Headlines:

ECB’s Visco: June rate hike out of the question, July perhaps the time to start
ECB’s Muller: The focus needs to be on fighting high inflation
ECB’s Kazaks says hopes that first rate hike will take place in July
BOE’s Pill: Policy tightening still has further to run
Japan PM Kishida: Rapid movements in the yen currency are undesirable
Russian gas flow to Finland to be halted on 21 May at 0400 GMT
Shanghai feel the economic pinch of lockdown measures in April
UK April retail sales +1.4% vs -0.2% m/m expected
Germany April PPI +2.8% vs +1.4% m/m expected

Markets:

NZD leads, JPY lags on the day
European equities higher; S&P 500 futures up 1.1%
US 10-year yields up 1.4 bps to 2.869%
Gold up 0.1% to $1,843.42
WTI crude up 0.2% to $112.45
Bitcoin up 0.5% to $30,333

It was a quiet session in terms of headline as markets kept steadier overall after a lot of pushing and pulling on the week.
Equities tracked higher, with European indices posting gains of around 1.4% to 1.8% across the board while US futures also extended their advance to over 1% on the session. That said, it will still take a miracle for US stocks to prevent a seventh consecutive weekly decline and that says a lot about sentiment at the moment despite the light respite.
The mood in FX is also not hinting at much although the dollar looks set for a weekly decline – the first in seven.
EUR/USD is little changed around 1.0560-70 levels while USD/JPY is hugging the 128.00 level for the most part with Treasury yields mostly little changed.
The pound saw a decent recovery from 1.2450 to near 1.2500 before sellers stepped in again near the figure level to keep gains in check. Elsewhere, AUD/USD is seen advancing to 0.7050-60 and a weekly close above 0.7000 will be a welcome development for buyers.Besides that, the Chinese yuan continued its snapback on the week, set for its best weekly performance since de-pegging from the dollar back in 2005.
Some food for thought:

Yesterday in
New York, should have been the usual bounce back day for stocks? Instead,
while there was some attempt, the market settled back toward the previous day’s
lows.

 

This is a
somewhat precarious situation and encourages our view that the ‚day and
technical traders‘ were caught enthusiastically long. While the real money
funds were very happy to take advantage of the liquidity provided and continue
to sell down their portfolios.

 

It is a bear
market. Has been all year. US data was worrying in that Existing Home Sales fell
another 2.4%, and New Jobless Claims leapt to 218,000. This remains a low and
good number, but it did exhibit a bit of a break to the upside which could
again indicate the tide is most definitely turning down for the US economy.

 

The ECB
wants to move toward tightening, or so the ’talk’ goes, but it is just way too
late for the ECB who was focussed on being popular, and is just now starting to
chase the inflation wave that has already inundated the region. This will
provide a moment of support for the Euro, but a bit of a ’snowflake in summer’
rally, really. ECB rates will fall further behind US levels, even if the ECB
starts to raise.

 

Additionally,
there is that small thing of war on the doorstep and energy supply concerns
recession likelihood.

 

This content
may have been written by a third party. ACY makes no representation or warranty
and assumes no liability as to the accuracy or completeness of the information
provided, nor any loss arising from any investment based on a recommendation,
forecast or other information supplied by any third-party. This content is
information only, and does not constitute financial, investment or other advice
on which you can rely.

 

This article was written by
Clifford Bennett, Chief Economist at ACY Securities.

 

Overview:

Watch the video for the key trading levels for AUDJPY,
AUDUSD, EURJPY, EURUSD, GBPJPY, GBPUSD, NZDJPY, NZDUSD, USDCAD, USDJPY, USD
Index, and S&P 500.

 
Key Trading Levels – AUDJPY, AUDUSD, EURJPY, EURUSD, GBPJPY, GBPUSD, NZDJPY, NZDUSD, USDCAD, USDJPY, USD Index, & S&P 500 from ACY Securities Australia on Vimeo.

Read
the updated analysis below:

·      AUDJPY has rallied
back to the 90.29 monthly resistance level.

·      AUDUSD has rallied
back to the 0.7030-51 daily resistance area.

