EUR/USD, USD/JPY and AUD/USD Forecast – US Dollar Softens Early on Thursday

Forex

Summary:

The US dollar weakened early Thursday. EUR/USD surged past 1.15 on ECB comments, USD/JPY fell but stayed in consolidation, and AUD/USD showed bullish signs amid a potential golden cross.

EUR/USD Technical Analysis

The euro has exploded to the upside in the early part of Thursday as an ECB official has said that monetary policy is stable. And that suggests, of course, there won’t be any more cuts. That has had the euro break significantly above the 1.15 level. And if we can keep up this type of momentum, we should see that drag it higher. On the other hand, if we break back down below the 1.15 level, that would be a very ugly turn of events. We do have a couple of announcements coming down to the United States later in the day that could cause a little bit of volatility, though, so do keep that in mind.

USD/JPY Technical Analysis

The US dollar has dropped pretty significantly against the Japanese yen, but we are still in the middle of overall consolidation. So, while it is an ugly candlestick and we did form a couple of shooting stars a couple of days before, it is just more of the same. I still look at the 142 yen level as a major support level. And at that point in time, I would expect to see buyers come back to support the market. If we were to break down below there, then we may see a move to the 140 yen level, but right now we’ll have to wait and see. I don’t necessarily look at this as a market that I would like to short. I want to continue to look for long, but right now we just don’t have the proper momentum.

AUD/USD Technical Analysis

The Australian dollar has turned around during the trading session after initially falling. The Aussie dollar has been a little bit of a lackluster currency over the last several weeks, but it has been grinding slowly higher. So, with that being the case, it’s not a huge surprise to see that there were buyers willing to step in and pick up at the dip.

The 50 day EMA looks as if it is going to break above the 200 day EMA and with that being said, the so-called golden cross could be kicking off. The 0.6550 level above being broken would be a very big signal that we are going higher. And we did try to do it during the Wednesday session, but we gave it back. And now it looks like we’re going to continue to bounce around in this same area, probably hanging on every word coming out of the US and Chinese trade talks.

Source: fxempire

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Warren Takunda

Economic

The EU is wrangling over a provision of Donald Trump's so-called "Big Beautiful Bill" for the US budget that could see European companies taxed higher than others in retaliation for certain taxes imposed on US enterprises overseas, the vice-chair of the European Parliament’s tax subcommittee has told Euronews.

The German European People's Party MEP Markus Ferber said the European Commission has raised the proposed legislation—already approved by the House of Representatives—in ongoing tariff negotiations with the Trump administration.

“We are concerned because within this ‘One Big Beautiful Bill’ there are special taxes aimed at jurisdictions that impose taxes on the US,” Ferber told Euronews.

He added that jurisdictions like the EU, which have already implemented the OECD agreement establishing a global minimum tax of 15% on multinationals, are directly targeted.

“It could also affect member states that have introduced a digital services tax,” he noted.

The OECD agreement, approved by 140 countries - though as yet unratified by the US - introduced a global minimum tax of 15% on the profits of multinational companies, regardless of where those profits are declared, with effect from 1 January 2024. The EU has transposed the agreement into law and applies it to multinationals operating within the Union, to the ire of the Trump administration.

Meanwhile countries such as Denmark, Portugal and Poland have implemented digital services taxes targeting US tech giants, while others are in the process of creating one.

The US is now looking to retaliate against taxes it deems unfair through a provision of the "Big Beautiful Bill” which would hit foreign investors with a bump in US income tax by five percent points each year, potentially taking the rate up to 20%, in addition to existing taxes.

The Commission is concerned, officials said.

According to Ferber, the EU executive has put this provision of the US budget bill on the negotiating table. “But we are not sure yet that the US agreed to put it in the basket,” the MEP said.

For several weeks, the EU and the US have been discussing a resolution to the trade dispute that has been ongoing since mid-March.

The US impose 50% tariffs on EU steel and aluminium, 25% on cars and 10% on all EU imports.

For its part, the EU has prepared countermeasures targeting around €115 billion worth of US products. These measures are either suspended until July or still awaiting approval by EU member states.

Source: Euronews

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Michelle

Economic

Forex

British goods exports to the United States suffered a record fall in April after U.S. President Donald Trump imposed new tariffs, official figures showed on Thursday, pushing Britain's goods trade deficit to its widest in more than three years.

Britain exported 4.1 billion pounds ($5.6 billion) of goods to the United States in April, down from 6.1 billion pounds in March, Britain's Office for National Statistics said, the lowest amount since February 2022 and the sharpest decline since monthly records began in 1997.

The 2 billion pound fall - a 33% drop in percentage terms - contributed to a bigger-than-expected drop in British gross domestic product in April.

Last week Germany said its exports to the United States fell by 10.5% in April although that figure, unlike Britain's, is seasonally adjusted.

The British Chambers of Commerce said the scale of the fall partly reflected manufacturers shipping extra goods in March to avoid an expected increase in tariffs. Even so, April's goods exports were 15% lower than a year earlier.

