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Currency Market Analysis

May 21, 2021 | Currency Market Analysis

Global Themes

USD reversed lower as risk appetite returns

Euro rebounded on Thursday, reversed the sell off earlier as US bond yields came off weighed on USD and improved risk sentiment drove equities higher. According to Reuters, short term structural support is at 1.2150, 10 DMA, and potential resistance is at double top 1.2250 but making a run for Jan’s 1.2350 high. Eurozone will release Markit PMI data today.

USDJPY fell overnight, inline with the drop in US bond yields as market doubt the Fed will taper that soon, as Philly Fed came in much weaker than expected, while US jobless claims remains high. According to Reuters, spot is below the up trendline from January at 109.01, but have not closed below it. Below this the next focus will be May’s low at 108.34, while May high at 109.78 is the initial resistance. US will release PMI and existing home sales data today.

Sterling pushed higher overnight, as global risk appetite returned, but market is likely to be capped at 2021 high at 1.4240 ahead of UK’s PMI and retail sales data release this afternoon. According to Reuters, support is at 10 DMA at 1.4107 and May 13 low at 1.4000.

USDCNH came off from 6.44 as weak US economic data weighed on US bond yields and USD, while stronger US equities also lifted risk sentiment and emerging market currencies. As expected, China kept its benchmark 1Y and 5Y lending rate for the 13th straight month. Short term support is at 3 year low 6.4000, while short term resistance is at 21 DMA at 6.4560 and 100 DMA at 6.4820.

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