Following a lower set of revisions, the euro area economy marginally contracted in Q1. Meanwhile, the annual reading is also revised lower to +1.0% from the +1.3% reading from the second estimate. The negative quarterly reading means that the euro area suffered a winter recession, but by the mildest of margins. Here’s the breakdown in terms of contribution to GDP for Q1:

• Household consumption -0.1%
• Government expenditure -0.3%
• Gross fixed capital formation +0.1%
• External balance +0.7%
• Changes in inventories -0.4%

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

The AUD is the strongest and the USD is the weakest at the North American session begins. The major currencies are relatively scrunched together and price action has been up and down (or down and up) for many pairs. The USD was higher earlier, especially vs the EUR and GBP with prices of the EURUSD and the GBPUSD declining in the Asian session. However, each has seen a rebound and are trading to new session highs as NA traders enter for the day. Each is also extending above hourly MAs indicative of a more bullish technical bias.

Looking at the EURUSD it is extending above the near converged 100/200 hour MAs at the 1.0214 area. The earlier low could not extend below the low from yesterday and sellers turned to buyers pushing the pair higher toward the moving average levels (see the chart below).

Overnight, Chinese trade data for May reveals a contraction in exports by 7.5% compared to the same period last year, pointing to weakened overseas demand for locally produced goods. This decline follows three consecutive months of export growth as Chinese manufacturers rushed to fill pending orders after COVID-19 restrictions were eased. Additionally, imports experienced a 4.5% drop, albeit at a slower pace than in April. Surprisingly, China’s trade surplus reached a one-year low in May at 452B (vs 676B est and 618B last month), signaling challenges in the post-pandemic recovery for the world’s second-largest economy. These figures underscore the sluggishness in China’s trade sector and highlight the impact of subdued global demand on the country’s export-oriented economy.The People’s Bank of China set the reference rate for onshore yuan at its weakest (for CNY, highest for USD/CNY) since December 1 last year. The PBOC’s persistent affirming of the slide for the yuan is a form of stimulus for the country’s export sector. The data supports that.

Also in the Asian Pacific session, Australian economic growth data for the first quarter of 2023 a day after the surprise 25 bp hike indicated a lower-than-expected GDP growth of 0.2% quarter-on-quarter, missing the already modest estimates of 0.3%. On a year-on-year basis, the growth stood at 2.3%, below the expected 2.4% and the previous quarter’s 2.7%. The data reveals little indication of diminishing price pressures, as the GDP implicit price deflator rose by 1.9% in the March quarter and 6.8% compared to the same period last year. The components of growth show that domestic final demand and capital investment were the primary contributors, while consumption expenditure by households and the government was subdued. Net trade had a negative impact, and changes in inventories did not contribute to growth. The household saving ratio decreased, reaching its lowest level since June 2008, and productivity also declined (inflationary).

The Organization for Economic Co-operation and Development (OECD) marginally upgraded its global growth outlook for 2023, citing lower energy prices and improving sentiment. Despite the positive forecast, headwinds remain, including tighter monetary policy and geopolitical tensions. U.S. stock futures dipped slightly, awaiting the Federal Reserve’s upcoming interest rate decision. The problem is that decision is not until next Wednesday. US CPI will be released on Tuesday next week ahead of the rate decision.

Oil prices experienced volatility in trading today as traders reacted to weaker-than-expected Chinese trade data, dampening hopes for increased oil demand from the world’s largest oil importer. Nevertheless, prices are higher in early US trading. Helping on the positive side is industry data released late yesterday indicating a larger-than-anticipated drawdown in crude inventories with crude showing a -1.710M drawdown vs an expected build of 1M. Gasoline saw a build of 2.417M vs +0.9M estimate as the summer driving season begins

A snapshot of the markets currently shows:

• Crude oil is up $0.71 at $72.45 after trading as low $71.01 overnight.
• Spot gold is trading down marginally by $-2.35 at $1960.91
• Silver is near unchanged $23.57
• Bitcoin is higher at $26,857 despite trouble with the SEC for Binance and Coinbase – two large crpyto exchanges. On Tuesday after the Securities and Exchange Commission sued Coinbase over operating an unlicensed exchange. The dip yesterday added on to steep losses seen on Monday that were sparked by similar charges brought by the SEC against rival Binance, but prices have rebounded from lows near $25,350.

