Fed Stays Dovish, Central Bank Torch Passed to the ECB

Gilead’s Drug and a Dovish Fed Keep Sentiment Supported

The dollar continued trading lower against most of the other G10 currencies on Wednesday and during the Asian morning Thursday. It gained slightly only versus CHF and GBP, while it was found virtually unchanged against JPY. The main gainers were NZD, NOK, CAD and AUD in that order.

USD/CAD — Technical Outlook

Looking at the technical picture of USD/CAD, we can see that it drifted all the way back to the key support zone, at 1.3855, which marks the current lowest point of April. Overall, the pair still remains in a wide range, roughly between the 1.3855 and 1.4265 levels, and as mentioned above, the rate is very close to the lower bound of that range. For now, we will stay neutral, but if the rate slides below the 1.3855 hurdle, this may change the near-term outlook to a more negative one.

Will the ECB Announce More Stimulus Measures?

As for today, the central bank torch will be passed to the ECB. Last Thursday, preliminary data revealed that the Euro-area manufacturing PMI fell to 33.6 from 44.5, hitting its lowest since February 2009, while the services index fell to 11.7, its lowest ever, dragging the composite PMI down to 13.5 from 29.7.

EUR/SEK — Technical Outlook

EUR/SEK fell heavily in the first half of this week, but found support near the 10.680 hurdle. The pair did try to recover somewhat yesterday, however, this morning we are seeing a different picture, where the rate is getting close to that above-mentioned support area again. For now, we will take a somewhat bearish approach and wait for a confirmation break below that support zone.

As for the Rest of Today’s Events

During the European day, Eurozone’s preliminary CPIs for April, and the bloc’s 1st estimate of Q1 GDP are due to be released, just a few hours before the ECB decision. Both the headline and core CPI rates are expected to have tumbled to +0.1% yoy and +0.7% yoy from +0.7% and +1.0% respectively, while the GDP data are anticipated to show that the Euro-area economy has shrank 3.2% qoq after expanding only 0.1% qoq in the last three months of 2019. Taking into account the fast spreading of the coronavirus in Europe during the last month of the quarter, a contracting economy is nothing but a given for the financial community. Therefore, we believe that EUR-traders may focus more on the ECB’s response to the damages caused by the pandemic rather than the data itself.

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