drive demand for Gold. 

Asian stocks are broadly lower on Friday, with the Hang Seng down 1.71%, the Shanghai Composite down 0.90%, and the Nikkie closing 1.36% lower. Investor concerns about high interest rates were a further factor weighing on sentiment.  

Gold price weakened after US data 

A slew of unexpectedly strong US economic data took its toll on the price of Gold on Thursday. 

The higher-than-expected US Purchasing Manager Index (PMI) preliminary data for May, especially in the Services sector – which has been singled out as a major contributor to high inflation – has dialed back bets that the Federal Reserve (Fed) will implement early interest-rate cuts. This is negative for non-yielding Gold as it increases the opportunity cost of holding the precious metal. 

India imports fall

The relatively high price of Gold may also be acting as a counterweight to demand in India, according to Reuters, who notes a fall in imports to the country as “high prices encourage retail customers to exchange old jewelry for new products”, reports FXStreet Editor Lallalit Srijandorn.  

Technical Analysis: Gold breaks below major trendline

Gold price (XAU/USD) has decisively broken below a major trendline for the uptrend since February, ushering in a new more bearish technical atmosphere. 

The steep decline from the all-time highs registered on Monday now suggests Gold is probably in a short-term downtrend, favoring short positions over longs. 

XAU/USD 4-hour Chart

The penetration of the major trendline signals Gold will probably now fall to a conservative target at $2,303 (Fibonacci 0.618 extrapolation of the prior down move from $2,435 to $2,355) or all the way down to $2,272 (100% of the prior down move). The latter level is also the support from the May 3 lower high. A break below the $2,325 lows would provide confirmation of more downside to these targets. 

The Relative Strength Index (RSI) became oversold and then reentered neutral territory on the previous bar, suggesting an increased chance of a pull back. It is also possible Gold could correct higher and return to the trendline in a throwback move before rolling over and going lower. 

The precious metal’s medium and long-term trends are still bullish, suggesting the risk of a recovery remains high, yet price action does not suggest this is currently the case.

A decisive break back above the trendline at $2,360 would provide evidence of a recovery and reversal of the short-term downtrend. 

A decisive break would be one accompanied by a long green bullish candle or three green candles in a row. 

Economic Indicator

S&P Global Services PMI

The S&P Global Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for USD.

Read more.

Last release: Thu May 23, 2024 13:45 (Prel)

Frequency: Monthly

Actual: 54.8

Consensus: 51.3

Previous: 51.3

Source: S&P Global

 

May 24, 21:10 HKT
USD/CAD remains calm above 1.3700 despite weak Canadian Retail Sales
  • USD/CAD didn’t move as expected despite the release of the Canadian Retail Sales and the US Durable Goods Orders data.
  • The Canadian Retail Sales contracted by 0.2% in March on a month-on-month basis.
  • US Durable Goods Orders surprisingly rose by 0.8% in April.

The USD/CAD pair remains unchanged above the crucial support of 1.3700 even though Canadian Retail Sales were weaker-than-expected in March and United States Durable Goods Orders for April beats estimates.

Canadian Retail Sales were down by 0.2% while investors forecasted them to have remained stagnant. In February, Retail Sales also contracted by 0.1%. Sales data excluding automobiles surprisingly declined by 0.6% as economists expected them to rise by 0.1%.

Retail Sales data indicate the current status of consumer spending, which accounts for a major part of economic growth. Significant decline in sales at retail stores indicates households are struggling to bear the consequences of higher interest rates by the Bank of Canada (BoE). This would strengthen the speculation that the BoC will start reducing interest rates from the June meeting.

Meanwhile, the market sentiment is upbeat though Federal Reserve (Fed) policymakers continue to maintain a hawkish guidance on interest rates. Considering positive overnight futures, the S&P 500 is expected to open on a positive note. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to 104.77.

The United States (US) Census Bureau has reported that Durable Goods Orders surprisingly rose by 0.7% while investors expected them to decline by 0.8%. The Durable Goods Orders data is a leading indicator of core Consumer Price Index (CPI) and higher demand for durable goods suggest a stubborn inflation outlook.

