The calendar for the week after the NFP is usually light in economic events, but this doesn't mean there can't be opportunities in the FX market.
Traders will be paying attention to the US inflation which will be in the spotlight with expectations to keep rising. The US PPI m/m data will also be closely watched.
The UK GDP is also coming Thursday and is expected to reflect a slower economic growth. Even if the UK economy has been resilient overall since the beginning of the year, elevated energy prices had a negative impact, especially on consumer purchasing power. Services activity and retail sales were also affected.
At the last FOMC meeting the federal funds rate rose 50 basis points with another rate hike expected in June. Meanwhile, some Fed speakers are scheduled to deliver remarks this week.
The war in Ukraine remains a major concern for the euro area and will influence the market for the foreseeable future.
The euro has room to weaken further as the Euro area will be influenced in the near future by the economic slowdown in China. There is a risk of recession and the French parliamentary elections in June could also have an impact. Even if expectations for the ECB to raise rates are growing and some members like Villeroy mentioned that above-zero rates by year-end are "reasonable", a rate hike in June is still seen as unlikely according to analysts from Scotiabank, so unless this becomes a strong possibility, there won't be significant movements in the market for EUR.
EUR/USD closed the week near the 1,0485 level of support. From a technical perspective on the H4 chart EUR/USD needs a correction somewhere around 1.0740 or even 1.08450 and if no significant event happens this week, it could resume its downtrend and test the next level of support at 1,0365.
On the H1 chart USD/CAD looks good for buying opportunities. The pair is close to the 1.2940 level of resistance and a correction is expected until at 1,2780 which is the next level of support. If rejected, the pair could test the resistance at 1.3000.
The USD is still strong and usually supported by volatility and uncertainty. The pair is expected to appreciate further, but there can also be an opportunity to sell if the pair reaches 1.3000. The Fed tightening already appears to be priced in the market, but the market could re-evaluate the Fed expectations and reprice them lower if upcoming US data is soft.
There are no significant economic events in the calendar this week for the CAD, but for the USD comments from several Fed speakers are expected: Mester, Bostic, Williams and Waller. In conclusion, USD/CAD looks bullish in the short term.
This article was written by Gina Constantin.