EUR/JPY is in new highs for the year and has the highs from April 2018 and September 2018 at 133.13/48 in its sights, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, briefs.
Bullish above uptrend is at 130.30
“EUR/JPY continues to inch higher and is poised to reach 133.13/48, these are the highs from April 2018 and September 2018 and they may provoke some profit-taking.”
“Our longer-term target is the 137.51 2018 high.”
“Uptrend support at 130.30 is reinforced by the 55-day ma at 130.10 and while above here, attention remains on the topside.”
According to UOB Group’s FX Strategists, USD/CNH faces extra downside in the short-term horizon.
24-hour view: “Our expectation for USD to ‘trade within a broad range of 6.4100/6.4400’ yesterday was incorrect as it dropped to 6.4039 before rebounding quickly. Downward momentum appears to have eased and this coupled oversold condition suggests limited downside risk from here. For today, USD is more likely to consolidate and trade between 6.4100 and 6.4360.”
Next 1-3 weeks: “We continue to hold the same view as from yesterday (10 May, spot at 6.4220). As highlighted, the risk for USD is still clearly on the downside but in view of the deeply oversold shorter-term conditions, the year-to-date low near 6.3980 may not come into the picture so soon. The downside risk is deemed intact as long as USD does not move above 6.4640 (no change in ‘strong resistance’ level).”
- DXY struggles for direction around the 90.20 area.
- US 10-year yields creep higher to the 1.60% region.
- NFIB Index, JOLTs Job Openings, Fedspeak next in the docket.
The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, stays depressed in the lower end of the recent range near 90.20.
US Dollar Index supported by the 90.00 zone
The index manages to keep business above the key 90.00 yardstick for the time being, always against the backdrop of the perseverant selling bias in the dollar, somewhat higher US yields and the still sour aftertaste among investors following the April’s Payrolls figures.
Indeed, Friday’s horrible prints from the US labour market report appear to still be weighing on traders’ sentiment and seem to have further undermined the US economic outperformance narrative and lent extra support to the ongoing accommodative stance in the monetary conditions.
In the US data space, the NFIB Index is due in first turn seconded by the JOLTs Job Openings and the weekly report by the API on US crude oil inventories.
In addition, NY Fed J.Williams (permanent voter, centrist), FOMC Governor L.Brainard (permanent voter, dovish), San Francisco Fed M.Daly (voter, centrist), Atlanta Fed R.Bostic (voter, centrist) and Philly Fed P.Harker (2023 voter, hawkish) are all due to speak throughout the session.
What to look for around USD
The index came under extra downside pressure and another visit to the 90.00 support and probably below appears to be gaining some thought among investors. The renewed negative stance on the dollar has been exacerbated following April’s NFP, hurting at the same time the sentiment surrounding the imminent full re-opening of the US economy, which is in turn sustained by the unabated strength in domestic fundamentals, the solid vaccine rollout and once again the resurgence of the market chatter regarding an anticipated tapering. The latter comes in despite Fed’s efforts to talk down this scenario, at least for the next months.
Key events in the US this week: April CPI, Core CPI (Wednesday) - Initial Claims (Thursday) – Retail Sales, Industrial Production, flash May Consumer Sentiment (Friday).
Eminent issues on the back boiler: Biden’s plans to support infrastructure and families worth nearly $4 trillion. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Could US fiscal stimulus lead to overheating?
US Dollar Index relevant levels
Now, the index is losing 0.01% at 90.27 and faces immediate contention at 90.04 (monthly low May 10) followed by 89.68 (monthly low Feb.25) and then 89.20 (2021 low Jan.6). On the upside, a breakout of 91.06 (100-day SMA) would open the door to 91.43 (weekly/monthly high May 5) and finally 91.72 (50-day SMA).
AUD/USD is struggling to clear two-month highs at 0.7819/49. However, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, is upbeat on the aussie and expects the pair to surge above the 0.80 level.
Uptrend at 0.7675 to underpin the aussie
“AUD/USD is attempting to erode the recent highs at 0.7815/49, it has not quite managed to clear this zone and will need a second close above here to confirm the break.”
“For now, we will maintain a positive bias and allow for gains to the end of February high at 0.8007.”
