. Daily FX Analysis - Data, geopolitics, bank policies.

Daily FX Analysis – Data, geopolitics, bank policies.

Daily FX Analysis – Data, geopolitics, bank policies.

23 Apr 2024

Introduction

Following the release of Eurozone PMIs, EUR/USD dips, propelled by a significant drop in the HCOB Manufacturing PMI, signaling deeper contraction. A Bear Flag pattern emerges, hinting at a potential sharp decline, with the pair touching the 1.0670s. Meanwhile, GBP/USD maintains stability around mid-1.2300s amid subdued USD demand, influenced by receding fears of Middle East conflict but hindered by expectations of prolonged US interest rate elevation and potential aggressive easing by the Bank of England. NZD/USD holds above 0.5900 as risk appetite improves, while USD/CAD softens below 1.3700 ahead of US PMI data, supported by strong US economic indicators and hawkish Fed sentiments, with policymakers advocating for maintaining current borrowing costs amidst a robust economy.

Markets In Focus Today – EUR/USD

EUR/USD ticks lower after release of Eurozone PMIs.

EUR/USD ticks lower immediately following the release of Eurozone April PMI data.The weakness is driven by the HCOB Manufacturing PMI which falls deeper into contraction territory. The pair has formed a Bear Flag price pattern suggesting the potential for a steep decline. EUR/USD ticks lower into the 1.0670s on Tuesday, immediately following the release of preliminary Eurozone Purchasing Manager Index (PMI) data for April. The decline is driven by a lower-than-expected reading for HCOB Manufacturing PMI which recorded a deeper decline into contraction territory below 50. Continued high inflation in the US is viewed as likely to keep interest rates relatively elevated in the United States compared to Europe. The expectation of higher borrowing costs for longer in the US has been bolstering the US Dollar (USD) since higher interest rates attract greater capital inflows.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0683 | Negative Crossover | Bearish
  • MA 20 : 1.0726 | Negative Crossover | Bearish
  • MA 50 : 1.0784 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.0664 | Positive Crossover | Bullish
  • MA 20 : 1.0739 | Negative Crossover | Bearish
  • MA 50 : 1.0807 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 40.5252 | Sell Zone | Bearish

Stochastic   Oscillator : 20.8876 | Sell Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.0928 R2 : 1.0978
  • S1 : 1.0765 S2 : 1.0715

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Sell : 1.0658 | Take Profit : 1.0600 | Stop Loss : 1.0700

GBP/USD

GBP/USD Flat lines around mid-1.2300s, bearish potential seems intact.

GBP/USD holds steady on Tuesday amid subdued USD demand, albeit lacks bullish conviction.The GBP/USD pair struggles to capitalize on the overnight bounce from the 1.2300 mark, or its lowest level since November 14 and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around mid-1.2300s, nearly unchanged for the day, and remain at the mercy of the US Dollar (USD) price dynamics. Receding fears about a wider Middle East conflict remain supportive of a generally positive risk tone, which is seen undermining the safe-haven buck and lending some support to the GBP/USD pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer amid sticky inflation continues to act as a tailwind for the Greenback. Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) further contribute to capping the upside for the pair.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2439 | Negative Crossover | Bearish
  • MA 20 : 1.2508 | Negative Crossover | Bearish
  • MA 50 : 1.2586 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.2438 | Negative Crossover | Bearish
  • MA 20 : 1.2532 | Negative Crossover | Bearish
  • MA 50 : 1.2627 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 29.9387 | Sell Zone | Bearish

Stochastic   Oscillator : 9.3389 | Sell Zone | Positive

Resistance   And Support Levels :

  • R1 : 1.2819 R2 : 1.2894
  • S1 : 1.2576 S2 : 1.2501

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Sell : 1.2345 | Take Profit : 1.2276 | Stop Loss : 1.2404

NZD/USD

NZD/USD remains above 0.5900 amid hawkish Fed, US PMI, Kiwi Trade Balance eyed.