"The economic effects of the U.S. tariffs are now a reality. Thousands of UK exporters are dealing with lower orders and higher supply chain and customer costs," the BCC's head of trade policy, William Bain, said.

The United States is Britain's largest single goods export destination and is especially important for car makers, although total British exports to countries in the European Union are higher.

Britain exported 59.3 billion pounds of goods to the United States last year and imported 57.1 billion pounds.

The United States imposed 25% tariffs on British steel and aluminium on March 12 and in early April increased tariffs on imports of cars to 27.5% as well as a blanket tariff of 10% on other goods.

Last month Britain agreed the outline of a deal to remove the extra tariffs on steel, aluminium and cars - the only country to do so - but it has yet to be implemented and the 10% tariff remains in place for other goods.

Before the deal, the Bank of England estimated the impact of the tariffs on Britain would be relatively modest, reducing economic output by 0.3% in three years' time.

BIGGER TRADE DEFICIT

Thursday's data also showed that the fall in exports to the United States pushed Britain's global goods trade deficit to 23.2 billion pounds in April from 19.9 billion pounds in March, its widest since January 2022 and nearly 3 billion pounds more than had been expected by economists polled by Reuters.

Excluding trade in precious metals, which the ONS says adds volatility to the data, the goods trade deficit was the widest since May 2023 at 21.6 billion pounds.

Source: Yahoo Finance

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Adam

Stocks

China–U.S. Trade War

Here are five key things investors need to know to start the trading day:

Data dump

All three major stock averages closed lower on Wednesday despite news of a U.S.-China trade agreement and better-than-expected inflation data. The S&P 500 sank 0.27%, snapping its three-day win streak, while the Nasdaq Composite lost 0.5% and the Dow Jones Industrial Average

dropped just 1.1 points. The consumer price index increased 0.1% in May — less than the Dow Jones forecast of 0.2% — putting the annual inflation rate at 2.4%. Investors will get another read on inflation on Thursday with the producer price index, due at 8:30 a.m. ET. Crude oil futures, meanwhile, climbed more than 4% on Wednesday amid increasing tensions between the U.S. and Iran. Follow live market updates.

Air India crash

An Air India Boeing Dreamliner bound for London Gatwick Airport crashed on Thursday shortly after taking off in western India, local officials and the carrier confirmed. The plane was carrying 242 passengers and crew, and the cause of the crash wasn’t immediately clear. “The injured are being taken to the nearest hospitals,” Air India said in an X post. The flight was operated by a Boeing 787 Dreamliner that was delivered to Air India in 2014, according to flight-tracking site FlightRadar24. “We are aware of initial reports and are working to gather more information,” Boeing said in a statement. Shares of the planemaker were down more than 7% before the bell.

90+ days

Treasury Secretary Scott Bessent signaled on Wednesday that the 90-day pause on reciprocal tariffs could be extended for 18 of the United States’ “important trading partners” who are “negotiating in good faith.” Testifying before the House Ways and Means Committee, Bessent said “it is highly likely” that the U.S. would “roll the date forward to continue good faith negotiations” with those countries. The Treasury chief’s comments marked a new tone out of the White House: Trump officials had so far not suggested that they’d be open to extending the 90-day tariff pause announced April 9 without “terms of an agreement” in hand. Meanwhile, Commerce Secretary Howard Lutnick told CNBC’s “Money Movers” on Wednesday that U.S. tariff levels on China will not change, even though a framework trade agreement between the two countries has yet to be finalized.

Cloud prophecy

Oracle beat Wall Street’s top- and bottom-line estimates for the fourth quarter on Wednesday, sending shares of the software maker 8% higher after the bell. Revenue for the quarter totaled $15.9 billion, the company said, an 11% increase from the same period last year. CEO Safra Catz indicated that Oracle’s cloud growth will accelerate. On an earnings call with analysts, she said that cloud infrastructure revenue should increase more than 70% in fiscal 2026. Catz also called for more than $67 billion in revenue in the next fiscal year, above the LSEG consensus of $65.18 billion.

Chiming in

Online banking services provider Chime priced its IPO at $27 per share on Wednesday — above the expected range — ahead of its Nasdaq trading debut set for Thursday. The offering values the company at $11.6 billion, a big step down from its last private valuation of $25 billion in 2021. Chime’s decision to go public will test investor appetite for consumer-facing finance companies starting to hit the market, following a multi-year freeze in the IPO pipeline. Shares of eToro popped 29% after the trading platform debuted on the Nasdaq in May, and stablecoin issuer Circle soared 168% after its New York Stock Exchange debut last week.

Source: cnbc

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Warren Takunda

Economic

U.S. wholesale prices rose modestly last month from a year earlier, another sign that inflationary pressures remain mild.

The Labor Department reported Thursday that its producer price index — which measures inflation before it its consumers — rose 2.6% in May 2024. Producer prices rose 0.1% from April to May after dropping 0.2% the month before.

