Most read: Decoding Fedspeak: How Central Bank Comments Move Markets – Gold and the US Dollar
The US dollar, as measured by the DXD index, earlier rose to a multi-month high, boosted by growing evidence that the Fed may wait a little longer before tapering policy restraints. A tight labor market and persistent inflation have dashed hopes for a quick and deep rate cut later this year, sending Treasury yields soaring and the two-year note just shy of a psychological 5.0% return. is approaching.
US dollar index weekly performance
Source: TradingView
Upcoming macro releases are likely to further consolidate USD strength. The US economic calendar sees the release of two important reports that could stimulate market volatility and shape investor sentiment in the coming days. They are first-quarter gross domestic product (GDP) on Thursday and the March core PCE deflator, the Fed’s preferred inflation measure, on Friday.
There’s a good chance these reports will beat consensus expectations, as last month’s retail sales, CPI, and PPI values were very strong. That said, forecasts show GDP grew at an annualized rate of 2.1% in the first quarter, slowing slightly from the solid 3.4% growth seen in the previous quarter, but still shortening potential output, which is inflationary by definition. Exceeds.
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Regarding core PCE, the metric is expected to increase by 0.3% on a seasonally adjusted basis, bringing the 12-month reading to 2.6% from 2.8% previously, a small but positive step in the right direction and This indicates that strong price pressures still remain. Very sticky.
Upcoming US data
sauce: DailyFX Economic Calendar
If there is an unexpected upside in both data points, investors are likely to agree that the economy is still working at full capacity and inflation will be harder to control. This scenario would prompt traders to push the Fed’s first rate cut further out and price in a shallower easing cycle. If interest rates continue to rise for an extended period of time, yields will trend higher and the bullish momentum for the US dollar will increase.
Overall, the outlook for the US dollar looks positive for now. Macroeconomic developments clearly favor a scenario in which the Fed errs on the side of caution and delays its easing cycle to counter stubborn inflation, while its counterparts such as the ECB and BOE move closer to switching to an accommodative stance. There is. This dynamic supports the possibility of continued dollar appreciation.
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EUR/USD Forecast – Technical Analysis
After enduring a notable decline last week, EUR/USD has stabilized and shown a gradual recovery over the past few days, rebounding from the psychological 1.0600 level and moving above the 1.0650 mark. If the pair continues to recover in the coming days, subsequent resistance levels are expected at 1.0695 and 1.0725. In terms of further strength, attention will be focused on 1.0820.
Conversely, if sellers reassert themselves and lead the market, technical support will be evident at 1.0600. The bull must defend this technical floor vigorously. Failure to do so could further exacerbate bearish momentum in the near term, paving the way for further declines towards 2023 lows around 1.0450.
EUR/USD price action chart
EUR/USD chart created using TradingView
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USD/JPY Forecast – Technical Analysis
At the beginning of the week, USD/JPY soared to multi-decade highs around 154.80, but retreated slightly from that high level as the weekend approached. If the downside reversal gains momentum in the coming trading sessions, subsequent support is looming at 153.20 and 152.00, and 150.80 could become the focus if these price thresholds are broken.
Conversely, if USD/JPY resumes its rise, resistance is likely to appear around 154.80, followed by resistance around 156.00, the top of the short-term upward channel since December last year. Although the pair maintains a bullish outlook, it is imperative to proceed with caution given overbought market conditions and the increasing likelihood of currency intervention by the Japanese government.
USD/JPY price action chart
USD/JPY chart created using TradingView
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|
change |
long |
shorts |
OI |
| every day | -2% | -11% | -Five% |
| weekly | 0% | 1% | 1% |
GBP/USD Forecast – Technical Analysis
GBP/USD sold off this week, falling below the technical floor of 1.2430 and hitting its lowest since November. With bearish momentum prevailing, losses may accelerate in the short term, which could prompt a revisit of the key Fibonacci support level at 1.2320. Price is likely to bottom in this area before reversing. However, in case of a breakdown, a move towards 1.2168 could develop.
Alternatively, if sentiment returns in favor of buyers and the cable rebounds from its current position, subsequent resistance zones could be identified at 1.2430 and 1.2525. A break above these levels could increase upward momentum and create the right conditions for a rally towards the 200-day simple moving average of 1.2570.