The NZD/USD pair moves slightly lower to near 0.5920 during the Asian session on Tuesday. The New Zealand Dollar (NZD) found support from an improved risk appetite, bolstering the NZD/USD pair. This positive shift follows reduced geopolitical tensions in the Middle East, as highlighted by an Iranian official’s recent statement indicating no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters. However, the upside potential for the NZD/USD pair appears to be capped due to a hawkish sentiment surrounding the Federal Reserve’s (Fed) interest rate outlook for June. According to the CME FedWatch Tool, the probability of interest rates remaining unchanged in the June meeting has increased to 84.4%, up from the previous week’s 78.7%.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.5927 | Negative Crossover | Bearish
  • MA 20 : 0.5960 | Negative Crossover | Bearish
  • MA 50 : 0.6023 | Negative Crossover | Bearish

Simple :

  • MA 10 : 0.5922 | Negative Crossover | Bearish
  • MA 20 : 0.5961 | Negative Crossover | Bearish
  • MA 50 : 0.6052 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 39.8217 | Sell Zone | Bearish

Stochastic   Oscillator : 22.7483 | Sell Zone | Negative

Resistance   And Support Levels :

  • R1 : 0.6149 R2 : 0.6211
  • S1 : 0.5951 S2 : 0.5890

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Sell : 0.5937 | Take Profit : 0.5867 | Stop Loss : 0.5988

USD/CAD

USD/CAD trades on a softer note below 1.3700 ahead of US PMI data.

The USD/CAD pair extends its downside near 1.3695 despite lower crude oil prices. However, the downside of the pair might be capped by strong US economic data and the Fed’s hawkish comments. Investors will keep an eye on the US S&P Global Purchasing Managers Index (PMI) ahead of US Gross Domestic Product (GDP) and US Core Personal Consumption Expenditures (PCE) later this week. Many Fed policymakers agreed with the idea of keeping borrowing costs at the current level, given the slow and bumpy progress on inflation and the robust US economy. New York Fed President John Williams said he doesn’t feel urgency to cut interest rates, given the strength of the economy. Chicago Fed Austan Goolsbee stated that the Fed’s current restrictive monetary policy is appropriate due to the robust US economic data. The high-for-longer rate narrative in the USD might lift the greenback against its rivals. The Core US PCE might offer some hints about the further confirmation that progress against inflation has stalled.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.3714 | Negative Crossover | Bearish
  • MA 20 : 1.3671 | Positive Crossover | Bullish
  • MA 50 : 1.3597 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.3744 | Negative Crossover | Bearish
  • MA 20 : 1.3650 | Positive Crossover | Bullish
  • MA 50 : 1.3574 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 56.2559 | Buy Zone | Bullish

Stochastic   Oscillator : 63.9040 | Buy Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.3598 R2 : 1.3644
  • S1 : 1.3450 S2 : 1.3404

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 1.3709 | Take Profit : 1.3779 | Stop Loss : 1.3659

Elsewhere In The Forex Market

USD/CHF down 0.11% to 0.9109, The AUD/USD up 0.04% to 0.6451. The EUR/GBP up 0.12% at 0.8637. USD/JPY down 0.01% at 154.83. AUD/NZD up 0.16% at 1.0912, The USD/CNY up 0.04% at 7.2426, AUD/SEK down 0.24% at 7.0071, at the time of writing.

Key Economic Events & Data Release Today:

(EUR) German Manufacturing PMI Forecast –42.8, Previous –41.9% at 13:00. (GBP) Manufacturing PMI Forecast 50.3, Previous 50.3 at 14:00. (GBP) Service PMI Forecast 53.0, Previous 53.1 at 14:00. (USD) Manufacturing PMI (Apr) Forecast 52.0, Previous 51.9 at 19:15 (USD) Building Permits Forecast 1.458M, Previous 1.524M at 17:30. (USD) New Home Sales (Mar) Forecast 668K, Previous 662K at 19:30.