The US dollar fells slightly ahead of the Consumer Price Index report due on June 12, which is a critical input for next week’s Fed decision.
However, markets are more optimistic about trade despite threats from Donald Trump to impose tariffs on China if he does not meet with his counterpart Xi Jinping.
Meanwhile, the US Producer Prices failed to ignite any noticeable reaction in the buck. In fact, headline Producer Prices rose 0.1% MoM and 1.8% on a year to May, while Core prices gained 0.2% inter-month and 2.3% on a yearly basis. Earlier in the day, the NFIB index rose to 105.0 in May, surpassing initial estimates.
The US Dollar Index, which tracks the greenback vs. a basket of its main rivals, keep the familiar range unchanged today around the 96.80 region. The index is extending the rangebound theme prevailing since yesterday in the 96.80 area, in line with the generalized lack of direction in the global markets and a tepid bounce in the risk-on mood.
At the moment, the US Dollar Index is gaining 0.01% at 96.78 and faces the next hurdle at 96.98 (100-day SMA) seconded by 97.41 (55-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the downside, a breakdown of 96.46 (low June 7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low February 28).
The EUR/USD pair maintains the positive tone, as it keeps holding above the long-term descendant trend line broken last week, now trading above the 1.1300 figure, although not much progress has been made ever since the week started.
This Tuesday, the pair reached 1.1331, underpinned by the better market mood, although retreated from such high following the release of the EU Sentix Investor Confidence Index for June, which came in at -3.3, much worse than the 2.9 expected and the previous 5.3. According to the official source, sentiment deteriorated alongside collapsing US-China trade talks, and the escalation in their dispute.
Furthermore, it indicated that the situation in Germany deteriorated further, sliding into negative territory for the first time since March 2010, lifting the odds of a recession.
The quite negative report had a limited effect on the shared currency, although it paints a gloomy picture for the Union, and should limit the long-term potential upwards for the pair. So far, the recovery from multi-year lows has been driven by broad dollar’s weakness, generated by mounting speculation the Fed would have to cut rates In the upcoming months.
The 4-hours EUR/USD chart shows that an intraday slide was quickly rejected by buyers aligned around a firmly bullish 20 SMA while the Momentum indicator extends its advance within the positive ground. The RSI indicator in the mentioned time frame continues lacking directional strength at around 61. The pair would need to break the high at 1.1347 to be able to extend its gains up to the 1.1440-1.1460 price zone.
The USD/JPY pair held on its positive tone through the early North-American session, albeit struggled to make it through a one-week-old ascending trend-line resistance. The USD/JPY pair continues to recover from the multi-month lows that it set at 107.80 on Monday as the safe haven JPY struggles to find demand in the risk-on environment. As of writing, the pair was up 0.26% on the day at 108.72, a couple of pips below the 10-day high that it touched earlier in the session.
Meanwhile, the fact that the pair has managed to hold above its important intraday moving averages – 50, 100 and 200-hour SMAs, support prospects for additional gains.
This coupled with the possible occurrence of a golden-cross on the 1-hourly chart, wherein 50-hour SMA is looking to break above 200-hour SMA, further reinforce the constructive outlook amid the prevailing risk-on environment.
However, traders are likely to wait for a sustained break through the mentioned barrier before positioning for any further near-term appreciating move towards testing the 109.25 horizontal support breakpoint turned resistance.
The British pound managed to book some small gains on Tuesday and the so-called cable (GBP/USD pair) was trading at around the 1.27 level during the US session.
Traders bought sterling today after somewhat positive UK labor market data, which showed that claimant count change rose to 23,200 in May, from 19,100 in April, which was a negative number, but average hourly earnings excluding bonuses rose a notch to 3.4% year-on-year and this was a bullish impetus for the cable.
The unemployment rate came out neutral and stayed at 3.8% in the month of April.
The technical picture is not very clear as the medium and long-term charts still point to further downside, while the short-term trend could potentially be bullish, mainly due to the US dollar weakness.
The 1.27 zone could be the key for the near future and if sterling manages to stay above it, we could see further rally toward the strong selling area near 1.2750. Only a close on a daily basis beyond 1.2750 would most likely lead to a stronger bullish momentum.
On the downside, bids seem to be located near 1.2670 and afterward some 20 pips. If bears push the pair below 1.2650, the short-term trend could switch to bearish, pointing to further decline to 1.26.