Solid ECN | Professional Market Analysis | *Video*

[SOLIDECN]

The Canadian currency continues to resist the active growth of the US dollar, receiving support after the publication of data on Gross Domestic Product (GDP). At the moment, the quotes of USDCAD are trading in a local uptrend at around 1.2869.

Thus, according to the statistics presented, Canada's economy grew by 1.1% in February, which is the best indicator since March 2021. Experts also note a significant strengthening of the services sectors (by 0.9%) and the production of goods (by 1.5%). Sixteen out of twenty industries grew in this period, and preliminary data show that in March, the country's GDP may continue its positive dynamics and add another 0.5% due to the recovery of the national tourism market, as coronavirus restrictions were significantly eased. More than one million tourists visited Canada in the middle of last month for the first time since the pandemic, according to the Canada Border Services Agency (CBSA). As for the quarterly GDP indicator, the preliminary forecast indicates a possible growth of 1.4%, which may also have a positive impact on the national currency.

Meanwhile, the US dollar is still holding above 103.000 in the USD Index after Friday's release of macroeconomic statistics. The Labor Cost Index in Q1 increased by 1.4% from 1.0%, which exceeded the 1.1% expected by analysts, and the Earnings index rose by 1.20%, having risen by 1.00% a quarter earlier, while the annual Personal Consumption Expenditure Index stood at 6.6 points in March, outperforming February's 6.3 points.

On the daily chart, the price continues to trade within a wide channel, actively approaching the resistance line. Technical indicators are holding a steady signal to open long positions: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram is forming new ascending bars trading in the buy zone.

Support levels: 1.2798, 1.2448 | Resistance levels: 1.2937, 1.31​

 

[SOLIDECN]

NZDUSD is correcting downwards to the July 2020 lows, under pressure from the rapidly strengthening US dollar ahead of the US Federal Reserve meeting this week, and is trading near 0.6427.

On the daily chart, the price continues to actively decline as part of another wave inside the global downward channel, and after overcoming the level of the initial trend of 61.8% of Fibonacci extension at 0.662, it is ready to break through the next support.
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On a four-hour timeframe, the quotes of the trading instrument approached the level of the basic trend of 100.0% of the Fibonacci extension at 0.6357, which also coincides with the support line of the global downward channel. Technical indicators confirm the high probability of breaking this level as well, strengthening their sell signal: the range of EMA fluctuations on the Alligator indicator expands in the direction of decline, and the histogram of the AO oscillator is forming new descending bars, being deep in the sales zone.

Support levels: 0.6357, 0.595 | Resistance levels: 0.662, 0.6976​

 

[SOLIDECN]

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Market in anticipation of an increase in interest rates in the US​

NZDUSD has been showing a downtrend since the end of last month, this week reaching its lowest levels since June 2020 around 0.6410. The pressure on the instrument is due to two main factors: the expectation of tightening of monetary policy by the US Federal Reserve and a decrease in prices for dairy products, which are New Zealand's main export goods.

On Wednesday, May 4, a meeting of the US Fed will be held, at which, as expected, the interest rate may be increased by 50 basis points, and it may also be announced that the regulator's balance sheet will be reduced, which will correct the record inflation growth in the country, that has reached forty-year high, and support the national currency. Many experts believe that a sharp increase in rates could lead to a recession in the US economy; moreover, according to preliminary data in Q1 2022, it has already decreased by 1.4%. However, US Fed officials hope that a significant decline will not happen and are ready to take risks, considering a significant increase in prices a more serious problem than a possible slowdown in economic development.

Meanwhile, milk prices have continued their downward correction since mid-March, shedding 3.6% despite a general increase in the cost of raw materials and food products. Today, the Global Dairy Trade will publish new statistics, and if the current trend continues, the New Zealand currency may be under significant pressure.

The price fell below 0.6470 (Murray [5/8], Fibonacci retracement 50.0%), which opens the way to 0.6347 (Murray [4/8]) and 0.6295 (Fibonacci retracement 61.8%). The key for the "bulls" seems to be the level of 0.6591 (Murray [6/8]), consolidation above which will allow the trading instrument to continue its upward movement to the area of 0.6714 (Murray [7/8], the center line of Bollinger Bands) and 0.6835 (Murray [8/8]). However, this option is less likely at the moment, as technical indicators show that the downtrend continues: Bollinger Bands are reversing downwards, MACD is increasing in the negative zone, and Stochastic is horizontal in the oversold zone.

