US fundamental worries persist

The USD was on the rise against its counterparts on Friday, especially against the JPY, with fundamental worries about a recession and inflation, continuing to provide safe haven inflows for the greenback. Yet a correction lower for the greenback, in today’s Asian session, seems to imply a slight improvement of the market sentiment, with US stock markets gaining in today’s premarket hours. Traders still have to navigate through perplexed US fundamentals with worries for possible recession, inflation and the US defaulting being high on the agenda. For US stock markets, we would like to note the release of the earnings reports of Home Depot (#HD) and Vodafone (#VOD) on Tuesday, Cisco (#CSCO) on Wednesday and Walmart (#WMT) and Alibaba (#BABA) on Thursday, which may allow for more focus to be placed on the retail sector, also showing another aspect of the demand side of the US economy on a macroeconomic level. As a sidenote, in the FX market the TRY hit a new all-time low against the USD as the first round of Turkey’s presidential elections showed Erdogan dropping below 50% and a runoff election is required, yet the Turkish President seems to be too close to the 50+1% in order for him to lose.

USD/JPY was on the rise on Friday breaking the 135.15 (S1) resistance line, now turned to support. We tend to maintain a bullish outlook for the pair as long its price action remains above the upward trendline that started to form since the 11 of May. Also note that the RSI indicator is at the reading of 70, showcasing the bullish sentiment of the market yet may also imply that the pair is nearing overbought levels and may be ripe for a correction lower. Should the pair find fresh buying orders along its path, we may see the pair breaking the 137.55 (R1) resistance line and start paving the way for the 140.65 (R2) resistance level. For a bearish outlook, we would require USD/JPY to break the upward trendline in a sign that the upward movement was interrupted, break the 135.15 (S1) support line and aim for the 132.85 (S2) support level.

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During today’s European session, we note the release of Sweden’s CPI rates and Norway’s trade data for April as well as the Eurozone’s industrial production for March. In the American session we get from Canada the House starts figure for April and the wholesale trade for March, while from the US we get May’s New York Fed manufacturing index. During tomorrow’s Asian session, we note the release of Australia’s Consumer Sentiment for May, while RBA is to release the minutes of its May meeting and we highlight the release of China’s industrial output and retail sales growth rate for April which may also have a side-effect on the Aussie as well, given the close Sino-Australian economic ties.

AUD/USD was dropping on Friday, yet bounced nicely on the 0.6640 (S1) support line, which held its ground and is now aiming for the 0.6700 (R1) resistance line. As the downward motion of the pair was interrupted and the RSI indicator bounced on the reading of 50 and is rising, implying that the bearish sentiment seems to be fading away, we switch our bearish outlook in favour of a sideways motion scenario initially. Should the bulls take over, we may see AUD/USD rising further, breaking the 0.6700 (R1) line and set at its sights the 0.6790 (R2) resistance level. Should the rise prove to be a mere correction higher and allow the bears to take over once again we may see the pair starting to drop once again, breaking the 0.6640 (S1) line and aim for the 0.6575 (S2) support level.

As for the rest of the week:

On a packed Tuesday, we note the release of UK’s employment data for March, the Eurozone’s second estimate of the GDP rate for Q1, Germany’s ZEW indicators for May, the US retail sales, Canada’s CPI rates and the US industrial output all for the month of April. On Wednesday, we get the release of Japan’s preliminary GDP rate and Australia’s wage price index both for Q1. On Thursday, we note the release of Japan’s trade data for April and Australia’s employment data for the same month whilst from the US we await the weekly initial jobless claims figure and the Philly Fed business index for May. On Friday we note the release of New Zealand’s trade data and Japan’s CPI rates, both for the month of April and Canada’s trade data for March.