Dow futures are also seen up 0.1% and Nasdaq futures up 0.3% at the moment as we start to see light gains on the session now. In trading yesterday, there was a heavy contrast in the mood in Wall Street. The Dow suffered losses once again while the Nasdaq surged higher as it owed much to Nvidia’s strong performance after its solid earnings report.

In the bigger picture, overall sentiment looks to be hinging quite a bit on the US debt ceiling talks at the moment.

Tech stocks though have continued to defy the odds, so that might make things a bit tricky as we look towards the long weekend. But at least for now, there are murmurs that debt ceiling talks might take a more optimistic turn (not too surprising) and that is also perhaps helping to see some mild positivity creep in ahead of US trading later.

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

The dollar is slightly lower on the day but it doesn’t take away from the gains so far this week, as the greenback continues to sit in the driver’s seat ahead of the US PCE price data later. The technical levels outlined yesterday (as per below) are still very much in play and we have to see if dollar bulls have the appetite to chase any breaks before the long weekend.

Elsewhere, Treasury yields are also just slightly lower on the day with 10-year yields down 2.8 bps to 3.786% at the moment. Meanwhile, equities are keeping steadier with S&P 500 futures now up 0.1% after a more tentative start. European stocks on the other hand have seen the early advance wiped out to be little changed now.

US debt ceiling talks are still clouding markets for the most part, at least in terms of equities sentiment that is. However, there are growing murmurs of positive developments and so we have to see if that will keep up ahead of the X-date – which I would estimate is some time during the first week of June.

Anyway, here are the levels to watch for in dollar pairs as highlighted yesterday and are still applicable now:

• EUR/USD at two month-lows as sellers hold their nerve
• USD/JPY continues to look poised in hunt towards 140.00 mark
• GBP/USD starts to get dragged back into the mud again
• USD/CAD buyers hopeful on latest upside break
• AUD/USD looks towards 0.6500 again in latest downside break
• NZD/USD looks for downside break in fall to lowest levels this year

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

This adds to the earlier decision from Fitch here, which is pretty much the same story. DBRS Morningstar notes that the review with negative implications „reflects the risk of Congress failing to increase or suspend the debt ceiling in a timely manner“. Adding that:

„While we still expect Congress to raise the debt ceiling before Treasury runs out of available resources, there is a risk of Congressional inaction as the X-date approaches. DBRS Morningstar would consider any missed payment of interest or principal as a default. In such a scenario, the relevant U.S. Issuer Ratings would be downgraded to “Selective Default.” „

You can check out the full post here.

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

• Rates are clearly in restrictive territory
• ECB has already completed most of the rate hike journey
• To monitor passthrough of „massive“ past rate hikes

It seems quite clear now that the ECB isn’t going to give a firm answer on when they would expect rates to peak. Given the resilience the economy to start the year, they have room to work with to be more data dependent and that is precisely what they are doing. A June rate hike, and arguably July, is a given but whether or not there is one more after that remains to be seen.

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

It is certainly not been a good week for the kiwi whatsoever. Not only did the RBNZ’s dovish tilt weigh on the currency, the more negative risk mood in markets also compounded the declines in the past few sessions. Add in a stronger dollar to the equation, and NZD/USD sellers are indeed looking for a downside break after a couple of months of consolidation:

The pair had been ranging somewhat between 0.6100 to 0.6300 mostly with a couple of attempts in early April and mid-May to chase a move towards 0.6400. Those ultimately faltered and now with a break back below 0.6100 – the lowest levels since November last year, we could see the downside momentum gather pace.

The next key target will be the 50.0 Fib retracement level around 0.6025 with the 0.6000 mark also in focus for sellers.

A lot will hinge on the daily and weekly closes today and tomorrow respectively, so just keep an eye out for that and how that will play into the technical picture for the pair.

But with the dollar continuing to stay more poised across the board and risk sentiment still looking skittish outside of tech stocks, it isn’t boding well for the kiwi as we look towards the latter stages of the week.

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

On the daily chart below, we can
see that the downtrend remains strong in the EURUSD pair. The multiple failures
to break the 1.1033 high, coupled with stronger than expected US data and a
hawkish repricing in interest rates expectations, led to a big selloff. The double
top at the
1.1033 high may take us all the way back to the 1.0533 support, which is also the neckline of
the pattern.

In such a scenario, EUR/USD would
erase all the post-SVB collapse rally, which is something we’ve also been
seeing across the other markets. The divergence between the two tops with the MACD also strengthens the case for a
return back to the 1.0533 level.

EURUSD Technical Analysis

On the 4 hour chart below, we can
see how the EURUSD has been trading lower within a falling channel with clear
swing highs and swing lows. The price has now reached the first downside target
in the form of the bottom of the previous divergent rising channel. We should
see a bounce on this level as the price has been diverging with the MACD
falling right into this support. This should be a signal that the bearish
momentum is waning, and we may see a pullback before the next fall.