“Longer term, the 0.8135 2018 high is in play. The 200-month ma lies at 0.8263.”
“Dips are indicated to remain shallow and the market should remain underpinned by the 0.7675 support line. Trendline support protects the 0.7533 April low.”
- USD/JPY edged higher for the second consecutive session on Tuesday amid stronger USD.
- An uptick in the US bond yields acted as a tailwind for the USD and remained supportive.
- The risk-on mood underpinned the safe-haven JPY and might cap the upside for the pair.
The USD/JPY pair traded with a mild positive bias during the early European session, with bulls making a fresh attempt to conquer and build on the momentum beyond the 109.00 mark.
The US dollar built on the overnight modest bounce from the lowest level since February 25 amid a modest uptick in the US Treasury bond yields. This, in turn, was seen as a key factor that assisted the USD/JPY pair to edge higher for the second consecutive session on Tuesday.
Apart from this, worries that the recent surge in COVID-19 cases could hinder Japan's fragile economic recovery further acted as a headwind for the Japanese yen. That said, a generally softer risk tone underpinned the safe-haven JPY and might cap the upside for the USD/JPY pair.
Meanwhile, the downside is likely to remain cushioned amid expectations that rising inflation might force the Fed to tighten its monetary policy sooner rather than later. Hence, the key focus will remain on the latest US consumer inflation figures, due for release on Wednesday.
In the meantime, the US bond yields will play a key role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon for some trading opportunities around the USD/JPY pair amid absent relevant market moving economic releases.
Technical levels to watch
The forces of stagflation may be offset by prompting central banks to continue stimulus, lawmakers to roll out additional fiscal stimulus in the US and Europe, business leaders to invest in a wave of capital spending, accompanied by a sharp rebound in output by the service sector, Jeffrey Kleintop, Senior Vice President and Chief Global Investment Strategist at Charles Schwab, briefs.
“Central bank stimulus. In the 1970s, central banks reacted to slowing output and rising prices with tighter monetary policy. Today’s response sharply contrasts this historical approach. The Fed and European Central Bank (ECB) continue to insist that the ongoing rise in inflation will be ‘largely transient’ and intend to be very slow to tighten policy.”
“Fiscal stimulus. President Biden’s plans for yet another huge US stimulus program and Europe’s massive rescue spending rolling out this summer may further feed demand, rather than lift supply. Besides being inflationary, these programs may also support business, consumer, and investor confidence through any soft patch in output or jobs.”
“Capital spending. Supply constraints may compel more capital investment by businesses.”
“Services rebound. The EU’s services sector may snap back on re-openings in the coming months. Because this year’s virus restrictions in Europe focused on services rather than the manufacturing sector, the economic re-opening should help the larger service portion of the European economy offset any weakness in manufacturing.”
“While the current environment does have some resemblance to the 1970s, the differences are likely powerful enough to keep investors focused on the positives of reflation, defined by solid growth accompanying inflation, rather than the negatives of stagflation.”
We are entering a time of year when stocks have historically found it more challenging to advance. With many equity indexes making new highs, investors may be tempted to follow the old adage: Sell in May and go away. But the sell-in-May strategy doesn’t work consistently across markets and economists at UBS see reasons why this year may be different.
Timing markets is notoriously tricky and can be costly
“While the strategy has worked for Europe, in the US a stay-invested strategy has tended to outperform, particularly in recent years. Market composition, with the US market more tilted toward growth stocks, partly explains the outperformance. The tech sector’s weight in the S&P 500 has increased to 27% compared with a weighting of just 8% for MSCI Europe. Trying to time the US market for seasonal reasons would have missed out on the outperformance of growth stocks in the bull market since the 2008-09 financial crisis.”
“In the current environment, it may be premature to expect a near-term peak in equities. The effect of fiscal stimulus and the post-COVID-19 bounceback in consumer and business demand is leading to extraordinary levels of growth, particularly in the US, that are likely to persist for a number of months yet. In turn, this supportive macro backdrop is feeding through into a stronger-than-expected recovery in corporate earnings – US 1Q profit growth will exceed 45%. In our view the rally in stocks has further to run.”
