The common currency weakened against the USD yesterday ahead of the release of Eurozone’s preliminary PMIs and a teleconference of EU leaders, in which they are about to discuss EU’s response to the coronavirus outbreak. The main issue is to be how the EU will finance its response to the coronavirus led crisis, to help European economies, as major disagreements about the mutualisation of the debt continue to exist. As per Reuters, an EU official stated that it may take European countries until summer or even longer in order to agree, yet in the meantime we would also like to add that Euro scepticism tends to grow in some countries. Hence the event may be primarily of a political nature and to a lesser extent an economic one. It’s also an issue of impressions and should the EU leaders show that the conflict between Germany, Netherlands and Italy tends to be defused, it may count as a success and a positive for the common currency. We expect the common currency to be under pressure today as also the area’s preliminary PMIs for April are due out and are forecasted to drop, showing a wider contraction of economic activity for the Eurozone. EUR/USD dropped yesterday breaking the 1.0835 (R1) support line, now turned to resistance. We tend to be biased towards a bearish outlook for the pair as it broke below the lower boundary of its recent sideways movement. Should the pair’s long positions be favored by the market we could see EUR/USD breaking the 1.0835 (R1) resistance line and aim for the 1.0890 (R2) resistance level. Should the pair come under the selling interest of the market, we could see it breaking the 1.0775 (S1) line and aim for the 1.0750 (S2) level.
CAD strengthens slightly as oil prices get some support
The Loonie strengthened somewhat against the USD yesterday as oil prices got some support, while during the Asian session tended to correct lower. Oil prices tended to get some support as a number of OPEC members including Saudi Arabia stated that they were ready to take additional measures to stabilise the oil markets, yet it seems that more needs to be done for oil prices to recover substantial ground. Nevertheless, cutting production further by the OPEC+ group makes sense, yet the cuts may need to be substantially higher for oil prices to react positively. Please note that CAD enjoyed some support, despite Canada’s inflation rates decelerated to a 5 year low, under-performing market expectations underscoring how oil oriented the Loonie is. We tend to remain rather skeptical for any rise of the CAD, as long as the slump in oil prices remains, crippling Canada’s oil production and outlook. USD/CAD during the European session dropped below 1.4175 (S1) support line yet corrected higher during the American and Asian session later on, recovering some ground. As the pair broke the upward trendline incepted since the 17th of April, we switch our bullish outlook, initially in favour of a sideways movement. Should the bulls be in control, we could see USD/CAD aiming if not breaking the 1.4290 (R1) line. If the bears take over, we could see USD/CAD breaking the 1.4175 (S1) line once again and aim for the 1.4050 (S2) level.
Other economic highlights today and early tomorrow
It’s going to be mainly PMI day today, as April’s Markit preliminary PMI’s for France, Germany, the Eurozone, UK and the US are to be released, in an effort to gauge the damage done their respective economies from the coronavirus crisis. Other than that, in the European session, we get Germany’s more forward looking GfK Consumer Sentiment for May and UK’s CBI trends-orders for April. In the American session, we get from the US the number of building permits as well as the number of new home sales, both for March, while the most interesting US release is expected to be the initial jobless claims figure for the week ended 18th of April. During tomorrow’s Asian session, we get Japan’s CPI rates for March. As for speakers, please note that NY Fed President Williams is scheduled to speak about the Fed and the Main Street as affected by the coronavirus crisis.
EUR/USD 4 Hour Chart
Support: 1.0775 (S1), 1.0720 (S2), 1.0650 (S3)
Resistance: 1.0835 (R1), 1.0890 (R2), 1.0955 (R3)
USD/CAD 4 Hour Chart
Support: 1.4175 (S1), 1.4050 (S2), 1.3975 (S3)
Resistance: 1.4290 (R1), 1.4400 (R2), 1.4500 (R3)
