• Dollar starting to benefit from that discarded tailwind?
• EUR/USD staggers towards key technical test as dollar holds firmer
• USD/JPY inches closer towards key resistance point
• BOE’s Bailey: Things are looking a bit brighter than they did a couple of months ago
• UK’s Hunt: The overwhelming priority has to be lowering inflation
• Eurozone April final CPI +7.0% vs +7.0% y/y prelim
• US MBA mortgage applications w.e. 12 May -5.7% vs +6.3% prior

Markets:

• NZD leads, JPY lags on the day
• European equities mixed; S&P 500 futures up 0.3%
• US 10-yeaar yields down 3 bps to 3.518%
• Gold down 0.1% to $1,986.53
• WTI crude up 0.5% to $71.23
• Bitcoin down 1.1% to $26,675

It was a quiet session in terms of headlines but there were some decent and light moves during the session at least.

The handover from Asia saw major currencies stuck in very narrow ranges but that extended in European morning trade, as the dollar gathered a bit of poise – particularly against the euro, pound and yen.

EUR/USD fell from 1.0860 to 1.0820 while GBP/USD declined from 1.2480 to 1.2425 before a light bounce after as dollar gains ease up. It can be seen as price action stretching its muscles, awaiting further conviction by traders. However, mixed markets are not really helping.

USD/JPY also moved up to a high of 137.17 but is keeping just below the 137.00 mark now alongside its 200-day moving average.

That comes despite bond yields looking a tad softer but equities are keeping marginally positive as US futures are higher while European indices are little changed mostly.

The mood in stocks is at least helping to see the antipodeans hold up with AUD/USD up 0.1% to 0.6660 after hitting a low of 0.6630 earlier while NZD/USD is up 0.5% to 0.6260 as price moves back just above its own 100-hour moving average.

It’s one of those days where traders are still largely sorting out their feet, awaiting some form of headline to really firm up any convictions out there.

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

• Prior +6.3%
• Market index 214.9 vs 227.8 prior
• Purchase index 165.4 vs 173.7 prior
• Refinance index 468.2 vs 507.1 prior
• 30-year mortgage rate 6.57% vs 6.48% prior

A rise in rates in the past week led to a notable decline in mortgage activity with both purchases and refinancing also falling. This just continues to rebuff the narrative that housing conditions remain rather challenging and troubled, with mortgages in particular suffering amid tighter financial conditions brought about by the Fed.

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

On the daily chart below, we can
see that after tapping into the record high at 2076, Gold started to fall as
better than expected economic data lifted treasury yields and boosted the US
Dollar. The price yesterday broke below a key trendline which is the base of an expanding
wedge pattern.

We should now see the price
falling towards the 1930 level where we can also find the 50% Fibonacci
retracement level and the major trendline. That support zone is expected to be really strong,
and the buyers are likely to pile in there with defined risk below the
trendline. The sellers, on the other hand, will want to see the price breaking
below the support zone before piling in more aggressively and extend the
selloff towards the 1800 level.

XAUUSD
technical analysis

On the 4 hour chart below, we can
see the breakout that happened yesterday after the better than expected US
Retail Sales data. The sellers are now clearly in control and
barring any negative news like a big miss in Jobless
Claims tomorrow or Fed Chair Powell being dovish on Friday, gold should
continue to fall towards the 1930 level.

On the 1 hour chart below, we can
see more closely the recent price action. The sellers should keep on piling in
at the break of the swing low at 1985. If the breakout fails, the likely
pullback should run towards the 2000 resistance where we can also find the
38.2% Fibonacci retracement level. The sellers will be waiting there with
defined risk just above the resistance zone and the 1930 level as target. The
buyers, on the other hand, will need a break above the trendline to regain some
control and target the 2076 high.

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

• We expected a shallow, long recession back in November
• Now we are forecasting modest, but positive growth
• There has been greater resilience in the economy than expected
• But inflation has also come in higher than expected
• However, we have good reasons to expect inflation to fall sharply in the coming months
• That should begin with the April number, to be released on 24 May
• Risks to inflation are skewed significantly to the upside
• Our commitment to 2% inflation is unwavering
• Full speech

These aren’t anything that we don’t already know. However, he is putting a good deal of emphasis on the upcoming CPI data later this month. That will be one to watch and while base effects are something to watch out for, we will see if the BOE can rely on price pressures to fall in the months ahead to head to the sidelines.

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

On the
daily chart below for USDJPY, we can see that the price found support at the trendline and the 133.77 level. The moving
averages remain crossed to the upside which keeps the uptrend intact. We can
also notice that the market is forming an ascending
triangle, which is generally followed by big moves once the price breaks out on
either side.

The
culprit for this USD/JPY rally is the rise in the Treasury yields due to the
recent better than expected data and rising long term inflation expectations in
the University
of Michigan report. Fed Chair Powell once mentioned that they are
looking at those expectations for their policy decision, so the bond market
reacted accordingly.

USDJPY
technical analysis

On the 4
hour chart below, we can see that after breaking above the 135.09 resistance, the price extended the rally
towards the 136 handle. Yesterday, US
Retail Sales beat expectations and gave the USD another boost
for a run towards the 137 level. The moving averages will act as resistance now
and we should see new higher highs unless the Jobless Claims tomorrow show a big miss to the
expectations or Fed Chair Powell on Friday sounds dovish.

On the 1
hour chart below, we can see that we have a trendline supporting this rally and
that the price bounced from a resistance-turned-support during the APAC
session. We can also see that we have a divergence with the MACD which is generally a signal for
weakening momentum and it’s often followed by pullbacks or reversals.

If we do
get a pullback, the buyers should lean to the support zone at 136.25 where they
will also find the trendline and the red long period moving average for further
confluence. The sellers, on the other hand,
will want to see the price breaking below that support zone to pile in and push
the price towards the 135 handle.

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