FOREX: Soft Data Further Weighs on USD, Weaker Theme Prevailing
- A returning soft-USD theme continued to dictate proceedings in the FX space on Thursday, with markets extending the post US-CPI trend, bolstered by Trump's confirmation of incoming unilateral tariffs on countries without a trade deal. Furthermore, soft PPI readings for May and a high jobless claims figure further dented greenback sentiment, allowing the USD index to reach bearish cycle extremes.
- Most notable was the strengthening impact on the Euro, as EURUSD broke the bull trigger at 1.1573 and rose to a fresh high of 1.1631, the highest level since late 2021. Above here, 1.1685 provides the next target for the move, the 76.4% retracement of the Jan ‘21 - Sep ‘22 downleg.
- Softer risk sentiment stemming from increased geopolitical tensions around Iran have relatively weighed on the high beta currencies, and the likes of AUD and NZD in G10 and the emerging market FX basket have relatively underperformed. President Trump talked down the likelihood of a nuclear deal with Iran, and reports continue to circulate of a potential Israeli operation on the region to stem Tehran's nuclear ambitions.
- A poor monthly GDP release from the UK works further in favour of a sell-on-rallies theme for GBP, but this appears most beneficial for the crosses given the broad dollar weakness. This has prompted the EURGBP recovery to briefly extend to as much as 1.42% in just three sessions. Price action has been exacerbated by a break of resistance at 0.8442, the 50-day EMA, and the cross briefly pierced the May 2 high, printing 0.8547.
- Friday’s data focus will be on the UK quarterly consumer BOE/Ipsos Inflation Attitudes Survey, before Eurozone IP and trade balance figures. US prelim UMich sentiment and inflation expectations are also due.
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LOOK AHEAD: Wednesday Data Calendar
- US Data/Speaker Calendar (prior, estimate)
- 14-May 0515 Fed Gov Waller on central bank research (text, Q&A)
- 14-May 0700 MBA Mortgage Applications (11.0%, --)
- 14-May 0910 Fed VC Jefferson economic outlook (text, no Q&A)
- 14-May 1130 US Tsy $60B 17W Bill auction
- 14-May 1740 SF Fed Daly fireside chat (no text, Q&A)
US: FED Reverse Repo Operation
RRP usage recedes to $144.214B this afternoon from $147.505B yesterday, total number of counterparties at 32. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
GBPUSD TECHS: Monitoring Support At The 50-Day EMA
- RES 4: 1.3550 High Feb 24 ‘22
- RES 3: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 2: 1.3402/3444 High May 6 / High Apr 28 / 29 and the bull trigger
- RES 1: 1.3323 High May 9
- PRICE: 1.3276 @ 16:48 BST May 13
- SUP 1: 1.3140 Low May 12
- SUP 2: 1.3087 50-day EMA
- SUP 3: 1.3041 Low Apr 14
- SUP 4: 1.2968 Low Apr 11
GBPUSD traded lower Monday as the pair extended the correction that started Apr 29. The 20-day EMA has been breached. Furthermore, a minor head and shoulders formation on the daily chart highlights a reversal and reinforces the likelihood of a corrective pullback near-term. Key support to watch is 1.3087, the 50-day EMA. The bull trigger is unchanged at 1.3444, the Apr 28 / 29 high. A break of this level would resume the uptrend.
