FX.co ★ Global macro overview for 05/06/2018

Behind traders, the day without interesting macro events, which allowed markets to maintain a positive sentiment, continue to increase stock prices and bond yields, and for the currency market it meant the consolidation of the major pairs and a little more appreciation for risky currencies. The rest phase after the busy and violate end of May lasts in anticipation of fresh information or the creation of an unambiguous trend.

Yesterday, the dollar initially gave away the ground, but the situation turned around after the Wall Street entered the game. As a result, after 24 hours we see more or less the same: EUR/USD hovering around 1.1700, USD/JPY at 110.00 and GBP/USD at 1.3300. The fluctuations back and forth reflect a calm ordering after the events of the last days. European political risks seem to descend into the background, and investors rather than quickly jump to the discussion on the uncertainty in trade relations United States against the rest of the world, find solace in better macro data and the cool green of the stock markets. Nevertheless, this situation might not last for a long time and the sensitivity to shocks is still high, although the discussions on the market more and more often the question arises whether we already begin to decline in volatility during the summer holiday period.

Investors are waiting for anything to happen in major pairs. The quietness of the Italian crisis gives grounds for Euro to rebound, but so far the market participants cannot see a bit of a conviction that it is worth pulling increases higher. It seems that the market has lost confidence in foundations and is looking beyond political factors. If we return to the balance of risks from two weeks ago, we face a pale image of macroeconomic condition that binds the hands of the ECB and delays the process of monetary policy normalization. Though after a series of a disastrous first quarter, now it should be easier for positive surprises, investors (and probably the ECB itself) need to strengthen the recovery of evidence to discount the better the profile of the risks for the Euro. However, this requires time and data. Today's PMI readings and Eurozone retail sales may be the first flash of improvement: the German PMI Services data were in line with expectations of 52.1 points and Composite PMI was even a slightly better at 53.4 vs. 53.1 expected. In the Eurozone, the PMI Services was a tad lower than expected (53.8 vs. 53.9), but Composite PMI was in line with expectations at 54.1 points. The Retail sales data disappointed as they were released at the level of 0.1% m/m while the global investors expected 0.5% m/m increase.

Let's now take a look at the EUR/USD technical picture at the H4 time frame after the data were published. The pair remains closed in a horizontal zone between the levels of 1.1676 - 1.1726 in oversold market conditions. The key level to the upside is still seen at the 1.1749 - 1.1756 zone and only a sustained breakout above this level would accelerate the rally towards the next resistance at the level of 1.1829. Otherwise, the market remains locked and might continue to consolidate even longer.