The foreign exchange market remained confined within a narrow range at the start of the week amid holiday-thinned trading with the US and UK markets closed. The yen fell sharply overnight as a result of heightened geopolitical risk following reports of North Korea testing nuclear weapons, prompting a slide in the yen to the 95.18-level.
The US market re-opens on Tuesday with the economic calendar consisting of the March Case-Shiller home price index, May Richmond Fed manufacturing and the May Conference Board's consumer confidence survey. The Case-Shiller home price index is estimated to decline by 1.8% in March, compared with a 2.2% fall in the previous month while falling by 18.5% on an annualized basis versus an 18.6% fall a year earlier. The Conference Board's consumer confidence survey in May is seen improving slightly to 42.0, up from 39.2 in April.
Euro Holds Above 1.40
The euro held firm above the 1.40-level against the greenback despite weaker than expected economic data from Germany. The Ifo business climate component disappointed expectations for an improvement to 85.0, instead improving to 84.2 from 83.7 while the expectations index edged up to 85.9 from 83.9 previously. Ifo President Sinn said the report suggested a gradual stabilization of the economy at a low level. With prospects that the rapid deterioration of Germany's economic fundamentals may be moderating, traders will look ahead to Germany's Q1 GDP and trade data.
EURUSD will encounter resistance at 1.4050, followed by 1.4080 and 1.41. Subsequent ceilings are eyed at 1.4130, backed by 1.4165 and 1.42. On the downside, support starts at 1.3970, followed by 1.3940 and 1.39. Additional floors will emerge at 1.3860, backed by 1.3820 and 1.38.