Yesterday, the US
ISM Manufacturing PMI missed forecasts although it wasn’t such a big miss
as it was still in the range of estimates, but it was nonetheless a miss and the market reacted accordingly. I’d
say that one bad report amid a series of good ones shouldn’t be enough for a
change in the trend, especially considering that the final reading of the S&P Global US Manufacturing PMI released a bit earlier showed an even greater improvement. The ISM report though, should set aside the inflation fears
which should be good news for the stock market as long as we don’t have more worrying data on the growth side.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 bounced recently around the 5200 level where we had
the confluence
of the trendline
and the 50% Fibonacci
retracement level. That’s where the buyers piled in on the last day of the
month fading the weakness from the month-end flows. The sellers will need the
price to break below the trendline to turn the bias more bearish and start
targeting a drop into the 5000 level.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently probed above the downward counter-trendline but
couldn’t really extend the rally into new highs. The 5313 level will be the
spot to watch as a break above it should see the buyers increasing the bullish
bets into a new all-time high. The sellers, on the other hand, should wait for
a break below the major trendline to get a bit more conviction for a correction
lower.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action with the S&P 500 now consolidating
between the major trendline and the 5312 level. There isn’t much to do in the
middle of this “range” as the erratic moves could give false signals. If we get
another drop into the major trendline though, some late buyers could take it as
an opportunity to step in with a better risk to reward setup. The red lines
define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings data. Tomorrow, we have the US ADP and the
US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures,
while on Friday we conclude the week with the US NFP report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The dollar is trading to the highs for the day against the other major currencies outside of the yen and franc. EUR/USD is now down 0.3% to 1.0868 while GBP/USD is down 0.4% to 1.2758 on the day. Commodity currencies are bearing the brunt of the pain with AUD/USD in particular now down 0.8% to 0.6635 and erasing all of its gains from yesterday.

The drop also sees sellers looking to seize back near-term control on a push below the key hourly moving averages. The confluence of the 100 (red line) and 200-hour (blue line) moving averages is at 0.6640-43.

Meanwhile, USD/CAD is also marked higher by 0.5% to 1.3695 on the day and NZD/USD down 0.4% to 0.6160 currently.

It’s an all out flight to safety in European morning trade thus far. Equities are keeping on the defensive with European indices down roughly 1% across the board. S&P 500 futures are down by 0.6% currently.

Going back to FX, USD/JPY is now down 0.7% to test the 155.00 level. The pair is down by more than 140 pips since Asia trading.

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

At the same time, it is reported that the BOJ has no intention to surprise bond traders. I mean, not to say that taking such a step is entirely surprising. They will likely do so while reaffirming that they have the flexibility to step back in again, should market conditions dictate them to do so.

In any case, this was always going to be the next move before they get to raising interest rates again. The latter looks to be on the cards for July potentially next.

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

10-year yields in the US are down 5 bps to 4.461% currently and that is weighing on USD/JPY mostly in European trading. The dollar is now trading more mixed again versus the rest of the major currencies, keeping little changed. But in the case of USD/JPY, the pair is nudging to the lows for the day as seen above.

In the bigger picture, there is still some pushing and pulling in and around the 157.00 mark.

Any attempts by buyers to try and test higher levels are still being met with some caution, with Japanese authorities keeping a watchful eye on things.

Meanwhile, the downside for now is being arrested by some near-term support. The region around 156.57-62 is limiting losses in the pair, at least for the time being. As such, sellers will have to do more as well in justifying any return trip towards the 155.00 mark.

For trading this week, the big US data surrounding the labour market will be key. The ISM manufacturing and services reports will be the first hurdle, before moving on to the ADP employment numbers and the initial weekly jobless claims. And all of that will culminate in the release of the non-farm payrolls report on Friday.

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

It’s a mixed showing so far in European morning trade, as the dollar is holding its ground despite lower Treasury yields today. 10-year yields are down 3.5 bps to 4.476%, continuing the retreat from the end of last week.

That is weighing on USD/JPY as the pair inches back to the 157.00 mark, down 0.2% on the day.

