On the daily chart below for
AUDUSD, we can see that the price recently sold off again from the top of the
range and the 38.2% Fibonacci
retracement level. We’ve been stuck in this range since the
collapse of the Silicon Valley Bank as the market is still uncertain if the
events will help the Fed to bring inflation down fast to target without a major
hit to the economy, or if we will have a worse hard landing than expected.

The
sellers, nevertheless, keep leaning on the resistance and they’ve been quite successful
for now. Needless to say, that an eventual breakout on either side of the range
should lead to big moves and traders should be prepared for that.

On the 4 hour chart below, we can
see that the trendline that was supporting the rally
towards the resistance got broken last Thursday and the sellers immediately
piled in to extend the selloff targeting the support at 0.6563. Yesterday, the
price bounced, and we got a pullback to the red long period moving
average that is now acting as resistance for the bearish short term trend. Such
pullbacks are generally healthy in a trend, especially after such quick moves.

On the 1 hour chart below, we can
see that the price pulled back all the way up to the swing high level where we
have also confluence with the 38.2% Fibonacci
retracement level. Since tapping into that resistance zone,
the price fell again and it’s now pulling back to the blue short period moving
average. The market is likely to find sellers here as the moving average
crossover will be taken as a hint that the bigger pullback has ended. Today, we have the US Retail Sales
report and it’s expected to be a market moving event. Worse than expected data
is likely to be taken as bad for risk sentiment, ultimately favouring the USD,
while better than expected figures may weaken the USD again.

This article was written by ForexLive at www.forexlive.com.

• I think we have lost a degree of trust
• That affects what we should be doing with our decision making
• We should be explaining it to more people, do more in terms of thinking about the audience we’re talking to
• We need to be explaining what we’re seeing and why we’re making the judgements we are and talk to the people and communities in a language they can understand

Just that little bit of trust, eh? That’s a bit modest. Pfft. He’s speaking in the context of explaining the decision making by major central banks to a wider audience, and not just financial markets.

This comes of course after having previously brushed aside inflation pressures back in 2021, with the ECB profusely calling it „transitory“. Remember that? And then all of a sudden now needing to pile on aggressively rate hikes in the past year.

Props to him for admitting it but even with knowing what they should do better, let’s face the facts. Central bankers are pretty much just like politicians at this point and they will not have played things out differently given another chance anyway.

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

Here’s a snapshot of the equities space:

• S&P 500 futures -0.2%
• Nasdaq futures flat
• Dow futures -0.3%
• Eurostoxx +0.1%
• Germany DAX +0.1%
• France CAC 40 flat
• UK FTSE flat

It’s not pretty but it’s not bad either, to put things nicely. And the lack of any real direction so far in the session is making it tough to get a grip on things happening elsewhere as well.

In the major currencies space, the dollar is still just slightly on the softer side while bond yields are continuing to stay heavier on the session.

At this point, it looks like traders are just hoping for a notable surprise miss/beat on the next big data in order to start jumping around. Let’s see whether or not the US retail sales data will offer that opportunity.

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

• There is some risk of a recession
• But if we fall into one, it will not be long or deep
• There could be some increase in unemployment from here but economy will still be strong

Pretty much just echoing what we already know since the FOMC meeting two weeks ago, as the Fed looks to be aiming to move to the sidelines for the time being.

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

Headlines:

• EU bumps up 2023, 2024 growth and inflation forecasts
• ECB reaffirms lagging impact of rate hikes in latest bulletin
• China’s central bank reaffirms to keep liquidity reasonably ample
• Germany April wholesale price index -0.4% vs +0.2% m/m prior
• Eurozone March industrial production -4.1% vs -2.5% m/m expected
• Switzerland April producer and import prices +0.2% vs +0.2% m/m prior
• SNB total sight deposits w.e. 12 May CHF 520.1 billion vs CHF 525.6 billion prior

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.4%
• US 10-year yields up 2.2 bps to 3.485%
• Gold up 0.2% to $2,015.03
• WTI crude up 0.6% to $70.45
• Bitcoin up 3.7% to $27,423

It was a relatively slow session but there were some decent moves in markets to start the new week.

The dollar is seeing a bit of a light pullback as risk sentiment recovers, with equities pushing higher in European morning trade. That weighed on the greenback as well as the yen, with a slight rise across the board for other major currencies.

