. Daily Forex Analysis - Euro Climbs, GBP Advances And USD/JPY Gains

Daily Forex Analysis – Euro Climbs, GBP Advances And USD/JPY Gains

Daily Forex Analysis – Euro Climbs, GBP Advances And USD/JPY Gains

20 May 2024

Introduction

EUR/USD climbs above 1.0850 in early Asian trading, driven by a softer US Dollar. Fed officials reiterate a cautious stance on rate cuts, while ECB’s Schnabel warns against premature easing. Market focus shifts to Fedspeak and Eurozone PMI data. Meanwhile, GBP/USD and USD/JPY gain amid lower US inflation expectations and Treasury yields. The Australian Dollar also strengthens due to improved risk sentiment.

Markets In Focus Today – EUR/USD

EUR/USD gains ground above 1.0850, focus on Fedspeak.

EUR/USD holds positive ground near 1.0875 in Monday’s early Asian session. Many Fed officials emphasized their cautious stance to hold rates higher for longer. ECB’s Schnabel said they should move cautiously on rate cuts because there is a risk of easing prematurely. The EUR/USD pair trades on a stronger note around 1.0875 on Monday during the early Asian trading hours. The uptick in the major pair is bolstered by the softer Greenback. The Federal Reserve’s (Fed) Bostic, Barr, Waller, Jefferson, and Mester are scheduled to speak on Monday. Eurozone data highlight will be preliminary May PMI on Thursday. Inflationary pressures eased in April, but the progress was unlikely to prompt the Fed to lower interest rates soon. The Fed Chair Jerome Powell said that he thinks the US central bank will need more data to gain confidence on whether inflation is steadily falling towards 2%. Furthermore, several Fed officials emphasized their cautious stance to hold rates higher for longer.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0824 | Positive Crossover | Bullish
  • MA 20 : 1.0791 | Positive Crossover | Bullish
  • MA 50 : 1.0784 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.0815 | Positive Crossover | Bullish
  • MA 20 : 1.0766 | Positive Crossover | Bullish
  • MA 50 : 1.0781 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 64.3772 | Buy Zone | Bullish

Stochastic   Oscillator : 40.19 | Neutral Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 1.0879 | Take Profit : 1.0939 | Stop Loss : 1.0843

GBP/USD

GBP/USD advances to near 1.2700 due to rising expectations for Fed rate cuts in 2024.

GBP/USD extends gains as softer US inflation raises expectations for Fed rate cuts in 2024.The US Dollar faces a challenge as US Treasury yields inch lower.The Pound Sterling may face a challenge as the BoE is expected to deliver 60 basis points rate cuts in 2024.The GBP/USD pair extends its gains for the second consecutive session, trading around 1.2710 during the Asian hours on Monday. A weaker US Dollar (USD) supports the GBP/USD pair. April data indicated that US consumer inflation had slowed to 0.3%, raising expectations for potential Federal Reserve (Fed) rate reductions in 2024. However, the US Fed maintains a cautious stance regarding inflation and the possibility of rate cuts in 2024.According to the CME FedWatch Tool, the likelihood of the Federal Reserve delivering a 25 basis-point rate cut in September has slightly increased to 49.0%, up from 48.6% a week ago. This potential easing of monetary policy by the central bank could undermine the US Dollar and bolster the GBP/USD pair.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2620 | Positive Crossover | Bullish
  • MA 20 : 1.2581 | Positive Crossover | Bullish
  • MA 50 : 1.2580 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.2593 | Positive Crossover | Bullish
  • MA 20 : 1.2553 | Positive Crossover | Bullish
  • MA 50 : 1.2584 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 64.2185 | Buy Zone | Bullish

Stochastic   Oscillator : 69.11 | Buy Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.2685 | Take Profit : 1.2768 | Stop Loss : 1.2641

USD/JPY

USD/JPY trades on a stronger note above 155.50, investors await Fedspeak.

