Forex-novosti i prognoze od 17-05-2022

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17.05.2022
23:54
Japan GDP less negative than expected for Q1

 

Japan's Gross Domestic Product, released by the Cabinet Office, has been released as follows:

  • Japanese GDP Annualised SA (QoQ) Q1 P: -1.0% (exp -1.8%; R previous 3.8%).
  • GDP SA (QoQ) Q1 P: -0.2% (exp -0.4%; R previos 0.9%).

''The omicron outbreak and associated hit to consumption were anticipated to weigh heavily on GDP growth in Q1,'' analysts at Westpac said. ''Meanwhile, supply issues will continue to be a headwind to industrial production in March.''

USD/JPY is steady on the release around 129.50. 

About the Gross Domestic Product

GDP is released by the Cabinet Office shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the JPY, while a low reading is negative

23:53
Japan Gross Domestic Product Deflator (YoY) above expectations (-1.2%) in 1Q: Actual (-0.4%)
23:51
Japan Gross Domestic Product Annualized above expectations (-1.8%) in 1Q: Actual (-1%)
23:51
Japan Gross Domestic Product (QoQ) registered at -0.2% above expectations (-0.4%) in 1Q
23:48
AUD/USD flirts with weekly top above 0.7000 as market optimism dwindles AUDUSD
  • AUD/USD struggles to extend three-day uptrend, grinds higher of late.
  • Fed’s Evans pushes for an ‘expeditious’ rate hike to 2.25-2.50% neutral range.
  • US dollar weakness, hawkish RBA Minutes and covid optimism in China previously favored bulls.
  • Aussie Wage Price Index for Q1 2022 will be crucial considering RBA’s 40 bps talks.

AUD/USD seesaws around the weekly high, pausing a three-day rebound from the two-year low, as it takes rounds to 0.7030 during Wednesday’s Asian session.

The Aussie pair’s latest inaction could be linked to the lack of positive sentiment in the market, mainly triggered by the fresh fears of the US Fed’s faster rate hikes. Also challenging the AUD/USD buyers is the anxiety ahead of the quarterly Wage Price Index from Australia.

Recent comments from Chicago Fed President Charles Evans seem to have weighed on the market’s mood by renewing fears of a faster rate hike as the policymaker said, “(the Fed) Should raise rates to 2.25%-2.5% neutral range 'expeditiously'.” On Tuesday, Fed Chair Jerome Powell and a generally-hawkish St Louis Fed President James Bullard pushed for a 50 bps rate hike and weighed on the USD.

It’s worth noting that chatters of 40 basis points (bps) of a rate hike by the Reserve Bank of Australia (RBA), spread via the Minutes of the latest RBA meeting, underpinned the AUD/USD pair’s upside momentum the previous day. On the same line were headlines suggesting Shanghai’s nearness to reversing the covid-led activity restrictions. Also favoring the quote were headlines suggesting more investments from China and firmer prices of equities, as well as commodities.

That said, the Wall Street benchmarks closed positive even if the US 10-year Treasury yields rose nearly 10 bps to 2.99% at the latest. The S&P 500 Futures struggle, however, around 4,090 by the press time.

Moving on, Aussie Wage Price Index for Q1 2022, expected 0.8% QoQ versus 0.7% prior, will be important for immediate direction amid hawkish concerns over RBA. Following that, the US housing numbers and risk catalysts will be crucial for trading impetus.

Technical analysis

A clear upside break of the 10-DMA level of 0.6984, as well as lows marked during January 2022 surrounding 0.6965, directs AUD/USD buyers toward a monthly resistance line near 0.7080.

 

23:30
GBP/USD balances below 1.2500 ahead of UK Inflation, Fed seeks price stability GBPUSD
  • GBP/USD is juggling in a 1.2484-1.2496 as investors await UK Inflation.
  • The annual UK CPI is seen at 9.1% against the prior print of 7%.
  • Pound bulls have strengthened on upbeat market mood and Employment data.

The GBP/USD pair is displaying back and forth moves in a narrow range of 1.2484-1.2496 in the Asian session as investors are on the sidelines ahead of the UK Consumer Price Index (CPI) figures on Wednesday. As per the market consensus, the annual inflation figure is eyeing the rooftop. The yearly CPI figure is seen at 9.1%, potentially higher than the prior print of 7%. While, the annual core CPI would jump to 6.2%, against the former figure of 5.7%.

A higher reading of the UK inflation is compelling for more rate hikes by the Bank of England (BOE) in the next monetary policy meetings. It would be justified to state that BOE Governor Andrew Bailey could feature a jumbo rate hike to contain the inflation mess. The inflation looks sky-rocketing in the UK zone and the BOE needs to take certain quantitative measures to safeguard the paychecks of the households.

Meanwhile, the jobless claims in the sterling area have reduced sharply by 56.9k, higher than the expectations of 38.8k. Also, the monthly ILO Unemployment Rate has been improved to 3.7% than the consensus and prior print of 3.8%.

On the dollar front, the US dollar index (DXY) is hovering around 103.30 and is expected to scale lower amid an improvement in the risk appetite of the market participants. The odds of a jumbo rate hike by the Federal Reserve (Fed) in June are advancing sharply as the Fed is focusing to bring price stability sooner. Fed chair Jerome Powell has stated in Q&A at Wall Street Journal that inflation needs to get dropped in a ‘convincing’ way.

 

23:23
NZD/USD Price Analysis: Bulls attack monthly hurdle surrounding 0.6350 NZDUSD
  • NZD/USD struggles to extend three-day uptrend around weekly top.
  • One-month-old descending resistance line, 100-SMA probe buyers, 50-SMA restricts immediate downside.
  • RSI, MACD conditions signal firmer upside momentum of late.

NZD/USD takes rounds to 0.6360 as it battles with the short-term key hurdle during Wednesday’s Asian session, after a three-day rebound from the two-year low.

In doing so, the Kiwi pair jostles with a downward sloping resistance line from late April amid firmer RSI and MACD conditions.

It’s worth noting that the 100-SMA level of 0.6405 also challenges the NZD/USD buyers, even if they manage to successfully cross the 0.6360 hurdle.

Following that, a run-up towards the 0.6500 and then to the monthly high near 0.6570 can’t be ruled out.

Alternatively, the 50-SMA level surrounding 0.6315-10 restricts the short-term downside of the NZD/USD pair ahead of the monthly low near 0.6215.

In a case where the pair drops below 0.6215, a late 2019 bottom around 0.6200 will be crucial to watch.

NZD/USD: Four-hour chart

Trend: Further upside expected

 

23:17
GBP/JPY Price Analysis: Bulls extend the rally above 161.50 but will face strong resistance around 162.00
  • On Tuesday, the GBP/JPY gained around 1.58%, pushing the weekly gains to 2.04%.
  • Sentiment improved as Shanghai is about to lift restrictions, helping to ease the supply chain constraints.
  • GBP/JPY Price Forecast: Upward biased, but bulls would face solid resistance around 162.00.

The GBP/JPY rallied for the third straight day and reached a fresh weekly high around 161.85, recording minimal gains as the Asian Pacific session began. At the time of writing, the GBP/JPY is trading at 161.67, up 0.07%.

Sentiment-wise, Wall Street’s session was positive, as reflected by US equities. Asian futures point to a higher open, courtesy of the improvement in the Covid-19 outbreak in China, particularly Shanghai, the second largest industrial hub in China, which reported zero coronavirus cases for the third consecutive day.

“From June 1 to mid-and late June, as long as risks of a rebound in infections are controlled, we will fully implement epidemic prevention and control, normalise management and fully restore normal production and life in the city,” deputy mayor Zong Ming said.

Meanwhile, on Tuesday, the GBP/JPY opened near the day’s lows, around 158.70s, and then rallied 250-pips during the day, breaking several figures on its way north, until settling around 161.50.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY remains upward biased, as shown by the daily chart. However, traders need to be aware that a head-and-shoulders chart pattern is still in play, but a daily close above April 28 swing high at 164.25, would invalidate the chart pattern and would open the door for further gains.

Upwards, the GBP/JPY’s first resistance would be May 9, the daily high at 162.18. A breach of the latter would expose the 163.00 mark, followed by April 28 swing high at 164.25. On the other hand, the GBP/JPY first support would be the head-and-shoulders neckline around 160.00. Break below could send the pair aiming toward the 100-day moving average (DMA) at 158.09, followed by May 12 swing low at 155.58.

Key Technical Levels

 

23:08
Japan manufacturers' mood slips to 15-month low in May – Reuters Tankan Poll

Japanese manufacturers have become the least optimistic in more than a year about business conditions as firms struggled with rising import costs due to a weak yen and higher raw material prices, the Reuters Tankan poll for May showed on early Wednesday.

Additional findings

The Reuters Tankan sentiment index for manufacturers fell to 5 in May from 11 a month earlier, its lowest since February last year. The service index rose to 13 from 8, hitting its highest since February 2020.

The monthly poll, which tracks the Bank of Japan’s (BOJ) closely watched “tankan” quarterly survey, found confidence was likely to become less optimistic for both manufacturers and non-manufacturers over the coming three months.

The service-sector mood recovered to its most positive level since the start of the COVID-19 pandemic in early 2020 as the world’s third-largest economy shook off more of the drag from the coronavirus, which has made consumers cautious about spending.

The poll of 499 big and mid-sized companies conducted from April 26 to May 13, of which 236 responded, showed firms faced headwinds from persistently high raw material costs and Chinese coronavirus lockdown measures.

Market reaction

Following the news, USD/JPY picks up bids to renew intraday high around 129.50, following a sluggish daily performance.

Read: USD/JPY bulls stand their ground as US equities close higher

23:01
WTI regains $111.00 on surprise API inventory draw, fears of EU’s Russian oil embargo
  • WTI picks up bids to reverse pullback from seven-week top.
  • API Weekly Crude Oil Stock registered surprise fall of 2.445M for the week ended May 13.
  • Market sentiment improves as Fedspeak refrains from 75 bps idea, firmer macros, China news also favors buyers.
  • Updates over European oil embargo on Russia, coronavirus and EIA stockpiles will be important for fresh directions.

WTI takes the bids to regain $111.00, paring the losses from a seven-week high flashed recently, as oil buyers cheer API inventories, as well as fears of more supply crunch, during Wednesday’s early Asian session.

That said, the weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data for the period ended on May 13 flashed a depletion of 2.445M barrels versus the previous addition of 1.618M.

Other than the API inventories, news from Reuters that the European Commission will on Wednesday unveil a 210 billion euro plan for how Europe can end its reliance on Russian fossil fuels by 2027 favored oil buyers of late. “To wean countries off those fuels, Brussels will propose a three-pronged plan: a switch to import more non-Russian gas, a faster rollout of renewable energy, and more effort to save energy, according to draft documents seen by Reuters,” said the news.

Elsewhere, China’s hopes of overcoming covid-led lockdowns in Shanghai and recently firmer data in the US and the Eurozone, coupled with the OPEC+ failures to meet the monthly target output, also favor the WTI crude oil buyers. Additionally, a softer USD offered an extra strength to the black gold prices.

Alternatively, inflation fears and hawkish comments from the key central bankers keep a tab on the energy prices. On the same line is global energy producers’ rejection to cut output.

Moving on, the official weekly oil inventory data from the Energy Information Administration (EIA), expected 1.533M versus 8.487M prior, will direct short-term oil prices. Also important are the risk catalysts including China's covid conditions, rate hike concerns and geopolitical woes.

Technical analysis

An upward sloping trend line from late March, around 111.40 by the press time, appears the key short-term hurdle for WTI buyers ahead of aiming for a late March swing high near $115.85. Meanwhile, sellers will wait for a clear break of the 10-DMA, around $106.80 by the press time.

 

22:52
Gold Price Forecast: XAU/USD struggles below $1,820 despite the upbeat market mood
  • Gold price is oscillating below $1,820.00, seeking a rally after a pullback.
  • The Fed is focusing on bringing price stability to the economy.
  • The precious metal is holding above 50% Fibo retracement.

Gold price (XAU/USD) is establishing below $1,820.00 after a modest fall from a high of $1,836.55 on Tuesday. The precious metal has failed to capitalize upon the diminishing safe-haven appeal of the US dollar index (DXY). The DXY has eased more than 1.5%, at the press time, from its recent 19-year high of 105.00 in the last two trading sessions. A balance in a range of 103.23-103.55 has been witnessed in the New York session, which is expected to get imbalanced sooner.

Fed Powell’s focus on bringing price stability

Federal Reserve (Fed) chair Jerome Powell has already announced two more jumbo rate hikes in the next two monetary policy meetings to curb the inflation mess, in an interview with Marketplace National Radio Station. Carry-forwarding his views in Q&A at Wall Street Journal, the focus of Fed’s Powell is to bring price stability to the economy. Fed’s Powell has also dictated that the central bank will keep with its tightening monetary policy until the inflation drops significantly.

This week, the light economic calendar will keep bringing topsy-turvy moves in the precious metal and investors will keep focusing on statements from Fed policymakers.

Gold technical analysis

On an hourly scale, XAU/USD is holding above the 50% Fibonacci retracement (placed from Monday’s low $1,786.94 to Tuesday’s high at $1,836.15) at $1,811.63. The precious metal has tumbled below the 50-period Exponential Moving Average (EMA) at $1,821.02. The Relative Strength Index (RSI) (14) is sensing support at 40.00 levels, which indicates the availability of responsive buying participants.

Gold hourly chart  

 

22:51
Fed’s Evans: Should raise rates to 2.25%-2.5% neutral range 'expeditiously'

Chicago Fed President Charles Evans on Wednesday said, per Reuters, “(the Fed) Should raise rates to 2.25%-2.5% neutral range 'expeditiously'.”

Additional comments

Favors 'front-loaded' interest rate hikes.

After front-loading rate hikes, hopeful we can transition to more measured pace.

Measured pace would give time to monitor supply chains, evaluate impact of tighter policy.

May need to take policy 'somewhat' above neutral to achieve 2%  inflation  goal.

Inflation is clearly much too high.

Modestly restrictive stance will still be consistent with growing economy.

US. economic momentum 'strong,' labor market 'downright tight'.

Expect substantial deceleration of core inflation as pandemic-related price pressures ease.

Monetary policy has critical role in addressing broad-based runup in prices, keeping expectations in check.

Market reaction

EUR/USD remains unaffected by the news as it continues to grind higher around 1.0550 at the latest.

Read: EUR/USD seeks fresh clues around 1.0550 after the biggest daily gain in two months

22:37
EU to map out escape route from Russian fossil fuels on Wednesday

The European Commission will on Wednesday unveil a 210 billion euro plan for how Europe can end its reliance on Russian fossil fuels by 2027, and use the pivot away from Moscow to quicken its shift to green energy, per Reuters.

Key quotes

To wean countries off those fuels, Brussels will propose a three-pronged plan: a switch to import more non-Russian gas, a faster rollout of renewable energy, and more effort to save energy, according to draft documents seen by Reuters.

The draft measures, which could change before they are published, include a mix of EU laws, non-binding schemes, and recommendations national governments could take up.

Taken together, Brussels expects them to require 210 billion euros in extra investments - which the EU plans to support by freeing up more money for the energy transition from its COVID-19 recovery fund, and which would ultimately reduce the billions of euros Europe spends on fossil fuel imports each year.

Market reaction

The news favors the WTI crude oil prices to regain $111.00 during otherwise quiet hours of early Asian session on Wednesday.

22:22
EUR/USD seeks fresh clues around 1.0550 after the biggest daily gain in two months EURUSD
  • EUR/USD steadies around weekly top following the heavy run-up.
  • Hawkish ECBspeak, EU GDP data favored Euro bulls amid market’s cautious optimism.
  • US dollar stayed pressured despite firmer US statistics, upbeat yields.
  • Second-tier data may entertain traders, risk catalysts are more important for fresh impulses.

EUR/USD bulls take a breather around mid-1.0500s, the weekly high, after positing the heaviest daily jump since early March. That said, the major currency pair has been trading inside a 30-pip range during the last hours of Tuesday, after a stellar rise, poking the range high surrounding 1.0550 as Asian traders brace for Wednesday’s work,

A fresh round of hawkish comments from the European Central Bank (ECB) policymakers has been the key support to the regional currency. Among them, Tuesday’s comments from European Central Bank (ECB) Governing Council member Klaas Knot was the most hawkish and fuelling the EUR/USD prices. ECB’s Knot told the Dutch TV that a 50 basis points (bps) rate hike should not be excluded if data in the next few months suggest that inflation is broadening and accumulating. On the same line were comments from European Central Bank Governing Council member Mario Centeno said on Tuesday that the normalization of monetary policy is desired and must happen, reported Reuters.

Additionally favoring the EUR/USD bulls was a slightly better-than-forecast reading of the preliminary Eurozone GDP for Q1 2022. The bloc’s GDP rose past 5.0% YoY to 5.1% while also rising above 0.2% QoQ expectations to 0.3%.

On the other hand, Fed Chairman Jerome Powell repeated his usual push for the 50 bps rate hike and didn’t surprise markets, despite pausing equity bulls. However, St Louis Fed President and outspoken hawkish FOMC member James Bullard’s preference for a 50 bps move, versus the previous support to the 75 bps action, seemed to have weighed on the US dollar. That said, the US Treasury yields remained firmer, up nearly 10 bps to 2.99% at the latest.

Talking about the US data, US Retail Sales rose at a pace of 0.9% MoM in April, slightly better than the expected pace of 0.7% but softer than the upwardly revised 1.4% growth (from 0.5%). US Retail Sales ex Autos, popularly known as Core Retail Sales, rose 0.6% MoM in April versus the 0.4% expected gain. It is worth noting that there was a big upward revision to the previous month’s Core Retail Sales figures, to 2.1% MoM versus the prior estimate of 1.1%. 

Elsewhere, improvement in covid conditions in China previously spread optimism in Asia, backed by softer US data. However, fears emanating from the Russia-Ukraine tussles challenge the bulls.

Moving on, final readings of Eurozone HICP for April precedes the US housing numbers to entertain EUR/USD traders. However, major attention will be given to talks of rate hikes, inflation and growth, not to forget covid and geopolitics, for clear directions.

Technical analysis

A previous support line from late 2021 challenges immediate EUR/USD upside around 1.0550 ahead of the 21-DMA hurdle surrounding 1.0575. Meanwhile, a fresh downside can aim for April’s low of 1.0471.

 

22:22
AUD/USD Price Analysis: Bulls rest up at 50% mean reversion target AUDUSD
  • AUD/USD bears are looking for a discount at critical level.
  • The bulls are testing bear's commitments at daily resistance. 

As per the prior analysis, AUD/USD Price Analysis: Bulls are taking charge at critical daily resistance, the bulls have moved in to the target area on the daily chart as follows:

AUD/USD daioy chart, prior analysis

AUD/USD live charts

The price could now struggle at this juncture and if the bears commit at a diocount, then we coudl see a follow though into the weekly targt areas for the forseeible future:

AUD/USD weekly chart

The bears will be looking to the 0.68 figure to mitigate the price imbalance between 0.6776 and 0.6828 ahead of 0.6536.

22:20
EUR/JPY to recapture 137.00 ahead of Japan’s GDP and Eurozone HICP EURJPY
  • EUR/JPY may continue its three-day winning streak amid a rebound in the risk-on impulse.
  • The odds of a rate hike by the ECB in July have risen strongly.
  • In today’s session, Eurozone HICP and Japan’s GDP will remain in focus.

The EUR/JPY pair is hovering around 136.50 in the early Asian session after a bullish Tuesday. The cross witnessed some significant bets from the market participants as investors underpinned risk-on impulse in the global market. The asset has displayed a three-day winning streak and is likely to continue further amid a firmer market mood.

The shared currency bulls are performing strongly against the Japanese yen on strong Gross Domestic Product (GDP) numbers. The annual figure has landed at 5.1%, a little higher than the former figure of 5%. Apart from that, Employment Change in the eurozone failed to keep up with the forecasts. The Employment Change landed at 2.6%, lower than the estimates of 2.7%. Going forward, investors will keep an eye on the HICP number by the Eurostat. The yearly HICP figure is seen as stable at 7.5%.

The shared currency bulls got extra mileage on Tuesday amid rising hopes of a 25 basis point (bps) rate hike in July. European Central Bank (ECB) Governing Council member Klaas Knot, speaking on Dutch TV, claimed that mounting price pressures could open doors for a 50 bps rate hike, however, a quarter-to-a-percent seems more realistic.

Meanwhile, the yen bulls are awaiting the release of the GDP numbers on Wednesday. The annual GDP figure is expected to release at -1.8%, against the previous figure of 4.6%. While the quarterly figure may decline to -0.4% in comparison with the prior print of 1.1%.

 

22:08
AUD/JPY Price Analysis: Bulls reclaim 90.50 as they prepare an assault towards 91.00
  • The AUD/JPY extended its gains for the third straight day, courtesy of a buoyant market mood.
  • Improvement in the Covid-19 situation in China shifted sentiment positively, as reflected by global equities rallying.
  • AUD/JPY Price Forecast: Neutral-upwards in both time-frames, though a bearish flag in the hourly chart could send the pair sliding towards 90.00.

The AUD/JPY advances as the North American session winds down, gaining 1.01%, courtesy of a positive market mood. Reports from China say that Shanghai has not reported Covid-19 cases for the third straight day, as the deputy major Zong Ming noted that Shanghai’s reopening would be carried out in stages. At the time of writing, the AUD/JPY is trading at 90.94.

Reflection of the above-mentioned is the behavior of US equities, finishing the session with gains. At the same time, Asian futures are pointing to a higher open, carrying on sentiment from Tuesday.

On Tuesday, the AUD/JPY opened around the 90.00 mark, and as China’s news crossed newswires, the risk barometer of the FX space rallied 120-pips, reaching a daily high at around 91.16, to finally retreat below the 91.00 threshold as the New York session came to an end.

AUD/JPY Price Forecast: Technical outlook

Daily chart

The AUD/JPY daily chart depicts the pair as neutral-upward biased, as the exchange rate is trapped between the 50 and the 100-day moving averages (DMAs), each at 91.19 and 86.97, respectively. MACD’s histogram shows that the distance between the MACD-line and the signal is reducing, suggesting that the former would crossover the latter, triggering a bullish signal that, if achieved, the cross-currency pair would face solid resistance at around 92.55-65.

Hourly chart

The AUD/JPY is also neutral-upward biased in this time frame, but it is close to the 200-hour simple moving average (SMA) at around 90.47. It is worth noting that the pair is moving within the boundaries of an ascending channel, meaning that a bearish flag is forming, suggesting the AUD/JPY might resume the previous downtrend unless it breaks above the top-trendline of the channel.

Upwards, the AUD/JPY first resistance would be the R1 daily pivot at 91.45. Break above would expose the confluence of the R2 pivot point and April 27, 2020, daily high at 91.98, followed by a downslope trendline, around 92.50-65.

On the other hand, the AUD/JPY first support would be the daily pivot point at around 90.66. Break below would expose the 200-hour SMA at 90.47, followed by the confluence of the 100-hour SMA and the S1 daily pivot at 90.07.

 

21:56
EU Offers UK Northern Ireland Protocol olive branch

The Telegraph has reported that ''the EU will offer Britain new concessions on the Northern Ireland Protocol, but has threatened a trade war if Boris Johnson refuses to agree a compromise.''

The British pound has been vunerable this week on such angst surrounding Brexit, so this should come as a relief to investors of Uk assets. GBP/USd is trading at 1.2490, supported on the news as well as an improved risk sentiment in markets on Tuesday. 

Meanwhie, the Telegraph wrrote that it ''understands that the European Commission will propose tweaking the bloc’s own laws to ease checks between mainland Britain and the province in order to end the long-running row over Brexit rules.''

According to sources, the Telegraph said, ''Maros Sefcovic, the EU’s chief negotiator, set out the olive branch in a call with Liz Truss after weeks of acrimony between the pair.''

''Details of their conversion emerged after the Foreign Secretary vowed on Tuesday to introduce new powers to tear up the post-Brexit solution and suspend border checks in the Irish Sea.

Despite the threat, insiders said that Mr Sefcovic was willing to agree significant compromises to virtually eliminate all customs and food safety checks between Great Britain and Northern Ireland, as he did with medicines.''

 

21:49
USD/CAD skids to near 1.2800, Fed focuses on price stability, Canada Inflation eyed USDCAD
  • USD/CAD is expecting more downside as DXY weakens significantly on a positive market mood.
  • The Fed will keep a restricted policy until inflation comes down drastically.
  • Canada’s annual CPI figure is seen unchanged at 6.7%

The USD/CAD pair is scaling lower after sensing rejection from its crucial resistance of 1.2850. The asset is oscillating around Tuesday’s low at 1.2807 and is expected to extend its losses after violating the same. A sheer downside move in the major after failing to sustain above the psychological support of 1.3000 intensified selling pressures, which resulted in a three-day losing streak.

