"FED may pause next meeting. Mixed European markets ahead of ECB decision"
Global markets had a mixed performance on Thursday as investors assessed the recent interest rate hike by the Federal Reserve and looked ahead to the European Central Bank's policy decision later in the day.
US futures and Asian stocks edged higher, indicating a positive start for the day, while European contracts were negative, suggesting a cautious sentiment among investors. The Fed raised the federal funds rate by 25 basis points on Wednesday, bringing it to a range of 5%-5.25%, the highest level since August 2007. However, investors largely brushed aside the central bank's commentary against interest rate cuts and instead looked ahead to an eventual pivot to easing.
In its post-meeting statement, the Fed hinted at a possible pause in future rate hikes by omitting a sentence present in the previous statement saying that "the Committee anticipates that some additional policy firming may be appropriate" for the Fed to achieve its 2% inflation goal. The central bank did, however, note that it will take into account various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments when determining the extent to which additional policy firming may be appropriate.
EURUSD
EUR/USD gathered bullish momentum and registered its highest daily close in over a year above 1.1050 on Wednesday. The pair continued to stretch higher toward 1.1100 early Thursday before going into a consolidation phase. The European Central Bank (ECB) will announce its policy decisions later in the day and the pair could extend its rally in case the ECB's outlook highlights a widening policy divergence with the US Federal Reserve (Fed).
On Wednesday, the Fed announced that it raised the policy rate by 25 basis points (bps) to the range of 5-5.25% as expected. In the policy statement, the Fed scrapped the language saying that it "anticipates" further rate increases would be needed. During the post-meeting press conference, FOMC Chairman Jerome Powell refrained from committing to a pause in rate hikes in June and said that they were not planning to cut rates this year. Powell's comments, however, failed to convince markets and the CME Group FedWatch Tool shows that the probability of another rate hike in June is virtually 0.
The ECB is forecast to raise its key rates by 25 bps. During the month of April, several ECB policymakers noted that they could opt for another 50-bps hike in May but developments since then caused markets to lean toward a smaller rate increase. Earlier this week, the ECB's Bank Lending Survey revealed the negative impact of high rates on credit demand.
Support: 1.1060– 1.1040 – 1.1000
Resistance: 1.0450 – 1.1100 – 1.1200
GBPUSD
GBP/USD bulls take a breather around 1.2580, after rising to the highest levels since June 2021 early Thursday. he pair is actually on the hunt for a eight consecutive weekly gain. That said, the Cable pair initially cheered the US Federal Reserve’s (Fed) dovish hike before retreating from an upward-sloping resistance line from April 14. The resistance from the May highs last year around 1.2660-66 will also offer up some challenge for buyers before thinking about the 100-week moving average (Yellow line) at 1.2722.
Cable is aiming higher as the Federal Reserve (Fed) is following the language of other central banks. Fed chair Jerome Powell has confirmed that further monetary policy decisions will be data-dependent, which indicates that the central bank has reached an intermediate terminal rate for now.
The Services and Composite PMI data being released today may provide additional insights into the health of the UK economy and a potential recovery from the slowdown experienced last month. This could potentially prevent the UK from entering a recessionary period, which was previously projected by the Bank of England.
Support: 1.2440– 1.2400 – 1.2350
Resistance: 1.2470 – 1.2500 – 1.2550
USDJPY
The Japanese yen has gained ground against some of its peers following the Fed's widely expected 25 basis points rate hike, with the yen finding strong support. The Fed's comments suggest a pause in its hiking cycle, while retaining a hawkish bias towards further policy firming. The focus will now shift to incoming data, such as the jobs report and CPI data, ahead of the June meeting, to determine the extent of credit tightening spillover. The Bank of Japan's ultra-loose policy settings remain unchanged, and if risk sentiment remains subdued, USD/JPY may move towards the lower end of its established range.
