Daily Commentary | 22/05/2019
USD remains stable in a fragile market sentiment
The USD remained rather stable against many of its counterparts yesterday, yet strengthened against the Yen. Analysts point out that the easing on Huawei’s trade restrictions from the US commerce department eased concerns somewhat yet the sentiment in the markets seems to remain fragile. Never the less US yields ticked up and provided some support for the USD and analysts were quick to note that its natural for the greenback to be bought, when the US yields rise. We expect the USD to remain rather stable in the absence of substantial financial releases, however we expect the release of the FOMC meeting minutes to create volatility and the USD to remain driven by headlines reeling in. USD/JPY rose yesterday, breaking the 110.30 (S1) resistance line (now turned to support) and stabilised above it. Technically speaking, the pair’s direction seems to be supported by an upward trendline incepted since the 15th of May, and for our bullish outlook to change, we would require the pair’s price action to break it. It should be noted that the pair could prove sensitive to any reaction caused by the release of the FOMC meeting minutes, as well as any further headlines regarding the US-Sino trade war. Should the pair find fresh buying orders along its path, we could see it aiming if not breaking the 110.90 (R1) resistance line. Should the pair come under the selling interest of the market, we could see it breaking the 110.30 (S1) support line and aim for the 109.75 (S2) support barrier.
GBP stable ahead of political storm
The pound stabilized against the USD yesterday after a week of pure losses and reaching the lowest level in four months. According to media, Theresa May is being pressured to give up her Brexit plan and resign in the next days. The pressure increased as May’s efforts to pass her Brexit plan through Parliament found strong resistance once again. Currently the Tory party braces for a disastrous election result in the European Parliament elections next week, which could speed up developments. We expect the pound to remain under pressure due to Brexit uncertainty, however today’s financial releases could also move the pound. Cable, maintained a sideways motion between the 1.2775 (R1) resistance line and the 1.2665 (S1) support line, breaking unsuccessfully the prementioned resistance line at some point yesterday. Technically the pair has broken the downward trendline incepted since the 13th of the month, hence we switched out bearish outlook in favor of a sideways motion scenario. Should the bulls take over, we could see the pair breaking the 1.2775 (R1) resistance line and aim for the 1.2875 (R2) resistance barrier. On the flip side should the bears dictate the pair’s direction, we could see it breaking the 1.2665 (S1) support line and aim for the 1.2560 (S2) support hurdle.
Other economic highlights, today and early tomorrow
In the European session, we get UK’s inflation rates for April. In the American session, we get Canada’s retail sales growth rates for March and from the US the EIA crude oil inventories figure. We would also like to highlight the release of the minutes of the last FOMC meeting. In tomorrow’s Asian session we get Japan’s preliminary Nikkei Mfg PMI for May. As for speakers, please note that ECB’s president Mario Draghi and Peter Praet, as well as Atlanta Fed President Bostic and NY Fed president Williams are speaking today.
• Support: 1.2665 (S1), 1.2560 (S2), 1.2475 (S3)
•Resistance: 1.2775 (R1), 1.2875 (R2), 1.2980 (R3)
• Support: 110.30 (S1), 109.75 (S2), 109.15 (S3)
•Resistance: 110.90 (R1), 111.40 (R2), 111.85 (R3)