The forex market began the week with traders anticipating decisions from the US Federal Reserve, the European Central Bank, and the Bank of Japan, with high volatility expected from Wednesday onwards. Despite the surprise rate hikes by the Reserve Bank of Australia and the Bank of Canada last week, it is expected that the US Federal Reserve and the Bank of Japan will leave rates unchanged, while the European Central Bank's decision is still uncertain. The US Dollar started the week stronger, with the Australian Dollar being the strongest currency and the New Zealand Dollar the weakest.
The U.S. dollar strengthened against other major currencies as traders anticipate a pause in the U.S. Federal Reserve's rate hike. Meanwhile, the Canadian dollar eased against its major counterparts due to an unexpected fall in employment【17†source】【18†source】. Also, Japan's machine tool orders declined for the fifth straight month in May, indicating a slowdown in the country's manufacturing sector.
In currency pair analysis, CADCHF has been moving in an Ascending channel and has reached the resistance area of the minor consolidation pattern. A survey of major banks suggests that the Bank of Canada will delay raising interest rates due to strong GDP, inflation, and retail sales data. The Bank is expected to maintain interest rates at 4.5%, but may indicate a readiness to increase them further if necessary.
AUDCAD is also moving in an Ascending channel and has reached the higher high area of the channel. Australia's first-quarter GDP in 2023 was 2.3%, slightly lower than the 2.4% expected and 2.7% recorded in 2022, indicating a slowing economy. Also, the market is keeping a close eye on China's trade data, with imports expected to have decreased 8% YoY in May after falling 7.9% in April, hinting at a slowdown in the second-largest economy in the world
NZDUSD is moving in a Descending triangle pattern and has fallen from the lower high area of the pattern. China's trade surplus shrank to its lowest level in 13 months in May due to a decline in exports, putting pressure on the New Zealand economy. The Reserve Bank of New Zealand signaled an end to its aggressive hiking cycle, further devaluing the New Zealand Dollar. The ambiguity surrounding the Federal Reserve's upcoming policy decision may discourage USD bulls from making risky bets and assist in containing losses for the NZDUSD pair.
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