Daily Market Outlook, May 28, 2021

Daily Market Outlook, May 28, 2021 Asian equities are mostly higher, with the ‘risk on’ tone supported by reports that President Biden will later today unveil a budget to increase federal spending by $6 trillion in the coming fiscal year. Economic data also supported sentiment, with US initial jobless claims yesterday falling to a new pandemic low of 406k. In the UK, Health Secretary Hancock said it is too early to say whether the fourth step in roadmap out of lockdown on 21 June in England can go ahead, with the Indian variant accounting for three-quarters of all new cases. UK cases have started to edge higher, although hospitalisations remain low.The latest monthly Lloyds Business Barometer survey was released overnight, based on polling between 4-18 May. It showed UK business confidence up for a fourth consecutive month, to 33% in May from 28%, including a five-year high in optimism for the economy. Employment expectations also picked up, with a third of businesses expecting to increase their workforce in the coming year. Despite that, pay expectations appeared to have stabilised after rising in recent months, and they remain below pre-pandemic levels.In the Eurozone, France was the first major country to release May CPI inflation figures (German and Eurozone reports are due next week). The French data showed the EU-harmonised inflation measure rising to 1.8% from 1.6%. Later this morning, the Eurozone economic sentiment index for May is expected to rise for a fourth straight month. Within the index, the ‘flash’ consumer confidence has already been released and showed an increase, while improvements are predicted for industrial confidence and services confidence. It all adds to evidence of a buoyant industrial sector and strengthening services activity as domestic economies start to open up.For the US, markets will await further details of the Biden federal spending proposals. In terms of data, expect personal consumption to have risen by 0.7% in April, driven by spending on services as restrictions are lifted. Markets will be watching the PCE deflator closely, which is the Fed’s preferred inflation measure. The figures follow the surge in the CPI measure to 4.2%, which partly reflected the impact on services prices from the reopening of the economy. However, global supply chain disruptions also seemed to play a key role, resulting in a surge in used car prices. Look for headline PCE deflator to pick up to 3.6%y/y from 2.3%y/y, and for the core measure (excluding food and energy) to rise to 3.0%y/y from 1.8%y/y. Fed officials continue to say the inflation rise is expected to be transitory. The advance April goods trade balance and the final reading of the University of Michigan consumer sentiment survey for May will also be released today.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby)EUR/USD: 1.2185 (461M), 1.2200-10 (1.6BLN), 1.2215-25 (1BLN)1.2250-60 (913M), 1.2265-75 (1BLN)EUR/CHF: 1.0800 (420M), 1.1000 (760M), 1.1040-50 (328M)EUR/GBP: 0.8625 (427M). GBP/USD: 1.4150 (268M), 1.4200 (464M)AUD/USD: 0.7750 (575M), 0.7800 (287M).USD/CAD: 1.2000 (640M), 1.2050 (420M), 1.2100 (1.5BLN), 1.2150 (612M)USD/JPY: 108.50-60 (915M), 110.00 (2BLN), 110.50 (1BLN)EUR/JPY: 132.80-85 (480M), 133.00 (210M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.2150 bullish aboveEURUSD From a technical and trading perspective, the close through 1.2120 is constructive but bulls must defend 1.21 to set up a test of 1.2270/80. A close through 1.2150 would suggest a corrective phase developing.Flow reports suggest topside offers congested through to the 1.2300 level with weak stops limited through the 1.2320 area and long term trend line around the 1.2345 area likely to see strong offers before weak stops opening the topside to further gains through the 1.2400 level.GBPUSD Bias: Bullish above 1.41 bearish belowGBPUSD From a technical and trading perspective, as 1.3960 now acts as support, bulls will target a retest of 1.4230’s. Only a close back below 1.41 would concern the bullish thesis opening the window for a corrective cycle.Flow reports suggest topside offers light through the 1.4200 level however, very few stops and stronger offers starting to appear through to the 1.4250 level and then increasing through to the 1.4310 area before weakness and stops appear for a break through to the 1.44 level before sentimental offers increase, downside bids light through to the 1.4100 level before stronger bids appear for any move beyond the 1.4050 level as congestion and sentimental levels appear.USDJPY Bias: Bullish above 108 targeting 112USDJPY From a technical and trading perspective, as 108.30 supports bulls will target 110.70’s, a closing breach of 108.30 would suggest a corrective move to test 106.30Flow reports suggest downside light through the 108.50 before opening the market to a new test of the 108.00 level, stronger bids into the 107.80 however, a break through the level is likely to see weak stops and breakout stops appearing and the market free to quickly test 107.50 and an old trendline then nothing until closer to the 107.00 area where stronger bids start to appear but the downside opening to Feb levels, topside offers through to the 110.00 level with light congestion through the figure level and weak stops possibly limited and stronger offers likely increasing on a move higher towards the 111.00AUDUSD Bias: Bearish below .7790 bullish aboveAUDUSD From a technical and trading perspective, the breach of .7790 refocuses attention on the downside as .7820 contains upside attempts, look for a test of .7680.Flow reports suggest topside offers into the 0.7800 area with weak stops through the 0.7820 before opening for a new run higher and strong offers likely through the 0.7840-60 area to build for the 79 cent level. Downside bids light through the 0.7750 area and stronger bids likely continue through to the 0.7700 area before weak stops appear below the 0.7680 and a stronger 0.7650 area then holds the downsideDisclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Market Update – May 28 – US Inflation & Stimulus in focus

