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Morning Brief
Starting with the economic calendar, today’s highlights for the markets will come from the German Ifo Business Climate data for May, which is accompanied by the German Ifo Current Conditions and Expectations data. Any good news from the Ifo readings should help push the EURUSD a bit higher with the upbeat euro extending recent gains.
In the US session, many Fed voters are speaking, which usually puts a pause on the markets while we wait for them to maybe say something new or unexpected. The hard data from the US will be the new home sales which are expected to show a decrease in the numbers of new home sales and then the US API weekly crude stocks.
In the overnight session, the Shanghai and Hang Seng stock exchanges followed the US session equity markets higher and due to the momentum, the Nikkei 225 was able to jump 150 points even against a backdrop of more concerns around the COVID-19 situation.
Germany’s economy contracted 1.8% for Q1 2021, missing analysts’ expectations and undoing the expansion of the previous reading. Once again, the cause of the decline is the country’s GDP due to the coronavirus disruptions.
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The EURUSD has cleared last week’s range highs and is now set to carry on this bullish momentum towards the January 2021 highs. A supply zone between the 1.22961 and 1.23490 area will likely get tested and if there is no rejection, I foresee a sweep of the highs before coming back into value. If we do get resistance at the first test, last week’s highs would be a good old resistance creating new support.
The 20,50 and 200 daily ema’s are all reflecting the higher momentum in the pair, but the RSI is still divergent to the price action. A good solid new high and close at the highs would likely lead the RSI indicator to print a new higher peak, but if we get a weaker close, counter-trend trader will be loading up below the 1.2330 level.
The ActivTrader sentiment indicator shows these short sellers are increasing their positions with 72% of the traders on the platform now looking for lower prices. Going against the daily momentum is likely to result in these traders having to buy back their position at the highs, which is when we could see the reversal occur.
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The bullish momentum in the EURUSD is weighing on the US dollar index, but the British pound and Swiss franc are also gaining bullish momentum at the start of the London session. The H4 chart for the USDCHF is looking extremely bearish as prices trade within a tight ranging channel to the downside. 0.88763, 0.88456 & 0.87635 are possible targets to the downside. While the US dollar index could be on target to reach the years swing low.
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