US dollar edges higher ahead of US inflation data
Asia stocks declined today as the market continued to worry about the second wave of coronavirus after several countries started to reopen. In China, the Shanghai Composite and Hang Seng declined by 0.10% and 1.35% while in Japan, the Nikkei 225 declined by 25 basis points. In the United States, the S&P 500 was barely moved while the tech-heavy Nasdaq 100 notched its sixth day of consecutive gains. The market is worried that countries will take more time to reopen now that new cases are being reported in countries that were first to reopen. For example, in China officials reported a new cluster of cases in Wuhan province, where the disease started.
The US dollar index rose slightly ahead of the inflation numbers and several Fed speakers. The market expects that headline CPI declined by 0.8% in April after declining by 0.4% in the previous month. On an annualized basis, they expect the CPI to rise by just 0.4%. The core CPI, which excludes the volatile energy and food products is expected to decline by 0.2% after falling by 0.1% in the previous month. These numbers are lower than the Federal Reserve target of 2.0%. Fed members James Bullard, Neel Kashkari, Patrick Harker, and Randal Quarles will deliver statements that could affect the dollar.
Like yesterday, the economic calendar will be relatively light today. In Japan, the Cabinet Office will release the leading index, which is an aggregate of 12 economic indicators that is meant to predict the future. In Norway, the statistics office will release the first quarter reading of GDP while in Brazil, the central bank will release minutes of the previous meeting. Finally, in the United States, the American Petroleum Institute (API) will release the inventory data for the previous week.
The EUR/USD pair declined to an intraday low of 1.0783, as the market started to worry about longer shutdowns. On the daily chart, the price is below the 14-day and 28-day exponential moving average and along the 23.6% Fibonacci retracement level. It is also below the neckline of the head and shoulders pattern. Therefore, a break past this support level will increase the likelihood of the pair reaching a low of 1.0765.
The XAU/USD pair was little changed as the market waited for the US CPI data. The pair is trading at 1697.45, which is lower than Friday’s high of 1723. On the four-hour chart, the pair has formed a bullish pennant, which is a triangle pattern that comes after a major upward trend. This means that the pair may breakout higher in the near term as the pennant approaches its tip.
The XBR/USD pair declined slightly ahead of the API crude oil stocks data from the US. The pair is now trading at 30.20, which is slightly below the yellow trendline shown below. The price is also slightly below the 28-day and 50-day EMA and is along the 61.8% Fibonacci retracement level. Therefore, the pair may move lower as bears attempt to retest the important support at 29.00.