EUR/USD moved up from 1.0860 to 1.0880 while GBP/USD moved up from 1.2460 to 1.2500 during the session. The antipodeans were the lead gainers, with AUD/USD improving from 0.6670 in Asia to 0.6690 and holding at the highs for the day now. NZD/USD is also up 0.4% to 0.6215 but off its earlier high of 0.6230 earlier in the day.

USD/JPY also pushed higher as yields moved up amid the better risk sentiment, with the pair holding just above 136.00 for now – up 0.3% on the day.

Elsewhere, commodities also traded higher across the board as it is a case of a dollar pullback mostly amid a slight bounce in the risk mood to kick start the week.

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

• Does not see inflation coming down quickly
• There is still a long way to go in battle against inflation
• We may have to go up further on rates
• Thinks the math (on inflation, economy) will work in Fed’s favour in months ahead

He adds that if there is a bias to take action, it might just be a little bit more as he says „we are where my dot has been“.

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

The pair is moving up today as the dollar is seeing a bit of a pullback to last week’s advance. We are seeing price now nudge back just above 1.2500 but does it really mean anything for cable at this point?

For now, the technical argument is indicating that it would take more than a push above the figure level (at least this one) to push the agenda on the part of buyers. The weekly chart shows that:

The pair did run up against the highs from May last year at 1.2660-66 but ultimately failed to breach that on last week’s close. In fact, that sharp rejection was the first weekly drop in cable in nine weeks. But it also comes just under a key technical point in the form of the 100-week moving average (red line), now seen at 1.2693.

As such, even with a push back above 1.2500, it hardly means anything for any upside move in cable unless buyers can look to take out the levels pointed out above.

And even before that, there is the near-term resistance points from the 100 and 200-hour moving averages, now seen at 1.2558 and 1.2575 respectively.

As for any downside push, the 10 and 17 April lows at 1.2343-53 is going to be a key supportive region to watch before any potential breakdown towards the 100-day moving average at 1.2250 currently. Those will be key targets to watch on any further selling during the week.

In terms of the fundamental picture, a lot of the positive vibes has already been priced in for sterling it would seem. The BOE did as expected and didn’t really offer any stronger conviction to battle inflation down the road. Bailey & co. even kept the door open to pausing and with markets already pricing in a peak of 4.85% in the bank rate, there’s not much room left for any further hawkish implications.

The 5.00% mark is of course the big one to watch but that will depend on the BOE’s conviction next month and also incoming UK economic data in the weeks ahead. But with market pricing already being nearly there, it’s hard to imagine more upside to come for the pound from this factor alone.

As for the Fed side of the equation, Fed funds futures are still pointing to around three rate cuts by year-end and all else being equal, that pricing can only turn to be more hawkish at this point. Markets are convinced the Fed will pause but policymakers have insisted that they want to keep rates higher for longer.

As such, the current outlook does suggest that the risks to the rates pricing are skewed towards the possibility that traders could be wrong. That is unless something else breaks in the US economy and the Fed is forced to „save the day“ by kicking off the rate cut cycle earlier than they intend to.

If you consider the above elements, the path of least resistance may be lower for GBP/USD especially if the technical considerations are also favouring the dollar for now. But even so, the amount of weakness in price may be largely contained as markets are still trying to sort out their feet in dealing with all of the other narratives above.

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

The upcoming week is expected
to be quite eventful and filled with data releases in all markets. The most
important events will be:

On Monday, the U.S. will release the Empire State Manufacturing Index,
providing insights into the manufacturing sector’s performance.

Tuesday will see several key
releases. In Australia, the Westpac consumer sentiment data and the Monetary
Policy Meeting Minutes will be important to watch. Meanwhile, the U.K. will
report the claimant count change, average earnings index 3m/y, and the
unemployment rate. Additionally, the eurozone will share the German ZEW
economic sentiment report. In Canada, important data such as the CPI m/m,
manufacturing sales m/m, core retail sales m/m, and retail sales m/m will be
published. In the U.S., we’ll get the industrial production data.

Moving on to Wednesday,
Australia will report the Wage Price Index q/q, offering insights into wage
growth. In the U.S., attention will be on the release of building permits and
housing starts, providing indicators for the housing market’s performance.

Thursday will bring
significant updates. Australia will share the employment change and
unemployment rate figures, shedding light on the labour market. In Europe, it
will be a bank holiday in observance of Ascension Day. In the U.S., the focus
will be on the unemployment claims, Philly Fed manufacturing index, existing
home sales, and the CB leading index. Moreover, the Bank of Canada (BoC)
Governor Macklem is expected to hold a press conference in Ottawa, discussing
the Financial System Review.

