NZD/USD Slips as Powell Comments and US Data Dent Risk Appetite

Economic

Traders' Opinions

Summary:

The New Zealand Dollar dipped as investor appetite soured despite Wellington’s NZ$190 million social investment fund initiative.

SELL NZDUSD

Close Time

CLOSED

0.58700

Entry Price

0.57400

0.59700

0.57842 +0.00088 +0.15%

100.0

Pips

Loss

0.57400

0.59702

Exit Price

0.58700

Entry Price

0.59700

The New Zealand Dollar (NZD) fell sharply on Thursday, succumbing to risk-off sentiment and a firmer US Dollar, even as the domestic government unveiled a targeted NZ$190 million ($112 million) social investment fund aimed at improving long-term social outcomes. While the initiative underscores a fiscally responsible and data-driven policy direction, it failed to offset the pressure stemming from global macroeconomic headwinds and the enduring strength of the Greenback, particularly following comments from Federal Reserve Chair Jerome Powell.

At the time of writing, NZD/USD was trading at 0.5870, down 0.43% on the day, marking a reversal from earlier week gains. The Kiwi’s retreat underscores the market’s preference for safety as a murky economic outlook in both the US and New Zealand clouds sentiment.

In a development that typically might favor risk currencies like the NZD, US inflation data came in cooler than expected. April’s Producer Price Index (PPI) rose just 0.1% month-on-month versus expectations of a 0.3% increase, while core PPI eased to 0.2% from the prior 0.3%. On the surface, this reinforced bets that the Fed may be nearing its pivot point in the tightening cycle, potentially paving the way for rate cuts later this year.

However, the market reaction was far from straightforward.

Offsetting the soft inflation print, Federal Reserve Chair Jerome Powell delivered a subtly hawkish message, acknowledging that the Fed may need to adapt its policy framework to accommodate persistent and more frequent supply shocks — a nod to the structural changes underway in the post-pandemic global economy. “The framework needs to be robust to many circumstances, including a world where supply shocks may be more frequent and persistent,” Powell stated in remarks reported by Reuters.

His comments, while not overtly dovish, signaled a Federal Reserve still cautious about loosening policy too soon. This nuanced tone, combined with weaker-than-expected US retail sales figures (flat in April vs. 0.4% forecast), underpinned modest support for the US Dollar. Market participants interpreted Powell’s stance as an affirmation that the Fed is in no rush to ease, especially with inflation expectations still delicately balanced.

On the home front, the New Zealand government’s pre-budget announcement of a NZ$190 million social investment fund was met with a muted market response. Finance Minister Nicola Willis emphasized that the initiative aims to create “smarter, earlier” interventions to improve outcomes for vulnerable communities — a signal of Wellington’s continued commitment to data-led governance and fiscal prudence.

“It’s about government investing earlier, smarter, and with much more transparent measurement of the impact interventions are having,” said Willis.

Despite the program’s social merit and long-term focus, currency traders were unmoved, as the short-term economic outlook remains dominated by global factors, including China’s faltering recovery and uncertainty over the Reserve Bank of New Zealand’s (RBNZ) policy trajectory. Investors are awaiting concrete signs of domestic economic resilience before pricing in any substantial upside for the Kiwi.

Traders are now turning their attention to a pair of crucial domestic data points that could influence the NZD's next directional bias. Thursday evening’s release of the Business NZ Performance of Manufacturing Index (PMI), last seen at 53.2, will be scrutinized for signs of whether New Zealand’s industrial momentum is holding up. A soft reading could further dampen sentiment toward the Kiwi.

More critical, perhaps, is Friday’s RBNZ two-year inflation expectations survey. Previously at 2.06%, an uptick could reignite market expectations for prolonged RBNZ hawkishness — a possible support pillar for NZD. However, if expectations ease, it would reinforce dovish bets and increase downside risk.

