official Market Update by Solidecn.com

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GBPUSD, UK inflation hits 30-year high

Yesterday, the pound made one of the most serious upswings for the current year and has now reached 1.3135. Investors are focused on the statistics from the UK on inflation, which has long gone beyond the target levels of the Bank of England and therefore creates only additional threats to the economic recovery process after the coronavirus pandemic.

Thus, CPI for March rose by 1.1% after rising by 0.8% a month earlier, although analysts had expected a value of 0.7%. It reached new record highs at 7% YoY, while market forecasts suggested an increase from only 6.2% to 6.7%. Thus, the March inflation in the UK was a record for the last 30 years – since March 1992. PPI also rose to 19.2% YoY from 15.1%, but the sharpest jump was recorded for prices that include homeowners' costs for their living space. According to the calculations of the special index CPIH (inflation, taking into account the costs of homeowners for its maintenance) for February and March, the indicator corrected immediately by 11.7%. Experts believe that rising inflation will put additional pressure on the Bank of England, forcing officials to accelerate the pace of raising interest rates.

Meanwhile, after reaching the key mark of 100.000 points in the USD Index, the US currency could not hold its position for a long time and returned to the current levels around 99.600. Today, data on initial jobless claims will be published, which will help assess the local state of the labor market and predict the prospects for the movement of dollar quotes for the next week.

The pair continues to trade within the global downward channel, but after reaching the support line at 1.3000, it reversed and began to form a new upward wave. Technical indicators keep the weakening sell signal. Indicator Alligator's EMA fluctuations range narrows, and the histogram of the AO oscillator approaches the transition level.

Resistance levels: 1.3259, 1.3616 | Support levels: 1.3, 1.28

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AUDUSD shows a moderate decline during the Asian session, testing 0.74 for a breakdown. The instrument is preparing to finish yet another trading week in the "red" zone; however, due to the active growth of the Australian currency last Tuesday, the total losses can be characterized as insignificant.

In addition to the rising US dollar, quotes are under pressure from weak macroeconomic statistics from Australia, published the day before. Employment Change in March was recorded at around 17.9K, which was below market expectations at the level of 40K and significantly inferior to 77.4K shown in February. At the same time, Full-Time Employment decreased from 121.9K to 20.5K, while the dynamics of Part-Time Employment improved from -44.5K to -2.7K. The Unemployment Rate remained at 4%, while many experts were confident that it would stay below this psychological level. At the same time, Consumer Inflation Expectations rose from 4.9% to 5.2% in April, while analysts had projected a decline to 4.6%.

Investors continue to monitor the consequences of the Russian-Ukrainian conflict. The Australian government imposed targeted financial sanctions on 14 Russian state-owned enterprises of strategic and economic importance. In particular, PJSC Gazprom, PJSC Rostelecom, JSC United Shipbuilding Corporation, JSC Ruselectronics, PJSC Novorossiysk Commercial Sea Port, PJSC Alrosa, JSC Russian Railways, and others were included in the list.

On the daily chart, Bollinger Bands are moderately declining. The price range expands, making way to new local lows for the "bears". MACD is preserving a stable sell signal (located below the signal line). Stochastic, having tried to reverse upwards at the beginning of the current week is directed downwards again, indicating the continuing risks of the instrument being oversold in the ultra-short term.

Resistance levels: 0.745, 0.75, 0.755, 0.76 | Support levels: 0.74, 0.7366, 0.73, 0.725

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The New Zealand dollar is moderately declining against the US currency during the morning session, testing the level of 0.6770 for a breakdown. NZDUSD develops a "bearish" momentum and returns to the local lows of March 16, updated last Wednesday, which became the most volatile day of the week.

On April 13, the Reserve Bank of New Zealand (RBNZ) raised interest rates by 50 basis points at once from 1% to 1.50%. The indicator was adjusted for the fourth time in a row, but each time the regulator raised it by only 0.25%. In a follow-up statement, the officials noted that such a move is designed to provide additional flexibility in economic policy in the face of high geopolitical uncertainty, as well as to curb high inflation and the cost of living, which is one of the key problems for world economies today. Note that consumer prices in New Zealand rose by almost 6% with while the target range of the RBNZ of 1–3%.

