USD shows strength as markets second guess Fed rate cut

Last week’s currency trading review
The Dollar rebounded in the early part of the week as speculation involving the Federal Reserve keeping rates unchanged in the near future. Supporting this notion was Thursday surprise release of New Home Sales which showed that sales had grown at its fastest pace in the month of April. The USD rally was shot lived as Friday’ release of Existing Home Sales failed to add to positive housing data. The Euro continued to ease against the USD before finding support on the back of Industrial orders which had markets expecting a future rate hike. In other data released the German ZEW and IFO both failed to add to Euro strength. The Euro closed last week at 1.3450 having opened at 1.3505. The Japanese Yen continued to feel pressure as carry trades remained in full swing before market uncertainty provided a slight pardon. In data specific news, CPI came in relatively of consensus at -0.1% up from the previous -0.3%. The JPY closed last week at 121.70 having opened at 121.14. The GBP moved on the back of the BoE minutes fo9r the May meeting where its was shown that members voted 8 to 1 in favor of a rate hike by 25 basis points, whilst some officials were in favor of hike by 50 basis points. The GBP closed last week at 1.9849 having opened at 1.9749.  The AUD was range bound and traded on technical’s for much of the week largely attributed to the lack of economic data. However the AUD did ease on the back of a broadly stronger dollar.  

The forex trading week preview
In the States; although US markets will be closed on Monday for memorial day a heavy data weak is expected out of the United States beginning with Consumer Confidence (Tuesday) and FOMC minutes (Wednesday). The volume picks up on Thursday as Chicago PMI and GDP made public before Fridays heavy slate of economic releases. Core PCE, Unemployment Rate, Manufacturing ISM, Michigan Sentiment and the much anticipated Non-Farm Payrolls will be sure to cause volatility. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; will also begin the week closed for market holidays. Key data releases are few for the EZ Current Account (Tuesday), CPI (Thursday) and PMI (Friday) generating most interest. However plenty of ECB officials are scheduled to speak throughout the week. In the UK; Monday sees a public holiday before Consumer Confidence (Wednesday) and Manufacturing PMI on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; A heavy data on Tuesday is expected on Unemployment Rate, Household Spending and Retail Sales all out on Tuesday. Industrial Production (Wednesday) and Manufacturing PMI (Thursday). We will provide our previews and reviews of these data releases in the daily summary.

In Australia; with recent lean weeks and data absence, plenty of interest will surround the Aussie Dollar as tier one data is finally scheduled for release, sure to cause plenty of interest. Wednesday sees the release of Retail Sales, whilst Trade Balance will be made public on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

Euro 1.3450 Initial support at 1.3371 (38.2% retracement of the 1.2865 to 1.3683 advance) followed by 1.3368 (Former resistance from Dec 4). Initial resistance is now located at 1.3545 (May 17 high) followed by 1.3612 (May 16 high)                                     

Yen 121.75 Initial support is located at 120.64 (May 16 low) followed by 120.15 (May 16 low). Initial resistance is now at 122.20 (Jan 29 reaction high) followed by 122.38 (61.8% ret 135.18 to 101.67) 

Pound – 1.9840 Initial support at 1.9677 (May 21 low) followed by 1.9659 ((50% retracement of the 1.9184 to 2.0134 advance)). Initial resistance is now at 1.9959 (61.8% retracement of the 2.0134 to 1.9677 decline) followed by 2.0000 (May 9 high)

Australian Dollar – 0.8185 Initial support a 0.8170 (May 4 reaction low) followed by 0.8150 (Apr 9 low). Initial resistance is now at 0.8273 (May 17 high) followed by 0.8354 (May 14 high)

Gold – 655.90 Initial support at 655.00 (May 17 low) followed by 652.01 (Mar 24 low). Initial resistance is now at 665.40 (May 22 high) followed by 675.05 (May 14 high)