EUR/USD technical analysis: Intraday recovery tests trend-channel/50-hour…

   •  Over the past few trading sessions, the EUR/USD pair has been trending lower along a short-term descending trend-channel formation on the 1-hourly chart.

   •  The pair has managed to stage a modest recovery from the mentioned trend-channel support, albeit might struggle to make it through 50-hour EMA resistance.

   •  The mentioned hurdle coincides with the top end of the ascending trend-channel and might now act as a key pivotal point for any subsequent recovery.

Technical indicators on the 1-hourly chart have just started catching up with the recovery move but maintained their bearish bias on 4-hourly/daily charts, suggesting that the near-term selling pressure might still be far from over.

Hence, it would be prudent to wait for a convincing break through the said confluence resistance before traders start positioning for any further short-covering move back towards reclaiming the 1.1200 round figure mark. 

Alternatively, fresh rejection from the current resistance zone might turn the pair vulnerable to challenge the trend-channel support, currently near the 1.1140 region before dropping to yearly lows, around the 1.1110 area.

EUR/USD 1-hourly chart



Fed’s Bostic: US inflation is not so far away from Fed target

Atlanta Fed President Raphael Bostic crossed the wires in the last minutes arguing that the inflation in the U.S. was not “so far away” from the Federal Reserve’s target to unanchor expectations.

Key quotes (via Reuters)

  • Financial stability a risk that is “always on the list” but not risen to crisis levels yet.
  • Lack of wage pressure suggests natural rate of unemployment may be lower than previously thought.

London Markets: London markets move higher as pound hits four-month low

London markets shook off a weakening pound and a disappointing industrial orders figure to erase Monday’s decline.

How did markets perform?

The U.K.’s FTSE 100

UKX, +0.76%

 is higher at 7,366.1, rising 0.8% to more than wipe out Monday’s 0.5% decline.

The pound

GBPUSD, -0.2200%

 was hit harder, shrinking 0.3% to $1.2685, a four-month low.

What’s moving the markets?

U.S. officials granted Huawei a temporary reprieve from some of the restrictions imposed on Friday. The Chinese telecommunications company caught in the U.S.-China trade dispute was granted a 90-day window to purchase equipment and parts needed to maintain existing activities, which may be renewed.

The “new and improved” Brexit deal promised by U.K. Prime Minister Theresa May is expected to contain promises on workers’ rights and environmental protections, and will seek cabinet approval on the concessions, according to the latest report in The Times. The move will put pressure on opposition Labour Party leader Jeremy Corbyn as some M. P.s may now support the bill, but many in the rank-and-file will staunchly oppose it.

The U.K. pound took a drubbing Tuesday, falling to a four-month low. Brexit uncertainty and U.S. dollar strength were the two key drivers.

In economic data, the CBI industrial trends total orders survey showed that in May, orders fell to -10, a sharp decline after a run-up in manufacturing driven by stockpiling for the now-aborted March 29 Brexit date. The figure was the lowest since October 2016.

Which stocks are active?

Entertainment One Ltd.

ETO, -5.21%

 fell 2% after reporting fiscal 2019 earnings, as pretax profit fell 43% year over year. The Peppa Pig franchise owner blamed the dip on one-off charges.

Tesco Bank, the lending arm of supermarket chain Tesco PLC

TSCO, +1.36%

said Tuesday that it was exiting the mortgage market and looking for a buyer of its existing mortgage assets, citing “challenging market opportunities”. Shares in the unit’s parent traded 0.6% higher.

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US Dollar Index Technical Analysis: A new visit to YTD highs around 98.30…

  • The index manages to leave behind yesterday’s pullback and has now reclaimed the key 98.00 handle and above, resuming the underlying bullish move.
  • Next on the upside appear 2019 peaks beyond 98.30. A breakout of this area on a convincing fashion should open the door for a test of the Fibo retracement at levels just below 99.00 the figure.
  • The broader constructive ooutlook is expected to prevail above key 200-day SMA at 96.37 and the +3-month support line at 96.46. This area of support is reinforced by a Fibo retracement of the 2017-2018 drop at 96.36.

DXY daily chart



Markets: Political headlines to remain in the spotlight – Danske Bank

Danske Bank analysts suggest that in light of another day of only tier-2 data releases, political headlines – be it the US-China trade spat or Brexit – will remain in focus today.

Key Quotes

“In the UK, PM Theresa May will convene a cabinet meeting today to consider how to respond to the collapse of the cross-party talks with Labour.”

“In the Euro area, consumer confidence data for May is on the agenda. Domestic demand, especially private consumption, was an important growth driver in Q1 as consumer sentiment recovered some ground after the H2 18 weakness. We will look for any signs that this trend might go into reverse amid the latest trade war escalation.”

