Federal reserve building, Washington DC. USA. Image source: Tananuphong Kummaru © 123RF.com
FED Has to Address the Issue of High Inflation
The sharp uptick in consumer prices in May caused additional volatility outbursts for the U.S. dollar. The EURUSD is yet to establish a bearish reversal as the greenback strengthens. FED's meeting this week is likely to speed up this process.
The most decisive event in the economic calendar for this week will undoubtedly be the June meeting of the FED, which is scheduled to take place on Wednesday. Jerome Powell and his colleagues from the Federal Open Market Committee (FOMC) should deliberate on the latest economic developments in the U.S. and elsewhere.
The Committee is expected to maintain the near-negative Federal Funds Rate unchanged at 0.25 per cent, similarly to the policy stance that was adopted by the ECB last week.
However, some worried market participants would like to hear hints in FOMC's statement suggesting the potential tightening of the policy by the end of the year. This is so due to steadily rising inflationary pressures, driven by heightened consumers sentiment and soaring energy demand.
Headline inflation in the U.S. peaked at 5.0 per cent in May, above market forecasts.
U.S. MoM Inflation Rate. Image source: TradingEconomics.com
While Jerome Powell and his colleagues had previously stated that they expect inflation to increase moderately above the 2.0 per cent symmetric rate in the near future before eventually converging back closer to the target, the rising pace of consumer prices growth may compel the FOMC to recalibrate its baseline forecasts.
The adoption of a more hawkish policy stance by the FED would likely strengthen the greenback as this would ease tensions and calm investors. The central focus on Wednesday would therefore be placed on FOMC's current take on inflation and whether it sees the need to tighten its policy sooner than initially planned.
Consumer Prices in Canada Likely to Continue Increasing at the Same Pace
Also on Wednesday, Statistics Canada is supposed to release the latest CPI data for the previous month.
Canada MoM Inflation Rate. Image source: TradingEconomics.com
Inflation in Canada has been growing at the same 0.5 per cent pace over the last three months, and the consensus forecasts anticipate this to be the case in May yet again.
Global demand eased marginally last month, which is likely to be reflected in Canadian consumption for the same period. Moreover, this also coincided with a minor stretch of corrective price action for crude oil, which is also likely to contribute to a smaller rise in CPI.
With inflation rising at a slower pace, the Canadian dollar is likely to continue giving way to the strengthening greenback.
U.S. Retail Sales Expected to Stall in May
The U.S. retail sector is projected to have contracted marginally in May as the initial impact of Joe Biden's "American Rescue Plan", which began in March, is starting to diminish as enthusiasm drops.
Retail sales are forecasted to drop by 0.6 per cent in May, following a downwards revision to 0.0 per cent the previous month. The Census Bureau is set to post the data on Tuesday.
U.S. MoM Retail Sales. Image source: TradingEconomics.com
The consensus forecasts for muted retail sales data represents the only conceivable hurdle that could impede the strengthening of the U.S. dollar over the next five days. Yet, the greenback seems poised to continue appreciating against the Loonie in the longer run.
Last week, the USDCAD was finally able to break out above the upper boundary of a massive Accumulation range, as presented on the 4H chart below. This happened after a prolonged period of consolidation above the 100-day MA (in blue), underpinning the steadily rising bullish bias.
The breakout above 1.21350 and the 200-day MA (in orange) implies that the USDCAD may finally commence establishing a new Markup. This transition from the preceding Accumulation into a new Markup occurs as per the expectations of the Wyckoff theory.
The price may yet drop to the upper end of the Accumulation from above before rebounding and continuing to head north. The first major target for the new uptrend is underscored by the 200-day MA (in green). This is the resistance at 1.22700.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
Other Prominent Events to Watch for:
Tuesday - BOE Governor Bailey Speaks; U.S. m/m PPI; U.S. m/m Industrial Production; RBA Meeting Minutes; UK m/m Unemployment Rate; Germany Harmonized Index of Consumer Prices.
Wednesday - UK y/y CPI; BOC Governor Macklem Speaks; New Zealand q/q GDP; China y/y Retail Sales.
Thursday - RBA Governor Lowe Speaks; Australia Unemployment Rate; Switzerland SNB Policy Decision.
Friday - BOJ Policy Decision; UK m/m Retail Sales.
Over the past few weeks, the USD has lost nearly 800 pips against the JPY, driven by Japan's shift away from decades of negative interest rates. With the Bank of Japan raising rates for the second time in a row, investors are adjusting their positions to [...]
