EURUSD is taking a break after four days of recovering.
The major currency pair slowed down its recovery. The current quote for the instrument is 1.0508.
The statistics published by the US yesterday were quite confident. The Retail Sales added 0.9% m/m in April after gaining 1.4% m/m the month before and against the expected reading of 1.0% m/m. The Core Retail Sales showed 0.6% m/m, which is better than forecasted.
The Industrial Production gained 1.1% m/m last month, which is much better than the expected reading of 0.4% m/m, after expanding by 0.9% m/m in March. The Capacity Utilization Rate also improved, up to 79.0%.
However, the primary focus was on the speech to be delivered by the US Fed Chairman Jerome Powell. He said that the Fed was going to raise the rates until inflation started to fall. If it implies pushing the boundaries of the theoretical conception of neutrality, the Fed will do what is necessary without hesitation.
We remind you that the April CPI reading was 8.3%, while the target level is 2.0%. Earlier this month, the regulator raised the rate by 50 basis points, for the first time in 20 years. It was the second consecutive rate hike and the Fed is expected to raise the benchmark interest rate after every meeting until the end of 2022.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The Consumer Price Index data (inflation rate) will be released today in Europe. Analysts expect the inflation rate to remain unchanged, which will mean a slowdown in inflation in the region. If the data is worse than expected it will be a positive factor for the European currency strengthening on expectations of faster monetary policy tightening.
From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is close to changing to bullish. The price has consolidated above the moving averages but has not broken through the priority change level. The MACD indicator has become positive, but buyer’s pressure remains high. Under such market conditions, it is possible to look for sell trades from the resistance level of 1.0587, but only after the additional confirmation. Buy trades can be considered on intraday timeframes from the support level of 1.0491 or 1.0445, but only with short targets and confirmation.
Alternative scenario: if the price breaks out through the 1.0588 resistance level and fixes above, the uptrend will likely resume.
News feed for 2022.05.18:
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
– Eurozone ECB Financial Stability Review at 12:00 (GMT+3);
– US Building Permits (m/m) at 15:30 (GMT+3).
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2313
Prev Close: 1.2492
% chg. over the last day: +1.45%
The UK inflation rate reached 9.0% on an annualised basis. This is the highest recorded 12-month value since 1997. Monthly inflation increased by 2%. The Producer Price Index, which measures the rate of inflation between factories and plants, rose from 11.9% to 14% y/y. UK consumer prices are approaching a projected peak of 10.25%. The Bank of England needs to take action to suppress inflation. Analysts forecast more aggressive interest rate hikes at the next meetings.
On the hourly time frame, the GBP/USD currency pair trend changed to bullish. The MACD indicator became positive, and the buyers’ pressure remains high. Under such market conditions buy deals may be considered from the support level of 1.2343 or 1.2283, but only with additional confirmation. Sell deals should be looked for from the resistance level of 1.2519, but with confirmation in the form of sellers’ initiative.
Alternative scenario: if the price breaks down through the 1.2200 support level and fixes below, the mid-term downtrend will likely be resumed.
News feed for 2022.05.18:
– UK Consumer Price Index (m/m) at 09:00 (GMT+3);
– UK Producer Price Index (m/m) at 09:00 (GMT+3).
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 129.14
Prev Close: 129.34
% chg. over the last day: +0.15%
Japan’s GDP fell by 0.2% for the quarter, but the data was better than analysts’ expectations of -1.0%. Japanese Economy Minister Yamagiwa believes the slowdown is due to rising commodity prices and supply-side constraints caused by the war in Ukraine and prolonged lockdowns in China. The industrial production rate showed a 0.3% increase last month. This is a significant decrease compared to the 2% growth a month earlier.
