Opening Comment 05.28
We have finally seen a decent reversal in the markets on Thursday, with currencies, equities and commodities all rebounding on the resurgence in risk appetite. The Euro has put in an impressive bullish outside day against the buck, after stalling just shy of the 1.2145, 2010 lows, and we could now be seeing the formation of a double bottom, with a break above neckline resistance at 1.2670 required to officially trigger the pattern. However, all of these markets have been deeply oversold and a corrective bounce was already to be expected given the stretched price action.
There is still a large amount of fear and uncertainty surrounding the outlook for the global economy, and as such, we do not recommend looking to exit USD long positions, and would rather look to buy the Greenback on any dips against all of the other major currencies, including the Yen. Market participants should also be reminded of the Memorial Day long holiday weekend ahead of us, and that trading into late Friday and all of Monday will be much thinner, which could lead to added volatility and unpredictable trade.
For now, the Euro has come back under pressure in Asian trade, with the market already lower by some 100 points. Look to see some squaring up of positions into the month-end, and also look for more rumors, market chatter, official comments, and press reports to dominate the headlines. Our best recommendation over the next few sessions is to stand aside, and only look to get involved if absolutely necessary.
On the data front, a batch of Japanese data was released overnight, highlighted by a higher than expected unemployment rate. Other data out of Japan included softer CPI, weaker household spending, and stronger retail trade.
Looking ahead, German import prices (1.5% expected) are due at 6:00GMT, followed by Swiss exports and trade balance at 6:15GMT. The Swiss KOF (2.02 expected) caps things off for European trade at 9:30GMT. In North America, personal consumption (0.1% expected), personal spending (0.3% expected) and personal income (0.4% expected), are due out at 12:30GMT, along with Canada current account (-7.5B expected). Chicago PMI (61.0 expected) is then due out at 13:45GMT, with University of Michigan confidence (73.3 expected) ending the data for the week at 13:55GMT. US equity futures and commodities are tracking slightly lower on the day thus far.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.