FOREX: Goldman Sachs Upgrades EUR/USD Forecast
Jun-08 21:24
Goldman Sachs: "USD: Still sliding. The broad Dollar has fallen about 6% on the year and has now fully reversed its Q4 2024 surge. At the same time, the Dollar has been roughly flat against other DM currencies on net over the last six weeks. It is therefore not surprising that investors see more two-way risks around the currency now than they have for some time. But while this adjustment has been swift and meaningful—which is pretty standard behavior around currency peaks—we still think this is more the “end of the beginning” rather than the “beginning of the end” of the Dollar shift. Today’s payrolls report is consistent with more slowing in the real economy and less exceptional US performance, which we think should still weigh on the Dollar over time. And some of the skepticism stems from whether foreign investors will continue to diversify out of US assets in an environment where US returns are solid but not exceptional. But, while US equities are back to flat on the year, for a EUR-based investor they are down 8%, which puts the relative performance to European equities in even starker contrast. This is one reason why we still think foreign investors will continue to see a stronger case for diversification ahead, especially when there are signs of a less-welcoming environment for foreign investors in US assets. As a result, while Dollar depreciation may be shifting to a new phase, we still think it is here to stay. Given the confirmation of a slowdown in US activity and a shift in global investor appetite, we are rolling our EUR/USD forecasts to 1.17, 1.20 and 1.25 in 3, 6 and 12 months (from 1.12, 1.15 and 1.20, which we established after the Liberation Day announcement)."
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
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