Resistance levels: 0.6591, 0.6714, 0.6835 | Support levels: 0.6347, 0.6295​

 

[SOLIDECN]

European currency under pressure​

The euro continues to trade at extremely low levels against its major counterparts, with the exception of the US dollar. Quotes of EURGBP are currently being corrected around 0.8391.

Macroeconomic data published the day before were weak: the Manufacturing PMI of Italy fell in April to 54.5 points from 55.8 points last month, and the same indicator in Germany declined to 54.6 points from 56.9 points, and only in France the value remained unchanged at the level of 55.7 points. Thus, the Composite Manufacturing PMI for the EU countries amounted to 55.5 points, which coincided with the March statistics and signals a slowdown in the eurozone economy.

In turn, the British currency currently looks much more confident than the European one. Today, data on the UK Manufacturing PMI for April will be published, and if the actual data coincide with the analysts' forecast, which suggests that the figure will remain unchanged at 55.3 points, this may serve as additional support for the pound.

Meanwhile, the issue of energy security in the EU and the UK is becoming increasingly acute. At the end of last week, German Chancellor Olaf Scholz announced that the country would not use its veto power over the EU decision to declare an embargo on Russian oil. He also announced the readiness to stop the supply of Russian coal this summer and refuse to import oil until the end of the year against the backdrop of a serious reduction in the purchase of "blue fuel". Meanwhile, the UK Treasury Chancellor said at a meeting with representatives of energy companies that the government is considering the option of imposing an additional tax on enterprises that are not ready to invest in protecting energy security. With gas prices skyrocketing, market participants, in his opinion, should include funding for a package of measures for the design of alternative energy sources and reducing imports in their development plans, since bills for ordinary citizens have doubled in the last year alone and will continue to grow in the autumn, which led to to social tension. Thus, the UK Labor Party is calling for a lump-sum tax on excess profits earned by companies such as BP Plc. and Shell Plc.

The asset is trading within the global Diamond pattern, and after reaching the resistance line, it forms a reversal. Technical indicators are holding a global buy signal, which is starting to weaken: fast EMAs on the Alligator indicator started to converge, and the AO oscillator histogram is forming descending bars, being in the buy zone.

Support levels: 0.8359, 0.8251 | Resistance levels: 0.8463, 0.8587​

 

[SOLIDECN]

Turkish Ministry of Treasury and Finance predicts a quick decline in inflation.

Such a serious depreciation of the lira was due to an unprecedented rise in inflation, which, according to macroeconomic statistics, reached 61.1% in annual terms in March, a record high over the past 20 years. The negative dynamics is explained by the increase in the cost of energy resources due to the conduct of a special military operation in Ukraine and the problems that have arisen against this background in global supply chains. Minister of Treasury and Finance Nureddin Nebati assured that the regulator does not expect a long-term and permanent uptrend in consumer prices, and the measures taken by the authorities, including the normalization of tariffs for commodities and the stability of the exchange rate, will soon lead to their reduction. Nevertheless, the Central Bank of Turkey raised its inflation forecast for the end of the year from 23.2% to 42.8%, to which independent experts immediately reacted, suggesting that in the future the value could exceed 100.0%. The financial authorities of the country did not adjust the level of the key rate for the third month in a row, explaining such a soft policy by the danger of a commodity crisis due to the military conflict in Ukraine.

As for the state of the US economy, the growth of inflation here again causes serious concern for experts, since 8.5%, recorded in March, can be transformed into 9.0% already in April, and, according to expert polls, this is quite a likely scenario, despite attempts by the US Federal Reserve to stabilize the indicator by raising the interest rate to 1.00%. An aggressive approach to adjusting monetary policy parameters can be demonstrated tomorrow, which will provide local support to the dollar and create an opportunity for further growth of USDTRY.

Quotes of the trading instrument are rising as part of the next wave of growth, reaching a global annual high at around 14.9800. Technical indicators are holding a steady signal to open long positions: the fluctuation range of the Alligator indicator EMA is directed upwards, and the histogram of the AO oscillator is in the buy zone, close to the transition level.

Support levels: 14.66, 13.835 | Resistance levels: 14.985, 16.368​

 

[SOLIDECN]

GBPUSD, in anticipation of the meeting of the Bank of England
The pound shows flat trading dynamics against the US currency during the morning session on May 4, consolidating near the level of 1.2500. Traders are in no hurry to open new trading positions, preferring to wait for the publication of the US Fed Meeting Minutes. Analysts have little doubt that the key interest rate will be raised by 50 basis points at once; however, some of them allow for a correction by 75 basis points, citing record inflation over 40 years, as well as fairly stable trends in the labor market as arguments.

