EUR/USD, FTSE Forecast: Two trades to watch

EUR/USD falls on concerns over the German recovery & on hawkish Fed comments

German industrial output falls -3.3%
Fed speakers see rates unchanged in 2024
EUR/USD tests 1.0750

EUR/USD is under pressure, falling for a second straight day amid strong U.S. dollar and concerns over Germany's economic recovery.

German industrial production slumped again in March, falling 0.4% month over month from 1.7% in February. Across the year, industrial production fell -3 %. The data comes after factory orders unexpectedly dropped yesterday and is a reminder that despite the recent batch of encouraging data over the last few weeks, the bottoming out of the German economy does not automatically result in a strong recovery.

Highlighting concerns over the outlook for the German economy, the economic institute IW warned that growth in the eurozone's largest economy is likely to stagnate in 2024 despite a stronger start to the year.

Meanwhile, the US dollar is pushing higher for a second straight day, supported by hawkish Federal Reserve comments and as the post-Fed meeting weakness fades.

Fed speakers overnight supported the view that the Fed will keep interest rates high for longer. Minneapolis Fed president Neel Kashkari suggested that the US central bank may not cut interest rates at all this year due to stubborn inflation.

His comments were in contrast to those of Federal Reserve Jerome Powell, who said that while the process of cooling inflation is taking longer than anticipated, he still considered that the Fed will cut this year.

A lack of U.S. economic data in the coming days means that the main focus will be on fed speakers, with several more officials due to speak later today.

EUR/USD forecast – technical analysis

After facing rejection at 1.08, the 200 SMA, EUR/USD has fallen lower and is retesting the 1.0750 late April high. The RSI is neutral, giving away a few clues.

Sellers, encouraged by the long upper wicks on recent candles suggesting that demand was weak at the higher prices, will look to take out 1.0750 to extend losses towards 1.07, the February low. Below here, 1.0640 comes into play.

Should buyers successfully defend 1.0750, a recovery will need to retest 1.08, the 200 SMA and last week’s high, to extend gains towards 1.09.

FTSE rises to fresh all-time highs ahead of the BoE rate decision tomorrow

A diverse range of companies lift the index
BoE rate decision is tomorrow no change is expected
FTSE rises above 8350 to a record high

The Footsie 100 has risen to a fresh all-time high, boosted by a diverse range of blue chip stocks, and nd ahead of the Bank of England interest rate decision tomorrow.

The UK index has risen over 5% across April as it's finally come into its own. The FTSE index, which lacks tech stocks, has lagged behind its peers, missing out on the rally in Q4 of 2023 and Q1 of 2024. Instead, the FTSE is heavily weighted in financials and commodity stocks, which have recovered recently thanks to the improvement in Chinese economic data and on optimism that interest rates could soon be cut.

The FTSE is also benefiting from signs that the UK economy is starting to recover after yesterday's construction PMI rose to 53 in April, a 14-month high, whilst the services PMI released last week also recorded strong growth.

This week, attention is on the Bank of England's interest rate decision, which could potentially pave the way for a rate cut as early as June.

The Bank of England will meet tomorrow, and while a rate cut is not expected, attention will be on forward guiding and messaging. If the Bank of England were to start cutting interest rates in June, then we could see a tee-up for such a move in the May meeting.

In the March meeting, the central bank left rates unchanged at 5.25%, but the vote split was less hawkish than expected, with no hawkish descents for the first time since last September. Currently, the interest rate markets are pricing in a 45% probability of a 25 basis point rate cut in the June meeting, with a 25 basis point rate cut fully priced in for August.

FTSE forecast – technical analysis

After breaking out of the rising channel and above 8300, the FTSE is in unchartered territory and heading towards 8400. The RSI is in overbought territory, so buyers should be cautious. A pullback could be on the cards.

Immediate support could be seen at 8300, the round number. Below here, 8200 comes into play; a fall below this level could negate the near-term uptrend.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.