EURUSD, NZDUSD, USDCAD

US PCE inflation and Fed minutes --> EURUSD

This week, markets are closely watching the US PCE price index, the Federal Reserve’s preferred inflation gauge. The latest data shows that core PCE inflation rose 2.6% y/y in March, slightly above the Fed’s 2% target. The headline PCE is to fall slightly to 2.2% from 2.3%. While inflation has eased significantly from its 2022 highs, persistent price pressures—especially from tariffs and supply chain adjustments—continue to complicate the Fed’s path forward. The upcoming April PCE data will be critical in shaping expectations for future rate moves, particularly as the Fed has held interest rates steady at 4.25%–4.5% since December 2024.

The upcoming Fed minutes, set for release on May 28, are expected to touch on trade policy risks, especially in the context of President Trump's recent decision to delay 50% tariffs on EU goods until July 9. While the delay came after the May 6–7 meeting, the broader uncertainty around tariffs—particularly with both the EU and China—was likely discussed as a potential headwind for inflation and business sentiment. Markets will be watching closely for any signs that the Fed is factoring trade tensions into its policy outlook.

EURUSD is rallying toward the 1.1420 resistance level after the break of the short-term downtrend line and the rebound off the 20-day simple moving average (SMA). More advances could lead the market toward the three-and-a-half-year high of 1.1572, ahead of the November 2020 peak at 1.1600. Technical oscillators confirm the upswing in the market.

RBNZ policy meeting --> NZDUSD

The Reserve Bank of New Zealand (RBNZ) is widely expected to cut its official cash rate (OCR) by 25 bps to 3.25% at its meeting on May 28. This would mark the sixth consecutive rate cut, as the central bank continues its easing cycle to support a slowing economy and address rising unemployment, which recently hit a 4.5-year high of 5.1%. With inflation now comfortably within the RBNZ’s 1–3% target range, economists believe the central bank has room to continue lowering rates, with many forecasting further cuts to 3.00% or even 2.75% by year-end.

NZDUSD has risen sharply over the last two sessions, but the outlook remains neutral in the short-term view, as the price has been holding within a trading range of 0.5845-0.6028 since April 14. An extension to the upside could reach the immediate 61.8% Fibonacci retracement level of the down leg from 0.6380 to 0.5484 at 0.6035. A break of the latter would open the way for further gains, potentially extending toward the inside swing low from September at 0.6100.

Canadian GDP --> USDCAD

Canada’s GDP data for March and Q1 2025 is set to be released on May 30 and is expected to show modest growth, with a forecast at 1.6% annualized, down from 2.6% previously. Trump’s tariffs are hitting Canada hard, as the majority of its exports go to the US. A February export bump likely came from businesses rushing shipments before March’s new tariffs, which then caused a drop. Gains in non-U.S. exports probably weren’t enough to offset the U.S. decline.

USDCAD plunged to a fresh eight-month low of 1.385 earlier in the day, approaching the long-term ascending trend line at 1.3645, which has been holding since August 2022. A drop below this line would give the green light to more decreases toward the 1.3420 support, which holds near the 200-weekly SMA. The RSI and stochastics are falling near the oversold levels.