The macroeconomic statistics released the day before managed to provide only little support to the instrument: Business NZ PMI rose from 53.6 to 53.8 points in March, while analysts had expected a more modest value of 53.7 points.

Meanwhile, New Zealand is gradually opening its borders to tourists. Thus, fully vaccinated residents of neighboring Australia will be able to visit the country without having to go through quarantine. Travelers from other visa-free countries will be allowed to enter New Zealand from May 2.

On the daily chart, Bollinger Bands are declining rather actively. The price range is expanding; however, it fails to catch the development of "bearish" sentiments. MACD is preserving a stable sell signal (located below the signal line). Stochastic is still located near its lows, signaling a strongly oversold NZD in the ultra-short term.

Resistance levels: 0.6812, 0.6874, 0.6924, 0.696 | Support levels: 0.6732, 0.67, 0.665, 0.66

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USDJPY, the US dollar updates record highs

The US dollar shows a moderate growth in Asian trading, renewing new record highs and approaching 127.00, but there are no drivers for its breakout yet. Last week, April 13, the yen reached its lowest level against the US currency since 2002, losing about 40% in value compared to the 2011 high.

Investors are returning to the market after the Easter week and are still inclined to buy safer assets, given that the fundamental background does not contain positive signals. The greatest support for currencies at the moment comes from the actions of world central banks, which are rapidly adjusting the current monetary policy in the hope of containing record inflation rates. In particular, it is expected that during the May meeting, the US Federal Reserve will announce an increase in interest rates by 50 basis points at once, and will also launch a quantitative tightening program.

Meanwhile, the ultra-soft monetary policy of the Bank of Japan against the backdrop of relatively low inflation in the country keeps the national currency in a weaker position. The regulator is expected to raise its inflation forecast for fiscal year 2022 to above 1.5% from the current 1.1%, while national economy growth expectations will be lowered from 3.8%. Statistics on inflation in Japan will be published on Friday. It is predicted that by the end of March, the national Consumer Price Index may accelerate from 0.9% to 1.3%.

Along with this, the Bank of Japan is exploring the possibility of launching its own digital currency (CBDC). Bank of Japan Chief Executive Shinichi Uchida said financiers will look at features to set a limit on the amount of transactions as a safeguard against unpredictable movement of deposits from financial institutions, as well as the possibility of rewarding token holders. At the same time, it is emphasized that the digital yen will not be used to achieve a negative interest rate.

Bollinger Bands on the daily chart show a steady increase. The price range expands slightly from above, freeing a path to new record highs for the "bulls". MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic has been near its highs for a long time, indicating the risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 127, 127.5, 128 | Support levels: 126.3, 125.6, 125.09, 124.5

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The British pound is falling during the morning session, testing the strong support at 1.3 for a breakdown. GBPUSD updates local lows from April 13, when the asset showed a sharp increase.

The US currency is supported by expectations of further tightening of monetary policy by the US Federal Reserve and an increase in the key rate by 50 basis points at once during the May meeting of the regulator. In addition, investors are still reluctant to redirect their capital into risky assets, fearing a further deterioration in the global economy. Despite the unprecedented sanctions against Russia, the special military operation on the territory of Ukraine continues, and at the moment the peace talks have faded into the background. The parties, apparently, hope to take more advantageous positions in the negotiation process, having shown success at the front.

Meanwhile, Western countries continue to introduce more and more restrictive measures. In the near future, EU officials will discuss the sixth sanctions package, which may relate to the most painful issue, restrictions on the import of oil and oil products. In the EU, there is still no consensus on the embargo on Russian supplies, due to the significant dependence on imported energy resources, but the general trend towards a gradual phase-out is still emerging. According to the forecasts of the operator of the united British energy system National Grid, the UK is ready to send significant volumes of natural gas to European countries in order to minimize their losses after the imposition of sanctions, using its terminals and the national system of gas transportation. Summer exports are expected to reach 5.1 bcm, well above the 2021 figure of 0.7 bcm.

