The Euro is rebounding higher after sliding and maintains a level above 1.19
The Dollar Index (USD/DXY) finished 0.18% lower in slow Friday trade missing fresh data. The Greenback’s descent slowed following a furious 3-week short-covering rally. EUR/USD rallied well off the week’s lows, up 0.21% at 1.1940 (1.1917 Friday). Speculative market positioning saw a hefty decline in total net short Dollar bets.
Outlook: Expect a quiet Monday start ahead with no major data releases scheduled. Tomorrow sees more Fed Speak (Bullard and Mester), a raft of Euro-area data, US Retail Sales and UK Employment. After Thursday’s softer US inflation report, the Dollar’s strong ascent takes a breather. This will see more two-way range trade ahead.
Trading View: The latest report on market positioning (week ended May 8) saw a hefty cut in total net speculative short US Dollar bets too -USD 162,400 contracts from -USD 229,400. Half of these cuts came in the GBP, JPY, AUD and EUR. Therefore much of the Dollar’s furious advance was the result of short-covering rather than any fresh buying. The factors for a more sustained Greenback rally remain in place.
Policy divergence and rate differentials are well in place and still favour the Dollar. The yield on the Ten-Year US Treasury ended one basis point higher to 2.97%. It is still below 3.0%. Germany’s Ten–year Bund yield ended flat at 0.56%.
Market positioning may saw a hefty cut in Dollar shorts. The speculative community remain Dollar short, particularly in the Euro and Sterling. Against the Aussie and Yen, speculators increased their shorts (ie long US Dollars).
The Dollar’s failure to break new ground could see further losses with more short-term two -way trade. There are no major market-moving data releases today. Asian currencies strengthened further following Malaysia’s surprise election result last week. This put an end to the corrupt regime of ex-PM Najib which threatened to de-stabilise Malaysia, important to the ASEAN nations.
Fresh rhetoric following the US decision to break its nuclear deal with Iran threatened to impose sanctions on European companies that do business with Iran. Markets will continue to monitor developments on this.
The Dollar Index (USD/DXY) – slipped to 92.554 from Friday’s opening 92.722. The overnight low reached was 92.369. Immediate support lies at 92.30, 92.20. The next important support level is 92.00. Immediate resistance can be found at 92.70/80 and then 93.10. Look to trade a range today of 92.30-92.80.
EUR/USD – extended its rally from last week’s lows of 1.1823 (Thursday) to finish at 1.1942. The overnight high traded was 1.1968. Immediate resistance can be found at 1.1970 and then 1.2000. Immediate support lies at 1.1910 and then 1.1890. A bunch of European data is due out this week and they include German Preliminary and Flash Euro-Zone GDP as well as German ZEW Economic Sentiment data (tomorrow). Likely trading range today 1.1880-1.1980. Look to trade this range.
GBP/USD – consolidating above 1.3500, Sterling has recovered mildly after it’s slump following a rally which reached 1.4376 in late April. GBP/USD closed at 1.3545 (1.3517 Friday). Sterling has immediate support at 1.3520 and then 1.3500 (overnight low traded 1.35019). Further strong support can be found at the week’s low around 1.3460. Immediate resistance lies at 1.3585 (overnight high 1.35955). Further resistance can be found at 1.3635 (strong). UK Average Earnings and Employment data are due out tomorrow. Likely trading range today 1.3520-1.3590.
USD/JPY – drifted lower in a quiet trade to close little-changed at 109.37 (109.42 Friday). The Dollar hit a low of 109.15 overnight. Immediate support lies at the 109.10/20 level followed by strong support at 108.85. Immediate resistance can be found at 109.55, the overnight high. The next resistance level lies at 109.85 with 110.00 strong. USD/JPY may have formed a short-term top at 110.00 which could take us back to 107.40/80. Likely range today 108.85-109.55. Look to trade this range with the preference to sell USD/JPY rallies.
AUD/USD – extended it’s short-covering rally to a close of 0.7545 (0.7535 Friday). The Aussie’s climb stopped short of the 0.7570/80 resistance with an overnight high of 0.7567. Metals were mostly lower led by a decline in gold and silver. Minutes from the latest RBA policy meeting are released tomorrow while Australian Employment data are due Thursday. The Aussie has been on a strong downtrend since April and has been unable to bounce significantly off its lows. That said, it has held the 0.7410/50 support level well. Immediate support in the AUD/USD lies at 0.7520 and then 0.7500. Immediate resistance can be found at 0.7570/80 and then 0.7600. Likely range today 0.7505-0.7565. Prefer to buy dips.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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