. Weekly Forex Analysis -EUR/USD Drops on Fed Rate-Cut Speculation.

Weekly Forex Analysis -EUR/USD Drops on Fed Rate-Cut Speculation.

Weekly Forex Analysis -EUR/USD Drops on Fed Rate-Cut Speculation.

11 May 2024

Introduction

The financial landscape witnesses diverse movements as currencies react to unfolding events. EUR/USD experiences a downturn as the US Dollar strengthens on speculations of Federal Reserve rate cuts. Meanwhile, Pound Sterling climbs following robust UK GDP figures. In contrast, USD/JPY advances despite dismal US consumer sentiment data. Additionally, the Australian Dollar faces pressure amid the RBA’s cautious stance.

Markets In Focus Today – EUR/USD

EUR/USD drops as US Dollar rebounds after investors digest Fed rate-cut prospects.

EUR/USD failed to hold gains near 1.0780 as US Dollar rebounds despite firm Fed rate-cut speculation. Easing US labor market conditions strengthens Fed rate-cut prospects. The ECB is projected to deliver three rate cuts this year due to easing Eurozone inflation. EUR/USD faces selling pressure near 1.0800 . The major currency pair fails to hold strength as investors expect that the European Central Bank (ECB) will start lowering its borrowing rates in June. However, ECB policymakers are divided over extending the rate-cut cycle after the June meeting. A few policymakers believe that additional interest rate cuts from the July meeting could revamp price pressures. This week, EUR/USD has been driven by market sentiment due to the absence of tier-1 Eurozone and United States economic data. However, next week, investors will focus on the US Consumer Price Index (CPI) data for April, which will be published on Wednesday.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.0746 | Positive Crossover | Bullish
  • MA 20 : 1.0738 | Positive Crossover | Bullish
  • MA 50 : 1.0765 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.0741 | Positive Crossover | Bullish
  • MA 20 : 1.0704 | Positive Crossover | Bullish
  • MA 50 : 1.0788 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 53.9484 | Buy Zone | Bullish

Stochastic   Oscillator : 75.5061 | Buy Zone | Positive

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.0750 | Take Profit : 1.0819 | Stop Loss : 1.0709

GBP/USD

Pound Sterling rises as UK economy comes out of shallow recession.

The Pound Sterling (GBP) extends its upside to 1.2540 on Friday as the United Kingdom (UK) Office for National Statistics (ONS) posted strong preliminary Q1 Gross Domestic Product (GDP) numbers. The agency showed that the economy expanded at a strong rate of 0.6% against expectations of 0.4% after contracting by 0.3% in the last quarter of 2023. Strong UK GDP growth has suggested that the technical recession observed in the second half of 2023 was shallow. Annually, the UK Q1 GDP expanded by 0.2%, the same pace at which it was contracted earlier. Investors anticipated a stagnant growth on a year-over-year basis. Meanwhile, the monthly GDP growth for March was 0.4%, stronger than the consensus of 0.1% and the prior reading of 0.2%, upwardly revised from 0.1%. Upbeat GDP growth would allow the Bank of England (BoE) to achieve a ‘soft landing’. BoE Governor Andrew Bailey commented in the press conference after the monetary policy statement that the central bank is confident that inflation will return to target in the coming months. A soft landing is a scenario in which the central bank achieves the price stability without triggering a recession.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.2516 | Positive Crossover | Bullish
  • MA 20 : 1.2519 | Positive Crossover | Bullish
  • MA 50 : 1.2561 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.2526 | Negative Crossover | Bearish
  • MA 20 : 1.2482 | Positive Crossover | Bullish
  • MA 50 : 1.2598 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 49.0912 | Buy Zone | Bullish

Stochastic   Oscillator : 62.0856 | Buy Zone | Positive

Resistance   And Support Levels :

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

Overall Sentiment : Neutral Market Direction : Buy

Trade Suggestion : Limit Buy : 1.2488 | Take Profit : 1.2592 | Stop Loss : 1.2424

USD/JPY

USD/JPY gains following dismal US consumer report.

