Dollar Recovers With Weak Momentum in Quiet Session

Dollar recovers broadly in a quiet Asian session today but momentum is very week so far. The economic calendar is rather light today and trading might remain subdued. Nonetheless, volatility could build up again as the week goes with some key events scheduled. The list includes US budget proposal, FOMC minutes, BoC rate decision, Eurozone sentiment data, OPEC meeting, etc. While for now, some consolidations could be seen, the greenback will more likely extend recent fall ahead, than not. In other markets, Gold retreats mildly but is staying solid above 1250 handle. WTI crude oil extends recent rise and is on course for 53.76/55.24 resistance zone.

Trump to deliver first budget proposal on Tuesday

US President Donald Trump will deliver his first major budget proposal on Tuesday. It’s reported there is a proposal for balancing the federal budget within 10 year through steep cuts to safety net and discretionary spending. One of the key point to note is possibly the massive USD 800b cut over 10 years on Medicaid. The Congressional Budget Office has estimated that this could impact healthcare benefits of 10 million low-income Americans over the decade. And, the inclusion of Medicaid cut is seen as significant by some analysts because there are clear rejections on it from a number of Senate Republicans. While the House has voted to cut Medicaid funding, Senate Republicans have already indicated that they would start from scratch. Such inclusion could further enlarge the division between Trump and some Republicans at the time of political turmoil in Washington.

CEBR: Brexit could cost GBP 36b annually

In UK, an analysis conducted by the Centre of Economic Business Research (CEBR) for the Open Britain organization noted that the lost of EU single market in services after Brexit could cost UK companies up to GBP 36b annually. The reported pointed out that "about a third of the losses from single market withdrawal result from lost businesses in financial services." The impact could be particularly negative on financial services, telecommunications and transport. It elaborated that "the free movement of services can also be seen to directly touch on immigration if people are coming to the UK to offer their services as self-employed individuals or if firms exercise their mobility rights while wanting to carry their workforce over." And, the overall impact on UK’s GDP would be between 1.4% and 2.0%, equivalent to GBP 25b to GBP 36b a year.

OPEC to agree on production cut extension

Oil prices continue to surge ahead of an OPEC meeting this Thursday. Saudi Arabia’s energy minister Khalid al-Falih said "everybody I talked to… expressed support and enthusiasm to join in this direction" of extending the product cut agreement by a further nine months til next March. And, he’s optimistic that continuation with the same level of cuts, plus eventually adding one or two small producers, if they wish to join, will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018." WTI crude oil is trading at 50.8 at the time writing, up 0.9% comparing to last week’s close. Recent rebound in WTI is expected to extend further to 53.76/55.24 resistance zone in near term.

In this week’s calendar…

Released today, UK Rightmove house price rose 1.2% mom in May. Looking ahead, FOMC minutes and BoC rate decisions will be the main focuses this week. Markets will look into FOMC minutes on hints to solidify the expectations of a June hike. BoC will very likely keep monetary policies unchanged. In additional to that, Euro will look into Eurozone PMIs and Germany Ifo for further affirmation of improvements in economy. UK inflation report hearing will also be watched. Here are some highlights for the week ahead"

• Tuesday: Japan all industries index; Swiss trade balance; Eurozone PMIs; German Ifo; UK inflation report hearings, public sector net borrowing; Canada wholesale sales; US PMIs, new home sales
• Wednesday; New Zealand trade balance; German Gfk consumer sentiment; BoC rate decision, FOMC minutes, US existing home sales
• Thursday: UK GDP revision, BBA mortgage approvals; US jobless claims, trade balance, wholesale inventories
• Friday: Japan CPI; US durable goods orders, GDP revision, U of Michigan sentiment

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7417; (P) 0.7443; (R1) 0.7480; More…

AUD/USD’s corrective recovery is still in progress and could extend higher. But upside is expected to be limited below 0.7555 resistance to bring fall resumption. Below 0.7388 minor support will turn bias to the downside. Break of 0.7328 will extend the decline from 0.7748 to 0.7144/7158 support zone. However, firm break of 0.7555 will argue that fall from 0.7748 is completed and turn bias back to the upside.

In the bigger picture, we’re still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8115) and above.

Economic Indicators Update