EURUSD licks its wounds at 12-day low ahead of key EU/US data

Strong yields weigh the risk appetite as market players await this week’s key data/events early Thursday. In doing so, the traders keep their US Dollar longs intact amid the hawkish Fed bias, which in turn challenges the other major currencies and commodities.

That said, the US Dollar Index (DXY) prepares for the second weekly gain after posting the biggest daily jump in a month. The same pushes EURUSD towards another weekly loss and makes the GBPUSD vulnerable to snap a two-week uptrend. Further, USDJPY pares weekly loss amid mixed concerns about the Bank of Japan’s (BoJ) next move.

AUDUSD and NZDUSD fail to cheer China’s stimulus measures and drop for the third consecutive day, bracing for a consecutive second weekly loss. Moving on, USDCAD posts a three-day winning streak while extending the previous weekly gains even as Crude Oil eyes the weekly positive despite falling in the last two days.

Gold remains pressured after snapping a three-day uptrend the previous day whereas equities bear the burden of strong yields and concerns suggesting fewer rate cuts from the Fed versus other major central banks.

Elsewhere, BTCUSD and ETHUSD lack clear directions while preparing for the first weekly loss in three even as crypto traders remain optimistic after the spot ETH ETF approvals. It should be observed that the on-chain data suggest a continuation of the Bitcoin bull markets.

Following are the latest moves of the key assets:

• WTI Crude oil holds lower ground near $79.00, mildly offered while extending the previous day’s losses.
• Gold drops to a three-week low before bouncing off $2,322, down 0.32% intraday near $2,330 at the latest.
• The USD Index remains defensive while staying on the way to posting weekly gains, making rounds to 105.15 by the press time.
• Wall Street closed in the red and weighed on the Asia-Pacific shares. British and European shares print minor losses during the initial trading hour.
• BTCUSD prints mild gains to snap a two-day losing streak near $68,000 but ETHUSD drops for the third consecutive day while declining to $3,750 as we write.

US Dollar traces firmer yields…

Growing conviction about the Federal Reserve’s (Fed) fewer rate cuts than previously estimated joined consolidation of the equity gains and geopolitical woes to underpin the US Dollar’s run-up the previous day. Also favoring the Greenback were upbeat prints of the second-tier data like the Richmond Fed Manufacturing Index. It’s worth noting that the mixed updates from the Fed Beige Book, suggesting modest US economic growth and uncertainty about the inflation conditions, failed to tame the US Dollar bulls.

On Thursday, the cautious mood ahead of today’s US Q1 GDP, Weekly Jobless Claims, and Personal Consumption Expenditure (PCE), as well as Friday’s Core PCE Price Index, also known as the Fed’s favorite inflation gauge, allowed the US Dollar to remain firmer.

Elsewhere, slightly downbeat inflation clues from Germany contrast with the nation’s print of upbeat GfK Consumer Sentiment to trouble the Euro traders. However, a confirmation of the European Central Bank’s (ECB) rate cut in June and doubts about the bloc’s economic health, versus the hawkish Fed bias, keep the EURUSD on the way to posting a second weekly loss.

GBPUSD also bears the burden of the firmer US Dollar and fails to justify hawkish remarks from the Bank of England (BoE) officials, especially while waiting for BoE Governor Andrew Bailey’s speech.

Further, Japanese policymakers keep showing readiness to alter the monetary policy and announce another Bank of Japan (BoJ) rate hike if needed. However, traders appear less convinced with the idea amid firmer yields and mixed inflation clues from the Asian major, which in turn keeps the USDJPY on a firmer footing despite snapping a two-day winning streak on Thursday.

China’s efforts to lift the economic activities, push back fears emanating from the reality sector, and remove some previous sanctions on Australia failed to inspire the AUDUSD buyers amid broad pessimism and dovish bias about the Reserve Bank of Australia (RBA). The same exerts downside pressure on the NZDUSD prices ahead of RBNZ Governor Adrian Orr’s speech. In addition to the all-around pessimism for the Antipodeans, downbeat prints of Oil prices, Canada’s main export item, and the hopes of witnessing more rate cuts from the Bank of Canada (BoC) propel the USDCAD prices.

Crude Oil marked daily losses despite witnessing a heavy draw in the weekly oil inventories, per the American Petroleum Institute (API). The reason could be linked to the US Dollar strength and the energy traders’ preparations for Sunday’s OPEC+ meeting wherein the global oil producers are likely to extend the supply cut agreement.

The firmer US Dollar, strong yields, and the mixed bias about China exert downside pressure on Gold and weigh on equities, as well as the crypto prices, even as hopes of witnessing lower rates in the future put a floor under the prices.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

A slew of EU/US statistics in the spotlight…

Although the US Dollar Index (DXY) grinds higher past 105.00 while preparing for another weekly gain, the Greenback bulls should wait for the top-tier data scheduled for release on Thursday and Friday before taking any big positions in favor of the US currency.

Among them, the second reading of the US Q1 2024 GDP, Weekly Initial Jobless Claims, Q1 Personal Consumption Expenditure (PCE) Price and Pending Home Sales for April will gain major attention on Thursday. On the other hand, Eurozone Consumer Confidence, Economic Sentiment Indicator and Unemployment Rate will entertain the Euro traders.

However, major attention will be given to Friday’s first estimations of the Eurozone inflation data for May and the US Core PCE Price Index. Also important will be China’s official PMI figures for the current month.

Apart from the catalysts mentioned above, Thursday’s speech from BoE Governor Andrew Bailey and Friday’s commentary from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr and Japan's inflation data will also be critical to determine the respective currency moves. Furthermore, the OPEC+ meeting scheduled for Sunday will also entertain the Oil traders on Monday.

It’s worth mentioning that the latest jump in the hawkish Fed bets and upbeat US Treasury bond yields, mainly backed by the clues about escalation in the US inflation and tighter employment market, keeps the US Dollar on the front foot. Hence, traders will seek signals confirming the present notion to defend the Greenback gains and weigh on the prices of EURUSD, Gold and Crude Oil. However, any negative surprises shouldn’t be taken lightly as the currency markets have recently shown a tendency to pare weekly moves during the later days.

May the trading luck be with you!