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Market Brief
The last trading day in May is upon us and if the overnight session was to be the direction of things to come it looks like equities are going to trade higher and the US dollar is going to strengthen.
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Japan’s Nikkei 225 has risen by 2.0% during the Asia-Pac session after data showed the unemployment rate at 2.8% for April. This is a rise by 0.2% from March but back into the range for the last year. The Tokyo CPI reading year-on-year for May came in as expected and showed an increase but still deflationary.
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The yen has been weakening as Japan goes into increased lockdown measures, and this is prompting the Bank of Japan to consider a 6-month extension to the pandemic relief programme. The USDJPY has recently broken out of a consolidation pattern but there is a lot of talk of a large options expiry today with 3 billion contracts focused on the 110.00 and 110.50 range.
On the ActivTrader platform the USDJPY sentiment is that 62% of traders are bearish the pair.
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Today’s price action may swing between the key data points from the Eurozone sentiment survey in the London session to the US PCE inflation data and Chicago PMI readings during the US session. The US dollar index looks set to remain pinned to the $90 level but a move above yesterday’s high could be a signal to dollar short sellers to cover as the index moves into a higher trading range.
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The EURUSD currency pair is currently at support from a rising trend line, the daily 20 ema and the previous weeks close. The trend is still intact to the upside while the weekly candles show that the last 3 candle lows are not broken, but obviously if the greenback catches a bid, we could be heading to the 1.2100 – 1.2150 zone. The daily RSI is divergent from price action showing a lack of strength in the current price action.
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As we approach June, we also approach the OPEC+ decision to curb their output cuts. We did see WTI breech the $67 level after this week’s EIA inventory data hinted towards increased demand. Range traders would be looking to short the WTI contract back to the mean, which would equate to price testing the current 50-day ems level around $62.50. On the H4 chart a stochastic indicator is providing good signals for when price is extended and up against the resistance levels, with the 200 period ema as the target to the downside.
