The US dollar index on Friday posted its largest weekly percentage advance in a month, supported by the prospect of a more aggressive pace of Federal Reserve tightening to curb soaring inflation.
The US Dollar gained ground against a basket of six currencies over the past month, particularly versus the euro, which has been pressured by investor concerns about the economic costs of war in Ukraine and a potentially an unpredictable presidential election in France.
The Fed’s hawkish message on quantitative tightening, renewed sanction risks in Europe and the polling shift in favor of far-right candidate Marine Le Pen ahead of France’s presidential election will put more pressure on risk sentiment, especially in Europe.
Next week, we will have a busy week especially on Wednesday and Thursday. The most important economic data for next week will be:
Tuesday, in the EU the ZEW Economic Sentiment will be released which is expected negative for the currency. Later the US Consumer price Index will be released.
On Wednesday, the day starts with the NZD Official Cash Rate and the UKs yearly Consumer Price index. Later in the day the US will releases its monthly Producer Price Index and in Canada the BOC will announce their overnight rate and statement.
Thursday the Australian Employment Change will be announced and then the Euro Main Financing rate will be released. Later the US monthly Retail Sales, Unemployment Claims and the Prelim UoM Consumer Sentiment will be released.
The week closes with a slow Friday as most of major economies (European and Australian) will be closed for Easter’s Good Friday.
Major Currencies Performance and Signals
EUR/USD
The Euro continues its series of losses last week. We expect the same momentum to continue as the Sunday results of the Round 1 of the French Elections will be known and risks heightened.
FORECAST: SELL
Resistance: 1.0900, 1.0950, 1.1000
Support: 1.0850, 1.0800, 1.0750
GBP/USD
The British pound has fallen more last week below the 1.30 mark. We expect this trend to continue next week as the Russian-Ukraine wars risks weigh in on the currency pair.
FORECAST: SELL
Resistance: 1.3050, 1.3100, 1.3250
Support: 1.3000, 1.2950, 1.2900
AUD/USD
Australia announces business confidence, consumer confidence and employment data this week. The latter on Thursday is perhaps the most important having seriously outperformed in previous months. Weakening confidence and employment gains will dampen sentiment in Australian markets and could increase the risk of a material correction lower by the AUD currency.
FORECAST: NEUTRAL
Resistance: 0.7500, 0.7550, 0.7600
Support: 0.7450, 0.7400, 0.7350
USD/JPY
Japan releases its Tanken survey this week, along with bank lending and machinery orders data. The Tanken has downside risks that may weigh on Japanese equities. We are bullish on the USDJPY pair this week.
FORECAST: BUY
Resistance: 124.50, 125.00, 125.50
Support: 124.00, 123.50, 123.00
USD/CAD
The Loonie this week will be dependant the BOC as they will announce the overnight rate and statement. The BOC is expected to raise rates to 1%. We are neutral on the USDCAD pair this week with an eye on the BOC Monetary policy and comments.
FORECAST: NEUTRAL
Resistance: 1.2600, 1.2650, 1.2700
Support: 1.2550, 1.2500, 1.2450
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