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Nasdaq-100: ⬆️ Buy

• Nasdaq-100 broke resistance area
•  Likely to rise to resistance level 21500.00

Nasdaq-100 index recently broke the resistance area between the resistance level 20220.00 (which has been reversing the index from March) and the resistance trendline of the Ascending Triangle from April.

The breakout of this resistance area accelerated the active short-term ABC correction 2 from last month.

Nasdaq-100 index can be expected to rise to the next resistance level 21500.00 (target price for the completion of the active wave 2).

Business sentiment in Germany improved significantly in May after a sharp drop in April. The ZEW business sentiment index rose from -14.0 to 25.2, well above the average forecast of 10, but remains below the March reading of 51.6.

The improvement in sentiment is due to expectations of positive effects from the promised 800 billion stimulus package, progress in trade disputes, and stabilising inflation. However, the assessment of the current situation remains extremely low, with the index standing at -82, close to its cyclical lows in the current century.

The positive surprise in the business sentiment index creates a favourable news background for the EUR/USD pair, supporting it near the 50-day moving average. This line serves as a benchmark for medium-term dynamics, and a break below it will confirm the breakdown of the last three months’ uptrend. Holding the level of 1.11 indicates the willingness of buyers to continue buying.

Markets

The sharp market moves (higher yields, stronger dollar, bullish stocks) on the 90-day US-Sino Chinese trade truce made way for a waiting game today in the run-up to April US CPI numbers. The recent chain of events changed markets’ sensitivity to the inflation data. Ahead of last week’s FOMC meeting and this weekend’s Geneva talks, markets were heavily skewed toward anticipative Fed rate cuts. Such context is/was fertile for downside CPI surprises as they take even more weight off the argument in the other side of the balance. Going into the release, especially upward surprises had market moving potential as they could extend the ongoing (hawkish) repositioning in US money markets. A Fed rate cut is only fully discounted by September. This setting helps explain the modest reaction to slightly softer inflation numbers. From a market stability perspective, it was probably the best possible outcome. Both headline and core CPI rose by 0.2% M/M in April, ducking the 0.3% consensus estimate. On an annual level, headline CPI slowed from 2.4% to 2.3% while core CPI stabilized at 2.8%. Both are the lowest since the spring 2021 inflation breakout, but still above the Fed’s 2% inflation target. Core services less housing rose by 0.2% M/M and 2.7% Y/Y. Other details showed food prices dipping by 0.1% M/M (+2.8% Y/Y; special mention to falling egg prices -12.7% M/M & +49.3% Y/Y), energy prices rising by 0.7% M/M (higher electricity outstripping lower oil; -3.7% Y/Y). Shelter prices were responsible for a big share of the increase, rising by 0.3% M/M (+3.6% Y/Y). Lower used cars and trucks prices (-0.5% M/M; +1.5% Y/Y) and airline fares (-2.8% M/M & -7.9% Y/Y) had an offsetting impact.

US Treasury yields take back up to 3.5 bps (5-yr) from yesterday’s sharp gains. EUR/USD ticked higher from the 1.11-area to 1.1130 at the time writing. US stock markets turned corrective losses in futures trading into small gains thanks to the goldilocks inflation number. German Bunds underperform US Treasuries with German yields up to 2 bps higher at the very long end of the curve. German May ZEW investor sentiment showed a sharp improvement in the forward looking expectations component (25.1 from -14), compensating part of the losses observed in April. ZEW President Wambach said that “With a new government in place, some progress in the tariff disputes and a stabilising inflation rate, optimism has increased”. This morning’s in line with consensus UK labour market data and hawkish comments by BoE Pill left no traces on UK markets with EUR/GBP holding steady just above the 0.84-mark.

News & Views

Reuters citing several ECB policymakers reported that the central bank will likely keep quantitative easing and other stimulus measures as part of its toolkit when inflation and interest rates are at rock bottom. The likes of Belgian central bank governor Wunsch had previously said the ECB should discuss dropping this particular QE reference in the updated official strategy, due to be presented by the summer. Others (Knot, Schnabel) argued that QE should be used in short bursts rather than costly lengthy ones. Large-scale bond buying created huge losses for national central banks once inflation and rates shot up in the wake of the post-pandemic recovery. At least part of it could have been avoided if the ECB wasn’t trapped in its forward guidance to keep rates ultra-low and even negative. Reuters’ sources said that during the May 6-7 retreat there was general agreement that this tool should be used in a more constrained manner. The strategy review will most likely reaffirm the ECB’s commitment to a “symmetric” 2% inflation target.

