US CPIs and RBNZ Decision Enter the Spotlight

Fears of a Second Coronavirus Wave Hurt Sentiment

The dollar traded higher against all the other G10 currencies on Friday, Monday, and during the Asian morning Tuesday. It gained the most versus NOK, AUD and SEK in that order, while it eked out the least gains versus CHF.

US CPIs Under Investors’ Radar

That said, today, market participants may pay extra attention to the US CPIs for April. Headline inflation is expected to have slowed to +0.4% yoy from +1.5%, while the core rate is forecast to have declined to +1.7% from +2.1%. Although this suggests that the fall in the headline rate may be mainly owed to the collapse in oil prices, a core rate below the Fed’s objective of 2% could keep the door open for further easing by the Fed.

S&P 500 — Technical Analysis

Yesterday, the S&P 500 came close to testing its April high, at 2973, but eventually reversed back down by the end of the day and closed the trading session virtually unchanged. On the positive side, the index managed to stay above a short-term tentative upside support line drawn from the low of May 4 th. As long as that line remains intact, the bulls have a chance to push the price higher in the near term. However, we will take a cautiously-bullish approach for now, because we prefer to see a break above the April’s high, in order to get comfortable with higher areas.

Will the RBNZ Expand its QE Program?

As for tonight, during the Asian session Wednesday, we have a central bank deciding on monetary policy and this is the RBNZ. A couple of weeks ago, the Kiwi came under strong selling pressure after Westpac said it expects the RBNZ to cut interest rates to -0.5% in November, a move that could be telegraphed as early as in August. They also said that they expect officials to double their QE program to NZD 60bn at this gathering.

EUR/NZD — Technical Outlook

After finding good support near the 1.7620 hurdle yesterday, EUR/NZD got pushed to the upside again. The pair climbed all the way to the 1.7855 barrier and the slowed down a bit. Around there, the rate also tested a 50 EMA on our 4-hour chart, which continues to provide a bit of resistance. Looking at our oscillators, although the RSI is currently on the flat side and balancing near 50, the MACD lies above its trigger line, pushing higher, despite sitting below zero still. For now, we will take a somewhat bullish approach and aim for slightly higher areas in the near term, because let’s not forget that overall, the pair remains below a tentative downside resistance line taken from the high of April 1 st.

As for the Rest of Today’s Events

In the US, besides the CPIs, we have four more Fed officials are scheduled to speak. Those are St. Louis President James Bullard, Minneapolis President Neel Kashkari, Philadelphia President Patrick Harker, and Board Governor Randal Quarles. We will pay extra attention to these speeches as it would be interesting to hear those officials’ opinions on negative interest rates.

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