24th May 2021 - AUD/USD bulls tiring in bearish H&S pattern

Good Morning,

Market Headlines

US Dollar appreciated following upbeat US data and comments from Federal Reserve officials suggesting a sooner rather than later discussion on tapering amid signs of heating inflation. On Friday, Atlanta Federal Reserve President Raphael Bostic said that he is worried about inflation getting entrenched, while Philadelphia Fed Patrick Harker noted that the Fed should start discussing tightening. Also, Dallas Federal Reserve Bank President Robert Kaplan reiterated that they are seeing a lot of uncertainty about inflation.

UK Prime Minister Boris Johnson said he remains confident the kingdom will continue moving toward full reopening by the end of June, despite the rapid increase of the coronavirus Indian strain. The number of cases of the new variant has more than doubled in a week and may become the dominant strain. Concerns that it may delay opening have put a cap on GBP demand. The UK won’t publish relevant macroeconomic data on Monday.

Wall Street struggled to post gains, despite reports indicating economic progress, as the preliminary May Markit PMIs came in much better than anticipated. Only the DJIA was able to post gains. Meanwhile, US government bond yields held at the lower end of their weekly range. The yield on the 10-year Treasury note settled at 1.62%.

Commodities, Brent crude oil futures rose 2.0% to $66.44, copper fell 2.0%, and gold rose 0.2%, while iron ore fell 5.4% to $196.75 (down a total of 16% from the early May record high, affected by China’s price curbs).

Overnight Currency Ranges

Currency Pair Low High

AUD/USD 0.7719 0.7783

EUR/USD 1.2160 1.2240

GBP/USD 1.4141 1.4233

USD/JPY 108.61 109.30

NZD/USD 0.7155 0.7222

USD/CAD 1.2028 1.2094

USD/CNH 6.4276 6.4415

AUD/JPY 84.12 84.65

AUD/NZD 1.0775 1.0808

AUD Thoughts

The AUD closed last week at 0.7730 with demand still expected ahead of 0.7700 while the key technical resistance remains between 0.7815/20.

Event Risk Data Today

New Zealand: Markets are forecasting a modest 0.7% rise in retail spending in the March quarter. New Zealand’s recovery is gaining traction and households are continuing to spend up on durable items. However, spending continues to be dampened by the sharp slowdown in population growth and the absence of tourists during the normal summer peak.

US: The April Chicago Fed Activity index will be published; industry surveys have been positive on current conditions and the business outlook in recent months. The FOMC’s Brainard, Mester, Bostic and George will speak