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Daily Pivots: (S1) 139.39; (P) 139.85; (R1) 140.69; More...

Range trading continues in USD/JPY and intraday bias stays neutral at this point. Further rally is expected as long as 138.22 minor support holds. On the upside, break of 140.90 will resume larger rise from 127.20 to 142.48 fibonacci level. However, considering bearish divergence condition in 4 hour MACD, break of 138.22 will confirm short term topping, and turn bias back to the downside for 55 D EMA (now at 137.02).

In the bigger picture, rise from 127.20 is seen as the second leg of the corrective pattern from 151.93 high. Stronger rally would be seen to 61.8% retracement of 151.93 to 127.20 at 142.48. Sustained break there will pave the way back to retest 151.93. On the downside, however, break of 133.73 support will argue that the pattern could have started the third leg through 127.20 low.

Daily Pivots: (S1) 0.9024; (P) 0.9059; (R1) 0.9087; More...

USD/CHF's break of 0.8983 support indicate resumes of fall from 0.9146. The development also revives that case that corrective rebound from 0.8818 has completed at 0.9146. Intraday bias is back on the downside for retesting 0.8818 low. For now, risk will stay on the downside as long as 0.9146 resistance holds.

In the bigger picture, fall from 1.1046 (2022 high) is seen as a leg in the long term range pattern from 1.0342 (2016 high), which might have completed at 0.8818 already, just ahead of 0.8756 long term support. Sustained trading above 0.9058 support turned resistance should confirm medium term bottoming. Further break of 0.9439 resistance will confirm bullish trend reversal.

Daily Pivots: (S1) 1.0757; (P) 1.0790; (R1) 1.0827; More...

Intraday bias in EUR/USD stays on the upside at this point. Rebound from 1.0634 is still in progress. Sustained trading above 55 EMA (now at 1.0810) will pave the way back to retest 1.1094 high. Nevertheless, break of 1.0732 minor support should resume the fall from 1.1094 through 1.0634 support.

In the bigger picture, as long as 1.0515 support holds, rise from 0.9534 (2022 low) would still extend higher. Sustained break of 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high).

Daily Pivots: (S1) 1.2532; (P) 1.2579; (R1) 1.2657; More...

Intraday bias in GBP/USD remains on the upside with focus on 1.2678 resistance. Decisive break there will confirm resumption of whole up trend from 1.0351. Further rally should then be seen through 1.2759 fibonacci level to 61.8% projection of 1.1801 to 1.2678 from 1.2306 at 1.2848. On the downside, below 1.2599 minor support will turn intraday bias neutral first.

In the bigger picture, as long as 1.2306 support holds, rise from 1.0351 medium term bottom (2022 low) is expected to extend further. Sustained break of 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759 will add to the case of long term bullish trend reversal. However, firm break of 1.2306 will indicate rejection by 1.2759, and bring deeper decline, even as a correction.

Dollar is facing renewed selling in early US session as data reveals a further slowdown in upstream inflation via PPI. All eyes are now on the much-anticipated FOMC rate decision where a 'hold' is broadly expected. However, the possibility of an upside surprise in both inflation projections and the dot plot remains, suggesting that we could be in for some choppy waters ahead.

Indeed, the overall market reaction could be multifaceted, especially when the equities and bond markets are added to the equation. So, market participants should buckle up for potential volatility.

In the meantime, Aussie and Kiwi dollars continue to flex their muscles, being the day's strongest performers. A noticeable rebound the Swiss Franc is also evident. British Pound isn't too far behind after GDP data matched expectations. Canadian dollar trails Dollar as the next weakest performer, followed by Euro and Yen.

Technically, GBP/CAD's break of near term falling trend line today is taken as the first signal that whole correction from 1.7143 has completed with three waves down to 1.6606. Further rally is now expected as long as 1.6759 support holds. Firm break of 1.6928 will solidify the case of larger up trend resumption through 1.7143 high. Let's see if that will happen before BoE rate decision next week.

In Europe, at the time of writing, FTSE is up 0.38%. DAX is up 0.47%. CAC is up 0.74%. Germany 10-year yield is up 0.0140 at 2.439. Earlier in Asia, Nikkei rose 1.47%. Hong Kong HSI dropped -0.58%. China Shanghai SSE dropped -0.14%. Singapore Strait Times rose 0.90%. Japan 10-year JGB yield rose 0.0099 to 0.431.