USD/JPY holds positive ground near 155.80 on Monday, Fed’s Bostic said he saw signs of cooling inflation, but he prefers to watch more data before cutting rates. The divergence in interest rates between the US and Japan weighs on the JPY and creates a tailwind for the pair. The USD/JPY pair trades in positive territory for the third consecutive trading day around 155.80 during the early Asian session on Monday. The downtick of the pair is supported by weaker Japan’s GDP data in the first quarter (Q1). The Fed’s Bostic, Barr, Waller, Jefferson, and Mester are set to speak later in the day. The FOMC Minutes will be due on Wednesday. On Friday, the Japanese National Consumer Price Index (CPI) will be in the spotlight. Atlanta Fed President Raphael Bostic stated on Friday that he saw signs of cooling inflation in the recent CPI report, but he prefers to watch the May and June data to make sure that the inflation doesn’t turn back the other way. Meanwhile, Richmond Fed President Tom Barkin noted the central bank needs to keep borrowing costs high for longer to ensure inflation is on track with its target.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 155.4129 | Positive Crossover | Bullish
  • MA 20 : 155.0533 | Positive Crossover | Bullish
  • MA 50 : 153.4709 | Positive Crossover | Bullish

Simple :

  • MA 10 : 155.5106 | Positive Crossover | Bullish
  • MA 20 : 155.3804 | Positive Crossover | Bullish
  • MA 50 : 153.1804 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 54.7250 | Buy Zone | Bullish

Stochastic   Oscillator : 59.72 | Buy Zone | Neutral

Resistance   And Support Levels :

  • R1 : 159.8369 R2 : 162.0561
  • S1 : 152.6531 S2 : 150.4339

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 154.91 | Take Profit : 156.74 | Stop Loss : 153.85

AUD/USD

Australian Dollar remains firmer due to risk-on mood, RBA Minutes eyed.

The Australian Dollar appreciates due to improved risk appetite on Monday.The US Dollar faces a challenge as US Treasury yields inch lower.The Australian Dollar (AUD) extends gains for the second consecutive session on Monday. The weaker US Dollar (USD) supports to underpin the AUD/USD pair. However, the Aussie Dollar trims gains after the interest rate decision from China. The People’s Bank of China (PBOC) kept the one-year and five-year Loan Prime Rates (LPR) steady at 3.45% and 3.95%, respectively. Traders await the Reserve Bank of Australia (RBA) Meeting Minutes to be released on Tuesday. The Australian Dollar may face challenges as the yield on Australia’s 10-year government bond hovers around 4.2%, its lowest level in a month. This decline in bond yields follows a softer domestic jobs report for the first quarter. Slowing wage growth has led markets to discount the likelihood of any interest rate hikes by the Reserve Bank of Australia (RBA). Australia’s Wage Price Index (QoQ) increased by 0.8% in the first quarter, falling short of the market’s forecast of a 0.9% rise. This quarter’s increase is the smallest since late 2022.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6645 | Positive Crossover | Bullish
  • MA 20 : 0.6605 | Positive Crossover | Bullish
  • MA 50 : 0.6569 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6638 | Positive Crossover | Bullish
  • MA 20 : 0.6589 | Positive Crossover | Bullish
  • MA 50 : 0.6551 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 65.0424 | Buy Zone | Bullish

Stochastic   Oscillator : 69.13 | Buy Zone | Positive

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 : 0.6665 | Take Profit : 0.6732 | Stop Loss : 0.6628

Elsewhere In The Forex Market

USD/CHF up 0.12% to 0.9091, The NZD/USD down 0.2% to 0.6122. The EUR/GBP up 0.19% at 0.8565. EUR/AUD up 0.06% at 1.6241. AUD/NZD up 0.22% at 1.0935, The USD/CNY up 0.11% at 7.2309, AUD/SEK down 0.15% at 7.1624, at the time of writing.

Key Economic Events & Data Release Today:

(USD) Fed Chair Powell Speaks at 01:00. (CNY) PBoC Loan Prime Rate (May) Forecast 3.95%, Previous 3.95% at 06:45.