. Daily Forex Analysis - Euro and Pound Rise Ahead of Central Bank Decisions

Daily Forex Analysis – Euro and Pound Rise Ahead of Central Bank Decisions

Daily Forex Analysis – Euro and Pound Rise Ahead of Central Bank Decisions

06 Jun 2024

Introduction

The Euro and British Pound rose against the US Dollar ahead of central bank decisions. The ECB is expected to cut rates today, while the Fed may follow suit later this year due to weaker US data. The New Zealand Dollar dipped on risk aversion, while the Canadian Dollar gained on rising oil prices and expectations of an eventual Fed rate cut.

Markets In Focus Today – EUR/USD

EUR/USD holds positive ground above 1.0850 ahead of ECB rate decision.

EUR/USD snaps the two-day losing streak near 1.0875 in Thursday’s early Asian session. The ECB is expected to cut interest rates for the first time in five years on Thursday. The US ISM Services PMI rose to 53.8 in May from 49.4 in April, above the consensus. The EUR/USD pair gains ground around 1.0875 despite the recovery of the US Dollar (USD) during the early Asian session on Thursday. The European Central Bank (ECB) interest rate decision and Press Conference by President Christine Lagarde will take centre stage later on Thursday. The ECB is anticipated to cut its interest rates by 25 basis points (bps) at its 6 June meeting, reducing the main refinancing, the marginal lending, and the deposit rate to 4.25%, 4.50%, and 3.75%, respectively. Financial markets have priced in 43 bps of ECB cuts by September and around 60 bps by the end of the year. The divergence between the ECB and the US Federal Reserve (Fed) could exert some selling pressure on the Euro (EUR) and create a headwind for EUR/USD.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0859 | Positive Crossover | Bullish
  • MA 20 : 1.0838 | Positive Crossover | Bullish
  • MA 50 : 1.0811 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.0856 | Positive Crossover | Bullish
  • MA 20 : 1.0845 | Positive Crossover | Bullish
  • MA 50 : 1.0777 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 57.9206 | Buy Zone | Bullish

Stochastic   Oscillator : 66.9540 | Buy Zone | Negative

Resistance   And Support Levels :

  • R1 : 1.0890 R2 : 1.0948
  • S1 : 1.0703 S2 : 1.0645

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 1.0887 | Take Profit : 1.0960 | Stop Loss : 1.0842

GBP/USD

GBP/USD resumes upside near 1.2800 on mixed US data, Fed rate cut expectation.

GBP/USD holds positive ground around 1.2790 amid the firmer USD on Thursday. The ISM said on Wednesday that its US Services PMI rebounded to 53.8% in May from 49.4% in April. The UK S&P Global Services PMI reached a six-month low of 52.9 from 55.0 in April. The GBP/USD pair resumes upside near 1.2790 despite the rebound of US Dollar (USD). Traders started to price in two interest rate cuts by the Federal Reserve (Fed) this year as the US economy grew at a slower pace in the first quarter than projected earlier. Later on Thursday, the US weekly Initial Jobless Claims and Balance of Trade will be published. In the past few months, Fed officials emphasized the need to hold the rate higher for longer until the central bank gains confidence that inflation is moving toward the Fed’s 2% target. However, the downbeat US May ISM Manufacturing PMI report and weaker Q1 Gross Domestic Product (GDP) data have triggered the expectation of easing policy from the Fed in September, which weighs on the Greenback broadly.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2753 | Positive Crossover | Bullish
  • MA 20 : 1.2708 | Positive Crossover | Bullish
  • MA 50 : 1.2649 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.2758 | Positive Crossover | Bullish
  • MA 20 : 1.2707 | Positive Crossover | Bullish
  • MA 50 : 1.2596 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 63.2484 | Buy Zone | Bullish

Stochastic   Oscillator : 76.3798 | Buy Zone | Negative

Resistance   And Support Levels :

  • R1 : 1.2798 R2 : 1.2882
  • S1 : 1.2527 S2 : 1.2443

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 1.2793 | Take Profit : 1.2865 | Stop Loss : 1.2747

NZD/USD

NZD/USD returns below 0.6200 after pulling back from two-month highs.

