Weekly technical outlook: USD/JPY, NZD/USD, GBP/USD [Video]

FOMC meeting Minutes, S&P global PMIs: USD/JPY

Despite surprising stagnation in April’s retail sales data and a slight easing of CPI inflation last week, the Fed is unlikely to reduce interest rates before September. The odds for two rate cuts have increased with the data, but investors are still doubtful about the second reduction, according to futures markets.

USDJPY was able to rotate near the 153.35 level and escape a worsening outlook last week, thanks to the uncertain direction of rate cuts. From a technical perspective, the pair seems to have more bullish fuel in the tank, though whether this will be enough for an advance above the 156.20-157.00 resistance zone and a decisive close higher than April’s bar of 158.40 remains to be seen.

The release of the FOMC meeting minutes on Wednesday at 18:00 GMT may offer more official insights on the discussions held during May’s policy meeting. However, the report might not have a significant impact on the greenback, as some policymakers are expected to share more recent opinions later this week. There will be several US data releases later this week as well, such as the flash S&P Global business PMIs, durable goods orders, existing home sales, and initial jobless claims.

As regards the yen, the currency barely reacts to domestic data. However, Japan’s CPI inflation figures due on Friday might attract special attention as a second rate hike in the second half of 2024 seems likely.

RBNZ rate decision: NZD/USD

Other key central bank events include the RBNZ rate decision on Wednesday at 02:00 GMT. No changes are expected to take place, though given the relatively slow progress on the inflation front, it would be interesting to see if there will be any hawkish adjustments on forward guidance. A press conference will follow the policy announcement at 03:00 GMT.

As regards the kiwi, the currency had its best weekly session so far this year, surpassing its April high to top near the 0.6140 barrier against the US dollar. Technically, the recent rally looks overdone, making a pullback to 0.6050-0.6070 likely. If there are more gains instead, the pair will need strong buying to overcome the obstacle near 0.6170 and then the barrier around 0.6215.

UK CPI inflation and more: GBP/USD

Elsewhere, S&P Global business PMI figures might affect European currencies on Wednesday, but UK CPI inflation data due at 17:00 GMT will give more reason to watch the British pound. Futures markets indicate that a rate cut in June could be a close decision, particularly if headline inflation sees a significant decline to 2.1% y/y from 3.2% and the core measure decelerates to 3.6% from 4.2% as anticipated by analysts. Falling retail sales could provide more incentives for a rate reduction, but improving business conditions could complicate the BoE’s decision.

GBPUSD is currently trading in a critical territory, testing the 1.2700 psychological mark and the long-term resistance trendline from May 2021. A step higher could stretch towards the March barrier of 1.2785, though given the overbought signals, there is some doubt whether the pair will mark a return to an uptrend in the medium-term picture.