·      EURJPY has
rallied back to the 135.51 daily resistance level after finding support at the
134.14 monthly support level.

·      EURUSD has advanced
and tested the 1.0600 level.

·      GBPJPY has rallied
back to the 159.61 daily resistance level after finding support at the 158.21
monthly support level.

·      GBPUSD has rallied
and retested the 1.2500 level.

·      NZDJPY
has
reversed at the 82.49 monthly resistance level and is now targeting 79.44 last
week’s low.

·      NZDUSD
has
rallied back to the 0.6380 weekly resistance level.

·      USDCAD continues
to find support at the 1.2800 level.

·     
USDJPY has declined down to the 127.51 daily support level.

·      USD Index has
closed back below the 103.81 monthly resistance level.

·      S&P 500 has
declined down to test last week’s low.

 

This content
may have been written by a third party. ACY makes no representation or warranty
and assumes no liability as to the accuracy or completeness of the information
provided, nor any loss arising from any investment based on a recommendation,
forecast or other information supplied by any third-party. This content is
information only, and does not constitute financial, investment or other advice
on which you can rely.This article was written by Duncan
Cooper – ACY Securities Senior Market Strategist & Trading Mentor.

Just another day for you and me in paradise, umm, FX land. Bid-offer spreads in early Sydney widened as FX volatility extended, picking up where it left off yesterday. At the close of trade, US bond yields eased while stocks erased losses. It was another day of risk-on, risk-off with the ongoing debate between inflation and recession dominating sentiment. US economic data released yesterday mostly missed expectations. Weekly Unemployment Claims climbed to 218,000 against estimates at 200,000 while the Philadelphia Fed Manufacturing PMI missed forecasts, dropping to 2.6 from a previous 17.6, and lower than estimates at 14.9. The Swiss Franc performed best in this environment. The USD/CHF pair tumbled 1.6% to 0.9720 from 0.9863. New Zealand’s Kiwi (NZD/USD) soared 1.37% against the US Dollar to 0.6380 from 0.6300 yesterday, finishing as second-best performing FX. The Dollar Index, which measures the value of the Greenback against a basket of 6 major currencies, tumbled 0.9% to 102.87 (103.64 yesterday), extending its pullback from a 20-year high (105.01), seen a week ago. The Australian Dollar (AUD/USD) jumped 1.27% to close above the 0.70 cent mark at 0.7050 (0.6968). Elsewhere, broad-based US Dollar selling pushed the Euro (EUR/USD) to 1.0585 from 1.0485, up 1.03%. Sterling (GBP/USD) rebounded from yesterday’s open at 1.2358 to 1.2465. Against the Japanese Yen, the US Dollar dipped to 127.80 (128.32) in classic roller coaster trading. The Greenback was also lower against the Asian and Emerging Market currencies. USD/CNH (US Dollar-Offshore Chinese Yuan) slumped to 6.7300 from 6.7775 while the USD/SGD pair (US Dollar-Singapore Dollar) fell to 1.3805 (1.3895). Global bond yields were mostly lower. The benchmark US 10-year treasury yield settled at 2.84% from 2.88%. Germany’s 10-year Bund yield dropped to 0.94% (1.02%). The UK 10-year Gilt rate was unchanged at 1.86%. Australia’s 10-year treasury yield however rose to 3.38% from 3.35%. Wall Street stocks finished with modest losses after a choppy, see-saw session. The DOW closed at 31,248 (31,362) while the S&P 500 was last at 3,902 (3,906). Other economic data released yesterday saw Australia’s April Employment report gain 4,000 jobs which missed expectations for an increase off 30,000. Australia’s Unemployment Rate fell to 3.9% from 4.0%. US April Existing Home Sales dipped to 5.61 million against expectations of 5.65 million. The US Conference Board Leading Index dipped to -0.3% from a downward revised 0.1% (from 0.3%), and lower than median estimates of 0.0%. EUR/USD – The Euro survived a test of 1.0432 it’s low earlier this week, finishing at 1.0585 (1.0485 open yesterday). Overnight low traded was at 1.0465 in another volatile session amidst mixed risk sentiment. The shared currency rallied to an overnight and near 3-week high at 1.0607 before easing at the close. NZD/USD – The Kiwi, also known as a flightless bird, found its wings yesterday, soaring 1.37% to 0.6380 at the New York close (0.6300). Overnight high traded for the NZD/USD pair was at 0.6417. The Kiwi was sold to a low at 0.6292 before it found its wings. AUD/USD – Against the broadly based weaker US Dollar, the Aussie Battler jumped 1.27% to finish at 0.7050 against yesterday’s 0.6968. Overnight, the AUD/USD pair rallied to a high at 0.7072 while the overnight low traded was 0.6953 in a choppy session. GBP/USD – Sterling also benefitted from the