Market Analysis

Pipscollector.com - Overbought DXY and oversold EUR/USD for the past 2 months traded maximum at 150 pip ranges for each of the prior 8 weeks.  Spot market EUR/USD Futures contracts since July traded 2 day highs at 300,000 contracts and a fairly normal 150,000 to 200,000 per day contracts. In days long past and never to return, EUR/USD traded 500,000 to 700,000 per day contracts regularly. No such concept as a 300,000 contract day existed.

The absence of spot market contracts found a new home in Currency swaps and interest rate contracts. Japan for example traded 400,000 Currency Swap contracs in 1998 and today well over 2 million while Spot Market contracts since 2015 / 2016  traded on an upswing at barely 200,000 contracts from multi year lows at 35,000.

Japan interest rate contracts in 1998 traded 9,000 per day and today contracts rose to 65,000 and at all time highs. EUR, JPY and DXY are most widely traded while JPY and USD market share account for  74.4% and 71.4%. Most popular are contracts with maturities at 1 year or less. Japan alone accounts for 87 trillion USD in Notional amounts.

Currency Swaps and Interest rate contracts ensured Spot markets traded limited weekly ranges. DXY amd EUR/USD for example traded 100 and 150 pip weeks in each of the past 8 weeks while USD/JPY traded 200 pips.

Anchor currencies must be viewed in total as permanent 200 pip weeks at the maximum and 300 peaks for GBP/JPY and wide rangers, GBP/NZD, EUR/NZD, EUR/AUD and GBP/AUD.

The week

DXY is in the same position as the past 8 weeks as severely overbought at 105.00's and 200 pip ranges from 103.00's to 105.00's.

EUR/USD targets long term at 1.1033 on breaks at 1.0855 and 1.0940 while GBP/USD targets 1.2746 on breaks at 1.2605 and 1.2665. EUR/USD on a break of 1.0940 ranges from 1.0940 to 1.1108 while GBP/USD ranges from 1.2665 to 1.2861.

Economics

Import Prices for all economies remain elevated which means CPI and Inflation also remains high. When Import prices drop then Inflation drops. The month of significant releaes is over except for the BOJ's Producer Prices  next week on Tuesday.

The BOJ's producer prices will answer the question to USD/JPY intervention.

YCC

The Tamura and recent BOJ Nakamura speeches answered the YCC expansion from 0.5 to 2.00 for the 10 year JGB yield as a protection to Inflation. As suspected due to past expansion were derived from Inflation rises.

USD/JPY 146.00's are blocked by the BOJ in a range from 146.42 to 148.43. My view is overbought ay 148.44 to 146.67. Break at powerful 146.00's is required to target 145.76 and 144.87.

AUD/USD next week targets easily 0.6500's while NZD/USD targets 0.6000's.

Best trades are short wide rangers: EUR/AUD, GBP/AUD, GBP/NZD, EUR/NZD. Further, USD/JPY, GBP/USD, GBP/JPY.

AUD/USD and EUR/USD serves as a double trade to GBP/USD while CHF/JPY serves its purpose as a double trade to USD/JPY.

The new permanent condition for currency markets is flattened ranges at barely 200 pip weeks.

Read more Market Analysis from Pipscollector to update the latest information to help your trading.

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Pipscollector - Weekly Crude Oil (WTI) Price Analysis Report

CRUDE OIL FORECAST:

• Oil prices rebound during the week, but the near-term outlook remains somewhat bearish

• Uncertainty over crude oil demand and stalled U.S. debt ceiling negotiations create a negative backdrop for energy markets

• The double-top pattern in WTI’s daily chart signals prices could head lower in the coming days

Pipscollector - Crude oil prices (as measured by West Texas Intermediate front-month futures) experienced a modest decline on Friday, settling near $71.30 per barrel, but closed higher on a weekly basis, ending a four-week losing streak that has been fueled by heightened uncertainty about the demand outlook and non-stop recession talk on Wall Street.