NZD/USD depreciates due to risk aversion as US NFP looms.CME FedWatch Tool suggests the probability of a Fed rate cut in September has increased to nearly 70.0%.New Zealand’s Finance Minister Nicola Willis insisted that the 2024 budget won’t keep interest rates higher for longer.NZD/USD pulls back from two-month highs, trading around 0.6190 during the European session on Thursday. The US Dollar (USD) gained ground due to higher US Treasury yields. However, the rising speculation of an interest rate cut by the US Federal Reserve (Fed) in September could limit the upside of the Greenback, underpinning the NZD/USD pair. Investors are likely awaiting key US employment data releases on Friday, including Average Hourly Earnings and Nonfarm Payrolls. In New Zealand, the Kiwi Dollar received support from the latest data released by Caixin, which showed that China’s Services PMI rose to 54.0 in May from 52.5 in April, significantly beating market expectations of 52.6. Investors turn cautious ahead of Friday’s export and import data from China, New Zealand’s leading trading partner, for May.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6153 | Positive Crossover | Bullish
  • MA 20 : 0.6118 | Positive Crossover | Bullish
  • MA 50 : 0.6072 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6152 | Positive Crossover | Bullish
  • MA 20 : 0.6118 | Positive Crossover | Bullish
  • MA 50 : 0.6025 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 65.5647 | Buy Zone | Bullish

Stochastic   Oscillator : 82.6323 | Buy Zone | Negative

Resistance   And Support Levels :

  • R1 : 0.6175 R2 : 0.6245
  • S1 : 0.5949 S2 : 0.5880

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 0.6162 | Take Profit : 0.6225 | Stop Loss : 0.6127

USD/CAD

USD/CAD edges lower to near 1.3650 due to improved risk appetite, higher Oil prices.

USD/CAD depreciates as mixed data from the US fuels speculations of a rate cut by the Fed.CME FedWatch Tool suggests the probability of a Fed rate cut in September has increased to nearly 70.0%.The appreciation of crude Oil prices supports the commodity-linked Canadian Dollar.USD/CAD retreats after two days of gains, trading around 1.3680 during the Asian session on Thursday. The US Dollar (USD) struggled after mixed economic data was released in the United States (US), which fueled interest rate cut speculations by the US Federal Reserve (Fed). Investors are awaiting key US employment data releases on Friday, including Average Hourly Earnings and Nonfarm Payrolls. The investors’ sentiment of the Fed’s rate cut leads to the weakening of the US Treasury yields, undermining the US Dollar and USD/CAD pair. Investors await the key US employment data releases on Friday, including the Average Hourly Earnings and Nonfarm Payrolls.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.3669 | Positive Crossover | Bullish
  • MA 20 : 1.3667 | Positive Crossover | Bullish
  • MA 50 : 1.3648 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.3664 | Positive Crossover | Bullish
  • MA 20 : 1.3657 | Positive Crossover | Bullish
  • MA 50 : 1.3667 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 53.2565 | Buy Zone | Bullish

Stochastic   Oscillator : 61.5273 | Buy Zone | Positive

Resistance   And Support Levels :

  • R1 : 1.3740 R2 : 1.3786
  • S1 : 1.3593 S2 : 1.3547

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.3665 | Take Profit : 1.3737 | Stop Loss : 1.3620

Elsewhere In The Forex Market

AUD/USD down 0.04% to 0.6645, The USD/JPY up 0.17% to 156.36. The EUR/GBP up 0.08% at 0.8506. EUR/AUD up 0.08% at 1.6363. AUD/NZD up 0.14% at 1.0750, The USD/CNY down 0.01% at 7.2467, AUD/SEK down 0.09% at 6.9038, at the time of writing.

Key Economic Events & Data Release Today:

(GBP) Construction PMI (May) Forecast 52.5, Previous 53.0 at 14:00. (EUR) ECB Interest Rate Decision (Jun) Forecast 4.25% Previous 4.50% at 17:45. (EUR) Deposit Facility Rate (Jun) Forecast 3.75%, Previous 4.00% at 17:45. (EUR) ECB Marginal Lending Facility Previous 4.75% at 17:45. (EUR) ECB Monetary Policy Statement at 17:45. (USD) Initial Jobless Claims Forecast 220K, Previous 219K at 18:00. (CAD) Ivey PMI (May) Forecast 65.2, Previous 63.0 at 19:30. (EUR) ECB President Lagarde Speaks at 19:45.