USD/JPY climbs after worse-than-expected US consumer sentiment data. Recession fears reignited as Americans became less optimistic about the economy. A jump in US inflation expectations underpins US yields and the Greenback. The USD/JPY advanced steadily during the North American session, following a worse-than-expected University of Michigan (UoM) poll that showed that American consumers are becoming pessimistic about the economy. Despite that, the major trades at 155.83, up 0.24%. USD/JPY rises after UoM Consumer Sentiment survey, eyes on next week US inflation. The US 10-year Treasury note yield rose four basis points (bps) to 4.498% following the data release. The US Dollar Index (DXY) has also advanced 0.14%, up to 105.35, as recession fears reignited, as the UoM survey suggests consumer spending could weaken in the near term.Next week, the US docket will feature the release of inflation figures, retail sales, building permits, and Fed speeches.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 155.0361 | Positive Crossover | Bullish
  • MA 20 : 154.5975 | Positive Crossover | Bullish
  • MA 50 : 152.8850 | Positive Crossover | Bullish

Simple :

  • MA 10 : 154.9866 | Positive Crossover | Bullish
  • MA 20 : 155.0453 | Positive Crossover | Bullish
  • MA 50 : 152.3406 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 57.8108 | Buy Zone | Bullish

Stochastic   Oscillator : 44.0986 | Neutral 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 : 155.57 | Take Profit : 157.20 | Stop Loss : 154.77

AUD/USD

Australian Dollar holds position near a psychological level.

The Australian Dollar retreated due to the recovery of the US Dollar on Friday. The Australian Dollar is facing pressure due to the RBA’s less hawkish stance on monetary policy. The US Dollar rebounded due to the expectations of the hawkish Fed maintaining higher rates for longer. The Australian Dollar (AUD) is retracing its recent gains on Friday, following a rally on Thursday. The rally was propelled by a decline in the US Dollar (USD) as weak US Initial Jobless Claims indicated a more dovish outlook for the Federal Reserve (Fed). This helped offset pressure on the Aussie Dollar resulting from the Reserve Bank of Australia (RBA)’s less hawkish stance, especially in light of the higher-than-expected inflation data.The Australian inflation rate dropped to 3.6% in the first quarter from 4.1% in the previous quarter, marking the fifth consecutive quarter of slowing. However, it exceeded forecasts of 3.4%. Additionally, the Monthly Consumer Price Index (YoY) for March surged to 3.5%, surpassing the expected reading of 3.4%. The Reserve Bank of Australia (RBA) acknowledged that recent progress in controlling inflation has stalled and maintained its stance of keeping options open.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.6577 | Positive Crossover | Bullish
  • MA 20 : 0.6552 | Positive Crossover | Bullish
  • MA 50 : 0.6543 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.6575 | Positive Crossover | Bullish
  • MA 20 : 0.6518 | Positive Crossover | Bullish
  • MA 50 : 0.6540 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 56.9096 | Buy Zone | Bullish

Stochastic   Oscillator : 79.8828 | 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 : 0.6576 | Take Profit : 0.6648 | Stop Loss : 0.6536

Elsewhere In The Forex Market

NZD/USD down 0.25% to 0.6019. The USD/CAD down 0.05% to 1.3669. The USDCHF up 0.01% at 0.9059. EUR/GBP down 0.21% at 0.8590. The USD/CNY up 0.09% at 7.2256, AUD/SEK up 0.3% at 7.1610, CHF/SGD up 0.1% at 1.4944 at the time of writing.

Key Economic Events & Data Release Today:

(EUR) German CPI (MoM) (Apr) (Tuesday) (GBP) Average Earnings Index + Bonus (Mar) (Tuesday) (CHF) PPI (MoM) (Apr) (Tuesday) (USD) PPI (MoM) (Apr) (Tuesday) (USD) Fed Chair Powell Speaks (Tuesday) (EUR) GDP (YoY) (Q1) (Wednesday) (EUR) Industrial Production (MoM) (Mar) (Wednesday) (USD) Core Retail Sales (MoM) (Apr) (Wednesday) (USD) Retail Sales (MoM) (Apr) (Wednesday) (USD) CPI (MoM) (Apr) (Wednesday) (USD) CPI (YoY) (Apr) (Wednesday) (JPY) GDP (QoQ) (Q1) (Thursday) (AUD) Employment Change (Apr) (Thursday)