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Dollar growth is a key market driver

May 12, 2022

EUR/USD: The euro steadied against the U.S. dollar on Wednesday on expectations that the European Central Bank will raise its benchmark interest rate in July for the first time in more than a decade to fight high inflation, with some policymakers even hinting at further hikes after the first. ECB policymakers have been calling for a rate hike for weeks. President Christine Lagarde has finally thrown her weight behind such a move, saying the central bank was likely to end its stimulus program early in the third quarter, followed by a rate hike that could come just “a few weeks” later. Inflation hit 7.5% in the eurozone last month and even measures that strip out food and energy prices rose above the ECB’s 2% target. Immediate support is seen at 1.0500. A breakout below could take the pair towards 1.0420.

SELL LIMIT 1.0520/TP 1.0420/SL 1.0550

 

USD/CAD: The Canadian dollar strengthened against the U.S. dollar on Wednesday as oil prices rallied, but gains for the currency were limited by investor nerves about the global economic outlook. The price of oil, one of Canada’s major exports, rebounded after plunging nearly 10% in the previous two sessions. On Tuesday, the currency touched its weakest level in 18 months at 1.3050. Further dynamics of the Canadian dollar will depend on the US dollar, which continues to grow. Immediate resistance can be seen at 1.3050. A breakout to the upside can trigger growth towards 1.3120.

BUY STOP 1.3050/TP 1.3120/SL 1.3020

 

GBP/USD: Sterling initially gained some ground against the dollar on Wednesday after U.S. CPI readings but dipped as traders’ attention turned to Thursday UK GDP data. The CPI release showed annual inflation at 8.3% versus the Reuters consensus forecast of 8.1%, Sterling shorts are hoping the UK gross domestic product estimate for March comes in below the forecast. A negative number could weigh on the pound by sharpening fears of a UK recession. The pound was hit hard by last week’s warnings from the Bank of England about a UK recession and 10% inflation, alongside its 25 basis-point rate hike to 1%. Immediate support is seen at 1.2200. A breakout below could take the pair towards 1.2100.

SELL LIMIT 1.2220/TP 1.2100/SL 1.2250