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Cracking the Crack SpreadThe ‘crack spread’ is a term used in the oil industry that refers to the differential between the price of crude oil and the petroleum products extracted from it, such as gasoline and heating oil. The name comes from the process of 'cracking' crude oil in a refinery to produce these valuable products. The spread serves as a measure of refining margin, or profitability, for oil refineries. When the prices of petroleum products are high relative to the price of crude oil, the crack spread widens, and refining margins increase, making it profitable for refineries. Conversely, when the price of crude oil is high relative to the products, the crack spread narrows, and refining can become less profitable or even unprofitable. The crack spread is typically expressed in terms of the ratio between the input (crude oil) and the outputs (refined products). For example, a 3:2:1 crack spread assumes that three barrels of crude oil can produce two barrels of gasoline and one barrel of heating oil. In the futures market, the crack spread can be traded by buying crude oil futures and selling futures in its products, thus locking in the margin between input and output prices. This can serve as a form of hedging against price risk for those involved in the oil industry. This week, we will delve into various factors influencing the crack spread and evaluate their potential impact on the current spread; Geopolitical Concerns SPR Refill One of the key points mentioned when we last covered oil was the potential refills of the SPR which are still pending as an attempt to purchase up to 6 million barrels was abandoned at the last minute. As the drawdown in the SPR continues, it seems inevitable that the Biden administration will have to replenish the reserve, likely pushing oil prices higher due to increased demand. Russia Ukraine escalation The simmering tensions of the Russia-Ukraine conflict leave us wondering if the price of crude oil might escalate further. The ongoing conflict focuses on a key port in the Black Sea. Consequently, this could potentially impact up to 20% of oil exports from Russia. Although most major nations no longer rely on Russia for oil supply, some countries are still buying from Russia. This leads to the concern that such countries might have to turn to the open market to make up for their supply shortage one day. Seasonality Crack falls in the 2nd half of the year Seasonal trends indicate a pattern where the 3:2:1 crack spread declines in the second half of the year. This trend has persisted for 6 out of the past 10 years, with the average decline of 29%. Three of the remaining four years closed flat, with one year ending approximately 20% higher. Economic Growth Current economic growth weak but some soft landing expected The year-on-year GDPs for major economies are trailing their long-term averages, indicating still fragile economic growth as industries and consumers grapple with sticky inflation and high rates. Weak economic growth generally dampens the crack spread, as industries and consumers cut back on spending, reducing the demand for refined products. Currency Interplay Between Dollar, Crude, and Crack Spread The Inverse Dollar and Crude Oil has as long-standing positive correlation up until the Russian-Ukraine Crisis when both Crude Oil and the dollar move sharply higher. As this relationship now begins to normalize again, any weakness in the dollar could provide the fuel for Crude & the Crack Spread to rally again. The crack spread is also highly correlated with Crude Oil outright prices, hence any view on crude oil can also be expressed using the Crack Spread. The crack spread hit an all-time high in June 2022 amidst the Russia-Ukraine tensions. Currently, the spread trades at a higher range relative to the past two decades and seems to face some resistance at the previous all-time high in 2013. On a shorter timeframe, the crack spread appears to be breaking out of a symmetrical triangle to the upside, typically a signal of bullish continuation. With prices slightly dipping, this could present an enticing opportunity. On balance the impending risk of the geopolitical event breaking out as well as the structurally weakening dollar seems to outweigh the seasonality and economic weakness effect. To express our view on the 3:2:1 crack spread, we can set up a long position on the crack spread. This can be set up by buying 2 RBOB Gasoline Futures & 1 NY Harbor ULSD Futures and selling 3 Crude Oil Futures at the current level of 114.5, stop loss at 97 and take profit at 140. The calculation of the 3:2:1 crack spread should also be noted as: (2 * RBOB Gasoline Futures + 1 * NY Harbor ULSD Futures ) * 42 – (3 * Crude Oil Futures). The factor 42 is multiplied to the RBOB Gasoline Futures and NY Harbor ULSD Futures as the two are quoted in USD per gallon, this converts the price quotation in Barrel terms, which is the same as Crude Oil Futures. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.eia.gov www.cmegroup.com www.cmegroup.com www.cmegroup.com www.cmegroup.com