USD/CAD

Overview
Today last price 1.3713
Today Daily Change -0.0017
Today Daily Change % -0.12
Today daily open 1.373
 
Trends
Daily SMA20 1.3676
Daily SMA50 1.3647
Daily SMA100 1.3563
Daily SMA200 1.3572
 
Levels
Previous Daily High 1.3744
Previous Daily Low 1.3657
Previous Weekly High 1.3691
Previous Weekly Low 1.359
Previous Monthly High 1.3846
Previous Monthly Low 1.3478
Daily Fibonacci 38.2% 1.371
Daily Fibonacci 61.8% 1.369
Daily Pivot Point S1 1.3676
Daily Pivot Point S2 1.3623
Daily Pivot Point S3 1.359
Daily Pivot Point R1 1.3763
Daily Pivot Point R2 1.3797
Daily Pivot Point R3 1.385

 

 

May 24, 19:35 HKT
Mexican Peso recovers as risk appetite improves
  • The Mexican Peso reverses earlier loses after risk appetite improves. 
  • The Peso fell against the US Dollar after strong US economic data strengthened the buck on Thursday. 
  • USD/MXN could be in a new short-term uptrend after breaking above a trendline.

The Mexican Peso (MXN) recovers after a weak start on Friday as a reversal in risk sentiment supports the Peso, a risk-on currency. 

MXN recently weakened against the US Dollar, threatening to reverse the Peso’s short-term trend, after a slew of positive economic data from the US further delayed the time the Federal Reserve (Fed) is expected to lower interest rates, supporting the Greenback. 

The Mexican trade balance showed a wider-than-expected 3.746 billion deficit in April according to data from INEGI released on Friday. This was lower than the previous month's surplus of 2.098B and the 0.8B deficit forecast by economists. 

Mexican Peso: Bank of Mexico releases meeting Minutes

Mexican data released on Thursday mostly came out in line with estimates, but the Q1 Gross Domestic Product (GDP) showed a surprise upward revision to 0.3% on a quarter-on-quarter basis compared to the 0.2% previous estimate. This temporarily boosted the Mexican Peso in its pairs. 

The release of the Bank of Mexico (Banxico) May meeting Minutes showed most policymakers continued to see upside risks to inflation despite data showing core inflation continuing to decline. Persistent inflation in the Services sector was seen as a key stumbling block to inflation falling to Banxico’s 3.0% target. 

The Minutes showed the decision to keep interest rates at 11.00% was unanimous. 

In its concluding statements, Banxico’s Governing Board said: “challenges and risks prevail, which requires monetary policy to continue being managed prudently.”

Adding, “With this decision, the monetary policy stance remains restrictive and will continue being conducive to the convergence of inflation to the 3% target in the forecast horizon.”

Technical Analysis: USD/MXN breaks above trendline and continues rising

USD/MXN – or the number of Pesos that can be bought with one US Dollar – rises after breaking above the trendline for the April-May decline. This could possible indicate the pair is now in a short-term uptrend, favoring long positions over shorts. 

USD/MXN 4-hour Chart 

A break above Thursday’s high at 16.76 would confirm a continuation of the young uptrend to a possible target at the previous range lows around 16.85. 

Given the medium and long-term trends are bearish, however, there remains a high risk of the short-term trend reversing and the pair continuing lower. 

A decisive break below the grey trendline for the up move at roughly 16.68 would bring the short-term uptrend into doubt and possibly signal the resumption of more downside. 

Economic Indicator

Trade Balance, $

The Trade Balance released by INEGI is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the Mexican Peso. If a steady demand in exchange for Mexican exports is seen, that would turn into a positive growth in the trade balance which should be positive (or bullish) for the Peso.

Read more.

Last release: Fri May 24, 2024 12:00

Frequency: Monthly

Actual: $-3.746B

Consensus: $-0.8B

Previous: $2.098B

Source: National Institute of Statistics and Geography of Mexico

 

May 24, 20:39 HKT
US Durable Goods Orders rise 0.7% in April vs. -0.8% expected
  • Durable Goods Orders in the US rose 0.7% in April.
  • US Dollar Index stays in negative territory below 105.00.

Durable Goods Orders in the US increased $1.9 billion, or 0.7%, to $284.1 billion in April, the US Census Bureau reported on Friday. This reading followed the 0.8% growth recorded in March (revised from +2.6%) and came in better than the market expectation for a decrease of 0.8%.

"Excluding transportation, new orders increased 0.4%," the press release read. "Excluding defense, new orders were virtually unchanged. Transportation equipment, also up three consecutive months, led the increase, $1.1 billion, or 1.2%, to $96.2 billion."

Market reaction

These figures don't seem to be having a significant impact on the US Dollar's performance against its rivals. At the time of press, the USD Index was down 0.22% on the day at 104.80.