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

May 04, 2022

EUR/USD: The euro was flat holding close to a five-year low against the U.S. dollar as markets awaited Fed rate hike decision. Investors expect the Fed to hike rates by half a percentage point today, and to detail plans to reduce its $8.9 trillion balance. The U.S. central bank raised its policy interest rate by 25 basis points in March. Comments by Fed Chairman Jerome Powell at the conclusion of the meeting will be scrutinized for any new indications about whether the central bank will continue to hike rates to battle rising price pressures even if the economy weakens. Given the options market’s indecision, as well as hopes of a disappointment from the Fed, considering the 0.50% rate hike being mostly priced in, EUR/USD prices may witness a rebound should the Federal Reserve (Fed) chose not to go beyond the limits already anticipated.

BUY STOP 1.0545/TP 1.0583/SL 1.0523

 

GBP/USD: The British pound initially gained but gave up ground as traders took profits ahead of both Federal Reserve and Bank of England monetary policy meetings this week. The Bank of England meeting, which is expected to result in a 0.25-percentage-point rise in interest rates on Thursday, is the big event of the week for sterling. In recent weeks the pound has fallen sharply as investors have piled into dollars in the expectation that the Federal Reserve will raise rates faster than other central banks and that the U.S. economy will hold up better than others in the face of soaring inflation and slowing economic growth. The US dollar retreated against a basket of currencies wilting below the dollar index and hit a 20-year high last week on expectations that the Fed will be more aggressive than peers as it fights inflation running at its fastest pace in 40 years.

BUY LIMIT 1.2458/TP 1.2585/SL 1.2395

 

XAU/USD: The price (XAU/USD) is hovering around $1,865.00 and is likely to remain on tenterhooks as uncertainty over the announcement of the monetary policy by the Federal Reserve (Fed) has paused the whole Fx domain. The precious metal has displayed a subdued performance in the early Tokyo session and is likely to perform lackluster till the announcement of the interest rate decision. Gold prices are going to witness a lack of attention from investors for a prolonged period as the determination of the Fed to return to neutral rates will keep pushing itself to raise interest rates sooner rather than later. An interest rate hike by 50 basis points is on the cards but taking into consideration the multi-decade high inflation and consistency in full employment levels and wage-price hikes, one more jumbo rate hike by the Fed looks imminent.

SELL STOP 1861.50/TP 1851.00/SL 1866.50