A meeting of the Bank of England will also take place this week, the result of which may be an increase in interest rates by 25 basis points to 1.00%, and by the end of 2022, experts predict an increase in the value in the range of 2–2.25%. Particular attention of traders will be riveted to the statement of the Governor of the regulator Andrew Bailey and his rhetoric regarding the steps of the financial authorities to curb inflationary pressure. Consumer prices in the United Kingdom are showing their fastest rate of growth in 30 years, already causing household incomes to plummet for the first time since 1956. It is estimated that electricity consumption for a typical British household this year will cost 620 pounds more than in 2021.

Macroeconomic statistics from the UK released yesterday provided additional support to GBP. The Manufacturing PMI from Markit in April rose from 55.3 to 55.8 points, which turned out to be better than the neutral forecasts of analysts, and the BRC Shop Price Index released today showed an acceleration year-on-year from 2.1 % to 2.7% in March, which coincided with analysts' estimates.

On the daily chart, Bollinger Bands are steadily declining. The price range is expanding, making way to new record lows for the "bears". MACD indicator is trying to reverse upwards and form a new buy signal (the histogram has to consolidate above the signal line). Stochastic, having shown corrective growth at the end of the last trading week is once again reversing into a horizontal plane, indicating an approximate balance of traders' sentiment in the ultra-short term.

Resistance levels: 1.25, 1.26, 1.2674, 1.28 | Support levels: 1.2400, 1.2334, 1.225, 1.22

 

[SOLIDECN]

The American currency shows flat trading dynamics in tandem with the Canadian dollar, consolidating near 1.2835. The day before, USDCAD showed an active decline, retreating from local highs since the end of December 2021, which was caused by investors fixing long positions in anticipation of the publication of the final protocols of the US Federal Reserve. The consolidated forecast assumes an increase in the interest rate by 50 basis points at once; in addition, the US regulator is likely to announce the start of a program to reduce its balance sheet in the amount of almost 9 trillion dollars. It is possible that officials may decide to take more active steps aimed at tightening monetary policy, as well as adjust their plans for the near future.

This week statistics on the national labor markets of the US and Canada traditional for the beginning of the month will be published. Both reports will appear on Friday and may have a significant impact on the dynamics of the trading instrument. Forecasts suggest that the US economy created about 400K jobs in April, which is slightly lower than the previous value of 431K, while the Unemployment Rate may fall from 3.6% to 3.5%. An increase in the Number of Employed in Canada by 55K people is expected, which is also worse than last month's data, when the figure was 72.5K; however, the Unemployment Rate may also correct from 5.3% to 5.2%.

On the daily chart, Bollinger Bands are steadily growing. The price range slightly expands from above, but remains too spacious for the current flat nature of trading. MACD is reversing into a descending plane, forming a weak sell signal (trying to consolidate below the signal line). Stochastic shows a more confident decline, signaling in favor of the development of the correctional decline in the ultra-short term.

Resistance levels: 1.2850, 1.2900, 1.2950, 1.3 | Support levels: 1.28, 1.275, 1.27, 1.265

 

[SOLIDECN]

The European currency shows ambiguous trading dynamics against the USD during the Asian session, consolidating near the 1.0516 mark.

The instrument is under pressure from high inflation, the growth of which in the eurozone in April was recorded at around 7.5%, a record high over the past 25 years. To support citizens and businesses against the backdrop of skyrocketing energy and food prices, the Italian government will allocate about 14B euros for social payments. According to Prime Minister Mario Draghi, the authorities will also provide a one-time financial assistance of 200 euros to low-income citizens (about 28M Italians will receive assistance), and will reduce taxes to market participants with energy-intensive production.

Meanwhile, data on the state of the German labor market turned out to be mixed: in April, the number of unemployed fell by 13K, although analysts expected a more significant value of -15K, and in March the figure was completely fixed at around -18K. Thus, the level of unemployment was 5.0%, which is fully in line with March statistics, but the overall rate for all eurozone countries rose to 6.8% against the forecast of 6.7%, which, however, is lower than 6.9% shown in the previous month. Relatively positive data did not lead to the continuation of a serious decline in euro quotes against the USD.