A firmer rebound in the risk-on impulse has brought weakness in the US dollar index (DXY)’s safe-haven appeal. The DXY has tumbled to near 103.30 despite higher-than-expected US Retail Sales. The US Census Bureau reported the Retail Sales at 0.9%, higher than the consensus of 0.7%. The rebound in the positive market sentiment is so strong this time that a bearish reversal in the DXY looks likely. The DXY has eased more than 1.5% in the last three trading sessions after hitting a 19-year high of 105.00 last week.

Meanwhile, Federal Reserve (Fed) chair Jerome Powell in his Q&A with Wall Street Journal has emphasized on bring price stability to the economy. The Fed will continue with its tightening policy until the inflation drops in a convincing way.

On the loonie front, investors are focusing on the release of the Consumer Price Index (CPI) numbers. The core annual inflation figure that excludes food and energy is seen at 5.4%, a little lower than the prior print of 5.5%. While the wholesome annual figure is expected to remain stable at 6.7%. This will keep the odds of one more rate hike by the Bank of Canada (BOC) intact.

 

21:36
United States API Weekly Crude Oil Stock dipped from previous 1.618M to -2.445M in May 13
21:13
USD/JPY bulls stand their ground as US equities close higher USDJPY
  • USD/JPY held ground despite weakness in the US dollar and firmer risk appetite. 
  • The Fed chair failed to deliver anything new in his WSJ interview and risk appetite recovered on Wall Street. 

At 129.34, USD/JPY is higher by some 0.18% into the close on Wall Street. Risk rallied on Tuesday as April industrial production and retail sales grew more than expected, indicating the strength of the economy which to some extent helped the US dollar vs the safe-haven yen.

As a consequence of the good mood, the S&P 500 and the Dow advanced 2.0% and 1.3%, respectively, while the tech-heavy Nasdaq jumped 2.8%. However, besides the yen, the dollar fell for a third straight day on Tuesday vs.s a basket of currencies. The greenback was pulling back from a two-decade high against a basket of major peers, as an uptick in investors' appetite for riskier bets diminished the US currency's appeal. The US 10-year yield jumped by 10.5 basis points to 2.98%. 

The U.S. Dollar Currency Index (DXY), which tracks the greenback against six major currencies, was down 0.84% at 103.226, its lowest since May 6. The index hit a two-decade high last week supported by a hawkish Federal Reserve and worries over the global economic situation.

Fed Chair Jerome Powell, speaking at a Wall Street Journal event, vowed to "keep pushing" until it was clear the current inflationary wave is on the wane but this failed to keep risk down for long and equities rallied into the close for fresh highs. 

As for data, Retail Sales and industrial output data provided a dose of optimism for market participants who fear the expected series of 50-basis-point interest rate hikes could drag the economy into recession.

Additionally,  reports that authorities in China are preparing to relax COVID-19 restrictions allayed worries over the risks to supply chains and weakening Chinese demand that would be expected to continue weighing on the global outlook.

 

20:02
NZD/USD extends its rally to three straight days, hovers around 0.6350s post-Fed Powell Q&A NZDUSD
  • The NZD/USD is advancing close to 0.80% on Tuesday, lifted by upbeat sentiment.
  • China’s Covid-19 crisis seems to be under control as Shanghai is about to lift restrictions.
  • Fed’s Powell reiterates that 50-bps in upcoming meetings remain “on the table.”

NZD/USD is surging for the third consecutive day and reclaims the 0.6300 mark for the first time in four days after a raft of risk-aversion struck risk-sensitive currencies, like the New Zealand dollar. At 0.6355, the NZD/USD reflects an improved market sentiment, courtesy of no new Covid-19 cases in Shanghai for the third straight day as the city prepares to lift restrictions.

Sentiment improvement boosts the NZD appeal amidst Fed speaking

US equities remain in positive territory as Wall Street prepares for the close. Meanwhile, US Treasury yields recovered some ground, led by the 10-year benchmark note, up to eight and a half basis points, sitting at 2.970%, while the greenback gave back some of its weekly gains and sat around 103.364, down 0.79%, as portrayed by the US Dollar Index, which tracks the buck’s value.

Late in the New York session, Federal Reserve Chair Jerome Powell crossed newswires at a Wall Street Journal event. Powell said that “what we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that.” He emphasized that “If that involves moving past broadly understood levels of neutral, we won’t hesitate at all to do that.”

Recapping the last Federal Reserve meeting, the US central bank hiked rates by 50-bps. Later in the press conference, Jerome Powell said that 50-bps increases are “on the table,” as market players have priced in a 100% odds of a 0.50% rate hike in the June meeting.

Also, earlier in the day, St. Louis Fed President James Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months and added that household consumption is expected to hold up well through this year. He emphasized that the base case scenario for the Fed is 50-bps rate hikes at upcoming Fed meetings.

Furthermore, Minnesota Fed President Neik Kashkari said that the Fed has indicated it will get rates to at least neutral by the end of 2022. He added that the Fed needs to bring inflation down to its 2% target before a wage-price spiral takes off.

Earlier in the North American session, the US docket featured April’s US Retail Sales met expectations and rose by 0.9% m/m. Regarding the year-over-year reading, sales grew 8.2%, crushing the expectations of 4.2%, demonstrating the resilience of American consumers. Following the positive tone of US economic data, Industrial Production rose above the expectations, further cementing the Fed’s case of hiking rates aggressively to bring inflation as soon as possible.

Key Technical Levels

 

20:01
Forex Today: Dollar extends its decline as sentiment improves

What you need to take care of on Wednesday, May 18:

The  American dollar edged lower across the FX board as the currency extended the bearish corrective decline that began on Monday. Upbeat US data helped the case for a better market mood, with global indexes closing in the green.

Nevertheless, the underlying concerns remain the same. Tensions between Europe and Russia continued after the latter invaded Ukraine.  Russian Deputy Foreign Minister Andrey Rudenko was on the wires and said that Ukraine has practically withdrawn from negotiations.

Federal Reserve chair Jerome Powell offered a speech. Powell failed to surprise investors, repeating that the central bank is comfortable with 50 bps rate hikes. He also mentioned that they could speed up or slow down the pace of hikes accordingly to the economic health. Speaking of which, Powell added that the underlying strength of the US economy is really good at the time being. US indexes retreated from their highs with his words but retained the green.

The EUR/USD pair surged to 1.0555, helped by ECB’s Governing Council member Klaas Knot, who said that a 50 bps rate hike should not be excluded if data suggest inflation keeps broadening and accumulating. He also added that a 25 bps hike in July would be realistic.

 GBP/USD hit 1.2498 and finished the day nearby, with the pound underpinned by a stronger-than-expected UK jobs report. The ILO unemployment rate contracted to 3.7% in the three months to March, while the April Claimant Count Change fell to -56.9K. Market participants ignored mounting Brexit tensions. Foreign Secretary Liz Truss updated the House of Commons on the government's intention to introduce legislation to make changes to the Northern Ireland Protocol. The government would prefer a negotiated solution with the EU but will anyway work on changing the protocol.  

The AUD/USD pair trades above the 0.7000 threshold, while the USD/CAD extended its slump and trades near the 1.2800 level. The better performance of equities underpinned commodity-linked currencies, despite softening gold and oil prices. The bright metal settled at $1,816 a troy ounce, while WTI is now changing hands at $109 per barrel.

The USD/JPY pair ended the day little changed at 129.35, while USD/CHF fell to 0.9938.

US Treasury yields ticked higher, with that on the 10-year note flirting with 3%.

Dogecoin price hints at one more fall towards $0.07


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19:32
GBPP/USD Price Analysis: Bears need to come out of their cave and hibernation
  • GBP/USD bulls are taking control at a key area of resistance.
  • If the bears do not come out of hibernation at this juncture, there are prospects of much higher levels. 

As per the prior analysis, GBP/USD Price Analysis: Bears waiting to take a bite out of bullish correction, the price has rallied into the 61.8% Fibonacci ratio, extending the recovery from the lowest levels since May 2020. 

GBP/USD prior analysis

GBP/USD live market

The price has pierced the golden ratio and bulls will be looking for a daily close above to confirm to the market that they are in control, opening prospects for higher territories for the foreseeable future:

The price is meeting resistance around the neckline of the M-formation which could lead to a correction back to test the prior highs that would be expected to offer some initial support. If bears do not come out of hibernation at this point, then a break of the early May highs at 1.2638 will likely lead to a grind back towards 1.30 the figure. 

19:02
Fed Powell offers nothing new, risk assets move back into positive territories

In a Wall Street Journal interview, Federal Reserve Chair Jerome Powell said on Tuesday that US central bank officials will keep tightening policy until inflation comes down in "a convincing way."

"There have been some promising signs you can point to," Powell said at a Wall Street Journal conference. But, he added, "There are some signs that are not so promising."

Risk assets were pressured during the event and the US dollar popped into a shorter bullish environment on the charts on hawkish rhetoric from the Fed chair who said that there is an overwhelming need to get inflation under control. 

His uber hawkish rhetoric sent the S&P 500 back towards the lows of the day but the index has since recovered ground printing a high for the day as markets digest the chairman's comments, noting that the Fed will slow the pace of rate increases depending on how conditions evolve. Such decisions will be made on a meeting by meeting basis. 

The US dollar has also fallen back to where it began at the start of the interview:

18:43
Gold Price Forecast: XAU/USD drops on Fed's Powell's hawkish WSJ Q&A
  • Gold goes offered on a hawkish Powell as the US dollar rallies. 
  • The US dollar has popped out of a 15-min wedge formation to the upside. 

The gold price was changing hands between the bulls and the bears during the Federal Reserve's chairman Jerome Powell's interview with the Wall Street Journal. At the time of writing, as the event concludes, XAU/USD is trading offered as the US dollar picks up a bid. The yellow metal is down some 0.48% at $1,815.50, falling from a high of $1,836.15 on the day printing a low of $1,813.74. 

The US Dollar Currency Index (DXY), which tracks the greenback against six major currencies, was down 0.82% at 103.33, a touch away from the low of 103.226 ahead of the Powell event:

On hawkish rhetoric, the price has rallied out of the containment of the wedge formation as follows:

While well off the two-decade high made last week, which was made on the heels of strong inflation data and supported by a hawkish Federal Reserve, as well as worries over the global economic fallout from the Russia-Ukraine conflict, the bulls are stepping in again. As a consequence, the price of gold is suffering. 

''A failure to confirm the early morning strength would see CTA selling resume course to a large net short position,'' analysts at TD Securities argued. 

''With the Fed telegraphing their every move, Fedspeak will be increasingly important this week, particularly as bearish sentiment continues to undermine positioning. In turn, we continue to expect substantial selling flow to weigh on the yellow metal when liquidity is scarce.''

Gold technical analysis

The failure to close above a 61.8% ratio leaves the outlook bearish, in line with the broader bearish trend:

18:42
EUR/JPY rallies and settles around 136.20s post hawkish ECB comments EURJPY
  • The euro advanced 200-pips on Tuesday and recorded a fresh weekly high at around 136.69.
  • ECB’s Knot expressed that a 25-bps rate hike is realistic, but he would not exclude a 50-bps.
  • EUR/JPY Price Forecast: The bias shifted upwards, but a daily close below 136.00 or under the neckline would keep the head-and-shoulders pattern intact.

The common currency is rallying during the day, and it remains the gainer in the FX complex on Tuesday, to the detriment of safe-haven peers, which are getting battered by most of the G7 currencies, as market sentiment improved. At the time of writing, the EUR/JPY is trading at 136.24, above the head-and-shoulders neckline, threatening to invalidate the pattern.

The market mood in the New York session remains positive, carrying on the mood from the Asian and European sessions. US equities are recording gains between 1% and 2.67%. China’s improvement on its Covid-19 crisis, particularly in Shanghai, recording three consecutive days without cases, was cheered by investors to the detriment of the greenback and the Japanese yen.

In the overnight session, the EUR/JPY opened around 134.50 and rallied on ECB Klaus Knot’s comments, saying that a 25bp hike in July is realistic while adding that a 50bp rate hike should not be excluded if data in the next few months suggests that inflation is broadening and accumulating.

Following those remarks, the EUR/JPY rallied more than 200-pips, putting in danger the validity of the head-and-shoulders pattern, with the cross-currency exchange rate being above the neckline, which lies around the 135.25-35 range.

EUR/JPY Price Forecast: Technical outlook

On Tuesday, the EUR/JPY surged above the 50-day moving average and the head-and-shoulders neckline in the 134.95-135.25/35 area, threatening to invalidate the chart pattern. In the near term, the bias, which shifted to neutral-upwards, as of writing is upwards.

With that said, the EUR/JPY’s first resistance would be 137.00. Break above would expose 138.00, followed by May 9 swing high at 138.32. On the flip side, the EUR/JPY first support would be 136.00. A breach of the latter, the next support would be the head-and-shoulders neckline around 135.25-35, followed by April’s 27 daily low at 134.77.

 

Key Technical Levels

 

18:09
Watch live, Fed's Chair Powell WSJ questions, US dollar to find support on hawkish rehtoric?

The US dollar is crumbling, this week as investors survey the landscape of the global economy, not just in the US. The greenback has fallen victim to improved risk sentiment, helping the likes of the euro that has been extending its rebound from a five-year low touched last week, and putting more distance between the common currency and parity with the US dollar.

However, in what could throw the US dollar bulls a lifeline, the Federal Reserve Chairman Jerome Powell is taking the Wall Street Journal's questions on the US economic outlook and its implications for the labour market, inflation and central-bank policies.

Watch live

Key notes

  • We know this is a time for fed to be tightly focused on getting inflation down.
  • We have tools and resolve to get inflation back down.
  • No on should doubt our resolve - wall street journal interview.
  • We need to see inflation coming down in convincing way.
  • Ongoing rate increases appropriate.
  • Broad support on fomc for having on table 50 bps at next two meetings.
  • That is short of a prediction though.
  • That said, if economy performs as we expect will be on the table.
  • Very difficult to think about giving forward guidance.
  • Economy very uncertain, as are outside events.
  • Markets are pricing in a series of rate hikes.
  • We like to work through expectations.
  • It's been good to see markets reacting to what we are saying.
  • Financial conditions overall have tightened significantly.
  • What we need is to see growth moving down from high levels.
  • We need supply side to have chance to catch up.
  • We need to see growth moving down to a level that's still positive.
  • By standards of central bank practice, we moving as fast as we have in several decades.
  • We need to see clear and convincing evidence inflation is coming down.
  • If we don't see that, we'll have to move more aggressively.
  • We need to see clear convincing evidence that inflation is coming down.
  • If we do, can slow pace of hikes.
  • Underlying strength of US economy is really good right now.
  • Labor market extremely strong.
  • Growth this year is still at very healthy leveles.
  • Consumer balance sheets are healthy.
  • It is well positioned to withstand tighter policy.
  • We are raising rates expeditiously to more normal level.
  • We'll probably reach that in Q4 this year.
  • That's not a stopping point though.
  • We are raising rates expeditiously to a more normal level, will reach in 4th quarter.
  • We don't know where neutral is, or where tight is.
  • We're going to be looking meeting by meeting at financial conditions, economic health.
  • We are going to look meeting by meeting, data by data, at financial conditions and economy.
  • We will be looking at our actions impact on the economy.
  • We really need to see clear and convincing evidence inflation coming down.
  • If we have to go past neutral, we won't hesitate.
  • If need to move past neutral, we wont' hesitate.
  • We will continue raising rates until we see inflation coming down.
  • There will be no hesitation about that.
  • We will go until we are at a place where financial conditions are appropriate, inflation is coming down.
  • There will be no hesitation about that.
  • We will go until we are at a place where financial conditions are appropriate, inflation is coming down.
  • Financial conditions haven't tightened so quickly in a very long time.
  • It would have been better to raise rates earlier with hindsight.
  • Inflation is way too high.
  • We need to bring it down.

US dollar chart

The US dollar was testing the resistance of the wedge formation on the 15-min chart ahead of the event. 

The US dollar is now picking up a bid during the interview:

About Fed chair Powell

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

17:52
AUD/USD advances sharply towards 0.7020s on a risk-on mood, ahead of Aussie Wage Price Index AUDUSD
  • Improvement in market sentiment benefits the Australian dollar.
  • Despite better than expected US economic data, the greenback remains trading softer.
  • Fed’s Bullard: The US central bank base case is 50-bps increases at upcoming meetings.
  • AUD/USD Price Forecast: Remains downward biased, despite the 200-pip rally from YTD lows at around 0.6820s.

The Australian dollar marches forward but faces solid resistance around the 0.7040-50 area and retreats towards the 0.7010s, amidst a positive market sentiment session that weighed on the greenback, which remains soft on Tuesday, despite higher US Treasury yields. At the time of writing, the AUD/USD is trading at 0.7022.

Sentiment improves as China begins to control Shanghai Covid-19 crisis

Global equities remain on the right foot, trading in the green, while in the FX space, risk-sensitive currencies rise, while safe-haven peers are getting smashed by the improvement in the market sentiment, courtesy of progress in the Covid-19 crisis in China. That benefits the Aussie dollar, which remains buoyant in the session, as the Reserve Bank of Australia (RBA) last meeting minutes showed that the board discussed a 40-bps increase in its meeting, and at the same time, members agreed that further hikes would likely be required to ensure that inflation returns to its target.

Following the minutes, the AUD/USD jumped near the 0.7000 mark, but traders lifted the major until the European session, at the mid-point, between the R1 and R2 daily pivots, lying at 0.7010 and 0.7050, respectively.

US Retail Sales and Industrial Production came positive, as Fed speakers cross wires

Data-wise, the US docket featured Retail Sales for April, which came at 0.9% m/m, in line with estimations. However, the annual base reading rose by 8.2%, crushing the 4.2% expectations, illustrating the resilience of consumers in the US. Moreover, Industrial Production also printed positive numbers, beating monthly and yearly forecasts, further cementing the case of the Federal Reserve tightening monetary policy at the pace that began a couple of weeks ago.

Elsewhere, Fed speakers would dominate the headlines throughout the day. St. Louis Fed President James Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months and added that household consumption is expected to hold up well through this year. He emphasized that the base case scenario for the Fed is 50-bps rate hikes at upcoming Fed meetings.

Later in the day, Minnesota Fed President Neik Kashkari said that the Fed has indicated it will get rates to at least neutral by the end of 2022. He added that the Fed needs to bring inflation down to its 2% target before a wage-price spiral takes off and stated that he does not know if Fed’s actions would trigger a recession.

In the week ahead, the Australian docket would feature the Wage Price Index on its quarterly and annual readings, expected at 0.8% and 2.5%, respectively. Meanwhile, the US docker would feature Building Permits and additional Fed speaking, led by Philadelphia Fed President Patrick Harker.

AUD/USD Price Forecast: Technical outlook

The AUD/USD remains downward pressured, despite rallying from 0.6828 to 0.7040. As of writing, the Relative Strenght Index (RSI) is at 42.50, aiming higher, but remains in negative territory. Based on Tuesday’s price action, unless AUD/USD bulls lift prices above 0.7051, the major would be vulnerable to additional selling pressure.

If AUD/USD bulls achieve the above-mentioned, the pair’s first resistance would be 0.71000, followed by  March 15 daily low-turned-resistance at 0.7165 and then 0.7200. However, if that scenario does not play out, the major’s first support would be 0.7000, followed by the January 28 daily low at 0.6967 and the YTD low at 0.6828.

 

17:51
EUR/USD bulls take on the 78.6% Fibo ratio ahead of Powell EURUSD
  • EUR/USD bulls in charge into the Fed Powell's comments. 
  • A close on a daily basis above the 61.8% ratio could be positive for the euro for the meanwhile. 

At 1.0548, the euro is higher vs. the US dollar by some 1.13% at the time of writing after rallying on broard risk-on from 1.0428 to a high of 1.0555. The euro has extended the rebound from a five-year low touched last week while the US dollar is down against its major trading partners.

The single currency benefited at the start of the week due to the European Central bank policymaker Francois Villeroy de Galhau who said a weak euro could threaten price stability in the currency bloc. On Tuesday, Dutch central bank chief Klaas Knot told the Dutch TV programme College Tour that the ECB should raise its key interest rate by 25 basis points in July but should not yet rule out a bigger increase,

"The first interest rate hike is now being priced in for the monetary policy meeting of 21 July, and that seems realistic to me," Knot said. He argues that a 50 bps rate hike should not be excluded if data in the next few months suggests that inflation is broadening and accumulating.

The euro has also benefitted from an improved risk sentiment in markets this week that has weighed on the US dollar. Hopes that China might ease two key sets of restrictions had set a positive mood. Additionally, Shanghai achieved the long-awaited milestone of three straight days with no new COVID-19 cases outside quarantine zones, which could lead to the beginning of lifting the city's harsh lockdown as soon as June 1. 

  • Shanghai sets out plans for end of a painful Covid-19 lockdown

Meanwhile, the US Dollar Currency Index (DXY), which tracks the greenback against six major currencies, was down 0.82% at 103.33, a touch away from the low of 103.226. The index hit a two-decade high last week supported by a hawkish Federal Reserve and worries over the global economic fallout from the Russia-Ukraine conflict.

However, the US dollar even remained subdued after data showed US Retail Sales increased solidly in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, showing no signs of demand letting up despite high inflation.

Markets will now tune in for comments from Federal Reserve's Chairman Jerome Powell at 1800 GMT, who is being closely watched for any clues about whether near-term rate expectations could become even more aggressive. Fed speak comes on the heels of a strong Consumer Price Inflation report, which has cemented the urgency to move quickly to a more neutral policy stance.

EUR/USD technical analysis

The pair has rallied to test the bearish commitments around a 61.8% / 78.6% ratios. A daily close above the 61.8% ratio could be positive for euro's outlook for the near term. 

16:34
USD/CHF Price Analysis: Retreats from parity and hovers around 0.9930s on profit-taking USDCHF
  • As shown by the USD/CHF dropping below the parity, the Swiss franc recovers some ground vs. the greenback, gaining almost 0.90%.
  • A positive market mood keeps the US dollar under pressure.
  • USD/CHF Price Forecast: Drops on profit-taking but remains upward biased.

The USD/CHF plunged following the release of US Retail Sales, which came better than expected, though market players booked profits ahead of a later speech of Fed Chair Jerome Powell. At 0.9929, the USD/CHF is eyeing to re-test on March 23, 2020, daily low at around 0.9901.

Risk-on prevails as the market mood driver on Tuesday. Global equities are still trading in the green, while the greenback remains softer, despite better than expected US economic data. US Treasury yields remain elevated, with the 10-year Treasury yield rising seven and a half basis points, sitting at 2.960%, shy of the 3% threshold.

The US Dollar Index is getting hammered, influenced by a strong euro, losing 0.70%, currently at 103.409.

During the overnight session, the USD/CHF opened above the parity, though plummeted below the 50, 100, and 200-hour simple moving averages (SMAs), as some ECB speakers, led by Klaus Knot, who said that the ECB could hike 50-bps depending on data available.

USD/CHF Price Forecast: Technical outlook

The USD/CHF remains upward biased, despite retreating almost 1% on Tuesday. The daily moving averages (DMAs) reside well below the exchange rate. Also, the Relative Strenght Index (RSI), around 67.91, exited from overbought territory, opening the door for further upward pressure on the major.

That said, the USD/CHF first resistance level would be May 10 daily high at 0.9975. A breach of the latter would expose the parity at 1.000, followed by the YTD high at around 1.0064.

Key Technical Levels

 

16:29
US: Continued strength in production is still encouraging – Wells Fargo

Data released on Tuesday showed Industrial Production rose 1.1% in April. Analysts at Wells Fargo point out that US factories, mines and energy producers together called more capacity into service than at any other time since the start of the pandemic. They warn supply chains are not fixed and could worsen in the coming months.

Key Quotes: 

“Supply chain issues, product shortages and difficulty finding labor are still key headwinds, but businesses are plodding ahead. In a rare event, every major category posted an increase in production in April; that was true whether broken out by industry group or market group.”

“Continued strength in production in the face of persistent supply issues is still encouraging and demonstrates increased activity amid an easing of some constraints. Our tracker of progress, the Pressure Gauge, continues to demonstrate a slow easing in constraints.”

“Price pressure remains elevated, but inventories have bottomed, unfilled orders are growing at a slower rate and delivery times, while still long by historic standards, have shortened.”

“Despite growing concern over the slowing of the broader economy amid a tighter policy environment, capital spending remains intact. Demand has not yet showed many signs of slowing as consumers' demand for goods has held up and businesses still need to replenish depleted inventory levels.”

16:25
GBP/USD could head as low at 1.20 on a 3-month view – Rabobank GBPUSD

Despite the recovery seen on Tuesday in the GBP/USD pair, the pound is not out of the woods. They consider risk appetite looks vulnerable and warn the pair could drop to 1.20 in a three-month perspective. 