On the 1 hour chart below, we can
see that the price recently bounced from the lower bound of the channel to
trade higher into the upper bound of the channel. The 50% Fibonacci
retracement level stalled the rally and after a bit of
consolidation, EUR USD broke lower, retested the support
turned resistance and continued lower.

The buyers should now lean on the
1.0710 support with defined risk just below it and target the 1.0760
resistance. The sellers, on the other hand, will want to see the price to break
through the support to target the 1.0533 level, but we should also see them
lean on the 1.0760 resistance for a better risk to reward setup.

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

• Prior 5

Retail sales volumes dipped again in May, after a return to growth in the previous month. The slight positive is that retailers do expect sales volumes to stabilise next month as the month ahead expectations reading came in at 0. But once again, the report here highlights the struggles faced by retailers amid high inflation.

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

• UK April CPI +8.7% vs +8.2% y/y expected
• Markets move to price in an additional rate hike by the BOE after UK CPI data
• Dollar stays in favour as equities slump
• Ifo economist: German economy heading towards stagnation in Q2
• Germany May Ifo business climate index 91.7 vs 93.0 expected
• UK May CBI trends total orders -17 vs -20 prior
• US MBA mortgage applications w.e. 19 May -4.6% vs -5.6% prior
• China president Xi says wants to take Russia cooperation to a higher level
• China premier Li reaffirms pragmatic cooperation with Russia in latest meeting

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields down 2.5 bps to 3.675%
• Gold up 0.3% to $1,981.22
• WTI crude up 1.7% to $74.14
• Bitcoin down 1.8% to $26,727

The UK CPI data was the main highlight in European trading today, with core annual inflation running hot at its fastest pace since March 1992. Headline annual inflation did fall in April but was higher than estimated, though that owes mostly to base effects adjustment on energy prices.

The sticky inflation numbers saw the rates market move to price in an additional rate hike by the BOE in the months ahead, with the peak in the bank rate now seen above 5.25% from roughly 5.00% before the data.

The pound got a brief lift on it as well, with GBP/USD touching 1.2465 only to fall back upon testing its 200-hour moving average. The drop was compounded further by a stronger dollar, as risk sentiment soured in the aftermath of the hotter inflation numbers. The pair then fell to a low of 1.2365 before keeping around 1.2390 now.

As risk sentiment took a hit, the dollar and yen are the two lead gainers today for the most part. EUR/USD dropped earlier to 1.0750 but large option expiries at the level is holding the line for now, before the pair trades back to near unchanged levels now at 1.0770.

Looking at stocks, European indices slumped early on in a catch up to Wall Street losses yesterday but extended the declines after the UK CPI data. That also saw US futures turn light gains into losses on the session with bond yields caught in a bit of a tailspin so far today.

Going back to FX, the kiwi is the biggest loser as it owes much to the RBNZ policy decision earlier. The central bank signaled an end to rate hikes and that already saw NZD/USD drop 1% in Asia before extending its declines to near 2% in Europe in a fall to 0.6117, before holding around 0.6130 now.

In the commodities space, gold is fighting back with a bounce above $1,980 but the likes of copper and iron ore are facing trouble with some steep losses today.

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

• Prior -5.7%
• Market index 205.0 vs 214.9 prior
• Purchase index 158.3 vs 165.4 prior
• Refinance index 443.0 vs 468.2 prior
• 30-year mortgage rate 6.69% vs 6.57% prior

A surge higher in rates in the past week weighed further on mortgage applications with both purchases and refinancing activity slumping heavily. The market index is the lowest since the first week of March as housing market conditions continue to be impacted adversely by the Fed’s tightening.

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

S&P 500 futures are now down 16 points, or 0.4%, with major European indices posting losses of around 1.5% to 1.8% at the moment. The sour mood is keeping the dollar underpinned, with the currency stretching gains now on the session.

EUR/USD is down 0.2% to session lows at 1.0750, with large option expiries now in play. Meanwhile, GBP/USD has erased its earlier jump post-CPI and the rejection at the 200-hour moving average has seen the pair fall further to 1.2370 currently:

That’s the lowest levels in a month for the pair with the 10 April low at 1.2344 a focus point from a technical perspective, before a potential drop towards the 100-day moving average at 1.2280.

Elsewhere, the dollar is also maintaining a decent advance against the commodity currencies with USD/CAD up 0.4% to near 1.3560 and AUD/USD down 0.7% to 0.6565 – testing the lows highlighted here.

NZD/USD is the biggest loser though as the pair is down nearly 2%, building on losses after the RBNZ earlier. The pair is now down to 0.6120 and looks poised for a test of key support at 0.6100-11 next.

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