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The US dollar shows signs of recovery, but not the Australian dollar

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EURUSD is barely hanging in the 1.2000 area, even if negotiations between Athens and EU/IMF/ECB lenders seems to have made progress on Friday, according to a Greek government official. Talks will be resumed today and hopefully will conclude with a saving solution as soon as possible. The last minute solution is getting profiled, while investors are getting used with a possible Greek default.

The Unemployment Claims report published down to 262k seems to have given birth to hopes of a new episode of stabilization in the U.S. economy. Now that the first quarter is ended, market participants are looking for signs that would point to a possible interest rate hike even later this year. On Friday, the American data were mixed, with the ISM Manufacturing PMI published down to 51.5 points and the revised UoM Consumer Sentiment reported to 95.9 points. These data, correlated with the low liquidity given by the May Day holiday, helped the American dollar get back on track.

The price of oil was also affected by the strong dollar, while the effect of the record April production in Saudi Arabia was already hitting the quotations. The correction didn’t last as the upward tendency gained control, supported by a slip in drilling rig activity in the United States. Oil’s quotations are already located in a strong support area that could help the rising trend continue for a while.

In the upcoming day, all eyes will be on the report of the interest rate level in Australia. Most of the market participants expect a cut to 2% (a part of the impact of the decision may be already integrated in the quotations). Concerning the AUDUSD evolution, the critical support area is located at 0.7800. A breakdown of this level could be triggered by an actual interest rate cut and the descending trend may resume if the healing of the U.S. dollar is indeed happening.

The Sterling pound declined versus the Euro and the U.S. dollar as the Manufacturing PMI fell to 51.9 points (the demand seems to have risen for the imported goods due to the appreciated Pound). Also the Construction and Services PMIs which are due to be published on Tuesday and Wednesday are expected to point lower. The general election also scheduled this week (adding as well the rising dollar) may contribute to a possible further decline of the Sterling pound.

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