Trading recommendations
Support levels: 129.02, 127.29, 126.91, 126.00, 125.57
Resistance levels: 129.74, 130.12, 130.99
The medium-term trend on the USD/JPY currency has changed to bearish. The price has confidently broken through the priority change level and has consolidated below the moving averages. Despite the change in the trend on the hour timeframe, it is better to look for buy deals with the expectation of an uptrend continuation, since the Japanese Yen has no fundamental support. First of all, it is worth considering the support level of 129.02, but with confirmation. A resistance level of 130.12 may be considered for sell deals, but only with additional confirmation.
Alternative scenario: If the price fixes above 130.99, the uptrend will likely be resumed.
News feed for 2022.05.18:
– Japan GDP (q/q) at 02:50 (GMT+3);
– Japan Industrial Production (m/m) at 07:30 (GMT+3).
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2841
Prev Close: 1.2809
% chg. over the last day: -0.25%
Canada’s inflation data will be updated today. Analysts are forecasting a monthly inflation increase of 0.5%. If the forecasts are true, Canada’s annualised inflation rate will reach 7.2%, which will be a new multi-year record. Growth in consumer prices is usually accompanied by a strengthening of the national currency in anticipation of more aggressive monetary policy tightening by the central bank.
Trading recommendations
Support levels: 1.2808, 1.2774, 1.2692, 1.2644, 1.2607, 1.2521
The USD/CAD currency pair trend is bearish in terms of technical analysis. The MACD indicator is in the negative zone, but the bears’ pressure is decreasing, as there are signs of divergence. It is worth trading only with short targets because fundamentally both the dollar index and the Canadian dollar are inclined to grow. Under such market conditions it is better to look for buy trades on the lower timeframes from the support level of 1.2808 or 1.2774, but only with additional confirmation. For sell deals, it is better to consider the resistance level of 1.2875 or 1.2904, but also better with confirmation and short targets.
Alternative scenario: if the price breaks through and consolidates above 1.3000, the uptrend will likely be resumed.
News feed for 2022.05.18:
– Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The pound surged after the UK saw a jump in average earnings over the past three months. Solid bullish momentum above 1.2400 has prompted sellers to cover their positions, exacerbating volatility in the process. The daily resistance at 1.2640 coincides with the 30-day moving average and is an important supply zone. Its breach could pave the way for a bullish reversal in the weeks to come. In the meantime, an overbought RSI may cause a pullback as intraday buyers take profit. 1.2310 is the closest support.
USDJPY enters narrowing consolidation
The yen recouped some losses after Japan’s GDP growth beat expectations in Q1. The US dollar is taking a breather after a prolonged rally. The latest retreat has found support at 127.50 over the 30-day moving average. Medium-term sentiment would stay upbeat as long as the price remains above this demand zone. 130.80 from a previously faded rebound is a key resistance and a bullish breakout could resume the rally towards 133.00. 128.70 is the immediate support for the current consolidation.
XAUUSD tests critical floor
Gold inched higher as the US dollar index pulled back from a two-decade high. The price action has stabilised near January’s lows at 1790. A bullish RSI divergence indicates a loss of bearish momentum in this critical demand area, triggering a buy-the-dip behaviour. Sellers’ profit-taking could drive the precious metal higher. A bounce above 1858 may trigger an even broader short-covering. On the downside, a fall below 1790 would send the price into bearish territory with December’s lows (1750) as the next stop.
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GBPUSD is correcting within the bearish channel. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test the cloud’s upside border at 1.2365 and then resume moving downwards to reach 1.1945 Another signal in favour of a further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 1.2465. In this case, the pair may continue growing towards 1.2555.
XAUUSD, “Gold vs US Dollar”
XAUUSD has fixed above Tenkan-Sen and Kijun-Sen. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test the cloud’s downside border at 1850.00 and then resume moving downwards to reach 1735.00. Another signal in favour of a further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 1880.00. In this case, the pair may continue growing towards 1915.00.
