Our forex experts targeted this week's UK jobs update and FOMC statement for potential short-term opportunities to watch.
Of the four scenario/price forecast discussions this week, The two arguably saw both financial and technical arguments raised To become a potential candidate for a risk management overlay. Check out our review of that discussion to find out what happened!
Watchlists are price predictions and strategy discussions supported by fundamental and technical analysis, and are a crucial step towards creating an account High quality discretionary business idea Before working on a risk management and trading plan.
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GBP/JPY 1 Hour Forex Chart by TradingView
On Monday, the British Pound was the target asset to watch as the latest employment data from the UK was ready to hit the markets this week. Our event guide for the UK jobs report was a bit mixed, with the market anticipating a slightly faster increase in unemployment claims for May and steady wage growth, while business surveys pointed to a likely stronger picture.
In the event that the jobs report comes out on a net positive note (likely reducing the odds of a BoE rate cut), we thought GBP/CAD would be a great option to monitor longer GBP settings given the recent increase in central bank policy. Canada.
But should UK jobs data turn out weaker than expected, we would look to GBP/JPY for potential bearish GBP setups, given that the Bank of Japan could be on the cusp of moving away from its ultra-loose monetary policy (i.e. raising interest rates potential and/or future quantitative tightening).
UK data was released on Tuesday, with a larger than expected jump in unemployment at 50.4K for May (10.2K expected; previous 8.9K), and the unemployment rate rose to 4.4% from 4.3% support. Both support seeing net negative results on issuance, but wage growth rates remain high at 5.9%, a likely driver for rates to remain high going forward, reducing support for a Bank of England rate cut.
Overall, though, this was a net negative report, leading to our bearish bias for GBP, which was arguably confirmed by the decline in GBP/JPY following the release of the event. In our original discussion, we noted that “the pair could head towards previous highs at 200.75 near the R1 pivot point line (200.89) today before seeing sustained bearish demand.”
On the chart above, Guppy saw buying pressure throughout the week even after the UK jobs release, arguably due to a weaker Japanese yen ahead of the Bank of Japan's monetary policy statement.
GBP/JPY rose to 201.55 after BOJ statement after no sign of tapering bond purchases before finding a top, but we eventually saw a reversal after BOJ Governor Ueda indicated interest rate hikes were still a possibility in press conference Bank of Japan. Along with possible quantitative tightening.
Overall, with this discussion, the implementation of risk management and trading was definitely a big factor in this outcome, as well as a little patience to execute at the right prices. But ultimately, the markets played into the fundamental developments this week.
Given that GBP/JPY closed below our discussion price, target catalyst price areas, and target resistance watch zone (and given that the market never traded more than one ATR above our target resistance zone), an argument can be made that this discussion was… “Probably” supports a net positive outcome.
USD/CAD 1 Hour Forex Chart by TradingView
On Wednesday, the upcoming monetary policy statement from the Federal Open Market Committee was our main event target for the week, and will likely send all markets moving significantly and creating potential opportunities, especially for the US dollar.
Our Event Guide to the Potential Big Event suggests that the most likely outcome will likely be the Fed's continued support for the restrictive interest rate environment in the US, and that the key thing to watch is the Fed's updated economic outlook and “Dot Plot” for 2024 .
Should the Fed lower economic growth and inflation expectations to support the narrative of multiple interest rate cuts in 2024, we would then turn to USD/CHF for potential USD selling opportunities, as the pair has given sellers strong bearish momentum recently.
Conversely, if we saw a scenario where the Fed's rhetoric and forecasts reflected smaller interest rate cuts in the future, we would have USD/CAD on our watch list for potential upside opportunity for the USD, given the recent increase in dovish policy from the Bank of Canada, As we mentioned. previously.
On Wednesday, the Fed kept its federal funds target range at 5.25%-5.50% as widely expected, maintaining moderate growth forecasts but raising inflation estimates for this year and next. What's even more interesting is that 11 out of 19 policymakers were expecting no more than one rate cut in 2024, while four officials actually expect no easing steps at all. This certainly made this event a net bullish driver for the dollar, leading to our long USD/CAD bias.
In our original discussion, we noted that USD/CAD could retreat to the 1.3710 – 1.3725 area as traders unwind their bets ahead of the US CPI and FOMC reports. Husband actually
So for those who implemented a long USD/CAD bias after the hawkish confirmation of the Fed event, it is “very likely” that this discussion will be supportive of a net positive outcome as the pair rises more than a daily ATR from the FOMC statement rate zone. Gains were maintained for that area with Friday's close.
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