“For investors selling in May, buying back later can be psychologically difficult, particularly if markets have rallied in the meantime. This can delay the decision to reinvest even further, potentially compounding the effect. Moreover, in the current environment, holding cash for too long is expensive. With nominal interest rates lower than inflation, real rates are negative, so cash will be a significant drag on portfolios.”
EUR/GBP has seen emphatic failure at tough resistance at 0.8722/32. Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects the pair t o extend its fall towards the 0.8471/65 neighborhood.
Failure at 0.8471/65 to target 0.8314/0.8239
“EUR/GBP has again failed at the 0.8722/32 tough resistance (highs from March). It is probing the 0.8588 the mid-April low and we continue to favour failure and a slide to 0.8533, the mid-March low. Below here targets the March and May 2019 lows at 0.8471/65.”
“Below 0.8465 we would have to allow for the 0.8314/0.8239 major support zone to be reached (the December 2016, April 2017, December 2019 and February 2020 lows).”
- AUD/USD edged higher during the Asian session on Tuesday, though lacked any follow-through.
- The risk-off mood benefitted the safe-haven USD and capped gains for the perceived riskier aussie.
- Investors now look forward to Australia’s federal budget for some meaningful trading opportunities.
The AUD/USD pair held on to its modest gains heading into the European session, albeit lacked follow-through and remained below mid-0.7800s.
The pair regained some positive traction during the first half of the trading action on Tuesday and recovered a part of the overnight pullback from the 0.7900 neighbourhood, or the highest level since February 25. The recent surge in commodity prices turned out to be a key factor that continued underpinning the aussie ahead of Australia’s federal budget. That said, a combination of factors held bulls from placing aggressive bets and capped the upside for the AUD/USD pair.
As investors looked past Friday's dismal US monthly jobs report, a slight rebound in the US Treasury bond yields extended some support to the US dollar. Apart from this, a turnaround in the global risk sentiment – as depicted by a negative tone around the equity markets – allowed the safe-haven USD to build on Monday's rebound from two-and-half-month lows. This, in turn, was seen as another factor that kept a lid on any meaningful upside for the AUD/USD pair, at least for now.
This comes on the back of strained relations between China and Australia, which further seemed to act as a headwind for the Australian dollar. From a technical perspective, acceptance above the 0.7815-20 heavy supply zone still favours bullish traders and supports prospects for an extension of the recent appreciating move. In the absence of any major market-moving economic releases from the US, a subsequent strength beyond the 0.7900 mark, en-route the next major hurdle near the 0.7965-70 region, remains a distinct possibility.
Technical levels to watch
EUR/USD has been under pressure as fears of inflation have boosted the dollar. According to FXStreet’s Yohay Elam, there are clear reasons for the currency pair's retreat from the highs, yet it probably remains only a temporary correction.
ECB's dovish policy comments may pressure the euro to counter Europe's vaccination progress
“Fears of rising inflation remain prevalent, as commodity prices continue rising and after China reported a leap in producer prices – 6.8% annually, more than predicted. Tech stocks have already suffered from these growing concerns and the safe-haven dollar is also gaining some ground.”
“The euro has been suffering dovish comments from Francois Villeroy de Galhau, a member of the European Central Bank. He favors maintaining the ECB's bond-buying scheme at least through March 2022, if not beyond. After several contradictory headlines, his words seem to carry more weight and push the common currency lower.”
“The euro remains underpinned by Europe's accelerating vaccination campaign. The old continent is catching up with the US and the efforts are bearing fruit – COVID-19 cases are falling in Germany and in other places. Roughly 30% of EU residents have received at least one jab.”
“Euro/dollar is benefiting from upside momentum, not the four-hour chart and trades above the 50 and 100 Simple Moving Averages (SMA). The Relative Strength Index (RSI) has dropped below 70, thus exiting overbought conditions and allowing for more gains.”
“Some resistance awaits at 1.2150, the April peak, and then by 1.2180, the high point recorded in May. Some support is at the daily low of 1.2125, followed by 1.2080 and 1.2050.”
The European Central Bank will decide on whether to progress to launching a formal investigation of a digital EUR around mid-2021. The central bank has pledged not to use the digital EUR to enforce deeply negative interest rates. Assuming the go-ahead transpires, its rollout would take time, but this may still put the ECB ahead of many of its G10 peers, economists at HSBC inform.
