USD continues to strengthen

The USD continued to strengthen against its counterparts yesterday, almost reaching a pandemic high while the market’s cautiousness and hawkish expectations for the Fed continue to feed the greenback bulls and seems to keep gold’s price under pressure. We expect the market today to focus on the release of the US GDP advance rate for Q1 and should the rate slowdown substantially as expected, we may see the USD weakening as it would imply a slowing down of the growth rate for the US economy, while the release may have ripple effects in the US stockmarkets as well. On the other hand, US stockmarkets tended to regain some confidence yesterday as the main indexes ended their day in the greens. The earnings reports that are being released, shake up the markets and Meta (former Facebook) made a sensation as it seems that its subscribers have increased, while today we highlight Apple (#AAPL) and Amazon ( #AMZN ) among other high profile companies that are to release their earnings reports for Q1 2022. The common currency was on the retreat yesterday against the USD for a sixth consecutive day and the fact that Russia has cut gas supplies for Poland and Bulgaria for not meeting their payments in Roubles as requested, tended to weigh fundamentally further.

On the monetary front the scenario of the ECB hiking rates in the summer tends to be widely discussed among EUR traders and seems to be providing support yet the economic outlook for the Zone remains uncertain. Today we highlight the release of Germany’s preliminary HICP rate for April and the rate is expected to remain unchanged, which on the one hand confirms that inflationary pressures in Germany remain high, yet at the same time may imply that they may have peaked. Also today, SEK traders are to keep a close eye over the release of Riksbank’s interest rate decision and the bank is expected to remain on hold, keeping rates at 0.0%. It should be noted that such a scenario is supported by SEK OIS which imply that the market may have priced in such a scenario currently, by 92.21%. Despite that, there exists a possibility for the bank to hike rates today we expect, policymakers will pave the way for a June hike and we expect the Riksbank to continue to be a broadly supportive factor for the SEK in the coming months. On the other hand, the GDP rate for Q1 is also due out today and is expected to decline into the negatives and if actually so could make the bank more cautious.

So, we see three possible scenarios coming to play today. Should the bank remain on hold and maintain a cautious, dovish tone we may see the SEK retreating. Should the bank remain on hold yet maintain a more optimistic, hawkish tone, in an effort to pave the way for a rate hike in June, we may see the SEK getting some moderated support and in the case the bank decides to make a preemptive strike and hike rates, possibly by 25 basis points, we may see the SEK getting some substantial support. Sticking to the monetary front, we would also like to note that 일본은행의 금리 결정 earlier today, practically reaffirmed the bank’s loose monetary policy causing the Yen to weaken further. EUR/USD maintained a downward motion yesterday and is now nearing the 1.0525 (S1) support line. We maintain our bearish outlook technically as long as the pair remains below the downward trendline incepted since the 31^st of March, yet we must note that the RSI indicator below our 4-hour chart fell below the reading of 30 which may imply that the pair has reached oversold levels and is ripe for a correction higher.

Should the bears maintain control as expected, we may see the pair breaking the 1.0525 (S1) support line, aim if not breach the 1.0465 (S2) support level thus opening the way for the 1.0360 (S3) support barrier. Should on the other hand the bulls take over, we may see the pair reversing course, breaking the prementioned downward trendline as a first sign of a reversing trend and also break the 1.0635 (R1) resistance line, aiming for the 1.0725 (R2) resistance level. EUR/SEK dropped yesterday breaking the 10.4010 (R1) support line, now turned to resistance. We tend to maintain a bias for a sideways motion given also that the main body of the price action since the midst of March is between the R2 and S2 levels, while also the RSI indicator below our 4-hour chart is at the reading of 50, implying a rather indecisive market. On the other hand we expect that Riksbank’s interest rate decision could alter the pair’s direction and should the pair find fresh buying orders we may see it breaking the 10.4010 (R1) resistance line and aim for the 10.4710 (R2) resistance level. Should a selling interest be expressed by the market we may see the pair breaking the 10.3125 (S1) support line and aim for the 10.2200 (S2) support level.

EUR/USD 4시간 차트