Technical Analysis

From a technical perspective, NZD/USD has surrendered gains from earlier this week, falling back below the psychological 0.5900 threshold. Price action is struggling to maintain traction above the 23.6% Fibonacci retracement at 0.5900 and 78.6% Fibonacci extension at 0.5930. This area now acts as immediate resistance.

If downside momentum persists, the next key support lies around 0.5820 (38.2% Fibonacci retracement), with further weakness exposing 0.5740–0.5760, a zone defined by the 78.6% retracement and full Fibonacci extension levels.

Still, the decline could prove corrective rather than impulsive. Should NZD/USD hold above the weekly low of 0.5847 and manage to reclaim the 0.5900–0.5930 region, bulls may target a retest of the monthly high at 0.6023. A breakout beyond the April peak at 0.6029 and the November high at 0.6038 would clear the way toward 0.6070 — a key Fibonacci extension zone.

TRADE RECOMMENDATION

SELL NZDUSD

ENTYR PRICE: 0.5870

STOP LOSS: 0.5970

TAKKE PROFIT: 0.5740

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound rose on strong UK GDP data, while weaker manufacturing figures were overlooked. Markets await Fed Chair Powell’s speech for cues on U.S. interest rates as the Dollar softens.

BUY GBPUSD

Close Time

CLOSED

1.32801

Entry Price

1.35000

1.32000

1.33248 -0.00064 -0.05%

34.4

Pips

Profit

1.32000

1.33145

Exit Price

1.32801

Entry Price

1.35000

The Pound Sterling surged on Thursday, climbing toward the 1.3300 mark against the US Dollar during European trading, buoyed by stronger-than-expected UK GDP data and broader weakness in the greenback ahead of a closely watched speech by Federal Reserve Chair Jerome Powell.

Sterling's rebound comes despite signs of industrial weakness, as investors weigh robust economic expansion in Britain against a backdrop of monetary policy uncertainty in the United States, where the Federal Reserve is increasingly seen as nearing the peak of its tightening cycle.

The Office for National Statistics (ONS) reported that the United Kingdom's economy expanded by 0.7% in the first quarter of 2025, exceeding consensus forecasts of 0.6%. This marks a sharp rebound from the previous quarter, when GDP growth was stagnant, and signals growing resilience in the face of elevated interest rates and inflation pressures.

On an annual basis, UK GDP rose 1.3%, marginally ahead of expectations (1.2%) though slightly slower than the 1.5% pace recorded in Q4 2024. The monthly breakdown showed that GDP increased by 0.2% in March, outperforming economists' expectations for flat growth. The surprise upside in GDP data has added fresh momentum to the Pound, as it implies that the Bank of England (BoE) may hold off on any immediate policy easing.

BoE Monetary Policy Committee member Catherine Mann reinforced that message earlier this week. Speaking to CNBC, Mann said monetary policy should remain restrictive due to persistent inflation risks and a still-resilient labor market. Despite recent softness in job growth, Mann emphasized that the market is undergoing a “non-linear adjustment,” not a dramatic slowdown, and warned against loosening policy prematurely.

However, the UK’s growth narrative isn’t without blemish. Manufacturing and Industrial Production contracted more than expected in March, with month-on-month figures showing a decline of 0.8% and 0.7%, respectively. Both indicators undershot the consensus forecast for a 0.5% contraction, suggesting that while consumer and service sectors are holding up, the industrial side remains under pressure—likely a consequence of persistent supply-side constraints and trade uncertainty.

Still, the broader macro picture, bolstered by strong GDP and a resilient services sector, is helping the Pound fend off downside risks. Markets are recalibrating expectations for the BoE’s interest rate path, which now appears increasingly tilted toward a prolonged pause rather than an imminent rate cut.

Meanwhile, in the U.S., traders are closely watching Fed Chair Jerome Powell’s upcoming remarks for any indication of a shift in tone following this week’s softer-than-expected Consumer Price Index (CPI) report. April CPI data showed inflation cooling more than anticipated, adding to speculation that the Fed might pivot to rate cuts later in the year, even as officials maintain a hawkish front.

