Headlines:Risk on the mend but is it just a fleeting moment?EU’s Borrell: We continue to discuss sanctions, there are still some difficulties pendingUS April NFIB small business optimism index 93.2 vs 93.2 priorGermany May ZEW survey current conditions -36.5 vs -35.0 expectedUAE energy minister: Oil market is balanced, no need to pump moreMarkets:JPY leads, NZD lags on the dayEuropean equities higher; S&P 500 futures up 0.6%US 10-year yields down 8 bps to 2.998%Gold up 0.5% to $1,862.68WTI crude down 1.0% to $102.05Bitcoin up 2.5% to $31,700It was a quiet session for the most part as risk sentiment bounced back or at least steadied a little in the aftermath of yesterday’s bloodbath.European indices are settling higher though gains are still barely halving yesterday’s drop while US futures are up slightly but without any real conviction to turn around the sharp decline in Wall Street yesterday.It is still early in the day so the latest bounce may yet be a tentative one. The bond market is seeing some added bids, continuing from yesterday with 10-year Treasury yields testing 3% again at the moment.In FX, the dollar is keeping more mixed but is little changed overall amid some pushing and pulling. The greenback was weaker early on as risk recovered but is holding its ground for the most part now ahead of US trading.EUR/USD is not much changed, lingering around 1.0550-60 levels while GBP/USD is up just 0.1% to 1.2340 currently.USD/JPY is seeing a slight retreat from 130.20 to just below 130.00 as bond yields also fall back a fair bit. Elsewhere, AUD/USD is keeping flattish around 0.6950-60 levels mostly while USD/CAD is seen flirting with a firmer break of 1.3000. Both the aussie and loonie are looking vulnerable but amid a steadier risk mood are able to hold on for a bit more at the moment.

Resolutely focused on restoring price stabilityWe have a „sizzling“ hot labour marketFed task is difficult but not insurmountableFed actions will cool demand and factors contributing to supply shortages will be resolvedFed needs to be data dependent, adjust policy actions as circumstances warrantIt sounds like the string of 50 bps rate hikes is still the right call for the time being at least. Williams also adds that he expects PCE core inflation to be around 4% this year before falling to 2.5% next year. That is likely an outlook shared by most Fed policymakers and how they are going about the outlook for the Fed funds rate at the moment at least.

The struggle for solidarity continues for Europe. Borrell says that he hopes this can be resolved by next week’s foreign affairs council meeting but I don’t think one should hold their breath.

Prior 93.2US small business confidence was unchanged last month after three straight monthly declines but high inflation pressures and worker shortages continue to weigh on sentiment for the most part. Of note, 32% of businesses reported that inflation was their single most important problem – the largest share since Q4 1980.

There’s just one particularly significant one to take note of for the day, as highlighted in bold.That being the large chunk for USD/CAD at 1.2935, although it may not serve as too much of an attraction to price action considering that dollar bulls are pushing the boundaries of 1.3000 since yesterday. The lack of technical significance won’t help with the expiry level.If anything else, just be mindful that there will be some large expiries rolling off tomorrow as well for USD/CAD with the ones to watch being perhaps between 1.2950 and 1.3000.For more information on how to use this data, you may refer to this post here.

Headlines:Dollar in cruise control in European morning tradeTreasuries selloff deepens, yields continue to break higherRussia says that peace talks with Ukraine have not stopped, being held remotelyEurozone May Sentix investor confidence -22.6 vs -20.8 expectedSNB total sight deposits w.e. 6 May CHF 750.9 bn vs CHF 744.4 bn priorFrance March trade balance -€12.4 billion vs -€10.3 billion priorMarkets:USD leads, AUD lags on the dayEuropean equities lower; S&P 500 futures down 2.1%US 10-year yields up 4.9 bps to 3.173%Gold down 1.4% to $1,858WTI crude down 2.5% to $105.61Bitcoin down 3.8% to $32,756We’re starting the new week from how we left things off at the end of last week and for most of April trading.Buy the dollar, sell everything else. That is the the overarching theme today, even in the commodities space. The greenback is running rampant with USD/JPY trading above 131.00, GBP/USD having dipped to fresh lows since June 2020 below 1.2300 (before recovering some ground) and AUD/USD testing a break below 0.7000 for the first time since the end of January.EUR/USD fell to test 1.0500 again before keeping around 1.0520-30 levels now, down 0.2% on the day.Elsewhere, bonds are still selling off on the long-end of the curve as 10-year Treasury yields climb towards 3.17%. That is weighing heavily on tech sentiment and stocks in general as the selloff in equities deepens. S&P 500 futures and Nasdaq futures are down over 2% and European indices are also following suit with similar losses.In the commodities space, gold is down over 1% to $1,858 while oil is also down over 2% with Brent nearing $110 again.It’s pretty much markets being in a sell everything mode and that includes Bitcoin, which is down to its lowest since July last year below $33,000.

