He also says that they have not yet reached the moment where they can put a stop to rate hikes just yet. Once again, it’s a relatively consistent message all around from the ECB so far this week.
This article was written by Justin Low at www.forexlive.com.
Markets:
There was plenty of data to scour through during the session but the most notable one is that euro area inflation is perhaps starting to show signs of slowing down. Both the headline and core annual inflation eased in May, providing a welcome relief to the ECB and for the economic outlook.
ECB policymakers were also quick to provide a couple of timely messages and a reminder to markets, that their job is not done yet despite the more optimistic data this week.
The euro was little changed on the news though, as a lot of this has been predicated by the individual country readings earlier this week.
Instead, it was more the case of the dollar faltering after a brighter start to the session. The greenback advanced early on but gave up gains and turned lower in European trading today.
EUR/USD fell to 1.0665 earlier but has clawed its way back up above 1.0700, with large option expiries also perhaps playing a role on the day. GBP/USD also dipped towards 1.2400 but has seen quite a modest turnaround to 1.2480 as buyers look to try and test the 1.2500 mark again.
Then, we saw USD/JPY rose to 139.95 during the tail end of Asia trading as higher bond yields helped to underpin the pair. However, as the dollar reversed, so did the upside momentum as the pair is seen falling back to 139.45 at the moment.
The antipodeans are arguably the ones that are finding the most relief from the dollar U-turn today, with AUD/USD having briefly fallen to 0.6485 before coming back up to 0.6520 levels now. Meanwhile, NZD/USD also tested waters below 0.6000 before coming back up to 0.6020 currently. Both pairs are seen holding the line at key support at 0.6500 and 0.6000 respectively.
It’s now over to US ADP data to see where that leads us next and how that will impact expectations ahead of the main event tomorrow.
This article was written by Justin Low at www.forexlive.com.
With regards to inflation, the view on the trend in core prices was „broadly seen as worrisome“. I guess that supports the argument for those wanting a 50 bps rate hike, although it will be interesting to see how this week’s inflation data factors into the view among policymakers at the moment.
This article was written by Justin Low at www.forexlive.com.
That’s now eleven months running that job cuts have exceeded the same month from a year ago and the increase in layoffs that we are seeing so far this year have been particularly notable. For some context, Q1 layoffs were already the highest since 2020 and we are likely to see that trend continue in Q2. Of note, year-to-date hiring is seen at its lowest since 2016.
This article was written by Justin Low at www.forexlive.com.
On the
daily chart below, we can see that EURUSD has sold off pretty heavily from the
1.1033 resistance as US
economic data in May beat expectations and made the market to reprice interest
rates odds on the hawkish side. The bias is clearly bearish with the moving averages crossed
to the downside and EURUSD printing lower lows and lower highs.
The
support level at 1.0700 is giving EURUSD bears a hard time as we need more
strong data to price in something more hawkish now, and therefore a pullback
may be due. If this is a major double top, we
should see EURUSD falling to the 1.0533 support eventually as that would be the
neckline of the pattern. The divergence between
the two highs with the MACD also
strengthens the case for more downside to come.
EURUSD Technical Analysis
On the 4
hour chart below, we can see that EURUSD has been trending downwards within a
falling channel. Recently, the price started to diverge with the MACD coming
into the 1.0700 support. This is a sign of weakening momentum often followed by
pullbacks or reversals.
Yesterday,
we got a big beat in US Job Openings which
made the EURUSD fall even more, but soon after some Fed members hinted to a
pause in June and the price quickly reversed and made new highs.
Today, the key data on
the calendar is the US Jobless Claims and the ISM Manufacturing PMI report.
However, it is unlikely that positive or negative data will significantly
impact the market, considering the recent statements made by Fed members.
Perhaps only a substantial deviation from expectations would have the potential
to generate market movements.
On the 1 hour
chart below, we can see that we have a downward trendline where
the price got rejected off of the last time it pulled back. Moreover, we have
also the 1.0711 support now turned resistance. This
will be the level to watch for traders today as the sellers are likely to lean
on it with a defined risk just above it to target another lower low. The
buyers, on the other hand, will want to see the price breaking higher to pile
in and extend the rally towards the 1.0760 level first and 1.0830 next.
Tomorrow, all eyes will be on
the US NFP report. Should the data reveal positive outcomes coupled with
higher-than-expected average hourly earnings, it could potentially increase
market odds for a June rate hike and even price some for a July hike. This
scenario might raise concerns within the market regarding a potential wage
price spiral.
