FOREX: Greenback Moderately Weaker, Antipodean FX Outperforms
Jun-09 16:42
- Although off its worst levels, the USD index remains lower on the session, hovering in close proximity to pre-NFP levels. Overall, this keeps the prevailing theme of a weaker greenback intact, and the DXY within range of the early June pullback low at 98.351 - a key level of support.
- Ahead of U.S.-China talks in London today, President Trump authorized Treasury Secretary Scott Bessent's team to negotiate away recent restrictions on the sale of a wide variety of technology and other products to China, according to people familiar with the matter. This is keeping risk sentiment buoyant to start the week.
- This cautious optimism is prompting AUD and NZD to outperform on Monday. NZDUSD has broken back above an important zone of resistance between 0.6025/40. Spot continues to threaten a daily close above the US election related highs, signalling scope for a more protracted recovery towards 0.6168, the 76.4% retracement of the Sep '24 - Apr '25 selloff. Initial resistance is seen at 0.6080, last week's high print.
- For AUDUSD, last Thursday’s close above 0.6500 was the highest in 6 months, and Monday’s resumption of strength keeps trend signals bullish. The pair’s recent climb signals scope for an initial climb to 0.6550, a Fibonacci retracement and the Nov 25 high.
- Elsewhere, the likes of JPY, EUR and GBP have all risen between 0.2-0.3% to start the week. USDJPY displayed its usual volatility in posting a near 100 pip range and has settled just below 144.50 as we approach the APAC crossover. EURUSD is consolidating back above 1.14 as markets continue to digest the latest ECB decision and await further US data, most notably – the May inflation release on Wednesday.
- Uk labour market data kicks off Tuesday’s calendar, while markets will remain sensitive to global trade developments.
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