USDCAD, “US Dollar vs Canadian Dollar”
USDCAD is no longer moving within the bullish channel. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test the cloud’s downside border at 1.2875 and then resume moving downwards to reach 1.2595. Another signal in favour of a further downtrend will be a rebound from the rising channel’s downside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 1.3035. In this case, the pair may continue growing towards 1.3125.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The Pound sterling continues recovering against the USD on Tuesday. The current quote for the instrument is 1.2458.
A short pause in the USD rally allows other traded currencies to reach stability or even recover a little bit. However, nothing really changes strategically.
Earlier today, the United Kingdom released the first of the two huge pieces of macroeconomic statistics planned for this week. First of all, the Unemployment Rate in the country was 3.7% in March after being 3.8% in February. The indicator wasn’t expected to change, so the actual reading might be considered positive. The Claimant Count Change showed -56.9K in April against the expected reading of -42.3K. The Average Earnings Index added 7.0% 3m/y after gaining 5.6% 3m/y the quarter before and against market expectations of 5.4% 3m/y.
The situation might be explained in the following way: in April, businesses and enterprises started feeling the negative external background, which only worsened the situation. However, they managed to save jobs and increase salaries adjusting for inflation. Probably, they might be able to hold this position for another quarter, but then the external pressure will come in full force. This, in turn, might lead to the disintegration of job and salary prospects.
The labour market, no matter how strong it may seem, didn’t completely recover after the pandemic – this process requires much time. one shouldn’t also forget about the Brexit issues – Northern Ireland turned out to be a sticking point in trade negotiations. In addition, interruptions in deliveries didn’t’ go anywhere. It appears that there are more complications than glimmers of hope and optimism right now. and that’s not good news for the Pound.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
More and more ECB representatives are inclined to raise the interest rate at the July meeting. At the same time, analysts are predicting that the ECB is likely to decide to end its stimulus program at its next meeting. The European currency has already started to strengthen a bit by this scenario, but it should be noted that by the summer the interest rate will be about 0.25% in Europe, while the US rate will be around 2%. This disbalance will cause EUR/USD quotes to decline in the mid-term.
From the technical point of view, the trend of the EUR/USD currency pair on the hourly time frame is still bearish. The MACD indicator became positive, the buyers began to show initiative, but it is weak. Under such market conditions, traders can look for sell deals from the resistance level of 1.0484, but only after the additional confirmation. Buy trades can be considered on intraday timeframes from the support level of 1.0379, but only with short targets and confirmation.
Alternative scenario: if the price breaks out through the 1.0588 resistance level and fixes above, the uptrend will likely resume.
News feed for 2022.05.17:
– Eurozone Italian Consumer Price Index (m/m) at 12:00 (GMT+3);
– Eurozone GDP (q/q) at 12:00 (GMT+3);
– US FOMC Member Bullard Speaks at 15:00 (GMT+3);
– US Retail Sales (m/m) at 15:30 (GMT+3);
– US Industrial Production (m/m) at 16:15 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 20:00 (GMT+3);
– US Fed Chair Powell Speaks at 21:00 (GMT+3);
– US FOMC Member Mester Speaks at 21:30 (GMT+3).
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2240
Prev Close: 1.2319
% chg. over the last day: +0.64%
The Governor of the Bank of England warned yesterday that “apocalyptic” food and energy prices are coming in Britain. The Bank of England said inflation is likely to peak at 10.25% in the last quarter of 2022. This will affect domestic demand and reduce activity and is likely to lead to an increase in unemployment. Also, Bailey added that raising the Bank of England’s interest rate is not enough to keep inflation within the target range. Michael Saunders of the Bank’s Monetary Policy Committee said that he believes a tighter monetary policy would do little to change the current level of inflation.
On the hourly time frame, the GBP/USD currency pair trend is still bearish. The MACD indicator became positive and there is a slight buying pressure. Under such market conditions, sell trades should be looked for from the resistance level of 1.2338, but with additional confirmation. For buy deals, traders may consider the level of 1.2283 or 1.2199, but only with additional confirmation in the form of a buyers’ initiative.
