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EUR/USD forecast, USD/JPY forecast: Two trades to watch

Article By: ,  Senior Market Analyst
April 28, 2023 8:39 AM

EUR/USD falls EZ GDP and German & US inflation data

 
  • Eurozone Q1 GDP is forecast to rise 0.2% QoQ
  • German inflation is set to slip to 7.3%
  • EUR/USD steadies above 1.10 ahead of key releases

EUR/USD is falling for a second straight session owing to a stronger U.S. dollar following yesterday's GDP and jobless claims data.

Today is a busy day on the economic calendar with preliminary inflation figures from France and Germany as well as GDP data for France, Germany, and the eurozone as a whole.

German inflation is expected slightly to 7.3% in April from 7.4% in March. Meanwhile, Eurozone Q1 GDP data is expected to show that the economy grew 0.2% QoQ, after stalling in Q4 2022.

Stronger growth and sticky inflation could fuel expectations of a 50 basis point rate hike from the ECB in the May meeting.

Investors will be listening closely to ECB president Cristina Lagarde when she speaks later today for clues regarding the ECB’s next move for rates. This week several ECB policymakers have said that the central bank will be weighing up a 25 basis point under 50 basis point rate hike at the next meeting.

The US dollar will look ahead to core PCE data,  which could also highlight how sticky inflation is.

Where next for EUR/USD?

 

EUR/USD has been guided higher by the 20 sma. However, the move higher appears to be running out of steam as the pair awaits the key data releases today.

Buyers will be looking for a rise above 1.1095, the 2023 high to extend gains towards 1.1185, the March 2022 high.

Immediate support can be seen at 1.0960, the 20 sma, which has been guiding the price higher over the past month. A break below here opens the door to 1.0920, last week’s low, and 1.0825 the confluence of the 50 sma and the rising trendline support.

 

USD/JPY breaks out after BoJ meeting & ahead of US core PCE

 
  • BoJ disappoints the hawks and maintain its ultra-lose policy
  • US core PCE expected to ease to 4.6% after GDP data boosted rate hike bets
  • USD/JPY breaks out above 135.00

USD/JPY it rising for a second straight day after the Bank of Japan stuck ultra-loose monetary policy keeping interest rates at -0.1% and maintaining the yield curve control.

BoJ governor Kazuo Ueda, the central bank, will start a review of the impact of the accommodative monetary policy, dashing any hopes of a quick hawkish surprise.

The dovish meeting overshadowed inflation data which showed that core consumer inflation in Tokyo rose at the fastest pace in 4 decades.

Meanwhile, the US dollar is moving higher ahead of the core PCE index, the Federal Reserve's preferred measure of inflation. Expectations are for core PCE to tick lower to 4.6% from 4.7%.

The data comes after GDP figures yesterday showed that economic growth in the US softened to 1.1% in Q1 annualised, down from 2.6%. However, the PCE sub-index was stronger, rising to 4.2%, and consumer spending rose 3.7%, indicating that there was room for further hikes from the Fed.

Today’s data is the last major release ahead of next week’s Federal Reserve rate decision where the central bank is expected to hike rates by 50 basis points.

Where next for USD/JPY?

 

USD/JPY has broken above resistance at 135.00, confirming a bullish breakout, this following a bounce from the 100 sma earlier in the week.

Buyers will look for a rise to resistance at 136.00 on its way to 137.90, the 2023 high.

Failure to hold above 135.00 could see bears test support at 133.90 the 50 sma ahead of 133.00, the weekly low. A break below here creates a lower low.

 

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