ECB has yet to decide on whether it plans to even go forward with this project
“The ECB will decide on whether to progress to launching a formal investigation of the digital EUR around the middle of 2021.”
“Many have raised concerns that a digital EUR could be used to enforce deeply negative interest rates. However, the ECB has pledged this will not be the case, and in other trials around the world central bank digital currencies (CBDCs) have not been interest bearing. If the same framework was adopted, the digital EUR would most likely act in a similar way to physical cash.”
“Should the digital EUR project be given the green light, then a two-year investigative phase will begin, which would aim to come up with at least one design that meets the requirements of the public. Thereafter, assuming the project was given the go-ahead, it would likely take another two to three years to develop, test, and eventually roll out the digital EUR.”
“We are unlikely to see a digital EUR until 2025, but this may still put the ECB significantly ahead of many of its G10 peers.”
UK Health Secretary Matt Hancock, speaking to Times Radio this Tuesday, said that Britain is keeping a close eye on the Indian variant of COVID-19. We are putting a lot of resources into tackling the Indian variant, Hancock added further.
- Measures such as enhanced tracking and tracing, travel restrictions and the roll-out of the vaccine should keep it at very low levels.
- There isn't any evidence yet that the vaccine doesn't work against it.
- We are going to bring forward a long-term plan on social care.
The European Central Bank policymaker and Bank of France Governor Francois Villeroy de Galhau cross the wires in the last hour, saying that the PEPP program will continue at least until March 2022.
- PEPP tapering talk is purely speculative.
- Monetary policy will remain accommodative even if the PEPP program were to ease up.
- Interest rates remain very favourable at present towards economic activity.
The comments had very little impact on the shared currency and failed to provide any impetus to the EUR/USD pair, which was last seen trading with modest gains around the 1.2135 region.
Gold added to last week's strong gains and climbed to fresh three-month tops on Monday, albeit struggled to capitalize on the move. The 200-DMA at $1850 might cap XAU/USD ahead of US CPI on Wednesday, FXStreet’s Haresh Menghani briefs.
See – Gold Price Analysis: XAU/USD bulls come out of the shadows to mull a test of $1850 – DBS Bank
Technical levels to watch
“The downside, however, remains cushioned amid expectations for an uptick in US inflation – fueled by improving prospects for growth, plans for infrastructure spending and pandemic-related stimulus measures. Given that gold is considered a hedge against inflation, the market focus will remain on this week's US CPI report.”
“The 200-day SMA is currently pegged near the $1,850 region, which should now act as a key pivotal point for short-term traders.”
“RSI (14) on the daily chart has now moved on the verge of breaking into the overbought territory. Hence, any subsequent positive move is more likely to confront stiff resistance and remain capped near the $1,873-75 region. That said, some follow-through buying should allow bulls traders to aim back to reclaim the $1,900 mark for the first time since January 8.”
“The $1,817-16 region now seems to protect the immediate downside. Any subsequent decline might be seen as a buying opportunity and remain limited near the $1,800 mark. That said, a convincing break below might prompt some aggressive technical selling and has the potential to drag the XAU/USD back towards a strong horizontal resistance breakpoint, now turned support near the $1,765-60 region.”
- USD/CHF extends bounce off 0.9001, refreshes intraday top.
- Clear break of 200-day SMA, two-month-old support line and 61.8% Fibonacci retracement level back the bears.
- Multiple levels marked since January lure sellers, bulls have a bumpy road before regaining market attention.
USD/CHF picks up bids to 0.9020, up 0.10% on a day, ahead of Tuesday’s European session. In doing so, the Swiss currency pair stretches the previous day’s corrective pullback from late February lows.
However, the quote remains below multiple strong supports, now resistances, amid the sluggish Momentum, which in turn suggests the USD/CHF weakness going forward.
Among the key resistances, 61.8% Fibonacci retracement of January-April upside near 0.9030 becomes immediate to cross for the pair buyers ahead of a downward sloping trend line from March 11, around 0.9045.
Should USD/CHF bulls manage to cross 0.9045 support-turned-resistance line, 200-day SMA and 50% Fibonacci retracement level, respectively around 0.9085 and 0.9115 will be the key to watch.