With today’s release of final April Czech CPI came the central bank’s personal assessment. The final headline number matched the preliminary -0.1% m/m and 1.8% y/y. This slowest pace since March 2018 was possibly related to Easter discounts, which this year took place in April compared to March in 2024. Core inflation rose only slightly to 2.6%. The increase in prices of core goods stopped and offset growth in market services prices (4.5%), leading to an overall more or less stable core CPI y/y print compared to March. The CNB said, however, that with other items on the rise as well, such as holidays and air travel, there’s evidence that services inflation has not fully stabilized and therefore continues to call for a cautious approach to monetary policy. The latter comment should be seen against the backdrop of last week’s (final?) rate cut to 3.5%, which is around the neutral rate. The CNB expects inflation to stay between 2% and 3% in the months ahead.

Daily Pivots: (S1) 1.3112; (P) 1.3205; (R1) 1.3271; More...

Intraday bias in GBP/USD is turned neutral with current retreat. On the downside, below 1.3138 will extend the correction from 1.3442 to 55 D EMA (now at 1.3067) and below. But downside should be contained by 38.2% retracement of 1.2099 to 1.3442 at 1.2929 to bring rebound. On the upside, above 1.3321 minor resistance will turn bias back to the upside for retesting 1.3442.

In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could either be resuming the up trend, or the second leg of a consolidation pattern. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on decisive break of 1.3433 at a later stage.

Daily Pivots: (S1) 0.8367; (P) 0.8421; (R1) 0.8512; More….

Intraday bias in USD/CHF is turned neutral with current retreat. Strong resistance is expected from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. Break of 0.8330 resistance turned support will turn intraday bias will turn bias back to the downside. Further break of 0.8184 will bring retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 146.56; (P) 147.61; (R1) 149.50; More...

Intraday bias in USD/JPY remains mildly on the upside at this point. As noted before, fall from 158.86 could have completed 139.87 already. Further rise should be seen to 61.8% retracement of 158.86 to 139.87 at 151.60 next. On the downside, below 145.70 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

The Consumer Price Index (CPI) rose 0.2% in April, after falling 0.1% month-on-month (m/m) in March. On a twelve-month basis, CPI was up 2.3% (from 2.4% in March).

• The energy index rose 0.7% m/m, as a jump in electricity and natural gas costs more than offset the pullback in gas prices. Meanwhile, grocery store prices declined 0.4% m/m, with the year-ago measure slowing to 2.0%.

Excluding food and energy, core inflation rose 0.2% m/m, following a cooler than expected 0.06% m/m gain in March. The twelve-month change held at 2.8% for the second consecutive month.

Services prices (+0.3% m/m) rebounded in April, after having recorded its softest monthly gain since August 2021 the month prior.

• Primary shelter costs (+0.4% m/m) remained a key driver of price pressures, though non-housing services (April: +0.1% m/m vs. March: -0.2% m/m) also firmed. This was largely due to a rebound in vehicle insurance premiums (April: +0.7% m/m vs. March: -0.8% m/m) and further gains in medical care services (+0.5% m/m).
• Meanwhile, most discretionary service spending categories including recreational (-0.3% m/m), airfares (-2.8% m/m) and other personal services (-0.4% m/m) recorded price declines last month.

Core goods inflation rose 0.1% m/m, following a modest pullback the month prior. Small gains were seen in household furnishings, medical care products, recreational and other goods.

Key Implications

Price pressures heated up a touch in April, but that was after a very subdued reading the month prior. Most of the uptick was driven by firmer services prices, with higher shelter costs accounting for the nearly two-thirds of the gain in core inflation. And while goods prices also turned higher last month, there was little evidence to suggest that the uptick was driven by President Trump's sweeping tariffs announced at the beginning of April. Efforts by companies to stockpile inventories and a willingness to absorb some of the tariff costs suggests a more incremental strengthening in goods prices is likely to occur over the coming months.

