It is shaping up to be a rather risk averse session in European trading today. Equities are falling across the board and bonds are being bid quite strongly on the session. Of note, France’s CAC 40 index is now down over 2% with S&P 500 futures down 0.4% on the day. And 10-year yields in the US are down to 4.21% after having been at a high of 4.27% earlier in Asia trading.

That is all weighing on USD/JPY as risk-off flows come into play. The pair traded to a high of 158.25 following the BOJ policy decision but has now pared all gains to 157.00 on the day.

The dollar is holding firmer for the most part despite that though. EUR/USD is down 0.6% to 1.0675 while GBP/USD is down 0.5% to 1.2695 on the day. USD/CHF is lower amid the negative risk mood, down marginally by 0.1% to 0.8930 currently.

Looking to commodity currencies, USD/CAD is up 0.2% to 1.3765 while AUD/USD is down 0.4% to 0.6605 at the moment.

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

Headlines:

• Dollar keeps steadier so far on the day, awaits more US data
• What now after the US CPI and Fed showdown yesterday?
• What has changed after the US CPI and FOMC?
• ECB’s Muller: It is too early to say when the next rate cut can happen
• ECB’s Vasle: Possible for more rate cuts if baseline scenario holds
• Spain May final CPI +3.6% vs +3.6% y/y prelim
• Germany May wholesale price index +0.1% vs +0.4% m/m prior
• Eurozone April industrial production -0.1% vs +0.2% m/m expected

Markets:

• USD leads, AUD lags on the day
• European equities lower; S&P 500 futures up 0.1%
• US 10-year yields up 2.3 bps to 4.318%
• Gold down 0.7% to $2,306.83
• WTI crude down 0.9% to $77.81
• Bitcoin down 0.5% to $67,740

The dollar is standing its ground on the day, keeping firmer after the Fed helped to stem the tide in trading yesterday.

The greenback was steadier early on before nudging a little higher now as we look to US trading. EUR/USD was hugging around 1.0800 before falling now to 1.0785. Meanwhile, GBP/USD stuck around 1.2790 before easing to 1.2765 currently.

USD/JPY was little changed, having already pushed up in Asia trading – holding around 157.10-20 levels, up 0.3% on the day.

Elsewhere, AUD/USD is down 0.3% to 0.6640 with USD/CAD up 0.2% to 1.3750 on the day now.

In the equities space, tech shares are still largely higher but the overall mood is mixed. Nasdaq futures may be up 0.6% but Dow futures are down 0.3%. For European indices, there is some catching up to do to the late retreat after the Fed yesterday too. Major indices in the region are down closer to 1% across the board.

Looking over to commodities, precious metals are feeling the pinch again as such. Gold is down 0.7% and eyeing the $2,300 mark while silver is down nearly 2% to $29.10 at the moment. I’d still like to see a stronger correction, especially in gold, before further dip buying in this space.

All in all, this has the makings of a turnaround Thursday for the most part. But we’ll have to see if US data later will help to spur that on or not.

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

• Labour market now resembling conditions before the pandemic
• We are creating jobs at a very rapid pace
• Unemployment rate has drifted up a little, labour market has become a little less hot; that is normal

Not quite the same message as the Fed but I reckon the language will be similar once Powell & co. finally decide to lean more towards rate cuts down the road.

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

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Fundamental
Overview

The USD yesterday was sold
across the board following the soft US CPI report. The data made the market to price back
in two cuts for this year. Later in the day though we got a bit more hawkish
than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this
year despite the soft US CPI report.

This gave the greenback a
boost, but Fed Chair Powell backpedalled on the projections making them a
bit less worrying as the central bank remains very data dependent. So, all in
all, the US Dollar might still come under pressure as the risk sentiment should
improve thanks to the soft US CPI.

The CAD, on the other hand,
has been a bit under pressure as the Bank of Canada delivered a slightly more dovish
cut than expected. Overall, the central bank said that they remain data
dependent and the rate cuts expectations didn’t change much.

