• The meeting decision
• Most members indicated that they would accept the proposed 25 bps rate hike
• Almost all members supported the 25 bps rate hike
• ECB communication should, however, convey a clear „directional bias“
• There was a strong preference against returning to outright forward guidance
• There was now more solid evidence that monetary policy was being transmitted to financing and credit conditions
• But it was also argued that transmission could be weaker than usual
• Full accounts

With regards to inflation, the view on the trend in core prices was „broadly seen as worrisome“. I guess that supports the argument for those wanting a 50 bps rate hike, although it will be interesting to see how this week’s inflation data factors into the view among policymakers at the moment.

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

• Prior 66.99k

That’s now eleven months running that job cuts have exceeded the same month from a year ago and the increase in layoffs that we are seeing so far this year have been particularly notable. For some context, Q1 layoffs were already the highest since 2020 and we are likely to see that trend continue in Q2. Of note, year-to-date hiring is seen at its lowest since 2016.

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

On the
daily chart below, we can see that EURUSD has sold off pretty heavily from the
1.1033 resistance as US
economic data in May beat expectations and made the market to reprice interest
rates odds on the hawkish side. The bias is clearly bearish with the moving averages crossed
to the downside and EURUSD printing lower lows and lower highs.

The
support level at 1.0700 is giving EURUSD bears a hard time as we need more
strong data to price in something more hawkish now, and therefore a pullback
may be due. If this is a major double top, we
should see EURUSD falling to the 1.0533 support eventually as that would be the
neckline of the pattern. The divergence between
the two highs with the MACD also
strengthens the case for more downside to come.

EURUSD Technical Analysis

On the 4
hour chart below, we can see that EURUSD has been trending downwards within a
falling channel. Recently, the price started to diverge with the MACD coming
into the 1.0700 support. This is a sign of weakening momentum often followed by
pullbacks or reversals.

Yesterday,
we got a big beat in US Job Openings which
made the EURUSD fall even more, but soon after some Fed members hinted to a
pause in June and the price quickly reversed and made new highs.

Today, the key data on
the calendar is the US Jobless Claims and the ISM Manufacturing PMI report.
However, it is unlikely that positive or negative data will significantly
impact the market, considering the recent statements made by Fed members.
Perhaps only a substantial deviation from expectations would have the potential
to generate market movements.

On the 1 hour
chart below, we can see that we have a downward trendline where
the price got rejected off of the last time it pulled back. Moreover, we have
also the 1.0711 support now turned resistance. This
will be the level to watch for traders today as the sellers are likely to lean
on it with a defined risk just above it to target another lower low. The
buyers, on the other hand, will want to see the price breaking higher to pile
in and extend the rally towards the 1.0760 level first and 1.0830 next.

Tomorrow, all eyes will be on
the US NFP report. Should the data reveal positive outcomes coupled with
higher-than-expected average hourly earnings, it could potentially increase
market odds for a June rate hike and even price some for a July hike. This
scenario might raise concerns within the market regarding a potential wage
price spiral.

Conversely, if the data is
favourable but falls short of expectations in terms of average hourly earnings,
it should weaken the USD further as it shouldn’t change rates pricing much and
the market will look forward to the CPI report next week.

In the event of unfavourable
data, it should be perceived as negative news. However, given recent Fed
officials’ comments, we should see EURUSD rallying as rate hikes from the Fed
get priced out.

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

It’s a tough one to read, especially just a day after month-end trading. And when you throw in the sort of Fed comments that we got yesterday, it makes things even trickier at the moment.

The dollar is now sitting lower against the likes of the euro, pound, franc and aussie in European trading while still just maintaining a light advance against the yen.

EUR/USD is up 0.2% to 1.0710 as large option expiries are perhaps doing some work on the day as well. USD/JPY came close to testing 140.00 again but sellers are holding their ground with a push back to 139.60 at the moment. The chart from earlier here. 10-year yields in the US are still up 3.4 bps to 3.671% currently.

Besides that, GBP/USD is hoping to try and push towards 1.2500 again with the pair now up 0.2% to 1.2460 on the day.

Then, we have AUD/USD which has recovered well to 0.6520 after a dip to 0.6485 earlier. And NZD/USD is flattish around 0.6020 at the moment. Both pairs are still barely hanging on to support at 0.6500 and 0.6000 respectively as outlined here.

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

• Prior +7.2%
• CPI -0.1% vs +0.2% m/m expected
• Prior +0.4%
• HICP +6.3% vs +6.8% y/y expected
• Prior +7.6%
• HICP -0.2% vs +0.2% m/m expected
• Prior +0.6%

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

• We have the votes to pass the debt limit bill today – McHenry
• Fed’s Mester: No compelling reason to wait on rate hikes
• ECB’s de Guindos: Inflation data today and yesterday has been positive
• ECB’s Villeroy: It is quite likely that inflation has passed its peak in France
• Traders pare ECB rate hike bets after French inflation data
• France May preliminary CPI +5.1% vs +5.5% y/y expected
• Saxony May CPI +6.5% vs +7.6% y/y prior
• Bavaria May CPI +6.1% vs +7.2% y/y prior
• North Rhine Westphalia May CPI +5.7% vs +6.8% y/y prior
• Italy May preliminary CPI +7.6% vs +7.4% y/y expected
• Germany April import price index -1.7% vs -0.5% m/m expected
• Germany May unemployment change 9k vs 15k expected
• France Q1 final GDP +0.2% vs +0.2% q/q prelim
• Italy Q1 final GDP +0.6% vs +0.5% q/q prelim
• US MBA mortgage applications w.e. 26 May -3.7% vs -4.6% prior

Markets:

• USD and JPY lead, AUD lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields down 5 bps to 3.646%
• Gold flat at $1,959.58
• WTI crude down 2.6% to $67.67
• Bitcoin down 2.4% to $27,121

It was an eventful session as there were a couple of broad market themes playing out in European trading today.