Market News Today – Treasuries slumped after news President Biden would offer a $6 tln spending plan on Friday. Gilts led a sell off in EGBs yesterday after hawkish leaning comments from BoE’s Vlieghe hinted at the possibility of an early rate hike. Wall Street was generally firmer on reflation trades and the stimulus news, though the major indexes also lost altitude into the close as the administration also indicated it wanted to make capital gains tax increase retroactive to April. As for the data, the mix numbers didn’t provided any, clear directional clues. BoJ is reportedly mulling an extension of the pandemic relief program as Japan prepares to extend its state of emergency. Stock markets at least moved broadly higher across the Asia=Pacific region. JPN225 jumped 2.1%, at 29,127.

Today, stock markets are not really spooked and GER30 and UK100 are up 0.3% and 0.4% respectively, alongside broad gains in US futures. In the meantime, German import prices released and jumped 10.3% by/y in April, the highest reading since December 2010 and up from 6.9% y/y in the previous month. Base effects from energy prices remain the main driving factor, with oil prices up nearly 200%, prices for mineral oil products nearly 80% and natural gas up nearly 60%.

In FX markets, NZD eased across the board, while USD and Yen were sought. NZDUSD is at 0.7240 (200-period EMA). Both EUR and GBP moved lower against the Dollar, with EURUSD at 1.2175 and Cable at 1.4105.  USOIL rallied to $67.16. Gold is at $1889.30 ahead of today’s data. 

Today: Local data releases today are likely to support the recovery story, with Eurozone ESI economic confidence, and the key U. data in the PM session, i.e. PCE, Michigan Index and Good Trade Balance. The G7 meeting of Finance Ministers and central bankers may also attract some attention.

Biggest Mover @ (07:30 GMT – NZDUSD +0.65% ) NZDUSD dipped to 0.7240. In the 1 hour chart, faster MAs remain aligned lower, RSI 31 and still sloping, MACD histogram & signal line turned below zero. H1 ATR 0.0010, Daily ATR 0.0069.

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Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Dollar Boosted by Higher Yields; Inflation Data Due

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Dollar Up Ahead of U.S. Inflation Data, Pound Moves on BOE Rate Hike Expectations

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China Seeks to Slow Yuan Gains With Weaker-Than-Expected Fixing

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British pound gains boost from BoE, dollar looks to inflation data

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Nikkei (JP225), H1 testing support, potential for a bounce

Nikkei (JP225), H1 is seeing support above the 28400 which happens to be a 127% fibonacci extension and a recent swing low. A bounce from here could see prices rise towards the 127.2% Fibonacci retracement which price tends to be attracted to.Disclaimer: Thematerial provided is for information purposes only and should not be consideredas investment advice. The views, information, or opinions expressed in the textbelong solely to the author, and not to the author’s employer, organization,committee or other group or individual or company.High Risk Warning: CFDsare complex instruments and come with a high risk of losing money rapidly dueto leverage. 73% and 65% of retail investor accounts lose money when tradingCFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You shouldconsider whether you understand how CFDs work and whether you can afford totake the high risk of losing your money.