Fed Vice Chair Philip Jefferson acknowledged the softer CPI numbers in remarks on Wednesday, describing the Fed’s current policy stance as “moderately restrictive.” However, he warned of looming uncertainties tied to new economic policies enacted by President Trump’s administration—including the impact of recently imposed tariffs. “If the increases in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation,” Jefferson cautioned.

According to the CME FedWatch Tool, markets now largely rule out a rate cut before the September meeting. Nonetheless, two 25 basis-point cuts are still priced in for 2025, contingent on continued disinflation and labor market moderation

Upcoming U.S. economic releases may sway market sentiment further. April’s Producer Price Index (PPI) is expected to show a slowdown in price pressures, with forecasts pointing to a 2.5% year-on-year rise in headline PPI, down from 2.7% in March. Core PPI, which strips out food and energy, is also projected to decelerate to 3.1% from 3.3%.

In tandem, retail sales—a key gauge of consumer spending—are projected to be flat in April, following a robust 1.5% jump in March. A soft retail print would likely reinforce the view that the U.S. economy is cooling, giving further impetus to the Fed doves.

Adding to the risk-on sentiment is the temporary truce between the U.S. and China. The two countries recently agreed to a 90-day pause on tariff escalation, cutting some levies by as much as 115% and pledging further negotiations. The reprieve, though fragile, has alleviated market fears of an imminent escalation in the trade conflict, offering breathing room for equities and risk currencies alike.

Technical Analysis

From a technical standpoint, the GBP/USD pair has reclaimed bullish momentum, trading back within a range previously capped between 1.32325 and 1.34155. After breaking below the 1.32325 mark, the pair staged a convincing recovery with a structure flip, signaling potential for further upside.

Should price action continue to hold above this range and confirm a clean retest, traders may target a revisit of the 1.34155 zone. A successful breach could pave the way for fresh yearly highs. For now, bulls are eyeing a 1:3 risk-reward long setup, anticipating renewed buying interest amid supportive macro tailwinds.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3280

STOP LOSS: 1.3200

TAKE PROFIT: 1.3500

Risk Warnings and Disclaimers

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Alan

Cryptocurrency

Summary:

The preliminary outcomes of the U.S.-China trade deals have bolstered risk assets, including Bitcoin.

BUY BTC-USDT

Close Time

CLOSED

102590.0

Entry Price

113000.0

96500.0

92185.0 +2630.2 +2.94%

240.5

Pips

Profit

96500.0

102830.5

Exit Price

102590.0

Entry Price

113000.0

Fundamentals

The current bullish thesis for Bitcoin is driven by two factors: the policy dividends following the U.S.-China trade deals and expectations of improved U.S. dollar liquidity. The newly enacted agreement between the two nations has reduced peak tariffs from 125% to normal levels, alleviating global supply chain pressures and mitigating U.S. import-driven inflation risks. This development indirectly supports the possibility of a Fed rate cut this year. Although the market's expectation for a September rate cut has declined to 51.8%, the core CPI has cooled for three consecutive months (April YoY: 2.3%), leaving room for a monetary policy pivot. If tonight's U.S. retail sales data (expected MoM: 0.8%) falls short of expectations, it could further reinforce easing expectations and drive a revaluation of risk assets.

Meanwhile, institutional capital flows indicate sustained long-term bullish sentiment. Despite recent single-day outflows from Bitcoin ETFs (e.g., Fidelity's FBTC saw an outflow of $96 million), cumulative inflows stay at $5 billion, with giants like BlackRock continuing to expand their holdings.

Market sentiment, as measured by the Crypto Fear & Greed Index, stands at 70 (indicating "greed"), slightly down from the previous 73 but still elevated. This suggests persistent optimism among market participants but also hints at potential overheating risks.

