EUR/USD, GBP/USD top out and USD/JPY rises as US dollar recovers from one-year low
Outlook on EUR/USD, GBP/USD and USD/JPY as US dollar regains lost ground on resilient US economy and as strong earnings from US banks bolstered market expectations for another US rate hike.
EUR/USD comes off its 13-month high on profit taking
Last week’s EUR/USD 13-month high at $1.1075, due to a reduction in the Federal Reserve’s (Fed's) rate hike probabilities as US retail sales fell by a more than anticipated 1% in March versus a 0.2% fall in February and an expected drop of 0.4%, was followed by some profit taking to below the $1.10 mark on Friday.
The area around the $1.0973 early-April high acted as support on Monday morning ahead of the European Central Bank (ECB) President Christina Lagarde’s speech at 4pm British Summer Time (BST). Further minor support comes in at the $1.0929 late-March high and along the March-to-April uptrend line at $1.0918.
Resistance above the minor psychological $1.10 mark sits at the $1.1033 February peak ahead of last-week’s high at $1.1075. If bettered, the January 2022 low and early-March 2022 high at $1.1121 to $1.1122 would be in focus.
GBP/USD comes off ten-month high
GBP/USD’s climb to its ten-month high, made marginally above the early-April high at $1.2525, at $1.2546 was followed by a swift sell off as the US economy’s resilience and strong earnings from major US banks bolstered market expectations for another Fed interest rate hike, taking fed funds to 5.00%-5.25%, and helping the greenback recover from its one-year low.
The cross thus dipped back towards the $1.24 region below which support can be spotted at $1.2345. While it holds, renewed upside may be seen, depending on UK employment and inflation data out over the coming days.
Meanwhile, minor resistance still sits between the December and January highs at $1.2446 to $1.2448 while more significant resistance can be found between $1.2525 to $1.2546. This would need to be exceeded, for the next higher May 2022 peak at $1.2667 to be in focus. Were last Monday’s $1.2345 trough to be fallen through, however, the mid-February high and early-April low at $1.2275 to $1.227 would be eyed.
USD/JPY rallies on appreciating greenback
USD/JPY’s advance from its early-April low at ¥130.64 has once more taken the cross above its early-April high at ¥133.75 and also last week’s high at ¥134.04 on Monday morning amid a recovery in the US dollar prompted by another US rake hike likely to be seen at the next Federal Open Market Committee (FOMC) meeting.
A rise above Monday’s ¥134.21 intraday high could lead to the 15 March high at ¥135.11 being reached next.
Slips below the early-April ¥133.75 low may find support along the 55-day simple moving average (SMA) at ¥133.20.
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