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The Nasdaq 100 struggles to find bottom as investors continue to flee risk assets. The index sees no sign of stabilisation yet as it approaches 11500. The price action has been capped by a falling trend line from last April. An oversold RSI may prompt sellers to take profit and possibly trigger a mean reversion trade to the upper band (13000) of the line. A break above 12400 may attract enough buying interest to make this happen, but the rebound could be limited unless the bulls succeed in pushing higher.

The New Zealand dollar tumbles as traders continue to pile into safe haven assets. The sell-off accelerated after the pair sank below June 2020’s lows near 0.6400. Downbeat sentiment may attract more trend followers after a faded rebound. 0.6100 near a two-year low would be the next target. 0.6370 is a fresh resistance and the bears may sell into strength at the next bounce. The support-turned-resistance at 0.6450 sits next to the 20-day moving average and is a major level to clear before a reversal could materialise.

The pound remained under pressure after a slowdown in the UK’s GDP growth in Q1. A break below the lower range (1.2260) of a brief consolidation signalled a bearish continuation. Sterling is heading towards its two-year low at 1.2100. Short-covering could be expected and in conjunction with dip-buying could drive the price up momentarily. 1.2400 is the first resistance and the bulls need to lift the recent high at 1.2640 before they could regain control. Otherwise, the psychological level of 1.2000 would be the next stop.

Daily Pivots: (S1) 1.0313; (P) 1.0421 (R1) 1.0488; More...

Intraday bias in EUR/USD stays on the downside for the moment. Decisive break of 1.0339 long term support will carry larger bearish implication and target 161.8% projection of 1.1494 to 1.0805 from 1.1184 at 1.0069. On the upside, break of 1.0641 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, break of medium term channel support suggests downside acceleration. Current decline from 1.2348 (2021 high) is probably resuming long term down trend from 1.6039 (2008 high). Retest of 1.0339 (2017 low) low should be seen next. Decisive break there will confirm this bearish case. This will now remain the favored case as long as 1.0805 support turned resistance holds.

Daily Pivots: (S1) 1.2158; (P) 1.2207; (R1) 1.2248; More...

GBP/USD's decline is still in progress and intraday bias stays on the downside. Current down trend should target 200% projection of 1.3641 to 1.2999 from 1.3297 at 1.2013 next. On the upside, above 1.2399 minor resistance will turn intraday bias neutral again. But outlook will stay bearish as long as 1.2637 resistance holds.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) at least at the same degree as the rise from 1.1409 (2020 low). That is, fall from 1.4248 could be a leg inside the pattern from 1.1409, or resuming the longer term down trend. In either case, deeper decline is expected as long as 1.2999 support turned resistance holds. Next target is 1.1409 low.

Daily Pivots: (S1) 0.9956; (P) 1.0003; (R1) 1.0076; More....

USD/CHF's rise continues today and there is no sign of topping after breaking 261.8% projection of 0.9149 to 0.9459 from 0.9193 at 1.0005. Intraday bias stays on the upside and further rally would be seen to next medium term projection level at 1.0306. On the downside, considering bearish divergence condition in 4 hour MACD, break of 0.9871 support will indicate short term topping, and turn bias to the downside for pull back.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 161.8% projection of 0.8756 to 0.9471 from 0.9149 at 1.0306, which is close to 1.0342 (2016 high). This will remain the favored case as long as 0.9459 resistance turned support holds.

Daily Pivots: (S1) 127.21; (P) 128.64; (R1) 129.75; More...

Intraday bias in USD/JPY remains mildly on the downside at this point. Correction from 131.34 short term top would extend lower to 125.09 cluster support (38.2% retracement of 114.40 to 131.34 at 124.86), as correction to rise from 114.40. For now, risk will stay mildly on the downside as long as 131.34 resistance holds, in case of recovery.

In the bigger picture, current rally is seen as part of the long term up trend form 75.56 (2011 low). Sustained trading above 61.8% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 130.04 will pave the way to 100% projection at 149.26, which is close to 147.68 (1998 high). For now, this will remain the favored case as long as 121.27 support holds.

Daily Pivots: (S1) 1.2990; (P) 1.3033; (R1) 1.3090; More...

USD/CAD's rally resumed after brief consolidations and intraday bias is back on the upside. Sustained break of 1.3022 fibonacci level will carry larger bullish implications. Next target will be 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. On the downside, break of 1.2919 minor support will turn bias back to the downside for 1.2712 support instead.

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. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.

Daily Pivots: (S1) 0.6804; (P) 0.6879; (R1) 0.6928; More...

