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

May 03, 2022

EUR/USD: The euro declined against the dollar on Monday after data showed Eurozone factory output growth stalled in April. Eurozone manufacturing output growth slowed down last month as factories struggled to source raw materials while demand took a knock from steep price increases and fears about the economic outlook, a survey showed. Russia’s invasion of Ukraine, coupled with renewed COVID-19 related lockdowns in China, have exacerbated supply chain bottlenecks and left factories struggling and forward-looking indicators in the survey did not point to an imminent turnaround. The events of the Fed rate hike and ECB’s Lagarde speech will remain major key events this week, investors will also focus on the US Nonfarm Payrolls (NFP), which are due later this week. The additions in the labor market are seen at 380 thousand against the prior print of 431 thousand. On the euro front, investors are focusing on the speech from European Central Bank (ECB)’s President Christine Lagarde, which is due on Tuesday.

SELL LIMIT 1.0552/TP 1.0496/SL 1.0578

 

USD/CAD: The Canadian dollar weakened to its lowest level in more than four months against its U.S. counterpart as the safe-haven greenback broadly climbed and Wall Street lost ground ahead of a policy decision this week by the Federal Reserve. Meanwhile, domestic data showed that manufacturing activity expanded at a slower pace in April as the war in Ukraine contributed to capacity and cost pressures. This uptrend is likely to continue as US inflation runs hot and the Fed continues its aggressive tightening cycle. Of note, the 2-year interest rate differentials are moving back in the dollar’s favor after a brief corrective phase last week. Meanwhile, analysts at TD Securities said that they think USD/CAD is a tricky proposition given that the Fed has scope for a much higher terminal rate relative to the Bank of Canada.

BUY LIMIT 1.2812/TP 1.2911/SL 1.2761

 

XAU/USD: The price is consolidating in a narrow range of $1,859 to $1,868 in the Asian session as investors reduced their positions and opted to stay on the sidelines ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday. The bright metal has lost its luster over the past few trading sessions as investors change their mindset in line with tight liquidity conditions over a long period of time. High inflation over several decades and an extremely tight labor market are forcing the Fed back to neutral rates, which would require long-term rate hikes and continue to depress demand for the precious metal. Therefore, gold prices will remain on hold for at least another year.

SELL 1861.20/TP 1847.30/SL 1868.20