The USD slipped as the market sentiment improved and hopes were further fueled despite unfavorable forecasts and further tensions in US-China relations. Analysts note that the US-Sino relationship looks like a ticking bomb, and if tensions escalate further, we could see some safe haven havens for the USD, at the same time as an extension of the global economic downturn. Trump’s tweets as well as Pompeo’s hardening rhetoric seem to be indicative of the American attitude. We expect the situation to worsen as the pandemic can serve as a pretext for the United States to impose stricter measures against China in the contradiction between the two superpowers. The Fed’s protocols released yesterday showed Fed officials see the pandemic posing “an extraordinary amount of uncertainty” for the economy. We expect the USD to be affected by today’s financial releases, and the market could also pay a penny to Powell’s speech later today. EUR / USD rose yesterday, which clearly broke the resistance line 1.0950 (S1), now turning to support. The pair’s price action over the past three days seems to form an upward trend line, but today’s Asian session seems to put the trend line to the test. Should he pair the price action clearly break the aforementioned trend line, we would change our bullish outlook in favor of a sideways move initially. Note, however, that today we have heavy financial releases that relate to both sides of the couple. If the pair’s long positions are preferred, EUR / USD may aim, if not to break the resistance line 1.1010 (R1) and aim for higher ground. Should the couple get below market interest, we could see the pair breaking the 1.0950 (S1) support line with the goal of supporting the level of 1.0890 (S2).
Pounds gives reasons gained
GBP weakened against the USD yesterday, which meant that any reason gained the day before was when lower CPI rates tended to weigh on the pound. Analysts note that when inflation is significantly below BoE’s inflation target of 2%, it may be the case that discussions about negative interest rates could come up. BoE Governor Bailey yesterday refused to rule out a reduction of below-zero interest rates in statements he made before British lawmakers additional fuel for speculation. We also expect the UK’s dark economic outlook, along with the rising uncertainty in Brexit negotiations, also weighs on the pound. Pound traders could see today’s economic releases in the UK, especially the preliminary PMIs that give a glimpse in May. GBP / USD fell yesterday and tested our 1.2200 (S1) support line. Therefore, we maintain our bias for a bearish move as the pair failed to rise further or maintain a sideways move proving yesterday’s suspicion that the bears are right around the corner correctly. If the Bears maintain control over GBP / USD, we could see it breaking the 1,2200 (S1) support line and aiming for the 1.2015 (S2) support barrier. Should the bulls take over, we could see cable bursting on the 1.2200 (S1) line and aiming if not breaking the 1.2400 (R1) line.
Other economic highlights today and early tomorrow
Today during the European session we will receive the provisional PMIs of France, Germany, Eurozone and the UK for May. During the European session, we will also get UK CBI trends (orders) for May. Late in the European meeting we come from Turkey’s CBRT interest rate decision. At the US session, we get from the US the initial number of unemployed claims for the past week, the Philly Fed business index for May, the preliminary PMIs for Markit for May and the existing home sales for April. During Friday’s Asian session, Japan’s CPI courses lapse, while you should also be aware that BoJ is holding an extraordinary meeting. Please note, in regards to speakers, New York Fed President Williams, Fed Deputy Clarida, BoC Governor Stefan Poloz, Fed Chairman Jerome Powell and Fed Board President Brainard. In particular, we would like to underline the speech by BoC Governor Poloz, who will give his position on June 2, while also wanting to see if Powell is commenting on the need for further fiscal stimulus to save the US economy.
EUR / USD 4 hour card
Support: 1.0950 (S1), 1.0890 (S2), 1.0835 (S3)
Resistance: 1.1010 (R1), 1.1060 (R2), 1.1120 (R3)
GBP / USD 4 hour card
Support: 1.2200 (S1), 1.2015 (S2), 1.1835 (S3)
Resistance: 1.2400 (R1), 1.2580 (R2), 1.2770 (R3)