Dollar Edges Lower; PCE Data Eyed for Policy Clues By Investing.com - Investing.com

Dollar Edges Lower; PCE Data Eyed for Policy Clues By Investing.com - Investing.com
Forex Weekly Commentary: Japanese Yen, Euro Pairs, Plus Copper - Investing.com
Mutual Funds Weekly: These money and investing tips can help you figure out what to buy, sell or hold right now - ForexTV.com

Posted: 23 May 2021 10:51 PM PDT

By Peter Nurse

Investing.com - The dollar edged down in early European trade Monday, trading near three-month lows as confidence that the Federal Reserve was set to start tapering its bond-buying program in the near future ebbs away.

At 2:55 AM ET (0755 GMT), the , which tracks the greenback against a basket of six other currencies, was down 0.1% at 89.975, marginally above a three-month low of 89.646 set on Friday.

traded 0.1% higher at 1.2184, off a three-month high of 1.2245 touched on Wednesday, was 0.1% lower at 108.81, rose 0.1% to 1.4154, while the risk-sensitive was up 0.1% at 0.7737.

The greenback received a boost early last week after from the meeting of the April Federal Reserve policy-setting meeting indicated that a number of policymakers wanted to discuss tapering bond purchase on worries that the considerable stimulus already pouring into an economy on the mend could stoke inflation.

However, traders have been gradually easing back bets on this tapering occurring promptly with Fed Chairman Jerome Powell repeating his view that it is not yet time to discuss a reduction in quantitative monetary easing.

"The weakness in the dollar owes a large part to a core of the Fed unhurried about the need to withdraw stimulus and recovery stories elsewhere in the world," said analysts at ING, in a note.

With investors preoccupied with threats of accelerating inflation, U.S. PCE (personal consumption expenditures) data, due on Friday, is seen as one of the biggest tests for markets this week.

The , excluding food and energy, is the Fed's preferred inflation measure for its 2% flexible average target. It was up 1.8% in the 12 months to March, and further rises could test the Fed's resolve to keep up asset purchases at their current pace.

Another data release that could influence the Fed is May's advanced , also due on Friday.

"A $92bn deficit is expected. Yes that's $92bn. That is quite a large hole to fill when the U.S. exceptionalism of the 2018-2020 period is being challenged by the overseas recovery and U.S. real rates remain very negative," ING added.

Adding to the pressure on the dollar has been the recovery in the euro, bolstered by rising optimism about economic reopenings in Europe from coronavirus lockdowns.

Eurozone figures, released late last week, showed a strong recovery in the region's dominant services sector.

"After two quarters of contracting GDP, the second quarter of 2021 will likely show firm growth on the back of reopening economies and strong consumer demand," ING said.

The EU leaders get together this week in a summit. The main point on the agenda is likely to be climate change, and this is unlikely to have much of an immediate market impact.

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Forex Weekly Commentary: Japanese Yen, Euro Pairs, Plus Copper - Investing.com

Posted: 23 May 2021 04:30 AM PDT

Japanese yen pairs

broke from its 85.00's close in the past 2 weeks at 85.11 and 85.05 to close lower at 84.16. Encouraging to future shorts is the break lower at 84.39 and 84.37 at the 10 and 15 year averages.

For the past 2 months, AUD/JPY traded from 83.01 to 85.79 or 278 pips and 139 pips per month. The AUD/JPY vital break is located at 83.27 and 77.37 for .

JPY cross pairs remain tied to correlation paralysis as not only correlates +90% to JPY cross pairs, but + 90% to anchor currencies, , , and .

correlates +90% to USD/JPY and minus 53% to . Overall JPY cross pairs will trade neutral for the new week and the same scenario as last week.

USD/JPY maintains a negative correlation to USD/CHF at -12%. correlates +48% to USD/CHF. USD/CAD and USD/CHF trade under current prices to represent a double trade although the correlation at 70% to 80% constitutes a better situation to fully trust.

The USD/CAD vital break is located 1.2372 and the 50 day average at 1.2345 while the USD/CHF vital break is located at 0.9070 and the 20 day average is found at 0.9049.

Moving forward, USD/CHF is first priority to trade long as USD/CHF is oversold to all averages dating to 1998 while USD/CAD becomes secondary.

USD/JPY must break lower at 108.08 for any serious price moves to its current deeply misaligned price. USD/JPY is not only perfectly neutral short, medium and longer term, but not worth the trade effort.

Neutral USD/JPY, while oversold USD/CAD and USD/CHF is derived from the BOJ Call Rates. High and low Call Rates traded Friday at 0.986 to 0.925 then subtracted for 0.06. Call Rates traded Thursday at 1.001 to 0.93, then subtracted for 0.07. Wednesday equated to 0.07. The Fed Overnight rate was 0.06 and this is not just a phantom number.

Cal Rates informed clearly that USD/JPY would close Friday at 108.90; known at the close of Japanese markets. Since exchange rates are glorified interest rates, neither the BOJ nor the Fed allows USD/JPY to trade correctly and at its proper levels.

USD/JPY and anchor pairs under equal correlations highlight how closely national interest rates trade against each other. Its up to the Fed to make a move as the world of trading is tied into the current 0.06.

Look for 108.35 to hold for Monday and Tuesday and vital 108.27 to not break yet.

Euro pairs

We were informed last week that EUR/USD's vital level at 1.2258. EUR/USD dropped from 1.2244 to lows at 1.2160 or 80 pips. While EUR/USD no longer qualifies as a problem pair to current price normalization after weeks in problem status, EUR/USD and all currency pairs suffer from severe range compression.

The EUR/USD big break lower is located at 1.2078 and the 50 day average is located at 1.2048.

, , and remain deeply oversold along with USD/CAD. No changes over many weeks.

oversold last week forced overbought higher. EUR/NZD this week maintains fairly neutral status to massively overbought GBP/NZD. Watch NZD/USD 0.7160.

Deeply overbought and problem pair last week traded 300 pips higher. This is what problem status demonstrates. Stay away. GBP/AUD this week remains deeply overbought while sits at neutral.

advises EUR/AUD trades at 1.5820 to 1.5656 while forecasts GBP/AUD trades at 1.8385 to 1.8198.

EUR/USD vital levels for the week: 1.2028, 1.2049, 1.2078, 1.2117, 1.2186, 1.2255, 1.2324, 1.2461 and 1.2530.

USD/CLP and Copper

Chile is home to the largest mines in the world and the greatest source of national revenue as it produces the world's copper, particularly China as Chile's best customer over decades.

In 2020, according to Chile's Statistics Office, Chile produced 5.7 million tones against an estimated reserve of 200 million tones. Copper output however dropped for the past 10 months. March saw a 1.3% decline to 491,720 tones. Producers blame COVID-19.

jumped 283 pips last Monday from 697.05 to 725.36 while copper fell last week 31 points from 4.7831 to 4.4731. If economic normalization appears, then copper heads higher while USD/CLP travels lower.

Mutual Funds Weekly: These money and investing tips can help you figure out what to buy, sell or hold right now - ForexTV.com

Posted: 23 May 2021 06:33 AM PDT

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