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 31
The British pound fell sharply with a YouGov/Times poll showing the ruling Conservatives could lose 20 seats and their majority in parliament at the coming June election. GBP/USD immediately dropped to 1.2800 from circa 1.2860. At the present moment, the pair is hovering around 1.2808 level. The recent decline is lacking momentum, so the pound may move higher towards the resistances at 1.2845, 1.2890.
The dollar weakened against the safe-haven yen amid European political turmoil overnight. In Tokyo morning, we had preliminary industrial production print for April. The data indicated the best growth since April of 2011. For the yen, the following release wasn’t a reason to gain more strength. So, USD/JPY edged up t0 110.95. There is a soled resistance at 112.50 (the horizontal border of Kumo cloud on the daily timeframe).
The US Dollar Index Futures fell to 97.15 overnight. US Treasury yields missed some points Tuesday after the Fed Governor Lael Brainard said that she is content to hike in June, but if soft inflation data persist, she will reassess the appropriate path of monetary policy. The US PCE released yesterday was in line with market expectations. It didn’t show any lift in underlying pace of inflation despite the tightening of the labor market. There will more Fed officials speaking as we approach the FOMC’s June meeting. Robert Kaplan is due to speak in New York on Wednesday. As to the US economic data, pay closer attention to the Chicago PMI, pending home sales and Beige Book.
Aussie dipped lower in Tokyo session with missing results for local bank’s retail sales estimate (official data will be released tomorrow). Additional headwind for AUD – falling iron ore futures in China.
EUR/USD is trading lower at 1.1165 from yesterday’s high at 1.1205. Yesterday we got the release of German inflation data that fell short of market expectations. A report that ECB policymakers might upgrade their economic risk assessment at the upcoming meeting kept the possibility of a change in forward guidance despite Draghi’s dovish tone yesterday. As downward momentum clearly vanished, we still observe a weak undertone to the current price action and would continue to hold the same view unless the single currency rises above 1.1190.
USD/CAD was a bit lower in the session. Now it is around 1.3450. Today’s focus will on the Canadian GDP figures coming at 3:30 pm MT time.
Oil futures skipped a few points sliding down from $52.35 to $ 51.90 in the Asian session as raising output from Libya added to concerns about increasing US production that make OPEC-led output cut deal inefficient. According to Libya’s National Oil Corporation, the country production will rise to 800, 000 barrels. This would boost Libya’s exports and keep oil prices under pressure.
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...