The situation may change as early as tonight, when the decision of the US Fede on the interest rate will be published. The consolidated forecast assumes an increase in the indicator by 50 basis points at once, in addition, the announcement of the start of a program to reduce the balance sheet of the department by a total of 9T dollars is expected. It is also worth noting that the statistics from JOLTS on the number of vacancies in the US labor market, which reflected the growth of the indicator to 11.549M from 11.344M a month earlier, remained almost completely ignored by the bidders.

The trading instrument is trading below the support line of the global downward channel, which indicates the strength of the downward pressure. Technical indicators hold a global sell signal: fast EMAs on the alligator indicator are below the signal line, and the AO oscillator histogram continues to fall in the sell zone, forming downward bars.

Support levels: 1.0466, 1.018 | Resistance levels: 1.0756, 1.1158​

 

[SOLIDECN]

The European currency shows mixed trading dynamics, consolidating near 1.0600 and local highs from April 27. The day before, EURUSD showed the strongest growth in the last few weeks, which was the market's reaction to the results of the two-day meeting of the US Federal Reserve.

As expected, the US regulator raised the interest rate by 50 basis points to the range of 0.75%–1.00% and announced the start of a quantitative tightening program, but it will not immediately reach the final volumes of purchases. From June 1, the Fed will start selling securities for a total of 47.5 billion dollars, after which it will increase the total monthly sales to 95 billion dollars within three months. The "hawks", who expected that the regulator would immediately bring purchases to the final amount, were somewhat disappointed by this decision. Additional pressure on the dollar was exerted by the rhetoric of the Chair of the US Federal Reserve, Jerome Powell, who said that the issue of raising the interest rate by 50 basis points would also be discussed at the next meetings. Thus, the risks that the indicator will be corrected at a more aggressive pace have almost completely disappeared.

In turn, pressure on the euro was exerted by frankly weak statistics on Retail Sales in the eurozone. In March, the indicator fell by 0.4% after rising by the same amount a month ago, and in annual terms, the pace slowed sharply from 5.2% to 0.8%, while analysts had expected an increase of 1.4%.

At the moment, eurozone household spending continues to grow strongly against the backdrop of rising gas and energy prices. Electricity rates, which nearly doubled in 2021, will add another 50% to the cost this year before a correction begins, according to World Bank statistics. The tightening of anti-Russian sanctions in connection with the escalation of the military conflict in Ukraine also contributes to the negative dynamics. The day before, the President of the European Commission, Ursula von der Leyen, announced the readiness to introduce a gradual embargo on crude oil for six months, and on oil products until the end of this year. If the EU countries fail to replace the volumes, the economy will face negative consequences: the already record inflation will continue to increase and it will become more difficult for companies to fulfill their obligations to customers, which will undoubtedly lead to stagnation.

On the daily chart, Bollinger Bands are moderately declining. The price range is slightly narrowing, staying spacious enough for the current activity level in the market. MACD is growing, maintaining a relatively strong buy signal, being located above the signal line. Stochastic is showing similar dynamics; however, the indicator line is rapidly approaching its highs, indicating the risks of overbought EUR in the ultra-short term.

Resistance levels: 1.0640, 1.069, 1.0726, 1.0767 | Support levels: 1.0576, 1.052, 1.047, 1.04

 

[SOLIDECN]

The New Zealand dollar shows mixed trading dynamics during the Asian session, consolidating near 0.653 and its local highs from April 27. On Wednesday, NZDUSD showed a sharp increase, which allowed the instrument to move away from record lows.

The investor activity was facilitated by the results of the meeting of the US Fed. As expected, the regulator raised interest rates by 50 basis points and also announced the start of a quantitative tightening program starting June 1. Initially, it is planned to buy securities for a total of 47.5 billion dollars, but then within three months the volume will be increased to 95 billion dollars. Thus, the US financial authorities decided not to rush to tighten monetary policy, which crossed out the premature conclusions of traders on the upcoming rate hikes by 75 basis points at once.

On the daily chart, Bollinger Bands are steadily declining. The price range is narrowing actively, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD has reversed to growth having formed a new buy signal (located above the signal line). Stochastic shows a more confident uptrend, but also points to growing risks of the New Zealand dollar being overbought in the nearest time intervals.

Resistance levels: 0.6567, 0.6600, 0.6650, 0.67 | Support levels: 0.6500, 0.6450, 0.64, 0.635

 

[SOLIDECN]

The New Zealand dollar shows mixed trading dynamics during the Asian session, consolidating near 0.6530 and its local highs from April 27. On Wednesday, NZDUSD showed a sharp increase, which allowed the instrument to move away from record lows.