In the premarket for US stocks, the major indices are now trading marginally higher:

• Dow Industrial Average is trading up 27 points after yesterday’s 10.42 point rise
• S&P index is trading up 6 points after yesterday’s 10.08 point rise
• NASDAQ index is trading up 28 points after yesterday’s 46.99 point rise

In the European equity markets, the major indices are also mostly higher. The exception is Spain which is up the strong 0.94%, and Italy which is down 10.3%

• German DAX +0.09%
• Frances CAC +0.11%
• UK’s FTSE 100 +0.14%
• Spain’s Ibex +0.94%
• Italy’s FTSE MIB -0.3%

In the Asian Pacific market today stock indices were mixed:

• Japan’s Nikkei came off of all-time highs on Tuesday and fell-1.82%
• Hang Seng index rose 0.80%
• Shanghai composite index rose 0.08%
• Australia’s S&P/ASX 200 index fell -0.16%

In the US debt market yields are mixed/little changed

• 2 year yield 4.533% +0.8 basis points
• 5 year yield 3.861% +0.6 basis points
• 10 year yield 3.700% unchanged
• 30 year yield 3.867% -0.7 basis points

In the European debt market, benchmark 10 year yields are mixed:

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

Ethereum faced downward
pressure due to the recent shift towards a more hawkish stance in the markets,
with expectations of additional rate hikes by the Federal Reserve. This impact
is attributed to Ethereum’s classification as a risk asset, as its correlation
with traditional markets and fundamentals has increased with wider adoption.
However, these hawkish expectations have started to diminish due to
disappointing economic data. Nevertheless, this week, Ethereum was further
affected by regulatory concerns raised by the U.S. Securities and Exchange
Commission (SEC).

Specifically, the SEC filed
a lawsuit against Binance, the world’s largest cryptocurrency exchange,
and its Chairman Zhao on Monday. The allegations include mishandling customer
funds, providing false information to regulators, and misleading investors
about operational safeguards. The following day, the SEC also sued Coinbase for operating as an unregistered broker.
Despite these regulatory challenges, Ethereum experienced a significant rally,
possibly driven by expectations that increased regulation would strengthen the
overall cryptocurrency market or simply due to a technical rebound.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, Ethereum bounced on the 50% Fibonacci retracement level
and started to range between the 1900 level and the Fibonacci support. The
market got stuck in a range as the fundamentals remain increasingly bearish
with hawkish or recessionary expectations and attacks on the regulatory front.
The divergence with the
MACD
signalled a possible pullback or reversal coming when the price broke out of
the 2029 high and eventually that’s what we got.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can better see the current
rangebound price action and the yesterday’s rally soon after the SEC sued
Coinbase. There’s not much to glean from this chart as support and resistance
levels are messy and the markets are in a limbo until the next week’s CPI and
FOMC events.

Ethereum Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we have some support zone
at the 1840 level where we can find the confluence with the 38.2% and 50%
Fibonacci retracement levels. We may find buyers leaning on this area with a
defined stop below it and target the 1920 high. The sellers, on the other hand,
are likely to pile in if the price breaks below the 1840 support zone and
target the 1681 level.

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

• Once we’ve reached a peak on rates, they are likely to stay there for a while
• Not going to say how long that will be
• Some people in markets are pricing in rate cuts by end of the year, I’d be interested in how they are coming to that conclusion

There is a hint of sarcasm in his last point, as the narrative among central banks now is that they will keep rates higher for longer. As for the other remarks, they are consistent with what we have heard before from his colleagues.

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

Headlines:

• ECB’s Knot: Outlook for rate policy after July is unclear
• ECB’s Knot: Prolonged monetary tightening might still lead to stress in financial markets
• ECB’s Schnabel: The impact of our policy on inflation expected to peak in 2024
• BOJ’s Ueda: When we can foresee achieving price target, then will discuss exit policy
• Germany April industrial production +0.3% vs +0.6% m/m expected
• France April trade balance -€9.71 billion vs -€8.02 billion prior
• UK May Halifax house prices 0.0% vs 0.0% m/m expected
• US MBA mortgage applications w.e. 2 June -1.4% vs -3.7% prior
• Turkish lira implosion shows no signs of stopping
• OECD sees limited improvement in global growth prospects as rate hikes set to weigh

Markets:

• AUD leads, USD lags on the day
• European equities mostly little changed; S&P 500 futures flat
• US 10-year yields down 1.3 bps to 3.687%
• Gold flat at $1,961.98
• WTI crude up 1.0% to $72.45
• Bitcoin down 0.2% to $26,900

It was a mostly sideways session as markets are lacking any appetite or real conviction, with the countdown to the US CPI and Fed decision next week starting a little early.

The lack of key economic releases this week isn’t helping with that, leaving traders and investors with little to work with. There were some ECB speakers during the session but they didn’t offer anything new.

The only real eye catching detail is perhaps in Turkey, with the lira imploding further in a over 7% drop against the dollar to fresh record lows.

Besides that, equities and bond market sentiment are looking rather subdued and disinterested. Meanwhile, major currencies were initially lacking any real direction but we are seeing the dollar sit mildly lower on the day currently.

That said, the ranges are leaving a lot to be desired as USD/JPY continues to stick around 139.30-50 mostly and EUR/USD also gyrating in and around the 1.0700 mark. AUD/USD is perhaps the notable dollar pair at the moment with a push to 0.6700, its highest levels in three weeks. The pair is now running up against key resistance and large option expiries on the day.

