USD bulls take a breather

The USD climbed higher against a number of its counterparts yesterday and especially against the JPY, yet the bulls seem to have taken a break as the ascent higher seems to have been halted for now. It should be noted that the markets were taken by surprise as the US GDP rate for Q1 dropped into the negatives intensifying worries for a possible recession of the US economy. At the same time investors seem to maintain their hawkish expectations for the Fed’s monetary policy tightening intentions and should they be preserved, we may see the USD regaining some confidence, albeit we must note that the greenback is at multi year high against a basket of other currencies allready. US stockmarkets seemed to maintain their confidence given that Nasdaq, S&P 500, and Dow Jones were in the greens yesterday, with market attention being on the earnings releases yet we would like to highlight that Apple yesterday forecasted bigger supply problems. Today we note the earnings releases for Chevron (#CVX), Exxon Mobil (#XOM) and Colgate Palmolive. Also, we intend to focus on the common currency as we get a number of high impact financial releases from the Eurozone area, while please note that yesterday Germany’s April preliminary HICP rate accelerated implying that inflationary pressures in the Zone are still strong.

We make a start with the preliminary HICP rates for France and the Eurozone as a whole, with the first expected to remain unchanged and the latter to accelerate implying that inflationary pressures in other countries of the Zone seem to be still present and accelerating somewhat. Should the rates accelerate and/or remain at high levels that would maintain the pressure on the ECB to tighten its monetary policy thus providing support for the EUR. The main focus of EUR traders though is expected to be on the preliminary releases of the GDP rates for Q1 of Germany, France and the Eurozone as a whole. On a quarter-on-quarter basis the rate is expected to accelerate for Germany providing some support for the EUR as it gets out of the negatives showing growth once again despite the adverse conditions for the German economy in the first quarter of the year. We note the expected deceleration for France’s rate, which may weaken the EUR as it would imply that the economy grew at a slower pace for France.

On the other hand though, Eurozone as a whole, seems to have been able to accelerate the growth rate of its economy on a year on year level, at least that is what is expected to be shown by the area’s preliminary GDP rate for Q1, which is to be a positive for the EUR if realised. Yet we would like to underscore that risks are tilted to the downside for the GDP releases due to the war in Ukraine. Fundamentally it should be noted that the war in Ukraine continues to weigh on the common currency while on the monetary front the ECB seems to be hinting towards a rate hike in the summer which could provide support for the EUR. EUR/USD broke below the 1.0525 (R1) support line yesterday, now turned to resistance and seems to have stabilised after testing the 1.0465 (S1) support level. For our bearish outlook to change though we would require a clear breaking of the downward trendline incepted since the 21^st of April.

Should the bulls actually take over, we may see the pair breaking the 1.0525 (R1) resistance line and the prementioned downward trendline as a first sign of the trend reversal and take aim if not breach the 1.0635 (R2) resistance level. On the flip side should the bears take over, we may see the pair breaking the 1.0465 (S1) support line and aim if not breach the 1.0360 (S2) support level. USD/JPY rallied yesterday breaking consecutively the 128.70 (S2) and the 129.85 (S1) resistance lines, both now turned to support, yet seems to have halted its ascent higher at the 131.00 (R1) resistance level. Despite a correction lower, we maintain our bullish outlook as long as the pair’s price action remains above the upward trendline incepted since the 27 of April. Should the buying interest be renewed, we may see the pair breaking the 131.00 (R1) line and aim for the 132.00 (R2) resistance level. On the flip side should sellers dominate the pair’s direction, we may see USD/JPY breaking the prementioned upward trendline, the 129.85 (S1) support line and aim for the 128.70 (S2) support level.

EUR/USD 4시간 차트