Currency markets search for meaningful direction ahead of data
May 23rd - There’s little of note on the economic calendar right now and this is leaving currency markets struggling to find any meaningful direction. With uncertainty continuing to prevail as to where the Fed will take interest rates next, volatility looks set to continue for the dollar in the medium term, but comments overnight from Bank of Japan governor Fukui predicting an increase in domestic demand have underlined the fact that Japanese yields will be rising – albeit slowly – to manage inflation. This has provided some support for the Yen and although USD JPY remains some way off last week’s lows around 109, significant appreciation has been seen in the last 24 hours. In the absence of any additional fundamental information, key technical levels are certainly worth looking at and a sustained break below 111 – a 50% retracement off the May 17th – May 22nd run of appreciation – could open the way for another test of the recent lows. German GDP data for Q1 has also been released this morning but with no surprises here, the common currency has failed to find any additional inspiration. As the week progresses further economic indicators are due for release and more sustainable direction may be forthcoming but for the time being, generally sideways trading looks set to prevail…
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