London 18/05/2022

After six bullish weeks, the US is traversing a bearish week, under the reservation of course that we’re still in the middle of the current week. More than 1% is the loss of the dollar, as there is a better risk sentiment in the markets, compared with the previous weeks makes the investors favor risky assets, rather than the USD. This fact is confirmed by the fact of the uptrend of the major stock indices in the US & Europe.
A few hours ago, the inflation in Eurozone was announced in April at 7.4%, slightly lower than the previous month which was at 7.5% but the impact on the euro was almost piddly, given that it performs profits this week with the risk-on mood of the markets. Earlier today, the inflation in the UK was announced in April at the surreal rate of 9%, which is significantly higher than the 7% of March but more or less was expected by the markets. The head of the Bank of England Andrew Bailey had warned of a 2-digit inflation rate by the end of 2022. Another important announcement of the current week was the retail sales in the US in April at +0.9% and the US economy earned some credits regarding the growth and the stability.
Bullish is the current week so far for the oil prices while the gold performs a consolidation/sideways trend. Finally, we see a bullish recovery attempt at the bond yields as the US 10-year bond yield is trying to touch the 3% price level.
EURUSD (current price at 1.0526) is bullish this week, recovering from the 5.5-year lowest price at 1.0350 of the previous week. The improved sentiment in the markets has helped the risk-on assets, such as the euro.  Klaas Knot who is the current President of the Dutch central bank De Nederlandsche Bank (DNB) and a member of the Governing Council of the European Central Bank, said that a 0.50% rate hike is possible enough if the inflation insists on the following months. This was an extra boost for the euro although today is rather bearish, after the Eurozone’s inflation announcement. The current price zone is critical enough: above 1.0565 and especially above 1.0645 the bullish reaction is well-established but if the pair drops below 1.05 for good, the downtrend may return.

GBPUSD (current price at 1.2421) has performed more than 160 pips higher, compared to last week’s close price. As of today, the US dollar seems to recover, and the GBPUSD performs a mild pullback from its weekly high at 1.25. Yesterday, the unemployment rate in the UK for March was announced at 3.7%, mildly improved from its previous rate of 3.8% and the sterling found another support. The current week will close on Friday with the UK retail sales and we’ll have another indication about the status of the economy. Above 1.25 the bulls may take over and below 1.2260, the target of 1.20 becomes more realistic for the pair’s sellers.

USDJPY (current price at 128.62) is bearish this week, even if the bond yields rise. The weak USD of the last few days has affected the pair a lot but the Japanese currency also has reasons to be stronger. Earlier today, the Bank of Japan released the results for the Japanese GDP for the 1at quarter of 2022 and the -0.2% is far better than the markets’ expectations. On Friday, we will also learn the inflation in April and the JPY will be affected a lot because the current monetary policy of the Bank of Japan is based on the conjecture of low inflation. The most important support of the USDJPY is at 127 because below this level, a downtrend will start to be formed while any come-back above 130 may trigger more buyers to enter.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

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