The EURUSD is rotating back lower in the US afternoon. The pair moved higher as Fed Powell (may not have to tighten as much due to banks slow lending), and the debt ceiling talk stall sent rates lower and the USD lower with it.

Technically, the price for the EURUSD moved above its 100-day MA at 1.0807 but stalled ahead of the falling 100-hour MA (blue line currently at 1.0832). The high reached 1.0828. Buyers turned to sellers.

The price has rotated lower and now trades below its 100-day moving average once again. The current price is trading at 1.0799.

We are heading into the weekend and then into a new trading week, but what is clear from the hourly chart at least is that the price has been able to stay below the 100-hour moving average since May 8. There have been 4 separate tests at lower successive levels, and each test has found willing sellers. The prices also looking to close a week below its 100-day moving average which is a more bearish bias shift.

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

The US 2-year yield is up about 30 basis points on the week trading at 4.296%. The high-yield today reached 4.349% the highest level since March 15, 2023. The move to the upside this week is the largest gain since the week of September 19, 2022, when yields moved up nearly 34 basis points. Ironically, the yield settled at 4.212% that week just 8 basic points away from the current level of 4.296%.

The catalyst to the upside this week was a better tone in regional banks. That took some of the flight to safety flows out of the market and had traders pricing in more Fed cuts into 2024.

The KRE regional bank ETF rose by 7.26% this week.

Boston Fed president Logan yesterday said she would pencil in a 25 basis point hike in June given current economic data. Feds Bullard also tilted toward another 25 basis point hike.

The January fed funds futures now implies 4.65%. That is still below the current target rate of 5.25%, but the implied yield in May reached as low as 4% back on May 4 and 4.22% as recently as May 11.

Although higher, the 2 year yield is still well off its high for 2023 at 5.085% reached on March 8, 2023

Further out the yield curve, the 10-year yield is up 25 basis points this week, or 6.599%. That is its largest 1 week gain since December 19, 2022 week. The yield today moved to a high of 3.719% which is the highest level since March 13, 2023. The high-yield in 2023 reached 4.089% on March 2. The high cycle yield was back on October 21, 2022 at 4.335%

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

Headlines:

• Dollar gains stall for now but the technicals look good
• Dollar back in the driver’s seat
• How has the Fed pricing changed in the past week?
• ECB’s Lagarde: We are heading towards more delicate decisions going forward
• ECB reportedly to step up scrutiny of bank liquidity, may raise requirements
• BOJ’s Ueda: Appropriate to take time in determining when to modify easy policy
• BOJ’s Ueda: Japan inflation likely to slow back below 2% in middle of current fiscal year
• China state banks reportedly seen swapping yuan for dollars in onshore forwards market
• Germany April PPI +0.3% vs -0.5% m/m expected

Markets:

• NZD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields up 0.7 bps to 3.655%
• Gold up 0.3% to $1,963.53
• WTI crude up 1.0% to $72.60
• Bitcoin up 0.5% to $26,843

There weren’t many major headlines during the session as European trading featured a quieter and calmer mood. The dollar saw its gains from yesterday cut back a little, but remains in a favourable spot overall. That comes as European indices rush higher again with the DAX hovering at fresh record highs currently.

The positive momentum in the equities space is continuing after the tech-heavy gains in Wall Street and US futures are also holding higher again today.

That is at least helping with a light pullback in the dollar with EUR/USD moving back to 1.0800 but still keeping just below its 100-day moving average at 1.0806. Meanwhile, USD/JPY did move lower to touch 138.00 but is now seen at around 138.40, still 0.2% down on the day, as bond yields recover from an early retreat.

Amid the more optimistic mood, the antipodeans are notable gainers with AUD/USD keeping a bounce from 0.6600 yesterday to stick around 0.6650 levels. NZD/USD is also seen up 0.8% to 0.6275, trying to nudge above its own 100-day moving average.

Elsewhere, gold is also seeing a minor bounce to $1,963 but it still doesn’t take away from the break of support at $1,975-81 from yesterday.

All eyes now move to Fed chair Powell’s speech to wrap up the week, so we’ll have to see if there is any angle for traders to work with or if we will see a continuation of the technical play in the dollar.

