Article by: ETO Markets
This week, the EUR/USD saw a strong rise, breaking the key psychological level of 1.1500 and hitting a 2025 high of 1.1572. This upward movement was primarily driven by broad US Dollar weakness ahead of the ECB meeting this Thursday (April 25th). While rates are widely expected to remain unchanged, investors will monitor for guidance on future rate cuts, with the first cut widely anticipated in June. Diverging policy paths (expected Fed cuts vs. potential ECB cuts) and US economic concerns support EUR/USD, though volatility is expected with an overall upward bias.
In the Asia-Pacific market, the US Dollar against the Japanese Yen (USD/JPY) has continued its downward trajectory this week, falling to 142.82. This movement is primarily influenced by the ongoing unwinding of carry trades and expectations of policy divergence between the Bank of Japan (BoJ) and the Fed. Persistent high inflation in Japan increases the likelihood of further BoJ rate hikes, while uncertainty surrounding the US economic outlook supports expectations for Fed rate cuts. This anticipation of a narrowing interest rate differential continues to provide support for the Yen. Technically, USD/JPY has found key support near 140.00. Should a rebound occur, 143.96 and 145.00 will act as significant resistance levels.
Meanwhile, the Australian Dollar against the US Dollar (AUD/USD) has performed strongly this week, staging a robust rebound from last Friday's low of 0.5914 and currently trading near 0.64. This rebound has been primarily driven by potential stimulus measures from China, improved risk sentiment, assurances from Fed officials, and the weakening US Dollar amidst concerns about the US economic outlook. However, China's announcement of halting exports of several rare earth minerals to the US has escalated trade tensions and somewhat limited further upside. RBA maintained interest rates, noting the labour market "remains tight" and will continue to closely monitor conditions. Upcoming Australian jobs data could heighten expectations for an RBA rate cut in May. Asia-Pacific currencies are anticipated to remain subject to volatility but generally exhibit relative strength against the US Dollar.
The Euro/Dollar currency pair is consolidating around the 1.1300 level following a notable rally earlier in the week, amidst a backdrop of broader US dollar softness. Key support for the Euro stems from the distinct monetary policy paths between major central banks; whilst the European Central Bank has recently enacted rate cuts, market expectations lean towards the US Federal Reserve initiating an easing cycle later this year, driven by signs of economic moderation and potential political influences on central bank policy. Furthermore, reported shifts in capital allocation towards Eurozone assets and a gradual narrowing of the US-Euro interest rate differential offer underlying support. However, headwinds persist, primarily concerns surrounding the Eurozone's growth trajectory, highlighted by recent IMF downgrades linked to potential trade frictions, especially the risk of US tariffs. The possibility of a wider global economic slowdown also tempers bullish sentiment. Market sentiment currently appears somewhat cautious; although institutional positioning has recently favoured the Euro, technical indicators suggest the prior advance may be slightly overextended, advising prudence as markets anticipate significant central bank communications and economic data releases in the coming week, likely fostering higher volatility.
Technically, EUR/USD is testing immediate support near the … mark, having recently slipped marginally below its 9-day Exponential Moving Average, currently at …. The MACD histogram ticking into negative territory points towards diminishing upward momentum in the immediate term. Should the pair fail to hold the … level, the next significant support zone lies near the 14-day Volume Weighted Average Price (VWAP) around … and the Parabolic SAR indicator at …. A more substantial support level is provided by the 50-day Simple Moving Average, sitting considerably lower near …. On the upside, resistance can be anticipated around the recent peaks near … and the April 21 high of …, with the upper Bollinger Band providing further resistance potential at ….
The Australian Dollar is currently steady around the 0.6400 mark, holding onto gains achieved during a significant V-shaped rebound from lows seen earlier in April, a move partially fuelled by broader US Dollar weakness. However, considerable headwinds persist, primarily stemming from market anticipation of a potential Reserve Bank of Australia interest rate reduction, with some analysts forecasting a 25 basis point cut as early as the upcoming May meeting. Adding to the bearish pressure are declining prices for key Australian exports such as iron ore, softer recent trade figures, particularly concerning exports to China, and overarching concerns about a global economic slowdown highlighted by the IMF, alongside lingering trade tensions involving the US and China. Counterbalancing these factors, the Aussie dollar finds support from the prevailing softness in the US Dollar, which has been exacerbated by recent economic reports like the Federal Reserve's Beige Book and mixed PMI data suggesting some weakening in US economic conditions. Furthermore, the gradual normalisation of trade relations between Australia and China, coupled with continued resilience observed in the domestic labour market, provides a degree of underlying fundamental support for the currency. Market sentiment remains cautiously constructive following the recent sharp recovery, though participants are keenly awaiting next week's crucial Australian CPI inflation figures and US ISM manufacturing data for clearer directional cues amid ongoing geopolitical uncertainty.
Technically, the AUD/USD pair is consolidating its recent advance, trading near … after stalling just below the four-month high of … established on April 22nd. This … level represents immediate resistance; a decisive move above this area, which would also clear the tested dominant rising trendline originating from October 2022, could open the door towards the Upper Bollinger Band currently situated near …, aligning closely with the five-month high target of … noted in market analysis. On the downside, initial support can be identified around the 9-day Exponential Moving Average at …. Should this level give way, further support lies at the 21-day EMA near …, with the 50-day Simple Moving Average just below at … offering a more substantial floor. While daily momentum indicators such as the Relative Strength Index (currently 55.52) and MACD configuration remain positive, suggesting underlying bullish momentum, the pair's failure to decisively break immediate resistance necessitates caution, as a drop below near-term moving average support could indicate the start of a deeper retracement.