Key Quotes: 

“The pound is the best performing G10 currency on a 1 day view as stronger than expected UK labour data raised the prospect that the BoE may have to go further with policy tightening to rein in inflationary pressures.  While a strong labour market is a good reflection of economic health, it is not good news for everyone insofar as higher interest rates will compound the impact of the cost of living crisis for many lower income households.”

“GBP/USD has pushed to its best levels since May 5 today with its reprieve being underpinned by a broad-based pullback in the USD. The softer tone in the USD reflects a better tone in risk appetite today. That said, we continue to view the medium-term outlook for risk appetite as vulnerable and don’t view GBP/USD as being out of the woods.”

“In addition to tomorrow’s UK CPI inflation release, the week ahead is yet to bring April retail sales numbers.  Surveys have already suggested that household balance sheets are being squeezed by higher prices.  The market consensus for the April release stands at -0.3% m/m.  A number in line with this is likely to be sufficient to take the wind out of GBP’s sails.”

“Under the weight of USD strength we see risk that GBP/USD could head as low at 1.20 on a 3 month view.  We see the potential for EUR/GBP to move to 0.86 on a 3 month view.”

16:07
US: Retail Sales rise despite inflation and weak consumer confidence – Wells Fargo

Despite rising interest rates, high inflation and product shortages, retail sales rose above expectations in April and upward revisions to the prior month suggests a better first quarter for consumer spending than first reported, explained analysts at Wells Fargo. 

Key Quotes: 

“Retail sales climbed 0.9% in April after an upwardly revised gain of 1.4% in March.”

“The main takeaway is that despite all the obvious reasons to expect otherwise, retail spending has continued to grow.”

“Believe it or not, there was some indication of a slight reprieve in consumer goods inflation for April. Prices did something they have not done in seventeen months—they boosted real retail sales. Last week we learned consumer prices rose 0.3% in April, but goods prices slid 0.3%. With the retail sales report mostly covering goods spending, the decline in prices suggests real retail sales rose a stronger 1.2% during the month.”

“For now, the 1.2% gain in overall real sales bodes well for second quarter consumption and suggests consumers continue to spend in the face of higher inflation. We have emphasized for sometime that consumers could rely on their balance sheets in the near-term to meet spending. Whether they are relying on credit, drawing down excess savings or simply saving less of their monthly income to fund purchases, the April data show little signs of an impending slowdown.”

15:57
USD/MXN drops to four-week lows below 20.00 amid risk appetite
  • Mexican peso continues to rise versus the US dollar as markets recover.
  • DXY extends bearish correction, and suffers the worst daily loss in months.
  • The slide below 20.00, weakens further the USD/MXN pair.

The USD/MXN is falling on Tuesday for the sixth consecutive day. It bottomed at 19.92, the lowest level since April 19 and then rebounded toward 20.00.

The Mexican peso continues with its rally versus the US dollar for the sixth consecutive day. It reached the highest level in almost a month. The MXN has been among the top performers during the last five days, after a new rate hike from Banxico.

The improvement in risk appetite across financial markets seen during the last few days pushed USD/MXN further to the downside. Also weakened by higher crude oil and commodity prices. The US Dollar Index is falling for the third consecutive day, posting on Tuesday so far the worst decline in months. The greenback trimmed losses after the release of US economic data that came in above expectations.

April lows back on the radar

The consolidation below 20.00 could open the doors to a slide toward the next support area at 19.85 in USD/MXN. A slide below would expose the April low at 19.72. A weekly close clearly under 19.70 would strengthen the medium-term outlook for the Mexican peso.

If the dollar recovers above 20.00, it would alleviate the bearish pressure. Above the next resistance stands at 20.07, followed by 20.22. The critical resistance remains 20.45: a consolidation above would target the 20.70 zone.

USD/MXN daily chart

USD/MXN

Technical levels

 

15:28
Gold Price Forecast: XAU/USD bulls suffer around the 200-DMA and throw the towel as gold slips to $1820s
  • After snapping two days of consecutive losses on Monday, the yellow metal remains on the backfoot and is down 0.13% on Tuesday.
  • The market mood remains positive, weighing on safe-haven peers and precious metals.
  • Gold Price Forecast (XAU/USD): Remains defensive and failure to register a daily close above $1820-25, a re-test of the YTD lows around $1780s, is on the cards.

Gold spot (XAU/USD) modestly slides after facing a solid resistance near the trend-setter 200-day moving average (DMA) at around $1837.57, which held nicely and pushed XAU/USD price towards the two-year-old upslope trendline around $1820-25 area, amidst a positive market mood and high US Treasury yields. At the time of writing, XAU/USD is trading at $1820.76 in the North American session.

The Covid-19 situation in Shanghai improves, lifts the market mood

Sentiment has improved, as Shanghai reported no Covid-19 cases for the third consecutive day and would begin easing restrictions gradually. Portraying the aforementioned are global equities trading in the green, despite Fed Chair Jerome Powell hitting the wires at around 18:00 GMT. Regarding geopolitics linked to the Ukraine-Russia war, hostilities remain while the Russian Foreign Ministry Lavrov added that there are no talks with Ukraine.

In the meantime, the US Dollar Index, a measurement of the greenback’s value vs. a basket of rivals, remains soft in the day and drops to a two-week low, at 103.481, down some 0.68%, despite higher US Treasury yields, led by the 10-year benchmark note at 2.949%, gaining six basis points, a headwind for the yellow metal.

Before Wall Street opened, the US economic docket featured Retail Sales for April, which showed the resilience of consumers. The figures came at 0.9% m/m, in line with expectations. While the annual based number came at 8.2% y/y, smashing the 4.2% estimations. Also, Industrial Production posted good numbers, beating monthly and yearly forecasts, further cementing the case of the Federal Reserve tightening monetary policy at the pace that began a couple of weeks ago.

Additionally to macroeconomic data, Fed speakers would continue in the day. Earlier, St. Louis Fed President James Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months at least, and added that household consumption is expected to hold up well through this year. He emphasized that the base case scenario for the Fed is 50-bps rate hikes at upcoming Fed meetings.

Also read:

  • Fed’s Bullard: 50 bps rate increases at the coming meetings are a good base case for now
  • Fed’s Bullard: Most pressing issue for Fed is inflation, labour market remains “super tight”

Gold Price Forecast (XAU/USD): Technical outlook

The price of gold remains downward pressured once XAU/USD broke below the 200-day moving average (DMA). Despite an earlier attempt to overcome the previously-mentioned DMA. Albeit XAU/USD remains defensive, it is trading around familiar ranges. However, faltering to record a daily close above the two-year-old upslope trendline around $1820-25 would open the door for further losses.

If gold bulls fail at $1820-25, XAU/USD’s first support would be $1800. Break below would expose the May 16 daily low at $1786.50, followed by the YTD low at $1780.18, and then December 15, 2021, daily low at $1752.35.

 

15:12
USD/CAD rebounds toward 1.2850 as the US dollar stabilizes USDCAD
  • US dollar recovers during the American session, DXY still down sharply.
  • Canadian dollar among weakest currencies on Tuesday despite higher crude oil prices.
  • USD/CAD finds support above 1.2800.

The USD/CAD bounced to the upside and eared losses on Tuesday after the greenback gained momentum during the American session. The pair printed a fresh daily high at 1.2854 and it is hovering around 1.2845. Earlier on Tuesday it bottomed at 1.2805, the lowest level since May 5.

The US dollar was falling sharply across the board amid risk appetite. During the last hours, the greenback recovered ground after US yields turned to the upside and as US stocks trimmed gains. The US 10-year yield rose from 2.90% to 2.97% and the 30-year yield from 3.11% to 3.16%. The Dow Jones is up by 0.55% or 165 points, down 200 points from the high.

Economic data from the US came in above expectations. Retail Sales rose 0.9% in April against the 0.7% of market consensus (March figures were revised higher). Industrial Production advanced 1.1%, above the 0.5% expected by analysts. The numbers helped the dollar.

The loonie is falling also versus the Australian and the New Zealand dollar, despite higher crude oil prices. The broad correction in markets boosted NZD/CAD and AUD/CAD.

Rebounding from the 20-day SMA

The slide of USD/CAD from the highest level in more than a year found support above the 1.2800 area. The rebound pushed the price back above the 20-day Simple Moving Average at 1.2835. A daily close below the line could open the doors to another test of 1.2800. The next support stands at 1.2770 and 1.2720.

If USD/CAD holds above the 20-day SMA, attention would turn to the next resistance at 1.2855 followed by 1.2870 and 1.2905.

Technical levels

 

14:42
New Zealand GDT Price Index registered at -2.9%, below expectations (-1.7%)
14:29
WTI rallies towards late-March highs in $116s on constructive China updates, Russia/OPEC+ output woes
  • WTI has continued to rise on Tuesday, hitting the $115s, up around $17 versus last week’s sub-$100 lows.
  • Easing China lockdown fears combined with ongoing Russia/OPEC+ production woes and risk-on flows is supporting prices on Tuesday.
  • Bulls are eyeing a test of late-March highs in the $116s.

Oil prices have maintained and extended on recent upside momentum on Tuesday, with front-month WTI futures rallying into the $115s per barrel and eyeing a test of late-March highs in the $116s. Constructive updates regarding the Covid-19 situation in China, with Shanghai reporting no Covid-19 infections outside of quarantine for a third day, have boosted hopes for imminent lockdown easing. This, combined with a general more risk-on feel to global macro trade and a weaker US dollar amid hopes the Chinese tech crackdown will also ease, has injected the latest impetus into WTI.

The US benchmark for sweet light crude oil now trades around $17 higher versus last week’s sub-$100 lows. While an easing of China lockdown fears has been the latest bullish catalyst, analysts continue to cite numerous other factors as supportive of prices. Firstly, traders continue to bet that the EU will soon agree on some sort of embargo on Russian oil imports (even though Hungary continues to push back), with some flagging a 30-31 May EU summit as a potential date where agreement could be reached.

An embargo would be a devastating blow to the already shrinking Russian oil output. Since the West imposed harsh sanctions on the nation for its invasion of Ukraine, Russian output has been in decline as exporters struggle to find buyers. OPEC+ output missed the group’s target by 2.6M barrels per day (BPD) in April, a Reuters survey released on Tuesday showed. Half of this miss was due to Russian output falling and things are expected to have gotten worse this month. But the latest report also highlighted the struggles many smaller OPEC+ nations continue to have in lifting output in line with their OPEC+ target, despite sky-high oil prices.

Continued Russia/OPEC+ output woes combined with an easing of China lockdown fears have proven to be a bullish combination for oil markets in recent days. Should risk appetite in broad markets (like in equities) continue to improve, WTI may well be headed back above its late-March highs in the $116s in the near future. This would open the door to a run higher towards annual highs around $130. Should the bulls fatigue, support in the form of earlier monthly highs in the $111s should offer short-term support.

 

14:01
US Dollar Index tumbles to 2-week lows near 103.20 ahead of Powell
  • DXY’s moderate retracement meets support near 103.20.
  • US Retail Sales surprised to the upside in April.
  • Chief Powell speaks later in the NA session.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, remains on the defensive well below the 104.00 mark on Tuesday.

US Dollar Index now looks to Powell

The index keeps the weekly decline well in place, although it manages to bounce off earlier lows in the 103.25/20 band, or 2-week lows.

The renewed downside in the dollar comes amidst further improvement in the risk complex as well as a technical retracement in light of the overbought condition of DXY seen in the last couple of sessions.

Positive results from the US docket helped the greenback to trim part of the daily drop after Retail Sales expanded at a monthly 0.9% in April, and 0.6% when it comes to sales excluding the Autos sector. In addition, Industrial Production expanded 1.1% and Capacity Utilization improved to 79.0%.

Later in the session, Chief Powell speaks at the Wall Street Journal Future of Everything Festival in New York. In addition, Philly Fed P.Harker (2023 voter, hawk) and Cleveland Fed L.Mester (voter, hawk) are also due to speak later.

What to look for around USD

The dollar met decent resistance in the 105.00 neighbourhood so far this month, sparking a moderate correction lower afterwards. Supporting the buck appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Key events in the US this week: Retail Sales, Industrial Production, Business Inventories, NAHB Index, Fed Powell (Tuesday) – MBA Mortgage Applications, Building Permits, Housing Starts (Wednesday) – Initial Claims, Philly Fed Manufacturing Index, Existing Home Sales, CB Leading Index (Thursday).

Eminent issues on the back boiler: Speculation of a “hard landing” of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is down 0.75% at 103.40 and faces the next support at 103.22 (weekly low May 17) followed by 102.35 (low May 5) and then 99.81 (weekly low April 21). On the other hand, the break above 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level).

14:00
United States Business Inventories registered at 2% above expectations (1.9%) in March
14:00
United States NAHB Housing Market Index came in at 69 below forecasts (75) in May
13:49
USD/JPY Price Analysis: Climbs to three-day high, eyes descending trend-line resistance USDJPY
  • A combination of supporting factors assisted USD/JPY to regain positive traction on Tuesday.
  • Fading safe-haven demand weighed on the JPY and extended support amid rising US bond yields.
  • Broad-based USD weakness held back bulls from placing aggressive bets and capped the upside.
  • Sustained move beyond a descending trend-line resistance is needed to confirm a fresh breakout.

The USD/JPY pair edged higher during the early North American session and climbed to a three-day high in reaction to better-than-expected US Retail Sales figures. The pair was last seen trading around the 129.75 region, up 0.40% for the day, with bulls now looking to build on the momentum beyond the 200-period SMA on the 4-hour chart.

The risk-on impulse - as depicted by a strong rally in the equity markets - undermined the safe-haven Japanese yen and assisted the USD/JPY pair to regain traction on Tuesday. Apart from this, a goodish pickup in the US Treasury bond yields acted as a tailwind for spot prices, though broad-based US dollar weakness might cap gains.

From a technical perspective, the USD/JPY pair now seems to have confirmed a bullish breakout through a two-day-old trading range. Meanwhile, technical indicators on the daily chart are holding comfortably in the bullish territory and have again started gaining positive traction on hourly charts, adding credence to the constructive set-up.

Any subsequent move up, however, is likely to remain capped near a downward sloping trend-line. The said hurdle is pegged just ahead of the 130.00 psychological mark, which now coincides with the 61.8% Fibonacci retracement level of the 131.35-127.52 corrective slide and should act as a key pivotal point for short-term traders.

A convincing break through the aforementioned confluence barrier would set the stage for the resumption of the prior bullish trend. The USD/JPY pair might then surpass an intermediate hurdle near the mid-130.00s and reclaim the 131.00 mark. Bulls might eventually aim back to challenge a two-decade high, around the 131.35 area.

On the flip side, the 50% Fibo. level, near the 129.45-129.40 zone, now seems to protect the immediate downside ahead of the 129.15 area. This is closely followed by the 129.00 round figure and the daily low, around the 128.85 region, which if broken decisively would drag the USD/JPY pair towards the 129.00 mark, or the 38.2% Fibo. level.

The next relevant support is pegged near the lower end of the trading range, around the 128.70 region, which if broken would shift the bias in favour of bearish traders. The subsequent downfall would expose intermediate support near the 128.30-128.20 region before the USD/JPY pair break below the 128.00 mark and retest mid-127.00s (38.2% Fibo.).

USD/JPY 4-hour chart

fxsoriginal

Key levels to watch

 

13:28
EUR/GBP to bounce back higher amid Brexit woes – BBH EURGBP

EUR/GBP is lower despite negative Brexit news but economists at BBH do not think sterling outperformance can be maintained.

Outlook for the UK economy is much worse than it is for the eurozone

“We continue to believe that if a trade war breaks out between the two, the UK stands to lose much more than the EU. The UK is already facing recession risks from other headwinds, but a trade war would likely turn a mild recession into a deep one. In addition, so-called equivalence for UK financial firms would be dead in the water.” 

“If the UK does follow through with its threats, we would expect the euro to greatly outperform sterling. Even if the UK steps back from the brink, the outlook for the UK economy is much worse than it is for the eurozone. As such, we would fade this move lower in EUR/GBP as it approaches the May 2 low near 0.8376.”

 

13:26
USD/IDR: A test of 14,700 now appears on the cards – UOB

Further gains in USD/IDR could extend to the 14,700 region in the short-term horizon, according to Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“We highlighted last Monday (09 May, spot at 14,545) that ‘rapid increase in upward momentum is likely to lead to a break of the Jul 2021 high of 14,565’. We added, ‘the next resistance is at 14,620’.”

“Our view was not wrong as USD/IDR rose to a high of 14,625 on Friday (13 May) before extending its advance today. Upward momentum remains strong and USD/IDR could advance further to 14,680, possibly 14,700. Support is at 14,600 followed by 14,550.”

13:23
EUR/USD Price Analysis: Next resistance comes at 1.0641 EURUSD
  • EUR/USD keeps pushing higher and retakes 1.0500 and above.
  • Immediately to the upside is now the weekly high at 1.0641.

EUR/USD picks up further pace and trespasses the key barrier at 1.0500 the figure on Tuesday.

Considering the pair’s ongoing price action, the continuation of the rebound appears likely in the very near term at least. Against that, the next hurdle emerges at the weekly high at 1.0641 (May 5) ahead of the temporary 55-day SMA, today at 1.0819.

Below the 3-month line around 1.0880, the pair is expected to remain under pressure and vulnerable to extra losses.

EUR/USD daily chart

 

13:22
Gold Price Forecast: XAUUSD to see a fleeting relief on a break above $1,830 – TDS

Gold is trading back at the bull-market trendline near $1,830. The yellow metal could enjoy a temporary relief on a move above this level, economists at TD Securities report.

Failure to confirm early morning strength to see gold selling resume

“A convincing break north of the $1,830 level on the day could whipsaw momentum funds that have recently started selling the yellow. Nonetheless, with downside momentum firming and broad macro liquidations also weighing on gold, we think any relief will be fleeting.”

“A failure to confirm the early morning strength would see CTA selling resume course to a large net short position.”

 

13:15
United States Capacity Utilization came in at 79%, above forecasts (78.6%) in April
13:15
United States Industrial Production (MoM) came in at 1.1%, above forecasts (0.5%) in April
13:08
US Dollar Index Price Analysis: A deeper pullback appears likely
  • DXY sheds further ground and breaks below 104.00.
  • The continuation of the corrective decline could revisit 102.30.

DXY breaches the 104.00 support and drops to new 2-week lows in the 103.20 region on Tuesday.

Against that, further retracements remain well on the cards and could now target the next support at 102.35 (May 5 low), where decent contention is expected to emerge.

The current bullish stance in the index remains supported by the 3-month line around 100.00, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 96.39.

DXY daily chart

 

13:05
GBP/USD rallies into upper 1.24s post-strong UK jobs data, eyes 21DMA in 1.25s despite rising Brexit risk GBPUSD
  • GBP/USD has rallied to the upper 1.2400s and is eyeing its 21DMA in the 1.2530s after strong UK jobs data.
  • But the Fed’s relatively more hawkish stance versus the BoE and rising Brexit risks may make further upside difficult.

Recent concerning headlines highlighting the rising risk that a spat over the Northern Ireland border into a fully-fledged trade war between the UK and EU has failed to dent sterling optimism, with GBP/USD holding in the upper 1.2400s for now as traders digest the implications of a super strong UK labour market report released earlier in the session. The pair has also shrugged off a just-released, stronger than expected US Retail Sales report for April, perhaps as it continues to also find support from a more buoyant tone to risk appetite on Tuesday.

For reference, the latest UK labour data revealed the unemployment rate falling to its lowest since 1974 at 3.7% in the three months to March, below the expected 3.8%. Meanwhile, wages were up 7.0% YoY in March, well above the expected gain of 5.4%, which will ease some concerns about the vulnerability of consumers amid the ongoing cost-of-living squeeze. Analysts said the latest labour market data will encourage the BoE to continue lifting interest rates at upcoming meetings. Another 25 bps rate hike is expected from the bank in June.

At current levels in the 1.2480s, GBP/USD trades with gains of about 1.3% on Tuesday and is now over 2.5% higher versus last week’s multi-month sub-1.2200 lows. Bulls will now be eyeing a test of the pair’s 21-Day Moving Average in the 1.2530s, but it is notable that this level has offered significant resistance in recent weeks. Fed speakers continue to remind us (John Williams on Monday, James Bullard just now and plenty more later on Tuesday) to expect significant further Fed tightening in the quarters ahead as the bank races to tame inflation.

The Fed is expected to raise rates by 50 bps at its next at least two meetings (maybe three), meaning that even if the latest UK labour market data does ease some of the BoE’s fears about UK economic weakness, the Fed is set to retain a decisive monetary policy tightening advantage. That, alongside rising Brexit risks, caps GBP/USD upside and suggests the 21DMA may prove an important resistance level once again. The UK on Tuesday announced plans to introduce legislation that would unilaterally alter the Northern Ireland Protocol, much to the consternation of the EU.

 

12:58
USD/MYR: Scope for a test of 4.4000 – UOB

In opinion of Quek Ser Leang at UOB Group’s Global Economics & Markets Research, further upside could encourage USD/MYR to visit 4.4000.

Key Quotes

“Last Monday (09 May, spot at 4.3800), we held the view that ‘strong momentum suggests USD/MYR could break 4.4000’. Our expectations did not materialize as USD/MYR rose to a high of 4.3965 on Friday (13 May).”

“While there is still chance for USD/MYR to move above 4.4000, rapidly waning upward momentum (note that daily MACD is turning negative) suggests that a sustained rise above this major resistance is highly unlikely. On the downside, a breach of 4.3670 could lead to a pullback but 4.3330 is likely out of reach for now.”

12:57
AUD/USD Price Analysis: Bulls retain control post-US Retail Sales, below 0.7050 confluence AUDUSD
  • AUD/USD gained traction for the third successive day and surged past the 0.7000 mark on Tuesday.
  • Hawkish RBA meeting minutes, the risk-on impulse benefitted the aussie amid a weaker greenback.
  • Bulls might now wait for sustained strength beyond the 0.7050 confluence before placing fresh bets.

The AUD/USD pair held on to its strong intraday gains through the early North American session and was last seen trading around the 0.7020 area, just a few pips below the daily high.

The Reserve Bank of Australia, in the minutes of its last meeting released on Tuesday, signalled that a bigger interest rate hike is still possible in June amid the upside risks to inflation. This, in turn, boosted the Australian dollar and pushed the AUD/USD pair higher for the third successive day amid broad-based US dollar weakness.

The risk-on impulse - as depicted by a strong rally in the global equity markets - turned out to be a key factor that weighed heavily on the safe-haven greenback. The USD bulls seemed rather unimpressed by a goodish pickup in the US Treasury bond yields and also shrugged off stronger-than-expected US monthly Retail Sales figures for April.

From a technical perspective, acceptance above the 0.7000 psychological mark, which coincided with the 38.2% Fibonacci retracement level of the 0.7267-0.6829 fall, was seen as a key trigger for the AUD/USD bulls. The subsequent move up, however, stalled just ahead of the 0.7050 confluence resistance, which should now act as a key pivotal point.

The said barrier comprises the 50% Fibo. level and the 200-period SMA on the 4-hour chart, which if cleared decisively would set the stage for an extension of the AUD/USD pair's recovery move from the YTD low. Bulls might then aim to challenge the 61.8% Fibo. level, around the 0.7100 mark, en-route the 0.7135-0.7140 resistance zone.

On the flip side, the 0.7000 mark (38.2% Fibo. level) now seems to protect the immediate downside ahead of the 0.6970 region. This is followed by the 23.6% Fibo. level, around the 0.6935-0.6930 zone, which if broken decisively will suggest that the corrective bounce has run its course and prompt fresh selling around the AUD/USD pair.

Spot prices could then slide further below the 0.6900 round-figure mark and retest the overnight swing low, around the 0.6870 zone. Some follow-through selling would make the AUD/USD pair vulnerable to prolonging the depreciating move and challenge the YTD low, around the 0.6830-0.6825 region, before dropping to the 0.6800 mark.

AUD/USD 4-hour chart

fxsoriginal

Key levels to watch

 

12:55
United States Redbook Index (YoY): 12.7% (May 13) vs previous 13.1%
12:46
Brexit News: EU's Šefčovič says EU has significant concerns about UK announcements of new NIP legislation

EU Commissioner for Interinstitutional Relations and Foresight Maroš Šefčovič said on Tuesday that the EU has significant concerns about the announcement made by the UK government regarding new legislation relating to the Northern Ireland Protocol (NIP). Unilateral actions are not acceptable, he added, noting that the potential of the flexibilities proposed by the EU commission are yet to be fully explored and they can deliver a real difference on the ground. 

Šefčovič noted that should the UK decide to move ahead with a bill disapplying constitutive elements of the protocol, the EU will need to respond with all measures at its disposal. In recent days, EU officials have threatened to scrap the post-Brexit trade deal with the UK if it takes unilateral action on the NIP.

