• Swiss franc set for first monthly advance against the dollar this year
• Dollar pares gains in mixed flows to start the session
• What is a bear steepener and why it matters?
• Spain May preliminary CPI +3.6% vs +3.7% y/y expected
• Eurozone April unemployment rate 6.4% vs 6.5% expected
• Eurozone May final consumer confidence -14.3 vs -14.3 prelim
• Switzerland Q1 GDP +0.5% vs +0.3% q/q expected
• Dollar selling one to watch for this month-end – Deutsche

Markets:

• CHF leads, USD lags on the day
• European equities higher; S&P 500 futures down 0.4%
• US 10-year yields down 3.2 bps to 4.591%
• Gold down 0.1% to $2,337.01
• WTI crude flat at $79.24
• Bitcoin up 0.6% to $67,842

Trading in Europe today was a bit mixed, as the early gains in the dollar and opening losses in regional indices were turned around during the session.

The greenback was a little higher in Asia as the risk mood was more sour, with equity futures pointing lower. That led to a softer open in Europe but we’re now seeing stocks hold a little higher with the dollar also lagging across the board. US futures are still down though, but S&P 500 futures have at least halved losses on the day.

EUR/USD was flirting with a firmer drop under 1.0800 early on but is now a little higher at 1.0820 with large option expiries at 1.0800 and 1.0825 also in play. USD/JPY is down 0.6% to 156.70 after some back and forth trading, with the pair having fallen to a low of 156.55 then moving back up to 157.20 before coming back down.

The Swiss franc is the top performer though, with USD/CHF down 0.7% to 0.9070 with the pair poised for its first monthly drop this year.

In other markets, bond yields are down with 10-year Treasury yields seen lower by 3 bps to 4.59%. Meanwhile, commodities remain sluggish with gold down at $2,337 but at least off its earlier low of $2,322.

This article was written by Justin Low at www.forexlive.com.

USD/CHF has seen gains in each of the opening four months this year. But in May trading, the pair looks set for its first monthly decline now. A chunk of that will owe to today’s drop, after having seen a bounce off key support at 0.9000 earlier this month.

The combination of a stronger dollar and a quick shift by the SNB to rate cuts in March has helped to precipitate the rise in USD/CHF this year. The Swiss central bank made their move as inflation pressures look to be coming well under control. However, there is still lingering uncertainty as evident with things in the US, Europe, and UK.

So, the SNB must not be too complacent in their approach. If the franc also continues to weaken, that might invite more inflation down the road for the Swiss economy. And as SNB president Jordan outlined earlier here, that is the key risk that they have to watch out for right now.

If they are to cut rates further, it will see more pressure on the franc. But at the same time, they’d be hoping to avoid too much of that so as to not stir up higher inflation.

The risk backdrop earlier today was rather sluggish and it was a good a time as any for the SNB to work some of their magic. But we’re now seeing mixed flows in European morning trade, though the franc is still unfazed and sitting at the highs for the day.

But in the case of USD/CHF, there is still key support closer to 0.9000 at this stage. As long as that holds, the pair can still maintain a more bullish momentum in the bigger picture.

This article was written by Justin Low at www.forexlive.com.

They make the case that May was a positive month for US equities, hence rebalancing flows will result in outflows for the dollar. This matches up with what Barclays argued from last week here.

At the same time, Deutsche says that their model also points to positive flows in the CAD and GBP. This comes as both Canadian and UK equities have lagged behind their US counterparts this month. In that lieu, they see the most selling in USD/CAD and most demand in GBP/USD for this month-end.

Typically, these flows can play out during the week but they can be particularly evident at the London fix in the last few days of the month. So, that might be one to watch out for later today or tomorrow.

This article was written by Justin Low at www.forexlive.com.

The USD got a boost from
the strong US Consumer Confidence data which triggered an aggressive
rise in long term Treasury yields. The report however just showed that the
labour market remains resilient which is good news for growth and not
necessarily bad news for inflation. The greenback benefited also from the
risk-off sentiment which seems to be caused more by the month-end flows rather
than a fundamental driver.

The GBP, on the other hand,
has been supported by a slightly more hawkish repricing in interest rates
expectations following the hot UK CPI report last week which saw the chances of a
rate cut in June evaporating. If we go back into risk-on sentiment, the
greenback could start losing ground against the Pound again.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD managed to eventually hit the 1.28 handle. The pair started to
drop steadily since then as the risk-off sentiment in the markets boosted the
US Dollar. If the correction extends further, we can expect the buyers to lean
on the trendline
around the 1.2630 level to position for a rally into new highs with a good risk
to reward setup.

The sellers, on the other hand, will want to see the price
breaking lower to invalidate the bullish setup and position for a drop into the
1.25 handle next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have the confluence of the previous swing high and the
50.0% Fibonacci retracement level around the trendline. This
should technically strengthen the support and give the buyers a bit more
conviction for a bounce. A break below that support
should give the sellers more control and increase the bearish momentum.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a good resistance at the 1.2710 level where we can find the
confluence of the downward minor trendline and the 38.2% Fibonacci retracement
level.

This is where we can expect the sellers to step in with a defined risk
above the trendline to position for a drop into the major trendline with a good
risk to reward setup. The buyers, on the other hand, will want to see the price
breaking higher to invalidate the bearish setup and start targeting new highs.

Upcoming
Catalysts

Today we will see the latest US Jobless Claims figures, while tomorrow we
conclude the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The markets went into
risk-off on Tuesday after the strong US Consumer Confidence data which triggered an aggressive
rise in long term Treasury yields. The report however just showed that the
labour market remains resilient which is good news for growth and not
necessarily bad news for inflation.

The month-end flows could
also be skewing the picture. The negative sentiment weighed on Bitcoin although
much less than in other markets, which might also be a signal that as soon as
the sentiment changes, we could see some more upside.

Bitcoin
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that Bitcoin is testing the 67275 support.
This is where we can expect the buyers to step in with a defined risk below the
level to position for a rally into the cycle highs. The sellers, on the other
hand, will want to see the price breaking lower to open the door for a drop
into the 60000 support next.

Bitcoin Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have some nice confluence
around the support with the trendline
and the 38.2% Fibonacci
retracement level. This should technically strengthen the support zone and
give the buyers a bit more conviction for a bounce. A break below the trendline,
on the other hand, will likely give the sellers more control and possibly
trigger a bigger correction.

Bitcoin Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the first resistance comes around the 68861 swing level. A break above
that level should open the door for a rally into the 70639 swing high.

Upcoming
Catalysts

Today we will see the latest US Jobless Claims figures, while tomorrow we
conclude the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.