The weakness in the yen has caused concern as the inflation report approaches. Investors are recalibrating their expectations for U.S. interest rate cuts this year in light of recent labor market data and central bank comments. Current market pricing points to a 60% probability of a 42 basis point cut in rates by September, as suggested by the CME FedWatch tool.
The EUR/USD pair remains flat around 1.0770 during early European trading hours on Monday. The pair is struggling to find clear direction ahead of major US events this week. The US April Producer Price Index will be announced on Tuesday, and the final data of the Consumer Price Index will be announced on Wednesday. Technically, EUR/USD has been stuck in a descending trend channel since mid-December 2023. In upward movements, 1.08 - 1.0835 levels can be followed as resistance points. In the alternative scenario, 1.0760 - 1.0720 levels can be followed as support points in downward movements.
The British Pound maintains gains above 1.25, inspired by strong UK Q1 gross domestic product data. The UK economy emerged from the recession seen in the second half of 2023, expanding by 0.6%. Investors are awaiting UK employment and US inflation data for new guidance. In the parity, 1.2563 - 1.2620 resistance points can be observed as 1.25 - 1.2410 support points.
The Japanese Yen fell further as investors remained uncertain about the BOJ extending the policy normalization process. It is estimated that the Japanese economy made a weak start to the year, contracting by 0.4% in the January-March period. The US Dollar will dance to the tunes of US consumer and producer inflation data. In the parity, 157.4 - 158.5 resistance points can be observed as 156 - 155 support points.
Gold fell after US Consumer Sentiment data showed a sharp decline in optimism and higher inflation expectations. Higher inflation could keep interest rates high, reducing the appeal of non-yielding gold. Rising XAU/USD is correcting and putting pressure on a key support level. Technically, 2340 - 2320 levels may come to the fore as support in the continuation of the declines. In the alternative scenario, 2355 -2373 levels appear in upward movements again.
Oil remains steady as investors await OPEC report and inflation data. Brent traded above $83 a barrel after gaining 0.7% on Monday, with U.S. crude near $79. The cartel's monthly in-depth review, which points to a slightly softer market amid disruptions in refinery operations and narrowing windows, comes about two weeks before members meet to decide policy. For Brent today, 84.3 - 85.8 levels can be followed as resistance and 82.8 - 81.7 levels can be followed as support.
European stock markets finished the day on a mixed note as the search for direction in global markets continued before the April inflation data to be announced in the USA on Wednesday. Stating that investors remain cautious due to the uncertainties regarding the future policies of the US Federal Reserve, analysts stated that it is highly unlikely that the FED will return to interest rate increases against inflation. In the continuation of the increases, 18900 levels may come to the fore above the 18780 resistance. In the alternative scenario, 18700 - 18600 levels appear in downward movements again.
Nasdaq finished the first trading day of the week with a mixed trend. Analysts pointed out that inflation data is expected to increase volatility in the markets and stated that the data and the statements of FED Chairman Jerome Powell will be followed by investors tomorrow. The data announced today revealed that the short-term inflation expectations of consumers in the USA have increased. In the continuation of the declines, 18100 - 18000 levels may come to the fore as support for the index. In the alternative scenario, 18200 - 18300 levels appear in upward movements again.
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