Author: Greg Michalowski
1

Forex news for traders on May 26, 2017.

In other markets today:

  • US yields ended marginally lower in holiday shortened trading: 2 year 1.293%, unchanged. 5 year 1.789%, down -0.4bp.  10 year 2.246%, down -0.8 bp. 30 year 2.912%, down -0.8 bp
  • US stocks ended with record closes for the Nasdaq and S&P but the changes were minimal.  S&P up 0.75 points or +0.03%. Nasdaq up 4.938 points or +0.08%. The Dow ended nearly unchanged at -2.67 points or -0.01%
  • Spot gold move up $11.50 to $1267.11
  • WTI Crude oil trades at $49.80, up $0.90 or+1.82%.  The price is closing above the 200 day MA at $49.52 but below the 100 day MA at $50.99 at the end of the trading week.
In the North American session today, US GDP revision for the 1Q came in higher at 1.2% vs 0.9%.  That will look better than the 0.7% that was the first stab at the release, but is still below the growth estimates for 2017. Nevertheless, at 1.2%, it is a more respectable showing for the quarter.   NY Fed Nowcast GDP guesstimate rose to 2.3% for the 2Q from 1.9% last week, while the Atlanta Fed GDPNow estimates a 3.7% 2Q number.  That is still a pretty good gap for the two Fed estimates (the market does not really react to either to be honest). 

Also released today was Durable goods orders which showed a -0.7% decline. This was still better than the -1.5% estimate.  Moreover the prior month was revised up to +2.3% from 1.7%. That's good news too.  The not so good news was the Cap Goods orders and shipments nondefense, ex air (always a mouthful) were not as good at 0.0% and -0.1% vs +0.5% estimates. 

Finally, the Univ of Michigan sentiment index for May (final) was revised a little lower to 97.1 from 97.5 estimate (and 97.7 last).  It is still near high levels going back to 2000 but it is one of the "soft" data points (i.e. does not necessarily need higher GDP). 

The other event today was the G7 meeting. The headlines from a mix of heads of state suggests that the G7 communique on the environment will not include the endorsement of the US.   That there were some serious talks about trade, with Trump promoting a more "fair trade" relationship with the other members. They were all in agreement about fighting terrorism.  That are the main talking points from the meetings in Sicily. The will conclude tomorrow and a shorter official communique will be released

The activity in NY session off the data had some of the JPY strength reduced. The JPY still ended the day higher with the GBPJPY up 1.51%.  The USD got a little stronger with larger gains against the GBP leading the way.  The GBP simply had a down day and although it is ending off the lows after a very modest afternoon rally, the pair is ending at around the 1.2800 level after being as high as 1.3041 at the start of the trading week. 

What are some of the technicals saying for the major US pairs (and going into next weeks trading)?

For the EURUSD, today, the pair extending the range for the week by less than 1 pip. Instead of a low of 1.11609, the low reached 1.11601 today.  For the week the low to high trading range was 108 pips. The lowest range going back to mid 2014 is 106 pips. So that says a lot about the EURUSD in trading this week.   There was not much going on.   Non trending leads to trending, so we will be looking for something more in the new week.   On the topside, the 100 hour MA at 1.12085 (and moving lower) will be a hurdle to get above and stay above, if this pair is going higher (closing at 1.1176). That is the minimum.   ON the downside, the 1.1160 level is not far away but it was a floor this week.  Get and stay below it and there could be more liquidation.  Of note from the CFTC commitment of traders released late on Friday was the longs in the EUR are the highest level since October 2014.  Are buyers keeping the bid in the pair. Will they be able to take it higher next week....OR....will the longs sell out (and push the price lower in the process.

As mentioned, the GBPUSD had a trend like down day today.  That moved the price back down to test a support area defined by lows after the PM May called the election. There were 4 days from April 19 to April 25th where the low came in between 1.2769 to  1.2774 (there was one day that quickly moved to 1.27548 but it quickly rejected that break).   Today, the low stalled at 1.2774 and are closing at 1.2797.  In the new week, the 1.2769-74 will be eyed as the key support again.  Move below (and then below the 1.27548 low) and the sellers are more in control for further selling (1.2688 would be a target below). If the price can get back above the old low for May at 1.28295, the sellers are going to start to feel a little more uncomfortable. It might be just take the pair to another resistance area at 1.2860 (look for sellers at 1.2860) but you never know if the move back higher is more serious.

The USDJPY trended lower into the NY session, but fear about stocks and yields which did not go lower, stalled the fall and the data helped to support a corrective move back higher.  The price moved back above the 200 bar MA on the 4-hour chart at 111.32 in the NY afternoon session but that stalled.  The price waffled into the close.  What we learned this week for the pair is that the 200 hour MA stalled the rallies. That MA is at 111.558 and moving lower. It is also almost converged with the 100 hour MA at 111.538. If you want to earmark a technical level for next week, it will be those MAs. Stay below, is more bearish.   On the downside the low today stalled within a few pips of the low from Tuesday at 110.866. Key level on the downside for the USDJPY in the new trading week.

The USDCAD ends down on the day. Oil prices recovered a bit that helped to increase the CAD (lower USDCAD).  The selling took the price below the 100 hour MA at 1.3472 and back below a trend line on the hourly chart (see post here).  Both are potential early week ceilings that if the price stays below, is more bearish. If the price goes, above, it may lead to a more corrective move higher.   Also of note in this pair is the commitment of traders report this week showed that speculative positions remain at record SHORT levels. The CAD has been rallying since peaking on May 5th. Are traders getting too long and will there be a bigger flush out?  That is the importance of a rally. If there is no rally, the shorts could get more nervous with the losing trades. 

The NZDUSD squeaked out a close above the 200 day MA today at 0.70536. The close was at 0.70585. That was the 1st close above the 100 day MA since March 1st.   I will give the benefit of the doubt to the close (for a bullish bias), but we could easily go back below on Monday given the failure to move higher on Friday. So watch for momentum on a move below the MA level.  Until then, the buyers remain more in control with the 50% of the move down from the 2017 high at 0.7096 and the 200 day MA at 0.71065.   Breaking those levels are the next hurdle for that pair.  

There is a lot of chop in the AUDUSD chart but at the low today (before the NA open), the price decline stalled at the 50% of the move up from the May 9th low at 0.74229.  The 100 bar MA on the 4-hour was also in the area at 0.74201 (the price closed at 0.7443).    Go below next week is more bearish. ON the topside, the 0.7466-70 sticks out as a level to get above and stay above. It corresponds with some swing level going back to mid May on the hourly chart AND the 100 hour MA and 200 bar MA on the 4-hour chart is also there.   

That does it for me. Wishing you all a good weekend.   For those on holiday in the US on Monday, remember the fallen soldiers and their families.   I know I will.  

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Below is a snapshot of the % changes of the major currency pairs against each other. The NZD is the strongest. While the GBP is the weakest.


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