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iFOREX Daily Analysis : May 20, 2016

The dollar edged higher against the other major currencies on Thursday, trimmed a bit his gains after the release of disappointing U.S. data, but never the less remained at seven-week highs, as fresh expectations for a June rate hike by the Federal Reserve continued to support.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending May 14 decreased by 16,000 to 278,000 from the previous week’s total of 294,000, while analysts expected jobless claims to fall by 19,000 to 275,000 last week. Separately, the Federal Reserve Bank of Philadelphia said that its manufacturing index deteriorated to -1.8 this month, from April’s reading of -1.6, while analysts had expected the index to improve to 3.5 in May. But the dollar remained supported after the Fed’s April meeting minutes showed that officials said a June rate hike would be appropriate if economic data indicated that growth was picking up in the second quarter and employment and inflation were firming.

Elsewhere: the pound strengthened, after the U.K. Office for National Statistics said retail sales rose 1.3% in April, well above economists’ forecasts for an increase of 0.5%; while the dropped to two-month lows, after the Australian Bureau of Statistics reported that the number of employed people increased by 10,800 in April, confounding expectations for a 12,500 rise, and the unemployment rate remained unchanged at 5.7% in April, compared to expectations for an uptick to 5.8%.

Today Tokyo is to host the G7 meeting; Canada is to release data on retail sales and consumer prices; while the U.S. is to round up the week with industry data on existing home sales.

The euro fell slightly on Thursday, sliding below 1.12 for the first time in more than a month, as foreign exchange traders parsed the minutes from recent meetings by the Federal Reserve and the European Central Bank for signals of further divergence between the top two central banks in the world.

The currency pair traded in a broad range between 1.118 and 1.1230 before settling down 0.14% on the session.
Today investors will focus on U.S. industry data on existing home sales, for further information on the strength of the American economy.

EUR/USD Chart

EUR/USD Chart

Pivot: 1.1255

Support: 1.1175 1.114 1.112

Resistance: 1.1255 1.129 1.1325

Scenario 1: short positions below 1.1255 with targets @ 1.1175 & 1.1140 in extension.

Scenario 2: above 1.1255 look for further upside with 1.1290 & 1.1325 as targets.

Comment: as long as the resistance at 1.1255 is not surpassed, the risk of the break below 1.1175 remains high.

Gold

Gold crashed to three-week lows on Thursday morning, before paring some of the losses late in the session, as market players continued to price in the improved chances of multiple rate increases from the Federal Reserve this year, following hawkish comments from the U.S. central bank on the likelihood of a June rate hike.

The precious metal wavered between $1,244.50 and $1,262.25 an ounce, before settling down $21.15 or 1.66%. Gold extended declines from the previous session when it plunged $15 an ounce after the FOMC said in the minutes from its April meeting that it will likely raise short-term rates at its next meeting in June, if the economy continues to improve as expected.
Today investors will focus on U.S. industry data on existing home sales, for further information on the strength of the greenback.

Gold Chart

Gold Chart

Pivot: 1261.5

Support: 1244 1237.3 1231

Resistance: 1261.5 1269 1276

Scenario 1: short positions below 1261.50 with targets @ 1244.00 & 1237.30 in extension.

Scenario 2: above 1261.50 look for further upside with 1269.00 & 1276.00 as targets.

Comment: the upward potential is likely to be limited by the resistance at 1261.50.

WTI Oil

Crude prices fell slightly below $48 a barrel on Thursday, pressured by a stronger dollar and a surprise increase in inventories, which served as a reminder that supplies are plentiful despite output problems.

Supply losses in Canada and Nigeria have supported the market. But cooler weather is expected to help firefighters battling Canadian wildfires and traders said Exxon Mobil (NYSE:) is boosting output at Nigeria’s largest crude stream.

Despite recent losses, oil prices have been well-supported in recent weeks due to a combination of Nigerian, Libyan and Venezuelan supply outages, declining U.S. shale output and reduced production of Canadian crude as a result of fires in Alberta’s oil sands region.

Today energy traders will focus on Baker Hughes weekly data on the U.S. oil rig count.

WTI Oil Chart

WTI Oil Chart

Pivot: 47.52

Support: 47.52 46.72 46.2

Resistance: 48.97 49.58 50.15

Scenario 1: long positions above 47.52 with targets @ 48.97 & 49.58 in extension.

Scenario 2: below 47.52 look for further downside with 46.72 & 46.20 as targets.

Comment: the RSI broke above a declining trend line.

US 500

U.S. stocks fell sharply on Thursday, as investors digested hawkish indications from the Federal Reserve that it will likely raise interest rates next month if the domestic economy continues to demonstrate signs of improvement.

The lost 0.52%, while the Composite index fell 0.37%, and the dipped 0.56%, amid a weak session among pharmaceutical stocks.

While the major indices came off session-lows with a late rally, stocks on Wall Street still closed broadly lower. With one session left in the week, the Dow and S&P 500 are both on pace for their fourth consecutive weekly decline. On the S&P 500 six of 10 sectors closed in the red, as stocks in the Financials, Industrials and Health Care industries lagged. Stocks in the Basic Materials and the Utilities sector led, each gaining more than 0.4%.

Today investors will focus on U.S. industry data on existing home sales, for further information on the strength of the American economy.

US 500 Chart

US 500 Chart

Pivot: 2034

Support: 2034 2006 1970

Resistance: 2085 2100 2130

Scenario 1: long positions above 2034.00 with targets @ 2085.00 & 2100.00 in extension.

Scenario 2: below 2034.00 look for further downside with 2006.00 & 1970.00 as targets.

Comment: the RSI lacks downward momentum. Thanks to a hammer candlestick, the head-and-shoulders pattern is still not confirmed.

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