Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from a sunny Hamburg and welcome to our last Daily FX Report for this week. Thailand’s army chief seized control of the government in a coup yesterday, two days after declaring martial law. He said the military had to restore order and push through reforms after six months of turmoil. Beyond that a Turkish bystander who was shot in the head during clashes between Turkish police and protesters has died yesterday.
We wish you a relaxing weekend!
Market Review – Fundamental Perspective
Yesterday, the Dow Jones Index of shares rose 0.1 percent and the Standard & Poor’s index climbed 0.2 percent. On Thursday data showed that U.S. manufacturing growth pickep up to a three-month high in May while private business activity in the euro zone increased at just under its fastest pace in three years. The U.S. Manufacturing Purchasing Managers Index climbed to 56.2 in May from 55.4 in April. On the other hand there was a bigger than estimated increase in U.S. weekly jobless claims. Yesterday data also showed that euro zone composite PMI for May as forecasted declined to 53.9, coming from 54. But some economists said that this data still pointed to quarterly growth of around 0.3 - 0.4 percent. Nevertheless the data also revealed that there is a big split in the euro zone’s two largest economies because France contracted in market manufacturing and services while Germany bounded ahead in market services. As a result the EUR dropped to almost a three month low versus the USD while anti-establishment political groups seek to win power at polls this weekend in Europe. The EUR/USD decreased 0.2 percent to 1.3655. The JPY weakened the most in two weeks as a report signaling an improving outlook for Chinese manufacturing and damped haven assets. The USD/JPY strengthened 0.4 percent to 101.75 and the EUR/JPY gained 0.1 percent to 138.95.
Yesterday, reports showed that U.K. first-quarter gross domestic product advanced as estimated 0.8 percent. The GBP decreased versus 12 of its 16 major counterparts as the market expects the first interest-rate rose since 2007. The GBP/USD tumbled 0.3 percent to 1.6860 and the EUR/GBP was at 0.8093. The GBP is the best performer among 10 developed-nation currencies, as it advanced 10 percent in the past 12 months. Released minutes of the Bank of England showed that officials decided to keep benchmark interest rate at a record-low 0.5 percent.
Daily Technical Analysis
XAG/USD (Daily)
At the beginning of this week we estimated a further decrease for silver versus the USD but as you can see the XAG/USD was able to move slightly out to the fan but rebounded at the resistance level around 19.72. We assume that the sideways trend will come to an end if the metal continues to climb along the current trend line, supported by the MACD.
Support & Resistance (Daily)
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Editors’ Picks
EUR/USD retreats toward 1.0850 on modest USD recovery
EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD holds above 1.2650 following earlier decline
GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.
Gold climbs to multi-week highs above $2,400
Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.
Chainlink social dominance hits six-month peak as LINK extends gains
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Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday.
Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.