May 19, 2023
DXY: The US dollar index is trading near 103.40. According to yesterday’s labor market data, last week the number of initial jobless claims was down to 242 thousand, below the expected 254 thousand. These statistics allow the Fed to continue raising interest rates at the next meeting. The head of the Federal Reserve Bank of Dallas, Lori Logan, is sure of this. She said that the current economic data is not yet suitable for a pause in the monetary tightening cycle. On the other hand, the negative factor for the dollar remains the risk of a default in the US, given the lack of a decision on the debt ceiling. In addition, the dollar is likely to correct today after a bullish rally observed since the beginning of the week.
SELL STOP 103.00/TP 102.20/SL 103.30
EUR/USD: The EUR/USD pair is consolidating near 1.0750. In the absence of significant economic releases, investors ponder the comments of European Central Bank (ECB) officials. Yesterday, the regulator’s vice-president, Luis de Guindos, said the ECB will have to continue raising interest rates in order to bring inflation back to the medium-term target of 2%, although most of the monetary tightening cycle has already been completed. The official also confirmed that he remains concerned about rising core inflation, especially in the services sector. As for the growth forecasts for the European economy, De Guindos suggested that this year it will be about 1%, while a technical recession will be avoided. Thus, the prospect of further rate hikes in the Eurozone could support the euro.
BUY STOP 1.0800/TP 1.0900/SL 1.0770
WTI: WTI oil is consolidating near $72.50. Pressure on prices comes from the possibility of further interest rate increases by the US Federal Reserve, as the labor market continues to be strong enough to support inflationary growth. In addition, the latest Chinese data disappointed traders, adding to concerns about the pace of Chinese economic recovery. Market expectations for growth in China may need to be eased as the slowdown in external demand puts much more pressure on the country. Against this background, the decline in oil may continue.
SELL STOP 72.40/TP 71.00/SL 72.90