For a long time, traders considered American Non-farm Payrolls (NFP) the most important release in the market. However, the situation has changed. Now US CPI moves financial markets.
Trading plan for May 4
On Wednesday, the Federal Reserve released the interest rate and the economic outlook. The interest rate remained unchanged at 1.75% as anticipated, however, Fed’s comments implanted doubts in minds of investors. Words of the Fed about the “symmetric” nature of its 2% inflation target seemed to signal an excess of the target. Furthermore, the FOMC removed the line saying the outlook had strengthened that added worries to investors. As a result, the US dollar could not stick to new highs and plunged.
Traders are waiting for the results of the US-China negotiations that take place on Thursday and Friday. If countries are able to come to an agreement, the US dollar will have chances to recover. Moreover, important economic data will be released tomorrow.
As the US dollar fell, some currencies managed to recover.
Let’s look at them.
The Australian economic data showed a significant surplus on Thursday. As the trade balance is an important factor for the currency appreciation, the aussie managed to recover. On Wednesday harami candlestick was formed that is signaling the reversal of the downward movement. So the Australian dollar/US dollar pair broke the resistance at 0.7510. If the pair is able to close above this level, the next aim will lie at 0.76. However, on Friday the Reserve Bank of Australia will release its monetary policy statement. It is well-known that the central bank does not plan to increase the interest rate until 2019, so there are high risks of the further fall to the support at 0.7450.
As the US dollar is depreciating, the Japanese yen managed to rise versus the greenback. On Wednesday the USD/JPY pair reached the highest level since February 2018 but could not stick there and fell. The pair formed a Doji candlestick that signals the reversal of the upward movement. The USD/JPY is moving to 108.75 where 100-day MA lies. No important data for the yen is anticipated this week as it is a bank holiday in Japan. However, further fall of the greenback will lead to the pair’s decline. If the US dollar is able to recover, the pair will return to the resistance at 109.80.
Thank you for your attention!
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