Daily Market Report
02 Jun 2021

EURUSD

The EUR/USD pair advanced to 1.2254, on the back of a better market mood. After a slow start to the week,  a busy calendar stimulated market players, with stocks rallying in Europe and the DAX hitting a record high. Wall Street opened firmly higher but eased from tops as yields surged on mounting US inflation concerns. The greenback recovered some ground ahead of the close, with EUR/USD ending the day at 1.2225.

Data wise, Markit released the final versions of its EU May Manufacturing PMIs. The German index was upwardly revised to 64.4, while the final EU printed at 63.1, also beating the preliminary estimate. Germany’s Unemployment rate unexpectedly rose to 10.7% against the expected slide to 10.1%. For the whole Union, the unemployment rate contracted to 8%. In the US, the Markit Manufacturing PMI for the same month was upwardly revised to 62.1, while the official ISM index printed at 61.2, both beating expectations.

This Wednesday, the EU will publish April Producer Prices, while ECB’s President Christine Lagarde is scheduled to speak. Germany will release April Retail Sales, foreseen at -2% MoM. The US won’t publish first-tier data.

The EUR/USD pair presents a clear bullish potential. The 4-hour chart shows that it develops comfortably above its moving averages, which maintain their bullish slopes. Technical indicators remain within positive levels, the RSI consolidating around 57 and the Momentum heading firmly north. The pair still needs to surpass the 1.2270 resistance level to be able to advance toward the year high at 1.2349.

Support levels: 1.2200 1.2165 1.2130  

Resistance levels: 1.2270 1.2310 1.2350

USDJPY

The USD/JPY pair attempted to advance but closed a second consecutive day in the red in the 109.40 price zone, pressured by the broad dollar’s weakness. Wall Street opened with a firm tone but trimmed most of its gains ahead of the close, weighing on the pair. At the same time, the downside was limited by higher US government bond yields, with that on the 10-year Treasury note reaching a daily high of 1.639% and settling at 1.61%.

On the data front, Japan published Q1 Capital Spending, which decreased 7.8% YoY, better than the -9% expected. Additionally, the May Jibun Bank Manufacturing PMI printed at 53, beating the 52.5 expected. On Wednesday, the country will publish May’s Monetary Base, seen up by 25.2% from 24.3% in April.

The USD/JPY pair is bearish near-term, despite holding above the 109.00 level. The 4-hour chart shows that it met buyers on approaches to its 20 SMA, currently at 109.70 and losing bullish strength. The longer moving averages remain flat below the current level, while the Momentum indicator heads firmly south within negative levels.  The slide will likely accelerate on a break below 108.90, a strong static support level.

Support levels: 109.30 108.90 108.55

Resistance levels: 109.70 110.20 110.50  

GBPUSD

The British Pound was the worst performer this Tuesday, as GBP/USD fell from an early high at 1.4228, a fresh two-year high, to as low as 1.4154, ending the day near the latter. The decline was triggered by a downward revision of the UK Markit Manufacturing PMI, which resulted in 65.6 in May from 66.1. However, the decline continued despite limited buying interest for the greenback.

The pound was not able to recover, even after the UK reported zero new coronavirus-related deaths in the last 24 hours, for the first time since the pandemic began. At the same time, the kingdom reported 3,165 new cases, although Prime Minister Boris Johnson said there is no evidence to delay reopening. On Wednesday, the UK will publish April Mortgage Approvals and M4 Money Supply for the same month.

The GBP/USD pair is pressuring the daily low heading into the Asian opening, a sign of further slides ahead. The 4-hour chart shows that it has broken below a bullish 20 SMA, now providing dynamic resistance at 1.4190, and approaching an also bullish 100 SMA, the latter at 1.4140. The Momentum indicator advances within neutral levels, but the RSI is stable around 45, indicating constant selling pressure.

Support levels: 1.4140 1.4100 1.4060

Resistance levels: 1.4190 1.4235 1.4285  

AUDUSD

 The AUD/USD pair advanced modestly on Tuesday, topping 0.7768 and settling around the 0.7760 level. The Reserve Bank of Australia left interest rates unchanged as expected in its June meeting,  also holding the yield on the 3-year Australian Government bond. Policymakers noted that the global economy keeps recovering, although such a recovery remains uneven as some countries have yet to contain the virus. The economic recovery in Australia is stronger than earlier expected, but inflation and wage pressures are subdued, according to the Board.

The country also published the AIG Performance of Manufacturing index which improved to 61.8 in May from 61.7 previously, and the Commonwealth Bank Manufacturing PMI, which printed at 59.9. This Wednesday, the country will publish the Q1 Gross Domestic Product, seen at 1.5% QoQ, down from 3.1% in the last quarter of 2020.

The AUD/USD pair is poised to extend its advance, although further confirmations are required. The 4-hour chart shows that the price is struggling around directionless 100 and 200 SMAs, also battling to surpass the daily descendant trend line coming from May’s high. The Momentum indicator heads firmly higher within positive levels, while the RSI advances but at a softer pace, currently around 59.