Today, investors are waiting for the speech of the representative of the Bank of England Catherine Mann, as well as the Governor of the British regulator Andrew Bailey.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is narrowing, limiting the prospects for the development of the "bearish" trend in the short term. MACD is going down having formed a new sell signal (trying to consolidate below the signal line). Stochastic shows a more confident decline, but is quickly approaching its lows, indicating the risks of the oversold pound in the ultra-short term.

Resistance levels: 1.305, 1.31, 1.315, 1.32 | Support levels: 1.3, 1.296, 1.29, 1.285

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European currency shows moderate growth against the US dollar in the Asian session, recovering after the "bearish" start of the week and retreating from the local lows of April 14, updated the day before. The growth of the instrument is primarily driven by technical factors, while the news background changes slightly and still does not contribute to an increase in demand for risky assets.

Moreover, since the beginning of the week, no significant macroeconomic statistics have been received from Europe, while US Federal Reserve officials continue to stir up investor interest in the May meeting of the Fed. In particular, on Monday, the Chair of the St. Louis Fed, James Bullard, admitted the possibility of raising the interest rate immediately by 75 basis points in the near future, but noted that this is not a "baseline scenario". In addition to adjusting the rate, the regulator is also expected to launch a program of quantitative tightening.

Today, investors will pay attention to the statistics on the dynamics of Industrial Production and Trade Balance in the euro area in February. It is assumed that the pace of production will increase by 0.7% after the zero dynamics of the previous month, and in annual terms, the figure may rise by 1.5% after falling by 1.3%. However, given the sharp deterioration in the geopolitical situation in Eastern Europe at the end of February, it is likely that the relevance of these data will be in question.

Bollinger Bands on the daily chart show a moderate decline. The price range is narrowing, reflecting the emergence of mixed trading dynamics in the ultra-short term. MACD indicator is reversing upwards forming a new buy signal (the histogram is trying to consolidate above the signal line). Stochastic is showing similar dynamics, again trying to rebound upwards from the level of "20".

Resistance levels: 1.085, 1.09, 1.0957, 1.1 | Support levels: 1.0800, 1.0767, 1.0726, 1.069

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The US dollar is recovering its position against the Japanese yen in Asian trading, correcting after a downtrend the day before, when the US currency showed a decrease in almost the entire spectrum of the market against the background of the rhetoric of the US Federal Reserve, which significantly corrected investors' expectations regarding a possible rate hike at the May meeting more than 0.50%.

San Francisco Fed President and FOMC member Mary Daly noted a correction in the federal funds rate to 2.5% by the end of the year, since a smooth transition to a neutral policy is the main priority of the regulator at the moment. The official stressed that the risks of uncertainty remain on the market caused by the development of the military conflict in Ukraine and the recorded outbreaks of COVID-19. In addition, traders drew attention to not the strongest statistics from the US on the dynamics of Existing Home Sales.

In turn, pressure on the yen was exerted by data from Japan. In March, Exports from the country slowed down from 19.1% to 14.7%, which turned out to be worse than analysts' forecasts at the level of 17.5%, while Imports for the same period decreased from 34.1% to 31.2%, while investors expected 28.9%. All this led to a trade deficit in March at -412.4 billion yen, which was significantly worse than the -100.8 billion yen forecast by analysts. Additional pressure on the position of the instrument was exerted by the Tertiary Industry Index of Japan, which fell by 1.3% in February after a decrease of 0.7% a month earlier.

A more "dovish" outcome of the Bank of Japan's meeting on April 28 and a further rise in US bond yields could see USD/JPY break out of its uptrend range and head back into correction.

