2023 April Outlook for G7 Currencies
2023 April Outlook for G7 Currencies
Dollar
Fundamental perspective:
In April, weakness in the US dollar lingered as price failed to break the key psychological level of 102. Mixed economic data indicated patchy growth in different parts of the economy, with manufacturing continuing to lag the services sector. Inflation remains persistent, albeit slowing, and wage inflation remains sticky. However, there is an overall contraction in the economy as advance GDP fell in the first quarter of this year. As the Fed approaches its terminal rate, markets are anticipating a 25bps hike in May; however, if the Fed’s peers continue to raise rates, the dollar may continue to weaken.
Technical perspective (EUR/USD):
On the daily timeframe, price is testing a resistance zone at 1.1120, in line with the graphical high. A break above the upside confirmation level could provide the bullish acceleration for a move higher to the resistance zone at 1.1350. Failure to hold above the support zone at 1.0950 could see prices push lower to test the next support zone at 1.0780. Price is holding above 20 EMA and Ichimoku cloud, supporting our bullish bias.
| S1 | S2 | R1 | R2 |
| 1.0950 | 1.0780 | 1.1120 |
1.1350 |
Yen
Fundamental perspective:
The yen weakened to a two-month low, with USD/JPY rallying above $137 after new BoJ Governor Ueda’s inaugural press conference in April. He scrapped the BoJ’s forward guidance, while calling for a 1-1.5-year long policy review, increasing the BoJ’s manoeuvring room. While Ueda left the BoJ’s stimulus measures untouched, his first meeting was seen as largely dovish, disappointing the yen bulls expecting normalisation in the BoJ’s monetary policy. The BoJ expects positive wage growth this year, which could see policy tweaks as early as July, with the timeline especially pertinent as speculation swirls around an early election.
Technical perspective:
Price is showing bullish order flow on the daily timeframe, with higher lows and higher highs being formed. Price tested the resistance level at 137.20, after bouncing off the support-turned-resistance zone at 133.80. A break above the upside confirmation level could provide the bullish acceleration for a move higher to the resistance zone at 141.50. Price is currently holding above 20EMA and Ichimoku cloud, supporting our overall bullish bias for USDJPY pair.
| S1 | S2 | R1 | R2 |
| 133.80 | 131.20 | 137.20 |
141.50 |
Gold
Fundamental perspective:
Gold continued its climb higher, reaching a year-high of $2048 per ounce as investors weighed the imminent end to the Fed’s hiking cycle with worries about persistent inflation. Still, with the long-term real return of gold being barely positive even in times of high inflation, gold could remain attractive to investors looking for an inflation hedge. The renewal of fears about US banking stability, brought on by the sale of troubled bank First Republic to banking giant JP Morgan, is providing additional support to the price of gold.
Technical perspective:
Prices are testing the resistance-turned support zone at 2009.20 on the daily timeframe, after having broken above it. A throwback to this zone can could provide the opportunity to play the bounce towards the next resistance zone at 2040.80. Price is trending above the 20 EMA and Ichimoku cloud, supporting our bullish bias.
| S1 | S2 | R1 | R2 |
| 1978.80 | 1954.80 | 2009.20 | 2040.80 |
