EUR/USD analysis: Merkel fuels the rally, EU PMIs up next
The EUR/USD pair keeps rallying to fresh 2017, pretty much daily basis, trading this Monday as high as 1.1263, before settling around 1.1240. The absence of macroeconomic data in the EU maintained the pair ranging early London, but buyers seize their chances after comments from German’s Chancellor Angela Merkel hit the wires, blaming the ECB on EUR’s weakness, when referring to the country’s trade surplus. The headline was enough to bring buyers back. There were no relevant news in the US either, with a couple of Fed’s member speaking in different events that had nothing to do with economic policies, with only Kaplan referring to rates, reiterating the usual stance that three rate hikes are appropriated. This Tuesday, focus will be on May´s preliminary Markit PMIs, for the EU and the US, whilst this last will also release New Home Sales and the Richmond manufacturing index.
Technically, the bullish tone persists, although due to the limited intraday range and the late retracement in the US afternoon, indicators in the 4 hours chart have lost upward strength, although the RSI remains within overbought territory. In the same chart and early decline was reverted on an approach to a bullish 20 SMA, currently providing support at 1.1165. Beyond the daily high, the pair has room to extend its advance up to 1.1300, where it topped early November as an immediate reaction to US election, while further gains will likely see the pair reaching the 1.1340 region this Tuesday. A deeper correction could take place on a break below 1.1160, with scope then to revisit the 1.1080 region.
Support levels: 1.1200 1.1160 1.1120
Resistance levels: 1.1260 1.1300 1.1340
USD/JPY analysis: downward pressure prevails, despite risk sentiment improving
The USD/JPY pair advanced modestly at the beginning of the day, following the release of Japanese trade balance figures, which missed expectations but anyway showed economic progress in the country. Exports were up in April by 7.5%, missing expectations of 7.8%, while imports rose by 15.1%, surpassing market’s estimates of 14.8%. The final surplus in the mentioned month, shrank to ¥481.7B. The early advance was contained by selling interest around 111.60, with the pair later trapped between the positive tone of equities and dollar’s weakness, falling down to 110.92, but regaining the 111.00 level ahead of the close. During the upcoming Asian session, the country will release the final revisions of March leading indexes, alongside with the May preliminary Markit PMI, expected at 52.9 from a previously revised 52.7. The pair settled a couple of pips below a key static resistance, the 111.20 region where in the 4 hours chart, the 200 SMA converges with the 50% retracement of the latest bullish run. In the same chart, the Momentum indicator has turned south around its 100 level, while the RSI indicator consolidates around 40, all of which supports additional declines on another downward acceleration below the 111.00 figure.
Support levels: 111.00 110.50 109.90
Resistance levels: 111.60 112.00 112.45