USD vs. Euro, Pound, Yen – Pricing Structures
- data-heavy week is approaching, which could keep the US dollar contained before the Easter break.
- Limited information now available from comparative monetary forecasts and economic growth rates.
- Which key levels should be monitored in the EUR/USD, GBP/USD, and USD/JPY?
In the days leading up to Easter, key US dollar currency pairs may find themselves trading in a range as investors await data on global manufacturing activity (including the US ISM report due today) and US payrolls (due Friday).
Inflation in the United States slowed in February, according to data released on Friday, but maybe not enough to prompt a US Federal Reserve rate pause in the near future. Headline inflation in the Euro area fell by the most on record in March, but rising core inflation has kept the possibility of additional monetary tightening by the European Central Bank alive. The Bank of England has left the door ajar for future rate hikes, and the incoming governor of the Bank of Japan will be widely observed at the upcoming meeting at the end of April.
In addition, since February, US macro indicators have been better than projected. (Economic Surprise Index is at a one-year high). Macroeconomic statistics from the UK have been pleasantly surprising in the last few weeks, but data from the Euro area and Japan have been less optimistic since February and March, respectively.
Forex Daily Chart: EUR/USD
Limits on further EUR/USD gains
As the pair nears the high from February, 1.1035, it faces formidable resistance and the daily charts show that progress has slowed in recent sessions. The low of 1.0710 on March 24 should provide first support. A violation of this level would indicate the formation of a modest double top (the late March highs), increasing the likelihood of a decline to the March low of 1.0515. The Euro/Dollar exchange rate is expected to maintain its previous stable range of 1.05-1.10 for the foreseeable future.As mentioned in the previous update, the higher-top-higher-bottom sequence (uptrend) from late 2022 remains unbroken as of last month’s comeback from around a crucial floor around the January low of 1.0480.
Daily Chart of the Pound and the Dollar
The challenge at 1.2450 for the GBP/USD
The fact that the GBP/USD pair was unable to drop below the 1.1830 support level last month is supportive of the continuation of the rise from late 2022. See “British Pound Price Setup: GBP/USD, EUR/GBP, and JPY,” published on March 29 for more discussion. However, the rise from early March appears to be losing some speed as the pair has encountered a formidable barrier at the December high of 1.2450. Nonetheless, the buffer near the low of late March (about 1.2200) could limit the extent of the decline. Any move that pushes the GBP/USD rate above 1.2450, as mentioned in the last update, might pave the way for significant gains.
Dollar/Yen Daily Chart
Dollar/Yen: Probing a Key Support Line
The 89-day moving average, the daily Ichimoku cloud, and the late-March peak of 133.00 are all providing resistance for the USD/JPY pair. Although the larger tendency is still down for the time being (See “Japanese Yen Price Setup: USD/JPY, AUD/JPY, EUR/JPY”, published on March 27), a breakout over the converged barrier could reduce some of the near-term negative risks and increase the likelihood of a wide range of 127-138 emerging in the near future. Additionally, if the price is able to break above the converged hurdle, it may be able to head for the 200-day moving average, which coincides with the high from March at approximately 138.00.
