Two trades to watch: EUR/USD, oil
Fiona Cincotta May 27, 2022 8:26 AM
EURUSD rises ahead of US inflation data. Oil steadies at a two-month high.
EURUSD rises ahead of US inflation data
EUR/USD jumped 0.4% yesterday after weak US data cooled fears of a more aggressive Federal Reserve.
Today the pair trades near a monthly high on shrinking Fed- ECB divergence. The USD trades down at a five-week low.
Attention now shifts to ECB Lane’s speech which comes after a week of hawkish commentary from ECB officials. Rate hikes are now expected across the summer and several policymakers support a 50 basis point hike if needed.
US PCE inflation data could pull the USD lower if it shows inflation cooling to 4.9%, down from 5.2% as expected.
Where next for EURUSD?
EURUSD is extending its rebound from 1.0350 the 2022 low. The recapturing of the 20 sma and the bullish RSI keeps buyers optimistic of further upside.
Buyers need to push over 1.0750 the 50 sma and April 14 low in order to continue the bullish trend towards 1.0940 the April 21 high.
On the flip side, support can be seen at 1.0640 the May 5 high, with a break below here exposing the 20 sma at 1.0570. A break below here will bring 1.0460 the May 19 low into play.
Oil steadies at a two-month high
Oil prices are holding steady after jumping in the previous session but are still on track to book a weekly gain. The fifth straight week of gains.
Tight supply and an improving outlook for demand is driving the price higher.
On the supply side, the EU is expected to approve the Russian ban on oil imports soon, and OPEC is not expected to raise output above the previously agreed 432k barrels per day.
Meanwhile, the demand outlook is improving as Shanghai is set to reopen after a two-month lockdown.
Baker Hughes rig count data is due later and any further weakness in the USD could help boost oil higher.
Where next for oil prices?
Oil trades above its multi-month rising trendline, above the 20 & 50 sma. The 20 sma also crossed above the 50 sma in a bullish signal and the RSI is in bullish territory.
Buyers will look to push above 114.35 yesterday’s high in order to continue the uptrend towards 116.30 the March 24 high and 120.00 a psychological level.
On the downside, support can be seen at 108.00 the 20 sma and 105.10 the 50 sma. A break below 103.95 the 19 May low could create a lower low opening the door to 100.00 psychological level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.