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

The dollar is losing a little bit of ground now in European trading and the aussie is taking full advantage of that, as it seeks to post a fifth consecutive day of gains today. AUD/USD is now trading above 0.6700 for the first time in three weeks and more importantly, buyers are attempting a break above the 200-day moving average (blue line) of 0.6690.

A break above that as well as the 61.8 Fib retracement level of the swing lower last month at 0.6680 will put the focus back on the 100-day moving average (red line). That is where buyers have failed to get above since April trading and it is seen at 0.6744 currently.

Beyond that, the April and May highs close to 0.6800 will offer the next big test for AUD/USD in trying to seek a further upside leg.

This week, the aussie has been helped by the RBA surprising with a rate hike. And with little else going on in markets, it continues to find legs in this latest run higher. The daily close is going to be crucial and while the dollar might only be pushing and pulling against other major currencies at the moment, this is one to watch as it is contesting key technical levels on the week.

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

The USDJPY buyers are making a play above the 100/200 hour MA in early US trading. Those MA come in at 139.493 and 139.77. If the buyers are serious, moving away from the MAs would show their commitment.

The USDJPY pair has been trading within a fairly narrow range between 138.73 and 140.92 over the last 10 or so trading days. The pair remains near the high of the move up from May, it is just having difficulty keeping the momentum going as traders fluctuate their feelings to the intraday whims of the market.

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

The US dollar is at the highs of the day on a number of fronts and that’s pushed EUR/USD down 42 pips to 1.0671, breaking yesterday’s low.

The catalyst might be fixed income, where US yields are up 1-3 bps across the curve and at session highs. The RBA hike may have convinced some that global central banks will need to hike further. For what it’s worth, Fed fund futures still price just a 25% chance of a hike in June, though that rises to 80% in July.

A further leg of US dollar strength would need some help from stock market selling.

This article was written by Adam Button at www.forexlive.com.

Last Friday’s NFP report surpassed expectations once again,
extending the impressive streak to 14 consecutive beats. However, when we look
closely at the report, the specific details weren’t very positive. The
unemployment rate experienced a significant increase from 3.4% to 3.7%, marking
the largest month-over-month rise since the pandemic began. Additionally, the
average number of hours worked per week slightly decreased, which is often an
indication that employers are preparing for potential layoffs.

Overall, the report
provided something for everyone to interpret. Optimists saw solid job growth
but also recognized that the higher unemployment rate and soft average hourly
earnings could indicate a less tight labour market, potentially reducing
inflationary pressures. The decrease in average weekly hours worked might be
seen as a return to the pre-pandemic trend.

On the other hand, pessimists
focused more on the specific details rather than just the headline number since
trends are generally more important than absolute figures.

Yesterday, the US ISM Services PMI came in much lower than expected at
50.3, narrowly missing the contraction territory. The employment sub-index fell
into contraction, and the prices paid sub-index decreased substantially,
returning to the level observed in May 2020. As a result, the market adjusted
its expectations for further rate hikes from the Fed on the dovish side.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that gold has
recently bounced from the key trendline and the
50% Fibonacci retracement level.
The rally found resistance at the red 21 moving average where the sellers
pushed the price back towards the trendline. The moving averages are
still crossed to the downside so the bias remains bearish, but given the recent
disappointment in the US data we may expect more upside from here as the market
reprices rates expectations on the more dovish side. If the price breaks below
the trendline, it will open the door for a selloff into the 1800 level.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that the resistance at 1984
stalled the rally in gold and the price sold off in the aftermath of the US NFP
report. This was a curious reaction given that rates expectations were lowered
and the details in the report weren’t that good. Nevertheless, gold found
support again at the trendline and rallied yesterday as the US ISM Services PMI
missed expectations. The price is now finding resistance at the red 21 moving
average, but if the price breaks above the recent high at 1964, we should see
another test of the 1984 resistance.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see more
closely the short-term price action and the 1964 high being the key level to
break for the buyers to extend the rally towards the 1984 resistance first and
make new higher highs next. The sellers, on the other hand, will want to see
the price breaking lower and ultimately get lots of conviction if gold breaks
below the 1934 support zone.

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

The EURUSD tried to move higher in the early Asian session and heading into the European morning session, but could not sustain upside momentum above its 100 and 200 hour moving averages (blue and green lines in the chart below). Weaker data ahead of Germany (factory orders) and EU (retail sales) helped to push the currency back to the downside. Buyers turn to sellers on the move back below the 200 and 100 hour moving averages which are near converged at 1.0713 area.

The subsequent move to the downside is now trading to new session lows, and has traders looking toward the swing low from last Thursday and a swing low from intraday on Wednesday near 1.0660. Will below that level and traders will target the cycle low (May low) at 1.06351.

It would now take a move back above a swing area above 1.0704, but really the 100 and 200 hour moving averages at 1.0711 and 1.07158 to tilt the technical bias back to the upside.

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