Weekly Currency trading forecast.
May-06, 2022, Weekly Currency trading forecast, by forex forum.
The British pound appears to regain composure but remains losing in the day, down 0.06%, after the Bank of England hiked rates by 25-bps on Thursday. At the time of writing, the GBP/USD is trading at 1.2352.
US employment figures came positive, and the BoE expects inflation to reach 10%
Global equities remain down during the North American session, while the US 10-year Treasury yield rose to a YTD high of around 3.131%. Albeit higher US yields, the greenback is giving back some earlier weekly gains, as portrayed by the US Dollar Index, a gauge of the buck’s value against a basket of six currencies, down 0.18%, sitting at 103.370.
Elsewhere, The dollar slipped against a basket of currencies on Friday after two volatile days as investors focused on how aggressive the Federal Reserve will be in hiking rates as it tackles rising inflation.
The dollar index hit a 20-year high overnight on safe haven demand, following a sharp stock selloff on Thursday driven by concerns about the Fed’s aggressive tightening and as European currencies weakened on worries about growth in the region.
It retraced some of these gains, however, as investors evaluated how much of the Fed’s hawkishness is already priced into the greenback, and as some analysts argued that inflation may be nearing a peak.
Data on Friday showed that U.S. job growth increased more than expected in April. Average hourly earnings increased 0.3% after advancing 0.5% in March. That lowered the year-on-year increase in wages to 5.5% from 5.6% in March.
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Moreover, the EURUSD is remaining near its lows going back to 2017.
However, the price is trying to stay above its shorter-term 200 hour moving average at 1.05516 and its 100 hour moving average at 1.05425. The current price is trading at 1.0577. The low price for the cycle reach 1.04703 last week.
On the other hand, Earlier this morning the Reserve Bank of Australia (RBA) released its monetary policy statement. Listed below are the important issues addressed by the central bank:
1. Inflation forecasts have been revised higher and is expected to remain elevated above the 2%-3% range.
2. No concern over weakening AUD — trading around similar levels pre-pandemic as well as the start of 2022.
3. Tight labor market with low unemployment levels.
Price action on the daily AUD/USD chart shows bears looking to test the 0.7000 psychological support zone for the third time since December 2021.
Short-term this does look probable with the dollar bid and the Chinese economy unlikely to make a swift turnaround. I will be looking for a confirmation break above 0.7183 (61.8% Fibonacci) to rethink the downside bias. If prices approach the 0.7183 resistance zone, this could be a great entry point for bears to re-enter.
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