Doubts for US-Iranian peace deal

The USD maintains  a wait-and-see position

We continue to view safe-haven flows as the main determinant for the USD’s direction in the FX market. On the one hand, market hopes for a possible diplomatic solution in the US-Iranian conflict tend to weigh on the USD, while the US strikes on Iranian targets tend to feed USD bulls, allowing for the greenback to maintain a wait-and-see position in the FX market. Also the release of the US consumer confidence for May could affect the USD, yet fundamentals are expected to remain the main issue for its direction.

Australia’s April CPI rates eyed

In tomorrow’s Asian session, we note the release of Australia’s CPI rates for April and any acceleration of the rates could take the markets by surprise and boost the Aussie. The CPI rates are already beyond RBA’s inflation target zone of 1-3%, which tends to make Australia’s central bank hawkish. On the flip side, a possible beyond-market-expectations easing of inflationary pressures in the Australian economy over the past month could weigh on AUD.

RBNZ to remain on hold

Also we highlight the release of New Zealand’s RBNZ interest rate decision. The bank is expected to remain on hold in tomorrow’s Asian session. If actually so, we expect the market’s attention to turn to the bank’s forward guidance, and should the bank adopt a more hawkish tone, we may see the Kiwi getting some support, while a possibly more dovish tone by the RBNZ could weigh.

Oil prices edge lower, yet uncertainty remains

Oil prices dropped yesterday as market hopes for a possible peace deal between Iran and the US and a consecutive re-opening of the Straits of Hormuz were enhanced. Yet the US strikes on Iranian vessels and missile launchers tend to raise doubts for the negotiation process once again. Oil bears seem to have been halted for now, with oil prices gaining even some ground and a possible further intensification of the market’s worries for an escalation of the conflict could boost oil prices, while on the contrary, a possible enhancement of the market’s hopes for a diplomatic solution of the crisis could weigh on oil prices. 

Other highlights for today

Today we get UK’s CBI distributive trades indicator and the US consumer confidence, both for May. In tomorrow’s Asian session, we note that BoJ Governor Kazuo Ueda and Fed Vice Chair Jefferson are scheduled to speak. 

Charts to keep an eye out

AUD/USD

AUD/USD’s price edged higher yesterday placing some distance with the 0.7110 (R1) support line. Given that the price action was unable to clearly break the 0.7100 (S1) support line last week, we maintain our bias for a sideways motion of the pair. Also the RSI indicator tends to suggest that a sideways motion is possible given that it runs along the reading of 50, implying a rather indecisive market. Should the bears take over, we may see AUD/USD’s price breaking the 0.7100 (S1) support line and start aiming for the 0.6940 (S2) support level. Should the bulls be in charge over AUD/USD’s direction, we may see the pair breaking the 0.7280 (R1) resistance line and start aiming for the 0.7455 (R1) resistance line.

WTI

WTI’s price tumbled yesterday as the price action teased the 93.80 (S1) support line. The RSI indicator tends to remain below the reading of 50 implying a bearish predisposition of the market for the commodity’s price action, which allows us to maintain our bearish outlook. Should the bears remain in charge, we may see WTI’s price breaking the 93.80 (S1) support line and take aim at the 87.10 (S2) support level. Should the bulls take over, we may see WTI’s price aiming if not breaking the 100.90 (R1) resistance line.

AUD/USD Daily Chart

• Support: 0.7100 (S1), 0.6940 (S2), 0.6800 (S3)
• Resistance: 0.7280 (R1), 0.7455 (R2), 0.7655 (R3) 

WTI Daily Chart

• Support: 93.80 (S1), 87.10 (S2), 82.00 (S3)
• Resistance: 100.90 (R1), 107.00 (R2), 112.70 (R3) 

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