The investor activity was facilitated by the results of the meeting of the US Fed. As expected, the regulator raised interest rates by 50 basis points and also announced the start of a quantitative tightening program starting June 1. Initially, it is planned to buy securities for a total of 47.5 billion dollars, but then within three months the volume will be increased to 95 billion dollars. Thus, the US financial authorities decided not to rush to tighten monetary policy, which crossed out the premature conclusions of traders on the upcoming rate hikes by 75 basis points at once.

An additional negative factor for the American currency was weak macroeconomic statistics from the US. The ADP report on employment in the private sector in April showed a drop in Nonfarm Payrolls from the previous 479 thousand to 247 thousand, while analysts expected a value of 395 thousand. The ISM Services PMI in April also showed an active decline from 58.3 to 57.1 points, while the market expected the index to rise to 58.5 points.

On the daily chart, Bollinger Bands are steadily declining. The price range is narrowing actively, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD has reversed to growth having formed a new buy signal (located above the signal line). Stochastic shows a more confident uptrend, but also points to growing risks of the New Zealand dollar being overbought in the nearest time intervals.

Resistance levels: 0.6567, 0.6600, 0.6650, 0.67 | Support levels: 0.6500, 0.6450, 0.64, 0.635

 

[SOLIDECN]

The US dollar shows moderate growth, developing a strong "bullish" momentum formed the day before and updating record highs since March 2020.

Market activity remains subdued again, as US investors prefer to wait for the April report on the national labor market to be published at the end of the week. However, after the increase in the interest rate of the US Federal Reserve, as well as rather restrained comments by the Chair of the regulator, Jerome Powell, who promised not to exceed a reasonable rate of increase in the value by 50 basis points, interest in macroeconomic publications has noticeably decreased. One way or another, the labor market is still one of the key indicators for the US Federal Reserve when making decisions on monetary policy. Forecasts for the current report are quite optimistic and suggest an increase in Nonfarm Payrolls by almost 400 thousand (against 431 thousand last month) and a decrease in the Unemployment Rate from 3.6% to 3.5%.

Last Monday, the head of the Swiss Federal Department of Economic Affairs, Education and Research Guy Parmelin admitted that in the event of an embargo of Russian oil and gas, the situation in the national economy would become much more complicated. Against this background, the Federal Council decided to create by the end of this year an organization to overcome crisis situations in the gas industry and possible shortages of “blue fuel”, as well as a tracking system that will control possible risks of electricity shortages at an early stage.

On the daily chart, Bollinger Bands are steadily growing. The price range is expanding but it fails to conform to the surge of “bullish” activity at the moment. MACD indicator is growing preserving a stable buy signal (located above the signal line). Stochastic, having retreated from its highs at the beginning of the week is again reversing into a horizontal plane, still indicating the risks of the instrument being overbought in the ultra-short term.

Resistance levels: 0.99, 0.9950, 1 | Support levels: 0.9847, 0.98, 0.977, 0.97​

 

[SOLIDECN]

The US dollar shows weak growth against the Japanese yen in Asian trading, again trying to consolidate above 130.50 and holding on to multi-year highs, updated at the end of last week. The instrument develops a "bullish" signal formed the day before and has already completely leveled the results of the decline last Wednesday, when the US currency came under pressure after the publication of the US Federal Reserve's decision on the interest rate. The regulator expectedly increased the indicator by 50 basis points at once, and also announced the launch of a quantitative tightening program in order to reduce its balance sheet by almost 9 trillion dollars.

On Friday, the yen is practically not supported by rather strong statistics on inflation in Japan: the Tokyo Consumer Price Index in April sharply accelerated from 1.3% to 2.5% YoY, which turned out to be significantly higher than market expectations at 1.9%. Excluding food and energy prices, inflation in the region rose by 0.8% after falling by 0.4% a month earlier, although preliminary estimates of experts assumed that the negative dynamics would remain at the level of –0.5%.