NYMEX:RB1!Long
by inspirante
2
EUR/USD rebounds after sharp lossesThe euro has bounced back on Friday after sliding 0.99% a day earlier. In the European session, EUR/USD is trading at 1.1018, up 0.38%. On the economic calendar, the US PCE Price index, the Fed's preferred inflation gauge, fell to 3.0% in June, down from 3.8% in May. The European Central Bank raised interest rates by 0.25% on Thursday, bringing the main rate to 3.75%. The ECB statement warned that inflation, although on the decline, "is expected to remain too high for too long". The ECB did not provide any forward guidance, as the statement said the Governing Council would base its decisions on the data. ECB President Lagarde didn't add much to this stance, saying that ECB members were "open-minded" about rate decisions at upcoming meetings and wouldn't commit to whether the ECB would raise or pause in September. The rate increase can be described as a 'hawkish hike', as the statement kept the door open for further hikes. Nevertheless, the euro lost ground following the decision, which could reflect expectations that the ECB is close to its peak rate, despite the hawkish rhetoric. The eurozone economy is struggling, and this week's Services PMIs pointed to weakness in Germany and France, the biggest economies in the bloc. The eurozone could slip into recession this year, which means that the ECB will have to think carefully before its raises rates. On the other side of the coin, inflation, which is the ECB's number one priority, is at 5.5%, well above the target of 2%. The eurozone releases the July inflation report on Monday and the reading could be a key factor in the ECB's rate decision at the September meeting. The euro lost further ground on Thursday after better-than-expected US data. In the second quarter, GDP rose 2.4% q/q, above the Q1 reading of 2.0% and the consensus estimate of 1.8%. US Durable Goods Orders and unemployment claims were better than expected, a further indication that the Fed may be able to guide the economy to a soft landing even with interest rates at their highest levels in 22 years. EUR/USD is testing resistance at 1.1002. The next resistance line is 1.1063 There is support at 1.0895 and close by at 1.0861
by OANDA
Return To BaseA "back to the basics" analysis. Let's leave behind the stock markets and look at the slow and deep fundamentals of the worldwide economy. Today I will attempt to make a simple analysis using GDP. This is the net profit of one country. The miracle of China caught the West in the sleep. It outperformed the largest economy of the world. And by incredible speeds. Many use the "stochastic" indicator, and rightfully so. The word stochastic may be coming from the Greek word "stochasmos" which means "thought process". To get a new perspective on these charts we must let nature think for us objectively. The mind of nature spoke. The miracle of China is fading. And the same happens when compared to the "treasure" called Taiwan. Many are willing to fight for it. For experimentation, let's compare the US with the Eurozone. For some unknown-to-me reason, GDP has embedded in it the relative strength of currencies between the two countries. Do note that all GDP is measured in USD. In a sense, relative GDP growth is another way of comparing currency strength. We have gone from comparing equities, to comparing GDP. We concluded that comparing GDP is simply comparing purchasing power of two countries. Currency strength comes from yield rates. The power is given from those who make and define money. Supply + Yields. Power = Money Supply * Money Strength MV = PQ Tread lightly, for this is hallowed ground. -Father Grigori P.S. You want to see an Easter Egg? Consider the following equations: MV = PQ Q = GDP M = M2SL V = FRED:M2V P = "price level" 1 / P = "currency strength" Currency Strength = Q / MV In the end, it is up to the FED to decide the future.