Meanwhile, the pair’s fresh weakness will need to break the 0.9000 threshold before targeting the 0.8925-30 a four-month-old horizontal support zone.
USD/CHF daily chart
Trend: Pullback expected
- USD/CAD holds onto a quiet tone in the early European session.
- Pair looks out for gains, inching toward 20-hour SMA.
- Oversold momentum oscillator points to stretched selling conditions.
The USD/CAD pair seesaws in the early European session. The pair opened higher earlier, albeit fizzling out rather quickly toward the session’s low of 1.2088.
At the time of writing, the USD/CAD pair is trading at 1.2096, down 0.01% on the day.
USD/CAD hourly chart
On the hourly chart, the pair has been consolidating near the 1.2090 mark,in progress to capture the 20-hour Simple Moving Average (SMA) placed at 1.2100. In doing so, the pair would carve a path toward the 1.2140 and the 1.2180 horizontal resistance zone.
The next area of resistance would be the May 6 high at 1.2288.
On the flip side, the Moving Average Convergence Divergence (MACD) indicator falters below the midline, and any downtick could bring the multi-year low from 2017 into the picture, where the first could be the September 2017 weekly low at 1.2061, followed by the weekly low of May 2015 at 1.2011.
USD/CAD Additional levels
The downtrend in USD/JPY is expected to meet relevant support around 108.20, noted FX Strategists at UOB Group.
24-hour view: “We highlighted yesterday that ‘the swift and sharp decline appears to be overdone and USD is unlikely to weaken further’ and we expected USD to ‘consolidate and trade between 108.40 and 109.10’. Our view was not wrong even though USD traded within a narrower range than expected (108.45/109.05). The underlying tone has improved somewhat but while USD could edge higher, it is not expected to challenge the strong resistance level at 109.35 (109.10 is already quite a solid resistance). Support is at 108.75 followed by 108.60.”
Next 1-3 weeks: “There is not much to add to our update from yesterday (10 May, spot at 108.80). As highlighted, the near-term bias is on the downside but we are mindful of the strong support at 108.20. This level is followed by another rather strong level at 108.00. All in, the downward bias is deemed intact as long as USD does not move above 109.35 (‘strong resistance’ level).”
Here is what you need to know on Tuesday, May 11:
The market mood has soured as investors focus on inflation fears rather than signs of cooling down. The dollar is off the lows ahead of the US JOLTs figures and speeches from Fed officials. Cryptocurrencies are on the back foot.
China reported an increase of 6.8% in the annual Producer Price Index (PPI), higher than expected. Rises in commodity prices have been attributed to the leap, the highest since October 2017. On the other hand, the Consumer Price Index (CPI) remained tame due to increases in pork prices recorded in 2020. \
Concerns of rising inflation have been spooking markets, weighing especially on US tech stocks. These fears replaced the calm following the downbeat Nonfarm Payrolls figures, which showed the US economy is not overheating. Tensions around mounting ahead of April's CPI figures due out on Wednesday.
US Consumer Price Index April Preview: The two base effects on inflation
The risk-off mood helped the dollar stabilize, with EUR/USD hovering around 1.2150, GBP/USD above 1.41, and AUD/USD above 0.78. The greenback lost substantial ground on Monday. The US releases its JOLTs job openings report for March later in the day, potentially showing a leap in vacancies.
The German ZEW Economic Sentiment is projected to show an increase in business confidence as Europe advances with its vaccination campaign. UK Prime Minister Boris Johnson announced additional loosening of measures from Monday.
Federal Reserve officials, including John Williams, Lael Brainard, Mary Daly and Raphael Bostic are set to speak later in the day. They will likely repeat the bank's message that inflation is temporary.
Pipeline: Gasoline supplies to the US East Coast are still strained due to a ransomware attack on Colonial Pipeline. The firm is working to resume normal activity by the end of the week, recovering from a more potentially originating from Russia.
Virus: The US Food & Drug Administration (FDA) approved the use of the Pfizer/BioNTech vaccine to adolescents aged 12 to 15. Reaching children would help in achieving herd immunity.
Cryptocurrencies have been consolidating their losses after correcting lower from their highs on Monday. Bitcoin is changing hands at around $55,000, Ethereum is below $4,000, XRP under $1.50 while Dogecoin stands out by moving higher.
