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Daily Pivots: (S1) 130.93; (P) 132.81; (R1) 134.11; More...

USD/JPY is still bounded in range below 135.58 and intraday bias remains neutral. Outlook stays bullish as long as 131.34 resistance turned support holds. Above 135.58 will resume larger up trend to 61.8% projection of 114.40 to 131.34 from 126.35 at 136.81. Firm break there will target 100% projection at 143.29. However, firm break of 131.34 will bring deeper pull back to 55 day EMA (now at 128.34).

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.

Daily Pivots: (S1) 1.2882; (P) 1.2927; (R1) 1.2992; More...

USD/CAD's rally resumed after brief consolidation and intraday bias is back on the upside. Firm break of 1.3075 will resume medium term rally and sustained trading above 1.3022 fibonacci level will carry larger bullish implications. Next target is 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. On the downside, below 1.2859 minor support will turn bias neutral again first.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness.

Swiss Franc remains the strongest one for the week and stays firm into US session. Dollar is also regaining some ground, as the second best. On the other than, commodity currencies are the worst performing one, as led by Canadian. In other markets, European indexes are mildly in black while US futures are nearly flat. Trading might turn quiet ahead of a long weekend in the US.

Technically, EUR/CHF is getting close to 1.0086 support. Firm break there will raise the chance of larger down trend resumption through parity and 0.9970 low. The question is, if that happens, whether it would be accompanied by more broad based decline is Euro. In particular, EUR/USD is still in favor to break through 1.0339 low at a later stage.

In Europe, at the time of writing, FTSE is up 0.51%. DAX is up 0.49%. CAC is up 0.45%. Germany 10-year yield is down -0.027 at 1.689. Earlier in Asia, Nikkei dropped -1.77%. Hong Kong HSI rose 1.10%. China Shanghai SSE rose 0.96%. Singapore Strait Times rose 0.02%. Japan 10-year JGB yield dropped -0.0377 to 0.233.

BoE Pill: There's a conditionality for forceful policy actions

BoE Chief Economist Huw Pill told BloombergTV that in yesterday policy decision statement, "the word 'forcefully' - which clearly is the word the market is focused on, you focused on, and has a meaning - it's also important to see that that was put in the context of 'if necessary we will act forcefully', and so there's a conditionality there."

"If we do see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms, in wage setting behavior by firms and workers, then that will be the trigger for this more aggressive action," he added.

But he also indicated that the statement had "a certain level of flexibility because it had to encompass those different views... we were trying to emphasise is that that flexibility also applies to what the decisions are. I don't think it's all about August. We talked about the pace, timing and scale of future decisions."

Eurozone CPI finalized at 8.1% yoy in may, core CPI at 3.8% yoy

Eurozone CPI was finalized at 8.1% yoy in May, up from April's 7.4% yoy. All-items excluding energy rose from 4.1% yoy to 4.6% yoy. All-item excluding energy, food, alcohol and tobacco rose from 3.5% yoy to 3.8% yoy. Energy prices accelerated from 37.5% yoy to 39.1% yoy. Food, alcohol and tobacco prices accelerated from 6.3% yoy to 7.5% yoy.

EU CPI was finalized at 8.8% yoy, up from April's 8.1% yoy. The lowest annual rates were registered in France, Malta (both 5.8%) and Finland (7.1%). The highest annual rates were recorded in Estonia (20.1%), Lithuania (18.5%) and Latvia (16.8%). Compared with April, annual inflation fell in one Member State and rose in twenty-six.

BoJ leaves rate unchanged at -0.1%, keeps 0.25% 10-yr yield cap

BoJ left short-term policy interest rate unchanged at -0.10%, and 10-year JGB target at around 0% under the yield curve control. It will continue to defend the 0.25% 10-year JGB yield cap, by offering to purchase it at the rate on every business day through fixed-rate purchase operations.

The decision was made by 8-1 vote. Goushi Kataoka dissented again, pushing for further strengthening monetary easing by lowering short- and long-term interest rate.

The central bank also said "it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices."

BoJ Kuroda: 10-yr JGB yields above 0.25% would diminish effect of monetary easing

BoJ Governor Haruhiko Kuroda said in the post-meeting press conference, "the recent rapid weakening of the yen is raising uncertainty over the outlook and making it hard for companies to draw up business plans so it is negative and undesirable for the economy."

"We will have to closely watch developments in financial and currency markets and their impact on the economy and prices," he added.