Bollinger Bands on the daily chart show a steady increase. The price range expands, freeing a path to new record highs for the "bulls". MACD histogram preserves the uptrend and a buy signal (located above the signal line). Stochastic, having reacted to the emergence of corrective dynamics the day before, maintains a confident downward direction, signaling a strongly overbought US dollar in the ultra-short term.

Resistance levels: 128.62, 129.39, 130 | Support levels: 127.5, 127, 126.3, 125.6

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The Australian dollar is showing mixed trading against the US dollar during the Asian session, holding near 0.7430. Since the opening of the daily session, the instrument has been trading mainly with the downtrend, but this still fits into the framework of a weak technical correction after active growth the day before. The Australian and New Zealand currencies rose significantly on Wednesday, reacting to the appearance of rather weak macroeconomic statistics from the US on the dynamics of Existing Home Sales.

As a result of March, Existing Home Sales fell again by 2.7% after a collapse of 8.6% a month earlier, which turned out to be much worse than analysts' forecasts. In addition, the quotes of AUD/USD were supported by statements by representatives of the US Federal Reserve, which weakened the hopes of investors for more active actions of the regulator aimed at tightening monetary policy in the country. The President of the Chicago Fed, Charles Evans, said that he adheres to a plan to raise the rate twice, by 0.50% each time. In turn, Fed spokesman Rafael Bostic, who is the President of the Fed of Atlanta, noted that raising the rate by more than 0.50% would be premature and could have negative consequences for the growth of the US economy.

In addition, the Reserve Bank of Australia (RBA) in the minutes of its April meeting indicated a "hawkish" position and gave a convincing hint to the market that the interest rate increase would occur earlier than expected, which contributed to the strengthening of AUD/USD in the middle of the week.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is reversing to growth forming a weak buy signal (located above the signal line). The indicator is also trying to recover above the zero level. Stochastic is showing more active growth and is already approaching its highs, signaling the risks of the Australian dollar being overbought in the ultra-short term.

Resistance levels: 0.7456, 0.75, 0.755, 0.76 | Support levels: 0.74, 0.7366, 0.7341, 0.73

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Against the backdrop of the growth of the US dollar, the NZDUSD pair is correcting in a downtrend, trading near 0.6788.

Today's trading on the Wellington stock exchange began to decline after the New Zealand analytical company Stats NZ published March inflation data. Thus, the consumer price index added 1.8% MoM, much higher than 1.4% a month earlier. The annual value reached 6.9%, reflecting the highest growth in the last 30 years. The main driver of the current trend was not the situation in the energy market but the utility segment, which reacted to an increase in the cost of new homes by 18%, which happened for the first time since 1985. Also, gasoline prices rose by 32% compared to the same period last year.

The US currency continues to trade above the psychological level of 100 points in the USD Index, and its rate was not affected even by disappointing data on sales in the secondary housing market. After the increase in the number of building permits for the construction of new homes, the drop in the indicator was expected, and analysts included in the forecast a value of 5.80M, but the actual decrease was even larger and amounted to 5.77M, while sales in February reached 5.93M.

The asset moves within the local rising channel, being near the support line. Technical indicators maintain a stable sell signal: fast EMAs on the Alligator indicator are well below the signal line, and the AO oscillator histogram is trading deep in the sell zone.

Resistance levels: 0.6842, 0.6988 | Support levels: 0.6718, 0.6536

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The British pound has been actively declining this week, reaching the support level of 1.3000 under the pressure of pessimistic investor sentiment regarding the growth of the national economy amid unprecedented high inflation.

According to a Deloitte survey, a record number of UK managers expect operating costs to rise sharply this year as inflation has proved more resilient than expected, with a majority (98%) of respondents believing that the Bank of England will not be able to bounce back prices in the nearest future. The survey included 89 CFOs, 22 of whom were from FTSE-100 companies and 34 from FTSE-250 companies. The results of the study show negative sentiment in business circles, primarily due to disruptions in supply chains and energy supply, as well as high prices as a result of the closure of warehouses with products during the coronavirus pandemic. Against this background, the projected decline in GDP in Q2 2022 is likely to force the Bank of England to decide to raise interest rates as early as this summer.

