Last week turned out to be disappointing for the AUD bulls, despite the gap up opening on Monday after the negotiations between the Chinese and US presidents. What are the reasons behind this slide?
USD/JPY: outlook for May 23 - 26
USD/JPY fell to 110.20 in the course of the past week. The pair was hit by continuing troubles of Trump administration. Nervous investors switched to the safe-haven yen after media reported that Trump obstructed justice by pressuring former FBI director James Comey to end investigation into ties between Russia and the former US security advisor Michael Flynn. Lawyers regarded Trump’s actions as an impeachable offense. On the economic data front, Japanese Preliminary GDP improved to 0.5% vs forecasted 0.4%. US jobless claims and the Philly Fed Manufacturing index surpassed market expectations and helped USD recover its losses, but only partially. It’s clear that political factor will keep affecting the pair.
Let’s have a look at the upcoming events. We will receive Japan’s trade balance data on Monday. Flash Manufacturing PMI and CPI figures will be released on Wednesday and Friday respectively. US statistical entities will release housing market data, manufacturing figures, core durable goods orders and, most importantly, preliminary GDP. If Trump’s aides fail to improve the situation, the US dollar will remain under pressure next week and lose even more ground.
USD/JPY reversed to the downside from 100-week MA just above 113.00. This line will now act as resistance together with 100-day MA at 112.75. Support lies at the psychologically important level of 110 ahead of 108.60 (50-week MA). The pair may consolidate between 112.50 and 108.50 in the coming weeks. Increase in the market’s risk aversion can make the greenback test lower border of this range.
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