#EURUSD & #USDJPY Technical Analysis:: 13 April 2023

EUR/USD Technical Analysis: Testing Psychological Resistance

We have often noted that the forex currency markets may remain completely calm until the markets and investors react to the US inflation figures. This may be a strong reaction to the future of raising US interest rates.

• Weak US inflation readings helped the bulls push the EUR/USD price towards the psychological resistance level of 1.1000, which is stable around it at the time of writing the analysis.
• In response to the weakness of the headline, traders sold the dollar and bought gold, silver and bonds.
• Stock index futures and crude oil also jumped. Overall, EUR/USD is making higher lows since it held key support around 1.05 in early March.
• The euro's rise has been nice and steady.

As the price stabilizes above the 21-day exponential moving average and the main support at around 1.0800, the general trend of the currency pair remains bullish, thus it remains on its way to climb above February's high at 1.1033 soon.

Euro predictions against the dollar today:

The weak US inflation readings might give the bulls more momentum to breach the resistance at 1.1035, the highest for the currency pair in a year. At the same time, overcoming this resistance will move the technical indicators towards overbought levels, and currently the closest resistance levels for the EUR/USD pair are 1.1045, 1.1120, and 1.1200, respectively. In the event that the US GDP numbers - an additional inflation reading - and the US weekly unemployment claims number are positive, the dollar may find the opportunity to compensate for some of its losses. Accordingly, the support levels 1.0920 and 1.0880 may be the most important, and breaking the latter is a breach of the current bullish trend.

USD/JPY Technical Analysis: Stronger Bullish Trend

Stocks rose and the US dollar fell after US inflation fell faster than investors expected in March. The share of the USD/JPY currency pair was a decline to the support level of 132.73, down from the resistance level of 134.04 recorded prior to the US economic data numbers and the contents of the minutes of the last meeting of the US Federal Reserve.

According to the official announcement, the headline CPI inflation rate rose 0.1% month-on-month in March, which was half of the 0.2% increase the market had expected. This also represents a significant slowdown from February's rise of 0.4%. This dragged down year-on-year growth to 5.0% in March, down from 6.0% in February and the consensus forecast of 5.2%.

Also, according to the forex market trading, the US dollar fell in general in the wake of the numbers: the pound-to-dollar exchange rate (GBP/USD) rose by half a percent to 1.2464 and the EUR/USD rose by a similar margin at 1.0990. Gains in EUR/USD and GBP/USD may have been tempered by very important core inflation data which did not present any surprises and, in general, kept alive the possibility of another US rate hike.

Core inflation rose 0.4% in March, down slightly from 0.5% in February, but on target with consensus expectations. The annual gain stood at 5.6%, again in line with expectations, but slightly above February's reading of 5.5%. Factors causing the decline in US inflation include lower energy bills, used vehicles, restaurant bills, and medical services.

Commenting on this, Ryan Brandham, head of global financial markets at Validus Risk Management, says that inflation in the United States is declining at the very least, even if not as fast as the Fed wants. He added, “The US economic data has softened recently, which will satisfy the Federal Reserve, and this latest release does not affect this issue in the market.”

The declines in inflation are consistent with Truflation data, which shows that the utilities, healthcare, education, and food and alcoholic beverages sectors are all driving the rate lower. The Truflation Index, compiled using millions of data points taken in real time and traded daily, shows US inflation at 4.3% as of April 12. Analysts now say the recent banking crisis appears to have overtaken the Fed, and that could lead to another 25 basis point hike to "really make sure that inflation dies." However, with a credit crunch already underway, there may be enough drivers now to bring down inflation without a further increase.

Forecasts of the US dollar against the Japanese yen today:

• The USD/JPY gains stopped following the US inflation figures, which did not stop the course of the current bullish trend for the currency pair.
• For the bulls to have strong and continuous control over the trend, the currency pair should move towards the resistance levels 135.10 and 136.50, respectively.
• On the other hand, upward hopes may arise if the currency pair returns to the vicinity of the support level 131.70 again.

Today's US inflation readings - the Producer Price Index - and the number of weekly US jobless claims - and tomorrow the US retail sales and consumer confidence readings will paint a picture of closing the trading of the currency pair for this week, which is the closest to an upward trend.

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