Fed funds futures are showing roughly 71% odds of the central bank not hiking rates in June now. Mind you, it was roughly 70% in favour of a rate hike at the start of the week. That’s a complete U-turn in terms of pricing as Fed policymakers delivered a somewhat coordinated message that they might very well „skip“ a rate hike this month.

And when you consider the balance of the situation now, the risks seem to be favouring further downside for the dollar rather than any major upside as we head into the US jobs report later today.

In the event that the numbers are strong and we get a solid report, it just once again reaffirms that labour market conditions are holding up well. That doesn’t really take away from the messaging that policymakers might „skip“ a 25 bps move in two weeks‘ time.

In case there is some reason that the labour market is running extremely hot, perhaps we might see some last-minute message by Fed speakers before the blackout period tomorrow. But barring any major surprise, the data should just reaffirm that things are solid and the Fed already knows that by now.

So, to deliver a message as they did in the past two days, does say a lot about what the line of thinking is. Of course, we could see other policymakers besides Harker come out to provide a rebuttal later today but then that will come after the jobs data.

Going back to the report, if there is going to be a downside miss on the numbers and wage pressures ease, that will likely pile on the misery for the dollar. If policymakers are now talking about a „skip“, such data might even turn that into talk of a „pause“.

In other words, it’s all about measuring the strength of the Fed pivot now.

Even with a decent set of numbers, the Fed is still going to move to the sidelines and reassess the situation again in a month’s time. But if there is some shakiness in the jobs report and then softer CPI figures later this month, that could really set off some alarm bells for dollar bulls to go cowering.

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

On the
daily chart below, we can see that May was a great month for the USD as the
strong economic data made the market to reprice interest rates expectations on
the more hawkish side. We even got a breakout of the March low recently, but
the sellers couldn’t sustain the momentum as they started to get big headwinds.
In fact, NZDUSD rallied in the past two days as the market started to unwind
hawkish bets due to some Fed officials
talking about a pause in June to wait for more data and decide in July.

Moreover,
yesterday’s soft data in the ISM
Manufacturing PMI and Unit
Labour Cost reports supported the idea of a pause in June. If the next set
of data doesn’t surprise to the upside, then we should see NZDUSD rallying all
the way towards the 0.6181 level where we can find confluence
from the trendline,
the 61.8% Fibonacci
retracement level and the red 21 moving
average.

NZDUSD Technical
Analysis

On the 4
hour chart below, we can see that we had already some signals of a weakening
bearish momentum from the price divergence
with the MACD.
Sure enough, we got a pullback, that may even become a reversal if the data
starts to disappoint.

The
buyers’ target is of course the 0.6181 resistance
and the cross to the upside of the moving averages is currently supporting the
idea of another wave of buying pressure to come. If NZDUSD reaches the 0.6181
resistance, we can expect the sellers leaning on that level with a defined risk
just above the resistance to target a break below the 0.5985 low.

On the 1
hour chart below, we can see that we have a bullish structure at the moment
with the last higher low standing at the 0.6058 level. This zone between the
0.6058 and 0.6084 coupled with the red 21 moving average will be the buying
area for the buyers with a stop just below it. The sellers, on the other hand,
will want to see the price to break through that zone to pile in and extend the
selloff into the 0.5985 low first and the 0.5820 level next.

Today, the attention will
be on the NFP report, and there are several potential outcomes to consider:

• If
  the data surpasses expectations, accompanied by higher-than-anticipated average
  hourly earnings, it is likely to increase the likelihood of a rate hike in June
  and potentially even signal the possibility of a rate hike in July. Such a
  scenario could raise concerns in the market regarding a potential escalation of
  wages and prices.
• On
  the other hand, if the data is positive but falls short of expectations in
  terms of average hourly earnings, it is expected to exert further downward
  pressure on the USD, as it would not significantly affect rate expectations. In
  this case, market participants will eagerly await the forthcoming CPI report,
  scheduled for next week.
• Should
  the data disappoint across all aspects, it will be regarded as negative news
  and could potentially prompt risk aversion in the markets, leading to an
  increased demand for the USD. However, given recent remarks made by Federal
  Reserve officials, we might witness a weakening of the USD due to reduced
  expectations surrounding future interest rate hikes.

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

• SNB ready to be active in forex markets to ensure appropriate monetary conditions
• Inflationary pressure is broadening
• Cannot sound the all clear on inflation despite recent dips in the data

With the ECB still on the tightening path, the SNB is also maintaining its approach for the time being. The next policy decision for the Swiss central bank will be on 22 June, so mark that down on your calendars.

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

• Likely to see another rate hike at the next meeting
• Inflation fall is very welcome but not definitive
• Underlying pressures are still quite strong

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.

• ECB’s Lagarde: We need to continue with rate hikes
• ECB’s Rehn: Core inflation must slow before mulling easing
• ECB’s Kazaks: It is hard to say where interest rates will peak
• ECB’s de Guindos: Recent inflation data are positive but still far from target
• ECB accounts: A number of members initially expressed preference for 50 bps rate hike
• Eurozone May preliminary CPI +6.1% vs +6.3% y/y expected
• Eurozone May final manufacturing PMI 44.8 vs 44.6 prelim
• Eurozone April unemployment rate 6.5% vs 6.5% expected
• Germany April retail sales +0.8% vs +1.0% m/m expected
• UK May final manufacturing PMI 47.1 vs 46.9 prelim
• UK April mortgage approvals 48.69k vs 53.00k expected
• UK May Nationwide house prices -0.1% vs +0.1% m/m expected
• Switzerland April trade balance CHF 2.60 billion vs CHF 4.53 billion prior
• US May Challenger layoffs 80.09k vs 66.99k prior
• OPEC+ not likely to deepen supply cuts at 4 June meeting – sources

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 1.9 bps to 3.656%
• Gold up 0.3% to $1,967.55
• WTI crude down 0.5% to $67.74
• Bitcoin down 0.8% to $26,894

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.

• The meeting decision
• Most members indicated that they would accept the proposed 25 bps rate hike
• Almost all members supported the 25 bps rate hike
• ECB communication should, however, convey a clear „directional bias“
• There was a strong preference against returning to outright forward guidance
• There was now more solid evidence that monetary policy was being transmitted to financing and credit conditions
• But it was also argued that transmission could be weaker than usual
• Full accounts

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.

• Prior 66.99k

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.

• Prior +7.2%
• CPI -0.1% vs +0.2% m/m expected
• Prior +0.4%
• HICP +6.3% vs +6.8% y/y expected
• Prior +7.6%
• HICP -0.2% vs +0.2% m/m expected
• Prior +0.6%

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