Intraday bias in AUD/USD stays on the downside for the moment. Current fall is part of the decline from 0.8006 and should target 0.6756 medium term fibonacci level next. On the upside, break of 0.7029 support turned resistance will turn intraday bias neutral again first. But outlook will remain bearish as long as 0.7265 resistance holds.

In the bigger picture, price actions from 0.8006 are seen as a corrective pattern to rise from 0.5506 (2020 low) with fall from 0.7660 as the third leg. Deeper fall should be seen to 50% retracement of 0.5506 to 0.8006 at 0.6756. This coincides with 100% projection of 0.8006 to 0.7105 from 0.7660 at 0.6760. Strong support is expected from 0.6756/60 cluster to contain downside to complete the correction. However, sustained break of 0.6756/60 would argue that AUD/USD is indeed in a medium term down trend.

Overall market sentiment stabilize in Asia today, with Nikkei leading other major indexes higher. Bitcoin is trading back above 20k, arguing that the climax of the crypto rout is over. In the currency markets, both Dollar and Yen are paring some recent gains while commodity currencies recover. But for the week, Yen is still the strongest, followed by the greenback and then Canadian. Aussie is the worst performer, followed by Kiwi and then Euro.

Technically, EUR/USD is now in proximity to 2017 low at 1.0339. There is no sign of bottoming yet and break of this low is likely. The main question is whether downside momentum will pick up further, and the reaction to parity. This will be the main focus for the rest of May.

In Asia, Nikkei closed up 2.55%. Hong Kong HSI is up 1.96%. China Shanghai SSE is up 0.58%. Singapore Strait Times is up 1.16%. Japan 10-year JGB yield is down -0.0059 at 0.245. Overnight, DOW dropped -0.33%. S&P 500 dropped -0.13%. NASDAQ rose 0.06%. 10-year yield dropped -0.104 to 2.817.

Fed Powell: Appropriate for 50bps increases at the next two meetings

Fed Chair Jerome Powell said in an interview that "what we were actively considering, and this is just a factual recitation of what happened at the meeting, was a 50-basis point increase... if the economy performs about as expected, that it would be appropriate for there to be additional 50-basis point increases at the next two meetings".

Powell also said that a "soft landing", getting back to 2% inflation while keeping the labor market strong, is "quite challenging to accomplish that right now". Unemployment is "very, very low", the labor market's "extremely tight", and inflation is "very high".

"What we can control is demand, we can't really affect supply with our policies. And supply is a big part of the story, here. But more than that, there are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so. So the question whether we can execute a soft landing or not, it may actually depend on factors that we don't control," he explained.

Fed Daly: Going up in 50bps increments makes quite a bit of sense

San Francisco Federal Reserve President Mary Daly said yesterday she'd like to Would like to see continued tightening of financial conditions to help bring down inflation. Yet, 75bps rate hike is "not a primary consideration".

"Going up in 50-basis-point increments to me makes quite a bit of sense and there's no reason right now that I see in the economy to pause on doing that in the next couple of meetings," she added.

BoC Gravelle: We need higher interest rates, the economy can handle it

BoC Deputy Governor Toni Gravelle said yesterday, "our policy rate, at 1%, is too stimulative, especially when inflation is running significantly above the top of our control range. We need our policy rate to be at more neutral levels."

"Simply put, with demand running ahead of the economy's capacity, we need higher interest rates to cool domestic inflation. And as we've said before, the economy can handle it," he said.

Still he noted that outlook remained unusually uncertain and therefore it's not easy to hike by 75bps in one go.

On the data front

New Zealand BusinessNZ PMI dropped from 53.7 to 51.2 in April. Japan M2 rose 3.6% yoy in April. Eurozone industrial production will be featured in European session. US will release import price index and U of Michigan consumer sentiment later in the day.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6804; (P) 0.6879; (R1) 0.6928; More...

Intraday bias in AUD/USD stays on the downside for the moment. Current fall is part of the decline from 0.8006 and should target 0.6756 medium term fibonacci level next. On the upside, break of 0.7029 support turned resistance will turn intraday bias neutral again first. But outlook will remain bearish as long as 0.7265 resistance holds.

In the bigger picture, price actions from 0.8006 are seen as a corrective pattern to rise from 0.5506 (2020 low) with fall from 0.7660 as the third leg. Deeper fall should be seen to 50% retracement of 0.5506 to 0.8006 at 0.6756. This coincides with 100% projection of 0.8006 to 0.7105 from 0.7660 at 0.6760. Strong support is expected from 0.6756/60 cluster to contain downside to complete the correction. However, sustained break of 0.6756/60 would argue that AUD/USD is indeed in a medium term down trend.

Economic Indicators Update