Excluding volatile food and energy prices, wholesale costs were up 0.1% from April and 3% from May 2024.

The readings were slightly lower than economists had forecast.

Wholesale energy prices were unchanged, although gasoline prices rose 1.6% from April after falling the month before. Food prices at the wholesale level ticked up 0.1% after dropping 0.9% in April. Egg prices, volatile because of the bird flu, rose 1.4% following 39.3% drop in April; they are up 125% from May 2024.

The report came out a day after the Labor Department said that consumer prices rose a modest 0.1% last month from April and 2.4% from a year earlier.

Since returning to the office, Trump has rolled out 10% tariffs on nearly every country in the world as well as specific levies on steel, aluminum and autos. Importers in the United States pay the taxes and pass them along to consumers via higher prices when they can. For that reason, economists expect inflation to pick up later this year.

So far, his tariffs don’t seem to have had much of an impact on prices overall

Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.

Inflation began to flare up for the first time in decades in 2021, as the economy roared back with unexpected strength from COVID-19 lockdowns. That prompted the Fed to raise its benchmark interest rate 11 times in 2022 and 2023. The higher borrowing costs helped bring inflation down from the peaks it reached in 2022, and last year the Fed felt comfortable enough with the progress to cut rates three times.

But it has turned cautious this year while it waits to see the inflationary impact of Trump’s trade policies. The central bank is expected to leave rates unchanged at its meeting next Tuesday and Wednesday.

Source: AP

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Glendon

Economic

Forex

The Bank of England (BoE) is expected to maintain its Bank Rate at 4.25% during its June meeting, according to a forecast from Bank of America (BofA). The financial institution predicts a 7-2 vote split among Monetary Policy Committee members, with two members voting for a 25 basis point cut.

BofA notes that recent British pound (GBP) weakness stems from seasonal underperformance and softening macroeconomic data. Despite the currency’s recent price movements, BofA’s GBP dashboard does not indicate that markets are adopting an increasingly bearish stance toward the pound.

Market positioning remains a concern for the currency, along with the broader risk environment ahead of the July 9th tariff deadline. BofA analysts point out that the recalibration in BoE market pricing is now more aligned with their base case scenario.

The financial institution emphasizes that interest rates and carry have not been reliable indicators for GBP price movements. Instead, global risk dynamics will likely play a more dominant role in determining the currency’s performance.

BofA suggests that a dovish Monetary Policy Committee stance is perhaps the base case scenario, which creates some asymmetry for the pound. This outlook comes as markets continue to assess the central bank’s policy trajectory amid evolving economic conditions.

Source: Investing

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Adam

Commodity

Oil prices jumped by as much as 5% yesterday, bringing WTI crude close to $70 per barrel. The main reason for the rise is positive news about a possible trade deal between China and the US, though no final agreement has been reached yet.

At the same time, talks with Iran over its nuclear program have not made much progress. If the negotiations fail completely, there is a risk of military conflict, which often pushes oil prices higher.

Adding to the upward pressure, US oil inventories fell more than expected for the third month in a row.

Oil Prices Move Under Geopolitical Pressure

Looking at the different parts of the ongoing tariff war, the situation with China seems to have the biggest impact on financial markets, including oil. The latest statement says that the deal is almost complete, but both Donald Trump and Xi Jinping still need to sign it. Given how quickly things can change, nothing is certain yet.

Still, the market is already hoping for a return to normal trade, especially for semiconductors and rare earth metals, which appear to be the key negotiating points for both countries. A revival in trade and a stable long-term deal would help GDP growth, which would also increase demand for oil.

Yesterday’s decision to withdraw some staff from the US embassy in Baghdad is a bad sign for the US-Iran talks on stopping Iran’s nuclear program in exchange for easing Western sanctions. People involved in the talks say that Iran is demanding more, and although negotiations are still ongoing, the chances of a deal look slim.

In the worst case, the US could launch strikes on Iran’s nuclear sites. If that happens, Iran may retaliate, and the conflict could spread across the region, pushing oil prices much higher.

Last month, OPEC+ announced a production increase of 310,000 barrels per day but managed to raise output by only 180,000 barrels. Key producers, led by Saudi Arabia, were unable to boost production as planned.

Combined with falling US oil inventories, this points to a possible, at least short-term, shortage of crude on the global market, especially if trade activity and GDP growth in the US pick up.

WTI Crude Oil Prices Approach Key Supply Zone

WTI crude oil has broken through the resistance level around $65 per barrel, opening the way for further gains. The next target for buyers is the supply zone near $72 per barrel, which is where a strong downward move started in early April.

Crude Oil: Uptrend May Extend on Cautious Trade Deal Optimism, Supply Risks_1

Any possible pullbacks are likely to face support near the intersection of the rising trend line and the previously broken resistance, which now acts as support. In a very bullish scenario, if prices break above $72 per barrel, they could even move toward this year’s highs just below $80 per barrel.