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Dollar Strikes Back, Kiwi Maintains Gains

While Kiwi and Aussie remain the strongest ones for today, Dollar is striking back as markets enter into US session. On the other hand, Canadian Dollar is now the selling focus. Euro and Swiss Franc also turn weaker. Overall markets are mixed though, with European indexes trading water while US futures advance. Gold is maintain gains above 1900 handle in spite of the greenback’s rebound. WTI crude oil is reversing after failing near term resistance too.

Technically, USD/CAD is now a focus for the rest of the day. As the current rebound extends, break of 1.2201 support will indicate short term bottom. More importantly, that would signal that a key long term support zone of 1.2048/61 is defended. In this case, USD/CAD is probably ready for near term bullish reversal, which could spillover to other Loonie pairs.

In Europe, at the time of writing, FTSE is down -0.28%. DAX is flat. CAC is down -0.01%. Germany 10-year yield is down -0.032 at -0.196. Earlier in Asia, Nikkei rose 0.31%. Hong Kong HSI rose 0.88%. China Shanghai SSE rose 0.34%. Singapore Strait Times rose 0.72%. Japan 10-year JGB yield rose 0.0004 to 0.075.

ECB Panetta: Discussion about phasing out PEPP is clearly premature

ECB Executive Board member Fabio Panetta said today that “The conditions that we see today do not justify reducing the pace of purchases, and a discussion about phasing out the PEPP is still clearly premature.”

“In fact, we are now seeing a further undesirable increase in yields after the rise we observed earlier in the year,” he added

Also, “we are far from the point where we can see self-sustained growth,” Panetta said. “A premature withdrawal of policy support would risk suffocating the recovery.”

Japan: Economy shows weakness in some components further

Japan’s Cabinet Office said in the monthly economic assessment that the economy “shows weakness in some components further”. Private consumption shows “weakness further recently, especially in service spending.”.

Nevertheless, other assessments were largely unchanged. Business investment is “picking up”. Exports continue to “increase moderately”. Industrial production ins “picking up” Corporate profits are “picking up as a whole”. Employment situation shows “steady movement in some components”. Consumer prices are flat.

BoJ Suzuki: Desirable to constrain pace of increase in ETFs and J-REITs purchases

BOJ board member Hitoshi Suzuki said in a speech that it’s important for the central to “conduct purchases of ETFs and J-REITs while paying attention to its financial soundness.” As the EFT and J-REIT holdings increase, “the impact on the Bank’s balance sheet will become large.”

Hence, “it is desirable for the Bank to constrain the paces of increase in their amounts outstanding as much as possible by conducting the purchases flexibly; it will decisively conduct them on a large scale during times of heightened market instability while refraining from conducting them during normal times.”

NZD rises as RBNZ pushed forward rate hike projection

The RBNZ delivered a less dovish message in May than a month ago. While leaving all monetary policy measures unchanged, it upgraded the inflation forecast and revised lower the unemployment rate. The central bank also pushed forward the first rate hike to 3Q22. Kiwi rallied to highest since February after the news.

More in Kiwi Rallies as RBNZ Suggests that Rate Hike can Come in as Soon as Next Year.

Gold breaks 1900, heading to retest 2075 high

Gold’s up rally continues this week and breaks above 1900 handle, hitting as high as 1907 so far today. The correction from 2075.18 should have completed with three waves down to 1676.65 already. Further rise is now expected to 1959.16 resistance first. Break will further affirm this bullish case and target a test on 2075.18 high. Break of 1845.31 resistance turned support is needed to indicate short term topping, or outlook will remain bullish in case of retreat.

Tentatively, we’re viewing current rally has resuming the long term up trend from 1046.37 (2015 low). Next medium term target will be 61.8% projection of 1160.17 to 2075.18 from 1676.65 at 2242.12.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2219; (P) 1.2242; (R1) 1.2273; More….

Intraday bias in EUR/USD is turned neutral with current retreat. But further rise is expected with 1.2160 support intact. Above 1.2265 will resume the rise from 1.1703 to retest 1.2347 high. Firm break there will resume larger up trend from 1.6039 for 1.2555 cluster resistance next. On the downside, however, break of 1.2160 support will delay the bullish case. Intraday bias will be turned back to the downside to extend the consolidation pattern from 1.2348 with another falling leg.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair.

Economic Indicators Update

22:45NZDTrade Balance (NZD) Apr388M90M33M39M
23:50JPYCorporate Service Price Index Y/Y Apr1.00%1.50%0.70%
00:30AUDWestpac Leading Index M/M Apr0.20%0.40%0.50%
01:30AUDConstruction Work Done Q12.40%2.20%-0.90%-1.50%
02:00NZDRBNZ Interest Rate Decision0.25%0.25%0.25%
03:00NZDRBNZ Press Conference
08:00CHFZEW Expectations May72.267.468.3
14:30USDCrude Oil Inventories-1.0M1.3M
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