- Asia-Pacific equities remain depressed as technology shares drop the most.
- The regional equity gauge marks the biggest losses since March.
- Traders seek strong clues to defy Fed’s rate hike, tapering chatters.
- China inflation picks up, Pfizer-BioNTech gets US FDA approval for age 12-15 age group jabbing.
Asian traders take offers, magnifying losses of their global counterparts, while heading into Tuesday’s European session. Uncertainty over the US Federal Reserve’s (Fed) next moves joined upbeat China data to put the region’s technology shares in pessimistic conditions.
Against this backdrop, MSCI’s index of Asia-Pacific shares outside Japan drops the most in two months, down 1.86% by the press time. Further, Japan’s Nikkei 225 and shares in Taiwan print losses over 3.0% as fears of chip shortage and higher inflation weigh on technology-led economies the most.
Chinese equities couldn’t cheer upbeat inflation figures for April as higher price pressure pushes the People’s Bank of China (PBOC) towards further consolidation of the easy money policies. The same dragged shares in Australia and New Zealand, down 1.05% and 0.62% respectively by the time of writing.
Elsewhere, Indonesia’s IDX Composite also failed to benefit from the upbeat Retail Sales whereas South Korea’s KOSPI couldn’t ignore chip-shortage woes, drops 1.37% to 3,204 amid early Tuesday.
On a broader scale, S&P 500 Futures print second consecutive daily loss and the US 10-year Treasury yields pause a two-day uptrend near the 1.60% level. This helps the US dollar index (DXY) to extend the previous day’s recovery moves.
Read: S&P 500 Futures track Wall Street’s losses to revisit mid-4,100s
It should be noted that the pessimism surrounding India’s coronavirus (COVID-19) conditions worsen despite the government’s claims of a reduction in the pace of virus infections. Hence, India’s BSE Sensex drops 0.70% by press time.
Other than the stock-specific headlines, China’s move to curb iron ore prices and the US policymakers’ rejection of the oil supply shortage, due to the Colonial Pipeline pause, are extra catalysts favoring the market bears.
Moving on, Wednesday’s US Consumer Price Index (CPI) for April will be the key for global markets as any strong pick-up in the headline inflation data, which is more likely, could push the Fed towards tapering.
CME Group’s advanced figures for Natural Gas futures markets noted open interest rose for yet another session on Monday, this time by nearly 5.2K contracts. On the other hand, volume went down by around 60.8K contracts, partially reversing the previous build.
Natural Gas remains capped by $3.00
Natural Gas started the week on a negative footing amidst increasing open interest. That said, the door stays open for further correction lower, while the upside still faces a tough barrier around the key $3.00 mark per MMBtu.
The stance for NZD/USD remains firm and could attempt a move to the 0.7330 level in the next weeks, suggested FX Strategists at UOB Group.
24-hour view: “We highlighted yesterday that ‘overbought conditions suggest NZD is unlikely to strengthen much further’. We added, ‘NZD could edge above 0.7300 but the next major resistance at 0.7330 is not expected to come under threat’. Our view was not wrong as NZD rose to 0.7304 before pulling back sharply. Upward momentum has eased and the current movement is viewed as part of a consolidation. For today, NZD is likely to trade between 0.7230 and 0.7290.”
Next 1-3 weeks: “Our update from yesterday (10 May, spot at 0.7285) still stands. As highlighted, NZD could advance but the major resistance at 0.7330 may not come into the picture so soon. NZD subsequently rose to 0.7304 before pulling back. Overbought shorter-term conditions could lead to a few days of consolidation first but the overall positive outlook is intact as long as NZD does not break 0.7215 (no change in ‘strong support’ level).”
- USD/INR pokes intraday high amid second consecutive positive day.
- Two-week-old resistance line guards immediate run-up, falling trend line from April 21, 200-SMA add to the upside filters.
- Bullish MACD backs corrective pullback, bears need clear break of 73.20 to tighten the grips.
USD/INR extends the week-start recovery to 73.51, up 0.05% intraday, amid the initial Indian trading session on Tuesday.
The Indian rupee (INR) pair dropped to the fresh low since early April on Friday but multiple lows marked in over five weeks triggered the quote’s corrective pullback afterward.
