U.S. Small Business Optimism Inches Up as Dollar Sees Volatility

U.S. small business optimism rises, and the dollar sees volatility. China inflation data is awaited. The FOMC statement is ahead. Currency and oil outlooks are discussed.

In a significant development during the U.S. session, the NFIB Small Business Index showed a consecutive monthly increase for the second time in 2024, rising from 89.7 to 90.5. Despite this uptick, the index continues to fall short of the 50-year average of 98 for the 29th month, indicating persistently low optimism among small business owners regarding future business conditions. Given that the small business sector accounts for over 40% of the U.S. GDP and employment, this pessimism underscores potential challenges for the broader economy.

Meanwhile, the dollar index (DXY) experienced volatility, hitting an overnight high of 105.45 before sharply reversing to fall below 105.20 by the session’s end.

Implications for the Asia Session

China is in the spotlight in preparation for the release of its May inflation data. Analysts anticipate a slight increase in the Consumer Price Index (CPI) from 0.3% to 0.4%, while the Producer Price Index (PPI) is predicted to decelerate from -2.5 % to -1.5 % year-on-year. An increase in inflationary pressures could indicate heightened business and industrial production activity and rising demand for crude oil, potentially driving oil prices higher.

The Dollar Index (DXY)

Key Events:

• CPI (12:30 pm GMT)
• FOMC Statement (6:00 pm GMT)
• FOMC Press Conference (6:30 pm GMT)

Expectations: With overall inflation easing in April and May estimates pointing to another month of subdued CPI readings, the dollar could face selling pressures if inflation continues to soften. The Federal Open Market Committee (FOMC) anticipates maintaining the Fed Funds rate at 5.25 to 5.5% for the seventh consecutive meeting. Any dovish remarks from Fed Chair Jerome Powell during his press conference could further weigh the dollar.

Currency and Commodity Forecasts

Gold (XAU)

Key Events:

• CPI (12:30 pm GMT)
• FOMC Statement (6:00 pm GMT)
• FOMC Press Conference (6:30 pm GMT)

Expectations: With anticipated soft inflation data, a weaker dollar could benefit gold prices. If the FOMC maintains its current rate and Powell’s comments are dovish, this could further bolster gold.

Next 24 Hours Bias: Weak Bearish

U.S. Small Business Optimism Inches Up as Dollar Sees Volatility

Australian Dollar (AUD)

With no major news events, The AUD will likely hover around its support and resistance levels of 0.6560 and 0.6640, respectively.

Next 24 Hours Bias: Weak Bearish

Kiwi Dollar (NZD)

Similarly, the NZD stabilizes around 0.6120, with support and resistance at 0.6100 and 0.6170, respectively.

Next 24 Hours Bias: Weak Bearish

Japanese Yen (JPY)

Robust demand for the dollar has kept USD/JPY elevated above 157. Support at 155.30 and resistance at 157.70 are key levels to watch.

Next 24 Hours Bias: Medium Bullish

Euro (EUR)

The Euro remains under pressure, trading around 1.0720 with key support at 1.0730 and resistance at 1.0800.

Next 24 Hours Bias: Medium Bearish

Swiss Franc (CHF)

USD/CHF remains near 0.8980, with key support at 0.8880 and resistance at 0.8990.

Next 24 Hours Bias: Weak, Bullish

Pound (GBP)

Ahead of the U.K.’s GDP release, traders expect the Pound to face pressure if growth turns negative. If GDP falters, they see support and resistance at lower levels.

Next 24 Hours Bias: Weak Bearish

Canadian Dollar (CAD)

BoC Governor Tiff Macklem’s speech could influence the CAD later today, especially if dovish tones emerge.

Next 24 Hours Bias: Weak Bearish

Oil

Key Events:

• China CPI and PPI (1:30 am GMT)
• EIA Crude Oil Inventories (2:30 pm GMT)

Expectations: Rising inflation in China could signal increased demand for crude, while the U.S. API stockpiles indicate higher demand. Optimistic demand forecasts from the EIA and OPEC will likely keep WTI oil prices elevated.

Next 24 Hours Bias: Weak, Bullish

Conclusion

Overall, the Asia session is poised to react to key economic indicators from the U.S. and China. Market participants will closely monitor inflation data, central bank statements, and commodity price movements, likely shaping the trading landscape over the next 24 hours.

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