Solid ECN—The Swiss franc has remarkably recovered, climbing to 0.91 against the US dollar from a seven-month low of 0.92 on May 1st. This rebound was sparked by unexpectedly high inflation data, which reduced the market's expectation that the Swiss National Bank (SNB) would further relax monetary policy. In April, inflation surged to 1.4% from a low of 1% the previous month, significantly exceeding forecasts of 1.1%.
Inflation Concerns Shape Policy
The recent jump in inflation rates is noteworthy, especially since the SNB had warned that prices could be unstable due to global tensions and a relaxed stance on the franc. Although foreign currency reserves have increased, the rapid inflation has fueled worries about potential ongoing price rises. These concerns have led to speculation about whether the SNB will reduce interest rates again in June.
Dollar's Influence on the Franc
Additionally, the franc's strength was bolstered by a weakening US dollar after the Federal Reserve avoided strong indications of future rate hikes. This backdrop provides a complex landscape for forex traders and investors, suggesting a cautious strategy approach.
Solid ECN – The EURUSD currency pair pulled back from last week's trading session's 61.8% Fibonacci support level. As of posting, the pair trades around the 1.078 mark, clinging to the descending trendline on the 4-hour chart.
Technical indicators suggest a bullish trend. However, for the uptrend to continue, the bulls must close and stabilize the price above 1.079. If this scenario comes into play, the European currency will likely gain more ground against the U.S. dollar, with 1.081 as the initial target, followed by the 1.083 mark.
Conversely, the downtrend will likely continue if the EURUSD price dips below the 1.075 minor support. In this case, bears would test the 1.073 level, followed by the 50% Fibonacci support.
Solid ECN – Gold has declined from $2,378 against the U.S. dollar on May 10 and is currently trading around $2,340. With technical indicators signaling a bearish trend, the dip is likely to extend to the EMA 50, a level supported by the lower line of the bullish flag.
Given the primary bullish trend, the EMA 50 can provide a good opportunity for traders and investors to join the bull market.
However, if the XAUUSD price dips below the 38.2% Fibonacci level, the downtrend will likely extend to $2,306, followed by the 50% Fibonacci support level.
Solid ECN – The Euro has strengthened above $1.078, reaching a five-week high. This rise comes as investors focus on important US and Euro Area economic data. Key figures like US inflation, first-quarter GDP, and employment statistics are closely monitored, as they could influence future monetary policies.
ECB and Fed Rate Expectations
The European Central Bank (ECB) is expected to start cutting interest rates in June, with a projected reduction of around 70 basis points this year. In contrast, the Federal Reserve will likely delay its rate cuts until September, with anticipated decreases of less than 45 basis points. These differing timelines reflect each central bank's response to their respective economic conditions.
Bank of England's Potential Moves
The Bank of England maintained its interest rates unchanged in May. However, a rate cut during the summer is possible. This potential move signals the bank's readiness to adjust its policy in response to economic developments.
