Dollar sellers are in control midweek as the Fed’s interest rate decision looms.
dollar
The dollar is trading in the middle of the week, retreating from its highest level in three consecutive weeks. The factors driving this selling pressure can be attributed to the mixed US economic data as the JOLTS employment opportunities for March showed slightly lower than expected, coming in at 9.59M from the previous reading of 9.74M. In addition, the lack of significant bullish momentum on the dollar can be linked to the Fed’s previous caution ahead of today’s key FOMC meeting where a solid 0.25% increase in interest rates is pegged. What traders will be waiting for are post announcements from the policy meetings as well as bank headlines for clear guidance on the risk sentiment driving dollar demand.
Regarding the market structure, the current price action has formed a possible reversal pattern in the form of a downward channel. The pattern partially validated as an impulsive break of the structure moved to the upside as the bulls dominated the story ahead of the next corrective wave. From now on, the price can remain bullish if buyers can defend the potential bearish channel continuation pattern that is currently forming. On the contrary, if the sellers break through the support level around 100.40 level, the narrative could turn towards the bears and break below the year low.
euro
The European shared currency heads into the middle of the week in full swing as the London session sees EUR/USD hitting a three-day high. The factors driving this exuberance can be linked to several reasons, the main one being the fact that traders tend to be very cautious before the release of big economic news like the one expected today from the Fed, which has increased demand for dollars for dollars. Take advantage of the Euro and other major currencies. In addition, inflation concerns remain, and this was the case yesterday as inflation data for the Eurozone came in slightly above expectations in April, with core inflation coming in at 5.6% y/y.
Looking ahead, traders will be watching the main event, the FOMC meeting, as well as the policy meeting tomorrow by the European Central Bank where a solid 0.25% increase is also expected, but the possibility of a surprise is not outside the realm of speculation because a 0.50% rate increase is on the cards, It is awarded with less probability though.
Technical Analysis (D1)
In terms of market structure, the current price has approached an area with sideways selling pressure in the form of an ascending channel. This pattern gives the speculators the potential to drive the price if the current continuation pattern plays out successfully, confirming the potential for a larger double top reversal pattern to form. Conversely, if the bulls can maintain pressure, the price may break above the level and continue to the upside if it negates the resistance area in an impulse wave.
fairy
The cable is heading into the middle of the week with renewed optimism as the price hit a new high for the trading day yesterday. The factors driving this steady influx of buyers into the British currency can be attributed to the decisions of the Bank of England, as they prepare for 12y Consecutive rate hikes, which satisfies the bulls and creates a potential floor under the GBP around the 1.234 region.
Looking ahead, traders will all be looking forward to the pivotal meeting of the Fed, where the 0.25% rate hike is expected, and will undoubtedly confuse traders given that all of this is all set up and priced in. Commented before GBP/USD gained any directional momentum.
Technical Analysis (D1)
In terms of market structure, the bulls were in control of the narrative and the price tested the key 1,244 The level has since declined, forming a possible bearish triple top within a narrow trading range. As the price retests this peak formation again, two scenarios present themselves. Namely, if the area is defended by sellers, it could cause the price to make its way to the lower end of the range. Conversely, if buyers break above the area, the price will continue to move upwards in the near term.
gold
Gold heads into the middle of the week and is still supported by significant buying pressure as it settles at a three-week high. Factors driving this continued enthusiasm from bullion buyers can be linked to a weakening of risk appetite (in favor of gold) driven by recent banking concerns as well as the approaching June expiry of the US debt ceiling. Furthermore, uncertainty about the path of the Fed rate hike and whether there is a pivot of rate hikes on the way or somewhere further afield adds to the risk pool as inflation still appears to be above the Fed’s target range, hence why Associated Reason Jerome Powell’s speech will give more directional impetus to gold than the actual price decision (if it comes as per expectations)
In terms of market structure, price action has been mostly bullish, with higher highs and higher lows being printed. The current price action is approaching the February 2022 high in a corrective wave associated with a possible ascending channel reversal pattern. From now on, price action should be given a chance to print itself to either validate the reversal pattern or to nullify it by continuing to rise impulsively towards the aforementioned peak.
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Ofentse Waisi
Financial market analyst
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