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Australian Dollar Resumes Downturn after Soft Chinese Numbers
AUD/USD has returned to its losing ways in the Wednesday session. Currently, the pair is trading at 0.6917, down 0.40% on the day. On the fundamentals front, Australian Wage Price Index remained pegged at 0.5%, shy of the estimate of 0.6%. In the U.S., the markets are braced for soft consumer spending numbers. Retail sales is projected slow to 0.2%, down from 1.6% in the previous release. Core retail sales is projected to drop to 0.7%, compared to 1.2% in March. Thursday will be busy, as the U.S. posts building permits, unemployment claims and the Philly Fed Manufacturing Index.
It’s been a rough week for the Australian dollar, which has slipped 1.2% and continues to set new lows in 2019. The currency sagged on Monday after the U.S. slapped new tariffs on some $200 billion in Chinese goods, with China quickly retaliating with tariffs on $60 billion in U.S. products. There was more bad news out of China on Wednesday, as industrial production and retail sales missed expectations. Industrial production fell to 5.4% in April, well short of the estimate of 6.5%. This reading dropped from 8.5% a month earlier. Retail sales also slipped to 7.2%, down from 8.7% in March. This was much lower than the forecast of 8.6%. The Aussie is sensitive to Chinese data, as China is Australia’s number one trading partner. AUD/USD has posted four straight losing weeks and the pair remains under strong pressure this week.
Canada CPI climbed to 2.0%, matched market expectations
In April, Canada CPI accelerated to 2.0% yoy, up from 1.9%, matched expectations. CPI core commons was unchanged at 1.8%, matched expectations. CPI core median slowed to 1.9% yoy, missed expectation of 2.0% yoy. CPI core trim slowed to 2.0% yoy, missed expectation of 2.1% yoy.
US retail sales dropped -0.2%, ex-auto sales rose 0.1%, both missed expectations
In April, US headline retail sales dropped -0.2%, missed expectation of 0.2% mom rise. Ex-auto sales rose merely 0.1% mom, much lower than expectation of 0.7% mom.
Empires State manufacturing index rose to 17.8 in May, up from 10.1 and beat expectation 8.0.
Into US session: EUR dives on German yield free fall, but AUD still the weakest
Entering into US session, Yen is back as the star performer, followed by Swiss Franc. This time, weaker than expected economic data were largely shrugged off by stocks and bond investors. Instead, renewed worry over Italy's fiscal health boosted Italian yield up. German 10-year yield, on other hand, is in free fall on safe haven flow, breaking -0.11 handle. US 10-year yield also dives through 2.38 handle at the time of writing. Both developments help lift Yen and Swiss Franc, Dollar follows as third strongest for now.
Australian Dollar is staying as the weakest one for today, followed by New Zealand Dollar. These two are probably the only ones who care about resumption of slowdown in China. Situation could only get worse with more tariffs ahead. Euro is currently the third weakest for today. US retail sales and Canada CPI will be the next triggers for volatility.
Technically, EUR/JPY and GBP/JPY resume recent decline by breaking through 122.48 and 141.20 temporary lows. EUR/USD will likely take on 1.1173 minor support. Break will raise the chance of down trend resumption and target 1.1111 low next.
In Europe, currently:
- FTSE is down -0.04%.
- DAX is down -0.60%.
- CAC is down -0.48%.
- German 10-year yield is down -0.0050 at -0.117.
- Italian 10-year yield is up 0.0345 at 2.77.
Earlier in Asia:
- Nikkei rose 0.58%.
- Hong Kong HSI rose 0.52%.
- China Shanghai SSE rose 1.91%.
- Singapore Strait Times dropped -0.15%.
- Japan 10-year JGB yield rose 0.001 to -0.05.
DAX Slips As German Automaker Shares Under Pressure
The DAX continues to show sharp swings this week. Currently, the DAX is at 11,932, down 0.49%. In economic news, first-quarter GDP reports for Germany and the eurozone matched their forecasts. On Thursday, the eurozone releases trade balance.
There was positive news from first-quarter GDP data in the eurozone. German Preliminary GDP improved to 0.4%, after a flat zero reading in the third quarter. In the eurozone, Flash GDP also climbed to 0.4%, up from 0.2% in Q1. Is the economic slowdown over in the eurozone? It’s too early to tell, but if key indicators follow suit and head upwards, sentiment towards the eurozone will improve and could boost the DAX.
