Here’s a snapshot of things now:

• S&P 500 futures +0.1%
• Nasdaq futures +0.1%
• Dow futures flat
• Eurostoxx +0.1%
• Germany DAX -0.2%
• France CAC 40 +0.2%
• UK FTSE +0.4%

For me, it’s a testament to how mixed trading sentiment has been all through the week. There is still US PMI data to follow later today and that is the last data hurdle before the weekend. The euro area PMI data earlier doesn’t seem like it is having much of an impact as traders look to be slowly gearing towards key central bank decisions in May instead.

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

• Following the announced intended interest rate path was seen as important to instill confidence and avoid creating further uncertainty in financial markets
• Some members would have preferred not to increase the key rates until the financial market tensions had subsided
• Members agreed that the elevated level of uncertainty reinforced the importance of a data-dependent approach to future policy rate decisions
• If inflation outlook matches the staff projections, ECB would have further ground to cover in adjusting the monetary policy stance
• Members generally agreed to refrain from communicating unconditional expectations for the future interest rate path
• Full accounts

All of the above are not anything new and do not contribute much to the debate between 25 bps and 50 bps for the May meeting. Carry on as you will.

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

• What are markets trying to say in trading so far today?
• BOJ reportedly open to tweaking yield curve control later this year if wage momentum holds
• ECB’s Knot: It is too early to talk about a pause in rate hikes
• PBOC reaffirms to continue implementing prudent monetary policy
• Germany March PPI -2.6% vs -0.5% m/m expected
• France April business confidence 102 vs 103 prior
• Eurozone February trade balance -€0.1 billion vs -€11.3 billion prior

Markets:

• CHF leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields down 3.6 bps to 3.566%
• Gold up 0.4% to $2,001.98
• WTI crude down 1.6% to $77.90
• Bitcoin down 1.6% to $28,766

It was more of a risk averse session with the bulk of the moves coming right at the European open, as stocks edged lower and bond yields falling in tandem. It seemed like broader markets are worried about higher rates weighing on economic prospects but that sentiment isn’t really shared by the FX market so far.

The dollar is sitting more mixed and mostly little changed, with notable moves among major currencies being rather sparse on the session. The kiwi continues to sit lower, after falling in Asia trading following the softer NZ CPI data. NZD/USD is down 0.4% to 0.6175 but is off its earlier lows of 0.6150 at least.

In other markets, equities retreated early on in Europe with regional equities stumbling in the opening hour to be down between 0.4% to 0.8% mostly. US futures also fell simultaneously with the drop led by tech, before consolidating losses thereafter.

The drop in stocks coincided with a nudge lower in Treasury yields as well, with a fall observed across the curve. It might be a reaction to global growth worries but 10-year yields also ran into its 100-day moving average at 3.61% this week, so that might be something to consider as well.

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

On the daily chart below for
EURUSD, we can see that with the latest rejection of the February high at
1.1033, we may have a possible double
top in play.
The price failed to break above the high as the US
Retail Sales missed expectations across the board giving the
market some recessionary vibes.

The buyers though keep leaning on
the red long period moving
average, so a break below that MA would be significant for the sellers. The
next thing to watch is the US Jobless Claims report todays and the US PMIs
tomorrow. In case the data deteriorates further, we are likely to see another
selloff as the market may switch from the rates trade to the recession trade.
On the other hand, benign data may keep weighing on the US Dollar and push the
pair higher.

EURUSD technical analysis

On the 4 hour chart below, we can
see that the price is trading within a rising channel. At the moment, the price
is consolidating near the lower bound of the channel with a bearish bias given
that the moving averages are crossed to the downside.

We can also see that the whole
rally within the channel is diverging with the MACD, which is generally a sign of a
weakening momentum, and we can generally see pullbacks or reversals. If this is
a pullback, then the price should bounce from the lower bound of the channel
and rally towards the upper bound. On the other hand, if the price breaks below
the lower bound, then we may see a reversal and the price falling towards the
1.0759 support as the first target.

On the 1 hour chart below, we can
see the current mini range. This is the one to watch in conjunction with the
economic data results. If the data is benign and the price breaks above the
range, then we should see the buyers piling in and the upper bound of the
channel being targeted.

On the other hand, if the data
deteriorates and the price breaks below the range and the lower bound of the
channel, then the sellers should jump onboard and extend the selloff to the
next support at 1.0759.

