Fundamentals to lead the day

In a rather easy-going Monday with the calendar being rather light as no high-impact financial releases are scheduled, we expect fundamentals to lead the way for the markets. On the trade war front, we note the US-Sino negotiations that took place over the weekend in Switzerland. Both US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng stated that substantial progress has been achieved during the negotiations and that differences may not be as wide as initially anticipated. For the time being the two sides are lowering tariffs for 90 days, in an effort to give diplomacy a chance to reach a possible deal. Overall, the developments tended to improve the market sentiment thus allowing for the USD to gain against safe-haven instruments such as JPY and CHF, while gold’s price dropped in today’s Asian session. We expect the improvement of the market sentiment to allow a more risk-oriented approach by the market, which in turn could support riskier assets such as equities and commodity currencies.

AUD/USD edged higher in today’s Asian session yet remained well within the boundaries set by the 0.6515 (R1) resistance line and the 0.6340 (S1) support level. Hence we maintain our bias for a continuance of the sideways motion of the pair between the prementioned levels. It’s characteristic that the RSI indicator remains just above the reading of 50 implying a relative indecisiveness from market participants, while the Bollinger bands have converged in a signal of lower volatility for the pair, which may allow the sideways motion to continue. For a bullish outlook we would require the pair to break the 0.6515 (R1) resistance line and start aiming for the 0.6680 (R2) resistance level. On the flip side an adoption of a bearish outlook would be possible should the pair’s price action break the 0.6340 (S1) support line and start aiming for the 0.6130 (S2) support level.

As for US equities, S&P 500 opened with a positive gap today breaking the 5710 (S1) resistance line, now turned to support. We maintain a bullish outlook for the index as long as the upward trendline initiated on the 7th of April remains intact. The RSI indicator is above the reading of 50 and rising, also implying an intensifying bullish market sentiment for the index which may enhance the upward movement. Should the bulls remain in charge as expected we may see the index aiming if not breaking the 5900 (R1) resistance line. Should the bears take over the reins of the index’s direction, we may see S&P 500 breaking the 5710 (S1) support line, continue to break the prementioned upward trendline in a first signal that the upward motion has been interrupted and start aiming for the 5520 (S2) support level.

Other highlights for the day:

Pound traders today, may be interested in the speeches of BoE’s Lombardelli, Greene, Mann and Taylor. In tomorrow’s Asian session, we get from Japan, BoJ’s summary of opinions for the May meeting while from Australia we get Mays’ consumer sentiment and April’s Business conditions and confidence.

As for the rest of the week:

On Tuesday we note the release of UK’s employment data for March, Germany’s ZEW figures for May and the US CPI rates for April. On Wednesday we note Sweden’s CPI rates for April and Canada’s building permits figure for March. On Thursday we get Australia’s employment data for April the UK preliminary GDP rate on a mom basis and Manufacturing rate for March in addition to the preliminary GDP rate for Q1, followed by Norway’s GDP rate for Q1, the Eurozone’s revised GDP rate for Q1 and industrial production rate for March followed by the US weekly initial jobless claims figure, Philly Fed Business index figure for May, PPI rate and retail sales rates for April, Canada’s manufacturing sales rate for March and US Industrial production rate for April. Lastly, on Friday we get Japan’s GDP rate for Q1 and the US UoM preliminary consumer sentiment figure for May.

AUD/USD Daily Chart

• Support: 0.6340 (S1), 0.6130 (S2), 0.5915 (S3)
• Resistance: 0.6515 (R1), 0.6680 (R2), 0.6940 (R3)

US 500 Daily Chart

• Support: 5710 (S1), 5520 (S2), 5345 (S3)
• Resistance: 5900 (R1), 6140 (R2), 6400 (R3)

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