Alternative scenario: if the price breaks down through the 1.2450 resistance level and fixes above, the mid-term uptrend will likely be resumed.
News feed for 2022.05.17:
– UK Average Earnings Index (m/m) at 09:00 (GMT+3);
– UK Claimant Count Change (m/m) at 09:00 (GMT+3);
– UK Unemployment Rate (m/m) at 09:00 (GMT+3).
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 129.24
Prev Close: 129.15
% chg. over the last day: -0.07%
Deputy Governor of the Bank of Japan Amamiya says that he does not expect further increases in energy and commodity prices. If his assumption is correct, inflation in Japan will fall again, and as a result, the Bank of Japan will continue its soft monetary policy, which is negative for the Japanese Yen.
Trading recommendations
Support levels: 129.02, 126.91, 126.00, 125.57
Resistance levels: 129.74, 130.12, 130.99
The medium-term trend on the USD/JPY currency has changed to bearish. The price has confidently broken through the priority change level and is now trading between the moving averages. Despite the change in the trend on the hour timeframe, it is better to look for buy deals with the expectation of an uptrend continuation, since the Japanese Yen has no fundamental support. First of all, it is worth considering the support level of 129.02, but with confirmation. A resistance level of 129.74 may be considered for sell deals, but only with additional confirmation.
Alternative scenario: If the price fixes above 130.99, the uptrend will likely be resumed.
There is no news feed for today.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2915
Prev Close: 1.2846
% chg. over the last day: -0.54%
The Canadian dollar is a commodity currency and is highly dependent not only on the monetary policy of the Bank of Canada but also on the dynamics of the dollar index and oil prices. Oil prices added another 3% yesterday as OPEC is suppressing any production increases. In turn, Canada’s economic indicators are showing growth, which along with low unemployment will force the Bank of Canada to move to a more aggressive monetary policy. This situation, along with rising oil prices, will strengthen the Canadian dollar.
Trading recommendations
Support levels: 1.2774, 1.2692, 1.2644, 1.2607, 1.2521
The USD/CAD currency pair trend has changed to bearish in terms of technical analysis. The price broke through the priority change level and consolidated below the moving averages. The MACD indicator has become negative, and the sellers’ pressure has increased. It is worth trading only with short targets because fundamentally both the dollar index and the Canadian dollar are inclined to grow. Under such market conditions buy trades should be considered on the lower timeframes from the support level of 1.2774, but only with additional confirmation. For sell deals, it is better to consider the resistance level of 1.2875 or 1.2904, but also better with confirmation and short targets.
Alternative scenario: if the price breaks through and consolidates above 1.3000, the uptrend will likely be resumed.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The XAGUSD pair hints at the development of a long correction wave b of the cycle degree.
Wave b, judging by the shape, is a primary triple zigzag Ⓦ-Ⓧ-Ⓨ-Ⓧ-Ⓩ.
The final wave Ⓩ will be an intermediate triple zigzag (W)-(X)-(Y)-(X)-(Z). It seems that the formation of the actionary intermediate wave (Y) has recently come to an end. This took the form of a standard zigzag pattern.
Now we are observing the construction of the initial part of the intermediate intervening wave (X). This can also take the form of a minor zigzag A-B-C, as shown in the chart.
The end of the wave (X) is expected to reach 23.334. At that level, it will be at 50% of sub-wave (Y).
The alternative scenario indicates that the bearish primary wave Ⓩ could end in the form of a double zigzag (W)-(X)-(Y), and much earlier than expected in the main scenario.
Most likely, the market is now in the final part of the actionary wave (Y), or rather in its final minor sub-wave C.
It is likely that wave C will end in the form of a minute impulse near 19.733. At the indicated price point, primary wave Ⓩ will be equal to previous actionary wave Ⓨ.
