. Daily Forex Analysis - Euro and Pound React to Data and Central Banks

Daily Forex Analysis – Euro and Pound React to Data and Central Banks

Daily Forex Analysis – Euro and Pound React to Data and Central Banks

07 May 2024

Introduction

EUR/USD retraces near 1.0750 as the US Dollar sees an upward correction, interrupting its recent gains. ECB Chief Economist Philip Lane expresses confidence in inflation reaching the 2% target, while Richmond Fed President Thomas Barkin suggests elevated interest rates could curb inflation. Despite the Eurozone’s upbeat PMI data, the Euro faces pressure. In the UK, Pound Sterling declines to 1.2540 against the US Dollar, while in Australia, the RBA maintains a steady interest rate. USD/CAD rebounds above 1.3650 amidst a stronger US Dollar and lower crude oil prices. Speculations of US rate cuts persist, influencing market sentiments amid geopolitical uncertainties and the BoC’s relative stance compared to the Fed.

Markets In Focus Today – EUR/USD

EUR/USD edges lower to near 1.0750 due to the upward correction in the US Dollar.

EUR/USD halts its winning streak due to the uptick in the US Dollar.ECB Chief Economist Philip Lane said that recent consumer prices have bolstered his confidence in inflation returning to the 2% goal.Richmond Fed President Thomas Barkin said that elevated interest rates will further assist in alleviating inflation pressures.EUR/USD snaps its four-day winning streak, trading around 1.0760 during the Asian hours on Tuesday. However, the Euro found support from higher-than-expected Eurozone Purchasing Managers Index (PMI) data released on Monday. Later on Tuesday, Retail Sales data are set to be released during the upcoming European market session. This data will provide insights into the short-term performance of the retail sector, which contributes approximately 5% to the total value added by the Eurozone economies. The upward correction in the US Dollar (USD) exerts pressure on the EUR/USD pair. However, the softer US labor data released on Friday has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024. This has boosted investors’ risk appetite, consequently undermining the Greenback against the Euro.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0730 | Positive Crossover | Bullish
  • MA 20 : 1.0729 | Positive Crossover | Bullish
  • MA 50 : 1.0766 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.0723 | Positive Crossover | Bullish
  • MA 20 : 1.0695 | Positive Crossover | Bullish
  • MA 50 : 1.0792 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 53.7237 | Buy Zone | Bullish

Stochastic   Oscillator : 76.8535 | Buy Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.0826 R2 : 1.0893
  • S1 : 1.0609 S2 : 1.0542

Overall Sentiment : Neutral Market Direction : Buy

Trade Suggestion : Limit Buy : 1.0739 | Take Profit : 1.0800 | Stop Loss : 1.0699

GBP/USD

Pound Sterling falls back as focus shifts towards BoE monetary policy decision.

The Pound Sterling (GBP) drops to 1.2540 against the US Dollar in Tuesday’s London session. The GBP/USD falls as the US Dollar extends its upside, with the US Dollar Index (DXY) – which tracks the Greenback’s value against six major currencies – moving higher to 105.25. Investors seem to remain confident about the United States’ economic outlook despite the recent weakness seen in a slew of economic data such as lower labor demand, slower wage growth and contracting Services PMI in April. The overall good performance of the economy will allow the Federal Reserve (Fed) to take its time to cut interest rates compared with other central banks from developed nations.Still, weak US economic data has fuelled expectations for the Fed to reduce interest rates from the September meeting. Uncertainty prevails over the Fed’s rate-cut timing as policymakers see the current monetary policy framework as adequate.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2522 | Positive Crossover | Bullish
  • MA 20 : 1.2523 | Positive Crossover | Bullish
  • MA 50 : 1.2568 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.2522 | Positive Crossover | Bullish
  • MA 20 : 1.2484 | Positive Crossover | Bullish
  • MA 50 : 1.2606 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 50.3588 | Buy Zone | Bullish

Stochastic   Oscillator : 32.68 | Sell Zone | Negative

Resistance   And Support Levels :

  • R1 : 1.2657 R2 : 1.2754
  • S1 : 1.2345 S2 : 1.2248

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Sell : 1.2561 | Take Profit : 1.2478 | Stop Loss : 1.2623

AUD/USD

Australian Dollar loses ground after RBA maintains interest rate at 4.35%.

