FX Midweek Outlook 6 April 2023

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On Tuesday, Australia is conservative by maintaining its interest rates at 3.60% while New Zealand on the other hand raised its rates by 50bps, which is twice the size expected.

It’s the NFP week but one thing to keep in mind is that banks in most major economies are on holiday on Good Friday. This could lead to more volatility as liquidity gets thinner.

Banks on Holiday: NZD, AUD, CHF, GBP, CAD

NFP numbers are expected to decline from the previous 311k to 236k, alleviating some inflationary pressure from the tight labor market. If actual matches or even comes out lower than forecast, we could see the dollar losing its strength further as there is now a lesser need to raise rates or maintain rates at a high level.



The Euro started to gain against the dollar Monday after it bounced off the 1.0770 support level. Interest rates differential and relative expectations continue to be the current theme at play that tilts the favor more towards the Euro. The US might be nearing or at the end of its hiking cycle, but the ECB isn’t done yet as inflation remains high in the Eurozone. 

Should the dollar’s weakness persist, we could see the pair testing the 1.1015 level if volatility surges Friday due to payroll data. If not, the 1.0770 is a very solid short-term support.



On the technical front, the Sterling has been creeping upward against the US dollar for about a month now. Bulls managed to push the price above the 1.2420 level and reach a multi-month high on Tuesday but it seemed like there was insufficient momentum to keep the move going. We are now trading back at the 1.2420 level and once again, the pair could continue to range before the main event tomorrow.

If GBPUSD does take a dive, the ascending trendline might be a good place to look for an opportunity to go long. Otherwise, 1.2670 looks to be a lucrative target area for buyers.

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