But elsewhere, the dollar is still keeping its composure overall. EUR/USD is down 0.2% to 1.0830 at the lows for the day. The price action there sees sellers back in near-term control on a push below the key hourly moving averages around 1.0838-40. The lower bound is still held closer to the 1.0800 mark for now though.

Then, GBP/USD is down 0.3% to 1.2700 and USD/CAD up 0.3% to 1.3660 levels at the moment.

In other markets, gold is flat at $2,328 while equities are maintaining slight gains but not really growing too optimistic. S&P 500 futures are still up just 7 points, or a little over 0.1%.

It’s still early in the week though as there is plenty to look forward to. Besides the BOC and ECB, the US jobs report and the run up to that release will be key items on the agenda to watch for markets.

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

The USD last week got a
boost from the strong US Consumer Confidence data which triggered an aggressive
rise in long term Treasury yields. The report however just showed that the
labour market remains resilient which is good news for growth and not
necessarily bad news for inflation. Eventually, both the Treasury yields and
the greenback gave back the gains as it became clearer that the price action got
impacted more by the month-end flows rather than a fundamental driver.

The CHF, on the other hand,
got a boost from SNB’s
Jordan comments where he said that if upward risks to Swiss inflation were
to materialise, these would most likely be associated with a weaker franc,
which could be counteracted by selling foreign exchange reserves (buying CHF).
On top of that, we got a selloff in the US Dollar across the board as the risk-on
sentiment returned.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF sold off all the way back to the key support
around the 0.90 handle. This is where we can expect the buyers to step in with
a defined risk below the support to position for a rally into the 0.9250 level.
The sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish bias and increase the bearish bets into the 0.88 handle.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an important zone around the 0.91 handle where the price reacted
to several times in the past few weeks. If the pair gets there, we can expect
the sellers to lean on that resistance zone with a defined risk above it to
position for a break below the 0.90 support with a better risk to reward setup.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into the 0.9250 level.

USDCHF Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have the upper limit of the average
daily range right around the most recent swing high level at 0.9070. This
should strengthen the case for a strong resistance around the 0.9070 and 0.9100
price region ahead of the Swiss CPI release and give the sellers a good point
where to lean on. The buyers will need to break above that zone to turn the
bias around and extend the rally into new highs.

Upcoming
Catalysts

Today we have the US ISM Manufacturing PMI. Tomorrow, we get the Swiss CPI
and the US Job Openings data. On Wednesday, we have the US ADP and the US ISM
Services PMI. On Thursday, we get the latest US Jobless Claims figures, while
on Friday we conclude the week with the US NFP report.

A downside
surprise in the Swiss CPI should see the market getting a bit more confident
for another rate cut in June and might weigh on the currency in the short-term.
On the other hand, an upside surprise might give the Swiss Franc a bigger boost
as the market should price out both the chances of a rate cut in June and
expect the central bank to prop up the currency.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Commodities have been some of the best trades so far this year, especially when it comes to metals. In the precious metals space, we have seen gold and silver especially rip higher in recent months. But can they continue their form into June? Here is what the seasonal pattern has to say.

In the case of gold, there isn’t anything too interesting. But for silver, this is how the precious metal has fared over the last 20 years:

June has been the worst performing month for silver during this period, with it falling in 15 out of the last 20 June months. That is typically followed by a stronger July though.

So, how does that play out against what we’re seeing on the charts?

Silver has recently struggled to firmly seal a firm break above the $32 mark. Since then, it has been dragged lower but buyers are holding at support around the $30 mark. The precious metal is down 0.5% to start the month today, with the low earlier hitting $29.78.

As things stand, support at $30 alongside the 38.2 Fib retracement level of the run higher in May at $30.03 is the key level to watch right now. Break below that and there is scope for the pullback in silver to run much deeper, accompanying what we’re seeing in the seasonal pattern.

Besides silver, oil is also one that has a more interesting seasonal pattern for June.

