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Colombia Interest rate meets expectations (2.75%)
AUD/JPY is printing higher highs and lows as the positive sentiment in Wall Street remains intact. The quote finally broke above the 71.75 level as the month o
  • AUD/JPY is trading in 12-week highs as the risk-on sentiment in Wall Street remains buoyant.
  • AUD/JPY ends the month of May by finally breaking above the 71.75 resistance.
 

AUD/JPY four-hour chart

 
AUD/JPY is printing higher highs and lows as the positive sentiment in Wall Street remains intact. The quote finally broke above the 71.75 level as the month of May comes to an end. Looking up, the next resistance can be seen near the 72.50/88 price zone. On the other hand, a turn lower below the 71.10 level could be seen as bearish in the medium-term with supports lined up near 70.15 and 69.60 levels.  
 

Additional key levels

 

Australia CFTC AUD NC Net Positions down to $-40K from previous $-39.6K
United States CFTC Oil NC Net Positions declined to 542.6K from previous 543.6K
United States CFTC Gold NC Net Positions: $237.9K vs previous $251.8K
European Monetary Union CFTC EUR NC Net Positions rose from previous ?72.6Kto ?75.2K
United States CFTC S&P 500 NC Net Positions down to $-276.7K from previous $-252.9K
Japan CFTC JPY NC Net Positions increased to 34.6K from previous 27.5K
United Kingdom CFTC GBP NC Net Positions dipped from previous -19Kto -22.3K
DXY dropped to the 98.20/98.00 support zone while under below the main SMAs. If the market can find some footing here, the index might rebound. However, a brea
  • US Dollar Index (DXY) is trading at levels last seen in mid-March. 
  • DXY is testing a key support level at the 98.00 figure. 
  
 

DXY four-hour chart

 
DXY dropped to the 98.20/98.00 support zone while under below the main SMAs. If the market can find some footing here, the index might rebound. However, a break below 98.00 can send the index towards the 97.50 and 97.00 levels in the medium term while resistance could be seen near the 98.80 and 99.00 levels initially.
   
   

Additional key levels

 

Next Friday, the US official employment report for May is due. Market consensus and also analysts at Wells Fargo expect a decline of 8 million in payr

Next Friday, the US official employment report for May is due. Market consensus and also analysts at Wells Fargo expect a decline of 8 million in payrolls. They explain the key question is how many of the temporary layoffs will become permanent job losses. 

Key Quotes: 

“Before March, the biggest one-month decline in nonfarm employment in the last 70 years was March 2009, when payrolls declined by 800K. The 881K fall in March 2020 nonfarm employment was then followed by the unprecedented 20.5M decline in April. As we turn to May, our forecast is for another historic print of 8.0M jobs lost and for the unemployment rate to climb to 20%.”

“One metric we will be watching closely is the reason given for unemployment. The current recession has been marked by an outsized increase in individuals citing “temporary layoff” as the reason for their job loss.”

“Temporary layoffs rarely have much relation with the business cycle, whereas today nearly four-in-five workers believes their job loss is temporary. Just how many of these temporary layoffs turn into permanent ones remains the key question to be answered, in our view.”

Analysts at MUFG Bank point out the EUR/USD pair finally broke above the 1.1000 level and argue the current advance was built on firmer foundations. T

Analysts at MUFG Bank point out the EUR/USD pair finally broke above the 1.1000 level and argue the current advance was built on firmer foundations. They consider the pair could test the top of the 1.0800/1.1200 trading range.

Key quotes:

“The EUR has extended its advance against the USD over the past week after finally breaking back above resistance at the 1.1000-level which had held since late March. EUR/USD is on course to strengthen for the fifth consecutive day, it is also the longest run since late March. On that occasion the move higher in EUR/USD proved short-lived as it hit an intra-day high of 1.1163 on 30th March and then quickly retreated back below the 1.1000-level.”

“The current advance though is built on firmer foundations as the pair appears set to test the top of the 1.0800 to 1.1200 trading range that has been in place since last summer.”

