GBP/USD Weekly Forecast (4th April 2022 – 8th April 2022)

Fundamental view:

The British pound dropped against the US dollar during the trading course of the week. Monetary policy divergence between the Fed and the BoE weighed heavily on the cable. BOE Governor Andrew Bailey turned down the rate hike expectation of May. On Monday, Bailey said the ‘situation is very volatile’ when asked about the May rate decision. On contrary, hawkish comments from the slew of Fed policymakers had already ramped up 50 bps rate rise expectations next month. Moreover, a lack of progress in the Russia- Ukraine crisis and global growth concerns also weigh on the pound.

The US economy gained 431,000 jobs in April, which is far higher than 80,000 expected, moreover, upward revisions, higher wages and a low unemployment rate of 3.6%  keeps the Fed on track for aggressive monetary policy, which favored the greenback.

In this week, US Goods Trade Balance on 28th March and UK GDP quarterly report on 31st March favored the bullish trend whereas US ADP Nonfarm Employment Change on 30th March, UK Markit/CIPS Manufacturing PMI and Nonfarm Payrolls report on 1st April favored the bearish trend for the pair.

The major economic events deciding the movement of the pair in the next week are BoE Governor Bailey Speech at Apr 04, US ISM Non-Manufacturing PMI, Fed Governor Brainard Speech at Apr 05, EIA Crude Oil Stocks Change, FOMC Minutes at Apr 06, UK Labour Productivity yearly report, US Initial Jobless Claims at Apr 07 and US WASDE Report at Apr 08.

GBP/USD Weekly outlook:

Technical View:

Last week’s high was 0.86% lower than the previous week. Maintaining high at 1.3183 and low at 1.3051 showed a movement of 132 pips.

In the upcoming week we expect GBP/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside.  Should 1.3047 proves to be unreliable support then the pair may fall further to 1.2983 and 1.2915 respectively whereas a solid breakout above 1.3179 will open a clear path upward to 1.3247 and then will further raise up to 1.3311. Chart formation of symmetrical triangle breakout downside in H4 chart favors prospects of a bearish trend. Three inside down pattern formation escalates the expectation for a bearish trend.

Preference
Sell: 1.3110 target at 1.2984 and stop loss at 1.3184

 

Alternate Scenario
Buy: 1.3184 target at 1.3310 and stop loss at 1.3110

EUR/USD Weekly Forecast (4th April 2022 – 8th April 2022)

Fundamental view:

Euro traded high during the first half of the week but later gave its gains against the greenback. The hopes for a ceasefire and higher eurozone inflation helped the Euro. The German’s report  showed inflation were up 7.3% YoY in March and the news from Europe’s largest economy and also Spain – which has near 10% yearly inflation has prompted European Central Bank members to mull raising rates this year. This has favored the Euro. 

Russia- Ukraine war is the key catalyst in directing the quote. Moscow may still cut the bloc off from Russian energy. If both sides finally agree on a ceasefire, it would help the currency to climb higher although investors are aware that any deal is fragile.  Meanwhile Talking on Fed, markets continue pricing a high chance of a 50 bps move in May. The US economy gained 431,000 jobs in April, which is far higher than 80,000 expected, moreover, upward revisions, higher wages and a low unemployment rate of 3.6% keeps the Fed on track for aggressive monetary policy, which favored the greenback.

In this week, ADP Nonfarm Employment change on 30th March, Eurozone Markit Manufacturing PMI and Nonfarm Payrolls on 1st April underpinned bearish trend whereas US CB Consumer Confidence Index on 29th March and Eurozone CPI monthly report on 30th March underpinned the bullish trend for the pair.

The major economic events deciding the movement of the pair in the next week are Eurozone Economic and Financial Affairs Council Meeting, US ISM Non-Manufacturing PMI, Fed Governor Brainard Speech at Apr 05, EIA Crude Oil Stocks Change, FOMC Minutes at Apr 06, Eurozone Retail Sales monthly report, ECB Monetary Policy Meeting Accounts, US Initial Jobless Claims at Apr 07 and US WASDE Report at Apr 08.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 1.04% higher than the previous week. Maintaining high at 1.1185 and low at 1.0944 showed a movement of 241 pips.

In the upcoming week we expect EUR/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. Should 1.0927 proves to be unreliable support then the pair may fall further to 1.0815 and 1.0686 respectively whereas a solid breakout above 1.1168 will open a clear path upward to 1.1297 and then will further raise up to 1.1409. Chart formation of a rising wedge pattern breakout in H4 chart sets prospects for a bearish trend. Bearish Harami formation in H4 chart escalates the expectation for a bearish trend.

