USD Edged Lower While Nasdaq Tumbled

May 11 21, 11:20 GMT

The USD edged lower against a number of its counterparts yesterday, albeit the king of currencies tended to remain rather numb awaiting for the release of the US CPI rates for April tomorrow. US yields and the greenback had some slight fluctuations yesterday as market participants calculate their expectations about when the Fed could start tapering its QE program and raise rates as the US economic recovery is ongoing. A high number of Fed officials are scheduled to speak this week starting today and could provide further clues regarding the Fed’s intentions. US stock markets tended to trade rather mixed, yet one move stood out and that was the selloff in tech shares as noted by Nasdaq’s drop yesterday. One of the main market worries seems to be for inflation to rise and thus provide for some grounds of some sort of tightening for the Fed’s monetary policy through the possible tapering of its QE program.

Nasdaq tumbled yesterday breaking the 13575 (R1) support line, now turned to resistance. We tend to maintain a bias for the downward movement to continue given its intensity yesterday. Also please note that the RSI indicator below our 4-hour chart is aiming for the reading of 30 also reaffirming the presence of the bears. Should the bears actually maintain control over the index, we may see Nasdaq, breaking the 13300 (S1) support line and aim for the 12960 (S2) support level. Should the bulls take over, we may see the index reversing course and breaking the 13575 (R1) resistance line and aim for the 13880 (R2) resistance level.

Pound rallies on USD weakness

Cable rose yesterday to a record high since late February, driven by USD weakness, improved expectations for the recovery of the UK economy and as the market shook off its worries for the outcome of the Scottish election. Pro-independence parties won a majority in Scotland’s parliament on Saturday, yet the Scottish National Party (SNP) failed to win an outright majority which may have eased the market’s worries about the party asking for a second Scottish independence referendum. Scottish leader Nikola Sturgeon stated that her party’s first priority was to deal with the COVID 19 pandemic, yet the plans for a second independence referendum seem to remain for SNP, albeit weakened. Market attention turns to BoE Governor Bailey’s speech today, while pound traders also prepare for the release of the UK GDP rates tomorrow.

GBP/USD rallied yesterday yet found considerable resistance at the 1.4145 (R1) resistance line and stabilised just below the prementioned level, during today’s Asian session. For our bullish outlook to change in favour of a sideways movement initially, we would require a clear breaking of the upward trendline incepted since the 7th of May, which by the way is being put to the test by the pair’s price action currently. Also please note that RSI reading below our 4-hour chart, remains above the reading of 70 despite a slight correction lower and may imply that the trading instrument is rather overbought, and a correction lower is possible. Should the pair find fresh buying orders along its path, we may see GBP/USD rising further breaking the 1.4145 (R1) resistance line and aim for the 1.4275 (R2) resistance level. Should a selling interest be displayed by the market, we may see cable breaking the 1.3990 (S1) support line and aim for the 1.3845 (S2) support level.

Other economic highlights today and the following Asian session:

Today during the European session, we highlight the release of Germany’s more forward looking ZEW indicators for May. In the American session we get from the US the Jolts Job openings number for March, while just before the Asian session starts, oil traders may focus on the release of the API weekly crude oil inventories figure. Also note that BoE Governor Andrew Bailey, New York Fed President Williams, Fed’s Board Governor Lael Brainard, San Francisco Fed President Daly, Atlanta Fed President Bostic and Philadelphia Fed President Harker are scheduled to speak. During tomorrow’s Asian session, we get New Zealand’s electronic card sales growth rate for April.

US 100 Cash H4 Chart