"Asian Stocks Rise for Third Day as Investors Watch Chinese Data and US Inflation, While Yellen Warns of Debt Limit Stalemate"
Asian stocks continued to climb for the third day, with positive sentiment and relative calm leading the gains, particularly in China. Energy and materials companies were the driving forces behind the rally, resulting in the Asia-Pacific stock index reaching its highest point in over two weeks. Meanwhile, the US dollar index fell for the fifth consecutive day, but Treasury yields remained steady. However, bank shares in Japan's Topix index fell by over 1% as traders returned from Golden Week holidays. Conversely, Chinese bank stocks saw an increase after several lenders lowered deposit rates, and Westpac Banking Corp in Australia beat analysts' expectations with a 1.8% gain in its first-half net profit.
Investors are closely watching Chinese trade and inflation data, which are due on Tuesday and Wednesday this week, respectively, to gauge the country's economic recovery.European stocks' futures contracts indicate a muted start. On Friday, US payroll data showed hiring and worker pay gains had increased in April, leading to signs of labor- market resilience and inflationary pressures, and easing fears of a US recession. The data has also fueled speculation that the Federal Reserve may leave interest rates higher for longer and potentially increase rates in June. However, futures contracts have priced in a 90% likelihood of steady rates in June and 38% for a cut in July, leaving the market vulnerable to an upside surprise on the CPI. The US core consumer price index, excluding food and energy, is also set to be released this week and projected to show a 5.5% increase in April from a year ago, closely watched by the Fed.
Meanwhile, Treasury Secretary Janet Yellen has warned that there are "no good options" to solve the debt limit stalemate in Washington without Congress raising the cap and even cautioned against resorting to the 14th Amendment, which could provoke a constitutional crisis. Finally, investors await the Federal Reserve's Senior Loan Officer Opinion Survey (SLOOS) to gain more insight on the potential banking crisis in the country, particularly given the current strife in US regional banks.
EURUSD
EUR/USD recovered during the Asian session but stopped at the 1.1050 level. The price action on the EUR/USD pair has entered a two-week range, waiting for data developments to determine a breakout in either direction. The 1.0900 level is providing resistance within the current range, while 1.0940 is the support level.
The long-term outlook is uncertain as the price action around 1.1100 shows hesitation, with multiple attempts to break the level resulting in no significant moves. The economic data developments from last week have added more uncertainty, especially in the labor market.
The current resistance levels to watch are 1.1050, 1.1090, and 1.1100, while the support levels are 1.1000, 1.0970, and 1.0950.
Support 1.1050, 1.1090, and 1.1100
Resistance 1.1000, 1.0970, and 1.0950
GBPUSD
GBP/USD continues to rally for the fourth consecutive day, breaking through a one-year high above 1.2650 on Monday. The ongoing move up is supported by dovish Fed expectations, which are keeping the USD depressed. Investors are now focusing on the Fed's Loan Officers Survey for further guidance.
Looking at the weekly chart, the 1.2650-1.2750 range is a critical area where the 100MA and 200MA converge, as well as a historical support level. A breakout above this range would require strong market data or events that are solid enough to boost the GBP, or we may see a reversal leading the pair down.
The current resistance levels to watch are 1.2650, 1.2680, and 1.2700, while the support levels are 1.2600, 1.2560, and 1.2500.
Support 1.2680, 1.2680, and 1.2700
Resistance 1.2600, 1.2560, and 1.2500.
USDJPY
The USD/JPY has reached the anticipated support level of 133.75 after a four-day correction and is now correcting towards the next resistance level of 135.50. The pair continues to respect its regional bullish channel, and the actual price action suggests that it may be bullish.
The lack of influence will leave the USD/JPY to respond further to the US Jobs Report from Friday. While recessionary jitters eased, bets on a 25-basis point Fed interest rate hike in June remained subdued. On Wednesday, the US CPI Report will give investors clues on what to expect from the Fed. Loan data for today may have an impact on the bond market and also sentiment, which may affect the pair directly.
The current resistance levels to watch are 135.50, 136.40, and 137.70, while the support levels are 133.50, 133.00, and 132.00.
Support 0, 136.40 136.40, and 137.70,
Resistance 133.50, 133.00, and 132.00.
XAUUSD
The price action on gold is currently showing divergence with the RSI, and a possible reversal may occur as the current price has touched the high level of 2080. Gold is waiting for the market to form a consensus on sentiment and a clear direction to find a way to make a new historical high or a more probable reversal.
Although the price has touched a historical high, there is uncertainty about whether there will be more bullish momentum at this level until there are strong data or event developments. Historically, gold has retreated from these levels and has not held for a long time at this resistance level.
The current resistance levels to watch are 2030, 2060, and 2070, while the support levels are 2011, 2000, and 1990.
Support 2030, 2060, and 2070
Resistance2011. 2000, and 1990
DAX 40
The Dax is currently hovering around the 16000 mark, with investors awaiting further developments from the ongoing earnings season. So far, European and German companies have shown resilience. However, European shares are expected to open unchanged on Monday, with UK markets closed for a holiday and US debt ceiling talks still at a stalemate.
Looking ahead, the next support levels for the Dax could be around 15750 and 15650, respectively. These levels have served as a support line for the past six corrections observed since mid-April. If the strong support at 15600-15500 is broken, it will be the next support level. On the resistance side, the 16000-16100 and 16270 levels are the next resistance levels to watch for the Dax to reach its historical high level.
Support 15750 and 15650,15600/15500
Resistance 16000-16100 and 16270
