Bullish Setup
The next HH HL is the sinal of the Bullish Trend start
Here’s the 4hr Elliott wave Chart from the 4/14/2022 New York update. In which, the rally to 1.6866 high ended 5 waves from the 2/10/2023 low in wave (1) & made a pullback in wave (2). The internals of that pullback unfolded as Elliott wave double three correction where wave W ended at 1.6579 low. Then a bounce to 1.6835 high-ended wave X & started the next leg lower in wave Y towards 1.6547-1.6369 blue box area. From there, buyers were expected to appear looking for new highs ideally or for a 3-wave bounce minimum.
GBP Funamentals
The GBP has experienced a notable rally in recent weeks, positioning it as the top-performing currency among the G10 nations this year. The unexpected success story of the GBP, now dubbed the "King of G10 FX," can be attributed to several factors.
Firstly, the rebound can be attributed to a series of positive UK data releases in recent months, which were influenced by the significant decline in European energy prices and subsequent improvements in commodity terms of trade. Additionally, the persistent UK inflation, combined with reduced post-Brexit tensions between the UK and the EU, as well as diminished risks of another independence referendum, have enhanced the attractiveness of GBP-denominated assets.
Asia overnight
The sentiment was mixed during Asian trading as investors grappled with concerns surrounding the US debt ceiling. However, their optimism was boosted by China's better-than-expected exports data.
Fig1: China headline news from 09/05/2023
There were also reports from newswires suggesting that Chinese authorities might announce additional measures to bolster the economy.
Currently, Asian markets were trading with a mixed performance, while S&P500 futures showed a slight decline.
In the G10 foreign exchange market, trading remained within narrow ranges, with the Norwegian krone (NOK) and Euro (EUR) underperforming, while the US dollar (USD) and Japanese yen (JPY) outperformed.
Kazuo Ueda, the Governor of the Bank of Japan (BoJ), stated that the central bank would discontinue its Yield Curve Control (YCC) policy once inflation consistently reaches 2%. However, this statement didn't come as a surprise and maintained investors' view of the new BoJ Governor as dovish. In March, Japan's wage growth continued to be lacklustre, with real wages experiencing a YoY decline of -2.9%. This data is unlikely to prompt any policy changes by the BoJ.
USD: Debt ceiling, regional banks, and the Fed
The short-term outlook for the USD is heavily influenced by the ongoing drama surrounding the US debt ceiling in Congress and the outlook for regional banks in the United States. Market concerns regarding the prospects of regional lenders are unlikely to ease following the recent release of the Senior Loan Officers Survey. Additionally, the political deadlock over the US debt ceiling is expected to continue negatively impacting the USD.
During the day, foreign exchange (FX) investors will closely monitor the high-level meeting between President Joe Biden and US congressional leaders, which aims to resolve the impasse over the debt ceiling. In terms of its impact on the FX market, any signs of progress between Democrats and Republicans towards a potential bipartisan solution, such as a short-term extension of the debt ceiling, could help the USD regain strength across the board. Conversely, indications that the political impasse has worsened may dampen the appeal of USD-denominated assets.
The next HH HL is the sinal of the Bullish Trend start
Here’s the 4hr Elliott wave Chart from the 4/14/2022 New York update. In which, the rally to 1.6866 high ended 5 waves from the 2/10/2023 low in wave (1) & made a pullback in wave (2). The internals of that pullback unfolded as Elliott wave double three correction where wave W ended at 1.6579 low. Then a bounce to 1.6835 high-ended wave X & started the next leg lower in wave Y towards 1.6547-1.6369 blue box area. From there, buyers were expected to appear looking for new highs ideally or for a 3-wave bounce minimum.
GBP Funamentals
The GBP has experienced a notable rally in recent weeks, positioning it as the top-performing currency among the G10 nations this year. The unexpected success story of the GBP, now dubbed the "King of G10 FX," can be attributed to several factors.
Firstly, the rebound can be attributed to a series of positive UK data releases in recent months, which were influenced by the significant decline in European energy prices and subsequent improvements in commodity terms of trade. Additionally, the persistent UK inflation, combined with reduced post-Brexit tensions between the UK and the EU, as well as diminished risks of another independence referendum, have enhanced the attractiveness of GBP-denominated assets.
Asia overnight
The sentiment was mixed during Asian trading as investors grappled with concerns surrounding the US debt ceiling. However, their optimism was boosted by China's better-than-expected exports data.
Fig1: China headline news from 09/05/2023
There were also reports from newswires suggesting that Chinese authorities might announce additional measures to bolster the economy.
Currently, Asian markets were trading with a mixed performance, while S&P500 futures showed a slight decline.
In the G10 foreign exchange market, trading remained within narrow ranges, with the Norwegian krone (NOK) and Euro (EUR) underperforming, while the US dollar (USD) and Japanese yen (JPY) outperformed.
Kazuo Ueda, the Governor of the Bank of Japan (BoJ), stated that the central bank would discontinue its Yield Curve Control (YCC) policy once inflation consistently reaches 2%. However, this statement didn't come as a surprise and maintained investors' view of the new BoJ Governor as dovish. In March, Japan's wage growth continued to be lacklustre, with real wages experiencing a YoY decline of -2.9%. This data is unlikely to prompt any policy changes by the BoJ.
USD: Debt ceiling, regional banks, and the Fed
The short-term outlook for the USD is heavily influenced by the ongoing drama surrounding the US debt ceiling in Congress and the outlook for regional banks in the United States. Market concerns regarding the prospects of regional lenders are unlikely to ease following the recent release of the Senior Loan Officers Survey. Additionally, the political deadlock over the US debt ceiling is expected to continue negatively impacting the USD.
During the day, foreign exchange (FX) investors will closely monitor the high-level meeting between President Joe Biden and US congressional leaders, which aims to resolve the impasse over the debt ceiling. In terms of its impact on the FX market, any signs of progress between Democrats and Republicans towards a potential bipartisan solution, such as a short-term extension of the debt ceiling, could help the USD regain strength across the board. Conversely, indications that the political impasse has worsened may dampen the appeal of USD-denominated assets.
The federal government operates in a deficit, spending more than it brings in with taxes, so it’s forced to borrow money to pay for everything from the salaries of armed forces and federal employees to Social Security
Congress has the power of the purse strings, letting it set a limit on what the government can borrow to pay for expenses (the debt ceiling). The current limit is $31.4 trillion.
What happens if the debt ceiling is not raised or suspended?
When does the U.S. hit spending limit?
How many times has the debt ceiling been raised?
How much has the U.S. debt increased in the past 20 years?
What caused the debt?
Answers here