Seperately, UK PM Boris Johnson recently said that he does not think a trade war with the EU is likely. 

12:41
Fed's Bullard: 50 bps rate increases at the coming meetings are a good base case for now

St Louis Fed President and outspoken hawkish FOMC member James Bullard on Tuesday said that 50 bps rate hikes at upcoming Fed meetings are a good base case for now, reported Reuters. Financial market tightening should already be lowering inflation, but also means a broad repricing of assets and more volatility. 

The Fed wants to act in a way that is transparent and that causes the "least amount of disruption we can get", Bullard continued, noting that the Fed has a "good plan in place" to bring down inflation. China does not appear to have an exit strategy from the pandemic and lockdowns, he worried. 

12:32
United States Retail Sales ex Autos (MoM) registered at 0.6% above expectations (0.3%) in April
12:31
United States Retail Sales (MoM) came in at 0.9%, above forecasts (0.7%) in April
12:31
Canada Canadian Portfolio Investment in Foreign Securities fell from previous $-9.68B to $-23.98B in March
12:31
Canada Foreign Portfolio Investment in Canadian Securities rose from previous $7.44B to $46.94B in March
12:31
US: Retail Sales rise by 0.9% MoM in April vs. 0.9% expected gain
  • Headline Retail Sales growth was in line with expected at 0.9% in April. 
  • But Core Retail Sales growth was stronger than expected at 0.6% MoM and there were big positive revisions. 
  • Nonetheless, FX markets did not seem to react to the data. 

US Retail Sales rose at a pace of 0.9% MoM in April, in line with the expected pace of 0.9% but slower versus the previous month's 1.4% MoM pace of gain (which had been revised up from 0.7%), data released by the US Census Bureau on Tuesday revealed. YoY, sales were up 8.19% in April from 7.34% in March (which had been upwardly revised from 6.61%). 

US Core Retail Sales rose at a pace of 0.6% MoM in April, higher than the 0.4% expected gain. Core Retail Sales also saw a big positive revision to the March report, with sales now estimated to have risen 2.1% MoM versus the prior estimate of 1.4%. 

The Retail Control rose 1.0% MoM, above the expected gain of 0.5%, while March's gain in the Retail Control group was also revised up to 1.1% from 0.7% previously. 

Market Reaction

Despite the massive upwards revisions to the March data and better than expected growth in Core Retail Sales in April, markets do not seem to have reacted much. The DXY is arguably a tad higher in wake of the release but has been unable to get back above 103.50 (for now). 

12:30
United States Retail Sales Control Group came in at 1%, above forecasts (0.5%) in April
12:22
Russia's Putin: We see problems being created for oil & gas investments

Russian President Vladimir Putin said on Tuesday that Russia is seeing problems being created for oil investments, and accused the West of introducing new oil and gas sanctions for political reasons, reported Reuters. 

Some EU countries will not be able to completely ditch Russian oil, he continued, adding that Western sanctions and the possibility of an embargo have led to a rise in oil prices. Russian oil and gas revenues are on the rise, Putin noted, adding that the Russian state will help facilitate settlements in national currencies, as well as access to loans and insurance. 

Putin warned that energy inflation will hit transport, industry and European consumers and said that Europe will have the most expensive energy resources in the case of a Russian oil embargo. This will result in European economic activity subsiding, Putin noted, who added that we have to discuss additional measures to protect our national interest. 

12:18
GBP/JPY clings to upbeat UK jobs data-led gains near one-week high, around mid-161.00s
  • GBP/JPY gained strong positive traction for the third straight day and shot to a one-week high.
  • The British pound witnessed aggressive short-covering in reaction to the upbeat UK jobs report.
  • The risk-on impulse undermined the safe-haven JPY and remained supportive of the move up.

The GBP/JPY cross maintained its strong bid tone through the mid-European session and was last seen trading around the mid-161.00s, just a few pips below a one-week high.

The cross built on last week's goodish rebound from the vicinity of the very important 200-day SMA and scaled higher for the third successive day on Tuesday. The British pound strengthened across the board after the latest UK jobs report showed that the ILO Unemployment Rate edged down to 3.7% in three months to March from 3.8% prior.

Additional details revealed that the number of people claiming unemployment-related benefits dropped by 56.9K in April. The data pointed to tight labour market conditions in the UK and lifted bets for an additional interest rate hike by the Bank of England at next month's meeting. This, in turn, prompted aggressive short-covering around the GBP crosses.

On the other hand, the risk-on impulse - as depicted by a strong rally in the global equity markets - undermined demand for the safe-haven Japanese yen. Apart from this, a more dovish stance adopted by the Bank of Japan further weighed on the domestic currency, which provide an additional boost and contributed to the GBP/JPY pair's strong move up.

It, however, remains to be seen if bulls are able to retain their dominant position amid the UK-EU dispute over the Northern Ireland protocol. Nevertheless, the GBP/JPY cross has now recovered nearly 50% of its recent sharp corrective pullback from a five-year high. As investors digest the upbeat UK macro data, the focus shifts back to Brexit developments.

Technical levels to watch

 

12:17
UK CPI Preview: Forecasts from five major banks, shocker inflation

The United Kingdom will release the April Consumer Price Index (CPI) data on Wednesday, May 18 at 06:00 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of five major banks regarding the upcoming UK inflation print.

Economists expect the headline UK CPI to have jumped from 7% YoY in March to 9.1% in April.

ING

“Headline UK inflation is set to rise by more than two percentage points, reflecting the 54% rise in household energy prices that came through at the start of the month. We think there are probably enough factors to push inflation slightly above 9% in April. It’s worth saying though that this is already baked into the Bank’s forecasts, which anticipate a double-digit reading later this year. We’re less sure it will get as bad as that, but then again inflation has consistently surprised to the upside.”

TDS

“Inflation is set to surge on the increase in the energy price cap and VAT changes in April. We look for the headline rate to soar to 9.2% YoY and core inflation to come in at 6.4%. The labour market likely remained tight, with the unemployment rate staying put at 3.8% and ex-bonus and headline wage growth coming in at 4.1% and 5.3% 3m/y respectively.”

SocGen

“A 54% increase in Ofgem’s utilities price cap will largely be responsible for inflation surging by 2pp to 9% YoY in April. This could be the peak, although inflation will likely remain elevated throughout the remainder of the year. Core inflation is also expected to increase from 5.7% to 5.9% in April due to the temporary reduction in VAT for the hospitability industry reversing and a strong seasonal increase from the Easter holidays occurring in mid-April.”

Citibank

“UK CPI Inflation, April: Citi Forecast 9.2% YoY, Previous 7.0% YoY (BoE: 9.1% YoY (May MPR)); CPI Core, April: Citi Forecast 6.1% YoY, Previous 5.7% YoY (services inflation picking up).”

Wells Fargo

“In April, consensus economists expect inflation to spike above 9% YoY as energy and food prices remain elevated amid the ongoing conflict in Ukraine. In our view, 2022 UK inflation is on track to be 6.9% on an annual average basis. While the Bank of England has started tightening policy and recently turned more aggressive, we expect BoE policymakers to continue lifting interest rates. However, BoE policymakers are in a difficult position. Growth prospects are dim and economic activity is slowing quickly, so much so that policymakers are warning of a potential recession in the near future. But, in the battle between supporting the economy and containing inflation, we ultimately believe elevated inflation will matter more and BoE rate hikes are likely to continue.”

 

12:13
Fed's Bullard: Most pressing issue for Fed is inflation, labour market remains “super tight”

The most pressing issue for the Fed to tackle is inflation, St Louis Fed President and vocal hawkish FOMC member James Bullard said on Tuesday. Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months at least, and that the US labour market remains "super tight". Meanwhile, household consumption is expected to hold up well though this year, he added. 

A lot of people want to "put the pandemic behind them", Bullard added, who added that what happens to the European and Chinese economies are the biggest risk to the US outlook. From a macroeconomic perspective, the effects of the Ukraine war have so far been contained, Bullard continued, adding that he does not see Europe going into recession. 

Bullard has in the past called for the Fed to lift interest rates to 3.5% by the end of the year (above what the 2.5% rate most of the rest of the FOMC seem to favour by the year's end) and has previously hinted that 75 bps rate hikes should be considered. 

12:09
Gold Price Forecast: XAUUSD to fall further towards $1,691/77 – Credit Suisse

Gold tested $1,800 on Monday but managed to reverse its direction. Economists at Credit Suisse expect the yellow metal to suffer additional losses towards the $1,691/77 zone.

Gold/Silver ratio holding a major base to reinforce the likelihood gold still outperforms

“Gold has broken support from its uptrend from last August and 200-day average at $1,838/28 to warn of a retest of pivotal long-term support from the lower end of the two-year range at $1,691/77. Only below here though would see an important top established here also.”

“The Gold/Silver ratio has completed a major base to suggest that gold should continue to outperform silver and even though gold can weaken on an outright basis, it is still more likely weakness within the broader range for now.”

 

11:55
Brexit News: UK Foreign Secretary Truss announces UK will introduce legislation to change NIP

UK Foreign Secretary Lizz Truss announced on Tuesday that the UK will be introducing legislation in the coming weeks to make changes to the Northern Ireland Protocol (NIP), reported Reuters. The UK remains open to further talks with the EU on the matter, she added, noting that she has invited EU Commissioner for Interinstitutional Relations and Foresight Maroš Šefčovič to partake in talks in London as soon as possible. 

Truss said the UK's preference remains to reach a negotiated outcome with the EU on changes to the NIP and said what the UK has already proposed is a comprehensive and reasonable solution. The EU's proposals would be a backward step from the current situation on the border, Truss said.  

Proceeding with new legislation on Northern Ireland is consistent with the UK's obligations under international law, Truss continued, noting that this is not about scrapping the protocol, but about lessening the burden of East-West trade by ensuring that goods moving and staying within the UK will be free of unnecessary bureaucracy through a new green channel. 

The bill will continue to ensure that there is no hard border on the island of Ireland, Truss said, noting that the new bill will not negatively impact the EU in any way. 

 

11:40
When are US monthly retail sales figures and how could they affect EUR/USD? EURUSD

US Monthly Retail Sales Overview

Tuesday's US economic docket highlights the release of monthly Retail Sales figures for April, scheduled later during the early North American session at 12:30 GMT. The headline sales are estimated to have risen by a seasonally adjusted 0.7% during the reported month as against the 0.5% growth recorded in March. Excluding autos, core retail sales probably climbed by 0.3% in April, down sharply from the 1.1% increase reported in the previous month.

Analysts at Commerzbank offered a brief preview of the report and explained: “Retail sales are likely to have risen by 0.8% in April from March even as the decline in the price of gasoline depressed sales by half a percentage point. In contrast, we expect a strong increase in new car purchases based on data from auto manufacturers. Overall, such an increase in retail sales would be encouraging, as the days when consumers mainly bought goods and consumed fewer services (of which only restaurant sales are included in retail sales) because of the pandemic are now over. Instead, the consumption profile is slowly returning to normal, for example, because consumers are traveling more frequently again.”

How Could it Affect EUR/USD?

Ahead of the key release, the risk-on impulse dragged the safe-haven US dollar further away from a two-decade high and pushed the EUR/USD pair back above the 1.0500 psychological mark on Tuesday. A weak sales number would fuel concerns about softening US economic growth and exert additional downward pressure.

Conversely, stronger readings might do little to impress the USD bulls as the markets already seem to have fully priced in at least a 50 bps Fed rate hike move over the next two meetings. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the upside, though the immediate market reaction is likely to be short-lived ahead of Fed Chair Jerome Powell's appearance.

According to Eren Sengezer, Editor at FXStreet: “The Relative Strength Index (RSI) indicator on the four-hour chart stays below 70 while holding above 50, suggesting that the pair has more room on the upside before turning technically overbought.”

Eren also outlined important technical levels to trade the EUR/USD pair: “On the upside, 1.0480 (50-period SMA, Fibonacci 50% retracement of the latest decline) aligns as initial resistance. In case this level turns into support, 1.0500 (psychological level, Fibonacci 61.8% retracement) and 1.0530 (100-period SMA) could be seen as the next recovery targets.”

“Supports are located at 1.0450 (Fibonacci 38.2% retracement), 1.0420 (Fibonacci 23.6% retracement) and 1.0400 (psychological level),” Eren added further.

Key Notes

 •  US Retail Sales April Preview: Market risk centers on recession

 •  US Retail Sales Preview: Forecasts from eight major banks, a decent gain

 •  EUR/USD Forecast: Door opens for additional recovery gains

About US Retail Sales

The Retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly per cent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

11:37
EUR/USD lurches above 1.0500 on hawkish ECB commentary, now eyes test of 21DMA EURUSD
  • EUR/USD was sent lurching above 1.0500 on hawkish comments from ECB hawk Knot who hinted towards a 50 bps hike.
  • The euro has now appreciated by roughly 1.0% on the day versus the buck, with EUR/USD now eyeing its 21DMA.
  • The pair was already gaining prior to Knot amid buoyant risk appetite and strong UK/EZ economic data.

Whilst remarks from arch ECB hawk Klaas Knot, who said the bank shouldn’t rule out a 50 bps rate hike if the data warrants it, were the catalyst to launch EUR/USD above the 1.0500 level, multiple other factors had already been working in the pair’s favour throughout the European morning. Broad USD profit-taking as a result of improved macro risk appetite on constructive Covid-19 and big tech crackdown updates out of China, plus much stronger than anticipated UK labour market data which have eased concerns about UK economic weakness saw EUR/USD rally from the low 1.0400s to the upper 1.0400s by midway through the European morning.

Solid Eurozone economic data (the first estimate of Q1 GDP growth beat expectations while Q1 employment change was robust) has probably also helped the pair on Tuesday. At current levels in the 1.0530s, EUR/USD on-the-day gains now stand at around to 1.0%, with the pair now trading about 1.7% above last week’s multi-year mid-1.0300 lows. The pair is now eyeing a test of its 21-Day Moving Average in the 1.0580s, but traders should be cautious not to get over-excited about the most recent rebound ahead of key stateside risk events.

The US is set to release April Retail Sales figures at 1230GMT, while the rest of the day will be packed with Fed speak. The most notable speaker is Fed Chair Jerome Powell, who is scheduled to appear at 1800GMT. Powell and other Fed policymakers (except perhaps the hawkish outlier James Bullard) are expected to stick to the script; i.e. rapid Fed policy tightening is needed and appropriate given the high inflation backdrop, with rates likely to return to neutral (around 2.5%) by the end of the year.

That means perhaps another three consecutive 50 bps rate hikes at upcoming Fed meetings after the 50 bps rate hike implemented earlier this month. The final of those 50 bps rate hikes isn’t fully priced in and FX markets will probably be sensitive to Powell’s tone in the context of how it impacts the likelihood of another two or three 50 bps moves. EUR/USD may yet slide back under 1.0500. However, in the absence of a hawkish surprise, all other signs point to EUR/USD testing its 21DMA over the next few days.

 

11:25
Chinese VP Lui He: China will suppport healthy development of the platform economy

Chinese Vice Premier Lui He said during a CPPCC meeting that China will support the healthy development of the platform economy, reported state media cited by Reuters. Lui He added that China needs to properly manage relationships between the government and the market and that he supports digital firms to pursue stock market listings both at home and abroad. The battle for "key core technologies" must be fought well, Lui He added. 

His remarks come after China's State Planner said on Tuesday that China's economy faces increasing downwards pressure. 

11:20
ECB's Centeno: Normalisation of monetary policy is desired and must happen

European Central Bank Governing Council member Mario Centeno said on Tuesday that the normalisation of monetary policy is desired and must happen, reported Reuters.

His remarks come after ECB Governing Council member Klaas Knot told the Dutch TV earlier in the day that a 50 bps rate hike should not be excluded if data in the next few months suggest that inflation is broadening and accumulating. "The ECB needs to normalize policy," Knot added, per Reuters, and reiterated that a 25 basis points rate hike in July would be realistic.

11:08
EUR/JPY Price Analysis: Scope for extra upside near term EURJPY
  • EUR/JPY advances further and retakes 136.00 and beyond.
  • Extra gains could see the 138.30 zone revisited in the short term.

EUR/JPY posts gains for the third consecutive session and manages to reclaim the area above 136.00 on Tuesday.

If the recovery picks extra pace, then the cross could see the downside mitigated on a close above the May peak at 138.31 (May 9). The surpass of the latter should put a potential visit to the 2022 high at 140.00 (April 21) back on the radar.

In the meantime, while above the 200-day SMA at 131.08, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

 

10:35
USD/THB risks a corrective move near term – UOB

Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggested risks around USD/THB seem to be shifting to the downside.

Key Quotes

“We highlighted last Monday (09 May, spot at 34.59) that ‘there is room for the overbought USD/THB advance to extend’. We indicated ‘the round-number level of 35.00 is unlikely to come into the picture’. USD/THB rose to 34.85 last Friday amid deteriorating upward momentum.”

“Note that daily MACD is on the verge of turning negative and that there is a ‘triple bearish divergence’. The technical readings suggest an increased risk of a short-term top in USD/THB.”

“In other words, the risk is shifting to the downside towards the rising trend-line support (currently at 34.32). A break of this trend-line could potentially trigger a deeper pullback even though the major support at 34.00 is unlikely to come under threat this week.”

10:29
ECB's Knot: 50 bps rate hike should not be excluded if data suggest inflation is broadening

European Central Bank (ECB) Governing Council member Klaas Knot told the Dutch TV on Tuesday that a 50 basis points rate hike should not be excluded if data in the next few months suggest that inflation is broadening and accumulating.

"The ECB needs to normalize policy," Knot added, per Reuters, and reiterated that a 25 basis points rate hike in July would be realistic.

Market reaction

EUR/USD jumped above 1.0500 with the initial reaction to these comments and was last seen rising 0.8% on the day at 1.0515.

10:20
Silver Price Analysis: XAG/USD stalled near 50% Fibo., bearish flag spotted on short-term charts
  • Silver gained positive traction for the third straight day on Tuesday.
  • The recent price action constituted the formation of a bearish flag.
  • Negative oscillators further support prospects for additional losses.

Silver built on its recovery from a near two-year low touched last week and gained positive traction for the third successive day on Tuesday. The momentum pushed spot prices to a four-day high, around the $21.85 area during the first half of the European session, though lacked follow-through.

The intraday uptick stalled near the 50% Fibonacci retracement level of the $23.24-$20.46 downfall and should act as a pivotal point for intraday traders. Any subsequent move up, however, is likely to confront stiff resistance near the $22.00 mark, representing the top end of an ascending channel.

Given the recent sharp decline, the aforementioned trend channel constitutes the formation of a bearish flag pattern. Moreover, technical indicators on the daily chart are still holding deep in the negative territory, suggesting that the attempted recovery runs the risk of fizzling out rather quickly.

That said, a convincing break through the $22.00 mark would negate the bearish outlook and trigger a fresh bout of a short-covering rally. The XAG/USD might then surpass the 61.8% Fibo. level, around the $22.20 region and accelerate the momentum to the next relevant hurdle near the $22.55 area.

On the flip side, the 38.2% Fibo. level, around the $21.50 zone, now seems to protect the immediate downside. This is closely followed by the ascending trend-channel support, near the $21.35 region, which if broken decisively will reaffirm the bearish bias and pave the way for further losses.

Silver 1-hour chart

fxsoriginal

Key levels to watch

 

09:48
Indonesia: FX reserves extended the downside in April – UOB

Economist at UOB Group Enrico Tanuwidjaja reviews the latest FX reserves figures in Indonesia.

Key Takeaways

“Indonesia’s foreign exchange reserves decreased to USD135.7bn in April 2022; down by USD3.4bn from the previous month. Approximately a cumulative decline of USD10bn was recorded since its peak in Sep last year.”

“Nevertheless, the current level of reserves remained well above the international adequacy standard of 3 months of imports. The latest reserve level was equivalent to finance 6.9 months of import or 6.7 months of imports and servicing the government’s external debt.”

“Bank Indonesia views that the official reserve assets will remain adequate, along with several accommodative policies to support long-term economic recovery.”

09:38
EUR/USD: Bulls remain hungry with 1.0500 in sight EURUSD
  • EUR/USD extends the march higher near 1.0500.
  • The risk rally continues to weigh on the dollar.
  • Another revision of EMU Q1 GDP surprises to the upside.

The risk rally remains unabated so far and lifts EUR/USD to fresh 3-day highs in the boundaries of the 1.0500 mark on Tuesday.

EUR/USD now looks to 1.0500 ahead of Lagarde, Powell

EUR/USD prolongs its weekly recovery and adds to the current bounce off Friday’s 2022 lows around 1.0350 against the backdrop of quite a moderate improvement in the risk-associated complex across the board.

Extra gains in the pair comes in line with the recovery in US yields along the curve and another attempt of the German 10y Bund yields to revisit the key 1.00% barrier.

In the docket, further support for the European currency comes after another revision of Q1 EMU GDP now sees the bloc expanding 0.3% inter-quarter and 5.1% from a year earlier. Later in the session, Chairwoman C.Lagarde will speak at an event in Germany.

In the NA session, the focus of attention will be the speech by Chair Powell seconded by US Retail Sales, Industrial Production, Business Inventories and the NAHB Index.

In addition, FOMC’s Bullard, Harker and Mester are all due to speak.

What to look for around EUR

EUR/USD pushes higher and approaches the 1.0500 mark on the back of the persistent risk rally. Despite the pair removed some downside pressure, the broader outlook for the single currency remains entrenched in the negative territory for the time being. As usual, price action in spot should reflect dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by firmer speculation the ECB could raise rates at some point in the summer, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: EMU Flash GDP Growth Rate, ECB Lagarde (Tuesday) – EMU Final Inflation Rate (Wednesday) – ECB Monetary Policy Meeting Accounts (Thursday) – Germany Producer Prices, EMU Flash Consumer Confidence (Friday).

Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro area. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is up 0.46% at 1.0478 and faces the next hurdle at 1.0492 (weekly high May 17) seconded by 1.0641 (weekly high May 5) and finally 1.0936 (weekly high April 21). On the other hand, the breach of 1.0348 (2022 low May 13) would target 1.0340 (2017 low January 3 2017) en route to 1.0300 (round level).

 

09:34
Gold Price Forecast: XAUUSD sticks to modest gains around $1,830, lacks follow-through
  • Gold gained some follow-through traction for the second successive day on Tuesday.
  • The ongoing USD profit-taking slide benefitted the dollar-denominated commodity.
  • The risk-on impulse, rebounding US bond yields kept a lid on any meaningful upside.
  • Traders eye US Retail Sales for a fresh impetus ahead of Fed Chair Powell’s remarks.

Gold built on the previous day's goodish rebound from the $1,786 region, or its lowest level since late January and edged higher for the second successive day on Tuesday. The XAUUSD held on to its modest intraday gains through the first half of the European session and was last seen hovering near the $1,830 region, up around 0.25% for the day.

The ongoing US dollar retracement slide from a two-decade high touched last Friday turned out to be a key factor that extended some support to the dollar-denominated gold. That said, a combination of factors held back bulls from placing aggressive bets and kept a lid on any meaningful upside for spot prices, at least for the time being.

The markets seem convinced that the Fed would need to take more drastic action to bring inflation under control and have fully priced in at least a 50 bps rate hike at the next two policy meetings. This, along with the risk-on impulse, led to a fresh leg up in the US Treasury bond yields, which, in turn, should act as a headwind for the safe-haven gold.

Hence, the focus will remain glued to Fed Chair Jerome Powell's speech later this Thursday. Investors will look for clues about the possibility of a jumbo 75 bps rate hike in June, which will play a key role in driving the USD demand in the near term. This, in turn, would determine the next leg of a directional move for the non-yielding gold.

In the meantime, traders will take cues from the release of the US monthly Retail Sales figures during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Apart from this, the broader market risk sentiment will also be looked upon for short-term trading opportunities.

Technical levels to watch

 

09:32
Russia's Rudenko: Talks with Kyiv are not going on in any form

Citing Interfax news agency, Reuters reported on Tuesday that Russian Deputy Foreign Minister Andrey Rudenko said they were currently not holding talks "in any form" with Ukraine.

"No, negotiations are not going on. Ukraine has practically withdrawn from the negotiation process," Rudenko noted.

Market reaction

Risk flows continue to dominate the financial markets despite these comments. As of writing, the Euro Stoxx 600 Index was up 1.6% on the day, the UK's FTSE 100 Index was gaining 0.7% and US stock index futures were rising between 1% and 2%

09:30
United Kingdom 30-y Bond Auction: 2.04% vs 1.58%
09:11
USD/CNH: Short-term top in place? – UOB

USD/CNH’s uptrend seems to be running out of steam, commented Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group.