Meanwhile, the Governor of the Bank of Japan, Haruhiko Kuroda, announced the continuation of inflationary pressure on the national economy this year against the backdrop of a significant increase in prices for electricity, utilities and food. The country is dependent on Russian energy resources: oil imports are 3.6%, and liquefied natural gas imports amount to 8.8%, and, according to the country's Minister of Economy, Trade and Industry, Koichi Hagiuda, it will not be able to abruptly refuse supplies. According to the forecasts of the department, the negative dynamics of consumer prices will slow down somewhat by 2023, and until that moment, the country's financial authorities do not plan to intervene in the process and tighten monetary policy, since the inflation rate in Japan is much lower than in other developed countries, although preliminary data for April indicate its increase to 1.8% from 0.8%.

On the daily chart, Bollinger Bands demonstrate active ascending trading dynamics. The price range expands from above, freeing a path to new record highs for the "bulls". MACD indicator reversed to growth while trying to form a new buy signal (the histogram is about to consolidate above the signal line). Stochastic reacted only by a reversal in a horizontal plane, indicating an approximate balance of sentiment in the short and ultra-short term.

Resistance levels: 130.79, 131.24, 132, 133 | Support levels: 130.00, 129.39, 128.62, 127.5​

 

[SOLIDECN]

The British pound is trading ambiguously against the US currency during the morning session, consolidating near 1.2360. After a sharp decline in the trading instrument the day before, which led to an update of record lows since June 2020, trading participants are in no hurry to open new positions, preferring to take short profits.

Noticeable pressure on quotes was put by the results of the meeting of the Bank of England on monetary policy. As expected, the regulator raised the rate by 25 basis points and brought it to a 13-year high of 1.00% per annum in order to contain the maximum rate of inflation, which reached a 30-year high of around 7%. The decision was taken unanimously, which allows us to hope for the smooth implementation of further plans for a gradual tightening of monetary policy. By Q2 2023, it is planned to reach the rate level of 2.5%. The Bank also said that it expects consumer prices in the UK to rise by 10.25% this year (the highest since 1982) due to the Ukrainian crisis and coronavirus restrictions in China. Department officials have warned that prices are likely to rise faster than the incomes of many citizens, exacerbating the cost-of-living crisis. In general, according to the regulator, in the last quarter of the year, the country's economy may expect a recession. The latest comments have greatly disappointed investors and put pressure on the pound's position. In addition, officials have adjusted downward the forecast for GDP growth in 2023 from 1.25% to 1.00%.

On the daily chart, Bollinger Bands are steadily declining. The price range is expanding, making way to new record lows for the "bears". MACD has formed a new sell signal (the histogram is again below the signal line), and Stochastic is showing similar dynamics, reversing downwards approximately in the middle of its area.

Resistance levels: 1.2400, 1.2500, 1.2600, 1.2674 | Support levels: 1.2323, 1.2250, 1.2200, 1.215

 

[SOLIDECN]

On the daily chart, GBPJPY is correcting above 157.96 and 159 levels. On the 4H time frame, the pair violated the ascending trendline with a weak selling force. The breach could be a whipsaw. However, if the breakout is correct, the instrument will target 157.96 and 159 supports. This scenario remains operational as long as GBPJPY trades below the 25 daily moving average and the descending trendline.

On the other hand, the uptrend continues if the bulls breach the descending trendline and the 25 moving average. In this scenario, the pair will target 164.24 and 168.42.

 

[SOLIDECN]

The European currency loses value against the US dollar during the Asian session on May 9, testing the level of 1.05 for a breakdown. The EURUSD pair develops flat dynamics in the short term and remains around record lows, renewed on April 28.

Market sentiment does not have excessive demand for risky assets, which does not allow the trading instrument to change the trend. Also, the dollar is supported by the rather active course of the US Federal Reserve for further tightening of monetary policy, while the European Central Bank (ECB) is not ready for decisive action in this direction. The representatives of the European regulator are discussing the possible start of the interest rate hike cycle, despite the alarming rise in inflation in the region due to the military crisis around Ukraine. The timing of the possible start of tightening monetary policy is called the end of summer, but there have been no official statements on this subject so far.

The March macroeconomic statistics from Germany, published last Friday, put additional pressure on the currency positions. Thus, the volume of industrial production in the EU's largest economy fell by 3.9% after rising by 0.1% last month, although analysts expected a correction of only 1.0%. Experts believe that the risks of recession in the German and European economies continue to rise in the current situation.

Meanwhile, the EU intends to soon agree on the next sixth package of sanctions, which limits the import of petroleum products from the Russian Federation and blocks supplies by sea, but so far, a decision cannot be made due to the blocking of the Hungarian ambassador. It is noted that the governments of countries such as Hungary and Slovakia will have an extended deadline for the implementation of the oil embargo until the end of 2024, and the Czech Republic until June of the same year due to heavy dependence on Russian resources. Still, officials said they were already considering options such as reducing purchases from the Russian Federation.

