FX markets focus on central banks this week

[MongiIG]

The Reserve Bank of Australia (RBA) and European Central Bank (ECB) meetings will be held this week. A quarter point rate hike is expected in Australia with no move from the ECB, but watch for indications around rate forecasts.

 

 

 

 

 

[MongiIG]

On 06/06/2022 at 16:30, MongiIG said:

European Central Bank (ECB)

Euro Price Forecast: EUR/USD Gearing Up for ECB Rate Decision

Source: Reuters

 

Jun 6, 2022 | DailyFX
Warren Venketas, Analyst

EUR/USD TALKING POINTS:

• ECB rate decision.
• Key eurozone and U.S. economic data in focus.

EUR/USD ECONOMIC CALENDAR

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

Chart prepared by Warren Venketas, IG

EUR/USD price action has bulls testing the downward sloping trendline (black) towards the psychological 1.0800 resistance zone. We could see a push lower leading up to the key eurozone economic data announcements later this week while the dollar looks to capitalize off the overextended euro positioning.

Resistance levels:

• 100-day EMA (yellow)
• 1.0800/trendline resistance (black)

Support levels:

• 50-day EMA (blue)
• 20-day EMA (purple)
• 1.0600

[MongiIG]

2 hours ago, MongiIG said:

European Central Bank (ECB)

Australian Dollar Forecast: AUD/USD Awaits RBA Decision

Jun 6, 2022 | DailyFX
Justin McQueen, Strategist

AUSTRALIAN DOLLAR ANALYSIS AND TALKING POINTS:

• Australian Dollar Eyes RBA Hike
• Risk Geared Toward Larger Hike

AUD/USD CHART: DAILY TIME FRAME

Source: Refinitiv

IG CLIENT SENTIMENT SIGNALS A MIXED AUD/USD TRADING BIAS

Data shows 55.82% of traders are net-long with the ratio of traders long to short at 1.26 to 1. The number of traders net-long is 9.12% higher than yesterday and 8.84% lower from last week, while the number of traders net-short is 7.57% higher than yesterday and 10.31% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed AUD/USD trading bias.

[MongiIG]

17 hours ago, MongiIG said:

RBA Decision

Aussie rates rise 50bps in a surprisingly hawkish move

 

 

Australian shares dropped and the Australian dollar (AUD) climbed after the Reserve Bank of Australia (RBA) turned hawkish. But, as IGTV’s Jeremy Naylor explains the AUD’s rise is not across the board.

[MongiIG]

Just now, MongiIG said:

Aussie rates rise 50bps in a surprisingly hawkish move

Who is trading or analysing Australian shares and the Australian dollar (AUD) ?

Share your analysis or thoughts for Australian shares and the Australian dollar (AUD) going forward after this surprising hawkish move.

 

Thanks and all the best 

MongiIG

[MongiIG]

1 hour ago, MongiIG said:

Aussie rates rise 50bps in a surprisingly hawkish move

Where next for AUD after 50bps rate hike?

Australian shares dropped and the Australian dollar climbed immediately after the Reserve Bank of Australia (RBA) turned hawkish.

 

 

Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Tuesday 07 June 2022 

RBA hike brings cash rate to 0.85%

The Reserve Bank of Australia (RBA) has delivered a 50-basis point (bps) hike in its June meeting, bringing the cash rate to 0.85%.

The move wasn’t completely unexpected as markets were leaning towards a larger hike than the 25bps in the days leading up to the meeting, but the move is still a bold one from the central bank at a time when increased focus is being placed on balancing soaring inflation and signs of stagnating growth.

Market reaction

The reaction in the market after the meeting seems to reflect the uncertainty from traders about whether this was the right move.

The Australian dollar (AUD) jumped higher on the announcement of the 50bps hike but retreated almost immediately back towards where it had first set off. I suspect a smaller 25bps hike might have had a more pleasing outcome for AUD bulls.

Hopes for a “soft landing”, where inflation is brought down lower without hindering growth too much, are still present in the market, but today’s 50bps move from the RBA is likely to have rocked many people’s faith a little bit, leaving the path for the AUD slightly unclear in the immediate future.

Key takeaway

The key takeaway from the meeting statement is the need to bring down inflation - no surprise there.

Governor Philip Lowe is stern in his message about removing the extraordinary monetary support introduced during the pandemic, which he now sees as unnecessary given the level of growth in economic activity, the labour market, and price pressures.

There is a hawkish tone all over the statement as the RBA is expecting inflation to rise further, especially as commodity prices continue to rise, pushing up household spending on electricity, gas, and petrol, suggesting further interest rate hikes in the near future.

This is where market participants have likely been somewhat spooked, as the statement seems to suggest that the governing council is oblivious to the current sensation of risk aversion looming in the market, with many expecting a recession to follow shortly. To attest to that point, the RBA points out the strong labour market in Australia, with unemployment down to 3.9% - its lowest rate in almost 50 years.

At first glance, this data is great news for the economy, but many likely have a bad feeling in the back of their mind, as economic recession usually follows a period of strong economic conditions, when unemployment is at its lows.

Combatting soaring inflation

All in all, the June meeting has proved that the RBA is still focused on combatting soaring inflation without getting too caught up on concerns about stagnant growth given the latest gross domestic product (GDP) readings have continued to show economic expansion.

Market jitters about stagflation haven’t factored into the bank’s monetary policy decision, which has shown more boldness than what is expected from the Federal Reserve (Fed) and the Bank of England (BoE) next week.

The reaction in the Australian dollar, most notably in AUD/USD, has proved that market participants don’t exactly agree with the bank’s aggressive tightening path but the weakness in the pair can also be attributed by a pickup in USD bulls and a slight correction after four weeks of strong performance from the Aussie dollar.

[akashkhan]

The foreign exchange market, sometimes known as the forex (FX) market, has no central headquarters. Foreign exchange market transactions occur in a variety of ways, 24 hours a day, through various channels all over the world, and wherever one currency is exchanged for another.

[MongiIG]

1 hour ago, akashkhan said:

The foreign exchange market, sometimes known as the forex (FX) market, has no central headquarters. Foreign exchange market transactions occur in a variety of ways, 24 hours a day, through various channels all over the world, and wherever one currency is exchanged for another.

Hi @akashkhan

Thanks for sharing!

Do you trade the forex market ? If yes, what currency pairs are on your watchlist that you trade.

 

All the best

MongiIG

[MongiIG]

On 06/06/2022 at 16:30, MongiIG said:

European Central Bank (ECB)

All the best

MongiIG

[MongiIG]

Euro Price Forecast: Hawkish ECB on the Cards for EUR/USD Tomorrow?

Jun 8, 2022 | DailyFX
Warren Venketas, Analyst

EUR/USD TALKING POINTS

• Q1 eurozone GDP smashes forecasts.
• Focus shifts to tomorrow’s ECB rate decision.
• IG client sentiment: Bearish.