Key Quotes

24-hour view: “USD traded sideways between 6.7848 and 6.8206 yesterday before closing largely unchanged at 6.7965 (-0.06%). The movement appears to be part of a consolidation and further sideway-trading would not be surprising. Expected range for today, 6.7750/6.8150.”

Next 1-3 weeks: “n our latest narrative from last Thursday (12 May, spot at 6.8160), we highlighted that boost in momentum is likely to lead to further USD strength to 6.8500. USD rose to 6.8391 on Friday before pulling back. Upward momentum is beginning to wane and this coupled with overbought conditions has increased the risk of a short-term top. However, only breach of 6.7650 (no change in ‘strong support’ level) would indicate that the month-long rally in USD has finally come to an end.”

09:10
Euro area GDP grows at an annualized rate of 5.1% in Q1 vs. 5% expected
  • Euro area economy grew by 5.1% (YoY) in the first quarter.
  • EUR/USD continues to push higher toward 1.0500 after the data.

The data published by Eurostat showed on Tuesday that the seasonally adjusted Gross Domestic Product grew at an annualized rate of 5.1% in the first quarter, compared to the market expectation of 5%.

Further details of the publication revealed that on a quarterly basis, GDP increased by 0.3%. Finally, the Employment Change was up 0.5% in the first quarter as expected.

Market reaction

The shared currency preserves its strength after these data. As of writing, EUR/USD pair was trading at 1.0480, rising 0.5% on a daily basis. 

09:07
GBP/USD rallies to near two-week high, eyeing 1.2500 ahead of US data/Fed's Powell GBPUSD
  • A combination of factors prompted aggressive short-covering around GBP/USD on Tuesday.
  • The British pound drew support from better-than-expected domestic employment figures.
  • A turnaround in the risk sentiment undermined the safe-haven USD and remained supportive.
  • Investors now eye the US Retail Sales for a fresh impetus ahead of Fed Chair Powell’s remarks.

The GBP/USD pair added to its strong intraday gains and shot to a nearly two-week high, around the 1.2480 region during the first half of the European session.

The British pound strengthened across the board on Tuesday after the UK Office for National Statistics reported that the number of people claiming unemployment-related benefits dropped by 56.9K in April. This was well below expectations for a fall by 38.8 and the 46.9K decline reported in the previous month. Adding to this, the ILO Unemployment Rate in the UK edged lower to 3.7% in three months to March from 3.8% prior.

Apart from this, the ongoing US dollar profit-taking slide from a two-decade high assisted the GBP/USD pair to build on its recent bounce from the 1.2155 region, or the lowest level since September 2020. Spot prices gained traction for the third successive day, taking along some short-term trading stops placed around the 1.2400 round-figure mark. The subsequent strength might have already set the stage for additional near-term gains.

That said, the UK-EU impasse over the Northern Ireland protocol could act as a headwind for sterling. UK Foreign Secretary Liz Truss will set out how the government plans to change the rules on goods moving between Britain and Northern Ireland and how it could override parts of the Brexit deal. Apart from this, the Bank of England's warning that the UK economy will slide into recession this year might cap gains for the GBP/USD pair.

Traders might also be reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the key US macro data and Fed Chair Jerome Powell's appearance later this Tuesday. The US economic docket highlights the release of monthly Retail Sales figures. Meanwhile, Powell's remarks will be scrutinized for clues about the possibility of a 75 bps rate hike in June, which will influence the USD and provide a fresh impetus to the GBP/USD pair.

Technical levels to watch

 

09:02
Italy Consumer Price Index (EU Norm) (YoY) below forecasts (6.6%) in April: Actual (6.3%)
09:02
Italy Consumer Price Index (EU Norm) (MoM) registered at 0.4%, below expectations (0.6%) in April
09:02
Italy Consumer Price Index (YoY) registered at 6%, below expectations (6.2%) in April
09:02
Italy Consumer Price Index (MoM) below forecasts (0.2%) in April: Actual (-0.1%)
09:00
FX option expiries for May 17 NY cut

FX option expiries for May 17 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

1.0450 392m

- GBP/USD: GBP amounts        

1.2100 272m
1.2200 282m
1.2250 294m
1.2500 341m

- AUD/USD: AUD amounts                     

0.6650 346m
0.6900 226m
0.7050 572m

- USD/CAD: USD amounts       

1.3000 360m

09:00
European Monetary Union Gross Domestic Product s.a. (YoY) above expectations (5%) in 1Q: Actual (5.1%)
09:00
European Monetary Union Gross Domestic Product s.a. (QoQ) came in at 0.3%, above forecasts (0.2%) in 1Q
09:00
European Monetary Union Employment Change (QoQ) in line with expectations (0.5%) in 1Q
09:00
European Monetary Union Employment Change (YoY) came in at 2.6%, below expectations (2.7%) in 1Q
08:57
GBP/USD: Sellers unlikely to show interest as long as support at 1.2430 stays intact GBPUSD

GBP/USD has gathered bullish momentum and climbed to its highest level in more than ten days above 1.2450. The pair is set to stretch higher as long as 1.2430 support holds, FXStreet’s Eren Sengezer reports.

In case 1.2430 fails, 1.24 forms the next key support

“FOMC Chairman Jerome Powell is scheduled to speak at an event organized by the Wall Street Journal. In case Powell reminds investors of the worsening inflation outlook, the risk rally might lose its steam and limit GBP/USD's upside.”

“In case the pair manages to hold above 1.2430, sellers are likely to remain on the sidelines and allow it to continue to push higher.”

“1.25 (psychological level) aligns as interim resistance ahead of 1.2540 (Fibonacci 38.2% retracement of the downtrend that started on April 21). A daily close above the latter could open the door for additional gains toward 1.26 (psychological level).”

“In case 1.2430 support fails, 1.24 (psychological level, Fibonacci 23.6% retracement) forms the next key support.”

 

08:50
AUD/CAD to slip another cent on a break under 0.8910 – Scotiabank

AUD/CAD slide extends back to early 2022 low at 0.8910. A break below here would open up additional losses toward low-0.88s, economists at Scotiabank report.

AUD/CAD in a very difficult position on the chart

“The Jan low at 0.8910 clearly offers AUD/CAD some support but the heavy selling in the cross in March and April suggest downside risks here remain significant, the more so as trend signals are aligned bearishly for the AUD across short, medium and long term DMI oscillators.” 

“A break under 0.8910 could see AUD/CAD slip another cent to the low 0.88s (61.8% retracement of the 2020/21 rebound at 0.8820). 

“We do think the AUD is looking oversold but absent any signs of a rebound developing against the low 0.89s, lower levels look likely.” 

 

08:25
AUD/USD adds to hawkish RBA minutes-inspired gains, climbs further beyond 0.7000 mark AUDUSD
  • AUD/USD gained strong positive traction for the third successive day on Tuesday.
  • Hawkish RBA meeting minutes boosted the aussie amid broad-based USD weakness.
  • Traders now eye the US Retail Sales data for fresh impetus ahead of Fed Chair Powell.

The AUD/USD pair maintained its bid tone through the early European session and was last seen trading near a multi-day high, comfortably above the 0.7000 psychological mark.

A combination of supporting factors assisted the AUD/USD pair to build on its recent bounce from a near two-year low and gain traction for the third successive day on Tuesday. Hawkish Reserve Bank of Australia (RBA) monetary policy meeting minutes turned out to be a key factor that boosted the domestic currency. Apart from this, the ongoing US dollar retracement slide from a two-decade high offered additional support to spot prices.

Australia’s central bank signalled that a bigger interest rate hike is still possible in June amid the upside risks to inflation. It is worth recalling that Australia's first-quarter inflation rose at its fastest pace in more than 20 years. Conversely, a goodish recovery in the equity markets prompted some follow-through profit-taking around the safe-haven greenback and further benefitted the perceived riskier Australian dollar.

The strong intraday move up took along some short-term trading stops placed near the 0.7000 mark. Sustained strength and acceptance above the said handle might have already set the stage for additional gains. That said, a pickup in the US Treasury bond yields should help limit the USD downside ahead of Fed Chair Jerome Powell's appearance later today. This, in turn, warrants some caution before placing fresh bullish bets around the AUD/USD pair.

The markets seem convinced that the Fed would need to take more drastic action to bring inflation under control and have fully priced in at least a 50 bps rate hike at the next two policy meetings. Hence, Powell's remarks would be closely scrutinized for clues about the possibility of a jumbo 75 bps increase in June. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.

In the meantime, traders will take cues from the US economic docket, featuring the release of monthly Retail Sales figures. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Apart from this, the broader market risk sentiment should allow traders to grab short-term opportunities.

Technical levels to watch

 

08:17
USD/TRY advances confidently towards 16.00, as the lira plunges
  • USD/TRY clinches fresh 2022 highs near 15.90 on Tuesday.
  • The lira already depreciates more than 7% so far in May.
  • Markets’ focus now shifts to the CBRT event next week.

Another day, another low in the Turkish lira. Indeed, price action in USD/TRY appears to have returned to the normality and resumes the uptrend, recording at the same time new 2022 tops near 15.90 on Tuesday.

USD/TRY keeps targeting 16.00 in the near term

USD/TRY extends the uptrend for the ninth session in a row on Tuesday and slowly approaches the round level at 16.00 against the backdrop of the relentless depreciation of the Turkish currency.

Indeed, the lira already loses more than 7% since the beginning of the current month, while the yearly decline surpasses 20% so far.

The escalation of geopolitical tensions since the Russian invasion of Ukraine in late February coupled with investors’ fears of a global slowdown continue to weigh on the lira and keeps the upside pressure in the pair well and sound for the time being.

In the meantime, the Turkish central bank (CBRT) will meet next week amidst speculation of a probable move on rates in light of the unabated upside pressure on inflation. It is worth recalling that domestic consumer prices rose almost 70% in April.

 

What to look for around TRY

USD/TRY keeps the upside well and sound for yet another session and seems to have shifted its focus to the 16.00 mark for the time being. So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Consumer Confidence (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 1.98% at 15.8494 and faces the next hurdle at 15.8802 (2022 high May 17) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a drop below 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).

08:08
EUR/CAD needs to crack on above 1.3755 in order to rally – Scotiabank

EUR/CAD capped in mid-1.37s. A break above this region is needed to see a race higher, economists at Scotiabank report.

EUR/CAD remains under technical pressure

“The alignment of trend oscillator signals, in particular, is a problem for the EUR; the intraday, daily and weekly signals all suggest deeply entrenched bear momentum on the cross which will limit the EUR’s ability to recover – as the block at 1.3755 reflects.” 

“The EUR is finding support in the 1.3395/00 zone at least but downside risks remain for this cross towards 1.31/1.32.”

“The one issue we can note which suggests weakening bear pressure on the EUR is the narrowing, downward-sloping range that has developed since March. Still, the EUR needs to trade above 1.3715/20 to give this some validity and clearly needs to crack on above 1.3755 in order to rally.”

 

08:03
US Dollar Index: Three reasons why DXY is unlikely to peak yet – BofA

US Dollar Index (DXY) is at 20-year highs. Still, economists at Bank of America Global Research maintain a bullish bias over the coming weeks due to three reasons.

Three broad themes support the DXY

“The US policy divergence theme is perhaps on its final stretch – evidenced by the muted response of US rates to the positive CPI surprise (airline prices notwithstanding). But the ECB and BoJ will ‘catch up’ only gradually and later this year – hardly sufficient for an imminent reversal in the DXY.”

"High energy prices, which have held the USD in good stead vs. the large importers in Europe and Japan, are likely to persist at least until 4Q – this is inextricably linked to the Ukraine crisis and possibility of EU sanctions on energy imports from Russia, which would weigh meaningfully on EUR.”

“The combination of China's zero-Covid policy and weaker CNY has meant China's import impulse for the rest of the world has ground to zero in YoY terms and will likely turn negative in the months ahead.”

 

08:01
Italy Trade Balance EU: €0.42B (March) vs €-0.115B
08:01
Italy Global Trade Balance came in at €-0.084B, above forecasts (€-1.62B) in March
07:59
S&P 500 Index: Bouts of weakness are the trend – Charles Schwab

It's been a very rough four-and-a-half month to start the year – the third-worst at this point on record for the S&P 500 and the worst since 1970. Aggressive Fed action, tightening financial conditions, and the liquidity drain may keep downward pressure on stocks, economists at Charles Schwab report.

There is no perfect signal of when bear markets end

“The Federal Reserve is on a mission to squash inflation via the tightening of financial conditions. Now the Fed concedes it may have to allow more economic and/or market harm to bring inflation down, with equity market volatility/weakness in a vacuum not likely to trigger a shift in policy.”

“There is no perfect signal of when bear markets end. What we do know is that in bear markets, from a technical perspective, support becomes less relevant and resistance becomes more relevant. Assessing technicians' consensus, as an example, resistance sits somewhere between 4330 and 4400 on the S&P 500, a range (for now) that represents a key hurdle.”

“For now, rallies are more likely countertrend, while bouts of weakness are the trend.” 

 

07:54
The USD should be stronger for longer – HSBC

The USD has benefitted from the Fed’s hawkish stance and expectations for softer global growth. The Russia-Ukraine conflict, ongoing global supply disruptions, and China’s growth challenges point to further USD strength but China’s pronounced policy stimuli would probably help offset some of these strong USD forces, economists at HSBC report.

Global growth risks skewed to the downside should support the USD

“We agree the market has priced in a lot of tightening by the Fed this year, but the fact that the Fed has a greater ability to deliver on the hikes that are priced in compared to many other central banks should keep the USD in a strong position. The Fed will also start to reduce its balance sheet from 1 June, which should benefit the currency gradually.”

“Ongoing uncertainties from the Russia-Ukraine conflict, high commodity prices, and the associated squeezes on real incomes and consumption might point to further downside risk to global growth dynamics, which should continue to benefit the USD.”

“With the current COVID-19 situation on the mainland, domestic production is impacted by labour shortages and transportation difficulties. This should also fuel broad USD strength. However, if strong policy stimuli emerge eventually in China, some of the strong USD forces will be mitigated.”

“For us to turn more cautious on the USD, an acceleration of global growth and a big about-turn by the Fed would likely be needed. However, we see no quick need to fully embrace that view.”

07:51
EUR/AUD: Resistances at 1.5395 and 1.5542 to cool the upside pressure – DBS Bank

EUR/AUD’s recent recovery from a 1.4321 low ran out of tarmac against the Ichimoku cloud resistance at 1.5273. Unless the cross makes a sustained move over 1.5395 and the 40-week moving average at 1.5542, the bearish underlying from last December’s peak at 1.6827 is intact, Benjamin Wong, Strategists at DBS Bank reports.

EUR/AUD remains under the cosh 

“The cross regained and scaled a 1.5279 high, but the push back lower is clear as the cross ran into an Ichimoku cloud resistance barrier at 1.5273. Against the grain of the mid-March peak at 1.5329, this again sprouts the potential of another pseudo double top. This is signalling that EUR/AUD remains under the cosh until it regains over the next tangible resistance at 1.5395, and the 40-week moving average at 1.5542.”

“The inability to crack cloud resistance at 1.5273 is magnified by the fact that it is a calibrated 50% Fibonacci retracement of the EUR/AUD cross’ decline from 1.6225 into 1.4321 lows (incidentally at the same level of 1.5273).”

 

07:46
USD/JPY: Shrinking bets for a drop below 127.50 – UOB USDJPY

According to Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, bets for a breach of the 127.50 level in USD/JPY appear to be losing impulse so far.

Key Quotes

24-hour view: “USD traded sideways between 128.68 and 129.63 yesterday before closing largely unchanged (129.16, -0.02%). The price actions are likely part of a consolidation and USD could continue to trade sideways. Expected range for today, 128.70/129.65.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (12 May, spot at 128.80) where USD is likely to trade above 127.50 for a couple of days before staging a deeper pullback. USD traded mostly sideways the last couple of days. Downward pressure is easing and the chance for USD to move below 127.50 has diminished. That said, only a breach of 129.90 would indicate that the downside risk has dissipated.”

07:43
US Dollar Index extends the correction below 104.00 ahead of Powell, data
  • DXY breaks below the 104.00 mark amidst risk-on trade.
  • US yields recover some ground lost on Tuesday.
  • Chief Powell, Retail Sales next of note in the docket.

The greenback, when measured by the US Dollar Index (DXY), continues its corrective downside and breaches the key 104.00 support on turnaround Tuesday.

US Dollar Index focuses on Powell, data

The index sheds ground for the third consecutive session on Tuesday and extends further the rejection from last week’s 19-year tops around the 105.00 neighbourhood (May 13).

The marked move lower in the buck comes amidst further improvement in the appetite for riskier assets, which is also reflected in the bullish attempt seen in US yields along the curve.

In the meantime, investors will closely follow the speech by Chief Powell at the Wall Street Journal Future of Everything Festival in New York. In addition, the release of April’s Retail Sales will take centre stage seconded by Industrial Production, Capacity Utilization, Business Inventories, the NAHB Index and speeches by St. Louis Fed J.Bullard (voter, hawk), Philly Fed P.Harker (2023 voter, hawk) and Cleveland Fed L.Mester (voter, hawk).

What to look for around USD

The dollar met an initial decent resistance in the 105.00 neighbourhood so far this month, sparking a moderate correction lower afterwards. Supporting the buck appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Key events in the US this week: Retail Sales, Industrial Production, Business Inventories, NAHB Index, Fed Powell (Tuesday) – MBA Mortgage Applications, Building Permits, Housing Starts (Wednesday) – Initial Claims, Philly Fed Manufacturing Index, Existing Home Sales, CB Leading Index (Thursday).

Eminent issues on the back boiler: Speculation of a “hard landing” of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is down 0.21% at 103.96 and faces the next support at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14). On the other hand, the break above 105.00 (2022 high May 13) would open the door to 105.63 (high December 11 2002) and finally 106.00 (round level).

07:42
US Dollar Index to correct a little lower, 103.40 to hold – ING

Dollar extends correction ahead of key US data and Powell speech. However, economists at ING expect the dollar to hold onto large parts of its gains.

April retail sales should keep dollar supported

“We still call for some further bearish steepening of the US yield curve and the US 10-year real yield pushing to +100bp over coming months – from +20bp today. This will continue to pose a challenge for equity and credit markets and we would view this week's recovery in both as a pause in a bear trend rather than a meaningful reversal.”

“US April retail sales and industrial production are expected to come in strong. We will also hear from Federal Reserve hawk James Bullard and Chair Jerome Powell. It seems too early in the tightening cycle for the Fed to be fighting market expectations of tightening and the dollar could in fact be a little stronger tomorrow after Powell's remarks tonight. But for today's session, we favour consolidation and a few recovery stories.”  

“DXY could correct a little lower today, but the 103.40 area could be too far.”

See – US Retail Sales Preview: Forecasts from eight major banks, a decent gain

 

07:40
USD/CAD remains depressed around 1.2825 area, over one-week low amid weaker USD USDCAD
  • USD/CAD edged lower for the third successive day on Tuesday amid broad-based USD weakness.
  • A goodish recovery in the equity markets prompted some profit-taking around the safe-haven USD.
  • The recent rally in crude oil prices underpinned the loonie and also contributed to the offered tone.

The USD/CAD pair remained on the defensive through the early European session and was last seen trading around the 1.2825-1.2820 region, just a few pips above a nearly two-week low.

The pair extended last week's retracement slide from the 1.3075 region, or its highest level since November 2020 and edged lower for the third successive day on Tuesday. The corrective decline was sponsored by the ongoing US dollar profit-taking slide from a two-decade high touched last Friday.

Given that the markets have fully priced in at least a 50 bps Fed rate hike move at the next two policy meetings, traders seem inclined to lighten their USD bullish bets. Apart from this, signs of stability in the financial markets turned out to be another factor that undermined the safe-haven greenback.

Conversely, the commodity-linked loonie drew support from the recent rally in oil prices, bolstered by the European Union’s impending ban on Russian crude imports. That said, softening global growth has raised concerns about faltering fuel demand and acted as a headwind for the black liquid.

Market participants, however, seemed reluctant and preferred to wait for Fed Chair Jerome Powell's appearance later this Tuesday. Powell's remarks will be looked upon for clues about the possibility of a 75 bps rate hike in June, which will play a key role in driving the near-term USD demand.

In the meantime, traders on Tuesday will take cues from the US economic docket - featuring the release of the US monthly Retail Sales - for some impetus during the early North American session. Apart from this, oil price dynamics should produce meaningful trading opportunities around the USD/CAD pair.

Technical levels to watch

 

07:33
Silver Price Analysis: XAGUSD to plummet towards the $18.95/40 area – Credit Suisse

Silver (XAG/USD) has completed a large and significant top. Strategists at Credit Suisse expect the precious metal to plunge towards the $18.95/40 region.

Silver marks an important change of trend lower

“Silver has removed long-term price support at $21.68/42 as suspected and this has seen a large and significant top complete to mark an important change of trend lower.”

“Support is seen at $19.65 initially, then $18.95/40, which we look to hold at first for a consolidation phase.”

 

07:30
Netherlands, The Consumer Spending Volume: 11.2% (May) vs previous 13.8%
07:30
Netherlands, The Gross Domestic Product s.a (QoQ) came in at 0%, below expectations (0.2%) in 1Q
07:30
Netherlands, The Gross Domestic Product n.s.a (YoY) increased to 7% in 1Q from previous 6.5%
07:29
GBP/USD to surge towards 1.2500/2550 on a break past 1.2400/2410 – ING GBPUSD

GBP/USD staged a decisive rebound on Monday and broke above 1.23. Economists at ING expect cable to see a brief spike into the 1.2500/2550 area on a move through 1.2400/2410.

Sterling seems to be ignoring Northern Ireland politics at the moment

“It has been interesting to see sterling running with a high correlation against the renminbi. The current short-term recovery of the latter can see GBP/USD recover a little, where a move through 1.2400/2410 could see a brief spike into the 1.2500/2550 area. Those could be some of the best cable levels for some time.”

“Sterling seems to be ignoring Northern Ireland politics at the moment – perhaps because Conservative backbenchers and also US politicians are leaning on the UK government not to go ahead with unilateral actions on the Northern Ireland protocol.” 

“EUR/GBP to remain gently offered, but 0.8430/0.8400 may well be the best sterling levels to be seen for a while.”

 

07:25
EUR/CHF looks for a move back lower again while below 1.0492/0515 – Credit Suisse

EUR/CHF remains capped at 1.0492/0515. This region is set to hold to keep the downtrend intact, economists at Credit Suisse report.

EUR/CHF remains at a key inflection point

“Whilst rising medium-term MACD momentum is signaling a potential move higher, we remain bearish whilst below the 200-day moving average and the recent high at 1.0492/0515 and look for a move back lower again to last week’s low at 1.0360. “

“Though a break below last week’s low at 1.0360 is needed to relieve the strong upward pressure, only a move below the late April lows at 1.0188/87 would firmly reinstate the downtrend and put the market back to the middle of the recent range.”

 

07:20
EUR/NOK to adjust lower towards the 10.00 level – ING

The Norwegian krone goes through episodic sharp declines at times of market stress but usually reclaims those losses when conditions settle. Economists at ING expect EUR/NOK and USD/NOK to correct towards 10.00 and 9.60, respectively.

Primed for a recovery

“We see a temporary reprieve for risk assets, which will allow investors to focus on one of the enduring impacts of the war in Ukraine – higher energy prices. 

“Having rallied 8% over the last month, we would not be surprised to see EUR/NOK correcting lower in a move that could extend back to 10.00.”

“USD/NOK could correct a little further to the 9.60 area.” 

07:20
NZD/USD now moved into a consolidative phase – UOB NZDUSD

NZD/USD is now seen navigating within 0.6230-0.6380 range in the next weeks, suggested Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, NZD dropped to 0.6229 before rebounding strongly to a high 0.6320. While there is scope for the rebound to extend, a sustained rise above 0.6350 is unlikely. Support is at 0.6295 followed by 0.6270.”

Next 1-3 weeks: “After NZD dropped to a low of 0.6219, we highlighted last Friday (13 May, spot at 0.6250) that downward momentum has not improved by much but NZD could weaken further but expect strong support at 0.6200. We did not quite expect the strong rebound yesterday that sent NZD to a high of 0.6320. The recent weak phase in NZD (see annotations in the chart below) has run its course and from here, NZD is likely to consolidate and trade between 0.6230 and 0.6380.”

06:57
USD/RUB Price Analysis: Further downside needs validation from 62.80
  • USD/RUB holds lower ground near two-year low, pressured of late.
  • Falling wedge bullish chart pattern, Dragonfly Doji tests USD/RUB sellers.
  • Bulls need clear break of 200-DMA to retake control.

USD/RUB remains on the back foot for the second consecutive day, after bouncing off a two-year low. That said, the Russian ruble (RUB) pair seesaws around 64.31 by the press time of the pre-European session opening on Tuesday.

