EUR/USD, FTSE forecast: Two trades to watch

EUR/USD rises ahead of retail sale, Fed speakers

EUR/USD is rising, reversing losses from yesterday amid an improved market mood.

The euro is finding support from hawkish ECB commentary after Klaas Knot said that the central bank wasn’t done with hiking rates. ECB’s De Cos agreed, saying that eurozone inflation remains elevated and requires further hikes to tame.

Today attention is on eurozone retail sales, which are expected to fall -0.8% MoM in February after rising a smaller-than-expected 0.3% in January, highlighting the underlying weakness in consumer demand as prices remain high.

The USD is falling as investors come to terms with a 25 basis point hike in May, following strong US non-farm payroll data.

There is no high impacting US economic data today. Fed speakers could influence the greenback by shedding more light on the future direction of rate hikes.

Where next for the EUR/USD?

After running into resistance at 1.0970, EUR/USD has eased lower. However, the pair remains above the key moving averages on the daily chart and the RSI also supports further upside.

Buyers will look for a rise over 1.0970 to extend the bullish trend towards 1.10 the psychological level and 1.1030, the 2023 high.

Strong support can be seen at 1.0790 which should limit the downside. A break below here, the April low, sees the outlook for the bulls deteriorate. Below here, the 50 sma at 1.0730 comes into play.

FTSE rises amid improved mood and after softer Chinese inflation

The FTSE, along with its European peers, is heading higher as investors return from the extended weekend in an upbeat mood. The positive outlook is helped by weaker-than-expected inflation from China, which means that the PBOC has leeway for further stimulus to aid the economic recovery in the world’s second-largest economy.

BRC retail sales showed a rise of 5.1% in March, down slightly from 5.2%, but above 3 month average of 4.8% and the 12 month average of 2.6%. Like-for-like sales rose 4.9%. With consumer confidence edging higher and the Kings Coronation on the horizon the outlook is improving for retailers.

The economic calendar is quiet; investors will look toward the Spring meetings of the IMF and the World Bank, which are meeting this week. The IMF’s World Economic Outlook (WEO) is due to be released today and could drive sentiment.

Where next for the FTSE?

The FTSE has rebounded from the late March low of 7335, rising above the 200, 100 & 50 sma. The price has broken above some key resistance levels to test 7800 a monthly high. The RSI supports further upside while it remains out of the overbought territory.

Buyers could look towards resistance at 7860, the January high, ahead of 7985, the March high, ahead of 8000 psychological level, and 8040 the all-time high.

On the flip side, immediate support can be seen at 7760 the 50 sma, and 7730 a level that has offered support and resistance on several occasions over the past few months. It would take a fall below 7600/7615 support zone to negate the near-term uptrend.