Despite its volatility, Silver remains in an uptrend. While not as dynamic as Gold, XAG often mirrors XAU’s movements. A Multiple Top has formed around $32.50, and history shows that the more a level is tested, the weaker it becomes, increasing the likelihood of a [...]
A combination of factors, including Trump-era tariffs, the emergence of DeepSeek, and a slowdown in GDP growth, has contributed to the recent pullback in the US30 from its record highs. From a technical standpoint, a Double Top pattern has formed around the [...]
Over the past month, Silver has experienced an impressive 13% surge, marking a strong bullish trend. Despite notable volatility and multiple pullbacks, the overall momentum remains firmly to the upside. This strength is further validated by the Golden Cross, a historically reliable [...]
The Swiss Stock Market has been on a remarkable rally, surging over 15% between December and January. At times, the price action resembled a near-vertical ascent. However, following the announcement of Trump’s tariffs over the weekend, Monday’s trading session opened with a [...]
Between October and January, GBPUSD experienced a significant decline, dropping by approximately 1300 pips. However, we now observe signs of a potential trend reversal. Over the past few weeks, the pair has rebounded by more than 400 pips, shifting momentum toward a [...]
For the past 1 month, the UK100 saw a fantastic 600 point rally! The occasional corrections only attracted more buyers, which is healthy for the current up trend and the RSI currently exhibits elevated demand. A 130 point correction started last week on Friday, dipped below the [...]
Over the past two weeks, Japan’s leading stock index surged 2,000 points, reflecting strong bullish momentum. However, this week saw a sharp sell-off, erasing nearly all gains since mid-January. Despite this drop, the decline stalled at the 61.8% Fibonacci retracement, a key [...]
There is a clear shift in the momentum in the Oil market, with the commodity dropping with nearly 10% for the past 2 weeks. The Death Cross, a classic sell signal, is indicating that sellers are indeed in control and we are lookin now at a strong [...]
The 350 pip rally for the past 2 weeks seems like a trend reversal for EURUSD, with buyers back in control. The strong bullish momentum is also confirmed by the Golden Cross, a historic buy signal. Corrections are healthy for the trend and we currently looking at [...]
For the past 2 weeks GBPUSD went up with 400 pips and this is why we believe we might be looking at a trend reversal. The strong bullish momentum is confirmed by the Golden Cross, a classic buy signal, which supports the hypothesis that [...]
The Death Cross formation in USDJPY signals a robust downward momentum, with the USD depreciating by 300 pips over recent weeks. Further declines exceeding 300 pips are anticipated, potentially reaching the 152.00 level. Despite several corrective pullbacks, the price has been unable to surpass the [...]
Following the formation of a Double Top pattern at the 21,930 level last Friday, the NASDAQ has experienced a significant decline, plummeting by nearly 800 points. This downturn has been primarily driven by unfavorable manufacturing data emerging from China, alongside the Bank of Japan's interest rate hike on Friday. The market reaction closely resembles the [...]
GOLD's uptrend has regained strength, with several factors supporting further gains. The RSI bounced from oversold levels and now stands at 65, signaling growing demand and increasing buying volume. Additionally, the appearance of a [...]
For the past few months, USDJPY gained 2100 pips! Then, about 10 days ago the USD started dropping and so far corrected with 300 pips, dropping down to 155.00. A local Double Bottom got formed and this level also aligns with the important [...]
For the past week, the US100 has surged by over 1,000 points, signaling strong bullish momentum. The RSI stands at 69, indicating high demand and buyer dominance. A bullish Golden Cross pattern has emerged, confirming the upward trend. Despite a brief correction yesterday, with the index dipping to [...]
The Descending Triangle on the 4-hour chart, typically a bearish signal, failed to materialize this time. Instead, the Triple Bottom support at 92,000 held strong, driving significant buying volume. A Golden Cross—a classic bullish indicator—confirms strong [...]
After a 300-point correction from its December highs, the SP500 appears to be rebounding as bulls regain control. This recovery is supported by positive economic data, including strong NFP numbers, low unemployment, and CPI readings meeting expectations—all favorable for stocks. Additionally, the earnings season began yesterday with [...]
For several months, the EUR has been trending downward, losing hundreds of pips. While occasional corrections to the upside occur, bears remain in control. The strong downward momentum is highlighted by the Death Cross pattern, a classic sell signal. Yesterday, we observed another [...]
The Dollar remains strong, with buyers firmly in control since the Fed's December comments hinting at fewer 2025 rate cuts. This drove a 400-pip rally in USDCAD, now facing resistance near 1.4450 as early buyers take profit. Corrections are part of healthy trends, and the pair is testing support at [...]
