• German economy to grow modestly in Q2
• Easing supply bottlenecks, fall in energy prices to support industry recovery
• This should also support exports, especially since global economy has regained some momentum
• Private consumption still likely to stagnate
• Price growth to fall only very gradually in the months ahead

Well, from the PMI data we can identify the contrast between the manufacturing and services sectors in Germany. The former is suffering but is marginally offset by a rather robust performance in the latter. At best, there might be modest growth but at the balance, we might just see another flat performance in Q2 for Germany.

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

• Prior -20

The order book balance is still rather subdued, even if the headline reading is a three-month high. It is still tracking below the historic average of -13 with export order balance falling sharply to -26 from -9 in the previous month. That said, UK manufacturers are at least expecting to raise prices by the smallest margin since March 2021. However, the price increases will still be much faster than the long-run average.

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

• Higher yields continue to underpin the dollar for now
• BOE’s Bailey: Inflation has turned the corner
• BOE’s Bailey: We are nearer to the peak on interest rates
• Eurozone May flash services PMI 55.9 vs 55.6 expected
• Germany May flash manufacturing PMI 42.9 vs 45.0 expected
• France May flash services PMI 52.8 vs 54.0 expected
• UK May flash services PMI 55.1 vs 55.5 expected
• Eurozone March current account balance €45.0 billion vs €21.3 billion prior
• Russia touts positive relations with China, says trade turnover may reach $200 billion

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields up 2.9 bps to 3.747%
• Gold down 0.5% to $1,958.93
• WTI crude up 1.0% to $72.75
• Bitcoin up 1.6% to $27,331

Euro area PMI data reaffirmed growth in the economy in May, albeit at a slower pace amid a further divergence between the manufacturing and services sectors. The former is seen slumping while the latter is holding up and on the balance of things, is keeping recession risks at bay for now.

The euro was steadier early on but ultimately bowed down to the dollar as the greenback pulled higher in European morning trade.

EUR/USD stuck around 1.0790 levels before easing to 1.0770 while GBP/USD slipped from around 1.2420 to 1.2375 as the dollar flexed its muscles. The bid in the dollar is helped out by higher Treasury yields again, with equities looking more cautious on the day as well.

That is putting pressure on the antipodeans, with AUD/USD down 0.5% to 0.6620 and NZD/USD down 0.5% to 0.6250 currently.

Elsewhere, gold is marked down by 0.6% to below $1,960 while silver is being beaten up badly in a over 2% drop to $23.13 – its lowest levels since the end of March.

It’s now over to US PMI data later to see if the market mood will carry on in the session ahead.

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

• Rate hikes must be conducted carefully
• Cannot try to fight inflation with very severe increase in rates
• We do have a challenge in how we communicate

Meanwhile, BOE policymaker, Catherine Mann, is out saying that they can’t make a judgment on peak interest rates yet. Adding that the situation is data dependent. Geez. In any case, markets have adjusted higher their view on BOE rates in the past week, with the curve now seeing a peak at around 5.01%.

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

Crypto
market capitalisation rose 1.4% over the last 24 hours to $1.138 trillion.
After quiet trading on Monday, most gains came on Tuesday morning. The timing
of the move is due to news on the US debt ceiling, where there is no deal yet,
but Biden notes progress in negotiations. Ether is up 2.3% at $1856, with the
top altcoins gaining between 0.3% (Solana) and 3% (Polygon).

Bitcoin is
up 1.6% over the past day to $27.3K and earlier today climbed close to $27.5K,
the upper end of the range since the 15th. Despite the positive momentum, the
daily timeframes remain bearish, with Bitcoin trading below $27.5K.

According to
CoinShares, investments in cryptocurrency funds fell for the fifth consecutive
week to $32 million last week, with bitcoin investments down $33 million and
Ethereum investments down $1 million. Investment in funds that allow shorts on
Bitcoin fell by $1.3 million.

According to
Santiment, the number of BTC and ETH on exchanges has fallen to its lowest
level in several years, which is seen as a sign of an attitude towards
long-term holding.

News background

Mott Capital
Management founder Michael Kramer warned that Bitcoin could fall to $20K.
According to him, BTC is a leading indicator for all risky assets, so its
decline would be negative for the stock market.

Anthony
Scaramucci, founder of hedge fund SkyBridge Capital, believes that the actual
value of Bitcoin should now be $40K. According to him, we are now witnessing a
global proliferation of BTCs, similar to what happened in the late 1990s with
the rise of the internet.

Cryptocurrency
platform Bakkt is considering expanding its business in Europe in light of the
Crypto Asset Market Regulation Act (MiCA) passed in April. Bakkt currently only
offers services in the US.

US lawmakers
have drafted a bipartisan bill prohibiting the Fed from issuing the digital
dollar (CBDC). Lawmakers cited Americans‘ right to financial privacy.

This article was written by FxPro’s Senior Market Analyst Alex Kuptsikevich.

This article was written by FxPro FXPro at www.forexlive.com.

On the daily chart below for
AUDUSD, we can see that the price has recently sold off from the top of the
range and it’s now approaching the support at 0.6563. AUDUSD has been
trading within this range since the Silicon Valley Bank collapse in March, so
it hasn’t done much for 3 months now.

The USD recently started to
appreciate across the board as strong economic data suggest that the Fed may
have to do more on the interest rates front and the market is slowly pricing in
higher and higher chances of another hike in June.