For one, the dollar resumed its bid from last week as it advanced across the board despite falling yields once again (it was the opposite yesterday). Poor China data from Asia trading earlier sort of set the tone for a more risk-off mood in Europe and that was certainly the case with the greenback gaining ground alongside the yen.

Equities fell as such and even with lower inflation figures in France, Italy, and German states, it wasn’t enough to turn the tide.

Instead, it was a typical flight to safety with commodity currencies and oil being offered. Despite a stronger dollar, gold held its ground as it seems like haven bids are helping out.

Going back to FX, EUR/USD declined from 1.0710 to 1.0660 before holding around 1.0680 now. Meanwhile, GBP/USD also fell from 1.2390 to 1.2350 with USD/CHF even moving up by 0.5% to clip the 0.9100 level on the day.

But it was against the commodity currencies where the dollar did most of its work, with AUD/USD down 0.6% to 0.6475 and NZD/USD down 0.6% as well to test the 0.6000 mark. Both pairs are down to their lowest levels for the year, threatening a further downside break.

WTI crude is keeping down by nearly 3% on the day as China’s worries weigh on demand prospects, testing waters below $68.

Month-end trading is also in focus, so just keep an eye out ahead of the London fix later in case we do get another injection of volatility.

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

On the
daily chart below, we can see that USDCHF has recently broke out of the major
downward trendline and has
now extended towards the 0.91 handle. The moving averages have
crossed to the upside confirming the change in trend. The rally has come amid
strong US economic data in May that have made the market to reprice interest
rates expectations on the hawkish side. In fact, the market is now giving a 65% probability for a 25
bps hike at the June meeting. This can all change with the next NFP and CPI
reports of course, so traders will be very attentive to those two releases.

USDCHF Technical Analysis

On the 4
hour chart below, we can see that USDCHF has recently bounced again on the
upward trendline, as that has been a strong support since the price bottomed in
early May, and kept offering buyers good entry points. We can notice that now
the price is diverging with the
MACD right
when it approaches the resistance at 0.91.
This is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we may get a pullback either to the broken resistance turned support at
0.9070 or even better the upward trendline.

On the 1
hour chart below, we can see that we have a strong support zone at the 0.9070
level. In case USDCHF pulls back, the buyers will be leaning on that level with
a defined risk just below it and target the breakout of the 0.91 handle for new
highs afterwards. The sellers, on the other hand, should defend the 0.91 handle
here targeting new lower lows and thus offer the pullback to the support zone.

As
mentioned above, the trend is bullish, so the sellers will have much more work
to do before getting back the control. In fact, only a break below the upward
trendline would switch the bias to the downside and see the sellers piling in
more aggressively.

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

• Prior -4.6%
• Market index 197.4 vs 205.0 prior
• Purchase index 154.4 vs 158.3 prior
• Refinance index 412.5 vs 443.0 prior
• 30-year mortgage rate 6.91% vs 6.69% prior

Once again, mortgage activity declined as there is a significant jump in the interest rate of the most popular US home loan. The 30-year rate increased to 6.91% in the past week, marking its highest level since the first week of November last year. That led to a further decline in both purchase and refinancing activity. Pain.

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

It’s all just semantics at this point as the debt ceiling issue is now kicked down the road once again, as it has always been over the past many decades. As mentioned earlier in the week, this isn’t going to be a concern for markets anymore as the focus switches back to central banks, inflation, and the economy.

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

On the daily chart below, we can
see that the ADUUSD pair has finally broken out of the 3-month long range it’s
been stuck in since the Silicon Valley Bank collapse. The big USD strength came
from stronger than expected US economic data that made the market to reprice
interest rates expectations on the hawkish side.

There’s a feeling that the Fed
may need to get to 6% FFR before really pausing as the data has shown data that
the economy is not weak enough to bring inflation back to the 2% target. The
price has recently pulled back to the broken support
turned resistance in what looks like a retest before a continuation
to the downside.

AUDUSD Technical Analysis

On the 4 hour chart below, we can
see that AUDUSD pulled back last week into the 0.6563 resistance where we also find the confluence from the trendline and the 38.2% Fibonacci
retracement level. This will be a key resistance zone and the
buyers will need the price to break above it before getting the conviction for
a rally towards the 0.66 handle or beyond. The sellers, on the other hand, will
lean on this resistance with a defined risk above it to target a break below
the recent low and then the 0.63 handle.

On the 1 hour chart below, we can
see that right now we have this consolidation beneath the 0.6563 resistance. As
previously mentioned, the buyers will need a break above the strong resistance
zone and the trendline to target new higher highs as at the moment the
technicals and the fundamentals are skewed heavily to the downside.

If the sellers missed the short
from the resistance, we may see more of them coming in once the price breaks
below the 0.65 swing low. The main event of this week is the US NFP report and the market may even
trade into it given the strong labour market data we got up to now.
Nevertheless, higher than expected figures should support the USD, while lower
than expected readings should weaken the greenback.

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