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Market Brief
The latest data from the US were broadly mixed with April Durables Goods Orders matching expectations at -0.5%m/m (4% prior). Markit Flash Services PMI came in below expectation at 65.4 versus 56.5 expected (57.4 prior) indicating that the US service sector lost momentum in May. However, since a read above the 50 threshold indicates an expansion, May’s figure is therefore not that bad. Finally, Consumer Confidence surprised markets on the upside as the index surged at 95.4 in May versus 95 expected and 94.3 prior. All in all, data release didn’t trigger major moves in FX markets as USD consolidates against G10 overnight before sliding slightly in late Asian session.
In Asia, equity returns are broadly negative. Korea’s Kospi is the biggest loser, down -1.68%. In Japan, the Nikkei is roughly positive, up 0.17% while the Shanghai Composite is rising, again, up 0.72%. Australian shares are down -0.83% despite Westpac leading index surged 0.1%m/m in April, rebounding from -0.35m/m in March. USD/JPY is consolidating around 123 after adding more than 3% in less than 3 weeks. This morning, BoJ minutes indicate that Japanese officials are comfortable with a weak Yen, helping to boost inflation. The dollar should find support at 121.48 (Fib 38.2% on late April – May rally) while a strong resistance implied by June 2007 high stands at 121.14. Further South, AUD/USD free fall continues as the Aussie broke the 0.7786 support (Fib 61.8% on April 13 – May 14 rally). Moreover, the break of the 50dma (0.7808) validate a negative trend, we therefore expect the pair lower. On the downside, the next support can be found at 0.75 (psychological threshold).
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