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EURUSD, H4 seeing strong bullish momentum and support from the ascending trend line

EURUSD, H4 is seeing strong bullish momentum as prices test our ascending trend line that stretches back to 6th May 2021. Pivot at 1.2190 also lines up nicely with a 100% Fibonacci extension and 78.6% Fibonacci retracement.We're seeing 1st support above the 1.2160 area which happens to be a nice swing low support.If prices do bounce from here, the 1st resistance is at the 1.2230 area which happens the be a nice 61.8% fibonacci retracement and horizontal overlap resistance.Disclaimer: Thematerial provided is for information purposes only and should not be consideredas investment advice. The views, information, or opinions expressed in the textbelong solely to the author, and not to the author’s employer, organization,committee or other group or individual or company.High Risk Warning: CFDsare complex instruments and come with a high risk of losing money rapidly dueto leverage. 73% and 65% of retail investor accounts lose money when tradingCFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You shouldconsider whether you understand how CFDs work and whether you can afford totake the high risk of losing your money.

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USDJPY, H1 seeing strong bullish momentum, potential for a bounce?

USDJPY, H1 seems to be approaching our support level at 109.00 which happens to line up nicely with a 38.2% fibonacci retracement and a 61.8% fibonacci extension. It also lines up very nicely with a pullback to support at that level.From a momentum perspective, it holds nicely above the EMA (34) and also a short term ascending trend line.We could be seeing a nice bounce from here to push price up to 109.20.Disclaimer: Thematerial provided is for information purposes only and should not be consideredas investment advice. The views, information, or opinions expressed in the textbelong solely to the author, and not to the author’s employer, organization,committee or other group or individual or company.High Risk Warning: CFDsare complex instruments and come with a high risk of losing money rapidly dueto leverage. 73% and 65% of retail investor accounts lose money when tradingCFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You shouldconsider whether you understand how CFDs work and whether you can afford totake the high risk of losing your money.

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Dollar Rebound will Likely to be Short-lived. Here is why.

The dollar index has crept above 90 level after the failed bearish retest of support at 89.65 which we discussed yesterday. However, it will be tough to extend the move as the Fed is probably months ahead of the start of QE tapering, while other Central Banks are much more specific about the timeframe of policy tightening. A prime example was the Bank of New Zealand, which announced that it intends to start hiking interest rates at the end of next year. NZDUSD jumped 1% due to RBNZ surprise, but there is still room to grow given support from commodity markets and breakout of the crucial mid-term downtrend line:The annual symposium in Jackson Hole, which is widely expected to be the place and time when the Fed will outline concrete steps towards reduction of assets purchases, will take place in August. What it means that there are at least two months of little support for USD from the Fed which suggests that broad USD pressure should remain in place and any upticks should be short-lived.The economic calendar is not particularly eventful today, so EURUSD is expected to remain in a range, hovering around 1.22 level. The release of US unemployment claims and some weakness in equities today will probably let USD to rise a little bit more with a possible test of 1.2150 on the pair. The comments of the ECB officials that the rise in inflation is temporary should be interpreted as a subtle hint that there is no immediate need to start discussion about reduction of QE, which somewhat reduces bidding on EURUSD.The Pound’s rally is on pause due to the lack of data releases. Reports that Scotland wants to hold an independence referendum after pandemic do not pose an immediate risk, as it is unlikely that this will happen in the current parliamentary term. GBPUSD may move to 1.4080, however, given strong fundamentals of Britain, the pair is likely to be readily bought out from this level.In the Asian part of the foreign exchange market, there is some also growing consensus about direction of the USD. The three main Asian currencies - the yuan, won and the Taiwan dollar - joined the pressure on the dollar about 10 days ago, which, of course, also does not add confidence about the prospects for the US currency:Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Will this be another stormy Thursday?

