Oil, EUR/USD Forecast: Two trades to watch

Oil struggles after mixed China data &  on Fed rate cut uncertainty

• Hawkish Fed commentary raises concerns about the demand outlook
• China's PPI fell further in April
• Oil tests rising trendline support

Oil prices are struggling, extending losses from Friday amid concerns over the fuel demand outlook.

Hawkish Fed chatter and mixed Chinese data overshadow concerns over the ongoing conflict in the Middle East.

Oil settled over $1.00 lower on Friday as Federal Reserve officials continued to support the view that interest rates need to remain high for longer to bring inflation back to the 2% target. A higher interest rate environment could result in slower growth, hurting the demand outlook.

This comes after oil prices fell last week following a rise in US gasoline and distillate inventories of the US driving season.

Meanwhile, data from China paints a mixed picture. While consumer price inflation increased more than expected, PP inflation fell for an 18th straight month, highlighting concerns over weak growth.

Still, oil prices could remain supported by expectations that the OPEC+ group could extend supply cuts into the second half of the year when they meet in June.

Oil forecast- technical analysis

Oil prices have fallen from the mid-April peak of 87.80, dropping below the 50 and 200 SMAs. At 78.00, the price is testing the 100 DMA and the rising trendline support dating back to the end of 2023.

Sellers, supported by the RSI below 50, will look to break below 78.00 to extend losses towards 75.50, a level that offered support on several occasions in mid-February, and 75.00, the round number.

Should the rising trendline support hold, buyers could look to retake the 200 DMA and psychological level at 80.00. Above here, 83.10, the mid-March high could offer resistance ahead of 85.00 round number.

EUR/USD inches higher with Fed speakers & US CPI data in focus

• Fed speakers are in focus amid a quiet calendar
• Fed -ECB divergence could limit the upside for the pair
• EUR/USD looks to test 200 SMA resistance around 1.08

EUR/USD dollar is holding steady at 1.0775 in quiet trade and amid a cautious market mood ahead of Wednesday's US inflation data.

US inflation data comes after weaker-than-expected jobless claims and softer-than-forecast US nonfarm payrolls raised expectations that the Fed could cut interest rates in September. However, hawkish commentary from Federal Reserve officials has also added to expectations that the Fed could keep interest rates high for longer, creating a mixed picture.

According to the Cleveland Nowcast forecast, US CPI is expected to rise 0.4% Month over Month in April, a level that is unlikely to encourage the Fed to cut rates soon.

Meanwhile,  U.S. consumer inflation expectations jumped, supporting the view that the Fed may leave rates high. The inflation outlook booked its highest level since November 2023 at 3.5% for the one year outlook.

Meanwhile, any gains in the EUR/USD could be limited as the ECB is expected to cut rates in June as inflation continues to ease back to the 2% level.

The eurozone economic calendar is quiet today. Attention will be on Fed speakers, and more hawkish commentary could limit the pair's upside.

EUR/USD forecast – technical analysis

EUR/USD has extended its recovery from 1.06 and is testing resistance at the 200 SMA, just below 1.08.

Supported by the RSI above 50, buyers will look to rise above this level to test 1.0825, the falling trendline resistance, and the 100 SMA. Above here, 1.0890, the April high, comes into play.

Should EUR/USD face rejection at the 200 SMA, the price could fall to retest support at 1.0725, last week’s low, ahead of 1.07, the round number and February low.