FRED:GDP
by akikostas
USD/CAD pares gains, Canadian inflation easesThe Canadian dollar is flat on Friday, trading at 1.3258 in the European session. Canada releases GDP for May later on Friday. The consensus stands at 0.2% m/m, which translates into 2.4% annualized, a respectable gain. If the GDP report beats the consensus, the Canadian dollar could post gains. Canada's economy showed strength in the first quarter, with a gain of 3.1%. This was higher than expected and was one reason cited by the Bank of Canada in its surprise decision to raise rates earlier this month. I would expect that GDP growth will again be a key factor when the BoC makes its rate decision at the July 12th meeting. The BoC, like most other major central banks, has aggressively tackled high inflation by raising interest rates. The policy appears to be working, as headline inflation eased to 3.4% in May, down sharply from 4.4% in April. The core rate, which is comprised of three indicators, fell to an average of 3.8% in May, down from 4.2% a month earlier. The drop in inflation is certainly welcome news for the central bank, but the key question is whether inflation is falling fast enough for BoC policy makers. A third factor in the BoC's decision-making process will be employment. Canada's labour market has shown strong resilience in the face of rising interest rates, although the economy shed jobs in May, after eight straight months of gains. Another decline in new jobs could dampen the Bank's appetite for a rate hike in July. The US is coming off solid GDP and jobless claims data on Thursday and all eyes are on the Core PCE Price Index, the Fed's favourite inflation gauge. The index is expected to remain at 4.7% y/y, which would mean that inflation remains uncomfortably high compared to the target of 2%. We'll also get a look at UoM Consumer Sentiment, which is expected to rise to 63.9 in June, up from 59.2 in May. USD/CAD is putting pressure on resistance at 1.3254. Next, there is resistance at 1.3328 1.3175 and 1.3066 are providing support
by OANDA
2
QQQ Outlook 0626-30/2023Technical Analysis: Last week’s price action put NASDAQ:QQQ back inside the bullish channel we’ve been watching since March. We should see come corrective price action this week before tech runs higher. Bulls will look to see if we can stay above last week’s lows at 360. It is crucial bulls hold this level or we could see the daily fair value gap that could be filled below at 357.66. Bears will want to see a breakdown under the daily fair value gap, where we could test the strong monthly level at 354.43. If we lose the levels above, we can look for a test of the lower trendline in the upcoming weeks, and possibly a large gap to fill to the downside from 336.67-332.91. Inside this gap is the 50SMA and the 61.8% retrace at 334.00. Upside Targets: 364.57 → 370.10 → 373.83 → 380.76 → 386.28 Downside Targets: 360.00 → 358.97 → 357.66 → 354.43 → 352.46
NASDAQ:QQQ
by peterjames_6
SPY Outlook 06/26-30/2023Last week’s newsletter, we leaned bearish and the market made lower lows 4 out of the 4 trading sessions. With more fed speakers this week, PCE and Consumer Confidence data releases, and political turmoil in Russia, uncertainty can cause volatility in the market bringing down equities. Technical Analysis: AMEX:SPY is still due for a retest of the bull flag and daily channel breakout around 429.57. Should this area not hold, a .618 retrace would suggest we pullback to the gap below at 424-423. I do think we revisit that, and possibly test the daily fair value gap below 419. Bulls will want price action to stay above the weekly 432.03 level. If this holds, we can target the gap above at 437.45-438.97. Bears will want to try and and break below the red uptrend trendline. If we cannot hold 432.03, we can target the previous bull flag breakout at 429.61. If that doesn’t hold, we could target the 50% retracement where we bullflagged in the beginning of the month around 426.70. An even deeper target is the the daily gap below at 423.95-422.92. Should this gap fill, I would flip long. Upside Targets: 436.00 → 437.45→ 438.97 → 441.21 → 443.90 Downside Targets: 432.03 → 429.61 → 428.78 → 426.70 → 425.14
