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Market Wrap
The UK and USA were on holiday today, so the trading was within thin markets. In the Asia-Pac session the Chinese NBS manufacturing PMI for May came in under expectations and was the lowest reading since February, with inflationary pressures and supply chain disruptions a big factor in the worsening data.
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The USDCNH is trading at prices last seen in 2018 and in a similar fashion is where the DXY found support. If the USDCNH were to drop below the balance area the DXY would surely follow.
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Also, in the overnight session the Japanese consumer confidence for May came in under analysts estimates. Japanese income data and employment perceptions were down as the country increases lockdown measures. The drop in the US dollar has weighed on the USDJPY despite the downbeat data, with the price action trading back towards the breakout level. Last week I described how the more cautious trader could use such an opportunity to get long on a retracement and mitigate the risk with the SL under a previous swing low.
Today’s German CPI Preliminary, year on year data rose 2.5% in May, according to a Federal Statistical Office (Destatis). The figure beat expectations and marked an increase from 2% the previous month.
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The month-on-month data showed the consumer price index (CPI) gained 0.5% from April. The harmonized index of consumer prices for Germany climbed 2.4% on an annual basis and added 0.3% month-on-month.
The EURUSD jumped today to take 1.2220 having traded off the daily 20 ema at the end of last week. The ActivTrader sentiment indicator still has the majority of traders on the platform short the currency pair.
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Media reports are coming through that the leading countries in the G7 will express “strong” support for the efforts to establish a global minimum corporate tax rate at their upcoming meeting on June 5. The G7 are looking to tighten corporate tax loops holes and will commit to use carbon pricing as a “policy lever to embed climate change in policy making”. They are also likely to pledge not to withdraw stimulus too quickly after the coronavirus pandemic abates. Also on the agenda is the wave of Central Bank Digital Currencies that are being developed. Central bank digital currencies could act as a “liquid safe settlement asset and anchor in the payments system,” but could they replace the global US dollar system? The US dollar index was down today, closing below the $90 level without trading much inside Friday’s price range.
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Oil prices rose 0.57% today ahead of a meeting between OPEC+ members who will discuss output quotas. The group is expected to continue with gradual production cuts until July as the global oil market starts to show continued signs of recovery from the coronavirus pandemic. The biggest threat to increased oil demand is a 3rd wave of lockdowns across Western countries and for the Indian variant to spike, as India is the 3rd largest oil consuming nation.