Historically, oil tends to enjoy a modest string of gains from April to June. And after, that sees oil get dragged into more of a bump road until the end of the year. So, this gives the commodity a more interesting outlook for the month ahead.

Over the weekend, OPEC+ surprised with a clear and concise plan of how they are going to go about with their current production cuts. The plan now is to extend those cuts through to the end of next year and to slowly taper them starting from October. Eamonn had the details earlier here.

It’s a rare occasion that the cartel managed to come together but the bottom line is that the big boys are planning to get more production back on the market in due time. That’s not too bullish for oil prices but OPEC+ might be overestimating the outlook for the global economy for now. They have been the only one with such a view but that has been vindicated by a stronger performance in Q1 at least.

From a technical standpoint, oil has been trading within a bit of a range since May. The range is holding around $76.50 to $80.00 with the 200-day moving average at $79.80 currently also one that is limiting stronger upside. The next trending move for oil will come on a break of that range as such. So, we’ll see if prices will keep with the seasonal suggestion or buck the trend.

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

• Final Manufacturing PMI 51.2 vs.51.3 expected and 49.1 prior.

Key findings:

• Manufacturing PMI at 51.2 in May.
• Output rises across all main sub-sectors and
  size categories.
• Business optimism springs to 27-month high.

Comment:

Commenting on the latest survey results, Rob Dobson,
Director at S&P Global Market Intelligence, said:

“May saw a solid revival of activity in the UK manufacturing
sector, with levels of production and new business both
rising at the quickest rates since early-2022. The breadth
of the recovery was also a positive, with concurrent output
and new order growth registered for all of the main sub-
industries (consumer, intermediate and investment goods)
and all company size categories for the first time in over two
years.“

„While the latest upturn was dependent on a strengthening
domestic market, there were signs of overseas demand
also moving closer to stabilisation. Business optimism rose
in tandem with the improvement in current conditions, with
63% of manufacturers forecasting their output to be higher
one year from now.“

“The latest PMI survey data provided a mixed picture for
price pressures at manufacturers, however. At the factory
gate, output charge inflation strengthened for the fifth
successive month and to its highest level in a year. That said,
a solid easing in the rate of increase in input costs should
help prevent price pressures from becoming embedded.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Monday: China
  Caixin Manufacturing PMI, Swiss Manufacturing PMI, Canada Manufacturing
  PMI, US ISM Manufacturing PMI.
• Tuesday: Swiss
  CPI, US Job Openings.
• Wednesday: Japan
  Average Cash Earnings, Australia GDP, China Caixin Services PMI, Eurozone
  PPI, US ADP, Canada Services PMI, BoC Policy Decision, US ISM Services
  PMI.
• Thursday: Swiss
  Unemployment Rate, Eurozone Retail Sales, ECB Policy Decision, US Jobless
  Claims.
• Friday: US
  NFP, Canada Labour Market report.

Monday

The US ISM Manufacturing PMI is expected
at 49.8 vs. 49.4. The S&P
Global Manufacturing PMI increased to 52.4
vs. 51.1 and overall the report showed that business activity expanded to a
two-year high. The details also showed that “both input costs and output
prices rose at faster rates, with manufacturing having taken over as the main
source of price growth over the past two months.“ However, “the overall
rate of selling price inflation remained below the average seen over the past
year”.

Tuesday

The Swiss CPI M/M is expected at 0.4% vs.
0.3% prior. The last
report beat expectations with the Y/Y rate
coming in at 1.4% vs. 1.1% expected but the rate was still within the SNB’s
forecasts. A rate cut in June is basically a coinflip, but a downside surprise
should see the market getting a bit more confident for another cut.

SNB’s
Chairman Jordan also said that if upward
risks to Swiss inflation were to materialise, these would most likely be
associated with a weaker franc, which could be counteracted by selling foreign
exchange reserves (buying CHF). Therefore, an upside surprise might give the
Swiss Franc a bigger boost as the market should price out both the chances of a
rate cut in June and expect the central bank to prop up the currency.