AMEX:SPY
by peterjames_6
GLD Bullish Outlook 06/26-30/2023AMEX:GLD is hot on my watch list as uncertainty in the world markets should cause investors to park their money in gold. AMEX:GLD is down -4% for the quarter and is due for a rebound. Technical Analysis: AMEX:GLD has been consolidating in a falling wedge and is approaching the .618 retrace at 177.24. I lean bullish on AMEX:GLD as long as we don’t break the falling wedge structure and can hold above the gap at 176.18. I am expecting a gap fill to the upside at 181.37. Bears will want to see this falling wedge invalidate with a gap to fill to the downside at 173.80. Upside Targets: 178.75 → 179.84 → 181.08 → 181.97 → 183.21 Downside Targets: 177.78 → 176.82 → 176.20 → 174.83 → 174.46
AMEX:GLD
by peterjames_6
USD/CAD- Canadian dollar extends gains despite weak job dataThe Canadian dollar continues to rally. USD/CAD is trading at 1.3328 in the North American session, down 0.22% on the day. The week wrapped up with Canada's May employment report, which usually is released at the same time as the US job data, but had the spotlight to itself today. The data was a disappointment. Canada's economy shed 17,300 jobs, all of which were full-time positions. This followed an increase of 41,400 in April and missed the consensus of a gain of 23,200. The unemployment rate rose from 5.0% to 5.2%, the first rise since August 2022. The weak job numbers could signal softness in the labour market, which would have major ramifications for the Bank of Canada's rate path. The Canadian dollar lost 40 points in the aftermath of the release but quickly recovered these losses. We could see more movement from USD/CAD on Monday as the markets digest these numbers. The US labour market has shown resilience, as we saw last week with a red-hot nonfarm payroll report. Still, some cracks have appeared, such as the jump in the unemployment rate and a low participation rate. The markets are looking for signs that the labour market is cooling off and jumped all over unemployment claims, which surprised on the upside at 261,000, up from 233,000 a week earlier. A spike in one weekly report isn't all that significant, but the timing of the release close to the Fed meeting may make a Fed pause more likely, and that has sent the US dollar lower against its major rivals. Central banks continue to wrestle with high inflation, which has remained stubbornly high despite aggressive rate tightening. This week alone, the Reserve Bank of Australia and the Bank of Canada raised rates by 0.25%, surprising the markets which had expected a pause. The BoC has made clear that its "conditional pause" stance would be data-dependent and perhaps the markets should have paid more attention to the uptick in April inflation and strong GDP growth in the first quarter. The BoC highlighted both of these indicators in its rate statement as factors in its decision to hike rates, and the central bank will be keeping a close eye on economic growth and inflation ahead of the July meeting. USD/CAD is testing support at 1.3339. Below, there is support at 1.3250 1.3496 and 1.3585 are the next resistance lines
by OANDA
1
Canadian dollar calm ahead of BoC rate announcementThe Canadian dollar is unchanged, trading at 1.3400 in the North American session. The Bank of Canada meets later today, and the money markets are expecting another pause, which would leave the benchmark rate at 4.5%. The BoC's rate-tightening cycle has been on a "conditional pause", which is another way of saying that rate decisions are data-dependent, especially on inflation and employment reports. The Bank has kept rates on hold since March and is expected to follow suit today, but there have been signals that the rate-hike cycle may not be over. First, April inflation report surprised on the upside after it ticked upwards to 4.4%, up from 4.3% annually, and rose from 0.3% to 0.7% month-to-month. The upswing will be of concern to BoC policy makers, as the central bank is intent on wrestling inflation back to the 2% target. The second concern is GDP, which hit 3.1% y/y in the first quarter, beating the BoC's forecast of 2.3% growth. Consumer spending has been stronger