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MTrading Team • 2024-04-12

EURUSD bears approach yearly low as ECB versus Fed divergence gains acceptance

EURUSD bears approach yearly low as ECB versus Fed divergence gains acceptance

Global markets remain jittery early Friday as hopes of witnessing lower rates outside the US join geopolitical woes. The same allows the US Dollar to reverse the previous weekly losses at the highest level in five months while EURUSD bears the burden of the European Central Bank’s (ECB) dovish halt.

Further, GBPUSD sellers attack the key support at a yearly low whereas USDJPY seesaws at the highest level since 1990. It's worth noting that AUDUSD and NZDUSD faded the previous day’s corrective bounce while USDCAD stays on the front foot at the yearly top.

Gold price again prints a record high, despite a firmer US Dollar, but the Crude oil prints mild gains to reverse the previous day’s losses while bracing for a five-week uptrend.

Elsewhere, BTCUSD and ETHUSD also ignore the US Dollar strength while bracing for a weekly gain amid optimism about the crypto markets ahead of top-tier events.

Wall Street closed mixed and the Asia-Pacific shares also edge lower as US Treasury bond yields grind higher amid hawkish Fed bets.

Following are the latest moves of the key assets:

  • Brent oil picks up bids to reverse the previous day’s losses around $90.85.
  • Gold price prints a fresh all-time high of nearly $2,395, making rounds to $2,392 at the latest.
  • The USD Index renews the yearly high near 105.55 during a three-day uptrend.
  • Wall Street closed mixed while the Asia-Pacific stocks edged lower. Further, European and UK shares lack clear directions during the initial trading hour.
  • BTCUSD and ETHUSD both stay firmer with mild gains to around $70,900 and $3,530 at the latest.
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US Dollar stays firmer on hawkish Fed bets, Euro drops on ECB’s dovish halt…

An upbeat print of the US Core PPI YoY, lower Initial Jobless Claims, and hawkish Fed talks allowed the US Dollar Index (DXY) to refresh the yearly high. Among the Federal Reserve (Fed) officials, Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin gained major attention. Also, New York President John Williams’ upward forecast of inflation and the International Monetary Fund (IMF) Managing Director Kristalina Georgieva’s comments suggesting an indecision about the Fed rate cuts, despite citing the odds favoring the rate cut in 2024, underpin the US Dollar’s upside.

Talking about the geopolitical woes, China’s countermeasures against two US enterprises for selling arms to Taiwan joined the Russian attack on the Ukrainian energy facility to highlight market fears. On the same line were news suggesting US President Biden’s warning to China over the dragon nation’s attack on Philippines' vessels.

It’s worth noting that the ECB held its benchmark rates unchanged during Thursday’s monetary policy but comments from President Christine Lagarde signal a sooner rate cut, hopefully in June, which in turn drowned the EURUSD toward the yearly low marked in February. Recently adding strength to the Euro’s fall is the downbeat prints of German inflation data and the upbeat performance of the US Treasury bond yields.

GBPUSD fails to cheer firmer prints of the UK Manufacturing Production and Industrial Production amid softer monthly GDP. Also weighing on the Cable pair is the market’s lack of belief in the Bank of England (BoE) officials’ hawkish tone. Further, USDJPY lacks clear directions as Japan’s downbeat Industrial Production and the Bank of Japan’s (BoJ) quarterly survey suggest pessimism about inflation conditions in Japan favor the Yen pair buyers at the multi-year high but upbeat yields and verbal intervention from the Japanese officials cap the upside moves.

On a different page, NZDUSD remains depressed after New Zealand’s Manufacturing PMI dropped for 13 consecutive months and data about the Food Price Inflation and Electronic Card Retail Sales slid in March. AUDUSD also bears the burden of the firmer US Dollar to reverse the previous day’s corrective bounce, especially amid downbeat China concerns and the geopolitical woes, not to forget the Reserve Bank of Australia’s (RBA) dovish bias.

Gold price remains firmer at the highest level on record amid the market’s increasing confidence in the yellow metal during uncertain times in the geopolitical world and the hopes of witnessing lower rates. That said, crude oil also picks up bids to reverse Thursday’s losses, bracing for the weekly gains, amid hopes of witnessing higher energy demand and a supply crunch due to the fears emanating from Russia, China, and the Middle East.

  • Strong buy: USDCAD, USDJPY, US Dollar
  • Strong sell: AUDUSD, NZDUSD, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

The last straw of data…

Looking forward, Indian inflation and industrial production data will precede the preliminary readings of the UoM Consumer Sentiment Index (CSI) and a slew of speeches from Fed officials to entertain the market players. However, a major market move isn’t expected as the most scheduled data suggest a continuation of the US Dollar’s upside, which in turn should challenge the recent run-up in the commodity prices and the Antipodeans. However, Gold prices may remain firmer as traders’ confidence in the yellow metal amid uncertain times.

May the trading luck be with you!