U.S. liquidity providers are back in the office following the Memorial Day weekend. At this point, forex participants are betting against the Greenback. Key movers have been the EUR/USD (+0.15%), USD/CHF (-0.35%), and USD/CAD (-0.21%). As we kick off June’s trade, it appears that the dollar is poised to continue 2021’s downtrend.
On the economic news front, there were a few releases out this morning. Here’s a look at the highlights:
Event Actual Projected Previous
ISM Manufacturing PMI (May) 61.2 60.9 60.7
ISM Manufacturing Prices (May) 88.0 89.8 89.6
The ISM figures are in for May and the manufacturing sector is on the uptick. However, it’s important to note that inflation is becoming a factor, specifically in the pricing of commodities. Prices are up across the board, led by WTI crude oil closing in on $70.00. In short, raw materials prices are spiking; this will certainly impact the manufacturing sector in the coming months.
For the EUR/USD, rates are closing in on January’s highs. Let’s take a look at the weekly technicals and see if we can spot a trade or two.
EUR/USD Rallies Toward Yearly Highs
The EUR/USD is showing strength as bidders continue to enter the market. Rates are above 1.2225 and climbing.
Bottom Line: Right now, there aren’t a whole lot of reasons to believe that the USD will recover anytime soon. Fed policy remains dovish and ready to accept a period of heightened inflation. Unless we begin to see a more hawkish tone out of Jerome Powell and the FOMC, the Greenback is going to continue to slip. Perhaps the June FOMC Meeting will shed some light on when the Fed may consider tapering QE unlimited.
Until elected, I’ll have sell orders in the EUR/USD from 1.2341. With an initial stop loss at 1.2409, this trade produces 60 pips on a slightly sub-1:1 risk vs reward ratio.
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