Support levels: 0.7710 0.7675 0.7640  

Resistance levels: 0.7780 0.7820 0.7850

GOLD

The gold price was back under pressure on Monday following an initial spike to score fresh highs at $1,916.61 as per XAU/USD. The price ended the North American session down 0.35%. Gold was resting around the 50% mean reversion mark of the latest daily bullish impulse at $1,899 and slightly higher than the lows for the day of $1,892.44.  

Gold was lower despite a softer US dollar that was only able to eke out a 0.1% gain by the close of the bell on Wall Street after data showed that while US manufacturing activity picked up last month but showed a soft employment segment of the ISM report. Consequently, the dollar index made a low of 89.6630, having risen as high as 90.447 on Friday when a measure of US inflation closely watched by the Fed posted its biggest annual rise since 1992.

Technically, the price rallied to score a fresh daily high following a retest of the support structure. However, it failed to extend with momentum and instead carved out a bearish closing candle for Monday. There are now also prospects for a bearish continuation for the sessions according to the hourly time frame. From a 15-min perspective, however, bears will want to see the 1,898 support structure give way for additional bearish conviction.

Support: 1,896 1,879 1,856

Resistance: 1,919 1,936 1,959

SILVER

The price of silver was under pressure in the New York session with XAG/USD falling from a $28.55 high to a low of $27.82 in the late part of the session. The white metal closed the day some 0.50% lower vs the greenback. 

The gold to silver ratio was higher by 0.2% at the close of the bell on Tuesday reflecting stronger demand for the yellow metal as the dollar was squeezed and equities printed gains. The US May ISM manufacturing index rose to 61.2 vs 60.7 and overall, the data continue to show that as the US economy recovers. There was also optimism over EU plans to lift quarantine requirements for the fully vaccinated which played into the offer in the DXY. Meanwhile, there is an analysis that suggests that silver continues to benefit the most from strong flows as China Smart Money funds notably add to their length in recent weeks.

Technically, the price fell to test the bullish 10 and 20 EMA structure and the prior 4-hour resistance. This break of the 4-hour 20 EMA is not promising for the bulls but the 10-day EMA remains intact still. However, a breach of the dynamic daily trendline support below there leaves the outlook sideways at best, if not bearish for the immediate future, especially below 27.50 horizontal daily support. 

Support: 27.85 27.47 27.02

Resistance: 28.30 28.68 29.14

CRUDE WTI

West Texas Intermediate crude (WTI), was off its highest levels since March and traded back down to $68.00, albeit still higher on the day by 1.48% at the time of writing. WTI moved between a low of $66.91 to a high of $68.85 on the day. 

The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to continue a slow easing of supply curbs in their meeting on Tuesday.  Consequently, Brent crude futures for August settled up 93 cents, or 1.3%, to $70.25 a barrel after hitting $71 earlier in the session - its highest intraday price since March 8.U.S. WTI crude for July was up $1.40, or 2.1%, to $67.72.

Meanwhile, there are also expectations for growing fuel demand during the summer driving season in the United States and vacations across mainland Europe. Also, Chinese data showed that factory activity grew at its fastest pace this year in May which underscores the prospects of a faster worldwide economic recovery. 

The price of oil is carving out a bullish extension above prior daily resistance in a fresh bullish impulse for WTI, supported by the 10-day EMA. From a 4-hour perspective, the price action is somewhat consolidative now given the strong bearish impulse to test the bullish 4-hour 10 EMA and prior 4-hour highs of 67.49. However,  the bullish bias remains intact from a longer-term perspective. 

Support: 65.92 64.34 62.07

Resistance: 68.18 69.76 72.02

DOW JONES

US stocks were subdued by the close on Tuesday and ending near flat following an initial spike to the upside in the first part of the day following a long holiday weekend, with gains in energy and real estate offset by weakness in health care. The Dow Jones was 0.1% higher at 34,575.31 while the S&P 500 and the Nasdaq Composite slipped less than 0.1% apiece, to 4,202.04 and 13,736.48, respectively.

The focus was on the Institute for Supply Management's US manufacturing index that climbed to 61.2 in May from 60.7 in April, compared with expectations for an increase to 60.9 in a survey compiled by Bloomberg. Meanwhile, traders will look ahead to the Nonfarm Payrolls report on Friday as the showdown for the week. For the immediate sessions ahead, Wednesday's focus will be on key speeches by RBA officials amid a light day on the data calendar.

Technically, the outlook is still mixed for the days ahead. The daily charts' price action is still being supported by the 10-day EMA which guards the 50% Fibo of the prior 4-hour bullish impulse at 34,512.  A bullish continuation, however, will bring the record highs back into focus.

Support: 34,367 33,642 32,749

Resistance: 35,260 35,984 36,878

MACROECONOMIC EVENTS