The recovery moves also propel the MACD bullish signals to attack a downward sloping resistance line from April 26.
Although buyers are likely to overcome the immediate hurdle around 73.52, any further upside seems doubtful as another downward sloping trend line from April 21 and 200-SMA, respectively near 73.90 and 74.15, could test the USD/INR bulls afterward.
Meanwhile, 73.20 becomes the key short-term support before the 73.00 threshold.
USD/INR four-hour chart
Trend: Further recovery expected
Open interest in Crude Oil futures markets rose by more than 5K contracts on Monday according to preliminary readings from CME Group. Volume followed suit and went up for the second session in a row, this time by around 34.8K contracts.
WTI faces some consolidation very near-term
Prices of the WTI charted an inconclusive session on Monday amidst rising open interest and volume. That said, extra rangebound looks likely in the very near-term, while a surpass of recent peaks near the $65.00 mark per barrel (May 5) could allow for the continuation of the uptrend.
In opinion of FX Strategists at UOB Group, the upside momentum in Cable could extend to the 1.4235 level in the next weeks.
24-hour view: “While our expectation for GBP to strengthen yesterday was correct, our view that ‘the major resistance at 1.4110 is unlikely to come under threat’ was not as GBP easily blew past 1.4110 (high of 1.4158). The sharp and rapid rally is overstretched but it is not showing signs of weakness just yet. However, any further GBP strength is likely limited to a test 1.4175. A move to the year-to-date high at 1.4235 would come as a surprise. On the downside, a breach of 1.4070 would indicate that the current upward pressure has eased (minor support is at 1.4100).”
Next 1-3 weeks: “We highlighted yesterday that ‘the strong build-up in momentum suggests further GBP strength’. We added, ‘the next resistance is at 1.4110’. That said, we did not anticipate the rapid manner by which GBP blast past 1.4110 (GBP surged to 1.4158 during early NY session). Upward momentum remains strong and the focus has shifted to the year-to-date high of 1.4235. On the downside, a breach of the ‘strong support’ at 1.4020 (level was at 1.3940 yesterday) would indicate that the current upward pressure has eased.”
Traders increased their open interest positions for the third session in a row on Monday, this time by around 22.5K contracts, the largest single day build so far this year considering flash data from CME Group. Volume, instead, reversed two straight builds and shrunk by around 58.6K contracts.
Gold still targets the $1,850 region
Gold prices edged higher at the beginning of the week amidst rising open interest, which is indicative that further upside still has legs to go. Against this, the next significant target lines up at the 200-day SMA around $1,850 per ounce troy.
- USD/IDR fails to extend previous day’s recovery, retreats from intraday high of late.
- Indonesia Retail Sales improved to -14.6% in March, BI turns optimistic for April.
- Risk-off mood tests rupiah bulls amid a light calendar in Asia.
USD/IDR strengthens bearish impulse, down 0.08% intraday around $14,190, after upbeat Indonesia Retail Sales favored rupiah buyers during early Tuesday. Even so, the currency pair struggles to go all with the bears as risk-off mood favors US dollar bounce.
Indonesia Retail Sales for March recovered from 18.1% prior contraction, as well as the Bank Indonesia (BI) forecast of -17.1%, to a yearly drop of 14.6%. Following the data, the BI survey also said, “Stronger fuel sales were supportive, although sales of clothes and recreational amenities continued to show drops during the month,” per Reuters.
It should be noted that the BI expects a 9.8% increase in Retail Sales in April.
Also positive for the USD/IDR could be the upbeat China inflation figures for April. Although the headline Consumer Price Index (CPI) missed upbeat expectations, the Producer Price Index rallied to October 2017 tops earlier in Asia.
Read: China CPI 0.9% YoY vs expected 1.0% / PPI 6.8% YoY vs the expected 6.5%
Even so, USD/IDR bears struggle amid the fears of reflation weighing on the US stock futures and Asian stocks.
Moving on, Fed chatters will be the key ahead of the US inflation data for April, up for publishing on Wednesday. Also, the coronavirus (COVID-19) and vaccine updates may as well provide near-term direction to the USD/IDR prices.
Unless rising beyond April’s low near 14,380, USD/IDR bears can keep the reins.