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Though higher US PCE inflation, which rose in May 3.4% YoY, its highest reading in almost three decades, the greenback’s performance is still weak

Market Focus

The S&P 500 index rose to another record last Friday after investors poured over fresh U.S. economic data a day after an infrastructure spending agreement in Washington helped lift the broad market to all-time highs. The Dow also finished higher (+0.69%), with the rise in Nike shares being a big driver of its gains. JPMorgan Chase & Co. also added to the benchmark’s performance, after the results of the Federal Reserve’s latest stress tests, released last Thursday, showed banks have enough capital to withstand a severe global recession and so can resume paying dividends and buying back stock. Nasdaq closed red (-0.06%).

The U.S. president Joe Biden and a bipartisan group of senators presented the agreement on new infrastructure spending on Thursday. Biden suggested after the deal was struck that his signature on any infrastructure bill was contingent on Congress also passing the much larger tax and social-spending measure that Democrats are preparing.

On Saturday, he issued a statement saying it “was certainly not my intent” to create the impression he was threatening to veto “the very plan I had just agreed to.”

Mitt Romney, also among a group of GOP senators who announced the infrastructure deal with Biden at the White House on Thursday, said he was concerned about the president’s earlier comments but thinks “the waters have been calmed by what he said on Saturday.”

“I do trust the president,” Romney, a Utah Republican, said on CNN’s “State of the Union” on Sunday. “At the same time, I recognize that he and his Democratic colleagues want more than that.”

Senator Bill Cassidy, a Louisiana Republican who’s in the bipartisan group, said “I’ll continue to work for the bill.” Asked whether, on NBC’s “Meet the Press” whether he expects Senate Minority Leader Mitch McConnell to try to sink the bipartisan plan, he said: “If we can pull this off, I think Mitch will favor it.”

Main Pairs Movement

Though higher US PCE inflation, which rose in May 3.4% YoY, its highest reading in almost three decades, the greenback’s performance is still weak as the stats didn’t surprise the market players. The dollar ended the week with modest losses. However, U.S 10-year Treasury Bonds yield soared 2.38% to 1.531, benefiting from the price index’s rise.

The euro pair kept lingering within familiar levels, ending the week at around 1.1930. Cable settled at 1.3870, as the pound remained under selling pressure, undermined by the BoE’s dovish announcement. The antipodean currencies modestly advanced against their American rival at the weekly close, while the loonie pair ended red.

Gold finished the week little changed around $1,780 per ounce. Crude oil prices advanced, with WTI up to $74.00 a barrel, and Brent to $76.00.

UK Health Minister Mark Hancock resigned on Saturday after breaking coronavirus-related rules imposed by himself. The news may impact the already weak Sterling at the weekly opening.

The week will start in slow motion from the fundamental side, with the focus on US employment numbers to be out by the end of the week.

Technical Analysis

USDJPY (4- Hour Chart)

USDJPY edges higher after the US PCE inflation data during the American session. The pair remains bullish mode as it continues to fall within the ascending channel, signaling the positive move. The stability of the USDJPY above the 110 psychological level continues to support the upside momentum. At the same time, the technical indicator, the MACD remains bearish while the RSI is still outside of the overbought territory on the 4- hour chart, giving the pair rooms to extend further north. It is expected to the pair moves toward the next resistance of 111.12.

Resistance: 111.12

Support: 110.51, 109.14, 109.84

EURUSD (4- Hour Chart)

EURUSD bounces back during the American session after touching weekly highs at 1.1976, caused by higher US yields, giving the greenback a boost. On the technical sphere, the pair still trades in levels close to the oversold condition, which means that its bullish attempt might cling to the resistance of 1.1985 for a moment before next week, a busy US calendar week. To the upside, EURUSD remains bullish as the MACD is positive, and the pair trades above the 20 SMA on the 4- hour chart. If the pair ends up breaching its current resistance and the 50 Simple Moving Average, then it will head toward the next psychological level at 1.2000.

Resistance: 1.1985, 1.2052

Support: 1.1919, 1.1837 

GBPUSD (4- Hour Chart)

GBPUSD continues to remain under pressure by the dovish BOE’s decision. The pair reverses from bullish to bearish this week, moving away from the key 1.4000 resistance region and now heading toward its next immediate support of 1.3896. GBPUSD remains bearish as the MACD has turned negative, lending supports to bears; at the same time, the downside pressure is expected to continue as the RSI is outside of the oversold territory, giving the pair rooms to extend further south. To the upside, the pair needs to trade above the critical hurdles at the 20 SMA and the 50 SMA to stand back to the positive trend.

Resistance: 1.3963, 1.4017, 1.4072

Support: 1.3896, 1.3787

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