Forex trading plan for May 5
US dollar recovered on more hawkish comments from the Federal Reserve’s members. San Francisco Fed President John Williams claimed he could vote for an interest rate hike in June if the economy keeps improving. In addition, according to Atlanta Fed President Dennis Lockhart, two rate hikes this year were certainly possible. However, ADP employment report showed that the number of employed people in the United States rose by only 156K in April vs. 205K expected.
Risk assets also suffered as crude oil was under pressure. the American Petroleum Institute reported on Tuesday that US inventories increased last week by 1.3 million barrels.
EUR/USD is holding above support at 1.1460 after it formed spike up to 1.1614 on Tuesday, but failed to stay at these maximums. Euro area’s retail sales contracted by 0.5% in March, while an increase by 0.1% was expected. On Thursday German and French banks will be on holiday. Next support is at 1.1415 and 1.1350. The pair has to rise above 1.1550 in order for the bulls to feel powerful again. Note that there’s declining 100-week MA at 1.1638, and it should create significant resistance.
GBP/USD returned down to 1.4500. British manufacturing unexpectedly fell in April for the first time in 3 years. The nation’s construction PMI also came lower than expected (52.0 vs. 54.1). In addition, ICM poll, which was weighted to take into account the likelihood of respondents taking part in the vote, showed that 45% of voters were in favor of Brexit, while 44% were against it. The pound may suffer more if services PMI due at 08:30 GMT on Thursday disappoints. Below 1.4500 we’ll focus on the next big figure at 1.4400/1.4388 (100-day MA) and 1.4330. Resistance is at 1.4550 and 1.4630.
USD/JPY tried to recover after falling as low as to 105.55 on Tuesday. The lack of monetary stimulus from the Bank of Japan last week is the biggest bearish factor the pair. Japanese Finance Minister Taro Aso said on Tuesday that the government is monitoring speculative foreign-exchange trades and will act if it’s necessary. On Thursday liquidity will be lower because of a bank holiday in Japan, so we may see some volatile moves. The pair will likely remain under bearish pressure. Support is at 105.00 (200-day MA) ahead of 103.70 (may 2013 high). Resistance is at 107.50 and 108.25 ahead of 110.50.
AUD/USD was little changed in the 0.7480 area where it fell from levels above 0.7700 on Tuesday. The Reserve Bank of Australia cut interest rate from 2.00% to 1.75%. There wasn’t much of the forward guidance in the central bank’s accompanying statement – we may get more insight about that from the RBA’s quarterly monetary policy statement, which is due on Friday. The RBA’s decision to act is probably connected with the slowdown in Australian inflation. Resistance lies at 0.7560 and 0.7600. Decline below 0.7450 will open the way down to 0.7410. Australia is due to release retail sales and trade balance figures at 01:30 GMT on Thursday, an improvement in data is expected.