US fundamentals continue to worry markets

The USD remained relatively unchanged against its counterparts yesterday, given the slow start of the week as volatility tended to remain at rather low levels. On a fundamental level market worries for the banking sector are still present, especially for regional banks which seem to be facing additional difficulties in the strained US financial environment. It should be noted that a recent survey tended to paint a less gloomy picture while the Fed tries to ease market worries about the issue. Also, market worries for a possible default of the US Government seem to remain elevated with some analysts speculating that “Date X” may be the 1st of June. Yet we note that negotiations in the US Congress have begun about a possible raise of the US debt ceiling but hopes tend to remain low for a resolution of the issue at the current stage. On a monetary level, we note that Fed’s intentions continue to puzzle traders, yet market expectations remain high that the bank is to pause interest rate hikes over the summer and start cutting rates from September onwards. Given the tight US employment market as displayed also by April’s data, we may see the Fed continuing to lean on the hawkish side and Fed speakers today and in the next few days may sway the markets’ opinion, yet the market seems also to be repositioning itself ahead of the inflation metrics for April on Wednesday and Thursday. US stock markets ended their day sending out mixed signals, maintaining Friday’s gains and in addition to all of the above issues have also to keep an eye out for the earnings releases. We note that most high-profile companies have already released the reports yet more are expected and for today we note Airbnb, which may catch traders’ attention. Please bear in mind that in the after-trading hours yesterday we got PayPal’s earnings report with both the EPS and revenue figures dropping since Q4 yet still landing in a better-than-expected position for Q1. Back in the FX market we note the release of China’s trading data for April, with the trading surplus widening, implying that the Chinese economy may have benefited more from its international trading activity, yet we also note the slowdown of both the import and export growth rates which may be a result of the economic activity contraction in China’s manufacturing sector.

GBP/USD seems to have hit a ceiling at the 1.2660 (R1) resistance line yesterday. Given that cable’s price action has broken the upward trendline guiding the pair since the 2^nd of May and the RSI indicator below our 4-hour chart has dropped, nearing the reading of 50, implying a rather indecisive market, we switch our bullish outlook in favour of a sideways movement bias initially. Should the pair find fresh buying orders along its path, we may see the pair breaking the 1.2860 (R1) resistance line and aim for the 1.2865 (R2) resistance level. Should a selling interest be expressed by the market, we may see the pair aiming if not breaking the 1.2465 (S1) support line.

AUD/USD edged higher yesterday testing the 0.6790 (R1) resistance line yet proved unable to clearly break it. The pair seems to be in a make-or-break position as its price action is about to test the upward trendline guiding it since the 4 of May. The RSI indicator seems to remain below yet near the reading of 70, implying that there is still a residue of bullishness in the market sentiment. Should the pair’s price action be able to remain above the prementioned upward trendline we will maintain our bullish outlook. Should the bulls actually maintain control over the pair, we may see AUD/USD breaking the 0.6790 (R1) resistance line and aim for the 0.6865 (R2) resistance level. Should the bears take over, we may see the pair breaking the prementioned upward trendline in a signal of an interruption of the pair’s upward movement and continue lower to breach the 0.6700 (S1) support line, aiming for lower grounds.

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During today’s European session, we note the release of UK’s Halifax House Prices for April and the Czech Republic’s industrial output growth rate for March while late in the American session oil traders may be interested in the release of the API weekly crude oil inventories figure. On the monetary front, we note that ECB chief strategist Philip Lane, Fed Board Governor Jefferson, NY Fed President Williams and ECB Board Member Schnabel are scheduled to speak.