. Weekly Forex Analysis -Currencies React to Economic Indicators and Market Sentiment

Weekly Forex Analysis -Currencies React to Economic Indicators and Market Sentiment

Weekly Forex Analysis -Currencies React to Economic Indicators and Market Sentiment

18 May 2024

Introduction

EUR/USD rebounds from intraday lows as the US Dollar weakens, despite hawkish Fed guidance. Market sentiment shifts towards potential rate cuts, bolstering EUR/USD. Similarly, GBP/USD reaches five-week highs, and USD/JPY extends gains. Meanwhile, AUD/USD experiences a temporary pullback amid mixed economic data from China. The overall market reflects investor reactions to evolving inflation and interest rate expectations.

Markets In Focus Today – EUR/USD

EUR/USD bounces back even though Fed officials maintain hawkish gudaince on interest rates.

EUR/USD bounces back from intraday low around 1.0830 as the US dollar retreats.Fed policymakers see one good inflation report as insufficient to change the trend.ECB’s Schnabel also highlighted risks from premature interest-rate cuts.EUR/USD recovers from 1.0830 in Friday’s American session as market sentiment over upcoming interest-rate cuts improves despite Federal Reserve (Fed) policymakers supporting keeping the monetary policy stance restrictive for a longer period. Earlier, these comments helped the US Dollar lick its wounds after the sharp fall induced by the decline in US inflation in April, as shown by the Consumer Price Index (CPI) report released on Wednesday. But the US dollar has now fallen back on firm speculation that the Fed will start reducing interest rates from the September meeting. The corrective move in the major currency pair seems purely the outcome of the US Dollar’s recovery. However, the appeal for the Euro also remains upbeat as European Central Bank (ECB) policymakers are also casting doubts over the need to extend the rate-cut cycle immediately after a widely anticipated June rate cut.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0813 | Positive Crossover | Bullish
  • MA 20 : 1.0782 | Positive Crossover | Bullish
  • MA 50 : 1.0780 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.0805 | Positive Crossover | Bullish
  • MA 20 : 1.0755 | Positive Crossover | Bullish
  • MA 50 : 1.0782 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 63.7284 | Buy Zone | Bullish

Stochastic   Oscillator : 33.34 | Sell Zone | Negative

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 : 1.0881 | Take Profit : 1.0942 | Stop Loss : 1.0846

GBP/USD

GBP/USD Upcoming UK inflation will put the rally to the test.

The Pound Sterling advanced to five-week highs against the Dollar this week.GBP/USD has so far met decent resistance around 1.2700.Next on tap for Cable will be the release of UK inflation figures.The British Pound (GBP) exhibited a bullish trend throughout the week and managed to advance to fresh five-week peaks around 1.2700 against the US Dollar (USD). This encouraged GBP/USD to close its third week of gains out of the last four ones, leaving behind at the same the key 200-day SMA at 1.2539. Simultaneously, Cable’s price action followed the resurgence of a marked selling pressure in the Greenback, as investors continued to reprice the likelihood of the start of the Fed’s easing programme in September.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2603 | Positive Crossover | Bullish
  • MA 20 : 1.2569 | Positive Crossover | Bullish
  • MA 50 : 1.2575 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.2580 | Positive Crossover | Bullish
  • MA 20 : 1.2536 | Positive Crossover | Bullish
  • MA 50 : 1.2586 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 64.9262 | Buy Zone | Bullish

Stochastic   Oscillator : 61.68 | 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 : Stop Buy : 1.2708 | Take Profit : 1.2772 | Stop Loss : 1.2668

USD/JPY

USD/JPY Price Extends gains but remains below 156.00.

USD/JPY maintains uptrend, trading at 155.66 after hitting a daily low of 155.25.The Japanese Yen (JPY) trades flat for the week, posting a second day of losses against the US Dollar (USD) on Friday. The JPY is struggling against the Dollar during the latter part of the week, almost reversing the surge it registered on Wednesday against the US Dollar after the US Consumer Price Index (CPI) report showed inflation pressures are easing. Bank of Japan (BoJ) President Kazuo Ueda faced on Friday questions in the parliament on monetary policy and recent market events, but investors reacted rather tepidly as he didn’t provide any real market-moving comments. Meanwhile, the DXY US Dollar Index is trying to extend recovery from the steep decline it faced after the CPI data for April. However, there are not many reasons left for the Greenback to outperform. The interest rate differential could still provide some strength to the US Dollar, but the economic data is no longer really outperforming and inflation is back on track towards its disinflationary path.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 155.3889 | Positive Crossover | Bullish
  • MA 20 : 155.0041 | Positive Crossover | Bullish
  • MA 50 : 153.3873 | Positive Crossover | Bullish

Simple :

  • MA 10 : 155.3460 | Positive Crossover | Bullish
  • MA 20 : 155.3446 | Positive Crossover | Bullish
  • MA 50 : 153.0093 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 55.3038 | Buy Zone | Bullish

Stochastic   Oscillator : 63.07 | Buy Zone | Positive

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 155.95 | Take Profit : 157.20 | Stop Loss : 155.22

AUD/USD

AUD/USD Price , Aussie pulling back within an uptrend.

AUD/USD has reached the bullish target for a price pattern that formed at the April 19 lows. It is currently correcting back but the overall uptrend suggests it will recover. AUD/USD reached a key upside target on May 16 and has retraced. The pair is in a short-term uptrend and the pull back is likely to be a temporary correction before the uptrend continues. The Australian Dollar (AUD) continued to experience a decline for the second consecutive session, largely influenced by recent mixed economic data from China released on Friday. Any economic change in the Chinese economy could catalyze the Australian market as both nations are close trade partners. The Aussie Dollar had already been under pressure after Australia’s employment figures released on Thursday presented a mixed picture.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6634 | Positive Crossover | Bullish
  • MA 20 : 0.6596 | Positive Crossover | Bullish
  • MA 50 : 0.6564 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6631 | Positive Crossover | Bullish
  • MA 20 : 0.6576 | Positive Crossover | Bullish
  • MA 50 : 0.6549 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 64.7534 | Buy Zone | Bullish

Stochastic   Oscillator : 46.92 | Neutral Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Stop Buy : 0.6711 | Take Profit : 0.6781 | Stop Loss : 0.6669

Elsewhere In The Forex Market

NZD/USD up 0.2% to 0.6134. The USD/CAD down 0.06% to 1.3609. The USDCHF up 0.22% at 0.9080. EUR/GBP down 0.33% at 0.8549. The USD/CNY up 0.07% at 7.2229, AUD/SEK up 0.23% at 7.1732, CHF/SGD down 0.38% at 1.4796 at the time of writing.

Key Economic Events & Data Release Today:

(CNY) PBoC Loan Prime Rate (May) (Monday) (AUD) RBA Meeting Minutes (Tuesday) (EUR) ECB President Lagarde Speaks (Tuesday) (USD) Fed Chair Yellen Speaks (Tuesday) (GBP) BoE Gov Bailey Speaks (Tuesday) (NZD) RBNZ Interest Rate Decision (Wednesday) (NZD) RBNZ Press Conference (Wednesday) (GBP) CPI (YoY) (Apr) (Wednesday) (USD) Existing Home Sales (Apr) (Wednesday) (USD) FOMC Meeting Minutes (Wednesday) (EUR) German Manufacturing PMI (May) (Thursday) (USD) Initial Jobless Claims (Thursday) (USD) Building Permits (Thursday) (USD) New Home Sales (Apr) (Thursday)