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

The latest retreat has roughly two parts to it as gold bulls were once again unable to chase a break above $2,070-75 from the 2020 and 2022 highs, as well as the dollar and bond yields moving higher in tandem. That pushed gold back towards the support region around $1,975-81 and that eventually gave way in trading yesterday.

While there is a bit of a pullback now with dollar gains easing up, gold is still trading below $1,970 and sellers are keeping in near-term control for now. Here’s a look at the daily chart:

Unless we do see price climb back above the $1,975-81 region, gold looks poised for a deeper pullback at this point in time. The next plausible target seems to be closer towards the 100-day moving average (red line) at around $1,928.

Beyond that, it could prove to be a slippery slope for gold prices as it lurches back towards $1,800+ levels. I would rate the odds of such a strong pullback as being limited but I wouldn’t discount the risks, especially since markets have been underestimating the dollar side of the equation since the regional banking crisis.

We’ve gone from pricing three Fed rate cuts by year-end to two now and that is exerting its influence on the dollar this week. If there is more to come, that means that the dollar rally may have legs to go and that doesn’t bode well for gold in the short-term.

That said, in the bigger picture, I still like gold’s long-term outlook especially as we draw closer towards the end of the tightening cycle. A deeper pullback to $1,800+ levels will present a very attractive dip buying opportunity in my view and I’d pile in on more longs there.

I wouldn’t go as far as to say that chasing gold shorts on a move under $1,800 is the way to go considering the balance of risks. As such, it is setting up to be a buy on dips kind of thing for gold in my view.

Of course, there still needs to be a break above $2,070-75 in the big picture but if we do return back to the expected playbook during the second-half of this year, I reckon the topside level could easily be taken out as we move towards next year.

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

On the daily chart below for the Nasdaq,
we can see that we have finally got a breakout. This 12274 level has been a
really tough nut to crack, but the buyers eventually succeeded. We can see how
they’ve been knocking on that door for over a month and as soon as the price
started to run to the upside, sellers folded quickly.

The risk sentiment was also
helped by the recent positive
news on the debt ceiling front which points to a classic “buy the rumour”
type of trade. Right now, the buyers don’t have much resistance on the upside except the clear
swing high at 13174. We may even see the rally extending towards that high with
little to no pullbacks as the FOMO kicks in.

Nasdaq
technical analysis

On the 4 hour chart below, we can
see more closely the breakout of the range just beneath the 12274 resistance.
The big bullish
flag pattern is still working and as previously mentioned, the target should
be right around the 13000 high. The sellers may have a hard time now timing a
top as there aren’t strong levels to lean on as before. Nonetheless, watch out
for Fed Chair Powell today as he may lean more explicitly
towards a June rate hike justified by the recent better than expected economic
data.

On the 1 hour chart below, we can
see that we have just a minor resistance from the August 2022 swing high. This
level may see some profit taking and lead to a pullback. The buyers should be
waiting for another rally at the nearest trendline though, while the sellers will
want to see the price to break below it to get some more confidence on further
downside. What looks clear is that the bias should remain bullish as long as
the price stays above the 12274 resistance.

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

• ECB will be courageous to take needed decisions to bring inflation back to 2%

Just some token remarks and not really giving much away for now. Another rate hike is well expected for June but we will see if there will be any more after for the ECB. A lot of that is going to come down to the data.

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

The dollar jump yesterday was certainly noteworthy but we are seeing a light pullback to the gains in trading today. Of note, USD/JPY is down 0.4% to 138.10 levels but buyers are still looking poised in the bigger picture.

Meanwhile, the antipodeans are also taking advantage amid the more positive risk mood. AUD/USD and NZD/USD are both up 0.5% to 0.6650 and 0.6260 respectively with the former holding a decent bounce off 0.6600 at the lows yesterday.

Despite the bit-part retracement so far today, the dollar continues to sit in a good spot from a technical perspective. That is rather evident against the euro and yen, so let’s take a look.

EUR/USD is marginally higher today near 1.0780 but the important detail on the chart remains that break below 1.0800 and the 100-day moving average (red line). That is keeping dollar bulls interested and poised to maintain a downside push in the pair so long as the levels above hold.

As for downside targets, there is room to roam perhaps back towards the March lows at 1.0516-36 and potentially 1.0500. However, there will definitely be a lot of twists and turns in the week(s) ahead so don’t expect any moves to be that straightforward.