than anticipated, as many households have sizeable savings from the pandemic which they are spending now that the economy has reopened. BoC policy makers are concerned about the rise in inflation and GDP, and we could see hints about future rate hikes even if the Bank opts to pause at today's meeting. The Fed meets next week and with a blackout period in place on Fed public engagements, the markets are hunting for clues. Market pricing has been on a roller-coaster as divisions within the Fed over rate policy have made it difficult to determine what the Fed has planned. Currently, the markets are predicting a 78% chance of a pause, which would mark the first hold in rates after 10 straight rate increases. 1.3375 is a weak support line, followed by 1.3250 1.3496 and 1.3585 are the next resistance lines
by OANDA
AUD/USD rises to 1-month high, shrugs off soft GDPThe Australian dollar has extended its rally on Wednesday. AUD/USD is trading at 0.6689, up 0.28%. Today's weak GDP report and soft Chinese trade data haven't spoiled the party, as the Australian dollar is up 1.2% this week. Australia's GDP slowed to 0.2% in the first quarter, down from 0.6% in Q4 2022 and missing the consensus of 0.3%. On an annual basis, GDP fell to 2.3%, following a 2.7% gain in Q4 2022 and shy of the consensus of 2.4%. The economy is cooling down, and that really shouldn't come as a surprise. The cost of living crisis, rising interest rates and weaker demand have taken a bite out of economic activity. China's reopening has faltered, as May trade data showed a decline in exports and imports. This is bad news for Australian exporters, as their largest market is China. The GDP report was released just hours after the RBA announced a 25-basis point rate hike. The RBA has surprised the markets with two straight rate hikes as it wages a relentless war against inflation, which isn't coming down fast enough for the central bank. Governor Lowe reiterated after the decision that the RBA would do whatever it takes to bring inflation back down to its 2-3% target, from the current 7%. Core inflation has been stickier than expected and that means that more rate hikes can be expected. The cash rate is currently at 4.10% and the RBA has looked at different scenarios in which the cash rate peaked at 4.8%. The RBA may not actually move to that level, as the danger of a recession would be high, but there's little doubt that more rate hikes are on the way. AUD/USD is testing resistance at 0.6677. Above, there is resistance at 0.6749 There is support at 0.6568 and 0.6496
by OANDA
1
AUD/USD extends gains after RBA surpriseThe Australian dollar continues to roll and has extended its rally on Tuesday. In the European session, AUD/USD is trading at 0.6659, up 0.63% on the day. The Aussie has sparkled in June, surging 2.4%. On the economic calendar, Australia releases GDP early on Wednesday. The markets are expecting a solid gain of 2.7% in the first quarter, up from 2.4% in Q4 2022. The markets were confident that the RBA would pause at today's meeting, projecting a 67% chance of a hike. I wrote yesterday that although a pause was likely, Governor Lowe has a habit of surprising the markets. Well, make that the second straight month that the markets have guessed wrong about a pause, with the RBA hiking each time by 25 basis points. Even with the surprise hike, the benchmark cash rate of 4.10% remains below most of the major central banks, including the Federal Reserve. Australian inflation has been heading in the right direction, dropping from 7.8% to 7.0% in April. This is evidently not fast enough for the RBA, which has a target of 2-3%. Governor Lowe has been hawkish and said last week that the Bank will do whatever it takes to bring inflation back down to target so perhaps the real surprise is why the markets keep expecting a pause when Lowe keeps repeating that inflation is way too high. Lowe reiterated this position in the rate statement, saying that "inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range". Households and businesses will feel even more pain from the hike, but that's a price the RBA believes is necessary to beat public enemy number one - inflation.