Technical Analysis

Awaiting Pullback for Long Positions, Potential to Reach New All-Time High _1

As reflected by the daily chart, Bitcoin has rebounded strongly after a deep correction, bottoming at 77,000 and resuming its upward trajectory. It recently tested the 61.8% Fibonacci extension (105,894) but faced resistance, showing signs of a potential pullback.

Regarding key indicators, the RSI is in neutral-to-strong territory but has retreated slightly, signaling weakened short-term upward momentum. Besides, the MACD remains bullish, though the histogram height has declined. In general, these indicators suggest an increased likelihood of a short-term pullback.

Bitcoin may retreat to the 100,000 support level. However, given its recent upward trend along the 20-day moving average (MA20), a break below 100,000 could see a deeper correction toward 98,000.

Buying after a retracement is recommended.

Trading Recommendations

Trading direction: Buy

Entry price: 101000

Target price: 113000

Stop loss: 96500

Valid Until: May 29, 2025, 23:00:00

Support: 100000/97896

Resistance: 105894/109800

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

Gold prices experienced a further decline on Thursday after breaching a pivotal support level. This downward trajectory was catalyzed by the escalating optimism regarding the China-U.S. trade agreement, which has alleviated market concerns over a more profound economic crisis and counterbalanced other factors that would typically bolster safe-haven demand.

SELL XAUUSD

Close Time

CLOSED

3183.05

Entry Price

2998.00

3248.00

4206.18 +8.27 +0.20%

649.5

Pips

Loss

2998.00

3248.15

Exit Price

3183.05

Entry Price

3248.00

Fundamentals

Gold prices plummeted to $3120 during the Asian session on Thursday, marking the lowest level since April 10. Since peaking in May, gold has witnessed a depreciation exceeding 8%.

The abatement of geopolitical tensions is poised to exacerbate bearish sentiment within the gold market. Concurrently, the mutual revocation of most equivalent tariffs by China and the U.S., coupled with the ongoing formulation of potential agreement details with India, Japan, and South Korea, has diminished the allure of gold as a safe-haven asset.

Moreover, with the easing of recessionary concerns in the U.S. economy, investors have been progressively paring back their expectations for a more aggressive easing stance from the Federal Reserve. This shift has been instrumental in driving up U.S. Treasury yields, which, in turn, should provide tailwinds for the U.S. dollar and place a lid on the upside potential for non-yielding gold prices.

In the run-up to the U.S. Producer Price Index (PPI) release later today, traders are likely to adopt a more cautious stance and refrain from making substantial bets. Additionally, remarks by Federal Reserve Chair Powell at the opening of the second Thomas Laubach Research Conference could introduce a meaningful catalyst for gold prices.

Descent Nears the Psychological Threshold of 3000 _1

Technical Analysis

The onset of a new wave of risk appetite early Thursday propelled gold prices below the $3150 mark, signaling that the significant correction from the $3500 peak would persist in generating bearish momentum.

Despite the Relative Strength Index (RSI) venturing into negative territory, the overarching downward trending structure remains intact. Any attempts at a rebound that surpass the near-term highs would be construed as a "bull trap."

Based on the equidistant pattern analysis, the current gold price decline is poised to test the psychological threshold of $3000, followed by a potential stabilization and subsequent rebound.

Trading Recommendations

Trading Direction: Sell

Entry Price: 3186

Target Price: 2998

Stop Loss: 3248

Valid Until: May 30, 2025, 23:55:00

Support: 3120/3100/3084

Resistance: 3193/3207/3231

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

Silver's rally loses steam as the US and China ease tariffs, undermining safe-haven appeal. Diminished Fed rate cut expectations and a shift in geopolitical risk sentiment weigh on XAG/USD, which hovers around $32.

SELL XAGUSD

Close Time

CLOSED

32.000

Entry Price

30.500

33.000

58.453 +0.136 +0.23%

100.0

Pips

Loss

30.500

33.003

Exit Price

32.000

Entry Price

33.000

Silver (XAG/USD) came under renewed pressure in early Asian trading on Thursday, shedding its recent bullish momentum and trading near the $32.00 per troy ounce mark. The pullback comes as appetite for defensive assets fades amid a notable easing in global trade tensions and a recalibration of monetary policy expectations from the Federal Reserve.

In a move that has reverberated across global markets, both Washington and Beijing have taken concrete steps toward de-escalating long-standing tariff hostilities. According to diplomatic and trade officials familiar with the matter, the United States has agreed to cut tariffs on a range of Chinese goods—from a punitive 145% down to 30%. In a reciprocal gesture, China will slash tariffs on U.S. imports from 125% to just 10%.

The dramatic reduction in cross-border trade barriers is viewed as a material shift in bilateral relations and signals renewed diplomatic engagement between the world's two largest economies. President Donald Trump, speaking in a televised Fox News interview, hailed the progress as "remarkable" and suggested that the White House is actively exploring a potential direct summit with Chinese President Xi Jinping to finalize a broader trade accord.

Michael Hart, President of the American Chamber of Commerce in China, echoed this optimism, stating that "a rollback in tariffs could reinvigorate supply chains, reduce input costs, and encourage foreign investment on both sides." Risk-sensitive markets responded in kind, with equity futures climbing and Treasury yields nudging higher, further undercutting demand for non-yielding assets like silver.

Compounding the downward pressure on silver is a discernible shift in expectations for U.S. monetary policy. Investors had previously priced in multiple interest rate cuts in 2025, anticipating a more accommodative Fed amid tepid inflation data. However, the improving global risk backdrop has prompted markets to walk back some of these dovish bets.

Still, softer-than-expected consumer inflation data for April injected a dose of ambiguity into the policy outlook. The U.S. Bureau of Labor Statistics reported a year-over-year increase in the Consumer Price Index (CPI) of 2.3%—below March’s 2.4% and slightly softer than economists’ consensus. Core CPI, which strips out volatile food and energy prices, rose 2.8%, matching expectations. On a monthly basis, both measures posted a 0.2% uptick.

While the inflation data briefly softened the U.S. Dollar and lent marginal support to precious metals, the underlying narrative remains one of waning inflation pressures in the short term—especially before the new round of tariffs takes effect in May.

Looking ahead, investor focus is shifting to Friday’s release of the U.S. Producer Price Index (PPI) and the University of Michigan’s Consumer Sentiment Survey—two high-frequency indicators that could shape market expectations around the Fed’s June meeting.

Technical Analysis

From a technical standpoint, silver has broken below a critical intraday support level near $31.90, halting its recent rally. This move triggered a corrective bounce as the metal sought to unload its oversold conditions on the Relative Strength Index (RSI), which had slipped into extreme territory.

Despite some early signs of a rebound, the broader technical setup remains fragile. XAG/USD continues to trade beneath the 50-period Exponential Moving Average (EMA50), suggesting persistent bearish pressure on the short-term charts. Moreover, chart analysts are closely monitoring the development of a descending triangle pattern—a formation typically associated with downside breakouts. A decisive break below $31.90 would confirm the bearish continuation and potentially expose silver to further declines toward the $30.50 region.

However, should silver manage to stabilize above the current support zone and reclaim EMA50 territory, it could challenge immediate resistance near $32.60, followed by the psychological $33.00 threshold.

TRADE RECOMMENDATION

SELL SILVER

ENTRY PRICE: 32.00

STOP LOSS: 33.00

TAKE PROFIT: 30.50

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

EUR/JPY continues to trade within a well-defined ascending channel. Recently, the pair approached the upper boundary of the channel but faced downward pressure from that resistance area.

