Two Trades To Watch: EUR/USD And Oil

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EUR/USD rises ahead of retail sales,  ECB minutes

EUR/USD is rising towards 1.0920 after five days of declines

The euro is finding its feet after stronger than expected German industrial production data, which showed that output rise 0.2% MoM in February, above the 0% forecast.

Looking ahead, Eurozone retail sales are due next and are expected to show sales rose 0.6% MoM in February, despite prices surging to a record high.

The minutes of the ECB’s March monetary policy meeting are also due to be released. They could shed some light on the level of concern among policymakers over inflation which is at 7.5%, almost four times the central bank’s 2% target. A more hawkish-sounding ECB could lift the EUR higher.

The USD index is falling away from a 23 month high reached in the previous session after the release of the Fed minutes, which were as hawkish as expected.

US jobless claims data will be in focus and is expected to show initial jobless claims fell to 200k, just down from 202k last week.

Where next for EUR/USD?

EUR/USD trades within a multi-month descending channel. The price slipped below the lower band of the falling channel yesterday but has managed to rise back into the channel today—the pair trades within a familiar range. Even so, the bearish crossover on the MACD, combined with the longer upper wick, suggests that there could be more downside to come.

Sellers would need a move below 1.0880, yesterday’s low in order to target 1.08, the 2022 low. Meanwhile, buyers could look for a move over 1.0940, yesterday’s high and March 28 low, in order to bring 1.10 the psychological level into play and open the door to 1.1120, a level which has offered both support and resistance on several occasions across the past few months.

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Oil rises from a 3-week low.

Oil prices fell 5.5% yesterday on the news that EIA member countries would release 60 million in oil reserves and the 180 million that the US had already announced.

An unexpected rise in crude oil inventories of 2 million barrels, against expectations of a 2.4 million draw, added pressure to the oil price, as did the hawkish-sounding Fed minutes.

However, prices are rising again as supply concerns persist. While the IEA release shows a solid political will to lower prices, this is still insufficient to totally fill the oil supply deficit. Meaning prices could still creep up.

The ongoing lockdown in Shanghai is also limiting the upside in oil.

Where next for oil prices?

Oil prices have been trending lower since March 24, forming a series of lower highs and lower lows. The price has broken below its 50 sma for the first time this year, suggesting that bullish momentum has stalled and bearish forces could dominate.

Support can be seen at 94.50, a level that has offered support and resistance on several occasions across the past six weeks. A breakthrough here could open the door to 91.50, the March low.

Resistance can be seen at 99.00, the 50 SMA and multi-month rising trendline a break above here and $100 the psychological level would bring  10.3.00 the falling trendline resistance and 108.00 the March 30 high into play.

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