by OANDA
Canadian dollar edges lower ahead of Canadian GDPThe Canadian dollar is trading close to a two-month low, as the currency remains under pressure. USD/CAD is trading at 1.3646 in the European session, up 0.34%. Canada releases GDP later today, and the markets are projecting a modest 0.4% q/q for the first quarter, after flatlining in Q4 2022. On an annualized basis, GDP is expected to jump by 2.5%, after stalling at 0% in Q4. The GDP report takes on even more significance as it is the last tier-1 release ahead of the Bank of Canada rate meeting on June 7th. A strong GDP release would support the Bank raising rates, while soft growth would give the Bank room to continue pausing rates at 4.25%. The key to the BoC's decision could well depend on the GDP release. The BoC has a tough decision to make at next week's meeting. The BoC would like to extend its pause of rate hikes but inflation hasn't cooperated, as it ticked upwards to 4.4% in April, up from 4.3% in March. Inflation has been coming down, but remains well above the Bank's target of 2%. In the US, the debt ceiling deal between President Biden and House Speaker McCarthy now has to be approved by both houses of Congress. Some Republicans are against the agreement, but the deal is expected to go through. The markets are optimistic, as 10-year Treasury yields dropped sharply on Tuesday in response to the agreement, which was reached on the weekend (US markets were closed on Monday). The 10-year yields are currently at 3.65%, after rising to 3.85% on Friday, their highest level since March. 1.3585 and 1.3515 are providing support 1.3685 and 1.3755 are the next resistance lines
by OANDA
GBP/USD edges lower, markets eye UK retail salesGBP/USD continues its downswing. The pound is trading at 1.2340, down 0.20% and is at a one-month low against the US dollar. The UK releases retail sales for April on Friday. On an annualized basis, the headline and core readings are expected to decline by 2.8% in April, which would indicate that UK consumers continue to hold tight onto the purse strings. Consumers are having a tough time with the cost of living crisis, with inflation at 8.3% and a weak reading could weigh on the pound. The US debt ceiling impasse remains unresolved, with the White House warning that the US could default on its debt on June 1st if no deal is reached in Congress. The markets are jittery and US 10-year Treasury yields have jumped to 3.75, up 1.1% today. The US dollar has also benefited from the debt ceiling crisis as investors have snapped up safe-haven assets. On Wednesday, Fitch Ratings put the top-ranked United States sovereign credit rating on "rating watch negative" due to the danger of a US debt ceiling default and we can expect market risk sentiment to continue falling as we move closer to June without a deal in place. The FOMC minutes indicated that the Fed remains unclear over future rate policy. At the May meeting, some members said there was a need for further increases as inflation was not falling fast enough. Other members argued that the economy was cooling and there was no need for more tightening. All the members agreed that inflation remains too high and the vote to raise rates by 25 basis points at the May meeting was unanimous. So what's next? The Fed meets on June 14th and appears to be leaning towards a pause in rate increases. The odds of a pause are currently 62%, versus 37% for a 25-bp hike, according to CME's FedWatch. Just a month ago, the probabilities were 70% for a pause, 8% for a 25-bp hike and 22% chance for a rate cut of 25 basis points. A hawkish Fed and solid US data have put to rest market speculation of a rate cut next month. Speaking of solid economic data, US Preliminary GDP rose 1.3% y/y in the first quarter, up from 1.3% in Q4 2020, which was also the estimate. On a quarterly basis, GDP climbed 4.2%, above the estimate of 4.0% and after a Q4 gain of 4.0%. Unemployment claims rose to 229,000, following a previous reading of 225,000, which was downwardly revised from 242,000. This easily beat the estimate of 245,000. The Fed will not be thrilled with these numbers, as it needs the economy to cool in order to wrap up the current rate-tightening cycle. GBP/USD tested support at 1.2375 in the European session. Below, there is support at 1.2307 1.2461 and 1.2529 are the next resistance levels
by OANDA
2
Gold fell to $1955 after Fed MintuesFed Minutes at midnight on Thursday and Fed member's speech deliver a hawkish stance. This hawkish stance may be considering raising interest rates or tightening monetary policy with other tools this next half year to pressure the high inflation and cool down the inflation down to a target rate of 2%. This can lead to a stronger US dollar and higher yields on US Treasury bonds continuously, making gold less attractive as a store of value and investment option. On Thursday European trading session, the gold failed to break out $1,985 and went down to continue its downtrend, testing the May 23 lowest price of $1,955. Suppose the gold price breakout $1955; the next target would be $1,948 and $1,944 (Red zone). However, the US dollar and the US Treasury yield could soften if the US GDP and PCE data are lower than expected on Friday, and gold price would rebound. Therefore, the resistance may target $1,969 and $1973 in the short run (Blue zone).
