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Tuesday, May 16th
The EUR/USD pair accelerated its upside traction in early Europe, keeping its bullish trend for the third consecutive session. Significant growth of the pair can be mainly attributed to ongoing broadly based US dollar’s softness, that was caused by fading chances of a June Fed rate hike, following a series of downbeat US economic data. However, the probability that the Fed will increase its rate on June meeting is still high, that is limiting further dollar’s decline. Currently chances that the Fed will take monetary policy tightening measures in June are approximately 74%, that is well above 60% which the Fed would like to see before increasing the rate. Now immediate focus shifts to the German ZEW Economic Sentiment report and block of macroeconomic indicators from Eurozone, while data scheduled in the US data calendar will also be able to bring some short-term opportunities to investors during NA session.
Today the GBP/USD pair keeps its positive tone, having refreshed its today’s highs at 1.2930 spot, as markets are pricing in positive numbers of UK CPI report. It is expected, that today Britain’s inflation will show positive results, which will be higher than the Bank of England's 2% target. In case of better inflation’s growing pace, the regulator usually responds with interest rate increase, however, during its last meeting the BoE made it clear that at the moment it does not see the need to raise its refi rate in the near future. Adding to that, persistent US dollar’s weakness, induced by lowered odds of Fed rate hike on June meeting, is also supporting the pair this Tuesday. However, further upside looks fragile, as risk-off sentiments are still gripping the market, pressuring on the higher-yielding assets, such as the pound. Besides the UK CPI report, today data from the US economy will also take place and will be released later during NA session.
Today the AUD/USD pair continues to trade with bullish bias for the fifth session in a row, however, having met fresh offers at this session’s highs, marked at 0.7435 handle, after RBA Meeting Minutes provided no hints on Bank’s monetary policy stance changes for the foreseeable future. Nevertheless, the meeting minutes showed that the Bank has revised its inflation projection upward, expecting it to rise to 2% by early 2018. Additionally, shrinking risk appetite is also providing some negative pressure on higher yielding assets, such as the Aussie. On the other hand, the pair managed to reverse most part of its early losses, as ongoing US dollar’s softness is remaining as a key driver across the market. Now all traders’ attention is focused on the US data pack, that will be released in NA session and will be able to bring some volatility across the market.
The USD/JPY was unable to hold its yesterday gains and came under renewed selling pressure, refreshing its daily lows at 113.27, amid fresh bout of risk aversion sentiments, that was the main theme during Asian trading session. Today brief pause on commodity market, after significant rally of oil prices, and cautious RBA Meeting Minutes triggered some nervousness across the market, that positively affected safe-haven assets, including the yen. Moreover, seems that the dollar is still suffering from Friday's dismal retail sale and inflation data, that is also collaborating with pair’s retreat. Looking ahead, today the US economy will release data bloc, including housing market and industrial production reports, that will be closely eyed for fresh directional impetus during NA session.
The main events of the day:
UK CPI – 11.30 (GMT +3)
German ZEW Economic Sentiment – 12.00 (GMT +3)
US Building Permits – 15.30 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.0895 R. 1.1029
USDJPY S. 112.84 R. 114.32
GBPUSD S. 1.2840 R. 1.2966
USDCHF S. 0.9919 R. 1.0041
AUDUSD S. 0.7351 R. 0.7477
NZDUSD S. 0.6813 R. 0.6951
USDCAD S. 1.3532 R. 1.3772
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