Monthly Forecast : #EURUSD & #USDMXN (May 2024)

EUR/USD Monthly Forecast: May 2024

• The EUR/USD is trading near the 1.07015 mark as of this writing, which is a bullish accomplishment considering the currency pair touched a low of nearly 1.06000 on the 16th of April.
• The shift in sentiment regarding a more cautious Federal Reserve has essentially been cemented over the past few weeks as inflation data from the U.S has remained sticky, and changed the rhetoric of FOMC members who have been speaking in public.
• The potential of a U.S Federal Funds Rate cut in the mid-term has now almost vanished and become a hoped for interest rate cut late this summer or sometime in the fall, this if the U.S economy behaves.

As the month of May gets ready to start it will be met with a bang as the U.S Federal Reserve steps to the podium this Wednesday and delivers its FOMC Statement. Last week’s stubborn U.S inflation outcomes have brushed away any optimism that may have existed for a rate cut in June. However, intriguingly the EUR/USD has actually climbed upwards since Tuesday the 23rd of April when the currency pair was around the 1.06375 level.

Lack of Confidence in the European Central Bank to Become Proactive

The EUR/USD is now fighting near the 1.07000 mark which is important psychologically for technical traders and this may last for a bit longer. The U.S will also issue jobs numbers this Friday which will factor into the EUR/USD over the remainder of this week. Germany today published slightly weaker than anticipated Consumer Price Index numbers, but the European Central Bank is likely going to take its cue from the U.S Federal Reserve during the month of May and remain cautious.

The ability of the EUR/USD to dive lower with a rapid pace caught some speculators off guard. The largest fall occurred on the 10th of April when Consumer Price Index numbers in the U.S came in stronger than expected. These higher inflation results helped take the EUR/USD which was around the 1.08670 ratio before the CPI report was published, to the 1.07300 as the day progressed. The ECB held their monetary policy pronouncements the very next day and a low on that Thursday the 11th of April came in around the 1.07000 level, which intriguingly enough is the vicinity the EUR/USD is trading now.

Equilibrium and Nervousness in the EUR/USD

The EUR/USD has shown the ability to trade lower and looking at its one month technical chart the currency pair remains within the lower elements of its price range. The lowest depth for the EUR/USD in the month of April challenged values not seen since the 2nd of November. The 1.06850 to 1.07250 range may feature within the near-term as financial institutions await the FOMC Statement.

• But here’s the thing, the Fed rhetoric this week is unlikely to deliver more clarity.
• Certainly they will try to stay cautiously optimistic, but will it be enough to create equilibrium for the EUR/USD above the 1.07000 mark and launch an upwards attack on the 1.08000 level?

EUR/USD Outlook for May 2024:

Speculative price range for EUR/USD is 1.06775 to 1.07650

Speculators have seen choppy trading in the EUR/USD for the past four months and this is likely to continue during May. The value of the EUR/USD in April created a wide price range. Now that most financial institutions likely believe the Fed will remain cautious, this might create a bit of a tighter value band moving forward. However, speculators will still need to be careful. Traders who believe the EUR/USD is oversold need to make sure they aren’t simply biased against the USD.

While it may seem logical to believe the EUR/USD will gain over the mid-term and reestablish stronger values, traders looking for upside should remain realistic regarding their goals. If the EUR/USD is able to sustain value above the 1.07000 level this would be a positive sign, but bullish speculators may not jump into long positions until the 1.07500 mark proves it is durable as support. Traders looking for values below should also practice caution and moves below the 1.06775 ratio may be too far.

USD/MXN Monthly Forecast: May 2024

• The US dollar has been bullish against the Mexican peso during the bulk of the month of April.
• That being said, I don’t necessarily think this means anything other than we have found an area where people are willing to take profit.

When you look at the longer-term charts, the 16 pesos level is an area that is a major support level. Because of this, it should not be a huge surprise that we have seen the market bounce the way it has. Furthermore, we have a lot of questions to ask around the world right now as far as risk appetite is concerned.

We tested the 50-We EMA a couple of times during the month of April, but ultimately, we continue to see a lot of overhang as far as pressure is concerned. Because of this, I would assume that the downward pressure continues, mainly due to the fact that there is a massive interest rate differential, as Mexico has a massive amount of interest attached to its currency, in the form of 11.75%. While the US dollar does enjoy historically high interest rates as far as the last 15 years is concerned, the reality is that the Mexican peso is an entirely different world as far as interest is concerned.

Traders will continue to get paid to be short of this market, but I also believe at this point in time you also need to pay close attention to risk appetite. After all, the Mexican economy is not one that people want to throw a ton of money into in times of huge concerns. With that being said, if we were to break above the 18.50 MXN level, then I think this is a market that could truly take off to the upside. On the other hand, if we break down below the 16 MXN pesos level, then we could really start to see the US dollar unwind. In general, the market is likely to see the US dollar shrink against almost everything else, not just the Mexican peso. On the other hand, if we see a major “risk off move” in the market, emerging market currencies like the Mexican peso will get decimated. At the end of the day, I would not be surprised at all to see this market bounce around between 16 pesos and 18 pesos for the month.

GFHGFH