After the bullish start of the year, the rand has started to weaken since the last Thursday. Let’s point out the main factors affecting the ZAR and set the key levels for this week’s trading.
Morning brief for May 22
GBP/USD was trading choppily in the Asian session. First, the pound gapped lower towards 1.2970, then bounced to 1.2995 covering much of its previous losses. GBP selling stemmed from option-related interest combined with Britain’s threats to quit negotiations on its departure unless the bloc drops its demand for a divorce bill payment as high as 100 bln euros. The officials and UK representatives will meet today to discuss their negotiating positions, so we expect some moves from GBP in the upcoming trading sessions. Formal Brexit talks are expected to begin. At 9:00 pm MT time don’t miss US PM Theresa May’s speech in an interview conducted by BBC TV.
USD/JPY was very active in the Asian trading session. North Korea conducted another ballistic missile test on Sunday which inspired the early yen strength. Towards the end of the Asian session, the greenback gained momentum and rose to 111.50 despite decent Japan’s trade balance data. The data reflected a declining trade surplus with the US on the month which should reduce pressure on Japan emanating from the US. The US dollar was weak throughout the past week after the media reports stating that Trump committed an impeachable offense (obstruction of justice) asking former FDI director James Comey to drop an investigation into Michael Flynn’s ties with Russian entities. The Republican chairman of the House Oversight and Government Reform Committee said he is going to talk with Comey on Monday and pursue any existing records of President Trump’s meeting with the fired FBI director. Meanwhile, Trump continues his trip in Saudi Arabia where he signed several agreements in the defense, energy and infrastructure industries.
EUR/USD closed past week above 1.12 for the first time since November 9, 2016. The following upsurge came after the French presidential election and a bulk of releases indicating an economic improvement in the Eurozone that might push the ECB to tone down its dovish language at the next meeting. In the course of the Asian session, the euro traded lower at 1.1190. The nearest support lies at 1.1170. Those who were trading long the EUR/USD should adjust their stop-loss to 1.1095.
The Aussie fell below 0.7430 against the USD in Tokyo morning. The RBA Assistant Governor will be speaking in Basel today; the Australian dollar might be affected. The Fed officials Patrick Harker and Neel Kashkari are also scheduled to speak today. The technical outlook for AUD/USD is still positive until quotes are trading above 0.7400. A move towards 0.7480/85 is possible despite the recent decline in AUD/USD.
USD/CAD dipped lower towards 1.3525 due to rising oil prices. Brent futures hit $54 for the first time in this month after Saudi Arabia’s energy minister Khalid A. Al-Falih said all producers are ready to agree to extend the cuts by nine months. It will be officially confirmed at the meeting in Vienna scheduled for May 25.
If we look at the daily charts of the US dollar index and the USD/JPY pair, we will see a misleading trend.
Britain has to leave the European Union in 66 days. Will it leave with a trade deal (good for the GBP) or without one (bad for the GBP)?
The last "Pennant" pattern has been broken, so bulls found resistance at 1.2915. Nevertheless, the market is likely going to move on, so we should...
USD/CHF remains weak across the board and stays strong with a bearish consolidation below the 200 SMA at H1 chart…
There's no any reversal pattern so far, so the market is likely going to test the nearest resistance area in the short term...