“Central bankers will also be on the wires today, with ECB Vice President De Guindos speaking in London and the Fed’s Evans and Rosengren discussing the economy and monetary policy.”

“Overnight to Wednesday, Japanese export figures for April are due out and will shed some light on where the Japanese export sector is heading after the surprisingly strong Q1 GDP figures released yesterday.”


Thailand: Growth slows to 4-year low – ANZ

ANZ analysts note that the Thailand’s GDP expanded by 2.8% y/y in Q1, the weakest performance in four years.

Key Quotes

“The decline in exports was a key drag, but private consumption and investment growth also slowed. Looking ahead, the economy faces multiple pressure points, ranging from weak external demand to domestic political uncertainty.”

“For full year 2019, our growth forecast is 3.2%, lower than the national economic planning agency’s revised projection of 3.3-3.5%. We expect the Bank of Thailand (BoT) to keep its policy rate on hold through 2019 and 2020, with the balance of risks tilted towards a cut.”

AUD/USD slumps to intra-day low after RBA’s Lowe signals rate cut in June

  • The RBA Governor considered cutting interest rates at June policy meeting.
  • Risk events and trade news could offer near-term direction.

The AUD/USD pair dropped to the day’s low near 0.6890 after Governor of the Reserve Bank of Australia (RBA) favored rate cut in his speech at the Economic Society of Australia Business Lunch, in Brisbane during early Tuesday.

Mr. Lowe also conveyed bearish bias for the labor market and growth data.

The pair recently witnessed pullback as minutes of the RBA’s May 07 minutes failed to include a statement that mentions near-term neutral policy bias by the central bank. The minute statement also emphasized employment data to be a signal for the next policy moves. The latest labor market data from Australia has been negative and indicates a rate-cut from the Aussie central bank even if it avoided the same in its latest minutes.

The Aussie has often being considered as a risk barometer of the market and earlier gained after the US announced some relief to the trading partners of China’s Huawei.

Risk sentiment was further brightened by the US President’s readiness to talk with Iran; though, with threats to the Middle East nation.

The 10-year yield of the US government bond, another indicator of the market’s risk tone, has so far been positive around 2.42% since early Tuesday.

Looking forward, the US monthly existing home sales data for April and developments surrounding the US-China trade deal might offer fresh directives to traders. As per the latest forecasts, the US housing market figure could rise to 5.33 million from 5.21 million prior.

Technical Analysis

Failure to clear 8-week old trend-line resistance, at 0.6940, continue signaling brighter chances for the pair’s run down to 0.6880 and 0.6860 whereas January 2016 low surrounding 0.6830 could please sellers then after.

In a case of sustained break beyond 0.6940, the quote can extend recovery towards 0.7000, 0.7030 and 0.7055 numbers to the north.

AUD/USD drops 20 pips after RBA minutes talk of rate cut

  • AUD/USD hits session low of 0.6905 after RBA minuets. 
  • The dovish set of RBA minutes confirms the central bank is closing on rate cuts, as expected by markets.

The minutes of the Reserve Bank of Australia’s May 7 monetary policy meeting released soon before press time said a rate cut would be appropriate if the labor market shows no further improvement, sending the AUD/USD pair down by 20 pips to a session low of 0.6905. 

The minutes also dropped the line that the board saw “no strong case” for the near-near-term policy move, while adding that the outlook would be less favorable without an easing in policy over the next six months. 

Further, the minutes stated that risks to the household consumption growth and global economy are tilted to the downside.

All-in-all, the dovish set of minutes released today confirm the central bank is closing on rate cuts and will likely deliver at least two in the next seven months. 

The markets, however, seems to have priced in the move over the last couple of months. After all, the central bank ditched its long-held tightening bias in early February. As a result, the AUD may defend the 0.69 handle for now, although worsening of risk sentiment due to deepening US-China trade tiff could send the pair well below the psychological support during the day ahead. As of writing, the pair is trading at 0.6910.

Pivot points


BOJ’s Kuroda: BOJ is buying bonds to achieve price target

The Bank of Japan (BOJ) Governor Kuroda is on the wires now, via Reuters, making his scheduled appearance in the Japanese parliament in Tokyo.

Key Headlines:

BOJ is buying bonds to achieve price target.

Not buying bonds to finance government debt.

BOJ held 29tln yen of ETFs as of Sept 2018, which is 77.5% of Japan’s ETF market.

ETF buying not aimed at boosting stock prices.

BOJ buying may restrain big fluctuations in stock market.