Last week, in the currency markets, US Dollar ended generally as the best performer, as supported by both Fed expectations and risk aversion. The Euro was the second strongest after some ECB members talked up the chance of a July rate hike. Commodity backed, Aussie and Kiwi ended as the biggest losers last week. Yen consolidated in tight range while European majors and USDCAD were mixed.
Speculations on aggressive Fed tightening intensified sharply last week after a chorus of hawkish comments from policy markets. Markets are indeed pricing in near 70% chance of federal funds rate at 1.50-1.75% by the end of first half, i.e., 125bps above current level. Stocks tumbled sharply towards the end, with DOW suffering the worst day since 2020 on Friday.
Looking ahead, the presidential election run-off in France on Sunday will be an important event for European markets. Polls still favor Macron, but it is going to be a tight race with left-wing voters as the kingmakers. A Le Pen win would trigger a negative market reaction in our view, but even if Macron is re-elected, France is facing increasing headwinds, both from the economy and political fragmentation.
On Monday the Australian and New Zealand’s banks will be closed in observance of Anzac Day. In the EU the German IFO Business Climate will be released which is expected to be decreased.
Tuesday the US monthly Durable Goods Orders and CB Consumer Confidence will be released.
On early Wednesday the Australian quarterly CPI will be released which is expected to be increased as global inflation is roaring.
On Thursday the Japan’s BOJ Outlook Report and Monetary Policy Statement will be released. Later in the day the all-important US quarterly Advance GDP and Unemployment Claims.
On Friday, Japanese banks will be closed in observance of Showa Day. A series of low impact EU economic numbers will be released. Later in the day the monthly Canadian GDP the monthly US Core PCE Price Index and the US Revised UoM Consumer Sentiment will be released
Major Currencies Performance and Signals
EUR/USD
The euro initially tried to rally last week but found enough selling pressure to turn things around and form an inverted hammer that sits right on top of the 1.08 level. We remain bearish again this week.
FORECAST: SELL
Resistance: 1.0850, 1.0900, 1.0950
Support: 1.0800, 1.0750, 1.0700
GBP/USD
The British Pound posts heavy losses against the US dollar during the week, falling to its weakest level since September 2020. We expect the British pound to rebound next week.
FORECAST: NEUTRAL
Resistance: 1.2850, 1.2900, 1.2950
Support: 1.2800, 1.2750, 1.2700
AUD/USD
Aussie and Kiwi were the worst performers last week, suffering much from risk aversion. But as for also the British Pound we expect a rebound next week.
FORECAST: NEUTRAL
Resistance: 0.7250, 0.7300, 0.7350
Support: 0.7200, 0.7250, 0.7300
USD/JPY
The USD/JPY pair recorded another high at 129.39 on Wednesday, April 20. The last time it climbed this high was in May 2002, that is, 20 years ago. We expect this trend to continue.
FORECAST: BUY
Resistance: 129.00. 129.50, 130.00
Support: 128.50, 128.00, 127.50
USD/CAD
The Canadian Dollar is off more than 0.85% against the US Dollar this week with the Loonie attempting to mark a fourth consecutive weekly advance. We expect the bullish trend to continue.
FORECAST: BUY
Resistance: 1.2750, 1.2800, 1.2850
Support: 1.2700, 1.2650, 1.2600
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