Yields have cheapened a bit since the open. The move has come largely on the news that President Biden will propose a $6 tln budget on Friday which has helped boosted equities.The dollar did little following the data, which saw Q1 GDP unrevised at 6.4%, lower than expected, while durable orders fell 1.3% versus forecasts for a 0.8% increase. Initial jobless claims fell to a pandemic low of 406k, better than forecast, while continuing claims were considerably lower as well. The USD had been on the rise ahead of the data, as Treasury yields popped higher after BoE’s Vlieghe suggested rapid recovery could see rate hikes early next year. USDJPY sits at 109.30, while EURUSD idles just under 1.2200. Equity futures remain mixed, while yields were little changed.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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EURUSD: The improving outlook with downside risks

Central bankers continue to do their best to keep tapering concerns at bay, but while ECB’s de Cos added to the dovish voices out of the Eurozone this week, Bundesbank President Weidmann and centrist Executive Board member Schnabel are due to speak this afternoon and likely to present a more balanced view. A compromise for the June meeting will be a scaled back monthly purchase target within an unchanged PEPP framework and overall QE target, which would effectively mirror the BoE’s action. Against that background the air for Eurozone bonds as well as stocks may be getting thinner at these levels as markets look to US data releases. GER30 and UK100 are down -0.3% and -0.1% respectively.

EURUSD has drifted off highs as markets anticipate a batch of US economic data releases today and tomorrow, including key price data. The Euro has lately found an underpinned from the improving outlook in the Eurozone economy, with the recent wave of Covid infections having been quelled and the EU has finally got its act together with its vaccination program. As for the US inflation situation, the prevailing dominant view is that price pressures will abate in Q3, as year-on-year base effects narrow and supply bottlenecks are ironed out, which — for now at least — is keeping shorter-dated Treasury yields anchored at low levels, with the Fed expected to hold out on ZIRP and QE.

The CME’s Fedwatch Tool shows that market positioning is implying a probability for a 25 bp Fed hike by year-end of just 9%, having ebbed back from the 11% odds that were being implied last week.

EURUSD futures are implying a first 25 bp hike in 2023, about a year ahead of what the Fed has been signalling. EURUSD is holding higher above the the 20-day EMA. However, the market is trading in a horizontal trajectory the past 8 days within the upper boundary of the 1.2165 Resistance and the lower immediate boundary of the 1.2157 Support. The RSI is sloping sideways above the 50 level, while the stochastic is heading downwards after the negative cross within the %K and %D lines. MACD lines held well above zero, presenting along with RSI an overall bullish outlook but a neutral outlook in the near-term.

However the key Support level for the asset is the 1.2135, which is the confluence of 20-Day SMA and 23.6% Fib. level. If the price breaks this bottom, it could meet the 50-day SMA and the 1.2000-1.2050 area. A bullish however movements could open the way for the pair to test the year’s peak and even the multi years high at 1.2460-1.2500, if however the bulls manage to successfully surpass the 1.2250 (FE 61.8%).

In conclusion, EURUSD is neutral in the near term but is looking neutral to bearish in the short-term outlook. 

Nevertheless, as stated in our latest post, EURUSD’s prevailing upside bias to sustain so long as markets continue to buy-in to the Fed’s narrative, but would see downside risk should Fed tapering start to look more inevitable. This would be when the US versus Eurozone growth differential is matched by a Fed versus ECB tightening expectations differential, which would be the circumstance for the directional bias of EURUSD to shift to the downside.

It is notable that the doves on the governing council have lately been quiet about the ascent of the Euro, despite the tightening effect via real interest rates. In fact ECB’s Panetta said just yesterday that the recent rise in the euro could, if sustained, “weaken inflationary pressures.” Given the outsized fiscal stimulus and higher growth trajectory in the US, this consider be the bigger-picture risk for EURUSD is to the downside.

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Wall Street Pros Are as Baffled as Anyone by the Dollar’s Fate

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S&P500: Potential Drop Ahead?

Good day,Having approached the level of 4200 for the third time in a row, American stock index S&P500 did not manage to break this level, remaining in the below. So far, we feel that a bullish trap might form, bringing the asset prices down. And this is exactly what is happening right now.The price of currency pair EUR/USD keeps pulling from the level of 1.2243. At that, the asset is trying to close the trading day with a bearish engulfing. The price of Euro might potentially hit the level of 1.2000.Currently, gold is touching the upper boundary of newly formed uptrend. Gold might undergo correction and drop. The asset might pull from the uptrend and head North afterwards.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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