Although the quote refrains from renewing the multi-month low of late, a sustained trading below the 200-DMA and a monthly falling trend line, forming part of the falling wedge bullish chart pattern, challenges the recovery moves.

Even so, oversold RSI conditions hint at an intermediate recovery of the USD/RUB prices, which highlights the aforementioned resistance line of the wedge, around 66.15, as a nearby key hurdle ahead of the 200-DMA level surrounding 78.50.

In a case where USD/RUB rises past 78.50, the 80.00 threshold and April’s high of 84.75 will be in focus for short-term upside moves. However, any further advances beyond 84.75 could help the bulls to approach the theoretical target of the wedge, around 92.00.

Meanwhile, a downside break of the latest low near 62.80 rejects the bullish signals flashed by the Dragonfly Doji candlestick.

Following that, a downward trajectory towards the wedge’s support line, at 58.70 by the press time, can’t be ruled out.

USD/RUB: Daily chart

Trend: Limited downside expected

 

06:53
EUR/GBP slides to near two-week low, bears flirt with 200-DMA near 0.8445 area EURGBP
  • EUR/GBP remained under some selling pressure for the fourth successive day on Tuesday.
  • The upbeat UK jobs report turned out to be a key factor behind sterling’s outperformance.
  • Modest USD weakness acted as a tailwind for the euro and might lend support to the cross.

The EUR/GBP cross witnessed some selling during the early European session and dropped to over a one-week low, just below mid-0.8400s in reaction to the upbeat UK jobs report.

The UK Office for National Statistics reported this Tuesday that the number of people claiming unemployment-related benefits dropped by 56.9K in April. This was well below expectations for a fall by 38.8 and the 46.9K decline reported in the previous month. Adding to this, the ILO Unemployment Rate in the UK edged lower to 3.7% in three months to March from 3.8% prior.

The data overshadowed the Bank of England's warning that the UK economy will slide into recession this year and turned out to be a key factor behind the British pound's relative outperformance. This, in turn, dragged the EUR/GBP cross lower for the third successive day and contributed to the ongoing retracement slide from the highest level since September 2021 touched last week.

On the other hand, the shared currency was undermined by concerns that the Eurozone's economy would suffer the most from the Ukraine crisis. That said, a softer tone surrounding the US dollar acted as a tailwind for the euro. Apart from this, fresh Brexit jitters should lend some support to the EUR/GBP cross and warrants some caution before placing aggressive bearish bets.

Even from a technical perspective, spot prices, so far, have managed to hold above the very important 200-day SMA. This further makes it prudent to wait for strong follow-through selling to confirm that the EUR/GBP cross has topped out in the near term. Market participants now look forward to the release of the flash Eurozone Q1 GDP report for a fresh impetus.

Technical levels to watch

 

06:50
EUR/USD could climb as high as 1.0550 – ING EURUSD

EUR/USD has enjoyed a short-term reprieve. Economists at ING believe that the world’s most popular currency pair could reach the 1.0550 mark on Tuesday.

Expectations for ECB hikes are still creeping higher

“Today looks as good a day as any for an oversold bounce in EUR/USD, which could carry it as high as 1.0550.” 

Interestingly, expectations for European Central Bank hikes are still creeping higher. The ECB managing expectations of a 100bp rate hike this year may be what it takes to deliver some temporary stability to EUR/USD – even though we remain in a powerful downtrend.

06:47
USD/CNY: Sustained move above 6.8475 to clear the way towards the 7.00 level – Credit Suisse

USD/CNY is nearing the 6.8475 mark. A break above here would open up the 6.9957/7.0000 region, economists at Credit Suisse report.

Fall back below 6.6870 to raise a question mark over further strength

“We still expect a move to our core objective at the 61.8% retracement of the 2019/2022 downtrend and the ‘neckline’ to the 2020 top at 6.8475/94. While this could prove a strong barrier to cross given the already steep advance, medium-term momentum remains strong and thus we believe a sustained break above this level is likely, which would trigger a move to the 78.6% retracement at 6.9957/7.0000 in due course.”

“A fall back below the last week’s low at 6.6870 would raise a question mark over further strength and would see scope for a lengthier pause to emerge.”

 

06:45
Forex Today: Dollar extends correction ahead of key US data, Powell speech

Here is what you need to know on Tuesday, May 17:

The greenback weakened modestly against its rivals on Monday and the US Dollar Index closed the second straight trading day in negative territory. The dollar stays on the back foot early Tuesday amid improving market mood. Later in the day, the first-quarter Gross Domestic Product data from the euro area, April Retail Sales and Industrial Production figures from the US will be watched closely by market participants. During the American trading hours, FOMC Chairman Jerome Powell will speak at an event organized by the Wall Street Journal.

The city of Shanghai reported on Tuesday that it had achieved zero coronavirus infections across all districts. Nevertheless, officials are planning to start easing restrictions in a gradual way from May 21 with an aim to have the lockdown completely lifted by June 1. The Shanghai Composite Index is on track to close in positive territory and US stock index futures are up between 0.35% and 0.75%, reflecting the upbeat market sentiment.

EUR/USD took advantage of the dollar weakness and posted modest daily gains on Monday. The pair continues to edge higher in the European morning and was last seen trading near mid-1.0400s. European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau said on Monday that a euro that is too weak would go against the ECB's price stability objective.

GBP/USD staged a decisive rebound on Monday and broke above 1.2300. Earlier in the day, the data published by the UK's Office for National Statistics showed that the ILO Unemployment Rate declined to 3.7% from 3.8% in three months to March. Additionally, wage inflation, as measured by Average Earnings Including Bonus, jumped to 7% on a yearly basis, surpassing the market expectation of 5.4% by a wide margin.

Meanwhile, Bank of England Governor Andrew Bailey said on Monday that he was not at all happy about the inflation outlook, explaining that over 80% of the UK's inflation overshoot was due to energy and tradable goods.

AUD/USD gathered bullish momentum in the Asian session on Tuesday and broke above 0.7000. Minutes of the Reserve Bank of Australia's (RBA) monetary policy meeting revealed earlier in the day that policymakers considered three options, raising the cash rate by 15 basis points, 25 basis points or 40 basis points. "Members agreed that further increases in interest rates would likely be required to ensure that inflation in Australia returns to the target over time," the publication read.

USD/JPY is having a difficult time making a decisive move in either direction and fluctuates in a relatively tight range above 129.00. Bank of Japan Deputy Governor Masayoshi Amamiya reiterated on Tuesday that it was important for them to continue with the current powerful monetary easing to support the economic activity.

Gold tested $1,800 amid rising US Treasury bond yields on Monday but managed to reverse its direction with the broad-based dollar weakness. At the time of press, XAU/USD was posting modest daily gains near $1,830.

Bitcoin lost nearly 5% on Monday but stays relatively resilient near $30,000 early Tuesday. Ethereum reclaimed $2,000 on Tuesday after having erased 5.7% on the first trading day of the week.

06:42
Sterling to remain under depreciation pressure whichever way you look at it – Commerzbank

The Bank of England (BoE) is concerned about the economy and fears a notable slowdown. This week’s data publications are likely to illustrate that interest rate hikes will still be necessary. In any case, sterling is going to come under significant depreciation pressure, economists at Commerzbank report.

Brexit woes to intensify the BoE’s economic concerns

“At this stage data, a tight labour market, as well as inflation above 9%, is more likely to put pressure on sterling. As the BoE is expecting the economy to cool notably thus signalling only moderate monetary policy tightening the market might fear that it could fall behind the curve.”

“If BoE seems concerned about inflation and signals its willingness to hike interest rates more significantly after all that would not necessarily be positive for sterling as recession fears amongst market participants might rise, which in turn would put pressure on sterling.”

“If the row about the Northern Ireland Protocol between the UK and the EU was to intensify and lead to a fully-blown trade war this might intensify the BoE’s and the financial market’s economic concerns. That means that sterling is likely to remain under depreciation pressure for now.”

06:34
NZD/USD to regain some ground through the back half of the year – Westpac NZDUSD

After soaring earlier in the year, the New Zealand dollar has crashed back down to earth in recent weeks. Economists at Westpac expect the kiwi to regain some ground against the US dollar and other major currencies over the coming months. 

Potential for gains relative to the Australian dollar looks limited  

“The New Zealand dollar is expected to reclaim some ground against the US dollar and other currencies through the back half of the year.”

“Relative to fundamentals, such as the strength of our commodity prices, the fall in the New Zealand dollar already looks overdone. And with demand for our commodity exports set to remain firm, we expect the New Zealand dollar will be well supported over the coming months.” 

“We also expect the strength in the US dollar to fade towards the end of the year as some of the recent sharp increase in expectations for tightening by the Fed is scaled back.”

“The NZD is set to hold around 91 cents against its Australian counterpart through to the end of the year. Australia is now running trade surpluses (in contrast to New Zealand’s continued deficits). However, balanced against that firmer trade position, financial markets appear to be significantly overpricing the extent of likely interest rate hikes from the RBA (and by a greater extent than in New Zealand). The eventual unwinding of those positions will leave the AUD weighed down relative to its New Zealand counterpart.”

 

06:31
GBP/JPY bulls attack 160.00 on upbeat UK employment data, firmer sentiment
  • GBP/JPY remains on the front foot for the third consecutive day.
  • UK Claimant Count Change, ILO Unemployment Rate dropped below market forecasts and prior readings.
  • Covid hopes join expectations of further easy money from Japan to strengthen bullish bias.

GBP/JPY extends the previous two-day rebound on strong UK employment data during the initial hour of the London open. That said, the cross-currency pair initially ticked up to 159.96 before easing to 159.75 by the press time.

The UK’s latest round of jobs report, mainly comprising the April month’s Claimant Count Change and ILO Unemployment Rate for three months to March, back the Bank of England’s (BOE) latest hawkish bias, as well as Governor Andrew Bailey’s push for faster rate hikes. That said, UK Claimant Count Change for April dropped below -38.8K forecast and -46.9K prior readouts to -56.9K. Also favoring the GBP/JPY bulls was the easy Unemployment Rate of 3.7%, compared to the 3.8% market consensus and prior.

Also read: UK: ILO Unemployment Rate declines to 3.7% in March vs. 3.8% expected

Other than the UK data, firmer sentiment and comments favoring no major challenges to the Bank of Japan’s (BOJ) money policy also keep GBP/JPY buyers hopeful. Additionally, firmer US Treasury yields act as an extra catalyst to propel the quote.

Japan’s Finance Minister Shunichi Suzuki and BOJ Deputy Governor Masayoshi Amamiya were the latest policymakers who pushed for easy money policies. Among the additional catalysts favoring the GBP/JPY bulls are the covid headlines from China, as well as recently downbeat US data and Fedspeak.

Amid these plays, the stock futures, Asia-Pacific equities and the US Treasury yields print gains but the US Dollar Index (DXY) remains pressured for the third consecutive day.

Moving ahead, GBP/JPY traders may keep their eyes on the risk catalysts and hence highlight a speech from Fed Chairman Jerome Powell, as well as Brexit news, not to forget covid updates, as the key factors to watch for fresh directions.

Technical analysis

A convergence of the previous support line from late March and the monthly resistance line highlights the 160.00 threshold as an important resistance for the GBP/JPY bulls to tackle before eyeing the driver’s seat.

 

06:31
India WPI Inflation came in at 15.08%, above forecasts (14.48%) in April
06:28
EUR/USD could move even lower before ECB July meeting – Commerzbank EURUSD

It will have to be seen whether the European Central Bank (ECB) will make action follow hawkish words. Economists at Commerzbank believe that EUR/USD could trade even lower ahead of ECB July meeting.

There is not going to be a lack of ECB hawkish comments

“If we really do see a lift-off EUR might benefit. Until then what probably matters is to what extent the ECB can convince the markets of its intentions.”

“There is not going to be a lack of hawkish comments. The closer the July meeting gets, the more EUR might be able to benefit from that. However, that does not mean that we might not see even lower levels in EUR/USD until then. After all, July is still some way off.”

 

06:11
GBP/USD extends falling wedge breakout towards 1.2400 on strong UK jobs report GBPUSD
  • GBP/USD prints three-day uptrend, taking the bids to refresh intraday high.
  • UK Claimant Count Change dropped to -56.9K, Unemployment Rate also eased to 3.7%.
  • Bullish chart pattern confirmation, upbeat UK data underpin hopes of further upside.
  • Anxiety ahead of Fed’s Powell, Brexit announcements test buyers.

GBP/USD justifies firmer prints of the UK’s latest employment data by taking the bids to 1.2365, up for the third consecutive day, during the early Tuesday morning in Europe.

That said, UK Claimant Count Change for April dropped below -38.8K forecast and -46.9K prior readouts to -56.9K. Also favoring the GBP/USD bulls was the easy Unemployment Rate of 3.7%, compared to 3.8% market consensus and prior.

Also read: UK: ILO Unemployment Rate declines to 3.7% in March vs. 3.8% expected

The upbeat UK employment numbers join Bank of England (BOE) Governor Andrew Bailey’s recently hawkish bias to suggest faster rate hikes by the “Old Lady”. However, all this seems to have been priced in and hence the GBP/USD bulls may look towards broad risk catalysts for further directions.

It’s worth noting that the risk-on mood joined the softer US dollar to underpin the cable’s previous run-up. The recovery in the market sentiment could be linked to the covid headlines from China while the US dollar seems to bear the burden of the recently downbeat US data and Fedspeak.

While portraying the mood, stock futures and the US Treasury yields print gains but the US Dollar Index (DXY) remains pressured.

Looking forward, today’s US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as a speech from Fed Chairman Jerome Powell, will be crucial for the GBP/USD bulls as markets anticipate Powell’s repeated support for 50 bps rate hike. The same, if not heard, could trigger a pullback in the pair prices.

Additionally, UK PM Boris Johnson is also up for releasing details of how the Northern Ireland Protocol (NIP) will be edited for “insurance” purposes, as per the British leader’s latest comments.

Hence, GBP/USD prices have more barriers to the upside even as the immediate reaction to the UK data appears positive.

Technical analysis

GBP/USD confirmed a falling wedge bullish chart pattern with a clear break above 1.2300 on Monday, suggesting further advances towards the monthly high surrounding 1.2640. The recovery moves also gain support from the MACD line’s impending bull cross and nearly oversold RSI.

Alternatively, a downside break of 1.2280 will negate the bullish breakout and can drag the quote back to the latest lows surrounding 1.2155.

 

06:05
UK: ILO Unemployment Rate declines to 3.7% in March vs. 3.8% expected
  • ILO Unemployment Rate in the UK declined to 3.7% from 3.8%.
  • GBP/USD edges higher toward 1.2370 after the data. 

The ILO Unemployment Rate in the UK declined to 3.7% in three months to March from 3.8%, the UK's Office for National Statistics reported on Tuesday. This reading came in slightly lower than the market expectation of 3.8%.

Further details of the publication revealed that the Claimant Count Change in April was -56.9K, compared to analysts' estimate of -38.8K. Finally, the Average Earnings Including Bonus and Excluding Bonus rose by 7% and 4.2%, respectively, on a yearly basis.

Market reaction

GBP/USD gained traction with the initial reaction and was last seen rising 0.37% on a daily basis at 1.2363.

06:05
USD/JPY sees upside to near 130.00 as Fed-BOJ policy divergence deepens, US Retail Sales eyed USDJPY
  • USD/JPY is facing a barricade around 129.45 ahead of the US Retail Sales.
  • Fed’s Powell has indicated two more rate hikes in 2022.
  • The ultra-loose monetary policy from the BOJ will keep the yen bulls passive.

The USD/JPY pair is gradually moving higher in the early European session and is expected to touch the psychological figure of 130.00 after violating intraday’s resistance at 129.45. The asset has formed a bullish Open-Rejection reverse as the bearish open move met with a responsive buying action, which drove the asset above the opening price to a high of 129.45.

The Federal Reserve (Fed) is hand chasing to squeeze liquidity from the economy. Rising inflationary pressures along with a tight labor market are hitting the paychecks of the households. Higher energy bills and food prices are hurting the real income of the households, which is diminishing their confidence in the economy. So investors should brace for a spree of interest rate hikes by the Fed.

Also, Fed chair Jerome Powell in his interview with Marketplace national radio program stated that the Fed could feature two more rate hikes by 50 basis points (bps) in its next two monetary policy meetings. And, the statement seems clearly responsible for the broad-based strength in the greenback.

On the Japanese front, the Bank of Japan (BOJ) will stick to its conservative monetary policy as BOJ’s Governor Harihuko Kuroda stated that the economy has failed in achieving its pre-pandemic growth levels. The continuation of a prudent monetary policy will keep the yen bulls on the tenterhooks.

In today’s session, investors are bracing for outperformance from the US Retail Sales data amid higher interest rates. The monthly US Retail Sales are seen at 0.7% against the prior print of 0.5%.

 

06:02
United Kingdom Claimant Count Rate fell from previous 4.3% to 4.1% in April
06:01
United Kingdom Average Earnings Excluding Bonus (3Mo/Yr) in line with expectations (4.2%) in March
06:01
United Kingdom Average Earnings Including Bonus (3Mo/Yr) registered at 7% above expectations (5.4%) in March
06:00
United Kingdom Claimant Count Change came in at -56.9K, below expectations (-38.8K) in April
06:00
United Kingdom ILO Unemployment Rate (3M) came in at 3.7%, below expectations (3.8%) in March
06:00
US Retail Sales Preview: Forecasts from eight major banks, a decent gain

The US Census Bureau will release the April Retail Sales report on Tuesday, May 17 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of eight major banks regarding the upcoming data. 

Retail Sales are forecast to climb 0.7% in April, up from 0.5% in March. Sales ex-Autos are expected to rise 0.3% after adding 1.1% in March and the Control Group is projected to increase 0.7% in April following a gain of 0.5% in March.

Commerzbank

“Retail sales are likely to have risen by 0.8% in April from March even as the decline in the price of gasoline depressed sales by half a percentage point. In contrast, we expect a strong increase in new car purchases based on data from auto manufacturers. Overall, such an increase in retail sales would be encouraging, as the days when consumers mainly bought goods and consumed fewer services (of which only restaurant sales are included in retail sales) because of the pandemic are now over. Instead, the consumption profile is slowly returning to normal, for example, because consumers are traveling more frequently again.”

TDS

“We look for retail sales to advance firmly in April (1.5%), continuing with the monthly gains registered so far this year. Spending was likely aided by a strong rebound in auto purchases and an increase in control group sales. We also look for a 1%+ MoM gain in the eating/drinking segment (i.e. bars & restaurants) as consumers continue to transition away from goods spending.”

SocGen

“We look for a 0.6% MoM gain in retail spending for April and above the inflation pace of 0.3% reported last week. We include a meaningful bounce in auto sales for April. New sales of autos and light trucks rose to a 14.3 mu pace in April from 13.4 in March. Outside of autos, retail sales are expected to be flat. The gains on autos are important, as these sales are typically very sensitive to the business cycle.”

NBF

“Car dealers likely contributed positively to the headline number, as auto sales improved during the month. Gasoline station receipts, for their part, may have retraced a bit judging from a decrease in pump prices. All told, headline sales could have advanced 0.9% MoM. Spending on items other than vehicles may have been a tad weaker, rising 0.6%.” 

Deutsche Bank

“We are anticipating a +1.7% print, up from +0.7% in March. Rebounding auto sales should help the headline number.”

CIBC

“Higher unit sales of vehicles in the US in April will boost total retail sales, more than offsetting the drop in prices at the pump. Combined with an improvement in restaurant traffic, total retailing likely advanced by a respectable 1.1% on the month. However, sales likely won’t look as rosy in other categories as the squeeze on consumer spending power from higher prices likely resulted in a more modest 0.4% advance in the control group of sales (ex. autos, gasoline, restaurants, and building materials), which implies only slight growth in volume terms. That would still leave sales well above where the pre-pandemic trendline would have put them in both nominal and real terms. We are slightly more pessimistic than the consensus on the control group which could see bond yields and the USD ease off.”

Citibank

“US April retail Sales – Citi: 0.6%, prior: 0.7%, Retail Sales ex Auto – Citi: 0.1%, prior: 1.4%, Retail Sales ex Auto, Gas – Citi: 0.4%, prior: 0.7%, Retail Sales Control Group – Citi: 0.4%, prior: 0.7%.  We see a solid increase in topline retail sales for April with data showing a still active consumer but one that is shifting preferences away from goods towards services.”

Wells Fargo

”We expect retail sales rose 0.6% in April, but when adjusted for inflation, we estimate real retail sales expanded 0.9%.”

 

05:56
Gold Price Forecast: XAUUSD unlikely to stage a meaningful recovery

Gold witnessed an intraday turnaround from a fresh multi-month low touched on Monday. But as FXStreet’s Haresh Menghani notes, the 200-day moving average (DMA) around $1,836 is likely to cap XAUUSD.

Investors eye the US Retail Sales for some impetus ahead of Fed Chair Powell’s speech

“The focus now shifts to Fed Chair Jerome Powell's speech later this Tuesday. Heading into the key event risk, the US monthly Retail Sales figures would influence the USD price dynamics and produce some meaningful trading opportunities around gold.”

“The attempted recovery move stalled just ahead of the $1,830 level. This is closely followed by the very important 200-day SMA, around the $1,836 region, which should act as a pivotal point for short-term traders. Sustained strength beyond might trigger a fresh bout of a short-covering move and lift spot prices back towards the $1,859-$1,860 supply zone.”

“The $1,811-$1,808 region now seems to protect the immediate downside ahead of the $1,800 mark and the overnight swing low, around the $1,786 area. A convincing breakthrough the said support levels would make gold vulnerable to weaken further below the 2022 low, around the $1,780 level. The downward trajectory could get extended towards testing the next relevant support near the $1,760 zone and the $1,753-$1,752 region.”

 

05:51
USD/CNH sellers approach 6.7800 as options market run most bearish since August 2021

USD/CNH prints a three-day downtrend as bears attack $6.7800 heading into Tuesday’s European session.

In doing so, the offshore yuan currency (CNH) pair tracks bearish signals from the options market as a one-month risk reversal (RR) ratio of calls to put drops the most since August 2021.

That said, the daily RR print also drops for the fifth consecutive day while flashing a 0.3000 negative figure.

The reason could be linked to the broad US dollar weakness, as well as cautious optimism in China due to likely improvement in covid conditions. The softer USD, however, needs validation from today’s US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as a speech from Fed Chairman Jerome Powell.

Also read: Asian Stock Market: Covid, tech updates underpin cautious optimism amid growth fears

05:45
Natural Gas Futures: Green light for further upside

Considering advanced prints from CME Group for natural gas futures markets, open interest extended the uptrend and increased by around 4.7K contracts on Monday. Volume, in the same direction, reversed four consecutive daily retracements and rose by around 19.7K contracts.

Natural Gas: On its way to $9.00?

Prices of natural gas started the week on a positive note amidst rising open interest and volume. That said, the commodity now targets the so far 2022 peak around the $9.00 mark per MMBtu.

05:41
WTI Price Forecast: Bulls are firmer on Symmetrical Triangle breakout, $120.00 looks likely
  • An upside break of the Symmetrical Triangle has pushed the asset into a positive trajectory.
  • The RSI (14) has shifted into a bullish range of 60.00-80.00, which adds to the upside filters.
  • A pullback towards the breakout area will be a bargain buy for the market participants.

West Texas Intermediate (WTI), futures on NYMEX, is oscillating in a narrow range of $111.20-112.60 in the early European session. The asset has entered into a consolidation phase after a stellar upside move on Monday. The oil prices witnessed a strong upside move after violating the psychological resistance of $110.00 and have made a fresh monthly high at $112.65.

An upside break of the Symmetrical Triangle is advocating a bullish momentum ahead. The ascending trendline of the above-mentioned chart pattern is placed from April low at $92.65 while the declining trendline is plotted from March 24 high at $115.87. The asset is consolidating above the symmetrical triangle formation which indicates an upcoming pullback as the market participants test the strength of the chart pattern.

The 20- and 50-period Exponential Moving Averages (EMAs) at $108.27 and $106.10 respectively are scaling higher, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has comfortably shifted into a bullish range of 60.00-80.00, which signals more gains ahead.

The morning consolidation in the black gold is indicating a pullback towards the declining trendline of the chart pattern at $108.87, which may call for a responsive buying action. An occurrence of the same will drive the asset towards March 24 high at $115.87, followed by the psychological resistance at $120.00.

On the flip side, bulls could lose control if the asset tumbles below Monday’s low at $106.32. This will drag the asset towards Thursday’s low at $101.32. A slippage below Thursday’s low will bring further downside to near May 7 low at $97.21.

WTI four-hour chart

 

05:37
Crude Oil Futures: Extra gains on the cards

CME Group’s flash data for crude oil futures markets noted traders added around 14.6K contracts to their open interest positions on Monday, reaching the fifth consecutive daily pullback. Volume followed suit and went up by around 114.4K contracts, reversing three daily drops in a row.

