Forex Signals Brief June 6: First ECB Interest Rate Cut Today
Yesterday the Bank of Canada delivered a 25 bps rate cut, while today the ECB is expected to cut rates, but let's see if they will keep it u
Yesterday started with the Australian GDP report for Q1, which was disappointing. Expectations were for the economic expansions to remain stable in Q1 at 0.2%, the same as in Q4 of 2023, however, we saw a slowdown to 0.1% instead. However, that didn’t have much impact on the Australian Dollar, with AUD/USD ending little changed by the end of the day.
In the US trading, we had the release of the US ADP national employment figures for May, which showed a higher-than-expected rise of 152K jobs compared to the 175K expectation. Despite this increase, the employment component of the services PMI data remained below 50 at 47.1, indicating a contraction in employment.
While this figure did show improvement from last month’s low of 45.9, it is still closer to the low for 2024 than the high, which was 50.5 in January. The discrepancy between the overall positive services PMI data and the weak employment component highlights ongoing challenges in the US labor market. As a result, yields on the 10-year Treasury note have decreased for the fourth consecutive day, currently sitting at 4.29%, representing a decrease of 4.7 basis points.
Today’s Market Expectations
Today, the Asian and European sessions are quiet, but later we have the European Central Bank (ECB) meeting, which is expected to reduce interest rates from 4.00% to 3.75%, a move that has been heavily anticipated by the market. However, the focus will be on the central bank’s future plans, especially in light of recent data indicating economic acceleration and a strong labor market in the Eurozone. Despite easing inflationary pressures, policymakers may exercise caution given the overall positive economic outlook. Market expectations suggest that the ECB may implement two more interest rate cuts this year, although these decisions will ultimately hinge on incoming data. As always, economic indicators will play a crucial role in shaping monetary policy decisions.
Meanwhile, the US Jobless Claims report remains a significant weekly release, offering insights into the state of the labor market and its potential impact on inflation. A weakening labor market increases the likelihood of disinflation, posing challenges for the Federal Reserve’s objectives. Conversely, a resilient job market may complicate efforts to meet these goals. Initial Claims are expected to be around 215K, with Continuing Claims remaining stable near the 1,800K level. These figures indicate ongoing strength in the US labor market, with Initial Claims hovering near cycle lows. However, there is uncertainty surrounding Continuing Claims data, with no consensus available at the time of writing.
Yesterday, the volatility remained elevated, with the USD falling after the soft employment data, but gaining some bids after the stronger ISM services for May. We opened 8 trading signals, in forex, commodities and indices, most of which closed in profit, which gave us some nice turnover.
Gold Continues to Bounce Within the Range
Since May 24th, gold prices have faced challenges in sustaining their upward momentum. After peaking at a record high of $2,450 on May 20th, the XAU/USD pair reversed its course and has been trading within the lower half of the $2,300 range. Moving averages have acted as resistance, hindering a rebound to higher price levels. However, recent weak US job data have fueled expectations of a Federal Reserve interest rate cut in the near future. These forecasts have exerted downward pressure on the dollar, providing support for gold prices. This correlation was evident in the surge in gold prices following the disappointing ADP employment report for May.
XAU/USD – H4 chart
The 200 SMA Turns into Support for NZD/USD After the Bullish Momentum
The USD to NZD rate has shifted from a period of consolidation to a possible rising trend, driven primarily by weaker US labor market statistics and the resulting USD weakening. This trend is reflected in the technical breakout over the 200-day Simple Moving Average (SMA), a significant event that establishes a new level of support for the pair. Monitoring US economic data and the pair’s behavior around the 200-day SMA will be crucial in determining whether this upward trend can be sustained.
NZD/USD – Daily Chart
Cryptocurrency Update
Bitcoin Moves Above 70K Again
Bitcoin’s long-term uptrend is still intact, with the 100-day Simple Moving Average (SMA) acting as a key support level. While technical indicators such as the 20-day and 50-day SMAs have previously limited Bitcoin’s upward momentum, recent price activity on the daily chart suggests a break above these resistance levels. This breakout implies that the 50-day SMA may now serve as a new support level going ahead. Despite a temporary three-day drop, Bitcoin continued its upward trend on Monday, surpassing the crucial $70,000 threshold. The successful breach of major resistance levels underscores the market’s overall optimism.
BTC/USD – Daily chart
Ethereum Consolidates Below $4,000
The recent boost in confidence induced by the SEC’s more favourable stance on spot Ether ETFs has pushed Ether (ETH) to a new high of $3,832.50. This large gain from its previous high of roughly $3,000 represents a staggering 25% increase in Ethereum’s value. Capitalizing on this upward trend, we profitably closed our Ethereum buy signal last week and are looking to open another one. The Ethereum ETF’s acceptance is regarded as an important milestone, with the potential to encourage larger institutional investment and broader Ethereum adoption. This change is expected to increase market stability and liquidity, pushing prices further higher. However ETH/USD has been stabilizing below $4,000 for two weeks.
ETH/USD – Daily chart
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Related Articles
Comments
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals