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Middle East tensions overshadow economic releases

Throughout this week, several economic figures have been released across various sectors. However, the influence of these figures does not seem to be as significant as usual. This is mainly due to the ongoing tensions in the Middle East. As a result, traders are strongly advised to exercise caution while considering their risk levels.

Powell confirms market fears

In his recent speech, Powell confirmed what markets feared over the past few weeks: inflation is not slowing down as much as needed for the Fed to start cutting interest rates.

Powell noted that there has been a lack of further progress on inflation, and it will likely take longer for confidence in inflation to be restored. Additionally, he suggested that it is good to give more time for the current policy to work.

DXY over 106.0 but heavily overbought

As of last week’s close, the US Dollar has shifted from a major downtrend to a bullish trend, indicating that it’s time to consider long positions. However, technical indicators are currently showing that the market is heavily overbought, which means we should wait for a correction before entering any positions.

It’s worth keeping in mind that the US Dollar will continue to strengthen as the market prices in fewer rate cuts.

UK inflation remains sticky

Earlier this morning, the UK inflation data showed a persistent increase in inflation rates. In March, the Core CPI YoY slowed down to 4.2% from 4.5%, while the Services CPI slowed down to 6.0% from 6.1%. These figures were expected to slow down more than the actual numbers suggest.

Due to recent developments, the likelihood of a rate cut by the Bank of England in the near future has decreased. It seems that not only the Federal Reserve, but other central banks may need to keep interest rates higher for a longer period of time if inflation does not decrease.

GBPUSD near 1.25

GBPUSD rose to 1.2480 after inflation data, approaching the 1.25 resistance.

For the past three days, the pair has managed to stay above 1.2730. Technical indicators are shifting towards a bullish territory, indicating an upside retracement.

The next resistance area is around 1.25. A break above this would clear the way for further gains towards 1.2550.

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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