EUR/USD, GBP/USD Rate, Charts and Analysis:
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What was supposed to be low liquidity on Monday due to a bank holiday in the UK and US was overshadowed by a temporary deal on the US debt ceiling. We have already seen some moves in the Asian session as risk assets look to rebound after two weeks of heightened uncertainty. We can see the impact so far as the US dollar starts the day as the weaker currency with the Australian dollar in the lead.
Currency strength chart: strongest – Australian dollar, weakest – American dollar.
Source: FinancialJuice
US debt ceiling deal
Although the US debt ceiling deal is temporary at this point as it still needs to be voted on by both sides before it gets to the president’s desk. The short shrug so far suggests there have been plenty of compromises on both sides with the suspension of student debt being one of the main topics of discussion. As part of the deal, defense spending is expected to get an 11% increase to $885 billion, while non-discretionary spending excluding defense is expected to fall to 2022 levels according to Republican policymakers.
Market participants would certainly be more comfortable with an agreement that provides some form of certainty going forward. The US dollar has already seen some losses in Asian trade as its safe-haven appeal has waned with this expected to continue as market participants shift funds into risky assets.
As mentioned above, bank holidays in Europe and the US are likely to lower liquidity and volatility as the week begins. There is not much in terms of risk events out of the Eurozone and more so out of the UK for the rest of the week, but we do have Eurozone Inflation scheduled for Thursday 1st June.
For all the economic data and events that move the market, see DailyFX calendar
Technical outlook and final thoughts
It’s important to remember that the strength of the US dollar and the recent rally may have started as a result of safe-haven appeal, however data over the past week has seen a hawkish re-pricing of the prospects for a June Fed rate hike and beyond. As we have the non-farm payrolls this week, we may see some type of bounce on the DXY ahead of the US jobs report with a positive reading likely to see a resumption of USD buying and a return of USD strength later in the week.
EUR/USD Daily Chart – May 29, 2023
Source: TradingView
From a technical perspective, EURUSD is consolidating at a key support level around 1.0700. The bounce in the Asian session struggled for momentum as the session drew to a close with concern that a lack of liquidity in London hours could halt any potential recovery in EURUSD.
Given the bank holiday, there is a real chance that EURUSD will remain in a narrow range for the rest of the day between 1.0700 and the daily high around 1.0745. A break of these levels on either side may also struggle and lack any form of significant follow through.
Key intraday levels to watch out for
resistance levels:
Key support levels:
GBP/USD Daily Chart – May 29, 2023
Source: TradingView
The GBPUSD is facing similar challenges to the EURUSD at the moment after its recent decline. A late recovery as the pair remains overbought at this point while it hovers above the 100-day moving average offering support around the 1.2290 handle. The close of the inverted hammer candle on Friday also indicates the potential for more upside, but we may not get the explosive upside until liquidity returns to the markets tomorrow.
Key intraday levels to watch out for
resistance levels:
- 1.2372
- 1.2436 (50-day moving average)
- 1.2500
Key support levels:
- 1.2290 (100-day moving average)
- 1.2250
- 1.2200
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Written by: Zain Fouda, market writer for DailyFX.com
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