- EUR/USD bulls are mauled by the bears and there could be more to go to the downside.
- The focus is on the US GDP for the day ahead.
At 1.0552, EUR/USD is around flat in the Tokyo open as the price consolidates below 50% mean reversion of the prior session sell-off. The pair, however, remains in the hands of the bears amid the Ukraine crisis and risk-off markets that favour the US dollar.
The greenback was a lot stronger versus its major trading partners mid-week as traders await the advance Gross Domestic Product reading for Q1 that will be released today along with weekly initial jobless claims, followed by Personal Income and Spending, the Michigan Sentiment Index on Friday and the Federal Reserve next week.
While Fed members remain in a quiet period before the May 3-4 Federal Open Market Committee meeting, the focus has turned towards the Chinese covid lockdowns and the Ukraine crisis with risks to eurozone economic growth.
Russia cut off gas supplies to parts of the region. Russia's Gazprom (GAZP) halted gas supplies to Poland and Bulgaria on Wednesday over their failure to pay in roubles, cranking up an economic war with Europe in response to Western sanctions imposed for Moscow's invasion of Ukraine.
Meanwhile, as China enacts lockdowns in a bid to stem the spread of COVID-19, Beijing has ramped up mass testing for COVID-19 and the combination of expectations of 50 basis points at the Fed's May 3-4 meeting is weighing in the single currency. WIRP suggests 50 bp hikes at the May 3-4 and June 14-15 meetings are fully priced in, with nearly 25% odds of a possible 75 bp move in June.
US dollar on fire
The dollar index against a basket of currencies (DXY) reached 103.282, the highest since Jan. 2017. ''We continue to target the March 2020 high near 103 but have gotten here much sooner than we expected,'' analysts at Brown Brothers Harriman said.
''As such, we have to start looking ahead as we think the strong dollar trend will remain in play through Q2 and into Q3. After 103, there's the December 2016 high near 103.65 but that's really not that far off either. After that, there really aren't any significant chart points until we get to the September 2002 high near 109.24.''
''This seems to be a bridge too far. Yes, we are dollar bulls but we don't think it can rally another 6-7% from current levels. Perhaps we can get up to 105 before topping out but that's really just a guess at this point, pure and simple.''
In contrast to the Fed and expectations in the markets, the European Central Bank's tightening path is a bit behind. Some ECB officials are calling for the next rate increase in July. Traders, in this respect, will be looking to EU inflation data that will be released on Friday.
EUR/USD technical analysis
From an hourly perspective, there is the potential for a downward continuation as per the correction meeting the 50% mean reversion mark, a bearish engulfing and drift to the downside again:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY jumps above 156.00 on BoJ's steady policy
USD/JPY has come under intense buying pressure, surging past 156.00 after the Bank of Japan kept the key rate unchanged but tweaked its policy statement. The BoJ maintained its fiscal year 2024 and 2025 core inflation forecasts, disappointing the Japanese Yen buyers.
AUD/USD consolidates gains above 0.6500 after Australian PPI data
AUD/USD is consolidating gains above 0.6500 in Asian trading on Friday. The pair capitalizes on an annual increase in Australian PPI data. Meanwhile, a softer US Dollar and improving market mood also underpin the Aussie ahead of the US PCE inflation data.
Gold price flatlines as traders look to US PCE Price Index for some meaningful impetus
Gold price lacks any firm intraday direction and is influenced by a combination of diverging forces. The weaker US GDP print and a rise in US inflation benefit the metal amid subdued USD demand. Hawkish Fed expectations cap the upside as traders await the release of the US PCE Price Index.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US economy: Slower growth with stronger inflation
The US Dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.