Lastly, on Friday, Japan will
release the National Core CPI y/y, providing insights into inflation trends.
The G7 Meetings will take place, with discussions revolving around global
economic and geopolitical issues. In the U.S., Fed Chair Powell will
participate in a panel discussion titled „Perspectives on Monetary
Policy“ at the Thomas Laubach Research Conference in Washington DC.
Furthermore, some Fed members are expected to deliver remarks throughout the
day.
Tuesday’s release of the RBA minutes will provide valuable insights into the
surprising 25bps rate hike delivered by the Bank at its previous meeting,
catching many off guard as they anticipated a pause. During the meeting, the
RBA maintained a hawkish stance, indicating the need for further tightening
measures to combat the persistently high inflation levels. The Bank emphasized
its commitment to taking the necessary actions to address the issue. In
Australia, although inflation may have reached its peak — currently standing
at 7% — it remains significantly elevated compared to the Bank’s target and
the current forecast is that it will take a couple of years to return to
target.
The upcoming labour market data for the U.K. could show some improvement,
particularly in terms of participation, employment and wage growth. The
consensus among analysts is for the unemployment rate to remain unchanged at
3.8%, but Citi forecasts a positive 3-month employment change to 190K from the
previous 169K. Should the labour market data continue to exhibit strength,
there is a possibility that the Bank of England will hike the rate by another
25bps at its next meeting in June. However, the decision will also take into
account other factors, such as the forthcoming CPI data scheduled for release
on May 24th, which will contribute to shaping the BoE’s stance.
In the U.S., headline retail sales are projected to rise by 0.7% for the
month-over-month data, while core retail sales are expected to show a modest
uptick of 0.5% m/m. However, Bank of America’s „Consumer Checkpoint“
data suggests a softening in consumer spending, with total card spending per
household declining to -1.2% year-over-year (Y/Y).

The upcoming CPI data for Canada will be closely monitored this week, as its
results carry significant weight. The consensus forecasts a 0.5% increase for
the month-over-month figures, while the year-over-year CPI is expected to drop
slightly from 4.3% to 4.2%. Citi analysts anticipate continued easing in the
y/y figures towards 3% in the coming months, largely driven by substantial base
effects from lower energy prices. Additionally, the Bank of Canada has
emphasized that if inflation persists above target, further tightening is
possible.

The labour market in Australia
remains tight. This week’s data is expected to show wage growth acceleration
primarily driven by the private sector. The unemployment rate is at the
historical 50-year low level of 3.5% under NAIRU forecasts of 4%-4.5%.

In the U.S. housing starts are
expected to see some further decreases, with a consensus of -1.4% m/m to 1.4M
from 1.42M. The consensus for building permits in April is 1.44M, a slight
growth from the previous 1.43M, but analysts from Citi anticipate a much higher
rise to 1.51M (6.2% m/m).

On Thursday, Australia will release labour market data, including the
employment change figures and the unemployment rate. The consensus suggests
that the unemployment rate will decline from 3.5% to 3.4%, while the
participation rate is expected to remain unchanged. Although the current labour
market data appears robust, there are indications from the business sector of a
slight easing in labour demand. Thursday is a bank holiday in most of Europe in
observance of Ascension Day.

For the U.S. – unemployment
claims; Philly Fed manufacturing index; existing home sales and the CB leading
index;

In the U.S. all eyes will be
on the unemployment claims data as it can give us some clues about the labour
market. The consensus is for a drop from 264K to 251K, suggesting the labour
market remains tight for now. Some softness is likely for existing home sales
with a drop to 4.30M from 4.44M being expected. Mortgage application data will
be an important factor for existing home sales, which might stall because
homeowners are reluctant to sell and give up their existing mortgage rates that
are much lower than current ones.

On Friday, Bank of Canada
Governor Macklem is scheduled to hold a press conference in Ottawa, focusing on
the Financial System Review. While these events usually do not yield
significant announcements, it is worth paying attention as there is a
possibility that he may provide new insights on inflation.

In Japan, the National Core
CPI year-on-year data will be released. Over the past few months, Japan has
experienced moderate economic growth, and this trend is expected to continue in
the near future. Although inflation in Japan remains elevated, consumer prices
are considerably lower compared to other developed countries. There are
indications that inflation in Japan may have already peaked, and with the
implementation of government subsidies and the modest economic growth, it is
possible that inflation will gradually return to the Bank’s target.