“We expect the ECB to expand PEPP by EUR500 billion and to continue asset purchases until at least the middle of next year in response to another downgrade of their staff forecasts. The potential impact on the EUR is mixed. On the one hand looser ECB policy should dampen the EUR’s upward momentum. However, market participants may also welcome reassurance that the ECB continues to stand behind debt markets to prevent spread widening.”

“We expect the EUR to continue trading on a firmer footing in the near-term. EUR/USD appears set to test the top of the 1.0800 to 1.1200 trading range. However, it may still be premature to turn outright USD bearish.”

The USD/MXN dropped to 22.00 on Friday, hitting a fresh two-month low and then rebounded. Near the end of the week, it is trading at 22.25, up for the
  • The Mexican peso is the biggest gainer of the currency market in May.
  • USD/MXN rises on Friday on risk aversion, but ends week lower.

The USD/MXN dropped to 22.00 on Friday, hitting a fresh two-month low and then rebounded. Near the end of the week, it is trading at 22.25, up for the day but about to post the second weekly slide in a row and the lowest close since early March.

The rally of the Mexican peso lost momentum but it held most of its monthly gains. Among the most traded currencies, the peso has been the best performer during May.

The key driver was an improvement in market sentiment amid fiscal and monetary stimulus and the re-opening of many economies. Over the last session, sentiment deteriorated as tensions between the US and China escalated.

Is the Mexican peso rally over?

The USD/MXN dropped 8% in May and bottomed around 22.00. The decline has been significant, and it could fall further as it usually the cross makes exacerbated moves. The weekly chart shows strong support at 22.00 and below at 21.60/80, a horizontal level and also the 20-week moving average that should limit the downside.

A recovery of the USD/MXN should face resistance around 22.90 initially, and above at the 23.20 area. If the dollar consolidates above the last one, more gains seem likely.

USD/MXN

 

 

"China broke their word to ensure the autonomy of Hong Kong," US President Donald Trump told a news conference on Friday. "China's action on Hong Kong

"China broke their word to ensure the autonomy of Hong Kong," US President Donald Trump told a news conference on Friday. "China's action on Hong Kong is a plain violation of treaty obligations."

Key quotes

"US is terminating the relationship with the World Health Organization."

"The US will redirect funds from WHO to other organizations."

"Issuing a proclamation to secure US university research."

"Instructing a working group to study differing practices of Chinese companies listed on US stock markets."

"Hong Kong is no longer sufficiently autonomous to merit special treatment from the US."

"Administration will begin process to eliminate policy exemptions that give hong kong special treatment."

"US will be revising state department travel advisory for hong kong to reflect the increased danger of surveillance."

"Will take steps to sanction Hong Kong officials involved in eroding Hong Kong's autonomy."

Market reaction

The market sentiment seems to have turned sour on these remarks. As of writing, the Dow Jones Industrial Average and the S&P 500 were down 0.85% and 0.63%, respectively.

According to several news outlets, US President Donald Trump won't announce any changes to the Phase-one trade deal with China. Trump is not expected

According to several news outlets, US President Donald Trump won't announce any changes to the Phase-one trade deal with China. Trump is not expected to introduce additional tariffs either.

Market reaction

Risk sentiment improved modestly on this headline but investors remain cautious while waiting for President Trump to host the news conference, that was supposed to start at 1800 GMT. As of writing, the Nasdaq Composite was gaining 0.58% on the day while the S&P 500 and the Nasdaq Composite were down 0.17% and 0.52%, respectively.

The Federal Reserve Bank of New York announced on Friday that it will purchase approximately $4.5 billion in Treasury securities every day next week.

The Federal Reserve Bank of New York announced on Friday that it will purchase approximately $4.5 billion in Treasury securities every day next week. 

With this decision, the total amount of weekly purchases will be lowered to $22.5 billion from $25 billion this week. 

Market reaction

This announcement was largely ignored by the market participants. As of writing, the US Dollar Index was down 0.1% on the day at 98.37. On the other hand, Wall Street's main indexes continue to trade mixed while waiting for US President Donald Trump's press conference on China.

Previewing the European Central Bank's monetary policy meeting next week on June 4th, "the focus of the June meeting will likely be the expansion of t

Previewing the European Central Bank's monetary policy meeting next week on June 4th, "the focus of the June meeting will likely be the expansion of the PEPP that the ECB has telegraphed," said TD Securities analysts.

