Many European markets were closed for holiday on Monday. The Dollar traded tightly near a six-week peak against the Euro and a three-month high versus the Yen on Monday as markets concluded that last Friday’s weak US housing data did little to help expectations of a Federal Reserve interest rate cut.
On Monday, European market activity has been thin due to public holiday in Germany, Switzerland and Britain, while US markets were also quiet, as expected, due to the Memorial Day holiday.
The US Treasury is expected to release this week its twice-annual report on currencies, which investors will scrutinize to see if it calls on China to allow the Yuan to appreciate further after Beijing widened the currency’s trading band earlier in the month.
News and Events:
Many European markets were closed for holiday on Monday. The Dollar traded tightly near a six-week peak against the Euro and a three-month high versus the Yen on Monday as markets concluded that last Friday’s weak US housing data did little to help expectations of a Federal Reserve interest rate cut.
The low-yielding Japanese currency looked weak across the board as investors continued to favor selling low-yielder currency to fund purchases of higher return assets in carry-trades.
European market activity has been thin due to public holiday in Germany, Switzerland and Britain, while US markets were also quiet, as expected, due to the Memorial Day holiday.
Data on Friday showed that the pace of existing US Home Sales in April was the weakest since June 2003. However, analysts concluded that those figures would not be enough to decrease the broadly positive Dollar sentiment as investors are still convinced that the Fed is still in no hurry to cut rates from their current 5.25%.
The US Treasury is expected to release this week its twice-annual report on currencies, which investors will scrutinize to see if it calls on China to allow the Yuan to appreciate further after Beijing widened the currency’s trading band earlier in the month.
Today’s Key Issues (time in GMT):
08.00 CHF UBS April Consumption Indicator 2.20 vs 2.13
08.00 EUR March Euro-zone Current Account (nsa) 5B vs -7.2B
08.30 GB BBA April Loans for House Purchases 56k vs 75.1k
13.00 CAD Bank of Canada Rate Decision expected 4.25%
14.00 US May Consumer Confidence Survey 105 vs 104
23.50 JPN April Industrial Production 0.5% vs -0.3% (MoM)
23.50 JPN April Industrial Production 2.8% vs 2.0% (YoY)
The Risk Today:
EurUsd outlook remains bearish with focus on the 1.3370 (38.2% retracement of 1.2865-1.3683) with momentum conditions also providing a bearish backdrop. Initial resistance is at last Wednesday’s 1.3503 high, but only a move above 1.3545 resistance would halt downward pressures and revive the bull trend with focus on the 1.3623 resistance.
GbpUsd consolidation has taken on the appearance of a bull flag, which suggests further near-term gains are likely. A break above the recent 1.9896 high would pave the way for gains towards the 2.0000 keylevel. Mild support for now is at last Tuesday’s 1.9770 breakout high. Renewed losses below 1.9716, Wednesday low, would however resume bear trend towards 1.9659 (50% retracement of the 1.9184 to 2.0134 advance).
UsdJpy bull trend remains intact with the focus on the January-February 122.10 to 122.22 highs. Last Wednesday 121.89 high would mark minor resistance before 122.05 (February high) next resistance Support lies at 120.86, last Friday low.
UsdChf maintains a bullish tone following the recent break of 1.2285 last Monday. This paves the way for gains towards the 1.2356 resistance (61.8% retracement of the 1.2575-1.1994 decline). Minor support is in the 1.2241 Wednesday’s low.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland