US CPI will lay the tempo for EURUSD, GBPUSD, and USDJPY. Ahead of the US CPI report, the US dollar could continue to be modestly robust.
US CPI will dictate the tempo for major currency pairs
The euro, the pound, and the yen continue to be the US dollar‘s principal trading partners. But given Friday’s positive employment report and the important US inflation data expected on Wednesday. It could continue to take a somewhat firmer stance.
The labor market appears to be still tight, according to jobs statistics reported on Friday. Which leaves room for another Fed rate rise next month. While nonfarm payroll growth of 236k in March fell short of expectations of 239k. The unemployment rate dropped from 3.6% in February to 3.5% in March. The steep decline in the Economic Surprise Index is a reflection of the depressing US economic indicators since March.
Money markets are betting on a further 25b rate increase
According to CME’s FedWatch tool, the probability of a 25-basis point rate hike in May has increased from 48% to 65%. The emphasis now switches to US CPI data due on Wednesday. Headline CPI is forecast to be 5.6% on-year vs. 5.5% in February, whereas core CPI increased by 0.4% vs. 0.5% in March.
Since the end of March, the overall macro picture has appeared to be more or less consistent everywhere. Whereas, figures have been typically less optimistic in places like the Euro region, the UK, and Japan. Core inflation, yet, is still persistently high, making it difficult for central banks to postpone rate increases.
Technical Perspectives
Rugged resistance for the euro at 1.10
According to the color-coded candlestick charts based on trend/momentum indicators, the daily period trend for the euro versus the dollar continues to be up. But until the CPI report, the February high of 1.1035 remains a formidable obstacle. Weaker data on inflation might make moving over 1.10 less difficult. On the negative side, there is a sizable support area between 1.0785 and 1.0875. Which includes the 240-minute charts’ 89-period moving average, and the 1.0785 bottoms from April 3. For the near-term trend upward to ease. The EURUSD would need to cross through the support zone.
GBP: A significant obstacle is ahead
GBPUSD is still burdened by a significant obstacle at the Dec top of 1.2450. However, as indicated by the modestly upward-sloping channel from last month, the immediate upswing is still in place. The 1.2275-1.2385 region has important support. Notably the bottom border of the channel, the 89-period pattern on the 240-minute graphs, and the 1.2275 low from April 3. As the support is still in place, the pull-up will be hard to diminish. On the plus side, as mentioned in a recent report, a break over 1.2450 would pave the way for a substantial upside in the GBPUSD.
USDJPY: Is a base being established, remains to be seen
The candlestick charts based on trend & momentum indicators show that the overall trend of USDJPY is still down. The 89-week MA and the base of the Ichimoku cloud on the weekly graphs are two recent areas. Where the pair seems to be finding support. On the upward side, an upward breakout over the present-day resistance at the high of 133.75 from April 3. This will suggest that the immediate negative pressure has temporarily subsided, opening the door to a wider range of 129-138.
