Weekly Technical Outlook – USDJPY, EURUSD, Oil

FOMC policy meeting --> USDJPY

The US calendar might send some important messages this week, particularly on Wednesday when the Fed announces its rate decision. Although changes in interest rates are not on the agenda this week, it would be interesting to see if the central bank will raise the possibility of a rate hike again after the latest inflation setbacks and some hawkish comments from policymakers.

June’s rate cut scenario went from being almost certain to extremely unlikely and futures markets are now less confident that the Fed will reduce borrowing costs before September. Nonetheless, there are several data releases this week, including the highly significant nonfarm payrolls report (Friday, 12:30 GMT) and the ISM manufacturing PMI (Wednesday, 14:00 GMT). The Fed might allow the data to steer investors.

Although the stats are expected to come under pressure in April, a potential hawkish outcome and a subsequent resurgence in USDJPY, might force Japanese authorities to buy the yen again. The sharp downfall to 155 after the steep rise to 160.2o was interpreted as an FX intervention earlier today, even though Japan’s top currency diplomat refused to comment.

From a technical perspective, the latest pullback has not violated the upward pattern in the market and there are a couple of key levels that could still support the market initially within the 153.00-153.83 territory, and then somewhere between 151.50 and 151.00.

Eurozone flash CPI inflation --> EURUSD

In the eurozone, there is a high likelihood of a rate cut in June, around 70%, but traders may reassess their predictions after the release of the flash CPI inflation data on Tuesday at 09:00 GMT. Forecasts point to a steady headline inflation of 2.4% y/y and a softer core CPI at 2.7% y/y from 2.9% previously.

EURUSD will need stronger than expected eurozone data or weaker US numbers to break the constraining 20-day simple moving average (SMA) and the 1.0743 barrier before it rallies towards the next barrier seen at 1.0787-1.0830.

Otherwise, a step below the nearby base of 1.0694 would justify the discouraging technical signals in the market, sending the price to 1.0650 and then down to April’s low of 1.0600.

China manufacturing PMI, geopolitics --> WTI oil futures

Oil prices might face a new round of volatility as a Hamas negotiator will be in Cairo today for peace talks. If there’s a deal to release hostages, Israel may delay an attack in Rafah, leading to a drop in oil prices. Nevertheless, if China’s manufacturing PMI data exceed expectations on Tuesday, it could restrict any possible declines in oil prices by signaling an ongoing revival in business operations and a surge in energy product demand from the global economy’s second-largest consumer.

WTI oil futures managed to pivot near the protective 50-day EMA for the fourth time, but have yet to climb above the wall at $84.00. A decisive close above that bar could prompt a quick bounce towards April’s high of $86.92.

On the downside, a drop below the 50-day EMA at $81.47 could squeeze the price towards the 200-day EMA at $79.10.