FOREX: USD Index Extends Bounce from Weekly Lows to 1.2%
May-28 18:53
- The greenback continues to trade with a more constructive manner on Wednesday, as a stable equity backdrop provides a more supportive tone for the USD index. This has allowed the DXY to extend the bounce off the week’s lows to 1.2%, narrowing the gap to both the 100.00 handle and initial resistance at the 20-day EMA.
- Headlines and newsflow have been few and far between for markets, with a semblance of stability for the Japanese yield curve also helping contain markets, as well as reduced headlines on the flow of trade deals with the US.
- USDJPY has once again outperformed, rising 0.45% on the session and threatening to close back above the 145.00 handle for the first time since May 16. Despite this week’s strong bounce, a technical downtrend in USDJPY remains intact and short-term gains are considered corrective. On the upside, initial firm resistance to watch is 145.68, the 50-day EMA.
- In similar vein, EURUSD has slipped back below the 1.13 handle as price looks to snap the uptrendline drawn off the early May low. 1.1284, the 38.2% retracement for the upleg off 1.1065, has been tested and clearance below would open the 50-dma which had successfully held as support when tested earlier this month.
- NZD is outperforming following the RBNZ rate decision. While the bank cut rates - as expected - by 25bps to 3.25%, the board suggested that the base rate is near the 'neutral' zone, which may limit the space for further rate cuts ahead.
- Latin American currencies have been notable laggards on the session, as markets react to the firmer dollar and weigh risks related to fiscal and monetary policy trajectories across the region. Both the Mexican peso and the Brazilian real have fallen 0.75%, with the former taking a hit leading into Banxico’s quarterly report, which downgraded both 2025 and 2026 growth forecasts for the Mexican economy.
- The second reading of US Q1 GDP/PCE will take focus on Thursday, before markets turn their attention to Friday’s release of April Core PCE. Central bank rate decisions for the BOK and SARB are also scheduled.
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USDJPY TECHS: Fades Off Resistance At The 20-Day EMA
Apr-28 18:30
- RES 4: 147.26 50-day EMA
- RES 3: 146.54 Low Mar 11
- RES 2: 144.47 20-day EMA
- RES 1: 144.03 High Apr 25
- PRICE: 142.66 @ 16:46 BST Apr 28
- SUP 1: 141.49 Low Apr 23
- SUP 2: 139.79 1.382 proj of the Feb 12 - Mar 11 - 28 price swing
- SUP 3: 138.82 1.500 proj of the Feb 12 - Mar 11 - 28 price swing
- SUP 4: 138.07 Low Jul 28 ‘23
Recent gains in USDJPY are considered corrective. Resistance to watch is 144.47, the 20-day EMA. A clear break of this level would signal scope for a stronger recovery. Resistance at the 50-day EMA, is at 147.26. Moving average studies are in a bear-mode position highlighting a dominant downtrend. A resumption of the trend would open 139.79 next, a Fibonacci projection.
US DATA: Manufacturing Prices Paid Picked Up Again In April (2/2)
Apr-28 18:26
Meanwhile the average of current Prices Paid indices across four regional Feds (Dallas, Kansas City, New York, Philadelphia - excludes Richmond which publishes a % change and not an index) hit a 33-month high (Jul 2022) in April.
- Three of the four in our index saw an increase in April vs March with the exception of KC which was unchanged, and notably Richmond prices paid hit the highest since January 2023.
- Current consensus is for ISM Manufacturing Prices Paid to rise to 73.0 in April from 69.4 prior, marking a fresh post-June 2022 high.
- The regional Fed readings suggest an increase in that category is certainly to be expected, and the magnitude seen in consensus in the low 70s doesn't appear to be far off.
US DATA: Regional Feds Point To Sharp ISM Manufacturing Pullback In April (1/2)
Apr-28 18:20
Four of the five major regional Fed manufacturing surveys deteriorated in April (Philadelphia, Richmond, Kansas City, Dallas - the exception was New York which was still very weak) versus March.
- This dragged the average of the 5 indices to the lowest since May 2020. At that time, the ISM Manufacturing index was in the low 40s.
- Average forward-looking expectations fell to the lowest since October 2022 on average in the 5 Fed surveys.
- This was the 3rd consecutive sequential deterioration in the 5-Fed index average, and we would expect the April ISM Manufacturing index to do likewise in April (50.9 in January, 50.3 in February, 49.0 in March).
- Current consensus is for ISM manufacturing (out Thursday at 1000ET) to print 48.0 in April, but we would see the risks to this firmly to the downside.
