Two trades to watch: EUR/USD, USD/CAD
Fiona Cincotta January 31, 2023 8:27 AM
EUR/USD falls ahead of EZ GDP data. USD/CAD rises on Fed jitters, falling oil & ahead of CAD GDP.
EUR/USD falls ahead of EZ GDP data
EUR/USD is falling, extending losses from the previous session as investors look digest the latest data from Germany, while looking ahead to the release of eurozone GDP data and the Fed & ECB rate decisions later in the week.
German retail sales plunged -5.3% MoM in December after rising an upwardly revised 1.9% in November. This was well below forecasts of 0.2%. The data comes after German GDP figures yesterday, which showed that the economy unexpectedly contracted in Q4. Recent data has revived recession fears in the eurozone’s largest economy.
Attention will now turn to eurozone GDP data, which is expected to show growth stalled at 0% in Q4, after 0.3% growth in Q3.
Meanwhile, the USD is rising as the Fed’s two-day FOMC meeting kicks off today. The Fed is expected to slow the pace of rate hikes, but doubts are rising as to whether Fed Chair Powell will be as dovish as the market has been pricing in.
Where next for EUR/USD?
After rising to a high 1.0930 last week, EUR/USD is edging lower, falling below the 50 sma on the 4-hour chart, which, together with the RSI below 50 keeps sellers hopeful of further downside.
Sellers need to break below 1.0765 the mid-January low, to expose the 100 & 200 sma at 1.0725, negating the near term uptrend.
Should buyers retake the 50 sma, at 1.0865 a rise towards 1,.0930 could be on the cards, ahead of 1.10 the psychological level.
USD/CAD rises on Fed jitters & ahead of CAD GDP
USD/CAD jumped in the previous session and is extending those gains today as oil prices fall and investors look ahead to the release of CAD GDP,
Oil has dropped over 3% so far this week after data showed that Russian supply to Asia was rising and amid a large outbreak of Covid in China, overshadowing upbeat PMI data.
CAD GDP is expected to show that the economy grew 0.1% MoM in November.
The USD will look towards US consumer confidence which is expected to improve to 109, up from 108.3.
This comes ahead of the Fed rate decision tomorrow.
Where next for USD/CAD?
USD/CAD has rebounded from yesterday’s low of 1.33, but still trades caught between the 50 & 100 smas.
The bullish crossover on the MACD is keeping buyers hopeful of further gains. Buyers need to rise above the 50 sma at 1.3510 to create a higher high anjd extend the bullish run up to 1.3685 the 2023 high.
On the flip side. Should sellers take out yesterday’s low at 1.33, a fall below the 100 sma at 1.3270 and 1.3250 the November low, exposes the 200 sma at 1.3210. A fall below here could be significant given that the price has traded above the 200 sma since June last year.
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