GBP/USD holds firm, while US dollar weakens versus Aussie and Canadian dollars
The pound is holding steady against the dollar, but the greenback is struggling against the Aussie and the Loonie.
GBP/USD still hovering above $1.30
The pound has edged up this morning and has avoided pushing through recent lows with GBP/USD. Once again, the dollar seems to have the upper hand overall, as US policymakers begin to talk about the need for an even faster pace of rate increases to deal with inflation.
Supply chain worries coming out of China thanks to their strict lockdown policies threaten to intensify the rise in prices, and even previously firm dove Neel Kashkari is calling for a more aggressive response to inflationary pressures. Set against this, the Bank of England's (BoE’s) more cautious approach leaves the pound lacking support against the greenback in the medium term.
But for now, the pair continues to hold $1.3. In the event of a turn lower, $1.2854 and then $1.2773 come into view as downside targets. Meanwhile to the upside the price will look towards $1.314.
AUD/USD recovers for a second day
AUD/USD has bounced from the 50-day simple moving average (SMA) and is making firm moves to the upside after the decline of the last three weeks. Stronger commodity prices have helped the Aussie to make some headway against the US dollar, potentially marking a resumption of the upward moves from February and the first half of March.
This comes despite the talk by some Federal Open Market Committee (FOMC) members of an event faster pace of tightening. But the Australian economy continues to be a major beneficiary of rising commodity prices, and thus investors continue to scramble over one another to gain exposure to the economy.
Current price action does point towards the creation of a higher low over the past two days; the price hit the 50-day SMA on Monday and then moved higher yesterday, building on those gains today. After the pullback from the April higher high, a new higher low would reinforce the bullish view and bring $0.76 back into view.
USD/CAD risks a fresh downturn
The US dollar appears to be at risk of a new decline against the Loonie, as the April bounce fizzles out in the C$1.265 area. Here too the US dollar’s triumphal progress has been halted, and after the small bounce in early April USD/CAD looks set for further declines.
The oil weakness we saw yesterday provided some respite, but talk of further increases in the pace of US tightening is not having the same effect as in other currency pairs.
Having seen the price falter at the 50-day SMA and now the 200-day SMA, traders may expect an additional turn lower. This puts the C$1.245 lows from the beginning of April back into play, and potentially lower. Longs have a major set of hurdles around C$1.26 and higher to navigate if a more bullish view is to emerge.
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