EUR/USD forecast, USD/CAD forecast: Two trades to watch

Could EUR/USD return to 1.10?

• German PPI cools to 7.5% YoY in March from 15.8%
• ECB minutes are in focus
• EUR/USD looks to test yesterday’s high

EUR/USD is rising modestly higher above 1.0960 after cool kids comments from ECB and despite a larger-than-expected cooling in the German PPI.

ECB official Isabel Schnabel said that the bank will be weighing up both a 25 and 50 basis point rate hike in the May meeting, and it was too close to call. She added that the outlook beyond May is even more uncertain. Data yesterday confirmed that inflation in the region cooled to 6.9% YoY from 8.5%, but at 3.5 times the ECB’s target level, there is still work to be done.

Today German PPI cooled by more than expected to 7.5% YoY in March, from 15.8% in February. This was below forecasts of 9.8%. PPI is often seen as a lead indicator for CPI and falling prices ease pressure on the ECB.

With inflation in focus, the ECB minutes will also be scrutinized closely for clues into the central bank’s policy intentions. A speech from ECB President Christine Lagarde will also be in focus with any comments on inflation or policy outlook like to influence the euro.

The USD is edging lower, helping EUR/USD gain traction. US jobless claims & Fed speak will be in focus.

Where next for the EUR/USD?

EUR/USD remains in an uptrend since the start of March. The price ran into resistance at 1.1075the 2023 and has eased lower. The price has held above the weekly low and the 20 sma which along with the bullish RSI keeps buyers hopeful of further gains.

Buyers will look for a rise above 1.0984 yesterday’s high, to open the door to 1.10, the psychological level and bring 1.1075 into target.

1.09 the 20 sma and the weekly low is a key support level, a break below could be a bearish signal, opening the door to 1.0830, last week’s low.

USD/CAD looks to US jobless claims, Fed speak & BoC’s Macklem

• Hawkish Fed bets lifted USD is early trade ahead of jobless claims
• BoC Governor Tiff Macklem to speak
• USD/CAD tests multi-month trendline resistance

USD/CAD rose ahead of the European open after gains in the previous session and trades around the weekly high. The USD found support from hawkish Fed rhetoric while the loonie tracks oil prices lower.

New York Federal Reserve President John Williams said that inflation remains too high, fueling expectations of another rate hike in May. Hawkish-sounding Fed officials this week have indicated rates rising again in May and remaining elevated across the year. However, the market is still pricing in several rate cuts by year-end.

Today attention will be on US jobless claims, which are expected to tick higher to 240k, up from 239k, as signs of weakness start to appear in the labour market, which has proved to be incredibly resilient. More Fed speakers are also likely to move the dial.

CAD is under pressure as oil trades lower. Oil is falling on bets that more rate hikes could slow the US economy hurting the oil demand outlook.

BoC Governor Tiff Macklem is due to speak later. Recent data, which shows that inflation continues to cool, has supported the BoC’s decision to pause rate hikes. Comments defending the decision could weigh on CAD further.

 

Where next for USD/CAD?

USD/CAD has broken out above the month-old falling trendline and 200 sma and is attempting to break back above the multi-month rising trendline. A rise above here could be a bullish signal and exposes the 100 sma at 1.3530. Beyond here, 1.3555 is a key resistance, the confluence of the 50 sma and the April high.

Sellers could be encouraged by the RSI below 50. Should bears successfully defend the multi-month rising trendline, a test of 1.34, the early April low and 1.3380, the month-old falling trendline could fuel a deep selloff towards 1.33.