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

April 19, 2022

EUR/USD: The euro weakened on Monday amid rising demand for USD driven by the two key factors: anticipation of the Fed tightening measures in the near future and concerns regarding the Russia-Ukraine crisis and its implications for global economic growth. Furthermore, it is now evident that USD has a lot more economic growth support to back its inflationary surge, unlike the euro which is directly exposed to the ongoing crisis in Eastern Europe and complex uncertainties related to it. Lastly, the U.S. rate futures market priced in a 96% chance of a 50 basis-point tightening at next month’s Fed policy meeting, and around 215 points in cumulative rate increases in 2022, providing further support for the greenback. Immediate resistance can be found at 1.0823 and the closest support is located at 1.0759.

SELL 1.07860/TP 1.07720/SL 1.07915

 

GBP/USD: The British pound weakened on Monday as investors kept anticipating multiple rate hikes from the Fed which provided ample support for the greenback. Furthermore, no important pound related news was released this week, whereas the greenback got firmer against its major trading partners due to a set of important news scheduled for the current week: home construction on Tuesday, Existing Home Sales on Wednesday, and Weekly Initial Jobless Claims on Thursday. The Federal Reserve will also release its Beige Book summary of economic conditions on Wednesday. The Fed is currently expected to accelerate its policy tightening with a 50 basis points rise during its next meetings in May and June. Lastly, the U.S. rate futures market has priced in a 96% chance of a 50 basis-point tightening at next month’s Fed policy meeting, and about 215 basis points in cumulative rate increases in 2022, providing further support for the greenback.

SELL 1.30121/TP 1.29915/SL 1.30188

 

XAU/USD: Gold reached a one-month high on Monday, getting close to the $2,000 level amid concerns related to the ongoing crisis in Eastern Europe as well as acceleration of inflationary pressures. As the Fed is planning to reach neutrality by year-end, and to start an aggressive QT regime, outflows from gold markets remain limited as investors prefer to preserve some options against the Fed’s current plan amid growth concerns. In addition, concerns related to the most recent COVID restrictions in China further supported the metal. However, even though inflation related concerns usually boost gold prices, it is necessary to point out that interest rate hikes could potentially undermine the demand for gold simply due to the higher opportunity cost.

BUY 1972.25/TP 1990.04/SL 1967.95