The trade war between the U.S. and China has shaken global equity markets, and the DAX continues to show strong volatility. Investors remain nervous about the economic outlook, and the ZEW economic sentiment surveys for Germany and the eurozone dropped into negative territory. In the latest bout between the two super-economies, the U.S. slapped tariffs on $200 billion in Chinese products, and China responded with counter-tariffs on $60 billion in U.S. products. The markets are concerned that the U.S. could raise the ante by slapping tariffs on European vehicles which are produced in China. This could spell trouble for the massive European auto industry, as the tariffs would raise the cost of German cars sold in the U.S. This has triggered sharp losses for German automakers which are listed on the DAX. On Wednesday, BMW is down 1.27%, Daimler has fallen 1.20% and Volkswagen has slipped 3.62%.
GBP/JPY Outlook: Brexit Concerns And Safe-Haven Buying Push The Cross Further Down
The cross extends weakness to new over three-month low on Wednesday, driven by fresh safe-haven buying and UK government's announcement that it would hold another Parliament vote on Brexit deal, which has been already voted down three times.
Rising Brexit concerns prompted further sterling sale that pushed the cross through important support at 141.00 (15 Fab trough / round-figure support).
Bearish daily studies (MA's formed multiple bear-crosses, including double death-cross of 10/200 and 20/200SMA's) support scenario.
Firm break of 141 handle would open way towards targets at 140.24 (Fibo 50% of 131.62/148.87) and 140.00 (psychological support).
Caution on oversold daily studies which way slow bears, however, no firmer signs of bounce being generated so far.
Corrective upticks will be expected to offer better levels for re-entering the downtrend.
Res: 141.64, 142.17, 142.86, 143.37
Sup: 140.96, 140.62, 140.24, 140.00
USDJPY Still Bearish
The US dollar is still trading below major weekly support against the Japanese yen despite a strong move higher in the value of the US dollar index. Sellers need to hold price below the 109.49 support level to trigger additional weakness in the USDJPY pair. Technical indicators across the four-hour time frame are starting to turn higher and yet to fully move away from oversold conditions.
The USDJPY pair is bearish while trading below the 110.00 level, key support is found at the 109.49 and 109.00 levels.
If the USDJPY pair trades above the 109.49 level, key intraday resistance is found at the 109.80 and 110.00 levels.
EURUSD Testing Key Resistance
The euro currency has moved back towards key intraday resistance against the US dollar after the 1.1200 support held firm during the European trading session. If buyers can move price above the 1.1216 level the 1.1230 level offers the strongest form of near-term resistance. Overall, EURUSD bulls need to make a new monthly high to encourage the next round of buying in the pair.
The EURUSD pair is only bullish while trading above the 1.1216 level, key technical resistance is found at the 1.1230 and 1.1264 levels.
If the EURUSD pair moves below the 1.1200 level, key technical support remains at the 1.1190 and 1.1164 levels.
EUR/USD – Euro Flat As Germany, Eurozone GDP Reports Match Forecasts
EUR/USD started the week with slight losses, but has steadied on Wednesday. Currently, the pair is trading at 1.1203, up 0.01% on the day. On the release front, first-quarter GDP reports for Germany and the eurozone matched their forecasts. The U.S. will release consumer spending reports for July, with the markets braced for weaker numbers. Retail sales is projected slow to 0.2%, down from 1.6% in the previous release. Core retail sales is projected to drop to 0.7%, compared to 1.2% in March. On Thursday, the eurozone releases trade balance, while the U.S. posts building permits, unemployment claims and the Philly Fed Manufacturing Index.
There was positive news from first-quarter GDP data in the eurozone. German Preliminary GDP improved to 0.4%, after a flat zero reading in the third quarter. In the eurozone, Flash GDP also climbed to 0.4%, up from 0.2% in Q1. Is the economic slowdown over in the eurozone? It’s too early to tell, but if key indicators follow suit and head upwards, sentiment towards the eurozone will improve and likely boost the euro.
On Tuesday, ZEW economic sentiment surveys for Germany and the eurozone missed the mark, as both posted declines. The German release ended a long streak of declines in April, with a gain of 3.1. The indicator slipped to 2.1 in May, pointing to pessimism. Eurozone ZEW economic sentiment posted a decline of 1.6 in May, after a score of 4.5 in April. The ZEW surveys indicate that institutional investors and analysts are pessimistic about the economic outlooks for the eurozone and Germany. The manufacturing sectors have been particularly weakened, as the trade war between China and the U.S. has escalated with another round of tariffs between the sides. The U.S. has raised tariffs on $200 billion in Chinese goods, and the next step could mean tariffs on European vehicles which are produced in China. This could spell trouble for the massive European auto industry, as the tariffs would raise the prices of German and French vehicles.
