USD Remains Weak Despite Small Gains

May 24 21, 11:36 GMT

The USD gained somewhat on Friday, yet overall seems to continue to remain rather weak given that it remains near a three-month low level. It should be noted that on the monetary front, Fed officials tried to talk down expectations for the May employment report citing problems in new hires and analysts do not exclude the possibility of an unwillingness of part of the workforce to return due to the ongoing unemployment benefit payments. The development could add pressure on the Fed to act in regard to its QE program given also that the market also still does not seem to accept that high inflation is of transitionary nature. US markets tended to send out some mixed signals on Friday as Dow Jones rose while Nasdaq and the S&P 500 relented some gains on Friday. South of the US border the Loonie seems to stabilize against the USD as Canada’s retail sales slowed down and despite higher oil prices. Across the Atlantic, the common currency weakened against the USD, yet the outlook seems to improve, given that vaccination is picking up pace and increased economic activity as shown by May’s preliminary PMIs, may put the foundation for further inflationary pressures in the area. Gold’s price seems to continue to benefit from the weak USD hence continued to be on the rise, as the market may also consider the precious metal as a better inflation hedging instrument. WTI prices rose as there is a storm forming over the Gulf of Mexico region, increasing concerns for the possible closure of oil drills in the area, while doubts about a US-Iranian agreement seem to rise.

Nasdaq, dropped on Friday as it found resistance at the 13575 (R1) resistance line. Overall though it should be noted that the most important feature of Nasdaq’s 4-hour chart may be the breaking of the downward trendline characterising its movement since the 29th of April, hence we switch our bearish outlook in favour of a bias for a sideways motion initially. Should the index find fresh buying orders along its path, we may see it breaking the 13575 (R1) resistance line and aim for the 13880 (R2) level. Should a selling interest be displayed, we may see the index, breaking the 13300 (S1) line and aim for the 12960 (S2) support level.

EUR/USD dropped on Friday as the USD strengthened, yet seems to have found support at the 1.2175 (S1) support line. Given that the upward trendline incepted since the 6th of April remains intact, we tend to maintain our bullish outlook, albeit it should be mentioned that some signs of a stabilisation seem to be present. Should the pair actually be under the spell of the bulls, we may see it aiming if not breaking the 1.2275 (R1) resistance line. Should the bears take over we may see EUR/USD breaking the 1.2175 (S1) support line, the prementioned downward trendline and aim for the 1.2100 (S2) support level.

Other economic highlights today and the following Asian session:

No major financial releases expected today and early tomorrow, yet Fed Reserve board Governor Lael Brainard, BoE Governor Andrew Bailey, Cleveland Fed President Mester, Atlanta Fed President Bostic and Kansas City Fed President George are scheduled to speak.

As for the rest of the week:

On Tuesday we get Germany’s detailed GDP rate for Q1 and the Ifo indicators for May, as well as UK’s CBI distributive trades for May, the US consumer confidence for May and the US new home sales figure for April. On Wednesday, from New Zealand we get RBNZ’s interest rate decision, yet before that we get New Zealand’s trade data for April. On Thursday, we get Australia’s capital expenditure for Q1, Germany’s forward looking GfK Consumer Sentiment for June, the US durable goods orders for April and the weekly US initial jobless claims figure. On Friday, we get from Japan Tokyo’s CPI rates for May, France’s final GDP for Q1, France’s preliminary CPI (EU Normalised) rate for May, Switzerland’s KOF indicator for May, Eurozone’s economic sentiment indicator for May, the US Consumption rate for April and the final reading of the US University of Michigan consumer Sentiment for May.

US 100 Cash H4 Chart