Dollar Correction or Month End Oppression

The dollar inched down, but traded near a two-month high against the yen, on Monday morning in Asia. Investors digested mixed economic data from China and strong inflation data from the U.S., while also expecting the U.S. Federal Reserve to start tapering its asset purchases eventually.

Both the U.S. and the U.K. markets are closed amid holidays on Monday.

Here are the key market moving factors for the week:

 The US

• The dollar inched down, but traded near a two-month high against the yen, on Monday morning in Asia. Investors digested mixed economic data from China and strong inflation data from the U.S., while also expecting the U.S. Federal Reserve to start tapering its asset purchases eventually.
• The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.01% to 89.987 by 13:15 AM ET (5:!5 AM GMT).

 EUROPE

• The ECB has one mandate:  price stability, which it presently defines as close to but below 2%. Many expect this could be tweaked to simply 2% later this year, but the significance may be difficult to articulate. ECB President Lagarde has sketched out many reasons why officials are inclined to look through the near-term gains in measured inflation. They largely have to do with base effect, changing the weights of the basket of goods and services used, alterations to the seasonal sales, and tax adjustments like the end of the temporary reduction in the German VAT.
• Europe seems to be a few months behind the US in the vaccine rollout, fiscal stimulus, and price pressures. The base effect in the US, for example, will peak with the May report.
• Last June and July, headline CPI rose by 0.5%, making year-over-year comparison not as challenging. That may lower the anxiety over inflation. On the other hand, measured eurozone inflation is likely to surge in July and August when headline CPI fell by 0.4% in both months in 2020.

The UK

• For the first time in three years, sterling closed above $1.42 after a BOE official talked about higher rates next year. However, it held below the multi-year high set in late February, just above $1.4235. The lack of follow-through sterling buying after the outside up day on May 27 is consistent with a consolidative/corrective phase.

JAPAN

• Industrial output in Japan was up 2.5 percent on month in April, the Ministry of Economy, Trade and Industry said on Monday.
• That missed expectations for an increase of 4.1 percent following the downwardly revised 1.7 percent gain in March (originally 2.2 percent).
• On a yearly basis, industrial production jumped 15.4 percent, beating forecasts for 13.0 percent following the 3.4 percent increase in the previous month.
• The total value of retail sales in Japan was down a seasonally adjusted 4.5 percent on month in April, the Ministry of Economy, Trade and Industry said on Monday – coming in at 12.200 trillion yen.

AUSTRALIA

• Private sector credit in Australia was up 0.2 percent on month in April, the Reserve Bank of Australia said on Monday – slowing from the 1.0 percent gain in March.
• On a yearly basis, credit gained 1.3 percent, accelerating from 0.4 percent in the previous month.
• The Reserve Bank of Australia’s meeting will receive more attention after the Reserve Bank of New Zealand signaled the likelihood of a rate hike in the second half of next year.

CHINA

• Data released earlier in the day said that China’s Manufacturing Purchasing Managers Index (PMI) was 51.0 and the non-manufacturing PMI was 55 in May, both remaining above the 50-mark indicating growth. However, the manufacturing PMI was slightly below 51.1 in forecasts by Investing.com and April’s reading.
• The dollar’s bounce in Europe and North America ahead of the weekend may halt the yuan’s advance after a seven-day advance. Chinese officials will welcome the price action after warning against a one-way market. Some talk about the CNY6.35 as the possible pain threshold, but in our experience, PBOC officials are more sophisticated than that.

Market Overview:

 Gold

• The yellow metal has been struggling to advance once it hit the top of its rising channel on May 17. If the precious metal were to retreat, support would be both at the bottom of its fast, rising channel, as well as by its falling channel since the 2020 record peak.

Oil

• A combination of fundamental themes are weighing on the price of oil, including green activism,
• US negotiations with Iran threatening to bring more supply to the market and the upcoming OPEC+ meeting on June 1 where talk of increasing output is on the agenda.

Below are the major market moving events for the week:

 All times listed are EDT

Monday

Markets closed for the Memorial Day holiday in the US, Bank Holiday in the UK.

21:45: China – Caixin Manufacturing PMI: expected to edge down to 51.7 from 51.9.

 Tuesday

00:30: Australia – RBA Interest Rate Decision: forecast to remain at 0.10%.

3:55: Germany – Manufacturing PMI: seen to remain flat at 64.0.

3:55: Germany – Unemployment Change: likely sank to -9K from 9K.

4:30: UK – Manufacturing PMI: to have remained unchanged at 66.1.

5:00: Eurozone – CPI: expected to rise to 1.9% from 1.6%.

8:30: Canada – GDP: predicted to jump to 1.0% MoM from 0.4%.

10:00: US – ISM Manufacturing PMI: forecast to have remained steady at 60.7.

11:00: UK – BoE Gov Bailey Speaks

21:30: Australia – GDP: anticipated to drop to 2.5% from 3.1%.

 Wednesday

21:30: Australia – Retail Sales: previously printed at 1.1%.

 Thursday

4:30: UK – Services PMI: expected to remain flat at 61.8.

8:15: US – ADP Nonfarm Employment Change: forecast to retreat to 650K from 742K.

8:30: US – Initial Jobless Claims: to edge down to 395K from 406K.

10:00: US – ISM Non-Manufacturing PMI: to rise to 63.0 from 62.7.

11:00: US – Crude Oil Inventories: previously came in at -1.662M bbl.

Friday

2:15: India – Interest Rate Decision: anticipated to remain at 4.00%.

4:30: UK – Construction PMI: seen to tick up to 62.0 from 61.6.

7:00: US – Fed Chair Powell Speaks

7:00: Eurozone – ECB President Lagarde Speaks

8:30: US – Nonfarm Payrolls: predicted to surge to 650K from 266K.

8:30: US – Unemployment Rate: forecast drop to 5.9% from 6.1%.

8:30: Canada – Employment Change: to jump to -22.5K from -207.1K.

10:00: Canada – Ivey PMI: previous release came in at 60.6.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

 

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