The Australian Dollar lost ground after the RBA’s policy decision to keep interest rate at 4.35%, as expected.The Australian Central Bank has extended its pause for the fourth meeting in a row.The Australian Dollar (AUD) halted its winning streak on Tuesday after the Reserve Bank of Australia (RBA) decided to keep its interest rate unchanged at 4.35%. However, markets were speculating that the RBA might adopt a more hawkish stance, fueled by last week’s inflation data, which exceeded expectations. The Australian economy witnessed a decrease in inflation during the first quarter, marking the fifth consecutive quarter of deceleration, despite exceeding initial forecasts. Additionally, the country’s monthly CPI indicator surged in March, contrary to market expectations of stagnation. The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, continues to face pressure following the release of softer US labor data on Friday. This development has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6558 | Positive Crossover | Bullish
  • MA 20 : 0.6536 | Positive Crossover | Bullish
  • MA 50 : 0.6536 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6551 | Positive Crossover | Bullish
  • MA 20 : 0.6503 | Positive Crossover | Bullish
  • MA 50 : 0.6534 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 58.7582 | Buy Zone | Bullish

Stochastic   Oscillator : 68.15 | Buy Zone | Negative

Resistance   And Support Levels :

  • R1 : 0.6602 R2 : 0.6668
  • S1 : 0.6386 S2 : 0.6320

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 0.6578 | Take Profit : 0.6644 | Stop Loss : 0.6539

USD/CAD

USD/CAD rebounds above 1.3650 amid firmer US Dollar, lower crude oil prices.

The USD/CAD pair gains traction around 1.3685 during the early European trading hours on Tuesday. The rebounds of Greenback and the decline of oil prices provide some support to the pair. Investors will take more cues from the Canadian Ivey Purchasing Managers Index (PMI) for April, due later in the day. The recent US labor market data and comments from Federal Reserve (Fed) officials have triggered the speculation of rate cuts. Richmond Fed President Thomas Barkin said on Monday that the current interest rate level should cool the economy enough to bring down inflation to the Fed’s 2% goal. New York Fed President John Williams noted that “eventually” the US Fed will cut interest rates, although he did not give a time frame. Meanwhile, the US Dollar (USD) strengthens broadly amid the uncertainties surrounding the geopolitical tensions in the Middle East, which boost the safe-haven currencies like the Greenback. The BoC potentially getting closer to rate cuts relative to the Fed, which might drag the CAD lower.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.3691 | Negative Crossover | Bearish
  • MA 20 : 1.3682 | Negative Crossover | Bearish
  • MA 50 : 1.3627 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.3690 | Negative Crossover | Bearish
  • MA 20 : 1.3715 | Negative Crossover | Bearish
  • MA 50 : 1.3612 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 51.7841 | Buy Zone | Bullish

Stochastic   Oscillator : 36.38 | Sell Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.3840 R2 : 1.3927
  • S1 : 1.3559 S2 : 1.3472

Overall Sentiment : Neutral Market Direction : Sell

Trade Suggestion : Limit Sell : 1.3693 | Take Profit : 1.3636 | Stop Loss : 1.3734

Elsewhere In The Forex Market

NZD/USD down 0.05% to 0.6007, The USD/JPY up 0.17% to 154.11. The EUR/GBP up 0.15% at 0.8586. USD/CHF up 0.1% at 0.9062. AUD/NZD down 0.33% at 1.0988, The USD/CNY up 0.1% at 7.2148, AUD/SEK down 0.27% at 7.1447, at the time of writing.

Key Economic Events & Data Release Today:

(AUD) Retail Sales (MoM) Forecast –0.2%, Previous 0.2% at 07:00. (AUD) RBA Interest Rate Decision (May) Forecast 4.35%, Previous 4.35% at 10:00. (AUD) RBA Rate Statement at 11:00. (GBP) Construction PMI (Apr) Forecast 50.4, Previous 50.2 at 14:00. (EUR) Retail Sales (MoM) (Mar) Forecast 0.6%, Previous –0.5% at 14:30. (CAD) Ivey PMI (Apr) Forecast 58.1, Previous 57.5 at 19:30.