The calendar for the
week after the NFP is usually light in economic events, but this doesn’t mean
there can’t be opportunities in the FX market.
Traders will be
paying attention to the US inflation which will be in the spotlight with
expectations to keep rising. The US PPI m/m data will also be closely
watched.
The UK GDP is also
coming Thursday and is expected to reflect a slower economic growth. Even if
the UK economy has been resilient overall since the beginning of the year,
elevated energy prices had a negative impact, especially on consumer purchasing
power. Services activity and retail sales were also affected.
At the last FOMC
meeting the federal funds rate rose 50 basis points with another rate hike
expected in June. Meanwhile, some Fed speakers are scheduled to deliver remarks
this week.
The war in Ukraine
remains a major concern for the euro area and will influence the market for the
foreseeable future.
EUR/USD expectations
The euro has room to
weaken further as the Euro area will be influenced in the near future by the
economic slowdown in China. There is a risk of recession and the French
parliamentary elections in June could also have an impact. Even if expectations
for the ECB to raise rates are growing and some members like Villeroy mentioned
that above-zero rates by year-end are “reasonable”, a rate hike in
June is still seen as unlikely according to analysts from Scotiabank, so unless
this becomes a strong possibility, there won’t be significant movements in the
market for EUR.
EUR/USD closed the
week near the 1,0485 level of support. From a technical perspective on the H4
chart EUR/USD needs a correction somewhere around 1.0740 or even 1.08450 and if
no significant event happens this week, it could resume its downtrend and test
the next level of support at 1,0365.
USD/CAD expectations
On the H1 chart
USD/CAD looks good for buying opportunities. The pair is close to the 1.2940
level of resistance and a correction is expected until at 1,2780 which is the
next level of support. If rejected, the pair
could test the resistance at 1.3000.
The USD is still
strong and usually supported by volatility and uncertainty. The pair is
expected to appreciate further, but there can also be an opportunity to sell if
the pair reaches 1.3000. The Fed tightening already appears to be priced in the
market, but the market could re-evaluate the Fed expectations and reprice them
lower if upcoming US data is soft.
There are no
significant economic events in the calendar this week for the CAD, but for the
USD comments from several Fed speakers are expected: Mester, Bostic, Williams
and Waller. In conclusion, USD/CAD looks bullish in the short term.
This article
was written by Gina Constantin.