On Friday, Federal Reserve
Chair Powell is scheduled to speak at the Thomas Laubach Research Conference in
Washington DC, where he will participate in a panel discussion focused on
„Perspectives on Monetary Policy.“ While this event is not anticipated
to yield any significant developments, there is a possibility that Chair Powell
may address topics such as inflation and future rate hikes in his remarks.

This article was written
by Gina Constantin.

This article was written by ForexLive at www.forexlive.com.

• US stocks close lower. Dow down for 5 consecutive days
• Bitcoin trades to the lowest level since March 17
• A snapshot of the major releases next week
• WTI crude oil futures settle at $70.04
• White House: Debt ceiling meetings over last few days have been productive
• Bakers Hughes oil rigs fall 2 to 586
• Fed’s Goolsbee: Inflation is still too high but at least it is coming down
• European indices hang onto gains for the day
• CBO: Treasury to face cash crunch in the first 2 weeks of June.
• Biden: Nominate Jefferson to be Vice Chair
• May Michigan consumer sentiment index (preliminary) 57.7 versus 63.0 expected
• Debt talks with leaders expected to resume on Monday or Tuesday
• US import prices for April 0.4% vs 0.3% estimate
• The GBP is the strongest and the NZD is the weakest as the NA session begins
• BOE’s Pill: Not intending to give a directional bias on future rate decisions
• ForexLive European FX news wrap: Dollar keeps steady in final stretch of the week
• BOE to end rate hike cycle in June – Morgan Stanley

The USD is the ending the day as the strongest of the major currencies, while the NZD is the weakest.

The move higher in the greenback can be attributed to:

• Higher inflation expectations from the University of Michigan Consumer survey
• Concerns about the debt ceiling leading to a flight to safety flow into the greenback
• Technical breaks in some of the major currency pairs.

In May 2023, the University of Michigan Index of Consumer Sentiment dropped by 9.1% MoM to 57.7 (from 63.5 last month), representing a 1.2% YoY decrease from May 2022. The Current Economic Conditions index experienced a -5.4% MoM decline to 64.5 (from 68.2), but increased by 1.9% YoY. Meanwhile, the Index of Consumer Expectations saw a significant 11.7% MoM drop to 53.4 from 60.5 last month, accompanied by a 3.3% YoY decline.

The fall was attributed to renewed concerns about the economy’s trajectory, erasing more than half of the gains since last June’s historic low. Despite the absence of recession indicators in macroeconomic data, consumers‘ worries escalated in response to negative economic news, including the debt crisis standoff. It was the inflation expectations that got the most attention. The 1-year inflation expectations slightly decreased to 4.5% in May from 4.6% in April, but the long-run 5-year inflation expectations, after two years of stability, reached its highest level since 2011, increasing from 3.0% to 3.2% this month.

Regarding the extension of the debt ceiling, the Congressional Budget Office (or CBO) released projections for cash flow absent legislation to extend the debt ceiling. According to projections they see the US treasury running out of money in the 1st 2 weeks of June (dependent on inflows and outflows and the timing of such). If things are just right and they get passed mid-month when additional tax inflows are expected, the government may cobble along to the July. However, there is also a chance they could also run out of money more toward the beginning of the month.

This week, the congressional leaders met with Pres. Biden with little progress made. They were expected to meet again today, but that meeting was postponed in favor of having staff members continue to work on a solution. Leaders are not expected to get together again until Monday or Tuesday of next week.

The full details, led to additional dollar buying as the fears of default started to enter into the markets.

Finally, technical breaks and some of the major currency pairs help to push the US dollar higher.

• NZDUSD: The NZDUSD was the biggest mover with a 1.71% decline. New Zealand inflationary expectations fell to 2.79% from 3.3% last quarter, sending the pair to the downside. The fall took the price below the 200-hour moving average of 0.8287, the 100-day moving average of 0.62776, and the 50% and 61.8% retracement of the move up from the April 26 low at 0.62475 and 0.62155. The low price reached down to 0.6181 before stalling and trading in a narrow range up to 0.6194. The 200-day moving average lose below at 0.6159. The price moved above that 200-day moving average back on April 28 near the same level.