Meanwhile, US banking woes have renewed as another commercial bank has come under pressure. Bloomberg reported that PacWest Bancorp is considering strategic options, including a potential sale. PacWest's shares fell by more than 50% in the post-market, indicating significant investor concern about the bank's situation
Support: 135.50 – 135.00 – 134.50
Resistance: 137.7 – 140.00 – 141.00
XAUUSD
During Thursday's Asian session, the price of gold experienced an intraday bullish spike, reaching a fresh record high of $2,078-$2,079 before retreating to the lower end of its daily range. The pullback can be attributed to some profit-taking but is expected to remain limited as economic conditions worsen. Federal Reserve Chair Jerome Powell warned on Wednesday that economic growth was cooling, and credit conditions were likely to tighten further due to growing pressure on banks. This, along with stress at PacWest Bancorp, sparks fear of a full-blown banking crisis in the US, benefiting the safe-haven precious metal. Additionally, the prevalent selling bias of the US dollar could further support the gold price, as the USD Index drifts lower for the third successive day. The US central bank hiked interest rates by 25 bps, as expected, and signaled a possible pause in June. The US inflation is still trending well above the Fed's target rate, which could result in further policy tightening. However, the prospects for more interest rate hikes by the European Central Bank and the Bank of England could act as a headwind for the non-yielding yellow metal. Traders are awaiting the Nonfarm Payrolls report on Friday, which could provide meaningful impetus to the US Dollar-denominated commodity.
Support: 2030 –2020 – 2011
Resistance: 2011 – 2020 – 2032
UKOIL
Oil prices experience a slight recovery after reaching a 16-month low on Wednesday, but investors remain cautious about the outlook for crude due to continued volatility. Brent rose by 1.2% to $73.16 a barrel following a 4% decline in the previous session. Ole Hansen, head of commodity strategy at Saxo Bank, explains that Russian oil exports have remained robust, while China's demand for crude has not recovered as quickly as expected. West Texas Intermediate futures initially plummeted by up to 7.2% at the beginning of trading due to concerns that a possible US recession would harm demand. However, the significant decline was reduced and eventually reversed by mid-morning in Asia. In the US, a recent government report showed a contraction in gasoline demand, an increase in fuel supplies, and a decrease in jet fuel demand, which remains slightly above last year's levels.
Support:74.00 – 73.00 – 71.00
Resistance: 75.60 – 77.00 – 78.50
Global markets had a mixed performance on Thursday as investors assessed the recent interest rate hike by the Federal Reserve and looked ahead to the European Central Bank's policy decision later in the day.
US futures and Asian stocks edged higher, indicating a positive start for the day, while European contracts were negative, suggesting a cautious sentiment among investors. The Fed raised the federal funds rate by 25 basis points on Wednesday, bringing it to a range of 5%-5.25%, the highest level since August 2007. However, investors largely brushed aside the central bank's commentary against interest rate cuts and instead looked ahead to an eventual pivot to easing.
In its post-meeting statement, the Fed hinted at a possible pause in future rate hikes by omitting a sentence present in the previous statement saying that "the Committee anticipates that some additional policy firming may be appropriate" for the Fed to achieve its 2% inflation goal. The central bank did, however, note that it will take into account various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments when determining the extent to which additional policy firming may be appropriate.
EURUSD
EUR/USD gathered bullish momentum and registered its highest daily close in over a year above 1.1050 on Wednesday. The pair continued to stretch higher toward 1.1100 early Thursday before going into a consolidation phase. The European Central Bank (ECB) will announce its policy decisions later in the day and the pair could extend its rally in case the ECB's outlook highlights a widening policy divergence with the US Federal Reserve (Fed).
On Wednesday, the Fed announced that it raised the policy rate by 25 basis points (bps) to the range of 5-5.25% as expected. In the policy statement, the Fed scrapped the language saying that it "anticipates" further rate increases would be needed. During the post-meeting press conference, FOMC Chairman Jerome Powell refrained from committing to a pause in rate hikes in June and said that they were not planning to cut rates this year. Powell's comments, however, failed to convince markets and the CME Group FedWatch Tool shows that the probability of another rate hike in June is virtually 0.
The ECB is forecast to raise its key rates by 25 bps. During the month of April, several ECB policymakers noted that they could opt for another 50-bps hike in May but developments since then caused markets to lean toward a smaller rate increase. Earlier this week, the ECB's Bank Lending Survey revealed the negative impact of high rates on credit demand.
