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Trading ideas for EUR/USD, GBP/USD and Brent

May 16, 2022

EUR/USD: Greenback’s dynamic against the Euro is mixed. Investors are still focused on the Fed Chairman Jerome Powell’s interview where he said that the regulator cannot guarantee a “soft landing” for the economy, that is, a return of inflation to the 2.0% level with a strong labor market. The April data on the U.S. export and import price index showed a slowdown. The export price index fell from 4.1% to 0.6% instead of the expected 0.7%, and the import price index fell from 2.9% to 0.0% against the projected 0.6%. European Central Bank Governing Council member Mario Centeno supported the position of some of his colleagues that the regulator may start raising rates in July. He stated that monetary policy normalization is necessary, but it must be done gradually to avoid the risks of slowing economic growth.

BUY 1.0420/TP 1.0580/SL 1.0380

 

GBP/USD: The British pound is getting weaker against the greenback. The Bank of England Deputy Governor stated that the British regulator would have to keep raising rates to curb soaring inflation, but there are risks that inflationary pressure due to rising wages will be stronger than the bank had previously assumed. Experts are also keeping an eye on the escalating trade conflict between the EU and the UK, which is threatening to drop a number of trade requirements in Northern Ireland. British Foreign Secretary Liz Truss said Britain would have no choice but to act unilaterally if the EU does not make concessions on trade issues. This situation increases the risks of a trade confrontation between Britain and the European bloc, which is even more dangerous amid the current global instability.

BUY 1.2280/TP 1.2380/SL 1.2250

 

Brent: Oil prices keep climbing. A potential embargo on Russian oil supplies to the EU contributes to the positive dynamics, although it is not yet fully agreed upon. This can lead to growth in demand for “black gold,” which producers will not be able to cover. Nevertheless, a number of negative factors prevent explosive growth. Executive Director of the International Energy Agency Fatih Birol said that more oil reserves might be released into the market if necessary. OPEC once again lowered its forecast of growth in global energy demand this year, citing the impact of the Easter Europe crisis, rising inflation, and the pandemic in China. This year, it could reach 3.36 million bpd, 20,000 bpd lower than the previous forecast. This situation practically guarantees that OPEC and its allies will maintain the previous modest rate of production build-up.

BUY 112.60/TP 118.30/SL 110.60