Daily Analysis: USD finds renewed support

The USD strengthened across the board yesterday reversing any losses made by the Fed’s interest rate decision. The better-than-expected readings of the Philly Fed business index for March and the weekly initial jobless claims figures tended to provide some support for the greenback but also the surprise interest rate cut of the Swiss National Bank may have boldened the USD on a monetary level. US stock markets ended their day in the greens, yet we also highlight that Apple is accused of monopolizing smartphone markets in a US antitrust lawsuit, which may weigh on the share’s price. At the same time, we note that Boeing’s issues seem to grow threatening the company.

On a technical level, USD/CAD rose yesterday, after bouncing on the 1.3485 (S1) support line. Given that the main body of the pair’s price action over the past month remained within the boundaries set by the 1.3610 (R1) resistance line and the 1.3485 (S1) support line, we tend to maintain a sideways motion bias. Yet we note that the RSI indicator is on the rise and has already broken the reading of 50, which may imply the building up of a bullish sentiment for the pair. Should the bulls take over, we may see the pair breaking the 1.3610 (R1) resistance line and aim for the 1.3710 (R2) level. On the flip side, should the bears take over, we may see the pair breaking the 1.3485 (S1) support line and taking aim of the 1.3365 (S2) support base.

The pound tended to weaken against the USD and the EUR yesterday as BoE’s interest rate decision weighed on the sterling. The bank as was widely expected, remained on hold, keeping rates at 5.25%. It’s interesting that despite the wider-than-expected slowdown of the UK CPI rates for February, the majority within the bank to remain on hold strengthened with Policymaker Dinghra being the only which sees the necessity of easing the bank monetary policy at the current stage. On the other hand, no BoE policymaker seems to see the need for the bank to start cutting rates, which may have not been a win for the doves yet it was a loss for the hawks. Understandably the release had a bearish effect on the pound. Yet in the , the bank does not seem to be in a rush to start cutting rates as it stated that “Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably”. Today, the UK’s retail sales growth rate for February was released showing a slowdown to stagnation levels, yet the market’s expectations were for a contraction, thus the release may provide some comfort to pound traders.

Cable sunk from BoE’s interest rate decision, but also by the strengthening of the USD yesterday breaking the 1.2760 (R1) support line, now turned to resistance. We note that the RSI indicator sunk along with the price action and is currently nearing the reading of 30, implying a strong bearish sentiment on behalf of the market for the pair. Should the selling interest be maintained by the market, we may see cable breaking the 1.2600 (S1) support line and aiming if not breaching the 1.2480 (S2) support base. Should buyers take charge of the pair’s direction we may see the pair reversing direction and breaking the 1.2760 (R1) resistance line thus paving the way for the 1.2890 (R2) resistance hurdle.

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Today in the European session, we note the release of the UK’s retail sales for February and CBI trends for industrial orders for March. From Germany, we get March’s Ifo indicators, while in the American session, we get Canada’s retail sales for January. On the monetary front, we highlight Fed Chairman Powell’s speech while ECB Board Member Buch, Fed Vice Chair Jefferson, Fed Vice Chair Barr, ECB Chief Economist Lane and Atlanta Fed President Bostic are scheduled to speak. During Monday’s Asian session, we get Japan’s Chain Store Sales for February while BoJ is to release the minutes of its January meeting.