EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(April 27 - May 01, 2020)
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US Dollar Fundamental Outlook: Fx Traders Watch FOMC Meeting & Preliminary GDP Data As Currencies Keep Stable
Not as it matters much anymore, but the Fed will hold a regular meeting on Wednesday. Given that they already made a dozen of unscheduled decisions at unscheduled meetings over the past month or so, the FOMC is likely to leave monetary policy unchanged this time around.
They will, however, use the FOMC statement and the press conference to communicate their determination to support markets and the economy with all the tools they have. GDP data will also be released before the Fed on Wednesday. It’s difficult to say what an impact this release would have, though large deviations from consensus expectations would likely cause a market reaction (probably USD positive in a risk-off negative surprise).
The US lost over 26 million jobs in the past 5 weeks, which is likely to put the US unemployment rate somewhere around 15%. The unemployment claims have stopped moving the market the last few times, though the rate of job losses declined in the last two reports.
The Dollar continues to trade in ranges with the DXY Index spending the month of April between the 98.75 and 101 levels. The number one world reserve currency status will keep the US Dollar generally supported, though the ranges will also persist, so this is unlikely to be a clear uptrend or any clean trend for that matter.
Euro Fundamental Outlook: The ECB Meets Thursday As Markets Hope For A Unified EU
The ECB meets one day after the Fed, and similarly, no changes are likely from them at this meeting. The ECB board will probably want to wait for a couple of months and see the full impacts of the crisis and their 750 billion euros PEPP QE (Pandemic Emergency Purchase Program).
Also, flash (i.e. preliminary) GDP numbers from several EU countries, including France and Italy, will be released this week. In the meantime, the unity of the EU remains the key focus for investors and traders. While for now, things are under control, Italy and the southern nations need funds that the northern, fiscally stable countries are unwilling to provide for them. This is a key issue for the EU and the Euro currency going forward that may
become even more prevalent in the coming weeks and months, especially if the economic contraction is more severe than initially expected.
Considering the above, there is not much to support the EUR this environment, though it too as most of Fx, will likely remain in broader ranges for now.
EURUSD Technical Outlook:
EURUSD moved below the 1.08 level for a day but then quickly returned above, staying in this sort of 1.08 – 1.10 range. The 1.07 lows from late March remain the more important support, hence we can also say that this range is between 1.07 and 1.10.
Nothing happened last week to suggest EURUSD is moving out of these ranges, with 1.10 holding as key and psychological resistance to the upside. Perhaps the bulls can attack 1.10, but presuming it holds, range-trading opportunities from the short side may prove worthwhile on EURUSD in this environment.
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