Key quotes

"We're onside with consensus in looking for an increase of €500bn, leaving the PEPP running into 2021."

"This will be easily justified by an unprecedented downgrade in growth forecasts, as the PEPP was introduced only at the beginning of the steep slide in growth expectations."

Sterling?s rally from 1.2230 lows has reached two-week highs at 1.2395. The pair, however, has not been able to consolidate at those levels and pulled
  • GBP/USD retreats from two-week highs at 1.2395 to levels right above 1.2300.
  • Pound loses steam as risk appetite wanes awaiting Trump’s conference on China.
  • Above 1.2363, the pair might advance towards 1.2643/48 – Credit Suisse.

Sterling’s rally from 1.2230 lows has reached two-week highs at 1.2395. The pair, however, has not been able to consolidate at those levels and pulled back to 1.2300 area, turning negative on the day, as risk appetite waned with the investors awaiting US President Trump’s conference.

Pound gives away gains on renewed geopolitical woes

The GBP/USD has opened the day on a firm tone and extended Thursday’s rally, with the USD trading lower across the board weighed by downbeat US macroeconomic data. The preliminary US GDP data, which anticipated a 5% contraction in the first quarter, and the decline on US treasury bond yields have increased negative pressure on the USD.

Cable lost steam during the US trading session, with investors increasingly wary ahead of Trump’s conference. The US President has elevated the heat with China, vowing with a strong response to the new security bill on Hong Kong and the market is worried that tensions might spill into global trade, hampering the post-coronavirus recovery.

GBP/USD: A break through 1.2363 might open the doors towards 1.2643/48 - Credit Suisse

The FX analysts’ team at Credit Suisse sees the pound weak on a broad basis, yet, above 1.2363 they think bulls might gain confidence, “Above 1.2363 should confirm to see the downtrend break with resistance then seen next at 1.2467 and then more importantly at the April highs and 200-day average at 1.2643/48 and 1.2669 respectively.”

US President Donald Trump is hosting a news conference from White House. US Pres. Trump weighing sanctions targeting China's financial sector ? Bloomb

US President Donald Trump is hosting a news conference from White House.

US Pres. Trump weighing sanctions targeting China's financial sector – Bloomberg.

US President Donald Trump is weighing sanctions that target China's financial sector through sanctions and trade policy over Hong Kong, Reuters reported on Friday, citing a tweet by a Bloomberg reporter.

Market sentiment

Investors remain cautious during the American session on Friday. As of writing, the US Dollar Index was virtually unchanged on the day at 98.48. Meanwhile, the Dow Jones Industrial Average and the S&P 500 were losing 0.93% and 0.52%, respectively.

The NZD/USD pair capitalized on the broad-based USD weakness and surged to its highest level since March 12th at 0.6241. However, the risk-averse envi
  • NZD/USD lost its traction after advancing to 0.6240 earlier in the day.
  • Souring market sentiment helps greenback gather strength in American session.
  • Investors are waiting for US President Donald Trump's press conference on China.

The NZD/USD pair capitalized on the broad-based USD weakness and surged to its highest level since March 12th at 0.6241. However, the risk-averse environment in the second half of the day forced the pair to make a sharp U-turn. As of writing, the pair was slightly above the daily low it set at 0.6170, losing 0.42% on the day.

Earlier in the day, the US Dollar Index (DXY), which closed the previous three days in the negative territory, extended its slide and touched its lowest level in more than two months at 97.95.

Eyes on US President Trump's press conference

The report published by the US Bureau of Economic Analysis on Friday showed that Personal Spending fell by 13.6% on a monthly basis in April. Moreover, the core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, fell to 1% on a yearly basis from 1.7%. Nevertheless, these data was largely ignored by the market participants.

Later in the American session, the cautious mood on worries over US-China tensions helped the greenback recovery its losses. At the moment, the DXY is virtually unchanged on the day at 98.50. According to a Bloomberg reporter's tweet, US President Trump is weighing sanctions that target China's financial sector. Investors are waiting eagerly for Trump's press conference at 1800 GMT.

