EUR/USD, Oil Forecast: Two trades to watch

EUR/USD inches higher after German confidence improves modestly

GFK consumer confidence rises to -27.4 from -28.8
Willingness to spend falls
US durable goods orders due

EUR/USD is heading higher for a second day amid U.S. dollar weakness and after improving German consumer confidence data.

GFK German consumer confidence ticked higher to -27.4 in April, up from -28.8 and ahead of forecasts of -27.9. The figure pointed to a slow recovery in early April amid real income growth but ongoing uncertainty about the German economic outlook—meanwhile, willingness to spend slipped to -15.3, highlighting consumer concerns about the economy. A declining willingness to spend could further dampen demand-driven inflationary pressures and keep the ECB on track to cut interest rates in the June meeting.

Attention will now turn to ECB chief economist Philip Lane, who is due to speak. Yesterday, he acknowledged a slowing wage growth in the region. ECB President Christine Lagarde had highlighted strong wage growth as a hurdle to cutting interest rates. His comment suggests that the central bank is on track to cut rates soon, which could limit gains in the EUR.

Meanwhile, the US dollar is falling against its major pairs after rallying 1% last week and reaching a monthly high. Overnight Atlanta Fed president Raphael Bostic reiterated that the Fed should cut interest rates once in 2024. However, the hawkish comment was offset by Fed Goolsbee, who said he still sees three rate cuts this year.

Attention will move to US durable goods data which is expected to rise 1% after falling over 6% in the previous month. Data highlighting the resilience of the US economy could raise questions about the Fed's ability to cut rates three times this year and boost the US dollar.

However, this week, the main show in town is on Friday -US core PCE, the Fed's preferred gauge for inflation, which could give further clues over the future path for interest rates.

EUR/USD forecast – technical analysis

EUR/USD recovered from support of 1.08 and is testing resistance at 1.0840, the 200 DMA. Buyers need a meaningful rise above this level to pave the way towards 1.09, the February high, and 1.0930, last week’s high. Above here 1.10, the psychological level comes into focus.

On the flip side, should sellers start to dominate again, support can be seen at 1.08, the weekly low. If the bulls fail to defend this level, it could result in a more significant decline to 1.0725 and 1.07, the March low.

Oil holds yesterday’s gains, API data due

Oil rose 2% yesterday on oil supply concerns
Russia ordered a 9 million bpd output cut
API stockpile data is due after falling 1.5M barrels last week
Oil trades in a rising channel

Oil prices are holding steady after rising 2% in the previous session after gaining momentum on a softer U.S. dollar and amid supply concerns.

Escalating geopolitical tensions in the Middle East combined with attacks on energy facilities in Russia and Ukraine have escalated concerns over global oil supplies boosting oil prices.

According to Goldman Sachs recent attacks by Ukraine on Russian energy infrastructure has resulted in around 900,000 barrels per day capacity coming offline which could last for weeks.

Meanwhile Russia's government ordered companies to cut output in Q2 to meet a 9 million barrel per day target comply with OPEC+ pledges.

Apart from concerns over supply expectations that the Federal Reserve will cut interest rates on multiple occasions this year is has also lifted oil prices. Low interest rates typically boost economic growth which leads to more demand, lifting oil prices.

The market will look to Friday's core PCE data for further clues over the Fed's ability to cut interest rates three times this year.

Looking ahead, today attention will be on API crude oil stockpile data after a 1.5 million barrel draw in the previous week.

Oil forecast – technical analysis

Oil trades in a rising channel and above the 200 DMA, which supports the medium-term uptrend. Buyers will look for a rise above 83.10, the March high, to extend gains toward 84.80, the August high, and 85.100, the round number.

Conversely, support can be seen at 80.00, the psychological level. A break below here exposes the 200 SMA at 78.30. A break below here could negate the near-term uptrend and bring 75.50, the mid-February low, into focus.

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