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The euro edged higher after an ECB official supported the idea of a stronger currency to combat inflation. The pair is bouncing off December 2017’s lows at 1.0350. The RSI’s oversold situation on both daily and hourly charts led some sellers to cover as a wave of profit-taking could help the euro snap back from this demand zone. The bias remains down unless the bulls lift the first hurdle (1.0530) from the latest sell-off. 1.0640 on the 30-day moving average is a major resistance to clear before a bullish reversal could happen.
NZDUSD stays under pressure
The New Zealand dollar recovers as weak data from China may trigger more policy support. The RSI’s double dip into the oversold territory shows an overextension. The sell-off has become such a crowded one-way trade and the kiwi could use some breathing room. A bullish RSI divergence suggests a slowdown in the downtrend but needs a breakout to confirm buying interest. 0.6380 is a fresh resistance and 0.6450 on the 20-day moving average a major obstacle. A drop below 0.6220 would further extend the kiwi’s losses.
US 30 tests resistance
The Dow Jones 30 struggles as investors still ponder a recession scenario. A break below the daily support at 32600 has put the bulls on the defensive. Bargain hunting may cause limited rebounds, but the lack of buying momentum means that the mood is still extremely cautious. 32600 has become a resistance and its breach could extend the recovery to 34000, where sell orders could be expected from trend followers. 31250 is the closest support and a breakout may send the index to the psychological level of 30000.
Orbex is a fully licensed broker that was established in 2011. Founded with a mission to serve its traders responsibly and provides traders with access to the world’s largest and most liquid financial markets. www.orbex.com
The mighty dollar kicked off the week in a shaky fashion despite crossing above 105.0 last Friday, its highest level since December 2002!
Nevertheless, it has appreciated against almost every single G10 currency this month thanks to Fed hike expectations and risk aversion stemming from not only global growth concerns but ongoing geopolitical risks.
With the Dollar Index (DXY) hovering around levels not seen in 20 years and the fundamentals clearly in favour of bulls, the greenback could be primed to hit fresh two-decade highs in the week ahead. Given how the next few days are jam packed with economic US data and speeches from Federal Reserve officials, it may be wise to fasten your seatbelts due to increased dollar volatility.
Before we take a deep dive into what to expect from the dollar this week, it is worth keeping in mind that the DXY is heavily bullish on the daily timeframe. There have been consistently higher highs and higher lows with 105.0 acting as a key point of interest.
The same can be said for the equally-weighted USD index which is trading at levels not seen since mid-2020.
The week ahead…
On Tuesday, all eyes will be on the US April retail sales and industrial production data which could provide insight into the health of the largest economy in the world. This will be complemented by numerous speeches from Fed speakers including Federal Reserve chair Jerome Powell. If Powell and other policymakers strike a hawkish tone, this may fuel expectations around a 75-basis point rate hike in June – ultimately boosting the dollar.
Mid-week, Philadelphia Fed President Patrick Harker will be under the spotlight while on Thursday it’s all about the weekly initial jobless claims. Given how these speeches and economic reports could influence rate hike expectations, the next few days could be wild for the greenback.
Last week, U.S Treasury yields climbed to new cycle highs, powered by aggressive rate hike bets. Although yields have pulled back from multi-year highs, prices are still hovering around the 3% level and could push higher in the week ahead. Should yields resume their climb higher, this is likely to elevate the dollar.
Bulls remain in control for now…
Watch this space as the equally-weighted USD Index could be gearing up for another rally.
Prices are heavily bullish on the weekly and daily timeframe as there have been consistently higher highs and higher lows. Beyond 1.1850, the next key level of interest can be found at 1.2070. A solid breakout above 1.2070 could open the doors towards 1.2300.
Should 1.1850 prove to be reliable resistance, a decline back towards 1.1550 could become reality.
On the daily charts, we see a similar story with prices respecting a bullish channel. A breakout above 1.1950 could trigger a move towards 1.2070 and 1.2300. below 1.1850, bears may test the 1.1170 higher low before challenging 1.1550.
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