Influence from the US economy

While the U.S. economy has remained resilient and managed to avert a recession so far, market indicators, such as the inversion of the yield curve, signal a downturn is on the way. True, the economic landscape could defy expectations and turn more positive, but recent turmoil in the banking sector has left little room for optimism, complicating the soft-landing narrative.

With the United States possessing the largest GDP worldwide, a contraction of its economy has the potential to significantly curtail global growth, resulting in a decrease in the overall demand for fossil fuels. This, in turn, could adversely impact crude prices, leading to a steep sell-off in cyclical commodities.

The ongoing U.S. debt ceiling impasse is exacerbating the challenges faced by energy markets. If the federal government fails to lift the borrowing cap in time, the Treasury Department could run out of cash to pay its obligations as soon as June 1, setting the stage for a default. This scenario would have catastrophic consequences for the economy and the financial system.

Forecast

It is likely that Democrats and Republicans will manage to secure a deal at the last minute, that’s the nature of politics in Washington. However, such an agreement may only come after markets have begun to convulse and experience significant turbulence.

In the current environment, oil prices could be skewed to the downside, so further losses should not be ruled out. With investor confidence fragile, conditions can turn treacherous quickly and without warning, so traders should remain vigilant and stay tuned to the news, with particular attention to the debt ceiling saga.

CRUDE OIL TECHNICAL ANALYSIS

In terms of technical analysis, WTI oil appears to be forging a bearish double-top formation. While the pattern is not yet complete, it may be confirmed soon if prices break below neckline support near the psychological $70.00 level. If this floor is breached, sellers may launch an attack on the $66.00 region. On further weakness, we could see a retest of the 2023 lows.

On the flip side, if prices manage to rebound from current levels, initial resistance lies at $73.80. A successful move above this barrier would invalidate the double top, opening the door for a climb toward $76.50.

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Pipscollector - Weekly US Dollar (USD) Analysis Report

US DOLLAR WEEKLY FORECAST: BULLISH

• The US Dollar rose the most over 2 weeks since September
• Rising Treasury yields continued cooling Fed rate cut bets
• All eyes turn to the central bank’s preferred inflation gauge
• DXY broke above the 100-day SMA, broader reversal ahead?

Fundamental Analysis

The US Dollar rallied against its major counterparts this past week. In fact, the DXY Dollar Index rose about 1.9% over the past 2 weeks. That is the best 10-day period for the world’s reserve currency since the middle of September. Let us take a closer look at what happened to the US Dollar and why there could be more strength in store ahead.

For one thing, the US Dollar’s ascent has been met with a similar uptake in front-end Treasury Yields. That is a sign that financial markets are slowly pricing out near-term rate cuts from the Federal Reserve, which were aggressively priced ever since the collapse of Silicon Valley Bank (SVB) triggered liquidity and recessionary concerns.

In recent weeks, ebbing financial market volatility, sticky underlying US inflation and what appears to be a still-tight labor market underscored economic resilience amidst the most aggressive monetary tightening cycle in decades. Meanwhile, during a speech on Friday, Fed Chair Jerome Powell confirmed that interest rates might not have to rise as far given recent credit stress.

That said, he noted that he did not yet decide about future tightening and highlighted that the market rate path is much different from the central bank’s forecast. As such, markets are only pricing in about a 25% chance of another rate hike in June. As usual, incoming economic data will continue deciding the fate of monetary policy.

The US Dollar will be closely eyeing the PCE Core Deflator on Friday, due at 12:30 GMT. The Fed’s preferred inflation gauge is expected to remain unchanged at 4.6% y/y in April. That is not a good sign from the perspective of the central bank. Initial jobless claims will be another interesting print, due at the same time but on Thursday. There may yet be more room to cool near-term rate-cut bets, offering support for the US Dollar.

Technical Analysis

Looking at the daily chart, the US Dollar broke above the 100-day Simple Moving Average (SMA). This might be an early warning sign that the dominant downtrend since September might be turning. Key resistance appears to be the 23.6% Fibonacci retracement level at 104.11. Clearing that exposes the March high at 105.88. Otherwise, key support is the 100.82 – 101.29 zone.

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