Commodity currencies are trading broadly higher today, with help from risk-on sentiment, with Aussie and Loonie competing for the first place. Selloff are mainly centered Yen and Swiss Franc, and to a lesser extent Dollar. Euro and Sterling are mixed for the moment. The moves could intensify further on relatively lower liquidity with US on bank holiday.
Technically, the rally in Yen crosses (including AUD/JPY below) is picking up momentum. There are some levels to pay attention to, including 129.77 resistance in USD/JPY, 138.33 resistance in EUR/JPY and 101.34 resistance in CAD/JPY. Break of these levels will argue that medium term up trends in Yen crosses are ready to resume in general. If happens, that would likely come with extended rebound in global stock indexes.
In Europe, at the time of writing, FTSE is down -0.02%. DAX is up 0.45%. CAC is up 0.56%. Germany 10-year yield is up 0.099 at 1.063. Earlier in Asia, Nikkei rose 2.19%. Hong Kong HSI rose 2.06%. China Shanghai SSE rose 0.60%. Singapore Strait Times rose 0.26%. Japan 10-year JGB yield rose 0.0038 to 0.234.
AUD/JPY rises on risk-on sentiment, ready for up trend resumption?
On the back of risk-on sentiment, AUD/JPY rally resumed the rally from 87.28 today, and hit as high as 91.67 so far. The development affirms the case that correction from 95.73 has completed with three waves down to 87.28. Further rally should be seen as long as 89.63 support holds. Next target is 94.00 resistance.
Also, while the pull back from 95.73 was deep, it was held above 85.78 resistance turned support, as well as 55 week EMA. Medium term bullishness is maintained. Firm break of 94.00 will argue that whole up trend from 59.85 (2020 low) is ready to resume through 95.73. In that case, next medium term target will be 100% projection of 59.85 to 85.78 from 78.77 at 104.70.
Eurozone economic sentiment ticked up to 105 in May, EU down to 104.1
Eurozone Economic Sentiment Indicator ticked up from 104.9 to 105.0 in May. Employment Expectations Indicator rose from 112.6 to 112.9. Industrial confidence dropped from 7.7 to 6.3. Services confidence rose from 13.6 to 14.0. Consumer confidence rose from -22.0 to -21.1. Retail trade confidence dropped from -3.9 to -4.0. Construction confidence rose from 7.0 to 7.2.
EU Economic Sentiment dropped from 104.6 to 104.1. Amongst the largest EU economies, the ESI rose markedly in Spain (+4.1) and, to a lesser extent, in France (+1.5) and Italy (+0.8), while it remained
Swiss KOF dropped to 96.8, below long-term average
Swiss KOF Economic Barometer dropped from 103.0 to 96.8 in May, below expectation of 102.3. The indicator is now below its long-term average. KOF said, “the Swiss economy is thus likely to develop moderately over the next few months.”
The decline was “driven by indicator bundles of almost all branches of the economy”, except financial and insurance services sector, and foreign demand.
RBNZ Conway: Probably some more 50 points hikes coming
RBNZ chief economist Paul Conway said today that 50bps rate hikes are the way forward, and he’s confident of soft landing as the labor market is strong.
“75 wasn’t seriously on the table because we are pretty convinced that we can get to where we need to get with 50-point increments,” he said. Also, the central bank was “signaling there’s probably some more 50 points coming over the next little while.”
On the economy, Conway said “it’s difficult to engineer a soft landing — typically a significant reduction in inflation is accompanied by negative economic growth — but there’s reasons to believe New Zealand is well placed to pull it off this time around.”
“The labor market is strong and that’s the underlying reason why the New Zealand economy is well placed to weather the storm,” he added.
BoJ Kuroda: Yen’s rapid weakening not because of monetary policy
BoJ Governor Haruhiko Kuroda told the parliament today, “I don’t think the BoJ’s monetary policy was the factor behind a rapid yen weakening. The recent yen weakening may have been driven by an abnormal situation where oil prices topped $130 per barrel.”
He also said that the rapid depreciation of Yen was “undesirable”. But the situation was improving with Dollar easing back to around 127 Yen.
Meanwhile, Kuroda also repeated the pledge to maintain powerful monetary easing to help the economy from recovering.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.0699; (P) 1.0732 (R1) 1.0767; More…
Intraday bias in EUR/USD remains on the upside at this point. Sustained trading above 55 day EMA (now at 1.0757) will target 1.0935 resistance next. On the downside, however, break of 1.641 minor support will turn bias back to the downside for retesting 1.0348 low instead.
In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case and bring medium term corrective rebound first.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 06:00 | EUR | Germany Import Price Index M/M Apr | 1.80% | 2.00% | 5.70% | |
| 07:00 | CHF | KOF Leading Indicator May | 96.8 | 102.3 | 101.7 | 103 |
| 09:00 | EUR | Eurozone Economic Sentiment Indicator May | 105 | 104.9 | 105 | 104.9 |
| 09:00 | EUR | Eurozone Industrial Confidence May | 6.3 | 7.5 | 7.9 | 7.7 |
| 09:00 | EUR | Eurozone Services Sentiment May | 14 | 14.3 | 13.5 | 13.6 |
| 09:00 | EUR | Eurozone Consumer Confidence May F | -21.1 | -21.1 | -21.1 | |
| 12:00 | EUR | Germany CPI M/M May P | 0.90% | 0.50% | 0.80% | |
| 12:00 | EUR | Germany CPI Y/Y May P | 7.90% | 7.60% | 7.40% | |
| 12:30 | CAD | Current Account (CAD) Q1 | 5.0B | -0.2B | -0.8B | -0.1B |