The U.S. and China moved to deescalate trade tensions over the weekend, with both country's agreeing to a 90-day pause on most of the tariffs imposed in April. Unequivocally, this is a step in the right direction. While it will not undo the near-term inflation impacts already in the pipeline, the administration's move to deescalate, and perceived willingness to quickly negotiate new trade deals, should help to limit the economic damage.

Daily Pivots: (S1) 1.1022; (P) 1.1132; (R1) 1.1199; More...

Intraday bias in EUR/USD is turned neutral first with current recovery. Overall, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to bring rebound. On the upside, break of 1.1380 will suggest that the correction from 1.1572 has completed, and bring retest of 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0789) holds.

Dollar softened slightly in early US trading today, though the move appears more related to a fading post-trade-deal rally than any direct reaction to economic data. While April’s inflation report showed encouraging progress on headline disinflation, the core CPI reading held firm, suggesting underlying price pressures remain sticky. That dynamic should keep Fed cautious, and today's market reaction suggests the data did little to shift expectations meaningfully. The more optimistic takeaway, however, is that recent tariffs have yet to significantly lift inflation.

In contrast, Sterling is gaining some traction, particularly against Euro, following solid UK wage data. Despite signs of softening in overall employment, wage growth remains robust, with average earnings still running well above levels consistent with BoE's 2% inflation target. BoE Chief Economist Huw Pill reinforced that concern by warning that more aggressive or sustained policy action may be needed to bring inflation under control. His remarks have helped underpin Sterling sentiment.

Overall in the currency markets, Aussie has overtaken Dollar to become the week's top performer. Kiwi and Loonie are also firm. At the other end of the spectrum, Yen continues to struggle, while Swiss Franc and Euro are also soft.

Technically, GBP/JPY is now pressing 195.95 resistance as rise from 184.35 extends. Decisive break of 195.95 will argue that choppy fall from 199.79 has completed at 184.35 already. More importantly, rise from 180.00 might then be ready to resume through 199.79 in this bullish case.

In Europe, at the time of writing, FTSE is up 0.05%. DAX is up 0.17%. CAC is up 0.23%. UK 10-year yield is up 0.021 at 4.671. Germany 10-year yield is up 0.013 at 2.666. Earlier in Asia, Nikkei rose 1.43%. Hong Kong HSI fell -1.87%. China Shanghai SSE rose 0.17%. Singapore Strait Times rose 0.13%. Japan 10-year JGB yield rose 0.06 to 1.449.

US CPI hits four year low at 2.3%, but core inflation holds steady at 2.8%

US headline CPI rose just 0.2% mom, below the expected 0.3% mom. Core CPI, excluding food and energy, also increased by 0.2%, undershooting forecasts of 0.3% mom.

On an annual basis, headline inflation eased to 2.3% yoy from 2.4% yoy, the lowest rate since April 2021. Core inflation held steady at 2.8% yoy, in line with expectations.

Shelter remained the key driver of monthly inflation, rising 0.3% mom and accounting for over half of the total increase.

Energy prices also ticked higher by 0.7% mom, while food prices declined slightly by -0.1% mom. On a year-over-year basis, energy costs dropped by -3.7%, helping to keep overall inflation in check, while food prices rose 2.8%.

BoE’s Pill: May require more aggressive and persistent effort to bring down inflation

Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the BoE’s 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.

He raised concerns that recent shifts in wage and price-setting behavior might reflect a more "structural change", drawing parallels with inflation dynamics of the 1970s and 1980s.

Pill emphasized that investors should not interpret BoE's latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.

Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.

Last week, Pill voted against the BoE's quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.

UK payrolled employment falls -33k, wage growth remains elevated

UK labor market data for April showed signs of softening in employment but continued strength in wage growth. Payrolled employment fell by -33k (-0.1% mom), while the claimant count rose by 5.2k. Median monthly pay rose by 6.4% yoy in April, accelerating from 5.9% yoy in the previous month.

In the three months to March, unemployment rate in the three months to March edged up from 4.4% to 4.5%, in line with expectations and marking the highest level since late 2021.

