Markets Mixed As Another Week Start
ActionForex | May 23, 2016 06:15AM ET
The financial markets open the week mixed so far. Japanese Nikkei is trading lower by more than -1.4% as Yen rebounds. But weakness is not seen in other Asian markets. WTI crude oil is still searching for needed sustainable buying to send it through 50 handle and it's trading in range around 48. Gold is trading to stabilize around 1250 after being sold off on dollar strength last week. Dollar index is holding in range above 95 for the moment and is waiting for fresh stimulus for another rally. Nonetheless, the greenback remains the strongest major currency this month as boosted by revived speculation of rate hike in June. Sterling follows as the second strongest as Brexit worries subsides and commodity currencies are weakest ones.
Dollar index is now pressing 55 weeks EMA and might consolidate for a while. Overall, we're favoring the case that consolidation pattern from 100.39 has completed with three waves down to 91.91 already, after hitting 38.2% retracement of 78.90 to 100.39 at 92.18. Sustained trading above 55 weeks EMA (now at 95.42) will pave the way to retesting 100.39 high. And in the case, the long term up trend from 2008 low of 70.69 could resume too. We'll hold on to this week as long as 93.68 near term support holds.
DJIA breached 17484.23 support last week but there is no follow through selling yet. Nonetheless, we're favoring the case that rebound from 15450.56 has completed at 18167.63 already. And fall from there could be another falling leg of the consolidation pattern from 18351.36 historical high. Deeper fall is in favor back to 38.2% retracement of 15450.56 to 18167.63 at 17129.70. Break will target 61.8% retracement at 16488.48. We'll look for bottoming below there.
Follow up on the trading strategy discussed in our weekly reports , we're holding on to our short position in NZD/USD, entered at 0.6757. There is no follow through selling in the pair yet even though commodity currencies are generally pressured elsewhere. We'll stay short in NZD/USD with stop at 0.6850.
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BoC rate decision is the only central bank event scheduled this week and the central bank is widely expected to keep interest rate unchanged at 0.50%. There are also a number of important economic data featured. Most eyes will be on German ZEW and Ifo, US durables and Japan CPI. Here are some highlights for the week ahead:
- Monday: Eurozone PMIs, consume confidence
- Tuesday: Swiss trade balance; German GDP final, ZEW; UK public sector net borrowing; US new home sales
- Wednesday: trade balance; Swiss UBS consumption indicator; German Gfk consumer sentiment, Ifo business climate; Swiss ZEW; US trade balance; BoC rate decision
- Thursday: UK GDP revision, BBA mortgage approvals; US durable goods orders, jobless claims, pending home sales
- Friday: Japan CPI; US GDP revision
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