Kuroda also added, "policy tightening is not appropriate at this point." And he warned, "if the 10-year JGB yield exceeds 0.25%, that would diminish the effect of our monetary easing."

New Zealand BusinessNZ manufacturing rose to 52.9, excess demand abating

New Zealand BusinessNZ Performance of Manufacturing index rose from 51.2 to 52.9 in May. Production rose from 49.4 to 52.8. Employment rose from 49.8 to 53.0. New orders dropped from 55.2 to 53.0. Finished stocks dropped from 54.0 to 53.1. Deliveries rose from 49.7 to 55.4.

BNZ Senior Economist, Craig Ebert stated that "The net result of the sub-index values was the inference that excess demand alleviated during May. New orders are perhaps the cleanest representation of demand, while deliveries speak more to the supply side. To the extent excess demand is abating, so too will be core inflation pressure".

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2882; (P) 1.2927; (R1) 1.2992; More...

USD/CAD's rally resumed after brief consolidation and intraday bias is back on the upside. Firm break of 1.3075 will resume medium term rally and sustained trading above 1.3022 fibonacci level will carry larger bullish implications. Next target is 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. On the downside, below 1.2859 minor support will turn bias neutral again first.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness.

Economic Indicators Update

WTI oil edged higher on Friday following strong downside rejection on Thursday, but the structure remains fragile, due to demand concerns, fueled by worries that recent rate hikes by major central banks and particularly aggressive Fed, would lead to economic slowdown.

The fundamentals remain key oil price drivers but focus has turned from supply which was affected by the war in Ukraine, towards the actions of central banks and raising fears that major economies are sliding into recession.

Technical picture on daily chart is mixed, as larger bullish structure has been dented by loss of positive momentum (14-d momentum indicator is heading south and about to break into negative territory), with negative signals being reinforced with expectations for strong weekly loss that would also complete Doji reversal pattern on weekly chart.

Friday’s close below 20DMA (116.40)would keep immediate bias with bears, but extension below 111.91 (cracked Fibo 38.2% of $92.92/$123.65) is need to confirm bearish near-term stance and open way for deeper drop towards $110.00 (psychological) and $108.28 (50% retracement).

Only bounce and close above 10DMA (118.31) would sideline downside risk and unmask $120 pivot.

Res: 115.47; 116.40; 117.03; 118.31.
Sup: 113.05; 111.91; 110.41; 110.00.

BoE Chief Economist Huw Pill told BloombergTV that in yesterday policy decision statement, " the word 'forcefully' - which clearly is the word the market is focused on, you focused on, and has a meaning - it's also important to see that that was put in the context of 'if necessary we will act forcefully', and so there's a conditionality there."

"If we do see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms, in wage setting behavior by firms and workers, then that will be the trigger for this more aggressive action," he added.

But he also indicated that the statement had "a certain level of flexibility because it had to encompass those different views... we were trying to emphasise is that that flexibility also applies to what the decisions are. I don't think it's all about August. We talked about the pace, timing and scale of future decisions."

The Euro started a decent increase from the 1.0380 support zone against the US Dollar. The EUR/USD pair traded above the 1.0420 resistance to start an upward move.

There was a clear move above a key bearish trend line with resistance near 1.0435 on the hourly chart. The pair settled above the 1.0450 level and the 50 hourly simple moving average. It traded as high as 1.0601 and is currently correcting gains.

An immediate support is near the 1.0520 level on FXOpen. The next key support is near 1.0500, below the pair could decline towards the 1.0450 level in the near term. Any more losses might send the pair towards the 1.0400 level.

On the upside, the next major resistance is near the 1.0580 level. A break above the 1.0580 and 1.0600 resistance levels could start another increase. In the stated case, it could even surpass 1.0650.

Pound jumps after BoE rate hike

The pound had a wild day on Thursday, trading in a 350-point range. Sterling traded in a 300-point range overnight, with markets not quite sure to make of the BoE’s 0.25% rate increase. In the end, the pound received a thumbs-up and posted a gain of 1.45%.  The rate hike, which was the fifth in a row, was indeed modest, but investors liked that the BoE signalled that more rate hikes were on the way. As well, the MPC’s split 6-3 decision (3 members voted for a 0.50% hike) no doubt sent a signal that the BoE could provide a hawkish pivot if inflation does not peak. The BoE has warned of a recession and has forecast that inflation will top 11%, making it difficult to feel reassured by the central bank, but it appears that with the MPC unanimously voting to raise rates at the meeting, investors had something to feel positive about.