US PPI at -0.3% mom, 2.8% yoy in May

US PPI for final demand fell -0.3% mom in May, below expectation of -0.1% mom rise. PPI goods fell -1.6% mom while PPI services rose 0.2% mom. PPI less foods, energy, and trade services was flat mom.

For the 12 months ended in May, PPI slowed from 3.1% yoy to 2.8% yoy, below expectation of 2.9% yoy. PPI for less foods, energy, and trade services slowed from 3.3% yoy to 2.8% yoy.

UK GDP grew 0.2% mom in Apr led by 0.3% growth in services

UK GDP grew 0.2% mom in April, matched expectations. Services rose 0.3% mom. Production declined by -0.3% mom. Construction fell -0.6% mom. In the three months to April, GDP grew 0.1%, compared with the three months to January 2023, with falls in 8 of the 14 sub-sectors.

Also released, industrial production fell -0.3% mom, -1.9% yoy in April, versus expectation of -0.1% mom, -2.6% yoy. Manufacturing production declined -0.3% mom, -0.9% yoy, versus expectation of -0.1% mom, -1.8% yoy. Goods trade deficit narrowed from GBP -16.4B to GBP -15.0B, versus expectation of GBP -16.5B.

NIESR forecasts anemic UK growth amid BoE rate hikes

NIESR projects that UK monthly GDP will "remain flat" in May compared to April. The institute added "Higher-frequency data suggest that continued growth in services in May be partially offset by a further decline in manufacturing activity."

For the second quarter, NIESR anticipates a rather lukewarm GDP growth of merely 0.1%, a pace that "broadly consistent with the longer-term trend of low economic growth".

Paula Bejarano Carbo, Associate Economist, NIESR, noted, "With the Bank Rate set to rise further over the coming months, curbing demand, it is likely that UK growth will continue to be anaemic at best."

Eurozone industrial production rose 1.0% mom, EU up 0.7% mom

Eurozone industrial production rose 1.0% mom in April, below expectation of 1.2% mom. Production of capital goods grew by 14.7% mom and energy by 1.0% mom, while production of intermediate goods fell by -1.0% mom, durable consumer goods by -2.6% mom and non-durable consumer goods by -3.0% mom.

EU industrial production rose 0.7% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+21.5%), Lithuania (+2.8%) and Sweden (+1.4%). The largest decreases were observed in Slovenia (-7.9%), Portugal (-5.5%) and the Netherlands (-3.5%).

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2532; (P) 1.2579; (R1) 1.2657; More...

Intraday bias in GBP/USD remains on the upside with focus on 1.2678 resistance. Decisive break there will confirm resumption of whole up trend from 1.0351. Further rally should then be seen through 1.2759 fibonacci level to 61.8% projection of 1.1801 to 1.2678 from 1.2306 at 1.2848. On the downside, below 1.2599 minor support will turn intraday bias neutral first.

In the bigger picture, as long as 1.2306 support holds, rise from 1.0351 medium term bottom (2022 low) is expected to extend further. Sustained break of 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759 will add to the case of long term bullish trend reversal. However, firm break of 1.2306 will indicate rejection by 1.2759, and bring deeper decline, even as a correction.

Economic Indicators Update

US PPI for final demand fell -0.3% mom in May, below expectation of -0.1% mom rise. PPI goods fell -1.6% mom while PPI services rose 0.2% mom. PPI less foods, energy, and trade services was flat mom.

For the 12 months ended in May, PPI slowed from 3.1% yoy to 2.8% yoy, below expectation of 2.9% yoy. PPI for less foods, energy, and trade services slowed from 3.3% yoy to 2.8% yoy.

Full US PPI release here.

NIESR projects that UK monthly GDP will "remain flat" in May compared to April. The institute added "Higher-frequency data suggest that continued growth in services in May be partially offset by a further decline in manufacturing activity."

For the second quarter, NIESR anticipates a rather lukewarm GDP growth of merely 0.1%, a pace that "broadly consistent with the longer-term trend of low economic growth".

Paula Bejarano Carbo, Associate Economist, NIESR, noted, "With the Bank Rate set to rise further over the coming months, curbing demand, it is likely that UK growth will continue to be anaemic at best."

Full NIESR release here.

• US inflation dips
• Federal Reserve expected to pause rates
• BoE feels pressure after sizzling UK jobs report

The British pound is in positive territory on Wednesday. In the European session, GBP/USD is trading at 1.2645, up 0.27%. The pound surged close to 1% on Tuesday, after a red-hot UK employment report and the drop in US inflation.