Technical levels to watch for

 

Analysts at MUFG Bank maintain a short GBP/JPY trade idea in anticipation that the weakness in the pound will extend further in the near-term. They se

Analysts at MUFG Bank maintain a short GBP/JPY trade idea in anticipation that the weakness in the pound will extend further in the near-term. They see a target in the cross at 126.60 with a stop loss at 134.10. 

Key Quotes: 

“Over the past week the GBP has continued to underperform. It was the third worst performing G10 currency over the past week, and by far the worst this month. The pound continues to be undermined by negative Brexit headlines, and ongoing speculation that the BoE (Bank of England) could introduce negative rates. The fourth round of Brexit trade talks take place next week. The mood music heading into the talks has not been good.”

“The BoE has signalled clearly that they are reviewing further policy options including negative rates. While we do not expect negative rates to be implemented, the uncertainty is set to persist as a weight on the pound in the near-term.” 
 

AUD/JPY is making higher highs and lows as the bullish sentiment stays intact. The quote is about to challenge the 71.75 level as the risk-on mood in Wall Str
  • AUD/JPY is trading close to 12-week highs as the risk-on sentiment in Wall Street remains intact.
  • The level to beat for bulls is the 71.75 resistance.
 

AUD/JPY four-hour chart

 
AUD/JPY is making higher highs and lows as the bullish sentiment stays intact. The quote is about to challenge the 71.75 level as the risk-on mood in Wall Street remains present. To the upside, the next resistance can emerge near the 72.50/88 price zone. On the flip side, a convincing break below the 71.10 level could lead to further selling in the medium-term with supports awaiting near 70.15 and 69.60 levels.  
 

Additional key levels

 

The US dollar increased its bearish pressure on Thursday after breaking below the bottom line of the last two months? triangle pattern at 0.9650 area
  • USD/CHF increased bearish momentum after breaking below the triangle support line at 0.9650.
  • The next target for the bears is now May 1 low at 0.9590.

The bearish pressure on the US dollar increased on Thursday after USD/CHF broke below the bottom line of the last two months’ triangle pattern at 0.9650 area. The pair has extended losses on Friday, reaching levels near the last 2 ½-month lows, at 0.9590 with the market on a risk-off tone, awaiting US President Trump’s conference on China.

A convincing move below the mentioned 0.9590 (May 1 low) might encourage sellers to push the pair towards 0.9545 (50% retracement of March’s rally) on its way to March 27 low at 0.9500.

On the flip side, the USD/CHF should move back above the broken trendline support, now at 0.9660, to ease bearish pressure and attack the 50- and 100-day SMAs, at 0.9685/0.9700 before trendline resistance at 0.9730.

USD/CHF daily chart

USDCHF daily chart

 

USD/CHF key levels to watch

 

 

US President Donald Trump is weighing sanctions that target China's financial sector through sanctions and trade policy over Hong Kong, Reuters report

US President Donald Trump is weighing sanctions that target China's financial sector through sanctions and trade policy over Hong Kong, Reuters reported on Friday, citing a tweet by a Bloomberg reporter.

At 1800 GMT, President Trump is scheduled to hold a news conference.

Market reaction

This headline doesn't seem to be having a significant impact on market sentiment. As of writing, the Dow Jones Industrial Average and the S&P 500 were down 0.95% and 0.55%, respectively. On the other hand, Nasdaq Composite was up 0.25% at 9,440 points.

Analysts at HSBC point out that in the current climate, gold may rally even if the US dollar goes up, and could be firm even if the equity market is s

Analysts at HSBC  point out that in the current climate, gold may rally even if the US dollar goes up, and could be firm even if the equity market is strong.

Key Quotes: 

“Gold may have received some support from plans for increased fiscal spending, but the underlying support is based on lingering uncertainty, according to our precious metals analysts.”

“Our precious metals analysts think that this uncertainty that has so far benfitted gold, will continue, as some investors may take on gold positions as insurance or a hedge against another economic downturn or equity pullback. In addition, geopolitical risks are also positive for gold, especially if they negatively impact trade. In the current climate, gold may rally even if the USD goes up (as both attract “safe haven” and quality asset buying, like what has happened since the onset of COVID-19 and during the 2007-08 global financial crisis). According to our precious metals analysts gold could be firm even if the equity market is strong.”
 

