26th May 2020 - Memorial Day holiday keeps AUD pinned under 0.6550



Good morning

OVERNIGHT DATA AND HEADLINES

  • Americans paid a mostly low-key tribute to those who died serving in the U.S. Armed Forces on Monday, with many Memorial Day events cancelled due to the coronavirus outbreak that has killed nearly 100,000 people in the United States alone. In some places, scaled-down ceremonies were broadcast over the internet. But the virus overshadowed the national holiday, which is normally a time of flag-waving parades and events to commemorate fallen soldiers. The Memorial Day weekend, which is the unofficial kickoff of the U.S. summer and a time when many head to beaches or outdoor barbecues, has seen Americans largely adhering to warnings to maintain social distancing guidelines. 

  • German business morale rebounded in May, recovering from its most dramatic fall on record the previous month as a gradual return to normal activity after weeks of curbs boosts expectations among companies. The IFO institute said its May survey showed that its business climate index rose to 79.5 from a downwardly revised 74.2 in April. A Reuters poll of economists had pointed to a reading of 78.3. "The mood at German companies has recovered after the catastrophic previous month," IFO President Clemens Fuest said in a statement. "The expectations for the coming months have improved significantly.”

  • The World Health Organization has suspended testing the malaria drug hydroxychloroquine in COVID-19 patients due to safety concerns, WHO Director General Tedros Adhanom Ghebreyesus said on Monday. "The executive group has implemented a temporary pause of the hydroxychloroquine arm within the Solidarity trial while the safety data is reviewed by the data safety monitoring board," Tedros told an online briefing. 

  • Japanese Prime Minister Shinzo Abe lifted a state of emergency for Tokyo and four remaining areas on Monday after the number of infections fell across the country, but warned that it could be reimposed if the virus started spreading again.The move meant that the whole country would now have the social distancing curbs loosened, after an initial lifting of restrictions for most areas on May 14. Spain also announced it will lift a quarantine requirement on overseas visitors from July 1, which may help its tourism sector. 

  • U.S. stock markets were closed for the Memorial Day holiday.

CURRENCIES

  • The USD erased earlier gains as the DXY index edged lower from 100.00 down towards 99.70.

  • EUR traded in a relatively tight range in and around 1.0900.

  • USDJPY traded 10 points either side of 107.70 in the offshore session.

  • GBP found some minor buying interest from 1.2165 up towards 1.2200.

  • AUD trading also relatively muted, up from 0.6520 to just shy of breaking 0.6550.

  • NZD rebounded, reclaiming losses from 0.6085 up towards 0.6100.

  • AUDNZD gained around 20 points, from 1.0715 to 1.0737.

  • AUDEUR found another break through 0.6000, this time hitting a 0.6011 high.

TREASURIES

  • Italy's 10-year yield dropped as much as 3 basis points to a six-week low at 1.57%. 

  • Safe-haven German 10-year yields were down 1 basis point at -0.50%. 

COMMODITIES

  • Gold eased in holiday-thinned trade as some investors took profits. Spot gold fell 0.3% to end at $1,728.55 per ounce, earlier hitting a session low of $1,721.50.

  • Dalian coke futures rose after major coke-producing province of Shandong said it will limit coke output this year in an effort to control new capacity and reduce coal consumption. Benchmark iron ore futures on the Dalian bourse dipped 0.2% to 722 yuan a tonne, following spot prices of iron ore with 62% iron content, which dipped to $98.5 a tonne, as of Friday. 

  • Shanghai copper prices fell for a second day on Monday, as investors focused on tensions between the U.S. and China. The London Metal Exchange was closed on Monday for the Spring Bank Holiday and reopens on May 26. 

ECONOMIC CALENDAR TODAY

  • No Australian Economic data releases today.

  • New Zealand - April trade balance $m (last 672, forecast 1270). Imports fell sharply during NZ’s lockdown. 

  • Singapore - April industrial production (last 21.7%, forecast -6.3%). Spike in March set to unwind as COVID impacts emerge.

  • US - April Chicago Fed activity index (last -4.19). April saw activity collapse to lowest level since the GFC.

  • US - March FHFA house prices and March home price index.

  • US - May consumer confidence index (last 86.9, forecast 87.0). Confidence expected to remain low after sharp fall in April.

  • US - April new home sales (last 627k, forecast 490k). Lockdown measures have stifled turnover.

  • US - May Dallas Fed index (last -73.7, forecast -65.0). Production subindex fell to record low on oil price collapse.

AUD THOUGHTS AND TECHNICAL ANALYSIS


With financial markets in Singapore, Britain and the United States closed for public holidays on Monday, market moves were relatively small and held within well-worn ranges. 

As a result, AUD traded in a relatively tight 25 point range between 0.6520 & 0.6545. 

No Australian data releases today - tonight we have a raft of releases from the U.S. which should keep markets relatively busy.  

For the AUD, opens this morning at 0.6544 as bullish signals remain but markets tread with caution. Trade concerns with China are likely to limit the upside. 

Technically, the 21 DMA at 0.6492 has now passed above the 100 DMA which can be considered a bullish sign. 

The Mon/Fri/Thurs/Wed highs 0.6550/0.6572/0.6599/0.6616 are all now resistance levels.  Immediate support at 0.6535 followed by 0.6510 and 0.6485.



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