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

Dollar pairs aren’t hinting at much with only the Swiss franc gaining some decent ground in European morning trade. USD/CHF is down 0.4% to 0.8940 as sellers continue to defend the 0.9000 mark in trading this week. The kiwi remains a decent mover as well, with NZD/USD down 0.3% to 0.6175 but that is off its earlier low of 0.6150 – after the currency was dragged lower by the softer NZ CPI data. I shared some thoughts on the technical picture for the pair here.

Besides that, there isn’t much to take note of as the ranges today are leaving a lot to be desired. This comes despite equities looking fairly sluggish and Treasury yields being marked lower across the curve.

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

For some context, the cutoff date for this is currently in early June and typically the can will get kicked down the road. We’re likely to see Yellen announce a revised date in the near future on this.

However, JP Morgan says that it expects both the debate over the debt ceiling as well as the one on federal funding to run „dangerously close“ to their final deadlines. Adding that there is a „non-trivial risk“ that US Treasuries will face a technical default situation. The firm also says that it expects the Treasury could run out of available resources by the middle of August.

The nature of the situation depends on the ongoing tax season and typically the federal government runs a deficit closer to the summer (around the end of Q3), which is the real risk. But as we have seen in the past, this is something that tends to get done one way or another at the end of the day with lawmakers likely to lift the borrowing cap if all else fails.

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

• UK March CPI +10.1% vs +9.8% y/y expected
• Dollar moves higher as sticky UK CPI stoke inflation fears
• Japanese yen under pressure as higher yields weigh
• BOJ said to be wary of tweaking yield curve control in April decision
• BOJ’s Shimizu: Appropriate to continue easing policy for the time being
• Eurozone February current account balance €24.3 billion vs €17.0 billion prior
• Eurozone March final CPI +6.9% vs +6.9% y/y prelim
• US MBA mortgage applications w.e. 14 April -8.8% vs +5.3% prior

Markets:

• USD leads, JPY lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields up 5 bps to 3.622%
• Gold down 1.7% to $1,970.43
• WTI crude down 2.0% to $79.30
• Bitcoin down 3.8% to $29,281

It was a lively session throughout as early morning data from the UK triggered a massive reaction in markets. UK consumer price inflation continues to run hot at double-digits with food price inflation seen at its fastest pace in 45 years.

That sparked some jitters across markets as fears of more sticky inflation and higher interest rates for longer were reignited.

The pound was whippy in reaction to the data with GBP/USD jumping to 1.2440 only to fall back to 1.2410 and then rising back up to 1.2470. The reaction in cable was not helped by the dollar’s strength across the board as equities slumped while bond yields jumped higher in response to the UK data.

But as the dust settled, it is the dollar that is taking charge in the major currencies space with GBP/USD now back down near 1.2400.

EUR/USD steadily declined from 1.0970 to 1.0920 while USD/JPY moved up to hit 135.00 for the first time in a month before running into offers at the key level.

As equities are pinned lower, commodity currencies are also seen weaker with USD/CAD up 0.4% to 1.3445 and AUD/USD down 0.3% to 0.6705, just off lows of around 1.3454 and 0.6690 respectively.

In the equities space, US futures gradually built losses after a bump lower on the UK inflation numbers while European indices are holding slight losses as well amid the sluggish mood.

Elsewhere, gold is also taking a heavy knock in a push down $2,000 to $1,970 at the moment – down nearly 2% on the day. As risk appetite is sapped, oil is also dropping back under $80 and Bitcoin also falling back under the $30,000 mark.

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

A 25 bps rate hike for May is fully priced in and the OIS market is seeing the terminal rate come in at around 5% after today’s inflation report. Here’s the reaction from earlier today.

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

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

• Prior +5.3%
• Market index 209.2 vs 229.5 prior
• Purchase index 161.6 vs 179.6 prior
• Refinance index 449.8 vs 477.5 prior
• 30-year mortgage rate 6.43% vs 6.30% prior

That’s a sharp retreat in mortgage activity in the past week as the interest rate of the most popular US home loan jumps higher, following the move higher in rates as well. The continued climb so far this week won’t be good news for homebuyers and will add to pressure on the housing market again, after a bit of a reprieve in the past two months or so.

/US Dollar

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