Conversely, if the data is
favourable but falls short of expectations in terms of average hourly earnings,
it should weaken the USD further as it shouldn’t change rates pricing much and
the market will look forward to the CPI report next week.
In the event of unfavourable
data, it should be perceived as negative news. However, given recent Fed
officials’ comments, we should see EURUSD rallying as rate hikes from the Fed
get priced out.
This article was written by ForexLive at www.forexlive.com.
It’s a tough one to read, especially just a day after month-end trading. And when you throw in the sort of Fed comments that we got yesterday, it makes things even trickier at the moment.
The dollar is now sitting lower against the likes of the euro, pound, franc and aussie in European trading while still just maintaining a light advance against the yen.
EUR/USD is up 0.2% to 1.0710 as large option expiries are perhaps doing some work on the day as well. USD/JPY came close to testing 140.00 again but sellers are holding their ground with a push back to 139.60 at the moment. The chart from earlier here. 10-year yields in the US are still up 3.4 bps to 3.671% currently.
Besides that, GBP/USD is hoping to try and push towards 1.2500 again with the pair now up 0.2% to 1.2460 on the day.
Then, we have AUD/USD which has recovered well to 0.6520 after a dip to 0.6485 earlier. And NZD/USD is flattish around 0.6020 at the moment. Both pairs are still barely hanging on to support at 0.6500 and 0.6000 respectively as outlined here.
This article was written by Justin Low at www.forexlive.com.
This article was written by Justin Low at www.forexlive.com.
Markets:
It was an eventful session as there were a couple of broad market themes playing out in European trading today.
For one, the dollar resumed its bid from last week as it advanced across the board despite falling yields once again (it was the opposite yesterday). Poor China data from Asia trading earlier sort of set the tone for a more risk-off mood in Europe and that was certainly the case with the greenback gaining ground alongside the yen.
Equities fell as such and even with lower inflation figures in France, Italy, and German states, it wasn’t enough to turn the tide.
Instead, it was a typical flight to safety with commodity currencies and oil being offered. Despite a stronger dollar, gold held its ground as it seems like haven bids are helping out.
Going back to FX, EUR/USD declined from 1.0710 to 1.0660 before holding around 1.0680 now. Meanwhile, GBP/USD also fell from 1.2390 to 1.2350 with USD/CHF even moving up by 0.5% to clip the 0.9100 level on the day.
But it was against the commodity currencies where the dollar did most of its work, with AUD/USD down 0.6% to 0.6475 and NZD/USD down 0.6% as well to test the 0.6000 mark. Both pairs are down to their lowest levels for the year, threatening a further downside break.
WTI crude is keeping down by nearly 3% on the day as China’s worries weigh on demand prospects, testing waters below $68.
Month-end trading is also in focus, so just keep an eye out ahead of the London fix later in case we do get another injection of volatility.
This article was written by Justin Low at www.forexlive.com.
On the
daily chart below, we can see that USDCHF has recently broke out of the major
downward trendline and has
now extended towards the 0.91 handle. The moving averages have
crossed to the upside confirming the change in trend. The rally has come amid
strong US economic data in May that have made the market to reprice interest
rates expectations on the hawkish side. In fact, the market is now giving a 65% probability for a 25
bps hike at the June meeting. This can all change with the next NFP and CPI
reports of course, so traders will be very attentive to those two releases.
USDCHF Technical Analysis
On the 4
hour chart below, we can see that USDCHF has recently bounced again on the
upward trendline, as that has been a strong support since the price bottomed in
early May, and kept offering buyers good entry points. We can notice that now
the price is diverging with the
MACD right
when it approaches the resistance at 0.91.
This is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we may get a pullback either to the broken resistance turned support at
0.9070 or even better the upward trendline.
On the 1
hour chart below, we can see that we have a strong support zone at the 0.9070
level. In case USDCHF pulls back, the buyers will be leaning on that level with
a defined risk just below it and target the breakout of the 0.91 handle for new
highs afterwards. The sellers, on the other hand, should defend the 0.91 handle
here targeting new lower lows and thus offer the pullback to the support zone.
As
mentioned above, the trend is bullish, so the sellers will have much more work
to do before getting back the control. In fact, only a break below the upward
trendline would switch the bias to the downside and see the sellers piling in
more aggressively.
This article was written by ForexLive at www.forexlive.com.
Once again, mortgage activity declined as there is a significant jump in the interest rate of the most popular US home loan. The 30-year rate increased to 6.91% in the past week, marking its highest level since the first week of November last year. That led to a further decline in both purchase and refinancing activity. Pain.
This article was written by Justin Low at www.forexlive.com.