Then, we have USD/JPY which rose to its highest levels since the end of November last year on a break above 138.00 yesterday. That is still very much holding with the broken resistance region at 137.77-91 one to watch if sellers are to wrestle back some momentum towards the end of the week.

Otherwise, buyers are looking poised to keep a push towards 140.00 next for the pair so long as the bond market plays ball.

But the pullback today is also seeing yields drop slightly with 2-year Treasury yields down 5 bps to 4.22% and 10-year yields down 2.5 bps to 3.62% on the day.

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

The USD is the strongest and the GBP is the weakest as the NA session begins. It is a holiday in most European countries in observance of Ascension Day (banks are closed). US yields are higher. US stocks are modestly higher. Walmart reported better earnings this morning with EPS coming in at $1.47 versus $1.32 expected. Revenues were higher at $152.3 billion versus $148.76 billion expected. Sales ex-gasoline were up 7.3% versus 5.1%. Walmart shares are trading at $151.81 versus $149.53 at the close yesterday. Oil prices have slightly dropped, awaiting the outcome of the debt limit talks. A successful agreement could bolster the prices. Yesterday, the inventory data showed a sharp build of 5.0 million barrels vs an expected draw of -1.2M barrels expected. The price moved higher by 2.78% (go figure).

U.S. President Joe Biden is in Japan for the G7 meeting discussing key global issues, while the spotlight stays on the resolution of the debt ceiling talks back home. The President has expressed optimism, emphasizing that the U.S. „will not default“ and citing ongoing negotiations with top Congress members. He is expected to return to Washington on Sunday to aid in reaching an agreement, which Republican leader Kevin McCarthy believes is feasible by the weekend. Despite guarded optimism, no formal resolution has been reached, and a potential government default looms as early as June 1.

The day’s economic agenda commences at 8:30 am with the release of the Canadian New Housing Price Index (NHPI) data. The forecast suggests a slight dip of -0.1%, compared to the previously recorded 0.0%. In the US at the same time, Unemployment Claims are expected to decrease to 253K from the previous count of 264K (the 4-week average was the highest since November 2021). The Philadelphia Fed Manufacturing Index is also set to be unveiled with an anticipated improvement to -19.5 from a previous -31.3. Recall, the empire manufacturing index fell sharply on Tuesday (to -31.8 from 10.8 in the previous month). At 9:05 am, remarks from FOMC Member Jefferson are scheduled, followed by FOMC Member Barr at 9:30 am. Their commentary could provide valuable insights into the Federal Reserve’s perspective on the state of the economy and monetary policy.

At 10:00 am, the release of US Existing Home Sales data, is forecasted to decline to 4.30 million from the previous figure of 4.44 million. Additionally, the Conference Board Leading Index on a month-on-month basis is expected to report a smaller decrease of -0.6%, an improvement from the previous -1.2%. FOMC Member Logan is also slated to speak during this hour. The sharp decline is forecasting a recession in the US going forward (nothing new).

A tentative release of the Bank of Canada’s (BOC) Financial System Review is on the docket, with no specific time provided. At 11:00 am, remarks from the Bank of Canada’s Governor Macklem are scheduled, potentially shedding light on Canada’s monetary policy direction.

Overnight, in the Asian Pacific session disappointing labor market data for April was released. Jobs in the economy shrunk while the unemployment rate jumped higher (however, the unemployment remains near record lows so it is not all bad). Nevertheless, the data today in addition to the subdued wages data published yesterday, along with other indications showing some steam coming out from the Australian economy should give the Reserve Bank of Australia reason enough to pause at its upcoming June 6 meeting. New Zealand PPI was lower than expectations.

Montana is the first US state to ban TicTok. The decision is expected to be challenged in the courts. If the ban is maintained it will go into effect in January and will raise tensions between the US and China.

A look around the markets is showing.

• WTI crude oil is down $0.05 or -0.07% at $72.78
• Gold is down $5.70 or -0.29% at $1975.77
• Silver is down $0.18 or -0.84% at $23.54
• Bitcoin is back about the $27,000 level at $27,377. The price low reached $26,550.

