Overview: This week’s market volatility was quite high due to the release of several key economic data points.This week’s highlights focused on the FED’s dovish hike, as the market believes the FED is on the verge of ending its monetary tightening, putting bearish pressure on the dollar basket.
Another key economic data release that we had was the falling inflation numbers in Canada and Japan, while inflation rises in the UK, causing consumer confidence there to edge higher but still remain weak. At the time of writing, we still have the upcoming UK retail sales and US durable goods orders to monitor.
DXY
Starting with the dollar basket, the greenback has been under pressure throughout the trading week after testing resistance in early March and being followed by the previous dovish hike and easing inflation numbers.The dollar basket previously broke through the 50-day moving average (103.445) and also breaks to the downside after consolidating between the 50-day moving average and the 200-day moving average (106.559), which signals bearish bias for the dollar.
Currently, the DXY is trading in the proximity of February’s low, while the stochastic is currently signaling for momentum to be relatively overstretched and strong bearish pressure for the DXY. Further selling could drive the DXY to February’s low.
EURO
The euro has been on a strong bull rally for the past five trading sessions, and as it breaks above the 50-day moving average (1.07284), the dollar weakens. So far, several non-European central banks have raised interest rates, including the Swiss National Bank and Norway’s Norges Bank, which may have contributed to the Euro’s recent rise.
From the current price, resistance is noticeable at 1.10, which is also a strong psychological number. Support will be found at 1.0740, which coincides with the 50-day moving average. The 200-day moving average is still far away from the current price of 1.0332, and the Stochastic is just above overbought territory, indicating a potential pullback in the coming trading sessions.
POUND
The pound sterling recently showed some interesting economic data. While other countries are starting to see easing inflation, the UK’s inflation rate remained sticky as inflation edged higher. This does bring the Bank of England quite a problem, as they may need to raise interest rates higher, for which they then hiked another quarter point. With rising inflation and the Bank of England’s interest rate hike, the Pound recently broke through the 50-day moving average (1.2146), followed by a weakening of the US dollar.
From the current price, the trading range can be found between the December’s high at 1.2441 as the resistance level and 1.2195 as the recent fresh support level. The 200-day moving average is also still a long way from the current price of 1.1891, and the stochastic is currently indicating that momentum is quite stretched and in overbought territory.
YEN
In Japan, inflation has recently dropped from a peak of 4.3% to 3.3%, which is good for the economy, while the manufacturing PMI remains below the 50 boom/bust level.So far, fundamental perspectives remain mixed, especially with the change in BoJ leadership.
On the technical side, the yen was favored as the dollar weakens across the board, making the USD/JPY pair trade below the 50-day moving average (132.57) and currently testing the 130 strong psychological support level. A break below the 130 level would spark more bearish bias on the pair and possibly cause it to trade lower with 127 as the next support level. The 200-day moving average is quite a distance from the current price of 137.38, and the stochastic indicates that the bearish momentum has streteched and entered the oversold territory.
AUSTRALIAN DOLLAR
Next on the AUD, earlier on the week, the RBA minutes confirmed that they would reconsider an interest rate pause on their next meetings to assess the economic outlook, and the RBA did not hint at any further ongoing rate hikes. However, with Australia’s inflation remaining high and showing no signs of easing, markets are expecting a rate hike in the upcoming meetings.
On the technical side, the AUD/USD has maintained its bearish bias. Price recently tested the 200-day moving average (0.6756), which acts as resistance in the trading range. While support can be found at 0.6563 which is the month’s low. The 50-day moving average is still far from the current price of 0.6844, while the stochastic is currently above the 50 level but remains in the neutral zone.
CANADIAN DOLLAR
The USD/CAD was relatively underperforming as the dollar weakened. As the country’s inflation rate falls, the BoC’s dovish stance becomes more justified, and slow retail sales growth could explain the cause.
From the technical side, the USD/CAD is still looking bullish. Currently, price is testing the support level at 1.3666; a break below would open the door for the pair to trade lower and reach the next support level at 1.35; and the resistance is currently at 1.39t support level at 1.35; and the resistance is currently at 1.39. The 50-day moving average (1.3526) and the 200-day moving average (1.3356) are still relatively far away from the current price, but they are sloping upward, indicating a bull trend. While the stochastic is currently below the 50 level and remains in the neutral zone.
P.S. Opinions are of my own, do your own due diligence as trading carries a high level of risk.