OANDA:XAUUSD
by ATFX_Global
DXY Weekly Forecast | 22nd May 2023Fundamental Backdrop The Flash Manufacturing PMI is expected to decrease from 50.2 to 50.0 which shows contraction in economic health. The Flash Services PMI is also expected to drop from 53.6 to 52.6. The FOMC Meeting Minutes on Thursday. The FED will talk about future interest rates which was previously indicated to be on pause. Technical Confluences Near-term resistance at 103.500 Next resistance at 105.000 Minor support at 102.765 Major support at 102.200 Idea With the Flash Manufacturing PMI and Flash Services PMI expected to drop, it could cause the DXY to drop further towards the 102.700 minor support. If the FED chooses to pause or indicate pausing of interest rates, it can cause the DXY to drop even further towards the 102.200 major support level. NOT FINANCIAL ADVICE DISCLAIMER The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas. We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades. Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks. OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
TVC:DXYShort
by OlympusLab
USD/JPY - Yen sinks to 6.5 month low, is 140 next?The yen woes continue, as the currency has plunged a massive 400 points over the past week. In Thursday's North American session, the yen is trading at 138.52, up 0.60% on the day. USD/JPY hasn't been at such high levels since November 2022. All eyes will be on Japan's Core CPI release early on Friday. This is a key inflation indicator and could move the dial of the yen. The markets are expecting Core CPI to rise to 3.4% in April, after two straight readings of 3.1%. Inflation remains a key issue for the Bank of Japan. The new Governor, Kazuo Ueda, has continued the Bank's ultra-accommodative policy but has also hinted at taking steps towards normalization, such as adjusting the yield curve control (YCC) policy if inflation remains sustainable above 2%.  This week's GDP release showed growth in the first quarter was higher than expected, and that could raise expectations that the Bank will shift policy, perhaps in baby steps, in the near future. As for interest rate policy, we're unlikely to see any tightening before 2024. Federal Reserve Chairman Powell will speak on a panel later today, and the markets will be all ears. Powell has remained hawkish, saying that high inflation could result in further rate hikes. Powell has dismissed outright any rate cuts, but the markets still believe that the Fed will trim rates before the end of the year. JP Morgan weighed in earlier this week, saying they agreed with the markets that the Fed would cut rates, as the economy was likely to tip into a recession. USD/JPY is testing resistance at 138.42. Above, the next resistance line is 139.58 There is support at 137.08 and 136.42
by OANDA
1
USD/JPY - Japan's GDP improves but yen slipsThe Japanese yen is on a four-day losing streak and is in negative territory on Wednesday. In the North American session, the yen is trading at 137.39, up 0.74% on the day. Japan's GDP in the first quarter was higher than expected. The economy grew by 1.6% y/y, after a 0.1% decline in Q4 2022 and easily beat the estimate of 0.7%. On a quarterly basis, GDP expanded by 0.4%, up from 0.0% in Q4 and above the estimate of 0.1%. One key driver behind the spurt in growth was personal consumption, as demand continues to rise now that the country has reopened. The services sector remains strong but manufacturing continues to struggle. On a sour note, exports fell 4.2% in Q4, as demand for semiconductors and automobiles declined. The uptick in growth means that sustainable inflation could stay above 2%, and that could prod the Bank of Japan to take steps toward normalization, such as adjusting its yield curve control (YCC) policy. The BoJ has said it would consider tightening policy if inflation is sustainable above 2%, but any shifts in policy are likely to be small, especially if the yen remains weak. The BoJ announced it would conduct a policy review which could take a year or more, and I would not expect the BoJ to raise rates before 2024. Federal Reserve members continued to remind listeners that more rate hikes are possible if inflation stays high. The Fed has also tried to dampen expectations of rate cuts in the second half of the year. The markets are listening somewhat, as the odds of a rate cut this year have fallen. JP Morgan came out in support of rate cuts on Tuesday, saying that "the market is right to be penciling in cuts", as inflation remains too high and the US was likely headed for a recession. USD/JPY is testing resistance at 137.08. Above, the next resistance line is 138.42 There is support at 136.26 and 135.08
