Dollar slightly lower in holiday mood, busy week ahead
The dollar broadly weakens in a relatively calm Asian session today, while the Australian dollar strengthens. Asian markets are trading slightly lower, but losses are limited. The month-end flow, along with UK and US vacations, could keep activity subdued today. But the coming week is extremely busy, with a lot of leading economic data.
Technically, the dollar’s attempt to rebound quickly failed last Friday. Some short-term resistance levels are still intact, keeping the greenback slightly bearish in general. The levels include 1.4090 support in GBP / USD, 0.7673 support in AUD / USD, 0.9046 resistance in USD / CHF, and 1.2201 resistance in USD / CAD. We would be careful whether dollar selling would return soon.
In Asia, at the time of writing, Nikkei is down -1.07%. Hong Kong HSI is down -0.5%. China Shanghai SSE is down -0.20%. The Singapore Straits Times is down -0.53%. Japan’s 10-year JGB yield is down from -0.0014 to 0.084.
Industrial production in Japan grew 2.5% mom, retail sales grew 12% yoy
Japan’s industrial production rose 2.5% mom in April, below expectations of 4.1% mom. Manufacturers polled by the Ministry of Economy, Trade and Industry (METI) forecast a contraction in output of -1.7% in May, followed by a rebound of 5.0% in June.
Retail sales grew 12.0% year-on-year, below expectations of 15.4% year-on-year. During the month, mom sales fell -4.5% on a seasonally adjusted basis.
China manufacturing PMI edged down to 51.0, non-manufacturing PMI increased to 55.2
China’s official manufacturing PMI fell slightly to 51.0 in May, from 51.1, below expectations of 51.1. Looking at a few details, production increased from 0.5 to 52.7. New orders fell to 51.3, while stocks of raw materials fell to 47.7. New export orders also fell to 48.2.
The non-manufacturing PMI rose to 55.2 from 54.9, above expectations of 52.7.
New Zealand business confidence ANZ rose to 1.8 as economy struggled to keep up with demand
New Zealand business confidence ANZ fell to 1.8 in May from -2.0 in April, but well below the preliminary reading of 7.0. The outlook for own activity stood at 27.1, up from April 22.2, but below the preliminary reading of 32.3.
If we look in more detail, export intentions fell from 9.1 to 12.2. Investment intentions fell from 17.1 to 18.9. The cost forecast fell from 76.1 to 81.3. Employment intentions fell from 16.4 to 20.5. Pricing intentions fell from 55.8 to 57.4.
ANZ said: “The New Zealand economy is struggling to keep up with demand, and pressures on costs and inflation continue to mount. Firms find it difficult to source inputs for production. We wouldn’t read too far the decline in activity indicators in the second half of the month, as it may have been influenced by fiscal uncertainty. We won’t have to wait long for a new reading, with preliminary June data due out on June 9. “
An extremely busy week ahead
It’s an extremely busy and potentially very volatile week ahead. In particular, the US ISMs and NSPs will be closely watched to assess the strength of the rebound in the US economy. Data on Eurozone inflation, Swiss GDP, Canadian GDP, China and CPIs are also important. As for the Australian dollar, the RBA rate decision is a priority, but the RBNZ is unlikely to turn hawkish. Instead, GDP and retail sales could move the market more.
Here are some highlights of the week:
- Monday: industrial production in Japan, retail sales, consumer confidence, housing starts; Inflation gauge Australia MI, credit to private sector; China’s PMI; Flash IPC Germany; M3 money supply in the euro zone; Canada Current Account, IPPI and IPMB.
- Tuesday: RBA rate decision, AiG manufacturing in Australia, building approvals, current account; Capital expenditure in Japan, final manufacturing PMI. Manufacture of Caixin PMI in China; Swiss GDP, retail sales, manufacturing PMI; Eurozone final manufacturing PMI, CPI flash, unemployment rate; Unemployment in Germany; UK PMI final manufacturing; Canada’s GDP, Manufacturing PMI; ISM manufacturing in the United States, construction expenses.
- Wednesday: Japanese monetary base, New Zealand terms of trade; Australia’s GDP; Retail sales in Germany; UK Currency M4, Mortgage Approvals; Euro zone PPI; Building permits in Canada; Fed Beige Book Report.
- Thursday: retail sales in Australia, trade balance; China Caixin PMI Services; Eurozone PMI services final; UK PMI end services; ADP US employment, jobless claims, nonfarm productivity, ISM services.
- Friday: Japanese household spending; Construction of PMI in the United Kingdom; Eurozone retail sales; Employment in Canada, labor productivity, Ivey PMI; Non-farm payroll in the United States, factory orders.
AUD / USD daily report
Daily Pivots: (S1) 0.7674; (P) 0.7711; (R1) 0.7744; After…
The AUD / USD intraday bias remains neutral for now, and a further rise is in favor with support at 0.7673 intact. On the upside, the breakout of 0.7890 will resume upward from 0.7530 to retest 0.8006 high. However, on the downside, a firm breakout of 0.7673 will suggest that the correction from 0.8006 continues with another lower leg. The intraday bias will be flipped lower to 0.7530 support and possibly below.
Overall, the downtrend of 1.1079 (2001 high) is already expected to end at 0.5506 (2020 low). The rise from 0.5506 could be the start of a long term uptrend or a corrective rise. Reactions to the key resistance of 0.8135 will reveal which case this is. But in any case, the rally in the medium term should continue as long as the resistance at 0.7413 becomes support.
Update of economic indicators
|23:50||JPY||Industrial production M / M Apr P||2.50%||4.10%||1.70%|
|23:50||JPY||Retail Y / Y Mar||12.00%||15.40%||5.20%|
|1 h 00||CNY||Manufacturing PMI May||51||51.1||51.1|
|1 h 00||CNY||May non-manufacturing PMI||55.2||52.7||54.9|
|1 h 00||NZD||ANZ Business Confidence May||1.8||7|
|1h30||AUD||Credit to the private sector M / M Apr.||0.20%||0.40%||0.40%|
|5:00 a.m.||JPY||Housing Starts Y / Y Apr||5.20%||1.50%|
|5:00 a.m.||JPY||Consumer confidence May||35.3||34.7|
|8h00||EUR||Euro zone M3 money supply Y / Y Apr||9.50%||10.10%|
|12h00||EUR||Germany CPI M / M May P||0.30%||0.70%|
|12h00||EUR||Germany CPI Y / Y May P||2.40%||2.00%|
|12:30 p.m.||GOUJAT||Industrial Product Price M / M Apr||1.60%|
|12:30 p.m.||GOUJAT||Commodity Price Index Apr||2.30%|
|12:30 p.m.||GOUJAT||Current account (CAD) Q1||2.4 billion||-7.3B|