The US Job Openings are expected to fall
to 8.350M vs. 8.488M prior. The last
report showed once again a decrease as the
labour market continues to come into better balance. The quits rate has also
eased to a new cycle low and that should be good news for inflation as it
generally leads wage growth.

Wednesday

The BoC is expected to cut rates from
5.00% to 4.75%. The market-based probability jumped to 80% chance following the
soft Canadian
GDP data. The expectations were already leaning toward a rate cut after the
last Canadian
CPI report where the BoC’s preferred underlying inflation measures
surprised to the downside and finally fell inside the 1-3% target band. The
central bank will likely refrain from pre-committing to another rate cut and
state that it will be dependent on the data.

The US ISM Services PMI is expected at
50.5 vs. 49.4 prior. As previously mentioned, the S&P
Global PMIs surprised to the upside with the Services measure in particular
beating expectations by a big margin. The focus will likely be on the
employment sub-index ahead of the NFP report but the data we got until now
suggest that the US economy is going well, and the labour market remains resilient.

Thursday

The ECB is expected to cut interest rates
from 4.00% to 3.75%. This rate cut has been telegraphed very strongly, so the
focus will be on what the central bank intends to do next. The recent data
showed that the economy picked up steam with the labour market remaining
strong. This might give the policymakers a reason to err on the cautious side
although the latest Eurozone
PMIs showed that inflationary pressures continue to abate. The
market expects two more rate cuts from the ECB this year but as it’s always the
case, that will depend on the data.

The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s a
timelier indicator on the state of the labour market. This is because
disinflation to the Fed’s target is more likely with a weakening labour market.
A resilient labour
market though could make the achievement of the target more difficult.

Initial Claims keep on hovering around cycle
lows, while Continuing Claims remain firm around the 1800K level. This week Initial Claims are
expected at 215K vs. 219K prior, while
there is no consensus at the time of writing for Continuing Claims although the
prior release showed an increase to 1791K vs. 1797K expected and 1787K prior.

Friday

The US NFP is expected to
show 180K jobs added in May vs. 175K in April,
and the Unemployment Rate remaining unchanged at 3.9%. The Average Hourly Earnings
Y/Y is expected at 3.9% vs. 3.9% prior, while the M/M measure is seen at 0.3%
vs. 0.2% prior.

The May labour market
data we got until now has been generally positive with the S&P Global PMIs reporting a
slowdown in the rate of job losses, the US Jobless Claims holding on strong,
and the labour market details in the US Consumer Confidence report rebounding. Therefore,
the bias should be skewed towards a good release.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Hamas says they view US Pres. Biden’s proposal for a cease-fire as positive
• S&P cuts France to AA- to AA
• US stocks rebound into the close.
• Highlights for next week: Bank of Canada and ECB are expected to cut rates. US jobs report
• S&P index rebounds off key support level
• U.S. Congress has extended an invitation to Israel PM Netanyahu to address a joint session
• Netanyahu: All goals need to be to be achieved for peace…
• Geopolitics: Biden proposes a three-step process for Israel/Hamas
• Impact of Trump’s Verdict on Voter Support Revealed in Reuters Poll
• Baker Hughes oil rig count 496 versus 497 last week
• European indices closed with mixed results
• Atlanta Fed GDPNow growth estimate for Q2
• OPEC+ to hold its June 2 meeting in person in Riyadh
• US Democratic Sen. Manchin (WV) registers at a independent
• Kickstart the FX trading day for May 31 w/a technical look at EURUSD, USDJPY and GBPUSD
• ECB Centeno: May inflation acceleration only slightly above forecast.
• US core PCE for April 0.2% vs 0.3% estimate
• US Canada GDP QoQ annualized 1.7% versus 2.2% estimate
• The NZD is the strongest and the CHF is the weakest as the NA session begins.
• ForexLive European FX news wrap: Dollar mixed with PCE inflation, month-end in focus

The big event of the week was the US core PCE data. The core PCE is the Fed’s favored measure of inflation. Expectations were for 0.3% increase. The actual increase rounded to 0.2% for the core measure. In reality, the unrounded number was 0.249% just under the number needed to round to 0.2%. As a result the year on year measure came in as expected at 2.8% for the cor PCE. Mean when the headline number came in at 0.3% as expected and the year on year measure came in at 2.7%.