In the premarket for US stocks, the major indices are marginally higher after yesterday’s gains:

• Dow industrial average is up 14.23 points after yesterday’s sharp 408.63-point rebound
• NASDAQ index is up 37 points after yesterday’s 157.51-point rise
• S&P index is up 8.25 points after yesterday’s 48.89-point rise

Although it is a banking holiday in Europe, stocks continue to trade:

• German DAX +1.64%
• Frances +0.92%
• UK’s FTSE 100 +0.49%
• Spain Ibex +0.64%

in the US debt market, yields are higher:

• 2-year yield 4.186% +3.0 basis points
• 5-year yield 3.617% +2.6 basis points
• 10-year yield 3.602% +2.1 basis points
• 30-year yield 3.89% +1.1 basis points

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

Headlines:

• The dollar’s resilience should not be understated
• EUR/USD hovers near key support with large expiries in play today
• USD/JPY flirts with key resistance region, 140 being eyed next?
• AUD/USD looks resigned to test the March and April lows again
• DAX closes in on record highs again as equities maintain the optimism
• ECB’s de Guindos: There is still scope to keep raising rates
• BOE’s Bailey: I do not envisage balance sheet returning to pre-financial crisis level

Markets:

• USD leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 1.9 bps to 3.600%
• Gold down 0.3% to $1,975.66
• WTI crude down 0.2% to $72.67
• Bitcoin up 0.1% to $27,365

It was a quiet session with not many headlines, as some parts of Europe are on holiday and with there being no major economic releases whatsoever.

That did not stop the dollar though, as it continues its grind higher and to test key levels in EUR/USD and USD/JPY.

The former is closing in on key support near 1.0800, although there are large option expiries limiting the downside push for now. Meanwhile, the latter is also running up against recent highs around 137.77-91 at the moment as buyers look for a breakout towards 140.00.

This comes despite equities continuing to show much optimism, with European indices rallying hard after the Wall Street gains yesterday. US futures are also slightly higher, so that is helping with the mood. Of note, the DAX is just inches away from fresh record highs set last year at 16,285-90.

As the dollar holds more resilient again, GBP/USD is seen down 0.4% to 1.2440 as the retreat this week continues while AUD/USD is down 0.3% to 0.6640 as the aussie is dragged down by softer jobs data earlier.

It’s a rare sight to see the dollar move higher in a time where stocks are also performing well, but it is what it is at the moment in markets.

Traders have been quick to price in relatively dovish Fed expectations since the regional banking crisis but perhaps that is now backfiring as high inflation is keeping the Fed on course to hold rates higher for longer, alongside economic conditions that are holding up in the US.

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

Market picture

The crypto
market capitalisation rose 0.55% over the past 24 hours to 1.134 trillion. Late
Wednesday afternoon, another attempt was made to break above 1.14 trillion,
following the US stock market rally on the government debt ceiling news.
However, it has so far failed to stay in this territory.

Bitcoin is
up 0.7% at $27.2K, staying within the recovery trend that has been in place
since the 12th. However, this recovery is painfully slow, and local resistance
at $27.5K, which has been supporting since late March, remains in place.

According to
Santiment, large Bitcoin holders continue accumulating BTC – over the past five
weeks, cryptocurrency holdings have increased by nearly 85,000 BTC ($2.3
billion). Santiment believes Bitcoin is now in a consolidation phase before a
new surge.

News background

The stock
and cryptocurrency markets will collapse if the US defaults, says Mike McGlone,
senior strategist at Bloomberg Intelligence. He is bearish on cryptocurrencies
but bullish on gold.

Lightning
Labs, the developer of the Lightning Network, announced the release of Taproot
Assets Protocol v 0.2, which avoids potential delays in transaction processing
due to congestion on the Bitcoin network.

The UK
Parliament has proposed regulating cryptocurrencies as gambling. Crypto assets
can potentially be used for fraud and money laundering, posing a high risk to
consumers and the economy.

Tether’s
issuance team has decided to invest up to 15% of its net profits in Bitcoin
monthly to diversify its reserves. It has already invested $1.5 billion in BTC.
The bulk of USDT’s collateral is still in short-term US Treasuries.

According to
a Bloomberg survey, only 31 of the top 60 cryptocurrency companies have
successfully undergone external financial audits or confirmed reserves. Many
auditors are reluctant to work with cryptocurrency companies or need more
expertise.

This article was written by FxPro’s Senior Market Analyst Alex
Kuptsikevich.

This article was written by FxPro FXPro at www.forexlive.com.