WTI: Next on the upside comes $116.60

Prices of the WTI added to the ongoing leg higher on Monday. The move was in tandem with rising open interest and volume and opened the door to the continuation of the uptrend in the very near term. Against that, the next target of note comes at the March 24 high at $116.61.

05:37
Asian Stock Market: Covid, tech updates underpin cautious optimism amid growth fears
  • Markets in Asia-Pacific region print mild gains as updates from China, US favor sentiment.
  • China’s anticipated covid recovery, rally in tech shares favor Asian market bulls amid anxiety ahead of US Retail Sales, Fed’s Powell.
  • RBA Minutes, BOJspeak fail to entertain traders as Treasury yields, stock futures rebound.

Equities in the Asia-Pacific zone grind higher as cautious optimism in China joins softer US data and Fedspeak to underpin the market’s recovery ahead of the key catalysts. That said, MSCI’s index of Asia-Pacific shares outside Japan rises 1.60% while Japan’s Nikkei 225 adds 0.45% heading into Tuesday’s European session.

The NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams, underpinned initial risk recovery. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue.

On the same line were comments from Bank of Japan (BOJ) policymakers who highlighted the need for easy money despite inflation fears, which in turn adds strength to Japan’s benchmark equity index, namely the Nikkei 225.

Alternatively, the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes signaled a 40 bps rate hike in June but optimism in China helps stocks in Australia and New Zealand.

That said, Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area. It’s worth noting that the latest comments from China State Planner, stating the increasing downside pressure on the economy, per Reuters, challenge the market’s optimism.

Elsewhere, a record trade surplus allows Indonesia’s IDX Composite to rise 0.75% by the press time whereas South Korea’s KOSPI and India’s BSE Sensex, as well as NIFTY, track China’s tunes to print mild gains.

It’s worth noting that Wall Street benchmarks closed mixed but S&P 500 Futures rise half a percent whereas the US 10-year Treasury yields add 3.6 bps to 2.915% by the press time.

Moving on, the preliminary readings of the Eurozone Q1 GDP, expected to remain unchanged at 0.2% QoQ and 5.0% YoY, will precede the US Retail Sales for April bears an upbeat forecast, expected at 0.7% versus 0.5% prior, to direct short-term market moves. Above all, comments from Fed Chairman Jerome Powell will be crucial as the Fed Boss is up for speaking at an event hosted by the Wall Street Journal.

05:30
France ILO Unemployment below forecasts (7.4%) in 1Q: Actual (7.3%)
05:21
GBP/USD now faces strong resistance at 1.2400 – UOB GBPUSD

In opinion of Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, further upside momentum in GBP/USD should meet a tough hurdle around 1.2400 in the near term.

Key Quotes

24-hour view: “GBP rose to a high of 1.2329 yesterday before closing on a firm note at 1.2321, up by 0.51%. Upward pressure is beginning to build and GBP could extend its gains from here. That said, the major resistance at 1.2400 is not expected come into the picture (1.2370 is already quite a strong resistance level). Support is at 1.2300 followed by 1.2270.”

Next 1-3 weeks: “GBP dropped to 1.2156 last Friday before rebounding strongly. The recent weak phase has come to an end and there is room for the current rebound to extend. However, any advance is expected to face strong resistance at 1.2400. On the downside, a breach of 1.2220 would indicate that the build-up in upward pressure has eased.”

05:16
Gold Futures: Further upside not favoured

Open interest in gold futures markets shrank for the third session in a row on Monday, this time by around 7.4K contracts according to preliminary readings from CME Group. In the same line, volume dropped for the second consecutive day, now by around 15.3K contracts.

Gold appears supported by $1780

Monday’s optimism in gold prices was on the back of shrinking open interest and volume, indicative that the continuation of the recovery appears not favoured in the very near term. In the meantime, the so far 2022 low at $1780 should offer decent contention for the time being.

05:15
AUD/USD Price Analysis: Multiple hurdles set to test bulls above 0.7000 AUDUSD
  • AUD/USD renews intraday high during three-day recovery from multi-month low.
  • Clear break of weekly falling trend line favors buyers amid firmer RSI.
  • 13-day-old horizontal area comprising 100-SMA challenges buyers ahead of descending trend line from early April.
  • Previous resistance line, weekly support to test pullback moves.

AUD/USD picks up bids to refresh daily top around 0.7010 heading into Tuesday’s European session.

In doing so, the Aussie pair justifies the previous day’s break of a weekly descending trend line, as well as a firmer RSI (14).

However, multiple hurdles from April 28, as well as the 100-SMA, stand ready to challenge the AUD/USD bulls between 0.7030 and 0.7055.

Also acting as the short-term key resistance is a downward sloping trend line from April 05, close to 0.7115.

Alternatively, the resistance-turned-support line, around 0.6950 by the press time, puts a floor under the short-term AUD/USD pullback.

Following that, a one-week-old rising support line, near the 0.6900 threshold and the latest multi-month bottom around 0.6830, marked the last week, will be important to watch.

AUD/USD: Four-hour chart

Trend: Limited upside expected

 

05:04
USD/IDR kisses 14,650 despite robust Indonesian trade surplus, US Retail Sales eyed
  • USD/IDR has touched 14,650.00 on an expectation of outperformance from US Retail Sales.
  • The Indonesian agencies have reported the largest ever trade surplus in April.
  • The Fed may announce one more 50 bps rate hike in June amid upbeat US NFP and solid CPI.

The USD/IDR has touched a high of 14,650.00 in the Asian session despite the Indonesian agencies reporting the largest ever trade surplus of $7.6 billion in April. The trade surplus is more than doubled from the market consensus of $3.25 billion. A stellar growth has been witnessed in the exports data as the goods sold in foreign nations have increased 47.7% from a year ago while imports grew 21.97%, lower than the consensus of 34.97% in April.

The pair has continued its four-day winning streak on Tuesday and is expected to continue gaining higher amid broader strength in the US dollar index (DXY). A lackluster performance has been displayed by the DXY on Tuesday amid the unavailability of the major economic events this week. The odds of a jumbo rate hike by the Federal Reserve (Fed) in June are surging faster as upbeat US Nonfarm Payrolls and Consumer Price Index (CPI) figures are compelling the Fed to feature a consecutive 50 basis points (bps) rate hike after announcing in the first week of May.

Although events are not in plenty this week that could trigger a decisive move in the DXY, investors are eyeing the release of the US Retail Sales in the New York session. The US Census Bureau is expected to report the monthly Retail Sales at 0.7%, higher than the prior figure of 0.5%.

 

04:58
EUR/USD: Diminishing bets for a breakdown of 1.0340 – UOB EURUSD

Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, noted that the probability of EUR/USD to break below 1.0340 seems to have lost momentum.

Key Quotes

24-hour view: “EUR traded between 1.0387 and 1.0442 before settling at 1.0431 (+0.19%). Upward pressure appears to be building and USD is likely to edge higher from here. That said, any advance is unlikely to break the strong resistance at 1.0490 (minor resistance is at 1.0465). On the downside, a breach of 1.0390 (minor support is at 1.0415) would indicate that the upward pressure has eased.”

Next 1-3 weeks: “Last Friday (13 May, spot at 1.0385), we highlighted that a break of the 2017 low near 1.0340 could trigger further sharp decline. EUR subsequently dipped to 1.0348 before rebounding. Downward momentum is beginning to ease but only a breach of 1.0490 (no change in ‘strong resistance’ level) would indicate that EUR is unlikely to break 1.0340. All in, the odds for a break of 1.0340 have diminished unless it can move and stay below 1.0390 within these 1 to 2 days.”

04:52
When are the UK jobs and how could they affect GBP/USD? GBPUSD

UK Jobs report overview

Early Tuesday, the UK’s Office for National Statistics (ONS) will release the April month Claimant Count figures together with the Unemployment Rate in the three months to March at 06:00 AM GMT.

Given the expectations of sustained rate hikes by the Bank of England (BOE), coupled with the latest testimony from BOE Governor Andrew Bailey confirming fears of inflation, today’s jobs report becomes crucial to recall the GBP/USD pair buyers. Also highlighting today’s employment numbers is the cable’s recent corrective pullback from a two-year low.

The UK labor market report is expected to show that the average weekly earnings, including bonuses, in the three months to March, may remain unchanged at 5.4% while ex-bonuses, the wages are seen rising to 4.2%, from 4.0% prior, during the stated period.

Further, the ILO Unemployment Rate is likely to remain intact for the three months ending in March. It’s worth noting that the Claimant Count Change figures are expected to improve to -38.8K versus -46.9K previous readouts.

Deviation impact on GBP/USD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 20-pips in deviations up to + or -2, although in some cases, if notable enough, a deviation can fuel movements over 60-70 pips.

fxsoriginal

How could they affect GBP/USD?

GBP/USD cheers softer USD, as well as cautious optimism in the market, to print a three-day uptrend surrounding 1.2350 heading into Tuesday’s London open.

While the recent improvement in British economic growth and firmer inflation data keeps pushing the BOE towards more rate hikes, today’s employment data need to stay in line to keep the GBP/USD buyers hopeful. Also suggesting an initially positive reaction to the likely upbeat data are the latest comments from BOE Governor Andrew Bailey during his testimony to House Finance Committee.

As a result, FXStreet’s Yohjay Elam said, “All in all, UK job figures may boost GBP/USD temporarily, but fail to trigger a more-pronounced upside turn for the currency pair.”

Even so, major attention is given to the Fed’s rate hike and hence today’s US Retail Sales for April and Fed Chairman Jerome Powell’s speech will be more important for the cable traders.

Technically, GBP/USD recently confirmed a falling wedge bullish chart pattern with a clear break above 1.2300, suggesting further advances towards the monthly high surrounding 1.2640. The recovery moves also gain support from the MACD line’s impending bull cross and nearly oversold RSI.

Alternatively, a downside break of 1.2280 will negate the bullish breakout and can drag the quote back to the latest lows surrounding 1.2155.

Key notes

GBP/USD marches towards 1.2350 ahead of UK Employment data

GBP/USD Price Analysis: Bears waiting to take a bite out of bullish correction

GBP/USD regains 1.2300 despite Brexit woes, BOE’s Bailey, focus on UK jobs, US Retail Sales

UK Jobs Preview: Why GBP/USD may offer an early selling opportunity, and when

About UK jobs

The UK Average Earnings released by the Office for National Statistics (ONS) is a key short-term indicator of how levels of pay are changing within the UK economy. Generally speaking, the positive earnings growth anticipates positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

04:45
Gold Price Forecast: XAU/USD rebound remains elusive below $1,835 – Confluence Detector
  • Gold fades recovery from three-month low as market’s optimism fades ahead of the key catalysts.
  • Softer US data, covid updates from China favored previous rebound, US Retail Sales, Fed’s Powell eyed for fresh impulse.
  • Fibonacci 38.2% on one week appears a wall of resistance, pullback has multiple stops beyond $1,800.

Gold (XAU/USD) prices struggle to extend the previous day’s rebound from a quarter’s low as market sentiment dwindles heading into crucial data/events up for publishing on Tuesday. The yellow metal cheers the overall US dollar weakness and risk-on mood while defending the $1,800 threshold, around $1,825 by the press time.

The US Dollar Index (DXY) prints a three-day downtrend after refreshing the 20-year high amid indecision over the Fed’s next move. Recently downbeat US NY Fed Manufacturing Index and downbeat Fedspeak seem to have weighed on the risk appetite. Elsewhere, covid hopes in China and expectations of a July hike by the European Central Bank (ECB), per Reuters, also weigh on the USD, which in turn favors gold buyers. However, today’s US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as a speech from Fed Chairman Jerome Powell, becomes crucial for near-term directions for gold price.

Also read: Gold Price Forecast: XAU/USD bulls eye $1,842 on firmer sentiment ahead of US data, Fed’s Powell

Gold Price: Key levels to watch

The Technical Confluences Detector shows that the Gold Price stays above multiple key supports beyond $1,800, suggesting further upside towards the $1.832-35 resistance zone including 38.2% Fibonacci on one week.

Following that, the 200-DMA and Pivot Point 1 R1, respectively around $1,837 and $1,840, may test the gold buyers before directing them to the mid-May swing high surrounding $1,858 will lure the market’s attention.

Alternatively, 38.2% Fibonacci on one week offers immediate support to the gold prices of around $1,820.

Following that, a convergence of the SMA10 on 4H and SMA 100 for 15-minutes will test the gold sellers for around $1,813.

It should be noted, however, that the XAU/USD weakness past $1,813 will make it vulnerable to testing the previous weekly low surrounding $1,800.

To sum up, gold has limited upside room but the pullback also has to witness multiple barriers to the south.

Here is how it looks on the tool

fxsoriginal

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

04:33
USD/CHF Price Analysis: Bulls are firmer above 20-EMA, a fresh three-year high looks likely USDCHF
  • The 20-period EMA (High-Low) has acted as a major cushion for the asset.
  • A (60.00-80.00) bullish range action in the RSI (14) is underpinning the greenback bulls.
  • A breach of the May 2019 high will expose the asset to a fresh three-year high.

The USD/CHF pair is going through a volatility contraction phase after easing from a high of 1.0064 recorded on Monday. The asset is oscillating in a narrow range of 1.0018-1.0022 from the Asian session and is expected to continue its directionless structure till the release of the US Retail Sales.

The pair has been displaying a perpendicular rally right from the first trading session of April. On a four-hour scale, the asset is trading in a Rising Channel chart pattern whose upper boundary is placed from April 28 high at 0.9759 while the lower boundary is plotted from March 5 low at 0.9710. The 20-period (High-Low) Exponential Moving Average (EMA) band has been a major cushion for the greenback bulls.

A (60.00-80.00) bullish range action in the momentum oscillator, Relative Strength Index (RSI) (14) is confirming more upside ahead.

The asset is expected to continue its upside momentum after surpassing Friday’s high at 1.0064. This will send the asset towards a 30 May 2019 high at 1.0098. Violation of the May 2019 high will expose the asset to a fresh three-year high at 1.0122.

Alternatively, a decisive move below Friday’s low at 0.9992 will drag the asset towards the round level support at 0.9900, followed by Wednesday’s low at 0.9872.

USD/CHF four-hour chart

 

04:31
Japan Tertiary Industry Index (MoM) registered at 1.3% above expectations (0.4%) in March
04:31
Indonesia Trade Balance came in at $7.56B, above forecasts ($3.25B) in April
04:31
Indonesia Imports came in at 21.97% below forecasts (34.97%) in April
04:11
Indonesia Exports registered at 47.76% above expectations (35.97%) in April
04:09
EUR/USD stays defensive around 1.0450 ahead of EU/US data, Fed’s Powell EURUSD
  • EUR/USD bounces off intraday low as bulls await fresh the key catalysts during three-day uptrend.
  • US dollar stays pressured despite firmer yields, risk-on mood weigh on greenback.
  • EC forecasts downgraded GDP estimations, Fed’s Powell expected to repeat 50 bps rate hike concerns.
  • US Retail Sales for April, risk catalysts are also important for fresh impulse.

EUR/USD picks up bids from intraday low during a three-day uptrend, mildly bid around 1.0440 during early Tuesday morning in Europe.

The major currency pair cheers softer US dollar, as well as risk-on mood to extend the previous rebound from a five-year low. However, cautious sentiment ahead of the data/events tests the EUR/USD buyers of late.

The recovery in the market sentiment could be linked to the covid headlines from China, as well as recently downbeat US data and Fedspeak.

Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area. It’s worth noting that the latest comments from China State Planner, stating the increasing downside pressure on the economy, per Reuters, challenge the market’s optimism.

On the other hand, the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue.

It should be noted that European Commission’s (EC) downbeat Eurozone growth forecasts for 2022, from 4.0% to 2.7%, seem to also weigh on the EUR/USD prices ahead of the preliminary readings of the Eurozone Q1 GDP, expected to remain unchanged at 0.2% QoQ and 5.0% YoY.

Also, the US Retail Sales for April bears an upbeat forecast, expected at 0.7% versus 0.5% prior, which in turn test EUR/USD bulls.

However, Fed Chairman Jerome Powell has repeatedly backed his bias for 50 basis points (bps) of rate hike in the next two meetings, which in turn keeps the pair buyers hopeful. Even so, a slight change in the tone may witness a major market reaction as the markets have barely forgotten the road to the risk-off mood.

In addition to the aforementioned catalysts, headlines concerning the Russia-Ukraine crisis and covid will be important for near-term EUR/USD directions too.

Technical analysis

EUR/USD rebound could be linked to the firmer MACD signals and a three-day-long rising support line, near 1.0410 at the latest.

However, a convergence of the 50-SMA, descending trend line from April 21 and a two-week-long horizontal region challenge the EUR/USD upside moves around 1.0480-90.

Alternatively, pullback moves can test the immediate support line, near 1.0410, before directing EUR/USD prices towards the 1.0350-40 support area including multiple lows marked since 2017.

 

03:48
GBP/USD marches towards 1.2350 ahead of UK Employment data GBPUSD
  • GBP/USD is advancing towards 1.2350 amid an improvement in the risk appetite of investors.
  • The UK’s jobless claims are expected to see a potential cut as per the market consensus.
  • The street is expecting outperformance from the US Retail Sales data.

The GBP/USD pair is trading minutely positive in the Asian session as investors are awaiting the release of the UK labor force data. The UK’s Office for National Statistics will report the Claimant Count Change in the early European session.  The cable is performing a little better on Tuesday as the risk-on impulse is gaining traction. Risk-perceived assets are attracting more funds, which has underpinned sterling against the greenback.

The Claimant Count change dictates the additions in the unemployed labor force who have applied for jobless benefits. The UK’s National Statistics agency is expected to report a drop in jobless claims by -38.8k in April, followed by a significant drop of 46.6k in March. This signifies a tight labor market in the UK. While the Unemployment Rate is expected to remain stable at 3.8%.

Meanwhile, the US dollar index (DXY) is trading lackluster amid fewer economic data this week. The DXY shifted into a correction mode after printing a 19-year high of 105.00 last week. To tame the galloping inflation, an interest rate hike by 50 basis points (bps) in June’s monetary policy is highly likely. But before that, investors are focusing on the US Retail Sales, which are due on Tuesday. A preliminary estimate for the monthly US Retail Sales is 0.7% against the prior print of 0.5%.

 

03:44
USD/INR Price News: Indian rupee bounces off 78.00 on firmer sentiment, Fed’s Powell eyed
  • USD/INR steps back from all-time high amid broad risk-on mood.
  • Softer oil prices, upbeat covid headlines from India, China strengthen pullback moves.
  • Fed’s Powell needs to repeat 50 bps rate hike concerns to keep USD pressured.

Having initially refresh the all-time high, with an uptick to 78.02, USD/INR takes offers to renew the intraday low around 77.70 during the initial hour of the Indian trading session on Tuesday.

The Indian rupee (INR) pair’s latest rebound could be linked to the broad optimism in the Asia-Pacific region, as well as the broad US dollar pullback. More specifically, covid updates from China and India underpin the USD/INR pair’s latest pullback moves.

That said, the latest covid updates from India hint at the lowest daily active cases since March 25. On the other hand, China’s Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area.

It’s worth noting that the WTI crude oil prices down 0.20% intraday around $111.00, also help USD/INR to lick its wounds, due to India’s position as a high oil importer, as well as due to the nation’s record deficit. The black gold remains easy amid global growth fears and the hopes of no demand constrain even if European pushes forward its oil embargo on Russia.

Altermatively, concerns surroudning the Reserve Bank of India's (RBI) further easing keep USD/INR buyers hopeful. "A government source told Reuters the RBI will use various instruments to help lower bond yields, which have hit their highest since 2019," said the news on Tuedsday.

Looking forward, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, for initial directions. However, major attention will be given to Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event.

Technical analysis

USD/INR pullback remains elusive until the quote drops back below the previous resistance line from December 2021, around 77.65 by the press time.

 

03:11
USD/CAD Price Analysis: Eyes a pullback for a bargain sell around 1.2900 USDCAD
  • A pullback towards 1.2900 may result in a responsive selling action.
  • The 20- and 50-EMAs are on the verge of giving a bearish crossover.
  • The RSI (14) has shifted into a bearish range of 20.00-40.00.

The USD/CAD pair is displaying back and forth moves in a narrow range of 1.2820-1.2846 in the Asian session followed by a sheer downside move. The greenback bulls have faced intense selling pressure after the asset failed to sustain above the psychological support of 1.3000.

A breakdown of the Rising Channel chart formation on a four-hour scale has shifted the asset into a negative trajectory. The asset has experienced a vertical downside move after slipping below Friday’s low at 1.2893. Usually, a steep bearish move is followed by a pullback, which is considered a selling opportunity for the market participants.

The 20- and 50-period Exponential Moving Averages (EMAs) at 1.2927 are going to display a bearish crossover for the first time in May, which could trigger a potentially bearish setup.

Meanwhile, the Relative Strength Index (RSI) (14) has already shifted into a bearish range of 20.00-40.00, which signals a bearish momentum ahead.

Investors should use a pullback towards the crucial resistance of 1.2900 as a selling opportunity. Formation of heavy short-buildup near the crucial resistance would drag the asset towards Tuesday’s low at 1.2819. Violation of Tuesday’s low would expose the asset to more downside towards May 5 low at 1.2713.

On the contrary, the greenback bulls could take back the charge if the asset surpasses the psychological resistance of 1.3000. This will drive the asset towards Thursday’s high at 1.3077, followed by the 13 November 2020 high at 1.3113.

USD/CAD four-hour chart     

  

 

 

02:39
AUD/NZD oversteps 1.1070 on hawkish RBA, Aussie Employment data in focus
  • AUD/NZD has surpassed 1.1070 as RBA has sounded more hawkish in its minutes.
  • The RBA also considered the option of elevating the cash rate by 40 bps.
  • Aussie’s labor force data will be a key event this week.

The AUD/NZD pair has touched an intraday high of 1.1074 after the Reserve Bank of Australia (RBA) reported its May monetary policy minutes.  The cross is observing an establishment above 1.1070 as the RBA sound more hawkish after the interpretation of its minutes released in the Asian session.

The minutes dictate that the RBA policymakers were considering the options of 15 basis points (bps), 25 bps, and 40 bps. As per the minutes, the policymakers ditched the idea of 40 bps to safeguard the economy from the upside risks of inflation. While the 15 bps rate hike would be incompetent with the consistency of changing the cash rate in increments of at least 25 basis points. The minutes from the RBA also dictated that labor cost is rising in a tight labor market and the formation is expected to continue further.

The Aussie dollar is expected to remain in the spotlight this week as investors are awaiting the release of the employment data on Thursday.  The street is expecting the job additions in the labor force by 30k, higher than the prior print of 17k. While the Unemployment Rate is likely to be improved to 3.9% from the former figure of 4%.

On the kiwi front, raising fears of a recession in the NZ area due to soaring inflation has kept Kiwis on the backfoot. Also, the kiwi dollar is not performing well on the underperformance of the Business NZ PSI. Business NZ reported the PSI at 51.4, a little lower than the prior figure of 51.5.

 

02:38
China State Planner: Economy faces increasing downward pressure

“China's State planner in April approved eight fixed-asset investment projects worth 18.8 billion yuan ($2.78 billion), spokeswoman Meng Wei told a news conference on Tuesday,” per Reuters.

“Will step up support for manufacturing companies, contact-intensive services, small companies and home-businesses,” adds China State Planner Spokesman Wei.

Reuters also mentioned that China's economy cooled sharply in April as data on Monday showed the country’s industrial output and retail sales fell at the fastest pace in more than two years, missing expectations.

Also read: Shanghai sets out plans for end of a painful Covid-19 lockdown

FX reactions

Given the hopes of further investments and easing of the activity restrictions, the news failed to spread disappointment among traders. That said, the AUD/USD prices remain firmer around the intraday high surrounding 0.7000 by the press time.

Read: AUD/USD renews intraday high around 0.7000 on RBA Minutes, US Retail Sales, Fed’s Powell eyed

02:31
Gold Price Forecast: XAU/USD bulls eye $1,842 on firmer sentiment ahead of US data, Fed’s Powell
  • Gold prices grind higher after bouncing off three-month low the previous day.
  • Headlines from China, softer US data help improve market sentiment.
  • US Retail Sales, Fed’s Powell eyed amid calls of 75 bps rate hike.
  • Gold Price Forecast: Bulls defending the $1,800 threshold

Gold (XAU/USD) prices dribble around intraday high, keeping the rebound from a three-month low flashed the previous day, as firmer sentiment joins technical support to favor buyers. That said, the commodity prices seesaw around $1,825, intraday high near $1,829, by the press time of the mid-Asian session on Tuesday.

The recovery in the market sentiment could be linked to headlines from China, as well as recently downbeat US data and Fedspeak.

Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area. It’s worth noting that the latest comments from China State Planner, stating the increasing downside pressure on the economy, per Reuters, challenge the market’s optimism.

On the other hand, the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue.

Amid these plays, the US 10-year Treasury yields added two bps to 2.9% whereas the S&P 500 Futures rose 0.40% at the latest. It’s worth noting that the US Dollar Index (DXY) remains pressured around 104.15, after printing a two-day pullback from a 20-year high.

That said, the gold traders will keep their eyes on the US Retail Sales for April, expected at 0.7% versus 0.5% prior, for initial directions. However, major attention will be given to Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event.

Read: US Retail Sales April Preview: Market risk centers on recession

Technical analysis

Gold prices defend the early-day break of a one-week-old descending trend channel. The bullish chart confirmation joins a firmer RSI line to push further towards an upper line of the downward sloping channel from April 18, close to $1,842 by the press time.

It’s worth noting, however, that an XAU/USD upside past $1,842 needs validation from the 100-SMA level surrounding $1,868 to keep the buyers hopeful.

Meanwhile, pullback moves may initially aim for the $1,800 threshold but lower lines of the aforementioned bearish channel, respectively around $1,785 and $1,780, could limit short-term declines of the metal.

Overall, gold prices keep the bearish consolidation but a short-term corrective pullback can’t be ruled out.

Gold: Four-hour chart

Trend: Further recovery expected

 

02:30
Commodities. Daily history for Monday, May 16, 2022
Raw materials Closed Change, %
Brent 113.96 1.47
Silver 21.623 2.19
Gold 1824.77 0.59
Palladium 2015.96 4.15
02:13
BOJ’s Amamiya: Important to continue current powerful easing to firmly back economy, people's livelihood

“Long-term interest rates have been stable since adoption of fixed-rate operations,” said Bank of Japan Deputy Governor Masayoshi Amamiya per Reuters.

Also read: Japan’s FinMin Suzuki: Carefully watching FX impact on economy with sense of urgency

Additional comments

Rapid FX moves as seen recently could heighten uncertainty over the outlook.

Should not link BOJ monetary policy with the term of a BOJ governor.

BOJ aims for virtuous cycle of growth in prices, corporate profits, wages and employment.

FX reactions

Hints of sustained easy money policies join upbeat market sentiment to keep USD/JPY firmer around the intraday high near 129.35.

Read: USD/JPY crosses 129.00 as yields recover ahead of US Retail Sales, Fed’s Powell

 

02:08
Japan’s FinMin Suzuki: Carefully watching FX impact on economy with sense of urgency

Japan’s Finance Minister Shunichi Suzuki sees no contradiction between Bank of Japan’s (BOJ) monetary policy and government efforts to cope with surging fuel cost, per Reuters.

Additional quotes

Rapid FX moves are undesirable.

Its important for currencies to move stably reflecting fundamentals.

Carefully watching FX impact on the economy with a sense of urgency.

Fx reserves are held for FX intervention in future.

To respond to FX moves while communicating with the US and other FX authorities.

No specific comment on FX policy, when asked about FX intervention.

BOJ's policy not aimed at influencing FX moves.

USD/JPY renews intraday high above 129.00

Following the news, also backed by the risk-on mood, USD/JPY prices renew intraday high around 129.35.

Read: USD/JPY crosses 129.00 as yields recover ahead of US Retail Sales, Fed’s Powell

01:50
AUD/JPY Price Analysis: Sees further upside towards 50-DMA on RBA Minutes
  • AUD/JPY takes the bids to refresh intraday high on RBA Minutes.
  • Policymakers also discussed 40 bps rate hike, per the Minutes.
  • Clear break of the weekly falling trend line, steady RSI underpin upside momentum.
  • Bears need validation from the 50% Fibonacci retracement level.

AUD/JPY extends the short-term resistance breakout following the RBA’s monetary policy meeting minutes on early Tuesday. That said, the quote refreshes the intraday high to 90.50 during the three-day rebound from a two-month low.

Read: RBA Minutes: A more hawkish consideration is putting a bid into the Aussie

Given the trend line break joining firmer comments from the RBA Minutes, buyers are ready to challenge the 50-DMA hurdle surrounding 91.10. However, the 91.00 threshold will act as an intermediate halt during the rise.

In a case where the AUD/JPY prices rise past 91.10, the odds favoring the bull’s run-up towards the monthly high around 94.00 can’t be ruled out.

Alternatively, the resistance-turned-support near 89.50 restricts the short-term pullback of the AUD/JPY.

Following that, the 50% Fibonacci retracement (Fibo.) of January-April upside, near 88.05, will precede the monthly low of 87.30 to challenge the bears.

AUD/JPY: Daily chart

Trend: Further upside expected

 

01:40
RBA Minutes: A more hawkish consideration is putting a bid into the Aussie

Minutes of the Reserve Bank of Australia's May monetary policy meeting showed that members considered three options, raising the cash rate by 15 basis points, 25 basis points or 40 basis points.

Key notes

  • The Australian economy was being supported by household and business balance sheets.
  • The resilience of the Australian economy was particularly evident in the labour market.
  • Reserve bank of Australia minutes: members considered three options for the size of the rate. increase at the present meeting – raising the cash rate by 15 basis points, 25 basis points or 40 basis points.
  • More timely evidence from liaison and business surveys indicated that labour costs were rising in a tight labour market and a further pick-up was likely over the period ahead.
  • Agreed that raising the cash rate by 15 basis points was not the preferred option given that policy was very stimulatory and that it was highly probable that further rate rises would be required.
  • A15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.
  • Although the rise in inflation largely reflected global factors, members noted that strong domestic demand and capacity constraints were also playing a role.
  • An argument for an increase of 40 basis points could be made given the upside risks to inflation and the current very low level of interest rates.
  • Members agreed that the preferred option was 25 basis points.
  • Board considered whether the condition that it had earlier set for an increase in the cash rate had been met.
  • Members observed that it would be more difficult to return inflation to the target if the inflation psychology in Australia were to shift in an enduring way.
  • A move of this size would help signal that the board was now returning to normal operating procedures.
  • Would have the opportunity to review the setting of interest rates again within a relatively short period of time.
  • Members agreed that further increases in interest rates would likely be required to ensure that inflation in Australia returns to the target over time.

AUD/USD is bid on the outcome, inching towards 0.70 the figure in what is a correction of the daily bearish impulse, in line with the following analysis:

  • AUD/USD Price Analysis: Bulls are taking charge at critical daily resistance

About the RBA minutes

The Reserve Bank of Australia (RBA) publishes the minutes of its monetary policy meeting two weeks after the interest rate decision is announced. It provides a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the AUD. The minutes also reveal considerations on international economic developments and the exchange rate value.

01:39
AUD/USD renews intraday high around 0.7000 on RBA Minutes, US Retail Sales, Fed’s Powell eyed AUDUSD
  • AUD/USD ticks high after the RBA Minutes signaled policymakers discussed 40 bps rate increase in the latest meeting.
  • Market sentiment improves on China headlines, optimism ahead of US data, Fed’s Powell.
  • Upbeat US data, Powell’s refrain from 50 bps rate hike could renew US dollar strength.

AUD/USD bulls attack 0.7000 threshold during three-day rebound from a two-year low buyers cheer upbeat statements from the RBA’s latest monetary policy meeting minutes.  Also favoring the risk barometer pair is the upbeat mood, mainly due to headlines from China. However, the traders remain cautious with eyes on the US Retail Sales for April and a speech from Fed Chair Jerome Powell.

As per the Minutes of the latest monetary policy meeting by the Reserve Bank of Australia (RBA), “Given the upside risks to inflation and the current extremely low level of interest rates, an argument for a 40 basis point increase could be made.”

Other than the RBA Minutes, the risk-on mood also underpins the AUD/USD pair’s latest run-up. The recovery in the market sentiment could be linked to headlines from China, as well as recently downbeat US data and Fedspeak.

Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area.

On the other hand, the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue.

Also acting as a negative catalyst for the USD, as well as favoring the AUD/USD prices, is the news suggesting the US extend covid public health emergency beyond July.

Against this backdrop, the US 10-year Treasury yields added two bps to 2.9% whereas the S&P 500 Futures rose 0.20% at the latest. It’s worth noting that the US Dollar Index (DXY) remains pressured around 104.20, after printing a two-day pullback from a 20-year high.

Moving on, AUD/USD traders will keep their eyes on the risk catalysts, comprising the covid and geopolitical headlines, for immediate directions. However, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event, will be more important for clear directions.

Technical analysis

Lows marked during late 2021 and earlier in the month, respectively around 0.6995 and 0.7030, challenge the additional upside of the AUD/USD pair’s recovery moves. Alternatively, a downward sloping trend line from August 2020, near 0.6820, challenges the pair’s downside moves.

 

01:23
USD/CNY fix: 6.7854 vs. the previous fix of 6.7871

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.7854 vs. the previous fix of 6.7871 and the previous close of 6.7870.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

01:20
EUR/USD Price Analysis: Bulls approach 1.0480-90 key resistance zone EURUSD
  • EUR/USD rises for the third consecutive day, around intraday high of late.
  • 13-day-old horizontal area, also comprising 50-SMA and monthly resistance line challenge further upside.
  • Bullish MACD signals join weekly support line to keep buyers hopeful.

EUR/USD grinds higher around daily top during the third positive daily performance from a five-year low. In doing so, the major currency pair rises towards a short-term key resistance area. That said, the quote takes rounds to 1.0445-50 by the press time of Tuesday’s Asian session.

That said, the pair’s latest rebound could be linked to the firmer MACD signals and a three-day-long rising support line, near 1.0410 at the latest.

However, a convergence of the 50-SMA, descending trend line from April 21 and a two-week-long horizontal region challenge the EUR/USD upside moves around 1.0480-90.

In a case where EUR/USD rises past the 1.0490 hurdle, the 1.0500 threshold could challenge the run-up towards the monthly high near 1.0640.

Meanwhile, pullback moves can test the immediate support line, near 1.0410, before directing EUR/USD prices towards the 1.0350-40 support area including multiple lows marked since 2017.

Should EUR/USD prices remain weak past 1.0340, a downward trajectory towards the 1.0300 and the 1.0200 thresholds becomes imminent.

EUR/USD: Four-hour chart

Trend: Further upside expected

 

01:04
USD/JPY crosses 129.00 as yields recover ahead of US Retail Sales, Fed’s Powell USDJPY
  • USD/JPY picks up bids to reverse early Asian session losses.
  • Covid updates from China recently favored market sentiment, Japan’s Suzuki pushes for budget surplus.
  • Softer US data, Fedspeak challenge buyers amid indecisive markets.
  • US Retail Sales, Fed Chair Powell’s speech to determine near-term moves, risk catalysts are important too.

USD/JPY refreshes intraday high to 129.25 as upbeat sentiment joins firmer Treasury yields to please buyers after a lackluster start to the week.

That said, the quote’s latest run-up could be linked to the positive headlines from China, as well as in anticipation of US Retail Sales for April and a speech from the Fed Chairman Jerome Powell. Furthermore, comments from Japan’s Finance Minister Shunichi Suzuki.

The Japanese policymaker recently said, “In FY 2025/26, the primary budget surplus aim must be met.”

Elsewhere, Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area, which in turn favors the market sentiment and propels the USD/JPY prices.

It should be noted that the US Treasury yields dropped the previous day, with the US Dollar Index (DXY), as a fall in the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue. It should be noted that the news suggesting the US extend covid public health emergency beyond July also allowed the US dollar to pare some gains. That said, the US Dollar Index (DXY) eased further from its 20-year top, printed a two-day downtrend as sellers approach 104.00 by the end of Monday’s North American session. The softer yields and hopes of not-so-heavy rate hikes helped the Wall Street benchmarks, even as US equities printed mixed closing on Monday.

Amid these plays, the US 10-year Treasury yields added 1.8 basis points (bps) to 2.897% by the press time whereas the S&P 500 Futures rose 0.20% at the latest.

Moving on, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, will offer initial directions to the USD/JPY prices ahead of Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event. Traders will be more interested in hearing how Fed’s Powell defends his 50-bps rate hike bias amid surging inflation fears. Should Powell manages to do that, the USD/JPY may witness fresh downside pressure.

Technical analysis

A convergence of the 10-DMA and weekly resistance line, around 129.65-70, appears a tough nut to crack for short-term USD/JPY buyers. However, fresh selling is likely to wait unless witnessing a clear break below the three-week-old support line, near 128.50 by the press time.

 

01:01
GBP/USD Price Analysis: Bears waiting to take a bite out of bullish correction GBPUSD
  • GBP/USD bears are lurking within the daily correction.
  • Bears eye a downside extension to weekly targets. 

As per the prior analysis, GBP/USD Price Analysis: Bears in control, but daily M-formation could be a spanner in the works, the bulls have taken charge in a delayed M-formation. The following illustrates the potential for a move into 1.2450 for the days ahead:

GBP/USD daily chart

The price edged into the weekly demand area from where the bulls have now engaged and driven back the bears towards the 38.2% Fibonacci retracement level. However, from a weekly basis, there could be still some downside to go from here and before the week is up:

00:49
NZD/USD Price Analysis: Kiwi bulls to attack 200-EMA, 0.6400 eyed NZDUSD
  • The greenback bulls surrendered their control after the RSI (14) indicated signs of exhaustion.
  • Kiwi bulls are firmer above 20-EMA and are expected to tap the 200-EMA.
  • The trendline placed from 0.6805 will act as a major barricade.

The NZD/USD pair is gently moving higher in the Asian session. The pair is expected to extend gains as it has overstepped Monday’s high at 0.6320. Kiwi bulls are dominating the greenback for the last two trading sessions after the major found a firmer rebound from Friday’s low at 0.6217.

On an hourly scale, kiwi bulls look firmer above the 20-period Exponential Moving Average (EMA) at 0.6294. The kiwi bulls are expected to tap the 200-EMA at 0.6333. The trendline placed from April 21 high at 0.6805 will act as a major barricade for the counter.

A rebound in the asset was witnessed after the formation of a Bullish Divergence on the asset. The asset formed a lower low on a continuous basis while the momentum oscillator, Relative Strength Index (RSI) (14) made a higher low, which indicates signs of exhaustion in the downtrend.

Also, the RSI (14) has shifted into a bullish range of 60.00-80.00, which indicates a firmer rally going forward.

A minor pullback towards the 20-EMA at 0.6294 will be a bargain buy for the market participants. This may drive the asset higher towards the trendline at 0.6330 followed by the round level resistance at 0.6400.

Alternatively, the greenback bulls could regain control if the asset drops below Friday’s low at 0.6225.  This will drag the asset towards the 13 May 2020 high of 0.6098. A slippage below the 13 May 2020 high will expose the asset to a low to near the psychological support of 0.6000.

NZD/USD hourly chart

 

00:42
When are the RBA minutes and how might they affect AUD/USD? AUDUSD

Early Tuesday morning in Asia, at 01:30 GMT, the Reserve Bank of Australia (RBA) will release minutes of the latest monetary policy meeting held in May.

The RBA’s May month monetary policy meeting announced a 25 basis point (bps) lift in the official cash rate (OCR). The board also signaled further rate hikes and revised inflation forecasts drastically higher during the quarterly Monetary Policy Statement.

Given the indecision over the RBA’s next moves, mainly relating to the size of the rate increase considering China’s covid woes and the latest softer data from Australia, today’s RBA Meeting Minutes will be crucial to determine short-term AUD/USD moves.

Westpac is on the same line and said,

While we have already heard plenty from the RBA since the May meeting, including the lengthy quarterly statement, markets will look for any clues on the likely size of the next rate hike, having been completely wrongfooted in May.

How could the minutes affect AUD/USD?

AUD/USD extends the previous two-day rebound from the lowest levels since mid-2020 as the bulls attack 0.7000 by the press time. The Aussie pair’s latest upside could be linked to the hopes of an early end to the covid-linked lockdowns from Shanghai, as well as a softer US dollar backed by the downbeat US data and Fedspeak.

That said, the Aussie pair’s further upside hinges on how the RBA manages to keep the bulls happy even if they know that the 25 bps rate hike is given. In that case, a hint of more 50 bps moves in the future could play a nice role to lure the AUD/USD pair buyers.

Technically, lows marked during late 2021 and earlier in the month, respectively around 0.6995 and 0.7030, will challenge the additional upside of the AUD/USD prices.

Alternatively, a downward sloping trend line from August 2020, near 0.6820, challenges the pair’s downside moves.

Key Notes 

AUD/USD struggles below 0.7000 ahead of RBA Meeting Minutes, US Retail Sales

AUD/USD Forecast: Challenge of 0.7000 on the table

About the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

00:33
US Treasury yields, stock futures remain defensive amid quiet Asian session
  • Market sentiment dwindles as a lack of macro/data follows recently positive mood.
  • US 10-year Treasury yields remain pressured, stock futures track Wall Street to print mixed moves.
  • Softer US data, Fedspeak enables cautious optimism ahead of US Retail Sales.

After an initial consolidation in the market’s risk profile, mostly to the positive side during the last two days, global markets remain sidelined during Tuesday’s Asian session amid a light calendar/macro stream. Also challenging the mood could be the anxiety ahead of the US Retail Sales for April, expected at 0.7% versus 0.5% prior.

While portraying the market sentiment, the US 10-year Treasury yields rose to 2.9%, up by two basis points (bps), whereas the S&P 500 Futures remain directionless around the 4,000 threshold by the press time.

The US Treasury yields dropped the previous day, with the US Dollar Index (DXY), as a fall in the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue. It should be noted that the news suggesting the US extend covid public health emergency beyond July also allowed the US dollar to pare some gains. That said, the US Dollar Index (DXY) eased further from its 20-year top, printed a two-day downtrend as sellers approach 104.00 by the end of Monday’s North American session. The softer yields and hopes of not-so-heavy rate hikes helped the Wall Street benchmarks, even as US equities printed mixed closing on Monday.

On the flip side, the recent headlines from Shanghai, conveying plans to end the covid-linked lockdown seems to have favored the risk appetite. The reason could be linked to the Chinese state’s third consecutive day of zero coronavirus cases outside quarantine.

It’s worth noting that the mixed numbers of the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, join the market’s indecision over the Fed’s next moves to keep the traders cautious.

Looking forward, headlines concerning covid and the Russia-Ukraine crisis, as well as the Fedspeak, will act as extra catalysts, in addition to the US Retail Sales, to direct short-term market moves.

00:30
Stocks. Daily history for Monday, May 16, 2022
Index Change, points Closed Change, %
NIKKEI 225 119.4 26547.05 0.45
Hang Seng 51.44 19950.21 0.26
KOSPI -7.66 2596.58 -0.29
ASX 200 17.9 7093 0.25
FTSE 100 46.6 7464.8 0.63
DAX -63.55 13964.38 -0.45
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NASDAQ Composite -142.21 11662.79 -1.2
00:24
Shanghai sets out plans for end of a painful Covid-19 lockdown

There are reports that Shanghai adds no new covid cases outside quarantine for the third day which is underpinning risk appetite. However, Shanghai had already set out plans for the return of more normal life from 1 June and the end of a painful Covid-19 lockdown that has lasted more than six weeks and contributed to a sharp slowdown in China’s economic activity.

In the clearest timetable yet, deputy mayor Zong Ming said at the start of the week that Shanghai’s reopening would be carried out in stages, with movement curbs largely to remain in place until 21 May to prevent a rebound in infections, before a gradual easing.

“From June 1 to mid-and late June, as long as risks of a rebound in infections are controlled, we will fully implement epidemic prevention and control, normalise management and fully restore normal production and life in the city,” she said.

Economic data was released at the start of the week also that had shown China’s industrial output fell 2.9% in April from a year earlier. This was down sharply from a 5.0% increase in March, while Retail Sales shrank 11.1% year-on-year after falling 3.5% the month before.

Both were well below expectations and initially weighed heavily on the yuan and antipodeans. 

However, there has been a recovery in risk appetite as analysts note that economic activity has probably been improving somewhat in May. Additionally, the government and the PBoC are expected to deploy more stimulus measures to speed things up.

“China’s economy could see a more meaningful recovery in the second half, barring a Shanghai-like lockdown in another major city,” said Tommy Wu, the lead China economist at Oxford Economics.

Meanwhile, the bulls are in town when it comes to the Aussie. AUD/USD Price Analysis: Bulls are taking charge at critical daily resistance

00:15
Currencies. Daily history for Monday, May 16, 2022
Pare Closed Change, %
AUDUSD 0.69718 0.43
EURJPY 134.671 0.1
EURUSD 1.04358 0.33
GBPJPY 158.98 0.3
GBPUSD 1.23194 0.52
NZDUSD 0.63079 0.4
USDCAD 1.28485 -0.44
USDCHF 1.00127 -0.09
USDJPY 129.072 -0.19
00:12
ECB to hike deposit rate 25 bps in July, ditch negative rates by end-Sept – Reuters poll

“The European Central Bank (ECB) is expected to raise the deposit rate for the first time in over a decade in July and bring it out of negative territory at its following meeting in September, despite a 30% chance of recession within a year,” per the latest Reuters poll of economists.

Key quotes

Of the 46 of 48 economists who expect the deposit rate to rise in the third quarter, 26 said rates would rise by 50 basis points by the end of the period, implying quarter-point moves at both the July and September meetings.

Another 18 respondents said the deposit rate would only rise 25 basis points in Q3 and two said it would only climb 10 basis points to -0.40% by the end of the quarter.

An even clearer majority expect rates to no longer be negative by the end of the year. About 90% of economists, or 43 of 48, said the deposit rate would be 0% or higher by then, with 44%, or 21 of 48, saying it would be at 0.25% by then and 8%, or 4 of 48, saying it would be at 0.50%.

The latest poll results are still lagging rate futures, which are pricing in a cumulative 90 basis points of rate increases for the rest of the year or between three and four 25 basis-point moves.

EUR/USD stays firmer

EUR/USD takes the bids to refresh intraday high around 1.0450, up for the third consecutive day, as traders cheer softer USD and mildly upbeat market sentiment during a quiet session.

Read: EUR/USD struggles around 1.0440 ahead of US Retail Sales and Eurozone GDP

00:06
Silver Price Analysis: XAG/USD pierces monthly hurdle around mid-$21.00s
  • Silver buyers take a breather after a two-day rebound.
  • Upside break of monthly falling trend line, firmer RSI favor buyers.
  • 50-SMA, fortnight-old horizontal line challenges short-term upside.
  • Sellers need validation from $21.20 for fresh entries.

Silver (XAG/USD) pauses the latest recovery from a two-year low of around $21.60 during Tuesday’s Asian session.

Even so, the bright metal manages to keep the upside break of the descending trend line from April 18, around $21.50 by the press time.

Given the firmer RSI (14) line, not overbought, the latest trend line breakout can support buyers to prosper, which in turn highlights the 50-SMA hurdle of $21.70.

Also challenging the XAG/USD bulls is a horizontal area comprising multiple levels marked since early May, close to $22.10.

Meanwhile, pullback moves need to break a two-day-old rising support line, around $21.20, ahead of challenging the latest multi-month low near $20.45.

In a case where silver prices drop below $20.45, the $20.00 psychological magnet will be crucial for sellers to watch.

Silver: Four-hour chart

Trend: Further upside expected

 

00:05
EUR/JPY oscillates around 134.60 as investors await eurozone GDP EURJPY
  • EUR/JPY is juggling in a 14-pips range ahead of GDP numbers.
  • Hungary is opposing a quick embargo on Russian oil imports.
  • An underperformance is expected from Japan’s GDP numbers this week.

The EUR/JPY pair is displaying an extreme volatility contraction in the Asian session. The cross is trading in a 14-pips range and is expected to continue with its lackluster move as investors are awaiting the release of the Gross Domestic Product (GDP) numbers in the eurozone.

A preliminary estimate by Eurostat claims that the yearly and monthly GDP figures will remain constant. The former is seen at 5% while the latter is expected to land at 0.2%. Lately, the shared currency bulls have been through intense selling pressure amid rising fears of a recession in the eurozone. The European Union (EU) is still discussing an embargo on Russian oil, a follow-up move to retaliate against Russia’s invasion of Ukraine. Opposition to the European embargo has been recorded from Hungary amid its higher dependence on Russia for its fossil fuels and energy needs.

On the Japanese front, yen bulls have remained firmer these trading sessions after Bank of Japan (BOJ)’s Governor Harihuko Kuroda displayed the intention to stick to a prudent monetary policy. The Japanese economy has yet not reached its pre-pandemic growth levels and inflationary pressures are extremely lower. Investors should brace for more stimulus packages by the BOJ to spurt the aggregate demand.

On Wednesday, the Japanese administration will also report the GDP numbers. The quarterly figure is seen at -0.4% against the prior print of 1.1% while the annualized figure is likely to land at -1.8%, significantly lower than the former number of 4.6%.

 

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