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Friday, May 25th
The EUR/USD pair has regained its negative tone, navigating towards its semiannual lows, marked on the level of 1.1676 on Wednesday. Today’s retreat of the pair can be mainly explained by renewed buying interest around the US dollar after its slight correction. Moreover, ongoing uncertainty on the political field of Italy continues to weight the common currency, limiting its chances on any recovery. In addition, yesterday’s ECB minutes showed that the Bank is not planning to change its current monetary policy stance, while the Fed is expected to continue with tightening of its monetary policy. The growing monetary policy divergence between the Fed and ECB also negatively affects the pair. As for economic events, today investors won’t have to complain about the lack of relevant data, as both economic calendars contain important releases, and the Fed Chair J. Powell will deliver his speech on Financial Stability and Transparency in early NA session.
The GBP/USD pair again came under bearish control at the end of this week, after brief upside correction, witnessed on Thursday. Yesterday, the pound managed to recover some part of its previous losses, as US bulls lowered its pressure on the pair, taking a short breather. However, as it was widely expected, the pound again came under bearish pressure on the back of ongoing series of disappointing economic data. Recall, earlier this month the BoE left its interest rate unchanged, despite broadly expected policy tightening, and now investors are beginning to doubt about BoE hawkish decision in August due to weak inflation data, published this week. Lower odds of a rate hike on the next BoE meeting increase divergence between the US and UK regulators, which puts extra pressure on the pound lately. Today all markets’ attention will remain glued to the bloc of the UK data, featuring preliminary GDP report, which will be able to influence market expectations regarding further BoE actions. In addition, investors will also pay attention to the speeches of the leaders of both regulators, which will be held in early NA session.
The USD/JPY pair turned positive after three consecutive sessions at a loss, having bounced off its 2-week lows, marked below the level of 109.00. The recovery of the pair can be explained by renewed buying interest to the US dollar after its brief downside correction. However, the pair remains weighed by risk-off sentiment, as the US President re-ignited geopolitical tensions. On Thursday, Mr. Trump sent a letter to N. Korean leader, cancelling the June meeting between the nations. In this letter, the US President mentioned nuclear weapon talks from N. Korean side, while noting that the US has more powerful and massive nuclear capabilities. Nevertheless, the negotiations between sides continue and now markets are awaiting for a response from N. Korea. In the day ahead, traders’ attention will remain focused on the US durable goods and Fed Chair Powell’s speech, while any changes in risk sentiment will also be able to influence pair’s further direction.
The AUD/USD pair eased the most part of its yesterday’s gains and marked its intraday lows on the level of 0.7557. Today all markets’ attention remains focused on the ongoing drama between the US and N. Korea, where the US President canceled summit, which was planned for next month. These actions of the US leader have triggered another wave of bids for safety, thereby forcing the pair to change its direction. Moreover, renewed demand for the US dollar after yesterday’s correction is another bearish factor for the pair at the last working day of this week. In Asia, Australian economy didn’t provide investors with anything relevant, however, the US economic event calendar will offer core durable goods orders and a speech from the Fed Chair Jerome Powell, which will be able to bring some fresh trading opportunities during the NA session.
Major events of the day:
German Ifo Business Climate Index – 11.00 (GMT +3)
Prelim. UK GDP – 11.30 (GMT +3)
US Core Durable Goods Orders – 15.30 (GMT +3)
BoE Governor M. Carney’s Speech – 16.20 (GMT +3)
Fed Chair J. Powell Speech – 16.20 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1661 R. 1.1779
USDJPY S. 108.28 R. 110.60
GBPUSD S. 1.3284 R. 1.3470
USDCHF S. 0.9842 R. 1.0000
AUDUSD S. 0.7526 R. 0.7610
NZDUSD S. 0.6893 R. 0.6957
USDCAD S. 1.2778 R. 1.2972
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