On the daily chart, Bollinger bands show a moderate decline: the price range is narrowing, reflecting the emergence of ambiguous trading dynamics in the short term. MACD tries to reverse into the downward plane, keeping its previous buy signal and above the signal line. Stochastic shows a more active decline and is currently rapidly approaching its lows, indicating that the euro may become oversold in the ultra-short term.

Resistance levels: 1.0576, 1.064, 1.069, 1.0726 | Support levels: 1.05, 1.047, 1.04, 1.035

 

[SOLIDECN]

The New Zealand dollar continues to fall against the US currency after the release of poor macroeconomic data, currently trading around the level of 0.6345.

Thus, according to the publication of Statistics New Zealand, annual wage inflation for March, measured by the labor cost index, increased to 3.0% compared to 2.6% a month earlier and reached its high in the last 13 years. Statistics also recorded an increase in the cost of labor for enterprises, which ultimately leads to an increase in prices for manufactured products, contributing, in turn, to a slowdown in economic recovery. The increase in consumer prices on an annualized basis has already exceeded wage inflation, amounting to 6.9% for March against 3.0% for April and reflecting the declining ability to pay. Also, experts predict a weakening of the national currency due to a negative impact on the economy if demand in China decreases due to the quarantine lockdowns caused by a new wave of COVID-19. From May 5, Beijing residents must provide a negative test for coronavirus in public transport, and from May 1, the same rule applies in all public places.

The US currency continues to trade above 103.000 in the USD Index, and late last week, it received significant support after the release of data on US non-farm payrolls. Despite preliminary estimates by analysts who assumed a decrease in jobs by 391K from 424K a week earlier, the figure remained unchanged, which is a positive factor for the dollar dynamics. Meanwhile, manufacturing jobs rose by 55K from 43K, and private non-farm payrolls stood at 406K against a forecast of 385K. The unemployment rate remained flat at 3.6%, instead of an expected decline to 3 5%, while the average hourly wage slowed growth from 0.5% to 0.3%, allowing investors to hope to reduce inflation. At the moment, market participants are trying to assess how the US economy will be affected by the current tightening of monetary policy by the US Federal Reserve: will it withstand pressure or still go into recession.

The instrument's quotes are traded within the global downward channel, near the support line. Technical indicators keep a stable sell signal: fast EMAs on the Alligator indicator are below the signal line, and the AO oscillator histogram trades deep in the sell zone.

Support levels: 0.635, 0.61 | Resistance levels: 0.654, 0.68​

 

[SOLIDECN]

The New Zealand dollar shows uncertain growth during trading in Asia, being pressured by the strengthening US currency ahead of the release of key data on US consumer price indices on Wednesday at 14:30 (GMT+2) and retreating from record lows renewed at the opening of the session. In the first hours of trading, the instrument tried to consolidate below the psychological level of 0.6300, where it was in June 2020.

Last week, the only important news coming from New Zealand was the unemployment report, but it failed to affect the national currency dynamics significantly. Macroeconomic data also showed rising labor costs for enterprises, which is a catalyst for higher product prices, thus putting significant pressure on the economy. Consumer price growth exceeded wage inflation, amounting to 6.9% YoY for March against 3.0% for April. Negative dynamics reflect the declining solvency of the population. Today, significant support for the New Zealand dollar is provided by new macroeconomic statistics. Thus, the volume of retail sales using electronic payment cards from New Zealand for April increased by 7% MoM after a decrease of 1.3% and by 2.1% YoY after a negative correction of 0.5% for March.

Meanwhile, investors are concerned about the prospects for a recovery in the global economy against the background of the rapid tightening of their monetary policies by the world's central banks and, in particular, the increase in interest rates to offset the negative effect of high inflation. Also, traders are focused on the introduction of new restrictive measures in China due to an increase in the incidence of coronavirus infection, which also significantly undermines the process of global economic recovery.

Bollinger bands show a steady decline on the daily chart: the price range narrow, reflecting an attempt at the appearance of corrective dynamics in the short term. MACD falls below the signal line, keeping a relatively strong sell signal. Stochastic reached its lows and reversed into a horizontal plane, indicating that NZD may become oversold in the ultra-short term.