Average earnings including bonuses rose 5.5% yoy, beating expectations of 5.2% yoy. Earnings excluding bonuses rose 5.6% yoy, slightly below forecast of 5.7% yoy.

German ZEW economic sentiment surges on stabilizing domestic politics and trade progress

Investor sentiment in Germany and the wider Eurozone improved sharply in May, with ZEW Economic Sentiment Index for Germany jumping from -14.0 to 25.2, well above the expected 9.8. Eurozone sentiment followed suit, rising from -18.5 to 11.6, also beating expectations.

According to ZEW President Achim Wambach, the rebound reflects growing optimism tied to easing trade tensions, a new German government, and stabilizing inflation, helping to offset last month’s sharp deterioration.

However, views on current conditions remain deeply negative. Germany’s Current Situation Index edged down further from -81.2 to -82.0, missing forecasts. Eurozone’s improved modestly but still stood at -42.2. This divergence suggests that while expectations for the months ahead are improving, near-term economic conditions remain fragile, particularly in Germany.

BoJ’s Uchida sees temporary inflation pause, but wage growth to persist

BoJ Deputy Governor Shinichi Uchida said today that while Japan’s underlying inflation and medium- to long-term inflation expectations may "temporarily stagnate", wage growth is expected to remain firm as "Japan's job market is very tight."

He added that companies are likely to continue "passing on rising labour and transportation costs by increasing prices".

Uchida also stressed that BoJ will assess the economic impact of US trade policy “without pre-conception,” acknowledging the high degree of uncertainty surrounding the global outlook.

BoJ opinions: Sees tariff risks but maintains flexible rate-hike stance

BoJ’s Summary of Opinions from its April 30–May 1 meeting revealed a generally cautious view on the impact of US tariffs, with board members acknowledging the potential economic damage but not seeing it as enough to derail the pursuit of the 2% inflation target.

One member noted that BoJ may enter a "temporary pause" in rate hikes due to weaker US growth. But it's emphasized that "it shouldn't be too pessimistic".

The member emphasized that rate hikes could resume if conditions improve or US policy shifts.

Other opinions highlighted the high level of uncertainty facing Japan’s economic and price outlook, driven largely by global trade tensions. One board member noted the policy path “may change at any time.”

Another reaffirmed that there has been "no change to the BoJ's rate-hike stance", as projections continue to show inflation reaching the 2% target and real interest rates remain deeply negative.

Australian Westpac consumer sentiment rises to 92.1, weak confidence supports RBA cut

Australia’s Westpac Consumer Sentiment Index rose 2.2% to 92.1 in May, partially recovering from April’s sharp decline triggered by trade-related uncertainty.

Westpac attributed the modest rebound to stronger financial markets and a decisive outcome in the Federal election. However, sentiment remains subdued, with the index still 3.9% below its March level and firmly in pessimistic territory.

With all key inflation measures now back within the 2–3% target range, Westpac expects RBA to cut the cash rate by another 25bps to 3.85%. The combination of soft domestic sentiment and a more "unsettled and threatening global backdrop" strengthens the case for further easing.

Australia’s NAB business conditions weaken to 2, profit pressures mount

Australia’s NAB Business Confidence Index edged up from -3 to -1 in April. However, the underlying Business Conditions Index slipped from 3 to 2. Trading conditions eased from 6 to 5, while profitability dropped sharply from 0 to -4, highlighting the ongoing strain on margins.

Purchase cost growth accelerated to 1.7% in quarterly equivalent terms, up from 1.4%. Labor cost growth remained elevated at 1.6%. Rising input costs appear to be eroding profitability, with businesses struggling to pass through the full extent of these increases. This was reflected in modest increases in final product and retail price growth, which rose to 0.8% and 1.4% respectively—still below the pace of input cost growth.

NAB Chief Economist Sally Auld noted that weaker profitability was at the core of the drop in business conditions, aligning with the uptick in purchase costs and softer trading performance.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1022; (P) 1.1132; (R1) 1.1199; More...

Intraday bias in EUR/USD is turned neutral first with current recovery. Overall, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to bring rebound. On the upside, break of 1.1380 will suggest that the correction from 1.1572 has completed, and bring retest of 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0789) holds.