AUD weakened against the USD as traders may have opted to post some profit after the pair reached a 5-month high. However, it should be mentioned that analysts tend to revise the outlook for the currency upward as Australia had a relatively low number of coronavirus cases, suggesting that a rebound may be faster than elsewhere. At the same time, it should be noted that Australia’s retail sales growth in April reached a record contracting level of -17.7% month-on-month, underscoring the damage caused by the lockdown measures introduced. On the flip side, the US seems to be starting to stabilize temporarily, despite the turmoil in the US and creating unrest. If the positive market sentiment persists and a risk of attitude re-enters the markets, we could see the Aussie begin to rise again. AUD / USD found resistance at 0.6940 (R1) level, which proved unable to break it. As the pair broke the upward trend line recorded since May 15, we shift our bullish outlook in favor of a sideways move. Note that the RSI indicator under our 4-hour chart is back until the reading of 70, which emphasizes the presence of bulls. If the pair finds new purchase orders along its path, we could see it breaking the line 0.6940 (R1) and aiming if not breaking the 0.7025 (R2) level. Should the pair get below market interest, we could see it breaking the 0.6840 (S1) line and aiming for the 0.6750 (S2) level.
ECB interest rate decision awaited by EUR traders
Today in the late European session (11:45, GMT), the ECB releases its interest rate decision and is largely expected to keep interest rates unchanged, with the refinancing rate at 0.0% while the deposit rate at -0.50%. Currently, the EUR OIS implies a 91.20% probability of the bank remaining on hold and actually keeping them at these levels throughout the year. Therefore, market attention is expected to turn to the accompanying statement and Lagarde’s press conference later (12:30, GMT) as well as the updates of the economic projections. According to ECB President Lagarde’s statements, a contraction of 8-12% for the region’s GDP for 2020 is expected, while we would not be surprised to see inflation forecasts also gloomy, both with a rebound in 2021 and 2022. In the GDP area any any rate near -8% could support the EUR, while anything close to -12% could weaken it. The bank is also expected to expand its PEPP program, with some analysts even citing a scale up of around € 500 billion. The bank should cheer for the EU’s 750 billion Stimulus as well as the recent further stimulus of the German government of 130 billion. €. Overall, we expect the event to be interesting, but with little, if any surprises, and if so, it can provide some support for the EUR. EUR / USD continued to rise yesterday, testing the resistance line 1.1240 (R1), but failed to break it and retreated slightly lower. We maintain a bullish outlook for the pair as long as it remains above the upward trend line recorded since May 26th. However, be aware that the couple seems to be testing it again. If bulls maintain control, the EUR / USD may break the 1.1240 (R1) resistance line and aim for the 1.1285 (R2) resistance level. If the Bears are predominant, the pair could break the aforementioned upward trend line, the 1.1160 (S1) guideline, and aim for the 1.1120 (S2) level.
Other economic highlights today and early tomorrow
Today during the European session, we will have the Swiss CPI rate for May, the UK PMI for construction in May and Eurozone’s growth in retail sales for April. At the US session, we get the US International Trade Balance for April, yet merchants can focus on releasing the original figure for unemployed claims. In the US session from Canada, we also get the trade balance for April. In the Asian session, we get Japan’s household spending growth in April. Also note that today the IMF is holding a regular briefing to discuss the global economy and the impact of the COVID-19 pandemic, so there may be some turbulence there affecting the market sentiment for a recovery of the global economy.
AUD / USD 4 hour card
Support: 0.6840 (S1), 0.6750 (S2), 0.6650 (S3)
Resistance: 0.6940 (R1), 0.7025 (R2), 0.7100 (R3)
EUR / USD 4 hour card
Support: 1.1160 (S1), 1.1120 (S2), 1.1060 (S3)
Resistance: 1.1240 (R1), 1.1285 (R2), 1.1345 (R3)