overall US Dollar weakness, rallying 0.96% to 1.2465 from 1.2358 yesterday. The British currency was initially pounded lower to 1.2338 overnight low before rebounding to its New York close. In its own volatile session, the overnight high hit was at 1.2524. On the Lookout: Welcome to Friday after a volatile session in all markets. Today’s economic data calendar kicked off earlier with New Zealand’s Trade Balance climbing to a Surplus of +NZD 584 million, bettering economist’s expectations of a Deficit of -NZD 350 million. However, the previous deficit of -NZD 392 million was revised to a larger deficit of -NZD 581 million. The Kiwi (NZD/USD) climbed modestly to 0.6385 from its opening of 0.6380. Japan followed with its National Core CPI which rose to 2.1%, matching median estimates of a 2.1% rise and higher than a previous 0.8%. Japan’s Annual Headline Inflation Rate for April rose to 2.5% from March’s 1.2% – ACY Finlogix. The UK released its GFK May Consumer Confidence Index which fell to -40 from a previous -38, lower than forecasts at -39. New Zealand releases its April Credit Card Spending data (y/y no f/c, previous was 3.4%). The G7 Finance Ministers and Central Bank Governors conclude their 3-day meeting in Germany. European data kicks off with Germany’s April PPI (m/m f/c 1.4% from 4.9%; y/y f/c 31.5% from 30.9% – ACY Finlogix). The Eurozone also releases its May Flash Consumer Confidence (f/c -21.5 from -22 – ACY Finlogix). The UK follows with its April Retail Sales report (m/m f/c -0.2% from -1.4%; y/y f/c -7.2% from 0.9%). Switzerland releases its Industrial Production (y/y no f/c, previous was 7.3%). Canada kicks off North American data with its March ADP Employment for March (no f/c, previous was 475,000). Over the weekend Australia holds its Parliamentary elections. Trading Perspective: Expect another volatile session as we come to an end of this week. Amidst central bank talk of higher interest rates ahead, risk sentiment remains shaky. Which will provide support for the US Dollar and prevent further gains for its rivals. Equities will edge back down. After tumbling to 102.87, expect the Dollar Index (DXY) to hold current levels and resume its rally. Speculative long Dollar bets have pared their positions which provides added support for the US currency. On the fundamental side, a recession in the US will lead to a global economic downturn. The one certainty that remains is elevated volatility. Prepare for another roller coaster ride so keep those tin helmets on. EUR/USD – it was inevitable for the shared currency to bounce off its lows after too many calls for parity. While that is still a possibility, we can expect consolidation now between 1.04 and 1.07 first up. The Euro closed at 1.0585. Immediate resistance today lies at 1.0610 (overnight high traded was 1.0607). The next resistance level is found at 1.0640, 1.0670 and 1.0700. Immediate support is found at 1.0550, 1.0520 and 1.0490. Look for another choppy session today with a likely range of 1.0480-1.0620. Preference is to sell into Euro strength. AUD/USD – The Battler jumped like a wounded kangaroo to finish at 0.7050 from yesterday’s open at 0.6968. Overnight, the Australian Dollar traded to a high at 0.7072. Immediate resistance today lies at 0.7080 followed by 0.7110. Immediate support can be found at 0.7010, 0.6980 and 0.6950. Look for another choppy one in this puppy today, likely range 0.6970-0.7070. Prefer to sell rallies. The Aussie still has room to head further south. USD/JPY – against the Japanese Yen, the Greenback dipped to 127.80 from 128.32 yesterday. Risk-off sentiment amidst lower US bond yields weighed on the USD/JPY pair. Overnight low traded was at 127.02 while the high recorded was at 128.94. Volatility in this currency pair has rocketed back to the old days. Often, the best traders in the room handled the Dollar Yen. Immediate resistance lies at 128.10, 128.40 and 128.70. On the downside, immediate support can be found at 127.50, 127.20 and 126.90. Look for further volatility in this currency pair, likely range 127.30-128.80. Am neutral here, just trade the range shag. (Source: Finlogix.com) GBP/USD – After getting a pounding earlier in the week, Sterling rebounded to finish at 1.2465 from 1.2358 yesterday. For today, immediate resistance lies at 1.2490 and 1.2520. On the downside, immediate support is found at 1.2430, 1.2400 and 1.2370. We can expect a choppy ride in this currency pair as well, likely between 1.2400-1.2500 first up. Preference is to sell into GBP/USD strength. It’s been a tough and tumble week, happy trading, and a top Friday all. This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.This article was written by Michael Moran, ACY Senior Currency Strategist at ACY Securities.

