EURUSD drops to fresh six-week low ahead of German inflation data

A cautious mood prevails in the market are traders return from a long weekend and react to the recently upbeat catalysts from the US. Also challenging the sentiment could be the geopolitical headlines from the Middle East, as well as the hawkish Fed concerns. However, the latest China data and anxiety ahead of this week’s top-tier catalysts restrict the momentum.

Against this backdrop, the US Dollar remains on the front foot and exerts downside pressure on the major currencies, as well as commodities. However, the AUDUSD joins Gold and crude oil to buck the trend while posting gains despite a firmer Greenback.

That said, EURUSD holds lower grounds at the six-week low whereas GBPUSD also stays depressed at the 1.5-month low. Moving on, USDJPY, USDCHF and USDCAD remain on the front foot while NZDUSD licks its wounds at the multi-day low.

Elsewhere, BTCUSD and ETHUSD extend the week-start fall as crypto traders prepare for Bitcoin halving.

Following are the latest moves of the key assets:

• Brent oil rises to a fresh high since October 30, piercing $89.00 as we write.
• Gold price prints half a percent intraday gains as bulls flirt with $2,260 after refreshing the record high with $2,265 the previous day.
• USD Index seesaws near the highest level since November 14, 2023, close to 105.00 at the latest.
• Wall Street closed mixed and so the Asia-Pacific stocks also edged lower. Further, traders in Europe and the UK appear optimistic during the initial trading hour.
• BTCUSD and ETHUSD both extend the previous day’s losses by falling nearly 4.0% each to around $66,500 and $3,360 at the latest.

US Dollar stays firmer as full markets return…

On Monday, US ISM Manufacturing PMI for March jumped to the highest level since November 2022 and joined the market’s cautious mood to propel the US Dollar Index (DXY) to a new high since November 14, 2023.

It should be noted that Fed Chair Jerome Powell pushed back concerns suggesting the US central bank’s immediate rate cuts while US Durable Goods Orders, GDP and Core PCE Price Index, also known as the Fed’s preferred inflation gauge, managed to defend the hawkish bias about the Fed and favored the DXY the last week.

Additionally, the Atlanta Fed’s GDPNow model predicts the US Q1 2024 GDP as 2.8% versus 2.3% prior and adds strength to the US Dollar.

Amid these plays, the odds favoring the Fed’s rate cut in June deteriorated from around 64% the last week to 56% and underpinned the US Dollar’s run-up.

On a different page, a suspension of China’s troubled real-estate developer Country Garden from trading on the Hong Kong Stock Exchange challenged the market’s optimism in Asia.

While the aforementioned catalysts favored the US Dollar, the EURUSD bears the burden of the European Central Bank (ECB) officials’ dovish tones suggesting sooner rate cuts. Also exerting downside pressure on the Euro pair could be the hopes of witnessing downbeat inflation from Germany, the old continent’s powerhouse. On the same line, GBPUSD also holds lower ground at the levels last seen during mid-February amid the market’s lack of confidence in the UK’s economic transition. Additionally, USDJPY holds onto the week-start rebound from the 10-SMA amid upbeat yields and the challenges for the Bank of Japan’s (BoJ) further rate hikes.

Further, AUDUSD rebounds from the lowest level in a month amid mixed data about inflation and employment, ignoring the dovish Minutes of the Reserve Bank of Australia’s (RBA) March meeting. It’s worth noting that the RBA Assistant Governor Christopher Kent showed uncertainty surrounding inflation and monetary policy outlook. Meanwhile, NZDUSD remains pressured at the lowest level since mid-November even as Reserve Bank of New Zealand’s (RBNZ) Governor Adrian Orr said that the bank is less focused on controlling inflation.

That said, the Gold price remains on the front foot at the highest level on record, making rounds to $2,255-60 by the press time, while ignoring a firmer US Dollar, as optimism surrounding Asia and hopes of witnessing lower rates from the major economies favor the bullion buyers.

The crude oil also rise to a fresh five-month high despite the upbeat US Dollar amid news that Israel bombed Iran's consulate in Damascus, suggesting more geopolitical woes in the Middle East and additional challenges for the oil supplies. Also favoring the energy buyers is the news of a reduction in the OPEC+ output in March.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

German inflation, second-tier US data to fuel volatility…

A return of the full markets after Good Friday and Easter Monday will join a slew of data from the West to fuel the momentum, especially challenging the commodity buyers amid the firmer US Dollar. However, the traders are likely to remain cautious ahead of Wednesday’s ISM Services PMI and Friday’s US jobs report. It’s worth mentioning that the anticipated weakness in Germany’s inflation data and a likely improvement in the US statistics like Factory Orders and JOLTS Job Openings could keep the EURUSD bears hopeful.

May the trading luck be with you!