• EURUSD: The EURUSD saw the price this week fall below the 100 bar moving average on the 4-hour chart, initially find support against the 200 bar moving average and a lower swing area (see green number circles), but then right below and use the consolidation area below near 1.0935 and resistance. The inability to move above the lower swing area in the „red box“ below gave the sellers the go-ahead to push to the downside. The 38.2% retracement of the move up from the March low was broken at 1.08735. The next key target area comes against the 50% retracement level, the swing area between 1.0798 and 1.0805, and the rising 100-day moving average in the same area roughly around the 1.0800 level. Breaking outside of the red box put sellers in firm control in the short term at least.

• GBPUSD: The GBPUSD made a new high going back to April 2022 this week at 1.26793. The high took out May 2022 high at 1.2665 in the process, but could not sustain the upside momentum. Buyers turned sellers. On Thursday, a swing area between 1.2536 and 1.2547 was broken, and held resistance on the corrective high price in trading on Friday. The 100 bar moving average on the 4 hour chart at 1.25227, and the 200 bar moving average on the same chart at 1.24701 was broken during training today with the pair stalling within a swing area between 1.2435 and 1.2445 (see red number circles). Stay below the 200 bar moving average of 1.24701 keeps the sellers and play and with short-term control in the new trading week.

For the current week, the US dollar rose against all the major currencies. Looking at the greenbacks changes:

• EUR, up 1.53%
• GBP, up 1.46%
• JPY, up 0.68%
• CHF, up 0.85%
• CAD, up 1.366%
• AUD, up 1.644%
• NZD, up 1.657%

The biggest gain came against the AUD and the NZD on risk-off flows. Those currencies also move lower after weaker China data this week.

In the US stock market today the major indices all moved marginally lower with the NASDAQ index leading the way with a decline of -0.36%. The Dow industrial average was near and change but still cause lower for the 5th consecutive day this week and the 9th time in 10 trading days since the beginning of May. The Dow industrial average fell -0.03%. The S&P index fell -0.16%.

For the trading week, the Dow industrial average fell -1.11%, the S&P index fell -0.29% but the NASDAQ index squeaked out a small 0.4% gain.

In the US debt market today yields moved higher after the stronger inflation expectations data. Yields were modestly higher for the week:

• 2-year yield rose 8.5 basis points to 3.99%. For the week, the 2-year was up 7.4 basis points
• 5-year yield rose 8.9 basis points to 3.46%. For the week the 5-year yield was up 3.8 basis points
• 10-year yield rose 6.6 basis points to 3.462%. For the week, that 10-year was up 2.9 basis points
• 30-year yield rose 3.9 basis points to 3.782%. For the week, the 30-year was up 3.6 basis points

in other markets:

• Crude oil fell for the 4th consecutive week. For the day, the price fell $0.83 or -1.17% to $70.04. For the week, the price fell $1.30 or -1.82%
• Gold fell $4 today or -0.20% at $2110.90. For the trading week gold fell $-5.04 or -0.25%.
• Bitcoin is trading at $26,724 after reaching an intraday low of $25,800. The price is down $1748 this week currently or -6%.

Thanks for all the support. Hope you have a good weekend.

This article was written by Greg Michalowski at www.forexlive.com.

The major US stock indices are ending the day lower. The Dow Industrial Average is closing down (only 0.03% but still lower) for the 5th consecutive day. In the month of May, the Dow was only up one day (last Friday).

The final numbers are showing:

• Dow industrial average of -8.9 points or -0.03% at 33300.63
• S&P -6.56 points or -0.16% at 4124.07
• NASDAQ index -43.77 points or -0.36% at 12284.73
• Russell 2000 fell -3.85 points or -0.22% at 1740.84

For the trading week, the Dow and S&P are ending lower. The Nasdaq was up marginally:

• Dow industrial average fell -1.11%
• S&P index fell -0.29%
• NASDAQ index rose 0.4%
• Russell 2000 fell -1.08%

Looking at some of the big cap stocks this week:

• Alphabet surged 11.31%
• Microsoft fell -0.54%
• Apple fell -0.61%
• Nvidia fell -1.19%
• Meta rose 0.442%
• Amazon rose 4.35%
• Disney tumbled -8.45%
• Tesla felt -1.22%

The regional banks were under pressure this week:

• KRE ETF (regional bank ETF), -5.16%
• PacWest Bancorp, -21.01%
• Western alliance Bancorp, +1.14%
• First Horizon Corp, -11.61%
• Zion Bank -5.6%
• Citizens financial group -6.20%

This article was written by Greg Michalowski at www.forexlive.com.