The US dollar has shown that it can recover quickly and the risk for the pound remains tilted to the downside, with dark clouds hovering above the UK economy. GDP fell by 0.3% in April after a 0.1% decline in March, the first back-to-back contractions since March 2020, at the start of the Covid pandemic. The OECD has forecast that the UK economy will grow by 3.6% this year, but will stagnate in 2023, which would make it the worst-performing G-7 economy in 2023.

In a week of dramatic central bank decisions, the Federal Reserve won the highlight of the week. The Fed delivered a 0.75% salvo, the first since 1994, bringing rates to a target range of 1.50-1.75%. The Fed downgraded its US growth forecasts for 2022 and 2023, but insisted that there would be no recession. Some analysts would beg to disagree, but the financial markets were relieved, as Fed Chair Powell said he didn’t expect 0.75% rate hikes to become common. The move is a clear signal that the Fed plans to use all available tools to wrestle down inflation, which has hit a 40-year high.

GBP/USD Technical

• GBP/USD has support at 1.2215 and 1.2016
• There is resistance at 1.2407 and 1.2514

The dollar regained traction and bounced on Friday, after two-day pullback from new highest since 1998 was contained by Fibo support at 132.05 (38.2% of 126.36/135.57 upleg.

The sentiment for yen was soured by today’s Bank of Japan’s decision to keep their monetary policy unchanged that would further widen the gap between hawkish Fed and neutral BoJ.

Strong bullish acceleration in early Friday has already retraced 76.4% of 135.57/131.49 pullback, suggesting that corrective phase is likely over.

Daily tech returned to full bullish setup and underpin the action for attack Wednesday’s peak at 135.57, violation of which would open way for further advance towards Fibo projections at 136.13 and 138.00.

On the other side, overbought conditions and fading bullish momentum on weekly chart, along with formation of weekly Doji candle, require caution.

Broken 10DMA offers initial support at 133.78, followed by pivotal supports at 131.49 (correction low) and 131.05 (20DMA) loss of which would weaken near-term structure.

Res: 135.16; 135.57; 136.13; 138.00.
Sup: 134.00; 133.78; 132.75; 131.49.

The Euro turned to red on Friday after recovery on Wed/Thu was capped by the base of thick daily cloud (spanned between 1.0566 and 1.0767)) and dollar returns to strength after hawkish Fed and BoJ remaining on hold.

The action remains heavily weighed by daily cloud and bearish studies on daily chart, with Thursday’s bull-trap on Fibo barrier (50% of 1.0786/1.0358) and 10DMA (1.0572) adds to negative signals.

Near-term action looks for repeated close below falling 10DMA to confirm negative stance, with extension through 5DMA (1.0466) to further weakens the structure and increase risk of fresh attack at key supports at 1.0349 (2022 low) and 1.0340 (2017 low), loss of which would open way for stronger bearish acceleration.

Alternative scenario would require rebound and close within daily cloud to ease immediate downside risk.

Res: 1.0566; 1.0591; 1.0623; 1.0638.
Sup: 1.0493; 1.0466; 1.0380; 1.0349.

Bitcoin was down 4.9% on Thursday, ending around $20.7K and trading near $20.8K at the start of the day on Friday. Ethereum lost 6.4% in the last 24 hours, returning to the $1100 area. Altcoins in the top 10 fell in price from 2.9% (BNB) to 8.8% (Polkadot).

Total crypto market capitalisation, according to CoinMarketCap, sank 3.5% overnight to $903bn. Bitcoin’s dominance index fell 0.3 points to 44.0%. The Cryptocurrency Fear and Greed Index was up 2 points to 9 by Friday.

Although we did not see any new intraday lows, Bitcoin closed Thursday with a tenth consecutive day of declines. New lows in stock indices contributed mainly to this.

Bitcoin could be uncharted territory in a few days when historical patterns stop working.

The bearish focus remains on the circular $20,000 level, the former peak of 2017. At no time in past down cycles has BTC fallen below the high of the previous bull cycle. Closing the week below $22.3K would also be unique, as it would be the first close below the 200-week average. Bitcoin has previously fallen below this curve more than once but quickly regained some ground, finding ample demand from long-term investors amid a deep and quick sell-off.

The latest issue to attract investors’ attention has been the uncertainty surrounding Singapore-based cryptocurrency fund Three Arrows Capital (3AC). The hedge fund could be the subject of a new scandal amid growing speculation about its possible bankruptcy.

Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero called on the US Congress to close the cryptocurrency regulation gap and compared the collapse in the crypto-asset market to the 2008 financial crisis.