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• NZDCAD broke daily down channel
• Likely to rise to resistance level 0.8570

NZDCAD currency pair recently broke the resistance trendline of the daily down channel from December (which encloses the previous intermediate ABC correction (B)).

The breakout of this down channel continues the minor impulse wave 3 of the intermediate impulse wave (B) from the middle of last month.

NZDCAD can be expected to rise further toward the next resistance level 0.8570 (which reversed the pair multiple times in March, target price for the completion of the active impulse wave 3).

• AUDCHF reversed from support level 0.5865
• Likely to rise to round resistance level 0.6000

AUDCHF currency pair recently reversed up from the key support level 0.5865 (which stopped the previous short term impulse wave 5) intersecting with the lower daily Bollinger Band.

The upward reversal from the support level 0.5865 stopped the previous intermediate impulse wave (3).

Given the strength of the support level 64.40, AUDCHF can be expected to rise further toward the next round resistance level 0.6000.

• WTI reversed from key support level 64.40
• Likely to rise to resistance level 70.00.

WTI crude oil recently reversed up from the key support level 64.40 (previous monthly low from March) standing well below the lower daily Bollinger Band.

The upward reversal from the support level 64.40 is currently forming the daily Japanese candlesticks reversal pattern Hammer.

Given the oversold daily Stochastic, WTI crude oil can be expected to rise further toward the next round resistance level 70.00.

US initial claims rose 13k to 242k in the week ending April 29, higher than expectation of 235k. Four-week moving average of continuing claims rose 3.5k to 239k.

Continuing claims dropped -38k to 1805k in the week ending April 22. Four-week moving average of continuing claims dropped -4.5k to 1828k.

Full US jobless claims release here.

ECB raised its three key interest rates by 25bps today, with main refinancing rate, marginal lending rate, and deposit rate becoming 3.75%, 4.00%, and 3.25%, respectively, effective May 10.

In the accompanying statement, ECB explained that incoming information broadly supports the assessment of the medium-term inflation outlook that the Governing Council formed at its previous meeting." While headline inflation has declined recently, the ECB noted that "underlying price pressures remain strong."

The central bank acknowledged that the transmission of past rate increases to euro area financing and monetary conditions has been forceful, but added that "the lags and strength of transmission to the real economy remain uncertain."

ECB emphasized its commitment to ensuring that policy rates are "sufficiently restrictive" to achieve a timely return of inflation to the 2% medium-term target, stating that rates will be kept at these levels "for as long as necessary".

The Governing Council will continue to follow a data-dependent approach, basing its policy rate decisions on assessments of inflation outlook in light of incoming economic and financial data, underlying inflation dynamics, and strength of monetary policy transmission.

Full ECB statement here.

The inflation outlook continues to be too high for too long. In light of the ongoing high inflation pressures, the Governing Council today decided to raise the three key ECB interest rates by 25 basis points. Overall, the incoming information broadly supports the assessment of the medium-term inflation outlook that the Governing Council formed at its previous meeting. Headline inflation has declined over recent months, but underlying price pressures remain strong. At the same time, the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain.

The Governing Council's future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary. The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. In particular, the Governing Council's policy rate decisions will continue to be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.

The key ECB interest rates remain the Governing Council's primary tool for setting the monetary policy stance. In parallel, the Governing Council will keep reducing the Eurosystem's asset purchase programme (APP) portfolio at a measured and predictable pace. In line with these principles, the Governing Council expects to discontinue the reinvestments under the APP as of July 2023.

Key ECB interest rates

The Governing Council decided to raise the three key ECB interest rates by 25 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 3.75%, 4.00% and 3.25% respectively, with effect from 10 May 2023.

Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP)

The APP portfolio is declining at a measured and predictable pace, as the Eurosystem does not reinvest all of the principal payments from maturing securities. The decline will amount to €15 billion per month on average until the end of June 2023. The Governing Council expects to discontinue the reinvestments under the APP as of July 2023.

As concerns the PEPP, the Governing Council intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.

The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.

Refinancing operations

As banks are repaying the amounts borrowed under the targeted longer-term refinancing operations, the Governing Council will regularly assess how targeted lending operations are contributing to its monetary policy stance.

***

The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission. The ECB's policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed. Moreover, the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the Governing Council to more effectively deliver on its price stability mandate.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:45 CET today.

BTCUSD (Bitcoin) has been gaining ground after it managed to jump back above its 50-day simple moving average (SMA). However, should this latest rebound fail to strengthen, the price would be on track to extend its structure of lower highs, which is a bearish technical signal.

The momentum indicators currently suggest that near-term risks are tilted to the upside. Specifically, the RSI jumped above its 50-neutral mark, while the stochastic oscillator is ascending after posting a bullish cross.

Should buyers reclaim the 30,000 psychological mark and push the price higher, the 10-month peak of 31,064 could serve as initial resistance. Surpassing this region, Bitcoin may challenge 31,852, which is the 50.0% Fibonacci retracement of the 48,226-15,479 downleg. An upside violation of that territory could set the stage for the 61.8% Fibo of 35,716.

On the flipside, if the price drops beneath its 50-day SMA, the 38.2% Fibo of 27,988 might curb further retreats. Should that floor collapse, the bears could aim for the April low of 26,945. Failing to halt there, the king of cryptocurrencies could descend towards the 23.6% Fibo of 23,207.

