Thursday May 20th, 2021

The US$ & US yields dip, oil prices weaken, while equity markets rebound ahead of US jobs data. The FOMC minutes on Wednesday showed several Fed officials appeared ready to consider changes to monetary policies based on continued strong economic recovery. The minutes highlighted the trouble that US businesses reported in attracting workers despite the current high unemployment levels. Markets remains focused on US jobs data as it will be a key to see the Fed to change its stance on tapering its bond purchases. In other news US & EU are close to lifting sanctions on Iran. Sino/US tensions remain high as the US house speaker urges diplomatic boycott of Beijing Olympics, while China says US warship illegally entered its territory in S.China sea. Asian currencies remain under pressure as fresh lockdown measures threaten the economic recovery efforts for Taiwan, Singapore, Korea, Malaysia, and India. CNY if flat while Asian currencies are down 0.2% on average. Trading currencies are mixed with NOK falls 0.4%, while NZD is flat, MXN & ZAR strengthen 0.15%, AUD & JPY are up 0.25% vs US$. Today’s focus will be on US Initial Jobless claims and Philadelphia Fed Manufacturing Survey for intraday direction.

Oil prices extend their losses to a 3rd day from a combination of a possible return of Iranian supplies and the ongoing Asian covid related demand reductions. The EU & US diplomats said progress was made towards a deal to lift sanctions on Iran, which would likely boost oil supply. C$ holds below 1.2150 as oil prices drops 5% in the last 24 hours. On Wednesday Canadian Inflation spiked to its highest levels since 2011 which will be a challenge for the BOC who have raised concerns of the strengthening loonie. Focus shifts to Canadian employment change, New Housing Price Index, alongside US Jobs for intraday direction.  Support holds 1.1985 with resistance at 1.2150. 

Euro retests 1.22 as the US$ strength fades post the FOMC minutes. The US$ edges back towards its 3-month lows after the FOMC minutes showed that US tapering was considered but rejected. Risk-on sentiment edges back helping Euro rebound on the weakening US$, and the strengthening EU vaccination campaign. ECB President Lagarde will be speaking today and is likely to acknowledge the improving EU economic situation. Support holds at 1.2170 and resistance holds 1.2250 if breached look for 1.2349 (Jan2021).

EURGBP edges slightly higher, but remains within its current range as non-US$ crosses remain stable. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP holds above 1.41 amid a weaker US$ and UK reopening optimism. The UK remains on course to fully reopen in the coming weeks. The UK’s vaccination campaign has extended to younger adults, while 2nd doses across the population has increased. BOE Cunliffe speaks today and will likely echo BOE Governor Baileys optimistic tone on the UK’s economy. Bias remains for a retest of Feb2021 highs as the US$ remains under selling pressure. Support resets at 1.4070, with resistance resetting at 1.4165, if breached look for a retest of 1.4235 (Feb2021).