U.S. Dollar Retreats As BoJ Intervenes To Support The Yen: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Is Under Strong Pressure

U.S. Dollar Index is losing ground as traders react to economic reports, central bank decisions and forex market interventions.

GDP Growth Rate was +2.0% in the first quarter, compared to analyst forecast of +2.3%. The report showed that AI investment provided support to the economy, although the report missed analyst estimates.

Currently, U.S. Dollar Index is trying to settle below the support at 98.00 – 98.15. In case this attempt is successful, U.S. Dollar Index will move towards the next support level at 97.35 – 97.50.

EUR/USD Moves Higher As Traders Focus On ECB Decision

EUR/USD gains ground as traders react to ECB Interest Rate Decision. The European Central Bank left the rate unchanged at 2.15%, in line with analyst estimates.

ECB President Christine Lagarde signaled that the bank could discuss an interest rate hike at the meeting in June as high energy prices pushed inflation towards higher levels.

EUR/USD attempts to settle above the 50 MA at 1.1718. If EUR/USD manages to settle above the 50 MA, it will move towards the nearest resistance, which is located in the 1.1765 – 1.1780 range.

GBP/USD Tests Resistance At 1.3570 – 1.3585 After BoE Decision

GBP/USD gained upside momentum as traders focused on the BoE Interest Rate Decision. BoE left the interest rate at 3.75%, meeting analyst estimates.

One BoE member voted for a hike. However, BoE indicated that rates would increase in case energy prices did not pull back soon. Traders believe that BoE will be forced to raise rates at the next meeting, which is bullish for GBP/USD.

From the technical point of view, GBP/USD attempts to settle above the resistance level at 1.3570 – 1.3585. If GBP/USD manages to settle above the 1.3585 level, it will move towards the next resistance at 1.3650 – 1.3665.

USD/CAD Pulls Back Amid Rising Demand For Commodity-Related Currencies

USD/CAD pulled back as traders reacted to Canada’s GDP report and focused on the dynamics of commodity markets. Canada’s GDP was unchanged in March, compared to analyst forecast of -0.1%.

Oil prices pulled back, while precious metals markets moved higher. The pullback in the oil markets boosted demand for risk assets and provided support to commodity-related currencies.

In recent weeks, rising oil prices have served as a negative catalyst for commodity-related currencies as they could put too much pressure on global economy and reduce demand for commodities.

A successful test of the support at 1.3620 – 1.3635 will push USD/CAD towards the next support level at 1.3535 – 1.3550.

USD/JPY Dives As BoJ Intervenes

USD/JPY suffered a strong sell-off as BoJ intervened to provide support to the Japanese yen.

Interestingly, Japan’s officials warned speculators ahead of the intervention. Atsushi Mimura, Japan’s currency official, told speculators that it was “final advisory if you want to escape” before the BoJ intervened.

The difference between interest rates in the U.S. and Japan serves as a major bearish catalyst for the Japanese yen. High energy prices put additional pressure on the Japanese currency.

To make the intervention successful, the Bank of Japan should continue to sell dollars. If BoJ does not push USD/JPY towards lower levels, speculative traders would resume buying USD/JPY.

In case USD/JPY settles below the 156.00 level, it will move towards the nearest support at 154.50 – 155.00. On the upside, USD/JPY needs to settle back above the resistance at 158.00 – 158.50 to have a chance to gain upside momentum in the near term.

If you’d like to know more about how to trade forex, please visit our educational area.