FED to stick on with its wait-and-see approach

The FOMC’s May meeting minutes were released yesterday. In the minutes it was stated that “participants saw the uncertainty about their economic outlooks as unusually elevated” , showcasing the persistent concern of policymakers in regards to the US Presidents trade agenda and how this uncertainty may influence the banks future decisions. Moreover, policymakers also deemed it “appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer”. Overall, it appears that the bank remains on its wait and see approach, which in turn may have been perceived as bullish nature and could have aided the greenback following its release. According to a report by Bloomberg “The vast majority of President Donald Trump’s global tariffs were deemed illegal and blocked by the US trade court”, the court ruling may be seen as bullish for US Equities which have faced heightened volatility and uncertainty as a result of the US’s trade ambitions. However, we would not be surprised to see the Government challenging the ruling and thus the true impact on the markets may not be seen immediately.

In tomorrow’s Asian session it’s going to be very busy for Yen traders given the financial releases which are due to be released. Specifically, we turn our attention to the release of the Tokyo CPI rates for the month of May, where the Core CPI rate is expected to showcase an acceleration of inflationary pressures. Such a scenario could increase pressure on the BOJ to resume its rate hiking path, which may aid the JPY.

Looking at US500 the index appears to be moving in an upwards fashion. We opt for a bullish outlook for the index’s price and supporting our case is the upwards moving trendline which was incepted on the 7th of April, in addition to the RSI indicator which currently registers a figure above 60, implying a bullish market sentiment. For our bullish outlook to continue we would require a break above our 6135 (R1) resistance line with the next possible target for the bulls being the 6425 (R2) resistance level. On the other hand, for a sideways bias we would require the index to remain confined between the 5775 (S1) support level and the 6135 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below our 5775 (S1) support level with the next possible target for the bears being the 5485 (S2) support line.

XAU/USD appears to be to moving in a sideways fashion, with the commodity’s price appearing to be facing resistance near our 3365 (R1) resistance level. We opt for a sideways bias for the precious metal’s price and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to continue, we would require the precious metal’s price to remain confined between the 3240 (S1) support line and the 3365 (R1) resistance level. On the other hand, for a bullish outlook, we would require a clear break above the 3365 (R1) resistance level, with the next possible target for the bulls being the 3500 (R2) resistance line. Lastly, for a bearish outlook we would require a clear break below the 3240 (S1) support level, with the next possible target for the bears being the 3115 (S2) support line.

Autres faits marquants de la journée :

Today we note the release of the US’s 2nd GDP estimate for Q1, the US weekly initial jobless claims figure and the EIA weekly crude oil inventories figure. In tomorrow’s Asian session, we note Japan’s Tokyo CPI rates for May, Japan’s unemployment rate and preliminary industrial output rate and retail sales rate all for April and ending the session is Australia’s final retail sales rate for April. On a monetary level we note the speeches today by Richmond Fed President Barkin, Chicago Fed President Goolsbee, Fed Governor Kugler and San Francisco Fed President Daly, whilst in tomorrow’s Asian session, we note the speech by Dallas Fed President Logan.

US500 Daily Chart

• Support: 5775 (S1), 5485 (S2),  5150 (S3)
• Resistance: 6135 (R1), 6425 (R2), 6715 (R3)

XAU/USD Daily Chart

• Support: 3240 (S1), 3115 (S2), 2980 (S3)
• Resistance: 3365 (R1), 3500 (R2), 3645 (R3)

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