If we go back into risk-on
sentiment, the CAD might appreciate amid a general US Dollar weakness.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD fell back inside the range following the soft US CPI report and
then pulled back to retest the support-turned-resistance on a more hawkish than expected
FOMC decision.

This is where we can expect
the sellers to step in with a defined risk above the resistance to position for a drop back into
the 1.36 support. The buyers, on the other hand, will want to see the price
rallying back above the resistance to regain some conviction and target a break
above the 1.38 handle.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the drop on the US CPI and then the move back up on the FOMC
decision. There’s not much more to add here as the sellers will look for a drop
from the resistance, while the buyers will look for a breakout to the upside to
keep targeting new highs.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price yesterday has also broke below the recent trendline that was defining the bullish trend
from the 1.36 support. If the price were to fall below the 1.3710 level, the
sellers will have another confirmation that the bearish momentum could pick up
steam. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US PPI and the latest US Jobless Claims
figures. Tomorrow, we conclude the week with the University of Michigan
Consumer Sentiment survey.

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

Fundamental
Overview

The USD yesterday was sold
across the board following the soft US CPI report. The data made the market to price back
in two cuts for this year. Later in the day though we got a bit more hawkish
than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this
year despite the soft US CPI report.

This gave the greenback a
boost, but Fed Chair Powell backpedalled on the projections making them a
bit less worrying as the central bank remains very data dependent. So, all in
all, the US Dollar might still come under pressure as the risk sentiment should
improve thanks to the soft US CPI.

The EUR, on the other hand,
has been gaining ground in the past months against the USD mainly because of
the Dollar weakness amid the general risk-on sentiment regime due to the pickup
in global growth.

This sentiment has been
changed recently by the NFP data and the European elections over the weekend where we got some
governments like France calling snap elections which added even more pressure
on the single currency due to political uncertainty.

Nevertheless, if we see the
market going back into risk-on due to the soft US CPI, the EURUSD pair should
still maintain its upward trajectory amid general US Dollar weakness.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD erased almost all the losses from the strong US NFP report and
the European elections. The price spiked above the 1.08 handle following the US
CPI release and then pulled back as we got a bit more hawkish than expected
FOMC decision.

There’s no real strong fundamental
driver supporting the Euro as the market continues to trade based on the risk sentiment.
If we were to go back into risk-on in the next days, we can expect the pair
climbing back into the 1.09 resistance
and possibly even reach the 1.10 handle.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price rallied above the 1.08 handle and then pulled back into it.
We have also the confluence
of the 38.2% Fibonacci
retracement level sitting there which makes it a good support zone.

This is where we can expect
the buyers to step in with a defined risk below it to position for a rally into
the 1.09 resistance. The sellers, on the other hand, will want to see the price
breaking lower to gain a bit more conviction and position for a drop back into
the 1.0727 support.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the consolidation around the 1.08 support zone. If the price
were to rise above the 1.0820 level, then we can expect the buyers to gain a
bit more confidence on a continuation of the rally. Conversely, a break below
the 1.08 support should turn the bias more bearish giving the sellers more control.
The red lines define the average daily range.

Upcoming
Catalysts

Today we have the US PPI and the latest US Jobless Claims
figures. Tomorrow, we conclude the week with the University of Michigan
Consumer Sentiment survey.

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

Headlines:

• A big day coming up for markets
• What are the main events for today?
• France’s Macron calls for democratic parties to unite to form a governing pact
• France’s Macron: I do not want to hand the keys of power to the far-right in 2027
• UK April monthly GDP 0.0% vs 0.0% m/m expected
• Germany May final CPI +2.4% vs +2.4% y/y prelim
• US MBA mortgage applications w.e. 7 June +15.6% vs -5.2% prior
• The „crypto president“ says he wants all remaining Bitcoin „to be made in the US“

Markets:

• CHF leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields flat at 4.398%
• Gold down 0.1% to $2,312.79
• WTI crude up 1.1% to $78.77
• Bitcoin up 0.8% to $67,800

It was a quiet and more tentative session as markets are waiting on the main events later today.

