May-31, 2022, Daily currency trading analysis and forex trading profitable strategy explain, by forex forum.
The U.S. dollar rose across the board on Tuesday as Treasury yields climbed and worries over a further acceleration in global inflation kept investors' risk appetite at bay.
The dollar was supported by demand for havens. U.S. stocks fell on Tuesday as soaring oil prices and hawkish comments from a Federal Reserve official spooked investors.
The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was up 0.5% at 101.92, on pace for its best one-day gain in nearly two weeks. The dollar index, up about 6.6% for the year, is down 1.2% for May, on pace for its worst monthly loss in a year.
Inflation in the 19 countries sharing the euro accelerated to 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden, indicating that it is no longer just energy pulling up the headline figure.
Against the dollar, the euro fell 0.6% to a 5-day low.
USD/CAD
On the other hand, The USD/CAD broke below 1.2650 and fell to 1.2628, reaching a fresh monthly low. The pair resumed the downside despite the Canadian GDP reading coming below expectations and ahead of Wednesday’s Bank of Canada meeting.
The USD/CAD is falling despite the recovery of the US dollar. The DXY is having the best day in almost two weeks as US yields move higher. A deterioration in market sentiment is also helping the greenback. The Dow Joines is falling by 0.78% and the Nasdaq drops by 0.71%.
If USD/CAD rises back above 1.2650 the loonie will likely lose momentum favoring a return to the 1.2685/1.2650 range. Below the daily low, attention would turn to 1.2600. Ahead of the BoC meeting, volatility is set to remain elevated.
EURO AREA INFLATION AT FRESH RECORD HIGH
Euro Area inflation rose to 8.1% in May, up from 7.5% and above expectations of 7.7%. The core figure also printed above expectations at 3.8% vs 3.5% and thus reaffirms the case for ECB tightening in Q3. Although, the question for the ECB is whether the bank will go ahead with 25 or 50bps in July. Despite money markets pricing in 34bps worth of tightening in July, a 25bps hike remains the base case for me. Alongside this, slower growth remains the risk going forward, which in turn, still supports the bias to fade dips in the US Dollar.
The current recovery in the Euro is around 4% from its recent lows, compared to prior recoveries of 3.3-3.5% in January and March, which signals to me that the current bounce back maybe a bit long in the tooth. While last week’s comments by Fed’s Bostic regarding a potential pause in tightening as soon as September likely exacerbated the USD weakness, the Fed will have little desire to pivot away from its aggressive tightening outlook given inflation remains very sticky at extremely elevated levels.
NZD/USD
Elsewhere, The NZDUSD moved to a new high going back to May 5 in the Asian session. The high price reached 0.65634. That was just short of the May 5 high at 0.65673 (which is also the high for the month of May).
The inability to extend above the May high turned buyers into sellers. The price rotated back to the downside, and after breaking below the swing high from May 25 at 0.65145 , the upward sloping trend line and the rising 100 hour moving average, the sellers took back control and push the price down to a new session low at 0.6482.
Thank You
The U.S. dollar rose across the board on Tuesday as Treasury yields climbed and worries over a further acceleration in global inflation kept investors' risk appetite at bay.
The dollar was supported by demand for havens. U.S. stocks fell on Tuesday as soaring oil prices and hawkish comments from a Federal Reserve official spooked investors.
The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was up 0.5% at 101.92, on pace for its best one-day gain in nearly two weeks. The dollar index, up about 6.6% for the year, is down 1.2% for May, on pace for its worst monthly loss in a year.
Inflation in the 19 countries sharing the euro accelerated to 8.1% in May from 7.4% in April, beating expectations for 7.7% as price growth continued to broaden, indicating that it is no longer just energy pulling up the headline figure.
Against the dollar, the euro fell 0.6% to a 5-day low.
USD/CAD
On the other hand, The USD/CAD broke below 1.2650 and fell to 1.2628, reaching a fresh monthly low. The pair resumed the downside despite the Canadian GDP reading coming below expectations and ahead of Wednesday’s Bank of Canada meeting.
The USD/CAD is falling despite the recovery of the US dollar. The DXY is having the best day in almost two weeks as US yields move higher. A deterioration in market sentiment is also helping the greenback. The Dow Joines is falling by 0.78% and the Nasdaq drops by 0.71%.
If USD/CAD rises back above 1.2650 the loonie will likely lose momentum favoring a return to the 1.2685/1.2650 range. Below the daily low, attention would turn to 1.2600. Ahead of the BoC meeting, volatility is set to remain elevated.
EURO AREA INFLATION AT FRESH RECORD HIGH
Euro Area inflation rose to 8.1% in May, up from 7.5% and above expectations of 7.7%. The core figure also printed above expectations at 3.8% vs 3.5% and thus reaffirms the case for ECB tightening in Q3. Although, the question for the ECB is whether the bank will go ahead with 25 or 50bps in July. Despite money markets pricing in 34bps worth of tightening in July, a 25bps hike remains the base case for me. Alongside this, slower growth remains the risk going forward, which in turn, still supports the bias to fade dips in the US Dollar.
The current recovery in the Euro is around 4% from its recent lows, compared to prior recoveries of 3.3-3.5% in January and March, which signals to me that the current bounce back maybe a bit long in the tooth. While last week’s comments by Fed’s Bostic regarding a potential pause in tightening as soon as September likely exacerbated the USD weakness, the Fed will have little desire to pivot away from its aggressive tightening outlook given inflation remains very sticky at extremely elevated levels.
NZD/USD
Elsewhere, The NZDUSD moved to a new high going back to May 5 in the Asian session. The high price reached 0.65634. That was just short of the May 5 high at 0.65673 (which is also the high for the month of May).
The inability to extend above the May high turned buyers into sellers. The price rotated back to the downside, and after breaking below the swing high from May 25 at 0.65145 , the upward sloping trend line and the rising 100 hour moving average, the sellers took back control and push the price down to a new session low at 0.6482.
Thank You
Attached Image (click to enlarge)
