EURUSD bears retake control after five-week uptrend as US Durable Goods Orders loom

The financial markets dwindle early Friday as optimism at the equities’ front eased after Thursday’s strong US data that propelled hawkish Fed concerns and the US Dollar. Also challenging the previous positive bias were escalating geopolitical tensions.

Amid these plays, the US Dollar Index (DXY) stays on the way to reversing the previous day’s losses while EURUSD eyes to snap a five-week uptrend. Further, GBPUSD remains firmer on the week despite falling for the second consecutive day as we write, mainly due to the UK’s upbeat early-week releases. Moving on, USDJPY prints a three-day winning streak as softer Japan inflation growth challenges the Bank of Japan’s (BoJ) hawkish bias.

AUDUSD drops the most among the G10 currencies while performing its role as the risk barometer while NZDUSD stays depressed on downbeat New Zealand (NZ) trade data. Further, USDCAD bears the burden of the firmer US Dollar and softer Oil prices whereas Gold prices stay on the way to posting the biggest weekly losses since late 2023.

BTCUSD drops for the fourth consecutive day while bearing the burden of the upbeat US Dollar and uncertainties about the US SEC’s future regulations on cryptocurrencies. However, the ETHUSD braces for the biggest weekly rise since late August 2021, despite posting mild losses of late, after the US SEC surprisingly approved the spot ETH ETFs.

Following are the latest moves of the key assets:

• WTI Crude oil drops for the fifth consecutive day, printing mild losses near $76.80 at the latest.
• Gold prints mild gains around $2,336 to snap a three-day losing streak but stays on the way to posting the biggest weekly loss of 2024 by the press time.
• The USD Index stays defensive near the weekly high surrounding 105.00 after rising in the last four consecutive days.
• Wall Street closed in the red and weighed on the Asia-Pacific shares. That said, British and European shares post minor losses during the initial trading hour.
• BTCUSD and ETHUSD both print intraday losses near $67,100 and $3,690 as we write.

US Dollar stays on the way to weekly gains…

Strong prints of the US S&P Global PMIs for May joined softer US Jobless Claims to underpin the US Dollar’s run-up the previous day. As a result, the US Dollar Index (DXY) braces for the weekly gains, up for the fifth consecutive day by the press time. It should be noted, however, that the cautious mood ahead of today’s US Durable Goods Orders and a long weekend seems to restrict the Greenback’s latest moves.

On Thursday, Atlanta Fed President Raphael Bostic said, “We may have to be a little more patient about inflation's path to 2% before moving policy rate.” His comments helped propel the hawkish Fed bets suggesting not more than two rate cuts in 2024, versus three expected earlier. The same fuelled the US Dollar to reverse the previous weekly losses.

Apart from the upbeat US data and the Fed talks, the recent escalation in the geopolitical woes surrounding China and the Middle East also allows the Greenback to remain firmer. That said, Sky News Arabia turned down the hopes of a ceasefire in Gaza on Thursday while the Sino-American trade wars and China-Taiwan tensions also escalated in the last few days and challenged the market’s risk-on mood even as the equities are higher.

In addition to the upbeat US Dollar, the softer prints of the Eurozone Consumer Confidence for May, as well as the unimpressive comments from the European Central Bank (ECB) official, also exert downside pressure on the EURUSD prices. It should be observed that the EU PMI improved for May but failed to impress the Euro buyers. That said, the first readings of the EU Consumer Confidence for May dropped to -14.3 from -14.2 while ECB Governing Council member Francois Villeroy de Galhau said that the latest wage data was a bit above expectations but due to Germany, we should not over-interpret the data. The same suggests further rate cuts from the bloc’s central bank.

GBPUSD remains pressured for the second consecutive day on witnessing a downbeat UK Retail Sales outcome for April. The same joins the market’s lack of belief in the Bank of England’s (BoE) hawkish signals despite the recently upbeat British inflation data and the upbeat prints of the UK Consumer Confidence for May, -17 versus -18 prior, to weigh on the Cable. It should be observed that the BoE’s cancellation of all public statements ahead of July’s national elections also seems to challenge the Sterling Pound of late.

Japan’s National Consumer Price Index (CPI) eased to 2.5% YoY for April versus 2.7% prior while the National CPI ex Food, Energy also softened to 2.4% YoY from 2.9% previous readings. The declining trend in inflation raises bars for the Bank of Japan’s (BoJ) further rate hikes, which in turn underpins the USDJPY pair’s run-up, especially amid firmer yields and cautious optimism in the market.

AUDUSD dropped the most among the G10 currencies amid the comparatively more hawkish bias about the Fed than the Reserve Bank of Australia, as well as due to fears surrounding China. On the same line, NZDUSD also remains pressured even as the Reserve Bank of New Zealand (RBNZ) officials push back concerns about the rate cuts. It’s worth noting that downbeat New Zealand trade numbers for April exert additional downside pressure on the Kiwi pair.

USDCAD braces for the biggest weekly jump since early April as firmer US Dollar joins downbeat prices of Canada’s main export item, crude oil, to fuel the Loonie pair. That said, Crude Oil bears the burden of likely higher for longer rates in the West, as well as hopes of witnessing lesser supply cuts from the major producers.

Elsewhere, Gold price prepares for the biggest weekly loss of 2024 amid firmer US Dollar and grim concerns about China, one of the world’s biggest Gold customers.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

US data eyed ahead of long weekend…

Looking forward, US Durable Goods Orders for April and the final readings of the University of Michigan’s (UoM) Consumer Sentiment Index for May, as well as the Consumer Inflation Expectation for the said month, will direct intraday moves of the market. Additionally important will be comments from the second-tier central bankers from the US and Europe. It should be noted that the recent improvement in the US data raised expectations of hawkish Fed moves and propelled the US Dollar. Hence, any surprise disappointment from the scheduled data will need to be extreme to recall the Greenback bears otherwise a small pullback in the USD in case of the softer statistics is expected.

Apart from the US Durable Goods Orders and final readings of the UoM Consumer Sentiment Index, as well as the 5-year Consumer inflation expectations, the market is likely to witness a less active session ahead of a long weekend due to Monday’s holiday in the US and the UK. It should be noted, however, that next week’s US CB Consumer Confidence, Fed inflation, and China PMIs could offer active days during a holiday-shortened week. Also important is Friday’s meeting of US Treasury Secretary Janet Yellen and ECB President Christine Lagarde.

That said, the US Dollar is likely to remain firmer amid the recent increase in the hawkish Fed bets, as well as growing geopolitical tensions surrounding China. The same could exert downside pressure on the Gold and Crude Oil prices while challenging the previous advances of the major currencies and Antipodeans versus the Greenback.

May the trading luck be with you!