It will be the first time since June 2020 that the US CPI report and FOMC meeting both falling on the same day, setting up for a blockbuster session in US trading ahead.

That is keeping markets on edge, with major currencies little changed overall. French president Macron came out to say that he will fight on and that is nudging the euro a little higher. EUR/USD is up 0.2% to 1.0760, with the dollar keeping mixed on the day so far.

USD/JPY is seen up 0.2% to 157.35 while GBP/USD is up 0.1% to 1.2755 currently, not doing a whole lot overall.

In the equities space, European indices are seeing a slight bounce back after the political angst weighed on sentiment in the last two days. US futures aren’t doing much though, waiting on the inflation numbers and the Fed later before acting.

It’s been a bit of a wait this week but we’re finally here now. Time to get the party started!

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

• 63 of 65 economists expect BOE to cut rates starting August
• All economists polled expect there to be no change to rates later this month
• 35 of 65 economists see two rate cuts by the BOE for this year
• 24 of 65 economists see three rate cuts by the BOE for this year
• Only 3 of 65 economists anticipate more than three rate cuts by the BOE for this year

It has been a while now that markets and the BOE itself have converged to a timeline for an August move. After a more resilient showing in Q1, the UK economy looks set to return to its sluggish roots again in Q2. That will add some pressure for the BOE to move, although price pressures remain relatively sticky for the time being.

It will certainly be a test of the central bank’s resolve with August being just two months away now.

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

Fundamental
Overview

The USD has been stronger
since last Friday following the US NFP report where the data surprised with solid jobs
and wage growth. There were also negatives like the uptick in the unemployment
rate, but all in all, we can say that it was a good report.

The data triggered a
hawkish repricing in interest rates expectations with the market now expecting
once again just one cut by the end of the year. It’s not a big deal in the
bigger picture, but for now the sentiment is bullish for the greenback and we will
likely need a catalyst to change it again.

The CAD, on the other hand, has been already a bit under pressure as the Bank of Canada delivered a slightly more dovish
cut than expected. Overall, the central bank said that they remain data
dependent and the rate cuts expectations didn’t change much.

If we go back into risk-on
sentiment, the greenback could start to lose ground against the major
currencies again, so the US CPI report today will be key as the recent breakout
could be invalidated in case we get soft data. On the other hand, if we get a
hot report, we should see the pair reach the 1.3861 level in the next weeks.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD broke out of the recent range as it breached the 1.3740 resistance following the US NFP release. The
target for the buyers remains the 1.3860 level and we can expect them to pile
in around the recent resistance now turned support.

The sellers, on the other
hand, will want to see the price falling back below the 1.3740 zone to
invalidate the bullish bias and start looking for a drop back into the 1.36
support.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the breakout and the support now around the 1.3740 level where
we can also find the 38.2% Fibonacci retracement level for confluence.

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 1.3860 level with a better risk to reward setup. The sellers, on
the other hand, will want to see the price breaking lower to position for a
drop back into the 1.36 support.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a trendline around the 1.3720 level which is
going to be the last line of defence for the buyers in case the price dips
below the support. The red lines define the average daily range for today but do note that the
price can extend beyond them when there are strong catalysts like today’s US
CPI report.

A hot report should give
the buyers even more conviction to increase the bullish bets into new highs,
while in-line or soft data will likely give the sellers more control.

Upcoming
Catalysts

Today we get the US CPI data and the FOMC rate decision. Tomorrow,
we have the US PPI and the latest US Jobless Claims figures. On Friday, we
conclude the week with the University of Michigan Consumer Sentiment survey.

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

• Prior -5.2%
• Market index 208.5 vs 180.4 prior
• Purchase index 143.7 vs 132.3 prior
• Refinance index 554.7 vs 432.1 prior
• 30-year mortgage rate 7.02% vs 7.07% prior

That’s quite a rebound in mortgage applications in the past week, owing much to a surge higher in refinancing activity. The latter is seen jumping up to its highest since September 2022. The data has been rather volatile in the last few weeks especially, so we’ll have to see how this plays into the overall trend in the months ahead.

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