Euro Technical Outlook: EUR/USD, EUR/CHF Chart Levels

EUR/USD momentum fade threatens a bearish support break EUR/CHF continues lower with eyes on former triangle resistance

The Euro has been declining versus the US Dollar since hitting a multi-month high earlier this week, reaching 1.2266. Still, EUR/USD is on track to record a monthly gain of over 1% as May wraps up over the next few days.

However, the currency pair is now grinding against trendline support set from the monthly swing low. Thisbarrier (green line on chart) will have to hold to preserve the broader trend higher. A break lower threatens the larger rally, but the 20-day Simple Moving Average may step in to provide intermediate support. To the upside, EUR/USD’s 23.6% Fibonacci level may offer resistance on its way to potentially challenge the 1.2266 May swing high.

EUR/USD DAILY CHART

EUR/CHF TECHNICAL OUTLOOK

The Euro has ceded ground to the Swiss Franc this month, extending losses from April when EUR/CHF put in a 0.83% drop. Price pierced below the recently supportive 100-day SMA (purple line on chart). Selling pressure has dragged the 20- and 50-day SMA’s (yellow and blue lines) lower, and a cross between the 20- and 100-day looks set to occur in the short term to mark a bearish signal.

With that in mind, further downside may be the most likely path forward. If so, the upper bound of a Rising Triangle may offer a supportive floor.Trendline support stemming from the triangle pattern floor may also help. Alternatively, a move higher could run into technical interference from the aforesaid moving averages.

EUR/CHF DAILY CHART

USD/JPY Jumps to Monthly High, US Dollar Eyes PCE Inflation Due

US Dollar traded mixed and left the DXY Index little changed on Thursday USD/JPY surged 70-pips as Treasury yields ticked higher ahead of PCE data The Yen weakened broadly and likely exacerbated recent USD/JPY strength

The US Dollar finished Thursday’s trading session practically flat gauging by the DXY Index. US Dollar price action was a mixed bag across the board of major currency pairs with strength against the Yen largely offsetting weakness versus the Sterling.

Treasury yields climbed for the second day in a row with the ten-year extending its rebound off Wednesday’s swing low to 5.4- basis points. Bond yields stayed perky even after strong demand was seen for today’s $62-billion seven-year Treasury auction.

This likely helped propel USD/JPY to a fresh monthly high, though the bid arguably looked exacerbated by a broadly softer Yen. Perhaps news that the MSCI Global Standard Index is removing 29 Japanese listings weighed negatively on the Yen and positively on JPY-crosses. That said, the latest advance by USD/JPY seems to have invalidated its bearish descending trendline as bulls wrestle back control.

USD/JPY price action is trading comfortably above its 50-day simple moving average as well. The latest influx of USD/JPY buying pressure has also coincided with a bullish MACD crossover and expansion of its Bollinger Band. The Dollar-Yen could be headed toward year-to-date highs now after eclipsing technical resistance posed by the 13 May swing high. Nevertheless, the direction of USD/JPY likely still hinges on Treasury yield volatility.

USD/JPY PRICE CHART: DAILY TIME FRAME (25 DEC 2020 TO 27 MAY 2021)

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

Looking ahead to Friday’s trading session on the IV Markets Economic Calendar, we see that high-impact event risk is posed by the scheduled release of monthly PCE inflation data. This is the Federal Reserve’s preferred gauge of inflation and stands to have an impact on markets. Judging by overnight US Dollar implied volatility readings, however, USD price action could be somewhat tame.

After all, traders have already digested red-hot CPI data released earlier in the month while FOMC officials continue to condition markets with their ‘transitory’ narrative.

NZD/USD Aims Higher But US PCE May Spark Volatility on Fed Policy Rethink

FRIDAY’S ASIA-PACIFIC OUTLOOK

Asia-Pacific markets may see a quiet day to close the week, with a light economic calendar for Friday’s trading session. This would extend Thursday’s dull action in APAC equity markets when the Hang Seng Index moved 0.18% lower. Wall Street trading also offered a rather bland showing despite a robust initial jobless claims figure to start the day. The S&P 500 notched up a 0.12% gain, while the tech-heavy Nasdaq 100 lost 0.33%.

The Department of Labor (DOL) reported 406k new applicants for jobless benefits for the week ending May 22, 19k under the consensus forecast, according to the DailyFX Economic Calendar. The second revision of second-quarter US Gross Domestic Product (GDP) data crossed the wires showing a rise of 6.4% on a quarter-on-quarter basis, matching initial estimates.

NZD/USD TECHNICAL OUTLOOK:

The New Zealand Dollar’s recent trek higher continued overnight against the US Dollar, although price remains off the prior day’s post- RBNZ intraday high. Still, momentum appears healthy with a rising MACD following a signal line crossover. The recent high of 0.7315 – which coincides with the January swing high – appears to be a technical barrier. A clean break higher would likely see the February multi-year high shift into focus.

Elsewhere, US government bond yields moved higher as rate traders sold Treasury securities across the curve. The benchmark 10- year yield gained 1.39% by the New York closing bell. The selling in Treasuries followed reports showing that President Joe Biden’s upcoming budget is expected to see government spending rise to $6 trillion next fiscal year, as reported by Bloomberg.

A 7-year note Treasury auction followed later in the New York session. Investors showed strong demand, with a higher-than-average

2.41 bid-to-cover ratio. The preceding selloff in Treasuries offered a strong concession for the auction. Bond traders normally sell onto the market before an auction to buy at a lower price. The sale yield came in at 1.285% versus an expected 1.294% bid deadline rate, showing the market’s willingness to buy even at a lower rate.

New Zealand saw the ANZ-Roy Morgan Consumer Confidence index hit the wires at 114 for May versus a read of 115.4 in the prior month. While the was a slight decline, the 114 level shows consumers remain confident. Later today, Japan will report labor data figures, and India’s foreign exchange reserves report for the week ending May 21 will close up the APAC day.

Looking further ahead, the US Personal Consumption Expenditure (PCE) print is a possible high-impact event that could see significant volatility move throughout risk-sensitive pairs like the New Zealand Dollar. The figure is forecasted to release at 2.9% on a year-over-year basis, with a stronger-than-expected printout being a potential headwind for NZD/USD. Markets have been worried that rising price pressures may pressure the Fed to dial back stimulus faster than currently expected, which could strengthen the Greenback.

NZD/USD DAILY CHART

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