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In this week’s Week Ahead Analysis we take a look at the key charts of the week with #GBPUSD, #USDJPY, #GOLD and more!
Watch the video to learn more…
Week Ahead Analysis
The United States has been experiencing stronger than expected economic growth, as evidenced by the robust jobs data released recently. In April, the US economy created an impressive 253,000 jobs, which has led to forecasts suggesting a substantial increase in the Consumer Price Index (CPI) month-over-month. Analysts predict that the US CPI will jump from 0.1% to 0.4%, reflecting heightened inflationary pressures in the country.
In addition to the CPI, the US Core Producer Price Index (PPI) is also projected to experience an uptick, with forecasts indicating an increase from -0.1% to 0.2%. The higher PPI is yet another sign of mounting inflationary pressures, which could potentially prompt the Federal Reserve to consider tightening its monetary policy in the coming months.
However, this economic growth is overshadowed by a deepening financial crisis in the US banking sector. Shares in regional banks have been plummeting, causing concerns among investors and market participants. The most recent example is the California-based bank, PacWest, which experienced a staggering 50% plunge in after-hours trading. This sharp decline was triggered by reports suggesting that the company is considering selling itself due to the increasing pressures from the current financial climate.
Across the pond, the Bank of England (BoE) is grappling with its own set of inflationary challenges. With the inflation rate in the UK hovering around a staggering 10%, the central bank is expected to take action by raising interest rates. Analysts anticipate that the BoE will increase rates from 4.25% to 4.5% in an attempt to rein in the persistently high inflation levels.
In summary, the combination of strong job growth in the US and the ongoing battle against high inflation in the UK has created a climate in which central banks are prompted to take decisive action. Simultaneously, the deepening financial crisis in the US banking sector poses significant risks for the global economy and currency markets. It is crucial for market participants to closely monitor these developments and stay informed about the potential impacts of the unfolding financial turmoil.
USD Index
The price on the chart has traded through multiple technical levels and some observations included:
- The price of the USD Index remained above the 101.00 key support.
- Price reversed its rally late on Friday despite a move higher after a strong NFP report.
- Traders saw the opportunity to trade the greenback lower, showing more signs of weakness.
GBPUSD
The price on the chart has traded through multiple technical levels and some observations included:
- The price of cable is trading at the key resistance level at 1.2650.
- The Bank of England is forecast to hike rates, and continue to do so due to the high inflation rates.
- This combined with a weakening US Dollar could see price trade through this key level of resistance.
USDJPY
The price on the chart has traded through multiple technical levels and some observations included:
- The price of USDJPY rejected the key highs of 137.00 last week.
- If the banking crisis concerns continue to grow in the US, investors may rush to JPY once again.
- This could see the price of USDJPY trade lower, with the price heading towards key supporting areas of 133.50 and 130.50.
GOLD
The price on the chart has traded through multiple technical levels and some observations included:
- Gold reached the highs at 2075.00 and found resistance.
- This was in line with the USD index being at the 101.00 support.
- Gold could be supported after the recent banking crisis starts to rear its head again.
- Buyers could begin to step back in at the recently formed lows.
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