Support: 1.1060– 1.1040 – 1.1000
Resistance: 1.0450 – 1.1100 – 1.1200
GBPUSD
GBP/USD bulls take a breather around 1.2580, after rising to the highest levels since June 2021 early Thursday. he pair is actually on the hunt for a eight consecutive weekly gain. That said, the Cable pair initially cheered the US Federal Reserve’s (Fed) dovish hike before retreating from an upward-sloping resistance line from April 14. The resistance from the May highs last year around 1.2660-66 will also offer up some challenge for buyers before thinking about the 100-week moving average (Yellow line) at 1.2722.
Cable is aiming higher as the Federal Reserve (Fed) is following the language of other central banks. Fed chair Jerome Powell has confirmed that further monetary policy decisions will be data-dependent, which indicates that the central bank has reached an intermediate terminal rate for now.
The Services and Composite PMI data being released today may provide additional insights into the health of the UK economy and a potential recovery from the slowdown experienced last month. This could potentially prevent the UK from entering a recessionary period, which was previously projected by the Bank of England.
Support: 1.2440– 1.2400 – 1.2350
Resistance: 1.2470 – 1.2500 – 1.2550
USDJPY
The Japanese yen has gained ground against some of its peers following the Fed's widely expected 25 basis points rate hike, with the yen finding strong support. The Fed's comments suggest a pause in its hiking cycle, while retaining a hawkish bias towards further policy firming. The focus will now shift to incoming data, such as the jobs report and CPI data, ahead of the June meeting, to determine the extent of credit tightening spillover. The Bank of Japan's ultra-loose policy settings remain unchanged, and if risk sentiment remains subdued, USD/JPY may move towards the lower end of its established range.
Meanwhile, US banking woes have renewed as another commercial bank has come under pressure. Bloomberg reported that PacWest Bancorp is considering strategic options, including a potential sale. PacWest's shares fell by more than 50% in the post-market, indicating significant investor concern about the bank's situation
Support: 135.50 – 135.00 – 134.50
Resistance: 137.7 – 140.00 – 141.00
XAUUSD
During Thursday's Asian session, the price of gold experienced an intraday bullish spike, reaching a fresh record high of $2,078-$2,079 before retreating to the lower end of its daily range. The pullback can be attributed to some profit-taking but is expected to remain limited as economic conditions worsen. Federal Reserve Chair Jerome Powell warned on Wednesday that economic growth was cooling, and credit conditions were likely to tighten further due to growing pressure on banks. This, along with stress at PacWest Bancorp, sparks fear of a full-blown banking crisis in the US, benefiting the safe-haven precious metal. Additionally, the prevalent selling bias of the US dollar could further support the gold price, as the USD Index drifts lower for the third successive day. The US central bank hiked interest rates by 25 bps, as expected, and signaled a possible pause in June. The US inflation is still trending well above the Fed's target rate, which could result in further policy tightening. However, the prospects for more interest rate hikes by the European Central Bank and the Bank of England could act as a headwind for the non-yielding yellow metal. Traders are awaiting the Nonfarm Payrolls report on Friday, which could provide meaningful impetus to the US Dollar-denominated commodity.
Support: 2030 –2020 – 2011
Resistance: 2011 – 2020 – 2032
UKOIL
Oil prices experience a slight recovery after reaching a 16-month low on Wednesday, but investors remain cautious about the outlook for crude due to continued volatility. Brent rose by 1.2% to $73.16 a barrel following a 4% decline in the previous session. Ole Hansen, head of commodity strategy at Saxo Bank, explains that Russian oil exports have remained robust, while China's demand for crude has not recovered as quickly as expected. West Texas Intermediate futures initially plummeted by up to 7.2% at the beginning of trading due to concerns that a possible US recession would harm demand. However, the significant decline was reduced and eventually reversed by mid-morning in Asia. In the US, a recent government report showed a contraction in gasoline demand, an increase in fuel supplies, and a decrease in jet fuel demand, which remains slightly above last year's levels.
Support:74.00 – 73.00 – 71.00
Resistance: 75.60 – 77.00 – 78.50