This news has a negative impact on GBPUSD, which is trading in a long-term downtrend. The key support at the moment is at 1.3000, in case of a breakdown of which the quotes will continue to fall with the targets of 1.2870-1.2700. The nearest resistance level is at 1.3150, near which one can consider new sales.

The mid-term trend is downward. This week, market participants are trying to break through the target zone 2 (1.3060–1.3026). If they succeed, the decline will continue with the target in the area of the target zone 3 (1.2716–1.2682). The key resistance of the trend is shifting to the levels of 1.3351–1.3317.

Resistance levels: 1.3150, 1.3288, 1.34 | Support levels: 1.3, 1.287, 1.27

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The New Zealand dollar shows an active decrease against the US dollar during the Asian session, developing a strong "bearish" momentum that formed the day before. NZDUSD is testing 0.67 for a breakdown and updating local lows from February 28. The pressure on the instrument is again exerted by the growing US dollar, which is supported by the expectations of an early tightening of the monetary policy of the US Fed. The regulator expects to raise the interest rate immediately by 50 basis points already during its May meeting. In addition, the Fed is likely to launch a quantitative tightening program that will help reduce its balance sheet.

Additional pressure on the NZ dollar is exerted by the macroeconomic statistics from New Zealand released yesterday. The Consumer Price Index in Q1 2022 accelerated from 1.4% to 1.8%, which turned out to be only 0.2% worse than market expectations. In annual terms, inflation reached a new record high of 6.9%, although analysts had projected an increase to 7.1%.

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. MACD reversed downwards having formed a new sell signal (located below the signal line). Stochastic, which made an attempt to grow a few days ago, is again reversing into a horizontal plane, reacting to a surge of "bearish" activity. It is necessary to wait for the trade signals from technical indicators to become clear.

Resistance levels: 0.677, 0.6812, 0.6874, 0.6924 | Support levels: 0.67, 0.665, 0.66, 0.6568

 

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The euro's fall continues against the backdrop of approaching the next meeting of the US Federal Reserve on May 4, at which the regulator is likely to raise interest rates by 25–50 basis points. Only 0.2% of experts believe that monetary policy will not change. The US dollar is likely to strengthen against all major currencies in the long term. By raising the rate, the regulator hopes to bring inflation under control: according to the latest data, the consumer price index in the US reached a record high in 40 years – 8.5%.

Inflation in the EU is not far behind at 7.4%, but the European Central Bank is in no hurry to tighten monetary policy. So far, all that is known is that in the second half of 2022, the curtailment of the bond redemption program may begin, and only then the agency will consider raising the rate. Until the ECB takes decisive action and until the end of the military conflict in Ukraine, the euro is likely to decline against the US dollar.

The long-term trend is downwards. After the price consolidates below 1.085, the decline continues to the 2020 low at 1.0650. The nearest resistance, from which one can consider selling, is 1.085.

The medium-term trend is down. This week, market participants are trying to break through target zone 2 (1.08–1.0781). The next sell target will be zone 3 (1.0608–1.0589) if they succeed. The key resistance of the trend is shifting to the levels (1.0968–1.0949).

Resistance levels: 1.085, 1.117 | Support levels: 1.065, 1.05

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AUDUSD, is trading in a downtrend amid a significant decline in the Australian currency, being at around 0.7343.

The Australian currency continues to decline in tandem with the US dollar against the background of the lack of positive dynamics of macroeconomic indicators. According to preliminary data, the Manufacturing PMI in April may reach 57.9 points, which is slightly higher than 57.7 points in March. The Services PMI may rise to 56.6 points from 55.6 points a month earlier.

In turn, the US currency continues to hold in an uptrend, being above 100.000 in the USD Index. The day before, the Chair of the US Fed, Jerome Powell, made a speech during which he indirectly blamed Russia's actions on the territory of Ukraine for the increase in inflation and noted that now the conflict in Eastern Europe is exerting slight pressure on the US economy, but soon it may intensify, and inflation may increase even more. In the local perspective, this will support the US currency, but globally, the growth of the dollar will soon end.

