Daily Commentary | 15/05/2019
US firms as trade worries soften
The USD stabilized against the Yen yesterday and firmed against a number of other currencies as trade worries seems to ease a bit. US President Trump, stated yesterday that trade talks with China are still ongoing and haven’t collapsed, calling the US-Sino trade war “a little squabble”, according to media. Also the US president tweeted that China will be pumping money into their system and called on the Fed to “match” the Chinese stimulus. On other news, Trump is expected to sign an executive order and practically banning Huawei’s equipment in the US market, as a national threat. Analysts point out that the markets may turn their attention and monitor key financial releases again in the next days. Should trade fears ease further, we expect the Yen to weaken, yet probably the Aussie could remain under pressure. USDJPY stabilised yesterday, maintaining a range bound motion just below the 109.75 (R1) resistance line. As the pair broke downward trendline incepted since the 6th of May, we switch our bearish outlook, in favour of a sideways movement. It should be mentioned that the pair may still be sensitive to any trade war headlines, as well as today’s financial releases. Should the pair come under the selling interest of the market, we could see the pair aiming if not breaking the 109.15 (S1) support line. Should the pair’s long positions be favoured by the market, we could see it breaking the 109.75 (R1) resistance line and aim for the 110.30 (R2) resistance level.
EUR drops on Italian concerns
The common currency weakened yesterday against the USD, as concerns about Italy’s intentions grew among investors. As per news reports, Italy’s deputy Prime Minister Salvini stated that the country is ready to break EU budget rules on debt levels if needed. We would like to note that the statements made could also pose a tactic of Salvini, ahead of the EU Parliament’s elections, to rally supporters of his party, the Lega. The EUR didn’t have any favors coming from financial releases yesterday either, as Germany’s ZEW dropped into the negatives, confirming the pessimistic view in Eurozone’s largest economy. We could see the uncertainty of the EU elections weighing on the EUR in the near term, however markets could also be watching financial indicators. EUR/USD dropped yesterday, breaking the 1.1220 (R1) support line, now turned to resistance. We could see the pair rebounding somewhat as today’s financial releases are forecasted to provide some support for the EUR, while at the same time weaken the USD. Should the bears be in control of the pair’s direction, we could see it breaking the 1.1175 (S1) support line and aim lower. On the flip side, should the bulls take over, we could see EUR/USD breaking the 1.1220 (R1) and aim for the 1.1260 (R2) resistance barrier.
Other economic highlights, today and early tomorrow
During today’s European session, we get from Germany the preliminary release of Q1’s GDP growth rate along with Eurozone’s 2nd estimate of the GDP release for Q1. In the American session, we get the US retail sales growth rates for April, Canada’s inflation rates for April, the US Industrial production growth rate for April and the EIA crude oil inventories figure. During tomorrow’s Asian session, we get Japan’s PPI rate and Australia’s employment data for April. As for speakers please note that Fed’s Quarles, Richmond Fed President Barkin and ECB’s Praet are speaking today.
• Support: 1.1175 (S1), 1.1125 (S2), 1.1075 (S3)
•Resistance: 1.1220 (R1), 1.1260 (R2), 1.1300 (R3)
• Support: 109.15 (S1), 108.50 (S2), 107.90 (S3)
•Resistance: 109.75 (R1), 110.30 (R2), 110.90 (R3)