Financial releases to lead the way

The USD corrected lower against its counterparts yesterday relenting part of Friday’s gains, with analysts noted that the possibility of the US defaulting seems to weigh on the greenback. Hence on a fundamental level, we highlight the issue especially as the White House and Republicans are set to meet today and another deadlock could weigh on USD. Today we expect attention to be also placed on the US retail sales growth rate for April and should the rate accelerate we may see the USD gaining as it would imply that the average US consumer is willing and able to actually spend more in the US economy. Yet not only the demand side of the US economy is to get an update this week as also April’s industrial production growth rate for the same month is due out and a possible slowdown may disappoint traders. But it’s not only financial releases for the USD today, we also get a barrage of Fed policymakers scheduled to speak and should they lean on the hawkish side we may see the greenback getting some support. It should be noted that Fed policymakers yesterday seemed to lean on the hawkish side, as they seemed to favor interest rates remaining at high levels or even increasing a bit further. Across the Atlantic, we note that EUR traders may keep an eye out for the release of the trading bloc’s 2^nd estimate of the GDP rate for Q1, but also Germany’s ZEW indicators for May could prove interesting. Both of Germany’s ZEW indicators are expected to drop and may weaken the EUR as they would imply that the investors become more pessimistic for the outlook of the largest economy in the Eurozone, but also that conditions on the ground are deteriorating.  

It was characteristic that the common currency edged a bit higher against the greenback, yet overall the picture of EUR/USD moving in a sideways motion above the 1.0855 (S1) support line, seems to prevail. We expect the pair to continue trading in the same direction, albeit the RSI indicator below our 4-hour chart, remains  below the reading of 40, implying a residue of a bearish sentiment in the markets. Should a selling interest be expressed for the pair, we may see it breaking the 1.0855 (S1) support line and aim for the 1.0695 (S2) support level. Should the bulls take over, we may see the pair rising and the next possible target for the bulls may be set at the 1.1000 (R1) resistance line.

North of the US border, Loonie traders may be focusing on the release of Canada’s CPI rates for April and a possible slowdown may weaken the CAD, as it could solidify market expectations for BoC to remain on hold, while CAD traders may also be keeping an eye out for the movement of oil prices. On a technical level we note that USD/CAD after a drop bounced on the 1.3465 (S1) support line. Given the relative stabilisation of the past 16 hours and that the RSI indicator runs along the reading of 50, implying a rather indecisive market, we tend to maintain a bias for the sideways motion to continue for now. Should the bulls take charge of the pair’s direction, we may see the pair aiming if not breaking the 1.3560 (R1) resistance line in search of higher grounds. On the flip side should the bears take over, we may see the pair breaking the 1.3465 (S1) support line and aim if not breach the 1.3335 (S2) support level.  In the land of the down under, Aussie traders after the release of RBA’s slightly dovish May meeting minutes and the rather disappointing Chinese data for industrial output and urban investment, now turn their attention to the release of the wage price index for Q1 and should the rate accelerate it could provide some support for the Aussie as it would imply that the Australian employment market may continue to feed inflationary pressures.

Other highlights for the day:

During today’s European session, we note the release of UK’s employment data for March. On the monetary front we note that Cleveland Fed President Mester, Atlanta Fed President Bostic, Fed Board Governor Barr, ECB President Christine Lagarde, Richmond Fed President Barkin, NY Fed President Williams, Chicago Fed President Goolsbee, Dallas Fed President Logan. During tomorrow’s Asian session, we note that Atlanta Fed President Bostic is scheduled to speak.

EUR/USD H4 Chart

Support: 1.0855 (S1), 1.0695 (S2), 1.0525 (S3)

Resistance: 1.1000 (R1), 1.1140 (R2), 1.1270 (R3)

USD/CAD H4 Chart

Support: 1.3465 (S1), 1.3335 (S2), 1.3230 (S3)

Resistance: 1.3560 (R1), 1.3655 (R2), 1.3780 (R3)

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