On the global chart of the asset, the price is trading within a broad upward channel, approaching the support line. Technical indicators have already reversed and issued an updated sell signal: the range of the Alligator indicator EMAs fluctuations is expanding in the direction of decline, and the histogram of the AO oscillator forms descending bars.

Support levels: 0.7285, 0.7 | Resistance levels: 0.745, 0.76

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The Australian dollar shows a steady decline during the morning session, updating local lows from February 28. The instrument has been developing a downtrend since last Thursday, when the Fed Chairman Jerome Powell once again announced the need to raise interest rates by 0.50% at once at the May meeting. In addition, the regulator may launch a quantitative tightening program, which its representatives have also often spoken about recently. Investors took the official's speech as an additional signal to reduce risky positions, which provoked a noticeable strengthening of the US currency.

The macroeconomic statistics released on Friday from Australia failed to slow down the development of the "bearish" dynamics for the instrument, despite the fact that the data turned out to be quite positive in general. The Commonwealth Bank Manufacturing PMI in April rose from 57.7 to 57.9 points, while analysts had expected growth to only 57.8 points. The Services PMI for the same period strengthened from 55.6 to 56.6 points, but the market expected a much more noticeable increase to 58.5 points. At the same time, the Composite PMI rose from 55.1 to 56.2 in April.

In addition, China recorded the highest daily death rate of the population from COVID-19 this year, and the record for the incidence in Shanghai was 21K people. The city authorities announced a new round of quarantine measures last week, including daily testing of citizens for coronavirus. China remains one of the few countries that have adopted a "zero tolerance" policy, imposing mandatory quarantine for those who come into contact with infected citizens in order to contain the spread of the disease.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is expanding, but at the moment it is not keeping up with the surge of "bearish" sentiment. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic retains a steady downtrend but is located in close proximity to its lows, which indicates the risks of oversold AUD in the ultra-short term.

Resistance levels: 0.72, 0.725, 0.73, 0.7341 | Support levels: 0.715, 0.71, 0.705, 0.7

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During the Asian session, the USDCHF pair is actively growing, testing the level of 0.9580 for a breakout and holding near the record highs of June 2020, renewed at the end of last week after the speech of the head of the US Federal Reserve, Jerome Powell.

The regulator chairman confirmed his intention to start an aggressive adjustment of the monetary policy parameters and raise the interest rate by 50 basis points at the next meeting in May to combat the inflation rate, which has been a record for 40 years. Also, the agency is likely to launch a quantitative easing program, which will allow it to reduce its balance sheet, which currently stands at about 9T dollars, mainly consisting of Treasuries and mortgage-backed securities.

Against the backdrop of rising buying sentiment, the US currency ignored the national macroeconomic data on Friday. The PMI Markit index in the manufacturing sector in April rose from 58.8 to 59.7 points, while analysts expected a slight decline to 58.2 points. In turn, the business activity index in the service sector for the same period fell from 58 to 54.7 points with neutral market forecasts. The composite business activity index corrected from 57.7 to 55.1 points, which was noticeably worse than analysts' expectations of 58.1 points.

On the daily chart, Bollinger Bands are steadily growing: the price range is expanding, letting the "bulls" renew the highs. The MACD indicator grows, keeping a strong buy signal (the histogram is above the signal line). Stochastic also maintains an upward direction but is near its highs, signaling that the dollar may become overbought in the ultra-short term.

Resistance levels: 0.96, 0.965, 0.97, 0.975 | Support levels: 0.9535, 0.95, 0.9459, 0.94

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The European currency shows a moderate decline against the US dollar during the Asian session, building on the "bearish" momentum formed at the end of last week, when the euro retreated from its local highs from April 7. The pressure on the instrument is exerted by the previous factors of a gradually strengthening dollar against the backdrop of deterioration in global economic prospects.

