May’s US CPI rates to rock the markets

May’s US CPI rates in the epicenter of the market’s attention

The USD edged lower in today’s Asian session.

Market interest is on the release of the US CPI rates for May. Both the headline and core CPI rates are expected to accelerate with the former at a faster pace. Should we see the rates accelerating beyond market expectations, we may see the market increasingly pricing in a possible rate hike by the Fed, thus providing support for the USD. Should the rates fail to accelerate as the market expects, or even slow down, the USD may end the day in the reds. We expect also the release to have ripple effects beyond the FX market with a possible wider acceleration than expected, weighing on US equities and gold’s price.

Loonie traders to keep a close eye on BoC’s interest rate decision

The CAD remained steady against the USD yesterday as better-than-expected trade data for April provided support for the Loonie. Canadian Dollar traders are expected to keep a close eye on BoC’s interest rate decision, and the bank is widely expected to remain on hold. Should the bank signal in its forward guidance its worries for inflationary pressures sounding hawkish, we may see the Loonie getting some support, while a more dovish tone could weigh on the CAD.

Oil prices continue to drop despite US-Iran attacks

Oil prices continued to drift lower despite a flare-up of tensions in the Middle East as the US and Iran exchanged strikes. The US hit Iranian targets after a US Apache helicopter was downed, while in further response, the Iranians proceeded with missile strikes on American targets in the region. We do not consider the latest exchange as a major escalation in the conflict, something reflected also in the drop of oil prices yesterday and today, yet we highlight the fragility of the ceasefire.

US equities send mixed signals

US equities sent mixed signals yesterday, with tech shares dropping. Meanwhile, SpaceX, according to Reuters, has drawn more than $250 billion of investor demand for its IPO. The amount is considered as substantially high as it surpasses the firm’s target of $75 billion by 3.3 times in a signal of strong demand for SpaceX’s share.

Other highlights for today

Today we get Sweden’s GDP rate for April, Norway’s and the Czech Republic’s CPI rates for May and the US EIA crude oil inventories figure.

Charts to keep an eye out

USD/CAD stabilised yesterday and corrected lower in today’s Asian session. The bullish market sentiment seems to remain albeit the RSI indicator suggests that the pair is at over bought levels and ripe for the correction lower. We maintain a bullish outlook for the pair as long as the upward trendline guiding it remains intact. Should the bulls remain in charge, USD/CAD may break the 1.4020 (R1) resistance line and open the gates for the 1.4145 (R2) resistance level. Should the bears take over, USD/CAD may drop breaching the 1.3880 (S1) support line, the prementioned upward trendline and start aiming for the 1.3730 (S2) level.

WTI’s price has been dropping for the past four days and is currently testing the 88.60 (S1) support level. We maintain a bearish outlook for WTI, as long as the downward trendline guiding it. Should the bears maintain control as expected, we may see WTI dropping below the 88.60 (S1) support line and start aiming for the 82.00 (S2) support level. Should the bulls take over, we may see WTI’s price breaking the downward trendline and reach if not breach the 98.50 (R1) resistance line, with the next possible target for the bulls being the 103.65 (R2) resistance base.  

Calendar follows

USD/CAD daily chart

• Support: 1.3880 (S1), 1.3730 (S2), 1.3550 (S3).
• Resistance: 1.4020 (R1), 1.4145 (R2), 1.4375 (R3). 

WTI daily chart

• Support: 88.60 (S1), 82.00 (S2), 76.60 (S3).
• Resistance: 98.50 (R1), 103.65 (R2), 108.85 (R3).