Easy Tuesday with fundamentals taking over

The greenback was on the rise yesterday against its counterparts supported also by market expectations for another rate hike by the Fed in its next meeting. It’s characteristic that NY Fed President Williams yesterday, dismissed the notion that the Fed’s monetary policy tightening is behind the fallout of SVB in March, while also dismissing the idea of rate cuts in the current year. On the other hand, the diverging monetary policy outlooks seemed to continue to weigh on the JPY as BoJ seems to be sticking to the ultra-loose monetary policy settings in place. New BoJ Governor Ueda stated that it was appropriate for the bank to maintain its dovish monetary policy for the time being yet also mentioned that the bank should not be too late to normalize it. To the west of Japan, we note China’s contraction of factory prices the sixth in a row, as demand seems to remain substantially weak and it’s no surprise that also the consumer price index slowed more than expected reaching the lowest levels since September 2021. China’s inflation metrics seem to suggest a weak demand that may have an adverse effect on the growth of the Chinese economy and thus also expand on a global level. The overall situation may remain worrisome for Aussie traders given also the close economic ties between Australia and China yet the positive market sentiment seems to be supporting the commodity currency AUD as it also seems to support the CAD, yet the Loonie is also sensitive to oil prices. It should be noted that WTI’s price seems to have remained stable at relatively high levels. With the supply side of the commodity seemingly remaining tight, attention turns toward the demand side and especially in China. Should the Chinese government actually provide a stimulus for the economy, given the slowing CPI and PPI rates mentioned earlier, that may also boost the consumption of oil and thus also boost its prices. Oil traders are expected to keep a close eye also on the release of the API weekly crude oil inventories figure, due out near the end of the American session and should the release show another substantial contraction of US oil inventories we may see oil prices getting some support as it would imply a rather tight US oil market. Moving to the US equities markets, we note the slow reopening yesterday, after the long weekend and the mixed signals sent out by key indexes, despite the improved market sentiment. We expect fundamentals with the highlight being on the Fed’s intentions to keep moving the markets while tomorrow’s US CPI rates and the beginning of the earnings season may increase volatility.    

AUD/USD was on the rise yesterday after bouncing on the 0.6630 (S1) support line. Given that the pair’s price action in the upward movement was also able to break the downward trendline guiding the pair since the 4^th of April, we switch our bearish outlook in favour of a sideways movement bias. It’s also characteristic that the RSI indicator rose and is now running along the reading of 50, also implying a rather indecisive market. Should the bulls take over, we may see the pair breaking the 0.6700 (R1) resistance line and aim for the 0.6760 (R2) resistance level. Should the bears be in charge of the pair’s direction, we may see AUD/USD reversing course breaking the 0.6630 (S1) support line and aim for the 0.6565 (S2) support level.

USD/JPY was on the rise yesterday breaking the 132.85 (S1) resistance line, now turned to support. Despite the rise, the correction lower in today’s Asian session of the pair’s price action turns the bullish momentum to be unconvincing and maintains our sideways bias. Yet we have to note that the fact that the pair was able to break above the 132.85 level tends to highlight the possibility of such a bullish outlook as is also the RSI indicator which has reached the reading of 65 and seems to imply a rather bullish sentiment on behalf of the market. Should USD/JPY actually be able to find fresh buying orders along its path, we may see it breaking the 135.15 (R1) resistance line and thus open the gates for 137.55 (R2) resistance level. On the other hand, should a selling interest be expressed for the pair, we may see USD/JPY dropping, breaking the 132.85 (S1) support line and aim for the 130.50 (S2) support level.   

Other highlights for the day:

During today’s European session we note the release of Norway’s CPI rates for March, Eurozone’s Sentix Index for April and retail sales for February. During tomorrow’s Asian session, we note the release of Japan’s corporate goods prices for March and machinery orders for February. On the monetary front, we note that Philadelphia Fed President Harker, Minneapolis Fed President Kashkari and RBA Deputy Governor Bullock are scheduled to speak.

AUD/USD H4 Chart

Support: 0.6630 (S1), 0.6565 (S2), 0.6490 (S3)

Resistance: 0.6700 (R1), 0.6760 (R2), 0.6825 (R3)

USD/JPY H4 Chart

Support: 132.85 (S1), 130.50 (S2), 127.55 (S3)

Resistance: 135.15 (R1), 137.55 (R2), 140.60 (R3)

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