The military conflict in Ukraine is intensifying, despite the unprecedented sanctions imposed on the Russian economy by Western countries. Meanwhile, the EU is preparing another, sixth in a row, package of sanctions, which will likely be announced on April 25-29 and will significantly reduce the possibility of energy supplies from Russia. The issue of oil and gas imports for European countries is still extremely painful. Nevertheless, quite clear trends have been identified, and, not without pressure from the White House administration, the EU is gradually reducing its energy dependence on Russian resources, which, in turn, leads to an upward correction in energy prices, simultaneously pushing up the already high inflation in the region.

The macroeconomic statistics from Europe published last Friday did not have a noticeable impact on the dynamics of the instrument, despite the fact that the data, in general, was not disappointing. The eurozone Composite Manufacturing PMI rose from 54.9 to 55.8 in April, beating its forecast of a decline to 53.9. The Services PMI for the same period strengthened from 55.6 to 57.7 points, contrary to forecasts of a decline to 55 points.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is expanding reluctantly, making way to new local lows for the "bears". MACD reversed downwards having formed a new sell signal (located below the signal line). Stochastic, having made an attempt to grow last week reversed downwards again and is testing the border of the oversold area.

Resistance levels: 1.08, 1.085, 1.09, 1.0957 | Support levels: 1.075, 1.07, 1.0634, 1.06

 

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The Canadian currency traded at stable levels all last week but weakened slightly on Friday after the publication of neutral macroeconomic statistics. Now the quotes of the USDCAD pair are around 1.2725.

Thus, according to the data presented, the February core retail sales index increased by 2.1%, which is lower than the 2.9% shown a month earlier, while the volume of retail sales for the same period increased by only 0.1%, significantly yielding to January's 3.3%. Meanwhile, the commodity price index shows an upward trend: the value added 11.8% for March, showing an almost twofold increase from 6.4% for February. Thus, the annual increase in prices for raw materials amounted to 42.7%, which is 12.5% higher than last month's figure of 30.3%.

As for the American currency, it becomes obvious that it is the catalyst for the significant growth of the USD/CAD currency pair. Yesterday, the USD Index broke the level of 101.000 against the backdrop of a speech by US Federal Reserve Chairman Jerome Powell, during which he said that the regulator should move a little faster in terms of adjusting monetary policy. Futures contracts on the US interest rate went up sharply, and it became clear that most analysts expect decisive steps from the country's financial authorities and an increase in value by at least 50 basis points at the next meeting on May 3–4.

On the global chart of the asset, the price moves within a wide channel, rising towards the resistance line. Technical indicators reversed and gave a signal to start buying: fast EMAs on the Alligator indicator crossed the signal line upwards, and the AO oscillator histogram formed the first upward bar after crossing the transition level.

Resistance levels: 1.2785, 1.3025 | Support levels: 1.2647, 1.2455

[Solid ECN ✔️]

The US dollar is developing flat trading dynamics in tandem with the yen during the Asian session, consolidating near 128. The development of the uptrend stopped last week, when USDJPY made new record highs, and the market plunged into a correction.

Meanwhile, demand for the US currency is increasing in anticipation of a more aggressive approach to tightening monetary policy parameters by the US Federal Reserve, pushing buyers to open new deals, while the Bank of Japan is only cautious about the risks of rising inflation in the country. The latter, however, does not frighten Japanese investors at all, who are accustomed to the deflationary characteristics of the national economy. The Bank of Japan is likely to keep its rate unchanged at -0.10% at its meeting on Thursday and refrain from major adjustments in its forecasts for further actions, as rising commodity prices force it to focus on maintaining the economic recovery after the coronavirus pandemic. Thus, in a broader sense, the Japanese yen is currently experiencing a "bullish" pullback after a consistent decline due to the regulator's ultra-loose monetary policy.