Federal Reserve likely to pause

The US inflation report made headlines as inflation fell from 4.9% to 4.0%. That was of course good news, but not the whole story. The drop in headline inflation was primarily due to lower food and energy prices, as the core rate decline was modest – from 5.5% to 5.3%. Core CPI levels remain incompatible with a 2% inflation target, which means that more rate hikes could be on the way after today’s expected pause.

The markets have priced in a pause at close to 100%, meaning it would be a stunner if the Fed raised rates. Still, with Fed members split on whether to pause or continue hiking, Jerome Powell could choose the middle path and deliver a ‘hawkish skip’, whereby the Fed takes a breather but sends out the message that the current tightening cycle is not over. The Fed decision is likely a foregone conclusion, but the rate statement and Powell’s follow-up remarks will be a must-watch.

UK jobs report puts pressure on BoE

Tuesday’s UK employment report was solid, as unemployment fell, employment numbers hit a record and wage growth climbed higher. Once upon a time, such data would have been cheered, but that’s not the case at a time when inflation remains frustratingly high and strong job numbers likely mean more rate hikes.

The Bank of England has tried to do its part by raising interest rates at twelve consecutive meetings. The aggressive tightening was supposed to cool the economy and dampen the labour market, which would then push inflation lower. To put it mildly, the plan hasn’t quite worked out as planned. The economy has not slowed as much as expected and the employment market remains robust, as seen in Tuesday’s employment report.

BoE policy makers appear to have little choice other than to raise rates, but that will make a soft landing a difficult task. The BoE meets on June 22^nd and may deliver an oversize 50-basis point hike, which we haven’t seen since December 2022.

GBP/USD Technical

• 1.2657 is under pressure in resistance. Next, there is resistance at 1.2734
• There is support at 1.2513 and 1.2436

Market picture

The crypto market cap fell 0.5% over the past 24 hours to $1.055 trillion. The recovery momentum was broken with the release of US inflation data, although other markets quickly recovered from the initial move. Bitcoin lost 1% to $25.8K, and Ethereum lost 0.5% to $1740. BNB was going up against the market, adding 5.8%, while XRP is losing 3.5%, having stumbled on profit-taking after rising.

The dynamics of Bitcoin are pulling the crypto market down faster than other assets, which could manifest as reduced demand in the most risk-sensitive part of the market spectre before the FOMC decision results.

An uptrend was built through the local lows of the last four days in BTCUSD. But Bitcoin’s attempts to accelerate gains the night before were met with a sell-off on the approach to $26.4K, the area of the previous consolidation. The Bears may have the upper hand right now. If so, the declines might accelerate to $25.7K, directly leading to $24.8K.

According to Glassnode, bitcoin’s hash rate (smoothed by the seven-day moving average) has reached 393.9 EH/s. As a result of the expected overnight recalculation, BTC’s mining complexity is expected to update to a high of 52.84T. The increase in complexity on the back of lower Bitcoin prices is putting pressure on miners’ yields.

News background

Fortune journalists found a video from 2018 in which future SEC chairman Gary Gansler reveals that BTC, ETH, LTC and BCH are not securities.

XRP renewed its 2.5-month high around $0.56 after the court formally disclosed documents related to former SEC official William Hinman’s 2018 speech. At the time, he claimed that, for some reason, bitcoin and Ethereum were not securities. Ripple Labs believes Hinman’s statements refute all of the SEC’s allegations, so the company has a good chance of succeeding in this case.

Circle CEO Jeremy Allaire said it’s time for US authorities to develop global crypto regulations that will significantly impact the crypto industry and the dollar’s competitiveness for decades to come. The first step could be the adoption of the Stablecoin Act.

Crypto exchanges in the US would likely be required to register with the SEC as brokers, and all cryptocurrencies on the platforms would be classified as securities, JPMorgan believes. Such a situation would put pressure on the crypto industry.

On the hourly chart of GBP/USD at FXOpen, the pair started a fresh increase from the 1.2500 zone. The British Pound was able to clear the 1.2540 resistance against the US Dollar.

It settled above the 1.2590 level and the 50-hour simple moving average. It is now consolidating gains below the 1.2625 resistance. Immediate support is near a connecting bullish trend at 1.2590.

The first major support is near the 1.2540 level. The main support is forming near the 1.2500 level, below which GBP/USD might move lower toward the 1.2440 support.

On the upside, the first major resistance is near the 1.2625 level. If there is a clear upside break above the 1.2625 resistance, the pair could rise toward the 1.2680 level in the near term. The next major resistance sits near the 1.2750 level.