Preference
Sell: 1.1035 target at 1.0816 and stop loss at 1.1172

 

Alternate Scenario
Buy: 1.1172 target at 1.1408 and stop loss at 1.1035

Dollar is up ahead of NFP

  • The greenback is favored by rising odds of a 50 bps rate hike by the Fed
  • BOJ’s concern over rising commodity prices weighs on yen
  • Japan Finance Minister’s comments also underpins Yen bears.

 

The US dollar climbed higher against its yen counterpart on Friday trading session ahead of a key U.S. jobs report that could help the Fed to decide on whether to order an interest rate hike of up to 50 basis-points next month.

Experts predict that Friday’s Labor Department report is about to come at 80 K , with the unemployment rate ticking lower while wage growth accelerated.

The FOMC (Federal Open Market Committee) is about to decide policy on May 5, Meanwhile, CME Group’s FedWatch tool is showing 71% odds of a half-point rate increase, and to follow on from a quarter point hike on March 16, when the Fed embarked on its tightening cycle.

The greenback also gains strength due to its safe haven status with peace talks between Russia and Ukraine getting stumbled, although they are set to resume later on Friday.

On the other hand, The elevated prices of base metals, food items, and energy amid Russia’s invasion of Ukraine have led to a devastating impact on the Japanese yen. Japan which is a major importer of commodities is severely effected by the wider fiscal deficit.

Mitsuhiro Furusawa, who was the head of currency intervention at Japan’s Ministry of Finance, has shown worries over the vulnerable yen citing that it is not good for the yen to keep dropping as it reflects Japan’s competitiveness.

Moreover, Yen bears were also underpinned by the Japanese Finance Minister’s comments that the Bank of Japan does not target foreign exchange rates.

USD/JPY 4 Hour chart:

Support: 121.15 (S1), 120.63 (S2), 119.98 (S3).

Resistance: 122.32 (R1), 122.97 (R2), 123.50 (R3).

The rising commodities prices amidst other catalysts weighs on yen, we expect a bullish trend for USD/JPY.

Rising Bets of rate hike favors Euro

  • The hopes that war in Ukraine might be entering in to a new de-escalating phase favors the Euro.
  • Rising bets over an interest rate hike by the ECB underpins the Euro bulls.
  • ECB’s Lagarde says Cost of living in Europe will Spiral as Ukraine war drags on.

 

The Euro edged higher against the US dollar on Thursday, with the hopes that the war in Ukraine might be entering a new de-escalating phase and amidst rising bets on the rate hike from ECB for the first time since the Covid-19 pandemic.

At peace talks in Istanbul, Russia said it would curtail operations near Kyiv and the northern city of Chernihiv to build trust, though Ukraine and its Western allies dismissed Russia’s pledge as a ploy to stem losses and prepare for other attacks.

President Zelenskyy said Ukrainian forces are preparing for new Russian attacks in the east of the country as Moscow builds up its troops there after suffering setbacks near the capital Kyiv.

European Central Bank (ECB)’s policymakers are pressurized to elevate the interest rate due to rising inflation in Eurozone. Meanwhile, German Consumer Price Index (CPI) portrays that German annual inflation could climb to 7.3%, which is the highest print in more than four decades. Thus showing an interest rate hike by the ECB sooner rather than later. 

European Central Bank chief Christine Lagarde warned Wednesday that a prolonged conflict in Ukraine would spur the energy prices and the cost of living higher for Europeans During a visit to Cyprus, Lagarde said Russia’s invasion of Ukraine last month had brought “considerable uncertainty” to the outlook for European Union economies.

“The economic impact of the war is best captured by what economists call a ‘supply shock’ which simultaneously pushes up inflation and reduces growth,” she told an event in Nicosia.

Moving on, Investors will keep an eye on the EU’s unemployment data which is expected to drop at 6.7% against the prior record of 6.8% While, the US docket will report Initial Jobless Claims, which are likely to surge by 197k against the previous addition of 187k.

EUR/USD 4 Hour Chart:

Support: 1.1104 (S1), 1.1052 (S2), 1.1019 (S3).

Resistance: 1.1190 (R1), 1.1223 (R2), 1.1276 (R3).

The expectation of rate hike and hopes of Ukraine war entering to new de-escalating phase favors the Euro; we expect a bullish trend for EUR/USD.