Markets interpretation was that it was good enough to keep the Fed on pace for a potential cut by the end of the year. However, it would still take a couple of other months of lower prices.

The Fed’s target of 2% mathematically requires month-to-month numbers of less than 0.2%. The unrounded 0.249% is okay but it’s not less than 0.2%. Hopes are that shelter costs will decrease over time. However, Fed officials are not confident of a 2% number by the end of the year, and more hopeful that at the end of 2025, the 2% target can be reached. That is a long time from now.

Nevertheless, yields moved lower today.

• 2-year yield 4.876%, -5.2 basis points
• 5-year yield 4.508%, -6.2 basis points
• 10-year yield 4.502%, -5.1 basis points
• 30-year yield 4.650%, -3.5 basis points

For the trading week, the 2-year yield fell -6.9 basis points, while the 10-year yield rose +3.7 basis points as the yield curve steepened (although still stayed negative at -22.7 basis points).

For the month of May, the 2-year yield fell -16.0 basis points while the 10-year yield fell -18 basis points.

In the currency market today, the US dollar fell but was overshadowed by the JPY decline. The strongest currency was the NZD and the CAD. Next week the Bank of Canada is expected to lower rates by 25 basis points when the central bank meets on Wednesday. Today Canada GDP data for the first quarter came in weaker than expected at 1.7% versus 2.2% estimate. The Canadian dollar still moved higher despite the weaker data.

Looking at some of the major currency pairs technically:

• The EURUSD founds for buyers against its 100 day moving every 1.0807 in the Asian session. Surged above its 100 and 200 hour moving averages at 1.0840 during the European morning session. Peaked between 1.0876 and 1.0887 swing area soon after the PCE data, and then rotated back down to retest its 100 and 200-hour moving averages, finding support against those levels. Those moving averages at 1.08405 will be the key barometer going into the new trading week. The ECB is expected to cut rates next week.
• The GBPUSD also traded up and down in trading today, but is ending the week above its 100 hour moving average 1.2739 and is 200 hour moving average 1.2731. Those moving averages will be the GBPUSDs key barometer in the new trading week.
• The USDJPY is also closing above its 100 and 200-hour moving averages after volatile up-and-down price action today. It’s 100-day moving average is at 157.05. It’s 200-hour moving average is at 156.88

For May, the DXY index fell -1.59%.. Looking at the major currencies versus the US dollar, the USD fell vs all the major currencies in May:

• -1.72% versus the EUR
• -0.35% versus the JPY
• -1.99% versus the GBP
• -1.87% versus the CHF
• -1.10% versus the CAD
• -2.76% versus the AUD
• -4.31% versus the NZD

In the US stock market today, late day buying erased earlier declines. The Dow industrial average rebounded and at its best trading day of the year. The major indices all closed higher for the month of May, but were down for the trading week. The S&P and NASDAQ index snapped five-week winning streaks.

For the trading week:

• Dow Industrial Average average fell -0.98%
• S&P index snapped a 5-week win streak with a decline of -0.51%
• NASDAQ index snapped its five week win streak with a decline of -1.10%

The story was different for the month of May:

• Dow industrial average rose 2.3%
• S&P rose 4.8%
• NASDAQ index rose 6.88%, its largest gain in 2024 and since November 2023
• Russell 2000 rose 4.87% its largest gain since February 2024

Next week in addition to the ECB and Bank of Canada rate decision where both central banks are expected to cut rates by 25 basis points, the major focus will be on the US jobs report on Friday, where estimates are for a gain of 185K. The unemployment rate is expected to remain steady at 3.9%. The US jobs report will be previewed by the traditional ADP, JOLTs and employment readings from ISM/PMI manufacturing and services data. Focus will also be on the inflation measures from those monthly PMI data.

In addition to Canada’s rate decision, they will release their employment statistics on Friday as well.

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