The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Weekly Forex Outlook: May 21-25
The week was positive for the greenback. The US dollar index managed to set new highs near $93.50. 10-year Treasury yields reached the highest level since 2011. Up to date, they are above 3%. Oil surprised with new highs amid Middle East tensions and global supply’s decrease. Brent tested levels above 80 dollars, WTI was above 72 dollars. Many emerging market currencies declined. We can say that markets were very volatile.
Let’s have a look at the economic calendar for the upcoming days. The pound needs some help in times of Brexit deal’s uncertainties. Tuesday’s inflation report hearings, CPI’s data on Wednesday, retail sales figures on Thursday and second estimate of GDP on Friday may either support it or pull it down. On Wednesday, the US Federal Reserve will release its May meeting minutes giving a deep outlook on economic and financial conditions. Similar outlook will be released by the ECB on Thursday. The week will end with the US durable goods orders on Friday.
It’s time to look at the technical side. USD/JPY is the only one pair that had a direction. It went up and broke above three important levels. Risk-on sentiment does not give many chances for the yen to recover. Above the Fibo level at 110.85, the pair will target 111.50.
EUR/USD was declining during the week. As long as it stays below 1.1850, next weekly aims are at 1.1760 and 1.17.
Other currency pairs continue to consolidate. For example, the pound cannot get out of the range between 1.3450 and 1.3550. The 200-day moving average is a strong resistance. To break it, GBP/USD needs positive economic data from the UK. Otherwise, it will break the bottom line of the consolidation range.
A strong growth of the US dollar led to the plunge of gold. It fell below 200-day MA and is now consolidating between $1,285 and $1,295. At the bottom of this range, there’s a long-term trendline support. If it fails, we’ll see a bigger selloff in gold.
Thank you for your attention!
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