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On April 6, German Berenberg Bank said that due to the strong reaction of some US trading partners to the new tariffs and the widespread uncertainty, European economic sentiment in the second quarter may be worse than we previously expected. We lowered our forecast for real GDP growth in the euro area and the UK in the second quarter by 0.1 percentage point to 0.1% and 0.2% month-on-month respectively. This will lower our annual forecast for the euro area economy in 2025 to 0.9%, and our economic forecast for the UK in 2025 and 2026 to 0.9% and 1.3%, respectively.April 6, Germanys Berenberg Bank said that tariff uncertainty has not yet reached its peak. Trumps tariff shock has laid the foundation for negotiations. As long as the results of Trumps negotiations with various countries are unknown, companies around the world may hesitate to invest in the United States or its most affected trading partners. The failure of these negotiations may lead to rounds of tit-for-tat retaliation. Trump may also add new tariffs on specific industries, including medicines, which have so far been exempt from his reciprocal tariffs. We assume that in response to rising US inflation, economic turmoil and threats of retaliation, the United States will negotiate to cancel about half of its new tariffs on Europe by the end of the second quarter. Otherwise, the bank said it would have to further lower its forecasts for US and eurozone growth.The strong earthquake in Myanmar has killed 3,564 people, injured 5,012 people, and left 210 people missing.On April 6, German Berenberg Bank said that downward pressure on US economic growth has intensified. Based on the reciprocal tariffs announced on Wednesday, the sharp decline in US stocks (US households exposure to the stock market has reached a record high), and the continued rise in uncertainty that has hindered corporate investment and employment plans, we have lowered our forecast for US real GDP growth in 2025 from 2.3% to 1.7%, and GDP in 2026 from 2.0% to 1.6%. Due to the increase in tariffs and the recent rise in inflation expectations, we expect US inflation (measured by core PCE) to reach 3.0% in 2025, compared with the previous forecast of 2.7%.European Commission President Ursula von der Leyen will meet with British Prime Minister Starmer in London on April 24.

Watching the foreign exchange market on October 19: technical analysis of the euro, the pound and the Australian dollar

LEO

Oct 26, 2021 10:52

Currency: EUR/USD



Resistance 2: 1.1680
Resistance 1: 1.1640
Spot price: 1.1619
Support 1: 1.1595
Support 2: 1.1525

The US dollar was weak during the US session, and the euro/US dollar traded near the intraday high of 1.1610. US economic data was weaker than expected, and US stocks performed better after falling European and Asian stock markets, boosting the euro/dollar. At present, the focus of the market is still on the yield of U.S. Treasuries, which is the most concerned indicator of inflation pressure in the market. The 10-year U.S. Treasury yield once hit a high of 1.627%, but then quickly fell below 1.60%, further increasing the weakness of the dollar at the close. On the daily chart, the bullish momentum for the euro/dollar is still limited. The stable and bearish 20 SMA constitutes resistance, while the large-level moving average maintains a bearish tendency and is above the short-term moving average. The kinetic energy of technical indicators is not balanced. They are regaining lost ground, but remain in the negative zone, indicating that the exchange rate will consolidate rather than bottom out. The 4-hour chart shows that the EUR/USD is above the 20SMA and 100SMA, and the short-term moving average is about to cross the long-term moving average. The kinetic energy indicator was flat near the midline, and the relative strength indicator fell from the intraday high and is still above the midline. If the euro/dollar breaks through 1.1640, the exchange rate may continue to rise, if the euro/dollar breaks below 1.1595, the short position may increase.

Currency: GBP/USD



Resistance 2: 1.3820
Resistance 1: 1.3750
Spot price: 1.3744
Support 1: 1.3690
Support 2: 1.3640

Data show that the monthly rate of retail sales in the United States in September was the same as the previous value, an increase of 0.7%, unexpectedly better than expected -0.2%, and the previous value was revised up from 0.7% to 0.9%. The monthly rate of core retail sales increased by 0.8%, which was also better than expected 0.5%. The beautiful data and the impressive performance of Bank of America's earnings report that week boosted market risk appetite. Among the risky currencies, the pound is clearly the leader, because the UK's interest rate hike expectations are constantly rising. However, it is still under the pressure of the downward trend line since the high point of the year. The daily chart regained the ground lost earlier with the big Yang line, and the recent rebound has been strong. However, the current test of the downward trend line since the July 30 high is still cautious about further upwards. The 4-hour chart broke through the previous day's callback high, but the stochastic indicator diverged bearishly. The hourly chart oscillates ascending short-term and there is a callback signal above 1.3770. Only above 1.3820 is above the breakthrough, which shows a clear upward trend.

Currency: AUD/USD



Resistance level 2: 0.7478
Resistance 1: 0.7440
Spot price: 0.7424
Support 1: 0.7385
Support 2: 0.7330

The weekly chart shows that the AUD/USD seems to be preparing to continue the upward trend. The AUD/USD has expanded its rebound from the flat 100 SMA, and was above the bearish 20 SMA last week. At the same time, the technical indicators remain upward, about to cross the midline and enter the positive zone.

The daily chart shows that the AUD/USD may be close to finishing down. AUD/USD is currently trading directly above the mildly bearish 100 SMA, while the technical indicators are near the overbought indicators, losing bullish momentum. AUD/USD faced strong resistance at the monthly high of 0.7477 in September. If AUD/USD breaks through the resistance, it will approach the 0.7600 area. In addition, if the AUD/USD drops below 0.7330 and falls to the 0.7200 area, the AUD/USD will turn bearish.

Wang Gang, Bank of China Guangdong Branch

Source: Bank of China official website

Original Title: Forex Market Watching on October 19, 2021

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