This is mainly seen as a sentiment indicator but in other words, it is hinting that we are approaching peak bearishness in markets. That doesn’t quite signal that the selloff may be over but given the pace of the market decline in recent weeks, one can argue that we are perhaps overdue for a technical breather as well.
BofA notes that last week observed $5.2 billion exiting world equities funds, while global bond funds saw $12.3 billion leave – marking a seventh straight week of outflows.
For some context, the BofA ‚Bull & Bear‘ indicator hints at an „unambiguous contrarian buy“ when it falls below 2.0:

Headlines:Dollar remains the laggard despite souring risk appetiteECB accounts: Some members viewed it as important to act on policy without undue delayECB policymakers reportedly ready to back at least two 25 bps rate hikes this yearBOJ buys ¥70.1 billion in ETFs todayChina reportedly in talks with Russia to purchase oil for strategic reservesEurozone March current account balance -€1.57 billion vs €20.8 billion priorUK May CBI trends total orders 26 vs 14 priorMarkets:CHF leads, USD lags on the dayEuropean equities lower; S&P 500 futures down 0.9%US 10-year yields down 4.2 bps to 2.842%Gold up 0.8% to $1,830.82WTI crude down 1.1% to $108.35Bitcoin up 0.6% to $29,371The session kicked off with a more cautious tone but that quickly turned into souring risk appetite as stocks retreated once again, with safety flows going into bonds and gold. The franc was also a notable beneficiary as European indices slid in playing catch up to Wall Street losses overnight.USD/CHF fell to 0.9800 initially, before extending losses to 0.9750 where it is down by over 1% on the day. The franc’s strength is also helped by a subtle push by SNB chief, Thomas Jordan, yesterday as he said that the central bank was ready to act on inflation if needed. I shared some thoughts on that here.It’s pretty much shaping up to be a risk-off kind of day but the dollar isn’t finding that to be much help. The greenback is lower across the board with EUR/USD up 0.5% to above 1.0500 and GBP/USD pulling back by 0.7% to above 1.2400.AUD/USD was initially higher around 0.7020, helped by a strong jobs report, before being dragged down to 0.6970 and then pushing back up now to near 0.7000 as the battle around the figure level continues.But just be wary though that if risk tones continue to sour, then the dollar’s lack of draw may not last for too long.

Read
the updated analysis below:

 

·     
AUDJPY has
reversed at the 90.29-71 monthly resistance area and is now targeting 87.28
last week’s low.

·     
AUDUSD has
reversed at the 0.7030 daily resistance level and is now targeting the 0.6826
monthly support level.

·     
EURJPY has
reversed at the 136.49 daily resistance level and is now targeting 132.65 last
week’s low.

·     
EURUSD has
closed back below the 1.0522 monthly resistance level.