In brief, BTCUSD has been attempting a rebound in the past few daily sessions after finding support at the 50-day SMA. Nevertheless, a fresh higher high is needed to revive bulls’ hopes for a sustained uptrend.

Market picture

The crypto market has risen 1.5% in the last 24 hours to reach a capitalisation of $1.2 trillion. Almost all the gains have come since the start of the day, coinciding with a fresh bout of fear surrounding US regional banks.

US index futures have risen modestly since the start of the day as the banking problems bring a monetary policy reversal closer. And that is another reason for buyers, in this case, medium-term buyers, to be happy.

The bulls in Bitcoin have pushed the price to $29K, consolidating above the 50-day moving average. This is an essential signal of a medium-term uptrend. Short-term attention is focused on the $29.4K area, where Bitcoin fell earlier this month, and resistance runs through the local highs of mid to late April. A move higher would pave the way for another test of highs for almost a year.

According to Santiment, bitcoin whales increased their holdings of the first cryptocurrency by 64,000 BTC in April, contrary to the view that the final direction of the asset’s movement has yet to take shape. Major investors continue to believe that there are growth prospects for BTC.

News background

Former Coinbase CTO Balaji Srinivasan lost a $1 million bet on Bitcoin’s rise. He bet BTC would reach $1 million by 17 June but conceded defeat before the deadline. “I burned a million to show everyone how the US government is printing trillions of dollars out of thin air,” the businessman tweeted.

The US president’s administration has proposed a 30% tax on crypto miners to make them more aware of the damage they are doing to the climate. The proposed tax will raise about $3.5 billion over ten years.

Robert Francis Kennedy Jr, a nephew of the 35th US President John F. Kennedy, criticised the SEC and FDIC for their “war on cryptocurrencies”, which he said had led to a banking crisis in the country.

The introduction of retail central bank digital currencies (CBDCs) will lead to “many unintended consequences”, said IMF chief Kristalina Georgieva. Florida Governor Ron DeSantis has vowed to ban the digital dollar in his state.

The Euro is holding firm tone and trading near 2023 high (1.1095) in European trading on Thursday, ahead of ECB policy decision.

Post-Fed rally on Wednesday on 25 bps hike but dovish US central bank’s stance, pushed the price into the upper part of near-term range, though with insufficient strength to break key barrier at 1.1095.

Traders await further signals from the ECB, which is on track to raise interest rates for the seventh time in a row, with open debate about the size of hike, as 25 and 50 bps are both on the table.

Markets slightly favor 25 bps increase, which will signal a slowdown after three straight hikes by 50 basis points but will likely not signal an end of tightening cycle, in which the central bank raised rates by a record 350 bps since July 2022, as primary aim to bring inflation to 2% target is still away and more policy tightening is likely to be expected in the near future.

Technical structure on daily chart remains firmly bullish as moving averages are in positive configuration and the price is gaining bullish momentum.

I addition, false break of key near-term support at 1.0960 (Fibo 23.6% of 1.0516/1.1095) generated bullish signal on formation of a bear-trap pattern, as well as leaving a higher base after a multiple failure at this zone.

Immediate bullish bias is expected to remain while the price stays above psychological 1.10 support and keep focus firmly at the upside for eventual break of 1.1095 pivot, which would signal a continuation of a larger uptrend from 0.9535 (2022 low) towards targets at 1.1195/1.1274 (200WMA / Fibo 61.8% retracement of 1.2349/0.9535 downtrend).

Res: 1.1095; 1.1154; 1.1195; 1.1274.
Sup: 1.1020; 1.1000; 1.0960; 1.0909.

• ECB expected to raise rates by 25 bp
• Federal Reserve hikes rates by 25 bp
• Powell signals a pause in June

EUR/USD is trading quietly on Thursday, ahead of the ECB decision later today.

ECB expected to hike, but by how much?

All eyes are the ECB, which is expected to raise rates at today’s meeting. The burning question remains will the central bank increase rates by 25 or 50 basis points? The eurozone April inflation report, published Tuesday, didn’t provide any insights as both the headline and core readings barely moved and were very close to the estimates. Headline CPI came in at 7.0% and the core rate at 5.6%, which is well above the 2% target and much too high for the ECB.

The Bank has been aggressive in its rate-tightening cycle and raised rates by 50 bp in March. Another 50-bp increase would help in the fight against inflation but also raise the likelihood of a recession due to the economy slowing down too abruptly. The markets are leaning closer to a 25-bp hike (80% probability) over a 50-bp increase (20% probability).

The Federal Reserve raised rates by 25 bp on Wednesday, to the surprise of no one. Investors were more interested in what is coming next, and Jerome Powell did hint that this hike would be the final one after 10 straight rate hikes. The rate statement was somewhat dovish, with the Fed removing the phrase “some additional” rate hikes might be needed. It changed the language that said that it would examine various factors in “determining the extent” that further hikes would be needed.

Powell sounded more hawkish in the press conference, saying that higher interest rates had not sufficiently slowed down the economy, the labour market or inflation. Just to be crystal clear, Powell said that “inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go”.

A rate cut, anyone? Powell said in his remarks that the inflation outlook does not support a rate cut. The markets disagree and have priced in an 81% rate cut in September (51% chance of 25-bp cut and 30% of 50-bp cut). Inflation is on its way down, but the pace of the deceleration could well determine if the Fed trims rates before the end of the year.

EUR/USD Technical

• EUR/USD tested resistance at 1.1088 earlier. The next resistance line is 1.1157
• 1.1025 and 1.0956 are providing support