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Daily Technical Insights 11 May 2023


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

EUR/USD (4 Hours)

EUR/USD Lacks Direction as US Dollar Recovers Despite ECB Hawkish Comments

The US dollar initially weakened in response to US inflation data, causing the EUR/USD pair to briefly surpass 1.1000. However, the US dollar later regained its footing, pushing the pair back below that level. The EUR/USD pair is currently moving sideways without a clear direction, despite the European Central Bank (ECB) members’ hawkish comments.

ECB Governing Council member Mario Centeno stated that policy would remain tight for some time, but interest rates might start to decline in 2024. Bloomberg reported that some ECB members are considering a rate hike in September, assuming earlier hikes in June and July. Meanwhile, German inflation data confirmed a 7.2% annual increase in April.

In the US, the Consumer Price Index (CPI) showed a slight decrease to 4.9% in April from 5% in March, while the Core CPI dropped to 5.5% from 5.6% in March. Initially, the US dollar faced significant losses but eventually rebounded and turned positive. Market participants are pricing in a potential pause in rate hikes from the Federal Reserve in June. On Thursday, the US will release additional inflation data with the Producer Price Index (PPI).

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair is currently trending lower after reached the middle band of the Bollinger band. It is expected that the EUR/USD will continue to move back lower to reach the lower band of the Bollinger band. The Relative Strength Index (RSI) is presently at 42, suggesting a neutral trend but lower in the EUR/USD market.

Resistance: 1.0990, 1.1032

Support: 1.0965, 1.0939

XAU/USD (4 Hours)

XAU/USD Retreats as US Inflation Data Spurs Speculation on Fed Rate Hike Chances

Following the announcement of US inflation data, spot gold initially reached a peak of $2,048.14 per troy ounce but has since declined and is currently trading around $2,025. The rise in the US Consumer Price Index (CPI), with a 4.9% year-on-year increase in April and a 0.4% month-on-month increase in line with expectations, led to a surge in XAU/USD. However, the inflation rate has been gradually easing from its previous record highs in mid-2022.

The release of the inflation figures prompted speculators to factor in reduced chances of a rate hike by the Federal Reserve (Fed) in July. This resulted in a rally in stock markets as investors hoped that the Fed would maintain its current stance, reducing the risk of an economic downturn. Consequently, the US dollar initially weakened across the foreign exchange (FX) market.

Although Wall Street opened on a positive note, sentiment quickly shifted, allowing the US dollar to recover its losses against major currencies. Similarly, US Treasury yields initially rose but subsequently fell back to their pre-announcement levels, remaining at the lower end of the daily range. Currently, stock markets are trading with mixed results, with the Dow Jones Industrial Average (DJIA) in negative territory, the S&P 500 struggling to stay afloat, and the Nasdaq Composite performing the best, showing a gain of 78 points.

Chart XAUUSD by TradingView

The technical analysis indicates that XAU/USD is moving higher on Wednesday. The price is currently just above the middle band of the Bollinger Band, indicating the potential for a consolidating movement with higher potential. Moreover, the Relative Strength Index (RSI) is currently at 54, indicating that XAU/USD is considered neutral but slightly bullish.

Resistance: $2,038, $2,052

Support: $2,015, $2,003

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.