Two trades to watch: EUR/USD, oil

EURUSD rises ahead of US inflation data. Oil steadies at a two-month high.

Charts (4)

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.

eurusd chart

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.

oil chart

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