ECB to continue its war path in raising interest rates?

ECB’s Wunsch on Friday morning according to Reuters stated, “I think May will be about 25 or 50 basis points”, potentially providing support for the EUR as in the event that further hawkish comments are made by fellow ECB members. On macroeconomic level, we highlight that the Eurozone’s Industrial production ticked up, improving on a year on year and month of month basis, providing support for the EUR. In France we highlight the announcement due today by the French Constitutional Council. The verdict will address French President Macron’s highly controversial pension reform that saw widespread strikes across France, following the decision to use article 49.3. In the event that the Constitutional Council rules in favour of the Government, we may see continued protests across France which on a macroeconomic level may have negative implications on the EUR in the long run. On the other hand, should the Council vote against the Government, we may see tensions easing and a return to normality. Potentially providing support for the common currency in the long run. On the other side of the Atlantic, we note the weaking of the USD across the board following yesterday’s economic releases with the weekly Initial Jobless claims increasing to 239k in combination with the decline of the PPI for March nearing levels that were last seen in March 2020. Potentially indicating that inflationary pressures may be easing and as such the case for the Fed to continue hiking may be weakened, hence weaking the greenback. We note the release of earnings today by JP Morgan(#JPM), Wells Fargo(#WFC), with deposits expected to be reported lower according to Bloomberg. Furthermore, we note that during today’s Asian session newly appointed BoJ Governor Ueda told his G20 counterparts that the BoJ will likely keep the monetary policy ultra-loose to stably and sustainable achieve is 2% target according to Reuters, thus potentially weakening the JPY.

EUR/USD moved higher yesterday breaking the 1.10 psychological barrier. We tend to maintain a bullish outlook for the pair as the pair maintains it’s upwards momentum, validating the upwards trendline formed on the 11 of April. It should be noted that the RSI indicator remains above the reading of 70, implying a bullish sentiment on behalf of the market for the pair, potentially indicating a willingness by the Bulls to move the pair even higher. Should the bulls maintain control over the pair, we may see the pair making a clear break above the 1.1125 (R1) level, aiming if not also breaching the 1.1230(R2) level. For a bearish outlook, we would like to see a clear break below the 1.1005(S1) support level with the next possible target for the bears being the 1.0930 (S2) support base. Yet financial releases impacting the USD side of the pair could alter the pair’s direction either way in the next 24 hours.

AUD/USD moved higher yesterday and is currently testing potential resistance at 0.6785(R1). We tend to maintain a bullish outlook for the pair as it remains above the upwards trendline formed on the 10 of April and that the RSI indicator seems to run along the reading of 70, implying a rather bullish market. For our Bullish outlook to continue we would like to see the pair make a clear break above the 0.6785(R1) level, with the next possible target for the Bulls being the 0.6880 (R2) resistance line. For a Bearish outlook, we would like to see a clear break below the 0.6675 (S1) level with the next potential target for the bears being the 0.6595(S2) support base. Yet financial releases impacting the USD side of the pair could alter the pair’s direction either way in the next 24 hours.

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During today’s European session, we note the release of Sweden’s CPI rates for March and France’s final HICP rate for the same month. In the American session, we note the release from the US of the retail sales growth rate and the industrial output growth rate, both being for March while we also note the release of the preliminary University of Michigan consumer sentiment for April. From Canada we get the manufacturing sales growth rate for February and on the monetary front, we note that Fed Board Governor Waller and BoE MPC member Tenreyro are scheduled to speak. On a more fundamental level, please note that the G7 meetings are to begin in Japan during the weekend.