Resistance levels: 0.6400, 0.6450, 0.6500, 0.6567 | Support levels: 0.6300, 0.6250, 0.6200, 0.6150​

 

[SOLIDECN]

The yen continues to trade in a global downtrend against most of the world's competitors, and the meeting of the Bank of Japan on monetary policy that ended yesterday could not reverse this trend. Currently, the quotes of the USDJPY pair are correcting around the level of 130.44.

Thus, the regulator kept the interest rate at –0.10% and the redemption of bonds – at the same level without an upper limit. As for macroeconomic indicators, they are still holding in zero dynamics: April Services PMI amounted to 50.7 points, being higher than the March value of 50.5 points, while average wages remained at the previous 1.2%, despite the analysts' expectation of a decline of 0.9%.

Last month, the Japanese currency lost more than 5% against the US dollar, renewing the 20 years' low, against the background of the super-loose monetary policy of the Bank of Japan, as well as after a sharp increase in bond yields in the US and Europe and a rapid increase in tariffs on commodities goods that catalyzed the rise in import costs. The consumer price index in Tokyo rose from 1.3% to 2.5%, and the core value from 0.8% to 1.9%, reflecting the highest rates in the past seven years. Japan's official April inflation report will be released on May 20, but experts believe the rate will exceed its 2% target this year, hurting sales as companies pass on their costs to consumers.

Tokyo intends to maintain its stake in the Russian oil and gas projects Sakhalin-1 and Sakhalin-2. However, according to Prime Minister Fumio Kishida, imports of "black gold" will gradually decrease. The decision aims to minimize the negative impact of rising energy tariffs on the standard of living of the population and business activity.

The US currency continues to consolidate around 103.600 points in the USD Index without making sharp fluctuations ahead of the publication of data on the consumer price index in the US. For the first time in the past few quarters, analysts expect the inflation rate to fall to 8.1% from 8.5% a month earlier, which was also announced by the head of the Fed of Atlanta, Rafael Bostic, during his speech yesterday. The official said he sees no reason for an acceleration in the rate hike in June and believes that a 25 or 50 basis point adjustment is the most likely scenario for tightening monetary policy if inflation starts to slow down.

The USDJPY pair continues to trade within the global uptrend, slowing down its growth to break the year's high of 131.30. Technical indicators keep a stable buy signal: indicator Alligator's EMA fluctuations range remains wide, and the AO oscillator histogram remains high in the buy zone, forming ambiguous bars.

Support levels: 128.93, 125.14 | Resistance levels: 131.3, 135​

 

[SOLIDECN]

After the price consolidates above 1.2950 due to the strengthening of the US dollar after the May meeting of the US Federal Reserve, the USDCAD pair continues its upward trend with the target at 1.3157.

Last week, the US regulator raised the interest rate by 50 basis points to 1.00% and announced that from June 1, it would begin a phased reduction in its balance sheet, which will reach 95B dollars per month. In a follow-up commentary, Regulator Chief Jerome Powell dismissed reports that officials may accelerate the pace of monetary tightening going forward but noted the intention to continue hawkish policies to combat record consumer price increases that hurt both private consumers and the industry. According to the latest data, inflation in the US is 8.5%, but renewed statistics will be published tomorrow. Analysts predict that due to the timely actions of the US Federal Reserve, inflation will fall to 8.1% in annual terms. If the forecast is justified, it will allow the US dollar to continue its upward trend.​

As for the position of the Canadian dollar, its strengthening is hampered by negative statistics on the labor market published last Friday. According to official data, 15.3K new jobs were created in April, significantly lower than preliminary market estimates of 55.0K and the previous value of 72.5K. The unemployment rate remained at the same level of 5.2%. The Bank of Canada, at its next meeting, scheduled for June 1, will undoubtedly take into account indicators related to the state of the national labor market. If the negative dynamics continue, then the rate increase may not occur, or the value will be adjusted by a minimum amount, which may cause disappointment for investors and further depreciation of the national currency.
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The long-term trend is upwards. Today the USD/CAD pair is trying to consolidate above the resistance area of 1.2950–1.2885, after which the next upside target will be 1.3157. Long positions may be opened from 1.2885.

The medium-term trend is upwards. Last week, the price broke through the target zone 2 (1.2862–1.2842), and now the trading instrument is moving to the area of 1.3064–1.3043. The key trend support is shifting to 1.2836–1.2816, from where it is worth considering new long positions.

Resistance levels: 1.3157, 1.336 | Support levels: 1.2885, 1.266
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