BUY EURJPY

Close Time

CLOSED

162.699

Entry Price

165.300

161.440

181.087 +0.214 +0.12%

11.3

Pips

Profit

161.440

162.812

Exit Price

162.699

Entry Price

165.300

A number of European Central Bank (ECB) officials stated on Tuesday that the institution’s ongoing strategic review is expected to largely validate its previous monetary policy decisions, particularly its implementation of quantitative easing (QE), despite lingering criticism from some members of the policymaking community. They reiterated that the ECB will remain fully committed to taking “decisive action” in environments characterized by low inflation and subdued interest rates, even after the review process concludes.

Gabriel Makhlouf, a member of the ECB Governing Council and Governor of the Central Bank of Ireland, expressed concerns that rising economic uncertainty is putting downward pressure on investment across the eurozone. He pointed out that the latest batch of soft economic data reflects a marked decline in both business and consumer sentiment, underlining the fragile state of the region’s economic recovery.

Amid these concerns, however, there were some signs of optimism. Germany’s ZEW Economic Sentiment Index saw a dramatic rebound, jumping to 25.2 in May from -14 in April—far surpassing the market’s expectation of 11.9. Similarly, the broader Eurozone ZEW Index climbed to 11.6 from a previous -18.5 reading, signaling improved outlooks from financial market experts even in the face of ongoing macroeconomic challenges.

In other economic updates, Germany’s Harmonized Index of Consumer Prices (HICP) held steady at 2.2% year-over-year in April. Although the figure was largely in line with forecasts, it served to reinforce the broader disinflationary trend that continues to weigh on the euro area. The data further fueled market expectations that the ECB may opt for a rate cut as soon as June. Reinforcing this sentiment, ECB officials, including Isabel Schnabel, emphasized the importance of maintaining the current accommodative stance in light of persistent global uncertainties. While these developments are not strong enough to spark a major rally, the combination of soft inflation data and dovish rhetoric provided modest support to the euro after its recent downward stretch.

Meanwhile, across the globe, Bank of Japan (BoJ) Deputy Governor Shinichi Uchida reaffirmed on Tuesday that the central bank remains open to further policy tightening, even amid ongoing global uncertainties such as U.S. trade policy shifts. Addressing lawmakers, Uchida acknowledged that Japan’s core inflation and long-term inflation expectations may stagnate temporarily, but he highlighted continued upward pressure from an “exceptionally tight” labor market. He emphasized that rising wages and shipping costs are likely to be passed on to consumers, reinforcing the potential for a sustained inflationary trend.

Japan's Producer Price Index (PPI) for April also supported this narrative, coming in as expected with a 4.0% year-over-year increase. The solid inflation data, combined with Uchida’s hawkish tone, strengthened market expectations that the BoJ could proceed with another interest rate hike in the near term. Price Correction May Offer Bullish Reentry Opportunity in EURJPY_1

Price Correction May Offer Bullish Reentry Opportunity in EURJPY_1

Technical Analysis

EUR/JPY continues to trade within a well-defined ascending channel. Recently, the pair approached the upper boundary of the channel but faced downward pressure from that resistance area. Price action has since shifted lower, and attention now turns to the lower end of the channel, where the 100- and 200-period moving averages are located at 163.03 and 162.33, respectively. These levels have historically provided strong support, fueling upward moves in previous sessions. A return to this zone may present a new bullish opportunity if the trend structure holds.

The Relative Strength Index (RSI) currently stands at 48 and is declining rapidly. This could signal that bearish momentum may begin to fade as the indicator approaches oversold territory. If the price tests and holds above the 162.62 level—a key support near the ascending trendline—it may trigger a fresh bullish leg within the broader uptrend. On the other hand, a firm break below this level and the lower channel boundary could open the door for a deeper correction, potentially accelerating downside pressure.

Trading Recommendations

Trading direction: Buy

Entry price: 162.70

Target price: 165.30

Stop loss: 161.44

Validity: May 23, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Forex

Summary:

This rejection could mark the beginning of a new bearish phase, with the next key support zone seen near the 1.5520 level.