Macroeconomic statistics from Japan, released the day before, turned out to be restrainedly optimistic: the Coincident Index in February rose from 96.3 to 96.8 points, which turned out to be better than the negative forecasts of analysts for a decline to 95.5 points. The Leading Economic Index for the same period fell from 101.2 to 100.0 points, while the market expected 100.9 points. The Unemployment Rate in the country in March also corrected down from 2.7% to 2.6%.

Bollinger Bands on the daily chart show a steady increase. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is going down having formed a new sell signal (located below the signal line). Stochastic maintains a confident downtrend, being approximately in the center of its area.

Technical indicators do not contradict the development of the correctional decline in the short and/or ultra-short term.

Resistance levels: 128.62, 129.39, 130, 131 | Support levels: 127.5, 127, 126.3, 125.6

[Solid ECN ✔️]

The American currency is moderately declining, retreating from the local highs of March 16, updated the day before. Investors attribute the development of "bearish" trend to the emergence of technical factors, while the fundamental background changes slightly and still contributes to the strengthening of the US dollar.

In particular, traders are concerned about the prospects for the recovery of the global economy against the backdrop of further escalation of the conflict in Ukraine, which is the cause of the crisis in the commodity areas. In addition, there are reports from Beijing of a rapid increase in the incidence of coronavirus infection among the local population. Recently a large-scale lockdown ended in Shanghai, and now a similar prospect seems to threaten the capital of China. Over the past day, about 22K cases of COVID-19 were detected in the country, and more than 21K infected occurred in Shanghai. Further tightening of coronavirus restrictions could lead to a decline in energy consumption in the Chinese economy.

Canadian macroeconomic statistics released late last week put moderate pressure on the positions of the Canadian currency, reflecting the expected slowdown in economic activity in the country. First of all, investors drew attention to a sharp slowdown in Retail Sales in February from 3.3% to 0.1%, while analysts had expected a decline of 0.1%. At the same time, Retail Sales excluding Automobiles over the same period slowed down only from 2.9% to 2.1%, while forecasts assumed zero dynamics.

Bollinger Bands in D1 chart show moderate growth. The price range expands, freeing a path to new local highs for the "bulls". MACD is growing, maintaining a relatively strong buy signal, being located above the signal line. Stochastic, having approached the level of "100", reversed into the horizontal plane, indicating risks of strongly overbought USD in the ultra-short term.

Resistance levels: 1.2750, 1.28, 1.2850, 1.29 | Support levels: 1.27, 1.265, 1.2600, 1.2538

[Solid ECN ✔️]

Quotes of USDJPY fell to a weekly low the day before, but today the yen is trying to regain its positions, despite the fact that the observed correction is largely associated with a slowdown in the growth of the US currency. Now the instrument is trading around 127.7.

Macroeconomic statistics from Japan turned out to be positive and supported the quotes of the national currency. The Unemployment Rate in the country in March fell to 2.6% from 2.7% a month earlier, despite the fact that analysts did not expect changes in the indicator. In turn, the Jobs / Applicants Ratio rose to 1.22 from the February value of 1.21, which coincided with analysts' forecasts. Also noteworthy is the Core CPI from the Bank of Japan, which stood at 1.1% in March, slightly up from 1.0% in the previous month. Investors are waiting for the results of the meeting of the Japanese monetary policy regulator, which will be held tomorrow. Prime Minister Fumio Kishida has already called for keeping the current monetary policy parameters and not raising interest rates to prevent a rapid fall in the yen.

In turn, the US dollar is holding at its highs, having exceeded the level of 102.000 in the USD Index the day before against the backdrop of disappointing data on the Conference Board Consumer Confidence Index for April, which fell to 107.3 points, despite preliminary estimates of 108.0 points. In addition, New Home Sales also corrected downward in March from 835K to 763K.

The instrument is trading in a global uptrend, correcting within the local Flag pattern. Technical indicators hold a steady buy signal, which is working out a slight correction: the range of EMA fluctuations on the Alligator indicator is expanding, and the histogram of the AO oscillator is high in the purchase zone.

Support levels: 126.94, 123.77 | Resistance levels: 128.96, 133