Weekly Market Wrap-Up 31 May

An Unforgettable Event Elevating Trading Education 

During the week of May 27th to May 31st, 2024, global financial markets experienced a series of significant events that influenced major currencies and assets. Among the most notable factors were the downward revision of the United States Gross Domestic Product (GDP), which raised concerns about the health of the world’s largest economy, as well as inflation in Europe putting additional pressure on the European Central Bank. Additionally, the upcoming OPEC+ meeting kept energy markets and investors in a state of anticipation. The dollar weakened due to the downward revision of the US GDP and expectations that the Federal Reserve might pause or reduce interest rates in response to signs of economic slowdown. This situation increased volatility in currency markets, with notable impacts on global trade.

In this context, it is crucial to analyze the performance of four major currencies: the US dollar (USD), the euro (EUR), the Japanese yen (JPY), and the British pound (GBP), as these currencies were affected in various ways by the economic and political events of the week.

Analysis of Major Currencies:

Euro (EUR/USD):

The euro experienced mixed pressures. Inflation in Spain rose, adding pressure on the European Central Bank to adjust its monetary policy. Additionally, trade tensions and uncertainties about economic growth in the eurozone kept the euro in a vulnerable position against the dollar.

Further weakness could push EUR/USD towards the 200-day SMA of 1.0787 before the May low of 1.0649 (May 1st), before the 2024 low of 1.0601 (April 16th), and the November 2023 low of 1.0516 (November 1st). Once this zone is cleared, the pair could target the weekly low of 1.0495 (October 13th, 2023), the 2023 low of 1.0448 (October 3rd), and the round milestone of 1.0400.

Japanese Yen (JPY/USD):

The yen strengthened slightly due to its status as a safe haven asset amid global economic uncertainty. Concerns about economic slowdown in the US and uncertainty in energy markets contributed to yen demand.

The major pair remains neutral to bullish after breaking the May 14th high of 156.76. That opened the door to challenge 157.00 and beyond, but the drop in US 10-year bond yield, which closely correlates with USD/JPY, weighed on the pair.

British Pound (GBP/USD):

The British pound showed some resilience this week. Despite political and economic uncertainties in the UK, including possible economic slowdown and post-Brexit challenges, the pound benefited from dollar weakness and investor diversification.

The daily chart suggests that GBP/USD has a neutral to bullish bias, but the failure of buyers to break the March 21st daily high at 1.2803 opened the door to a retracement. Although momentum remains bullish, as shown by the RSI, buying pressure begins to moderate after testing 1.2800.