SELL EURCAD

Close Time

CLOSED

1.56071

Entry Price

1.55210

1.56800

1.61016 +0.00153 +0.10%

72.9

Pips

Loss

1.55210

1.56800

Exit Price

1.56071

Entry Price

1.56800

Several officials from the European Central Bank (ECB) remarked on Tuesday that the institution’s strategic review will broadly endorse its previous policy decisions—most notably its quantitative easing (QE) programs—despite continued pushback from some policymakers. They also underlined that, following the review, the ECB will maintain its readiness to take "decisive action" during times of persistently low inflation and interest rates.

Gabriel Makhlouf, a member of the ECB Governing Council and Governor of the Central Bank of Ireland, warned that rising levels of uncertainty are dampening investment across the eurozone. He noted that recent soft economic indicators suggest a notable decline in both business confidence and consumer sentiment, raising concerns about the fragility of the region’s economic recovery.

Nonetheless, there were encouraging signs from Germany, where the ZEW Economic Sentiment Index surged to 25.2 in May from -14 in April—easily beating market expectations of 11.9. Similarly, the Eurozone ZEW Index rose sharply to 11.6 from -18.5, reflecting renewed optimism among market participants despite ongoing economic headwinds.

In terms of trade relations, both the European Union and Canada stand out as the only major economies that have not made notable progress in trade negotiations with the United States since President Donald Trump announced reciprocal tariffs. Anticipating a lack of resolution, the EU has prepared countermeasures in the event that talks break down. On Thursday, the European Commission published a public consultation paper outlining potential tariffs on up to €95 billion worth of U.S. imports—measures that could further inflame trade tensions between the two sides.

In other developments, Germany’s Harmonized Index of Consumer Prices (HICP) remained steady at 2.2% year-over-year in April. While the data came in broadly in line with expectations, it reinforced the broader disinflationary trend across the eurozone and supported growing speculation that the ECB may move toward a rate cut as early as June. Comments from ECB officials, including Isabel Schnabel, stressed the importance of maintaining the current policy stance given ongoing global uncertainties. Although not a catalyst for a strong rally, the combination of subdued inflation and a dovish tone from policymakers helped the euro stage a modest recovery after recent losses.

Meanwhile, Friday’s disappointing Canadian employment report—highlighting slow job creation and a rising unemployment rate—has weakened expectations of further rate hikes from the Bank of Canada (BoC). This has contributed to a softer tone in the Canadian dollar.

Crude oil prices have also played a role in adding pressure to the commodity-linked Canadian dollar. West Texas Intermediate (WTI) crude has stalled after a four-day rally, now trading near $63.00 per barrel at the time of writing, further limiting support for the CAD. Overbought Conditions Heighten Bearish Pressure on EURCAD_1

Overbought Conditions Heighten Bearish Pressure on EURCAD_1

Technical Analysis

EUR/CAD has rallied strongly in recent sessions, filling the price gap left by the sharp downward opening on May 9. Although the pair made a previous attempt to close this gap, it fell short; this time, however, the gap has been fully filled, and price action has since turned lower. This rejection could mark the beginning of a new bearish phase, with the next key support zone seen near the 1.5520 level.

The Relative Strength Index (RSI) recently hit 74, placing the pair deep into overbought territory and suggesting the possibility of increased downward pressure in the short term. Additionally, the 100- and 200-period moving averages are situated at 1.5598 and 1.5621 respectively. A strong daily close below both moving averages could reinforce bearish momentum and accelerate the decline.

Conversely, if the price breaks above the 1.5670 level with conviction, it could invalidate the current bearish setup and open the door for a continuation of the upward move. For now, however, the overbought RSI and recent rejection at gap resistance favor a downside bias.

Trading Recommendations

Trading direction: Sell

Entry price: 1.5611

Target price: 1.5521

Stop loss: 1.5680

Validity: May 23, 2025 15:00:00

Risk Warnings and Disclaimers

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