by OANDA
GBP/USD ends slide, employment report nextGDP/USD has started the week in positive territory, after a two-day slide that saw the pound lose 1.5%. In the North American session, GBP/USD is trading at 1.2514, up 0.54%. On the economic calendar, it's a fairly quiet start to the week. There are no releases out of the UK. In the US, the Empire State Manufacturing Index slid to -31.8, versus 10.8 prior and an estimate of -2.5 points. This was the lowest level in three years and pointed to a sharp contraction. Orders and inventories fell sharply, and the report was another indication of the sorry state of the manufacturing sector. The US releases retail sales on Tuesday, with the markets expecting an improvement in the April data. The headline reading is expected to improve to 0.7%, up from -0.6%, and the core rate is projected to rise to 0.4%, up from -0.4%. If the data is within expectations, it would indicate that consumers are still spending, despite a drop in consumer confidence. Friday's GDP release pointed to a UK economy in trouble. March GDP came in at -0.3%, and Q1 growth posted a meagre gain of 0.1%. The economy might manage to avoid a recession, but the BoE is projecting practically zero growth in 2023. The labour market has remained robust in the UK, despite the weak economy and the bite of rising interest rates. However, cracks are appearing - unemployment claims rose by 28,200 in April, and are expected to rise by 31,200 in the April report, which will be released on Tuesday. The Bank of England will be keeping a close eye on wage growth, a driver of inflation. The estimate for average earnings including bonuses for January-March stands at 5.8%, versus 5.9% in the previous release. GBP/USD is putting pressure on resistance at 1.2524. The next resistance line is 1.2604 1.2369 and 1.2289 are the next support levels
by OANDA
USD/JPY - Yen eyes Tokyo CPI, US GDPUSD/JPY is trading quietly at 133.84, up 0.13% on the day. The yen's lack of movement could change today with a host of key releases. Japan will release Tokyo Core CPI, while the US publishes Preliminary GDP for the first quarter and unemployment claims. Japan releases Tokyo Core CPI for April early on Friday, which is expected to remain steady at 3.2%. Will BoJ meeting bring more of the same? Japan's inflation is running around 3%, a dream for most central banks but a headache for the Bank of Japan. There has been pressure on the BoJ to tighten policy as inflation remains above the target of 2%. Japan has experienced decades of deflation and the massive stimulus programme was meant to stimulate the economy. Inflation has moved higher, but former BoJ Governor Kuroda insisted that the central bank would not consider tightening until it was convinced that inflation was sustainable, which required stronger wage growth. New BoJ Governor Ueda has toed the party line so far, but left open the possibility of tightening if wage growth and inflation climb faster than expected. All signs point to the BoJ maintaining its policy settings when it wraps up its 2-day meeting on Friday, but the central bank has surprised the markets in a big way before, and the markets will be following the meeting closely. In the US, unemployment claims have moved higher for four straight weeks and come in above the estimate each time. The upward trend is expected to continue, with claims expected to rise to 248,000, up from 245,000. The labor market remains strong, but the upswing could signal cracks in what has been a robust US labour market. Preliminary GDP for the fourth quarter is expected to drop to 2.0% y/y, down from 2.6% in Q4. USD/JPY tested support at 133.41 earlier in the day. The next support line is 132.69 134.27 and 134.99 are the next resistance lines
by OANDA