Last week the major currency pairs saw an appreciation against the US dollar except the Japanese Yen. The US Federal Reserve raised its interest rates for the first time since 2018, signaling more increases on rates to restrict raging inflation. US economic data continued to show resilience through February, with another jump higher in housing starts. Retail sales also showed people spending more on dining out, boding well for the expected pick up in services spending.
Oil prices were down last week as renewed lockdowns in China raised worries about demand. Uncertainty on the outlook is very high given Russia’s war in Ukraine, and we have marked down our own economic forecast released this week.
In addition to the ongoing situation in Ukraine, the focus next week will be also on the Fed speech, with Powell speaking on both Monday and Wednesday. The Fed has signaled a much stronger appetite to combat inflation, suggesting a further 6 rate increases in 2022. Looking at the comments from some of the Fed member that have spoken, there is a likelihood that we may even see a 50 basis point increase in May.
In the economic data front, the highlights include the US durable goods orders on Thursday and housing market data. From the UK, we have CPI and retail sales, while in Switzerland, the SNB will be making a “decision” on interest rates. Another set of key data will be the latest PMI numbers, due on Wednesday from Eurozone. On Monday, Japanese banks will be closed in observance of Vernal Equinox Day.
Major Currencies Performance and Signals
EUR/USD
The Euro has rebounded last week but next week based on the growing risks and the current outlook ahead, we see a bigger risk of a new weakening in market conditions with the US dollar set to advance vs the European currencies.
FORECAST: SELL
Resistance: 1.1000, 1.1050, 1.1100
Support: 1.0950, 1.0900, 1.0850
GBP/USD
Same situation as the Euro, the British pound has rebounded as well versus the US |Dollar. We expect that the GBP will go down due to continued risks and no resolution in the horizon of the Russian-Ukrainian war.
FORECAST: SELL
Resistance: 1.3200, 1.3250, 1.3300
Support: 1.3150, 1.3100, 1.3050
AUD/USD
Last week the Australian Dollar climbed to a four-month high after Chinese authorities pledged to support the economy. The Australian job report topped market expectations, strengthening the case for RBA rate hikes. We expect next week to continue the positive trend.
FORECAST: BUY
Resistance: 0.7450, 0.7500, 0.7550
Support: 0.7400, 0.7350, 0.7300
USD/JPY
The USDJPY last week has jumped above 118 as markets price in Japan’s soaring imported energy bill and the widening US/Japan interest rate differential. We expect next week to continue the positive trend.
FORECAST: BUY
Resistance: 119.50, 120.00, 120.50
Support: 119.00, 118.50, 118.00
USD/CAD
The Canadian dollar has regained along with other risk assets, with USDCAD down more than 1.1% in the last five sessions. After this week’s pullback, USD/CAD is now sitting above a key support zone near 1.2600/1.2580.
FORECAST: SELL
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
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