FX Weekly

FX Weekly Update – April 17th, 2023

Posted Under: Weekly updates

The dollar begins this week near last week’s opening levels. That does not mean that there were no exciting rallies or falls. The dollar fell throughout the week, supported by lower inflation. CPI and PPI fell, which pushed the U.S. interest rates lower but the USD reversed its losses on Friday afternoon. Many of the currencies had touched their resistance levels and turned lower. If the Fed has completed raising rates, how quickly will they cut them? Job creation has been robust but may lag earlier layoffs’ “garden leave” numbers. Once those numbers feed through, the employment situation may be much worse than it seems. Housing data will be released mid-week; the forecasts are upbeat. Expect another volatile week as the market debate on rates continues.

EUR (1.1980): Last week’s high of 1.1075 ran out of momentum and quickly reversed to a critical short-term support level of 1.0975. Below this current level, trendline support exists on the 4-hour chart at 1.0895. Resistance is now 1.1075 and then 1.1225. This week’s economic calendar has inflation numbers and the ZEW survey. Unless these miss one way or the other, the market will not be impacted.

GBP (1.2390): What seemed like a significant move (1.2550) toward 1.3000 ended with GBP sellers pushing it back to the current level. Technically, the present action may test 1.2350, which, if breached, can see the pound fall back to 1.2100. On the other side of the fence, if the sterling moves above 1.2550, the 1.3000 level will be the target by mid-summer.

JPY (134.00): Last week’s reversal in USD/JPY (132.00 to 134.00) was driven by the BOJ’s announcement that the current level of their interest rates is at the right level for this cycle. The bounce in the dollar has run into resistance at the current level. This short-term U.S. dollar rally will likely turn back lower, putting the March 24 low of 129.64 at risk.

CAD (1.3360): USD/CAD fell hard last week. The rally in oil ($82.50) has capped the recent U.S. dollar rally. Now the levels of support are at 1.3250. A close below this level will trigger a move toward 1.3060. Last week the BoC decided to follow the Fed and not change their interest rates. It currently stands at 4.5% compared to the U.S. at 4.75-5.00%. This week, several important economic reports will be released. CPI, Housing Starts, Industrial Product Prices, and Retail Sales. These and what happens in the oil market will provide enough information to trade USD/CAD.

MXN (18.0000): The March 5 low of 17.9000 will be the Monday level that will set the tone for the entire week—a close below 17.9000 will open up the next target level of 16.7500. The Fed may decide they have raised rates far enough, which, compared to the Mexican interest rates, is a large spread that favors the Mexican Peso.

CNY (6.8800): The PBOC keeps a tight reign on their currency. The ranges are tight, and more geo-political issues keep the market nervous. This alone will keep the market from pushing too much out of these tight ranges. Keep the 6.50 and 7.10 levels.