United States Baker Hughes US Oil Rig Count down to 222 from previous 237
According to the Research Department at BBVA, despite the downside surprise of 1Q GDP in Turkey, they still maintain a 2020 GDP forecast of 0%, with r

According to the Research Department at BBVA, despite the downside surprise of 1Q GDP in Turkey, they still maintain a 2020 GDP forecast of 0%, with risks still somehow balanced, depending on the recovery pattern in the rest of the year.

Key Quotes: 

“Turkish Economy grew by 4.5% yoy in 1Q20, lower than expectations (5.5% BBVA Research vs. 4.9% Bloomberg). Seasonally and calendar adjusted quarterly growth also decelerated to 0.6% from the previous 1.9% in 4Q19. The downside surprise stems from the more rapid reaction of services to the impact of the Covid shock, especially on the more sensitive ones: trade, transportation, accommodation and financial services.”

“Our monthly GDP indicator nowcasts a yearly growth rate of -0.4% for April and -6.3% for May, which would be recovering in June thanks to both positive calendar day effects and the lifting of the restrictions and could even be better than our initial projections.”

“We still maintain our GDP growth forecast at 0% for 2020, assuming a partial gradual recovery pattern in the rest of the year.”

“As the lockdown measures begin to ease globally, we expect a gradual recovery from now onwards, whose pattern will depend on the behavioral changes and global risk mood together with the domestic macroeconomic policies.”
 

The euro rally o=bserved over the last two weeks has been fuelled by the coronavirus stimulus proposal says the FX analysts? team at Rabobank, who see

The euro rally o=bserved over the last two weeks has been fuelled by the coronavirus stimulus proposal says the FX analysts’ team at Rabobank, who see the pair still vulnerable, aiming towards 1.05 in the next three months.

 

Key quotes

“If the bulls are correct, the USD could trend lower from here. In our view, however, the threat of mass unemployment, deep recession and geopolitical tension should keep nerves frayed and the safe-haven USD supported against a broad basket of currencies.”

“If all 27 nations can ratify this budget without too much difficulty, this could be a game-changer in terms of cohesion within the EU. This could significantly bolster the position of the EUR.”

“That said, ‘horse trading’ and ‘muddling through’ are more usual in Europe. Consequently, we consider it to be too early to alter our forecast that EUR/USD will dip lower towards 1.05 on a 3-month view.”

Analysts at Wells Fargo, point out that thanks to a massive surge in government transfer payments, April 2020 goes down in the history books as the la

Analysts at Wells Fargo, point out that thanks to a massive surge in government transfer payments, April 2020 goes down in the history books as the largest monthly increase in personal income on record.

Key Quotes: 

“Government transfer payments increased $3 trillion in April— can that be right? Recall that these are annualized figures, so when you add up the $1,200/individual or $2,400/household and then factor in the $600 weekly additional unemployment benefits…then annualize it, you get a stunning number. The result was the largest ever increase in income, and a reminder why the NBER excludes transfers when dating recessions.”

“The sudden stoppage of spending in many key services industries resulted in a never-before seen 12.0% monthly decline in real services.”

“Real consumer spending is heading into the second quarter falling at three-month annualized rate of 56.8%.”
 

After attempting to break above the 133.00 resistance one more time, GBP/JPY remains choppy as the month of May comes to an end. As the overall trend remains b
  • GBP/JPY remains choppy below the 133.00 figure.
  • The level to beat for sellers is the 132.00 support. 

 

GBP/JPY four-hour chart

 
After attempting to break above the 133.00 resistance one more time, GBP/JPY remains choppy as the month of May comes to an end. As the overall trend remains bearish, sellers would be looking for a break below the 132.00 level with the possibility of a breakdown towards the 131.33 and 130.75 levels. On the other hand, the spot is expected to meet strong resistance near the 133.00 level. 
 
 
Resistance: 133.00, 133.87, 134.83
Support: 132.00, 131.33, 130.80
 

Additional key levels

 

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