The Analytical Overview Of The Main Currency Pairs
The EUR/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.12213
Open: 1.12031
% chg. over the last day: -0.18
Day's range: 1.11984 – 1.12134
52 wk range: 1.1111 – 1.2009
EUR/USD started to descend. The trading instrument updated the local minimums. EUR was under pressure yesterday due to the statements by the Italian vice-premier that the country is ready to violate the EU regulations regarding debt balance in order to increase the employment rates. Right now the quotes are consolidating around 1.12000-1.12200. The financial market participants are waiting for important releases from the US and the EU. The quotes can correct further. You should open positions from the key levels.
The Economic News Feed for 15.05.2019:
Preliminary GDP reports for the first quarter (EU) – 12:00 (GMT+3:00);
Retail sales report (US) – 15:30 (GMT+3:00);
Industrial production volume (US) – 00:00 (GMT+3:00);
The indicators do not provide precise signals, the price has crossed 200 MA.
The MACD histogram is in the neutral zone but above the signal line which gives a weak signal to sell EUR/USD.
The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points to the bearish mood.
Trading recommendations
Support levels: 1.12000, 1.11800, 1.11650
Resistance levels: 1.12200, 1.12400, 1.12600
If the price fixes below 1.12000, consider further descend 1.11800-1.11600.
Alternatively, the quotes can recover toward 1.12400-1.12600.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.29547
Open: 1.29035
% chg. over the last day: -0.38
Day's range: 1.28988 – 1.29181
52 wk range: 1.2438 – 1.3631
GBP kept losing positions against USD. The quotes fell by more than 50 points. The GBP is under pressure due to the weak labout market report in the UK. Right now GBP/USD is consolidating around 1.29000. 1.29350 acts as a mirror resistance. The trading instrument can descend lower. You should open positions from the key levels.
The Economic News Feed for 15.05.2019 is calm.
The price fixed below 50 MA and 200 MA which points to the power of the buyes.
The MACD histogram is in the negative zone but above the signal line which gives a weak signal to sell GBP/USD.
The Stochastic Oscillator is in the neutral zone, the %K line started to cross the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.29000, 1.28500
Resistance levels: 1.29350, 1.29700, 1.30000
If the price fixes below 1.29000, expect further descend toward 1.28600-1.28400.
Alternatively, the quotes can recover toward 1.29700-1.30000.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.34716
Open: 1.34629
% chg. over the last day: -0.12
Day's range: 1.34563 – 1.34772
52 wk range: 1.2727 – 1.3664
USD/CAD has an ambigous technical picture. The instrument is moving sideways. The local support and resistance are 1.34550 and 1.34850. The investors are waiting for the Canadian inflation report. Keep an eye on the oil quotes and open positions from the key levels.
At 15:30 (GMT+3:00) Canada will publish a consumer price index.
The indicators do not provide precise singals, 50 MA has crossed 200 MA.
The MACD histogram is close to 0. There are no precise signals.
The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line which points to the bullish mood.
Trading recommendations
Support levels: 1.34550, 1.34350, 1.34100
Resistance levels: 1.34850, 1.35000
If the price fixes above 1.34850, expect further growth toward 1.35250-1.35400.
Alternatively, the quotes can descend toward 1.34300-1.34100.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 109.287
Open: 109.620
% chg. over the last day: +0.33
Day's range: 109.485 – 109.702
52 wk range: 104.97 – 114.56
USD/JPY is consolidating around 109.350-109.750. There is no defined trend. The quotes have prospects for recovery after a long fall. The investors are waiting for more info regarding the US/China negotiations. Keep an eye on the US news feed and open positions from the key levels.
The Economic News Feed for 15.05.2019 is calm.
The indicators do not provide signals, the price crossed 50 MA.
The MACD histogram is close to 0. There are no signals.
The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points towards selling USD/JPY.
Trading recommendations
Support levels: 109.350, 109.000
Resistance levels: 109.750, 110.100, 110.300
If the price fixes above 109.750, expect further correction toward 110.100-110.300.
Alternatively, the qutoes can fall toward 109.000.