AUDUSD Technical Analysis

On the 4 hour chart below, we can
see that once the price broke below the trendline, the sellers piled in
aggressively. We got a bounce recently that ended up in a continuation from the
38.2% Fibonacci
retracement level as expected. The AUD/USD price has now
started to diverge with the MACD and since we are near the bottom
of the range, this may be an early signal of a weakening bearish momentum that
will translate into a correction from the 0.6563 support.

On the 1 hour chart below, we can
see that the price action has formed a falling
wedge pattern. When the price breaks out to the upside, it generally rallies
to the top of the pattern, which in this case would be the 0.67 handle. AUD/USD
needs to break below the 0.6537 support with conviction and supported by
fundamentals to invalidate this pattern and lead to an even stronger selloff.

Meanwhile, the bearish bias remains,
and we should see the price getting to the 0.66 support first and 0.6563 after.
Watch out for the US
PMIs today as a beat should give the USD another boost, while a miss should
weaken it.

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

The dollar is gaining further ground now in European morning trade and among the bigger losers today is gold. The yellow metal is down 0.7% to just under $1,956 currently as it erases the advance from Friday. Gold is now threatening a steeper fall towards its 100-day moving average (red line) once again:

That level comes in at around $1,931 and will be a key technical support to watch alongside the 50.0 Fib retracement level at around $1,935.

With 10-year Treasury yields breaking higher, there might be scope for gold prices to correct further in the days/weeks ahead. However, as mentioned before, I’d still be one for dip buying in the bigger picture but you have to pick your fights.

Looking at precious metals, gold isn’t quite the biggest loser today as we are seeing silver get hammered down by over 2% to $23.13 at the moment:

The double top pattern just above $26 was already an ominous signal before the break of the neckline around $24.65 came about. After that, it has been rather one-way traffic with the only the declines last week being halted by the 100-day moving average (red line).

That level has now been broken and could set up a sharper drop in silver next.

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

• Dollar breakout gets an early check back
• US debt ceiling concerns – justified or not?
• Fed’s Kashkari: It’s a close call on whether to raise or pause in June
• Eurozone March construction output -2.4% vs +1.7% m/m prior
• SNB total sight deposits w.e. 19 May CHF 515.7 bn vs CHF 520.1 bn prior

Markets:

• CHF leads, JPY lags on the day
• European equities lower; S&P 500 futures flat
• US 10-year yields flat at 3.678%
• Gold down 0.2% to $1,972.01
• WTI crude up 0.1% to $71.62
• Bitcoin down 0.1% to $26,803

It was a quiet session for the most part with a lack of key economic releases not really helping with the mood in Europe. The dollar saw its gains last week checked back on Friday and it was more of the same story today.

The greenback traded more mixed across the board as US debt ceiling concerns continue to work its way through markets. EUR/USD is marginally lower at 1.0810-20 levels as buyers look to push back against a break below its 100-day moving average last week, though upside is capped nearer to the 100-hour moving average for now.

USD/JPY was also largely more tepid around 137.80-90 earlier before Fed’s Kashkari offered up a nudge higher for the pair and bond yields, moving up to 138.20 levels at the moment. That is now helping the pair to build on last week’s break after a bit of a check back early on today and on Friday.

Meanwhile, the franc is the lead gainer as USD/CHF fails to make its way past 0.9000 in a drop back to 0.8960 currently.

Elsewhere, with equities also looking fairly tentative and tepid, the antipodeans aren’t up to much with AUD/USD down 0.2% to 0.6635 and NZD/USD little changed at around 0.6275 on the day.

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

• Not seeing evidence that banking stress is doing Fed’s job on inflation
• Fed has to keep going in battle against inflation
• Services inflation seems „pretty darn entrenched“
• It may be that we have to go north of 6% but that isn’t clear yet

There seems to be some differing opinions at the Fed currently but the remark on 6% rates is certainly reflective of more hawkish sentiment than what markets are thinking right now. USD/JPY is at the highs for the day now at 138.09 currently.

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

Similar to EUR/USD and USD/JPY last week, it looked like gold was facing a technical break lower as price fell through the support region of $1,975-81. However, with the dollar getting checked back on Friday and in trading today, we are seeing price action consolidate a little as traders call into question the breakout move from last week.

The US debt ceiling talks seem to be the main focus in markets at the moment and that is arguably keeping dollar gains in check. Now, gold is trading back towards the broken support region of $1,975-81 and so buyers are not quite throwing in the towel just yet.

However, looking at the near-term chart:

It is proving to be a similar case for gold as it is in EUR/USD here. The minor bounce today ran into a test of its 100-hour moving average (red line) and that key level is holding for now. In technical terms, sellers are still in near-term control as such. And it would require buyers to break above that to open up some room to work with between that and the $2,000 mark again.

So, while the downside break is being questioned right now, sellers are still hanging on in there as they hold at the key near-term level pointed out above – now seen at $1,980.38 roughly. Keep below that and the near-term bias remains more bearish but break above and the bias will turn more neutral instead.

But as we can see with other dollar pairs right now, the technical picture is more or less the same. This suggests that dollar sentiment is the key driver of trading conditions currently so it is best to keep the focus on factors impacting that i.e. debt talks, Fedspeak, US economic data.

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