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EUR/USD rises ahead of Eurozone inflation data. FTSE head higher as earnings impress.
 

EURUSD rises ahead of Eurozone inflation data

The euro is rising after 4 days of losses amid a weaker USD and as investors digest weaker-than-expected German retail sales and look ahead to the release of eurozone inflation data.

German retail sales plunged -2.4% MoM in March, after falling -1.3% in February. Expectations had been for a +0.4% rise. The data highlights the pressure that households are under as inflation remains elevated and interest rates rise.

Eurozone inflation is coming into focus and is expected to tick higher to 7% YoY in April, up from 6.9% in March. Core CPI is forecast to hold steady at 5.7%.

Eurozone manufacturing PMI will also be under the spotlight and is expected to confirm the preliminary reading of a contraction in the sector to 45.5, down from 47.3.

The data comes ahead of the ECB rate decision on Thursday, where the central bank is expected to weigh up both a 25 basis point and a 50 basis point hike.

Hot inflation, but cooling growth could tip the balance towards a 25 basis point hike.

Meanwhile, the USD is falling after several days of gains after a warning from Treasury Secretary Janet that the US could run out of money by June 1^st if no agreement over raising the debt ceiling is reached.

US factory orders and JOLTS job openings are in focus as the Fed’s 2-day interest rate meeting begins.
 

EURUSD outlook: technical analysis

EURUSD appears to have found support on the 20 sma at 1.0970 and is edging higher, although the RSI bearish divergence raises questions over the pair’s ability to keep pushing higher. That said a monthly close above 1.10 on Friday could keep buyers optimistic.

Buyers will look for a rise back above 1.10, the psychological level, to bring 1.1095, the April high, into focus. Beyond here 1.1185, the March 2022 high comes into play.

Sellers will look for a break below the 20 sma and last week’s low of 1.0970 to extend the selloff towards 1.0930, a level that has offered support and resistance on several occasions this year.

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FTSE head higher as earnings impress

The FTSE is set to open higher after the long weekend and as investors digest encouraging earnings from heavyweights HSBC and Shell.

HSBC reinstated its dividend and announced a share buyback program after profits tripled thanks to rising global interest rates and the reversal of a $2 billion impairment charge against the planned sale of its French business.

BP posted a rise in profits to $4.96 billion in Q1 thanks to strong oil and gas prices. This was up from $4.8 billion in Q4 2022 and well ahead of forecasts of $4.3 billion. BP also said that it will repurchase a further $1.75 billion of shares over the coming three months.

The UK economic calendar is quiet. Nationwide house prices rose by 0.5% in April after falling for the previous seven months, suggesting that the property market has stabilized after the mini-budget upheaval.

Looking ahead, sentiment could be driven by the US, with factory orders and JOLTS job openings that could drive Fed expectations ahead of tomorrow’s interest rate decision.
 

FTSE outlook: technical analysis

The FTSE has rebounded from last week’s low of 7790, rising back above the 20 sma as it rises towards 7900.

The RSI above 50 and the 20 sma crossing above the 500 & 100 sma keep buyers hopeful of further upside.

Buyers will look for a rise above 7920, the falling trendline resistance, and 7940, the April high a rise above here creates a higher high. Beyond here a rise above 7975, the March high is needed to extend gains towards 8046 the all-time high.

On the flip side, Immediate support can be seen at 7840 the 20 sma, and rising trendline support. A break below here opens the door to 7790, the April 28 low, and the 50 sma at 7760.

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