US DOLLAR INDEX RECOILS AHEAD OF US HOME SALES DATA
The euro moved sideways on Tuesday morning after a mild statement by Christine Lagarde, the European Central Bank (ECB) chair. In a speech, she reiterated her earlier statement that the bank will hike interest rates in July and September. The two 0.25% rate hikes will see the bank exit negative interest rate hikes for the first time in years. The statement came a few days after the ECB decided to tweak its asset purchase program in a bid to support highly vulnerable economies like Italy, Greece, and Spain. She also added that wage growth was gaining steam in Europe and warned that inflation will keep rising.
The Canadian dollar rose slightly against the US dollar as investors waited for the upcoming Canadian retail sales data. Analysts expect the data to show that sales eased slightly in May this year as inflation kept soaring. The median estimate among analysts polled by Reuters is that the headline retail sales rose by just 0.8% in May while core sales rose by 0.6%. The slowdown in retail sales is likely because of the country’s soaring inflation. Recent data showed that inflation surged to a multi-decade high in May.
The key data to watch on Tuesday will be the latest American existing home sales numbers. Analysts polled by Reuters expect the data to show that existing home sales dropped from 5.61 million in April to 5.39 million in May. This will be the fourth straight month that existing home sales have dropped. Last week, other housing numbers revealed that building permits and housing starts also plummeted in May. As a result, investors are worried about the state of the housing starts as interest rates surge.
USDCAD
The USDCAD pair has been in a strong bullish trend in the past few weeks as the dollar strength continues. It has eased recently and is now trading at 1.2982, which is lower than last week’s high of 1.3080. It is also slightly above the 25-day moving average while the Relative Strength Index (RSI) and Stochastic Oscillator have been falling. Therefore, the pair will likely resume the bullish trend as bulls target the key resistance at 1.3050.
EURUSD
The EURUSD pair rose to 1.0536, higher than last Friday’s low of 1.0440. It has moved above the 25-day moving average while the Relative Strength Index have moved above the neutral level at 50. The pair has formed an inverted cup and handle pattern, which is usually a bearish sign. Therefore, the EURUSD pair will likely continue falling, with the next key support being at 1.0400.
USDMXN
The USDMXN pair retreated to 20.24, lower than last week’s high of 20.65. It has formed a double-top pattern and moved below the 25-day moving average. The MACD is approaching the neutral point. The pair will likely continue falling ahead of the upcoming Mexican GDP data scheduled for Tuesday afternoon.