The calendar for the
week after the NFP is usually light in economic events, but this doesn’t mean
there can’t be opportunities in the FX market. 

 

Traders will be
paying attention to the US inflation which will be in the spotlight with
expectations to keep rising. The US PPI m/m data will also be closely
watched. 

 

The UK GDP is also
coming Thursday and is expected to reflect a slower economic growth. Even if
the UK economy has been resilient overall since the beginning of the year,
elevated energy prices had a negative impact, especially on consumer purchasing
power. Services activity and retail sales were also affected. 

 

At the last FOMC
meeting the federal funds rate rose 50 basis points with another rate hike
expected in June. Meanwhile, some Fed speakers are scheduled to deliver remarks
this week.

 

The war in Ukraine
remains a major concern for the euro area and will influence the market for the
foreseeable future.

 

EUR/USD expectations

 

The euro has room to
weaken further as the Euro area will be influenced in the near future by the
economic slowdown in China. There is a risk of recession and the French
parliamentary elections in June could also have an impact. Even if expectations
for the ECB to raise rates are growing and some members like Villeroy mentioned
that above-zero rates by year-end are „reasonable“, a rate hike in
June is still seen as unlikely according to analysts from Scotiabank, so unless
this becomes a strong possibility, there won’t be significant movements in the
market for EUR. 

 

EUR/USD closed the
week near the 1,0485 level of support. From a technical perspective on the H4
chart EUR/USD needs a correction somewhere around 1.0740 or even 1.08450 and if
no significant event happens this week, it could resume its downtrend and test
the next level of support at 1,0365. 

 

USD/CAD expectations

 

On the H1 chart
USD/CAD looks good for buying opportunities. The pair is close to the 1.2940
level of resistance and a correction is expected until at 1,2780 which is the
next level of support. If rejected, the pair
could test the resistance at 1.3000.

 

The USD is still
strong and usually supported by volatility and uncertainty. The pair is
expected to appreciate further, but there can also be an opportunity to sell if
the pair reaches 1.3000. The Fed tightening already appears to be priced in the
market, but the market could re-evaluate the Fed expectations and reprice them
lower if upcoming US data is soft.

 

There are no
significant economic events in the calendar this week for the CAD, but for the
USD comments from several Fed speakers are expected: Mester, Bostic, Williams
and Waller. In conclusion, USD/CAD looks bullish in the short term.

 

 

This article
was written by Gina Constantin.

The Bitcoin chart isn’t too comforting at the moment after its latest attempt to get back above $40,000 last week faltered. Since then, it has been one-way traffic as price has slumped heavily following the market risk mood – more or less.Right now, we’re seeing price start to dribble below $33,000 to its lowest since July last year and will bring the focus towards key support around the $30,000 to $32,000 region. The former in particular is key for Bitcoin’s technical „vitality“ in my view.If stocks continue to hit the skids and Bitcoin follows suit, a technical break under $30,000 will start ringing alarm bells. Look out below.

S&P 500 futures -2.0%
Nasdaq futures -2.3%
Dow futures -1.7%

Things are not looking good in the equities space to start the week as last week’s drop on Thursday and Friday is carrying over to this week. Europe’s Stoxx 600 is also down 2% on the day now as the selling continues.
Tech is bearing the brunt of it as higher yields continue to prove to be a drag on sentiment this year. 10-year Treasury yields are up 5.7 bps on the day to 3.183% at the moment.
This isn’t a confident-looking chart by any means:

The 50.0 retracement level of the pandemic rally is the next key support but that stands at 11,421. That would represent a 6% drop from the Friday close.

There isn’t really any major significant expiries on the board for today.The only large one being for AUD/USD at 0.7100 but given prevailing dollar sentiment and the focus on the technicals being on the 0.7000 level, it is hard to see the expiry level coming into play.Once again, it is worth noting a lack of significant expiries for USD/JPY above 130.00 – as has been the case in previous weeks when we were talking about the general pockets above 120.00 and 125.00.For more information on how to use this data, you may refer to this post here.