EUR/USD, FTSE Forecast: Two trades to watch

EUR/USD recovers from earlier losses with Trump & Powell in focus

EUR/USD has risen above 1.09 ahead of Federal Reserve chair Jerome Powell's speech and as strength in the dollar faded following an earlier spike higher after an assassination attempt on former president Donald Trump over the weekend.

The US dollar had a knee-jerk reaction of jumping higher following news of the assassination attempt on Trump. The incident appears to have improved Trump's odds of winning the elections in November, driving the US dollar sharply higher in Asia trade. However, it has since given up those gains as attention turns towards Federal Reserve chair Jerome Powell, who will speak at an event organized by the Economic Club of Washington.

His appearance comes after soft inflation data last week kept the market hopeful of the Fed cutting interest rates by 25 basis points in September. A dovish tilt in Powell's tone could feed expectations of three rate cuts before the end of the year, which could still pull lower the US dollar.

Meanwhile, the euro is gaining as investors look ahead to the ECB interest rate decision later this week. The central bank is expected to leave rates unchanged at 3.75%, and the markets will be watching closely for any clues over when the ECB may start cutting rates again. Policymakers have highlighted concerns over sticky service extra inflation and wage growth as hurdles for a further cut.

EUR/USD forecast – technical analysis

EUR/USD has recovered from the 1.0670 low, is rising above the 200 SMA, and is testing 1.0915, the June high. Buyers, supported by the RSI above 50, will look to extend gains towards 1.0980, the 2024 high, and on to 1.10, the psychological level.

Support can be seen at 1.08 the 200 SMA; a break below here could see sellers gain momentum.

FTSE falls following weaker China GDP data

The FTSE is trading lower on Monday as markets continued to weigh up the disinflationary trend in the US and look ahead of UK inflation data later this week.

Heavyweight miners are under pressure following disappointing Chinese data. Chinese Q1 GDP grew at 4.7% annualised, missing expectations and down from 5.3% in the first quarter. Growth slowed in the second-largest economy as the impact of stimulus faded, and consumption overshadowed recovery in the manufacturing sector.

Retail sales also missed estimates, rising just 2% compared to the three-point 3% forecast, highlighting weak consumption.

However, industrial production beat expectations rising 5.3% compared to an estimate of 5%.

Meanwhile, Burberry tumbled 15% after canceling its dividend and changing its CEO Q1 sales slumped 21%.

Looking ahead across the week, UK inflation data and jobs figures will provide further insight into the likelihood of the Bank of England's August rate cut.

The market's pricing is around a 50% probability of the central bank reducing rates by 25 basis points next month following stronger-than-expected GDP growth and hawkish comments from BOE policymakers last week.

FTSE forecast – technical analysis

The FTSE trades in a descending triangle. The price has recovered from support at 8130 and is testing the falling trendline resistance at 8240. Should the price rise above this level at 8264, last week’s high, buyers could extend gains towards 8364, the June high.

Should sellers successfully defend the falling trendline, a re-test of 8130 could be on the cards.  A break out below this level could open the door to 8000.

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