Forex Afternoon Wrap – 26/05

May 26, 1:05 pm
Fed

US Dollar edges back as the Euro weakens

Key Notes:

  • Australia Trade balance 123mn vs. 98mn
  • UK, CBI reported sales 51 vs. 20
  • US durable goods orders m/m-0.5% vs. -0.5%
  • US core durable goods orders m/m 0.5% vs. 0.3%
  • US HPI m/m 0.3% vs. 0.7%
  • S&P/CS HPI m/m 1% vs. 0.9%
  • S&P/CS HPI y/y 5.0% vs. 4.6%

Later:

  • US PMI services
  • US consumer confidence
  • US new home sales m/m

The currency markets opened today after a thin and virtually flat trading day yesterday on account of US, UK and some major European trading hubs closed on account of bank holiday. The US Dollar continued to post gains as the Greenback managed to break above the critical 96.55 broken support level but the more important test will be whether price can hold above this level on the daily or weekly time frame. For the moment however, the US Dollar gained across the board with most of its peers giving way.

The Asian trading session was relatively quiet but the US Dollar managed to make early gains against the Japanese Yen which turned weaker across the board. With the US trading session, USDJPY broke to fresh multi year highs, trading above the 122 handle and looks poised in the near term for more gains should the bullish momentum continue. Against the Kiwi and the Aussie, the Dollar gained as both the currencies flipped over with NZDUSD trading below the 0.727 handle, trading near three month lows, while the AUDUSD was back below the 0.782 handle.

The European trading session did not see any major economic data and with the Spain regional elections and Greece on investors’ minds, the Euro continued to decline against the Greenback. But with a broader set of currencies, the Euro did edge out a few gains, especially against the weaker Kiwi and the Aussie dollars.

The British Pound was also no match to the Greenback’s strength as the Cable continued to drift lower, breaking below 1.54 round number with the next support coming in at 1.5325. A break of this support will see the Cable target 1.513 ahead of the revised second estimate GDP release from the country later this week.

The US trading session saw the Core durable goods data being released. While on the headline, durable goods declines -0.5%, it was well within expectations but on the core, durable goods for the month rose 0.5%, above estimates of 0.3%. The housing price index was relatively mixed however, rising only 0.3%, below estimates of 0.7% but the S&P Case Shiller housing price index rose 1% and 5% on monthly and annualized basis, beating estimates on both counts. The data continued to boost the Greenback ahead of the services PMI and consumer confidence alongside the new home sales data that are due later in the day.

With the Greenback rising, Crude Oil and Gold were also under pressure as WTI crude settled below the $60 handle while Gold was seen trading below the $1200 handle at 1185. Later this week, the US second estimates of the GDP is due to be released, which is expected to show that the economy contracted during the first quarter of the year.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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