·     
GBPJPY has
closed back below the 158.21 monthly support level and is now targeting 155.59
last week’s low.

·     
GBPUSD has
failed to hold Tuesday’s gains closing back below the 1.2411 daily resistance
level.

·     
NZDJPY
has
reversed at the 82.49 monthly resistance level and is now targeting 79.44 last
week’s low.

·     
NZDUSD
has
reversed at the 0.6380 weekly resistance level and is now targeting the 0.6204
monthly support level.

·     
USDCAD has
declined down to the 1.2800 level and found support.

·     

USDJPY has formed a lower top at the 129.40 daily
resistance level.

·     
USD Index
has closed back above the 103.81 monthly resistance level.

·     
S&P 500
has declined strongly down from the 4104 monthly resistance level.

This article was written by Duncan Cooper – Senior Market Strategist
& Trading Mentor at ACY Securities.

This content
may have been written by a third party. ACY makes no representation or warranty
and assumes no liability as to the accuracy or completeness of the information
provided, nor any loss arising from any investment based on a recommendation,
forecast or other information supplied by any third-party. This content is
information only, and does not constitute financial, investment or other advice
on which you can rely.

So as to demonstrate the ECB’s determination to achieve price stabilityMembers widely expressed concern over high inflation numbersMany of the upside risks to inflation outlook that was discussed last summer had materialisedMembers pointed out it was hard to imagine sustained higher inflation without increase in wage pressuresThe notion of „some time“ should not prevent timely rate rise if conditions so warrantedFull accountI think it is clear enough that the ECB is arguably unanimous in proceeding with a July rate hike. That said, it was expressed that „even relatively small steps might be sufficient to turn the current accommodative monetary policy stance into a restrictive stance“. That’s something to consider when it comes to viewing how aggressive the central bank is going to be in the months ahead.I mean, when you consider stagflation risks and a looming recession, the point being made about reaching the neutral level „only at a very late stage of the normalisation process“ may not necessarily mean the ECB could afford to hike continuously without interruptions this year.All this are but some food for thought for the coming months, in any case.

Their previous call for 4,900 was set back in 10 January, so it comes before all the shenanigans involving the Russia-Ukraine conflict and China lockdowns. No doubt that the inflation outlook and squeeze on businesses (in turn earnings) and consumers are part and parcel of the picture now.In case you missed it, Deutsche had earlier today called for the S&P 500 to fall to 3,650 before recovering to around 4,700 to 4,800 by year-end here.

This is exactly why we have been aggressively warning people to hedge and protect their investment portfolios. All year. This is not a short-term aberration that people can walk away from and just assume the market will magically rise back up. The hard truth is that global stock markets are only in the very early stages of pricing in a global economic slow-down that is already in full swing. There is in fact significant risk of a Triple Recession across the northern hemisphere of the world’s three largest economies, Europe, USA and China. China will be the first out of this difficult period, but even there too, subdued growth long term is the new reset normal.  Europe will continue to be impacted by war, sanctions and energy concerns. USA will have an inappropriately blindly aggressive central bank focussed only on inflation. Which is bizarre to say the least given it’s previous best efforts to completely ignore rising inflation for the past year. Everywhere, yes, the entire globe will continue to experience both extreme inflation and actual food or energy scarcity over the next 12 months. This, as we have been saying all year, even before the tragedy of Ukraine, is not an environment in which to be buying stocks.  This is a long term correction. Not a short term aberration. As such we cannot know if this will be a 6-18 month corrective phase or is in fact something far more significant akin to a 3-6 year decline in asset prices generally. When hedging investment portfolios is so easy these days, why take that degree of risk. I continue to suggest playing defence in the current global economic and financial market environment. Markets which are likely to remain strong, regardless of gains already seen and recent volatility, are the US dollar, Gold and Oil. The world is full of opportunity as long as investors play good defence now. So as to be in a position of relative power when markets eventually begin a new grand bull cycle. At the moment we are only in the early stages of ending the last grand super cycle 2009 to 2021. Clifford Bennett ACY Securities Chief Economist. The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett. This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.