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USD/CHF's decline from 0.8041 resumed last week. Initial bias stays on the downside this week. Firm break of 61.8% projection of 0.8041 to 0.7774 from 0.7923 at 0.7758 will target 100% projection at 0.7656. On the upside, above 0.7808 minor resistance will turn intraday bias neutral again first.

In the bigger picture, as long as 55 W EMA (now at 0.8051) holds, fall from 0.9200 is expected to continue, as part of the larger down trend. Firm break of 0.7603 will target 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.

In the long term picture, price action from 0.7065 (2011 low) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). It's uncertain if the fall from 1.0342 is the second leg of the pattern, or resumption of the downtrend. But in either case, outlook will stay bearish as long as 0.8756 support turned resistance holds (2021 low). Retest of 0.7065 should be seen next.

AUD/USD edged higher to 0.7277 last week as up trend continued, but retreated since then. Initial bias remains neutral this week for consolidations. Further rise is expected as long as 0.7101 support holds. Above 0.7277 will target 61.8% projection of 0.6420 to 0.7187 from 0.6832 at 0.7306.

In the bigger picture, rise from 0.5913 (2024 low) is still in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). Further rally should then be seen to retest 0.8006. For now, outlook will remain bullish as long as 0.6832 support holds, in case of pullback.

In the long term picture, rise from 0.5913 is seen as the third leg of the whole pattern from 0.5506 (2020 low). It's still early to judge if this is an impulsive or corrective pattern. But in either case, further rise should be seen back to 0.8006 and possibly above. This will remain the favored case as long as 55 W EMA (now at 0.6730) holds.

USD/CAD recovered last week but upside is capped by 1.3709 resistance. Initial bias remains neutral this week first. On the downside, below 1.3549 will extend the fall from 1.3965 to retest 1.3480 low. Decisive break there will resume whole down trend from 1.4791. However, sustained break of 1.3709 will confirm short term bottoming, and turn bias back to the upside for 1.3965 resistance again.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen, as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. However, decisive break of 38.2% retracement of 1.4791 to 1.3480 at 1.3981 will argue that the correction has completed with three waves down to 1.3480 already.

In the long term picture, rising 55 M EMA (now at 1.3581) remains intact. Thus, up trend from 0.9056 (2007 low) could still be in progress. However, considering bearish divergence condition M MACD, sustained trading below 55 M EMA will argue that the up trend has completed with five waves up to 1.4791, and turn medium term outlook bearish for correction to 38.2% retracement of 0.9056 to 1.4791 at 1.2600.

GBP/JPY stayed in range of 210.43/214.21 last week and outlook is unchanged. Initial bias remains neutral this week first. Below 210.43 will extend the fall from 216.58 to 209.58 support first. However, firm break of 214.21 will argue that the pullback from 216.58 has completed, and turn bias back to the upside for retesting this high.

In the bigger picture, while the fall from 216.58 is steep, there is no clear sign of trend reversal yet. The long term up trend could still extend to 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90 on resumption. However, sustained break of 55 W EMA (now at 205.46) will argue that it's already in medium term down trend for 184.35 support.

In the long term picture, up trend from 116.83 (2011 low) is in progress. Next target is 251.09 (2007 high). This will remain the favored case as long as 55 M EMA (now at 186.82) holds.

EUR/JPY edged lower to 182.01 last week but rebounded since then. Initial bias remains neutral this week first. Break of 182.01 will extend the fall from 187.93 to 180.78 support. Nevertheless, firm break of 185.02 will suggest that pullback from 187.93 has completed, and turn bias back to the upside for retesting this high.

In the bigger picture, the pullback from 187.93 is steep, there is no sign of reversal yet. Uptrend from 114.42 is still expected to resume at a later stage to 78.6% projection of 124.37 (2022 low) to 175.41 (2025 high) from 154.77 at 194.88. However, sustained break of 55 W EMA (now at 177.79) will argue that it's already in a medium term down trend to 175.41 resistance turned support and below.

In the long term picture, up trend from 94.11 (2021 low) is in progress. Next target is 138.2% projection of 94.11 to 149.76 (2014 high) from 114.42 (2020 low) at 191.32. This will remain the favored case as long 55 W EMA (now at 177.79) holds.

EUR/GBP recovered last week as it failed to break through 0.8610 support. Initial bias stays neutral this week first. On the downside, firm break of 0.8610 will carry larger bearish implications and pave the way to 0.8466 fibonacci level next. Nevertheless, firm break of 0.8676 will turn bias back to the upside for stronger rebound back to 0.8740 resistance instead.

In the bigger picture, focus is back on 38.2% retracement of 0.8821 to 0.8863 at 0.8618. Sustained break there will confirm that whole rise from 0.8221 has completed at 0.8863. Deeper decline should then be seen to 61.8% retracement at 0.8466 at least. For now, risk will stay mildly on the downside as long as 55 D EMA (now at 0.8677) holds, in case of recovery.

In the long term picture, price action from 0.9499 (2020 high) is seen as part of the long term range pattern from 0.9799 (2008 high). Range trading should continue between 0.8201 and 0.9499, until there is clear signal of imminent breakout.

EUR/AUD's fall from 1.6842 extended lower last week but recovered ahead of 1.6125 low. Initial bias is turned neutral this week first. On the downside, decisive break of 1.6125 will resume larger fall from 1.8554. Nevertheless, break of 1.6371 resistance will indicate short term bottoming, and turn bias back to the upside for stronger rebound to 55 D EMA (now at 1.6525).

In the bigger picture, fall from 1.8554 (2025 high) is in progress and deeper decline should be seen to 61.8% retracement of 1.4281 to 1.8554 at 1.5913, which is slightly below 1.5963 structural support. Decisive break there will pave the way back to 1.4281 (2022 low). For now, risk will stay on the downside as long as 55 W EMA (now at 1.7068) holds, even in case of strong rebound.

In the longer term picture, fall from 1.8554 is seen as the third leg of the pattern from 1.9799 (2020 high), which is part of the pattern from 2.1127 (2008 high). Sustained trading below 55 M EMA (now at 1.6590) will confirm this bearish case, and pave the way back towards 1.4281.

EUR/CHF edged lower last week but failed to get rid of 0.9155 cluster support (38.2% retracement of 0.8979 to 0.9264 at 0.9155) cleanly. Initial bias stays neutral this week first. On the upside, break of 0.9177 minor resistance will turn bias back to the upside for 0.9264 resistance. However, sustained trading below 0.9155 will turn bias back to the downside for deeper pullback to 61.8% retracement at 0.9088 and possibly below.

In the bigger picture, considering bullish convergence condition in W MACD, a medium term bottom should be in place at 0.8979. Sustained trading above 55 W EMA (now at 0.9268) will add more credence to this case. Further break of 0.9394 resistance will pave the way to 0.9660 resistance next. However rejection by the 55 W EMA will set up another fall through 0.8979 low at a later stage.

In the long term picture, outlook will stay bearish as long as 0.9407 support turned resistance (2022 low) holds. However, firm break of 0.9407 will argue that the down trend from 1.2004 (2018 high) has completed with five waves down to 0.8979. Stronger rebound should then be seen to 38.2% retracement of 1.2004 to 0.8979 at 1.0135 in the medium term.

• Equities maintain a "risk-on" rally, defying the market disconnect from elevated oil prices and rising interest rate expectations.
• The US market faces a pivotal week with the final Powell-led CPI report expected on Tuesday, ahead of the Fed Chair handover to Kevin Warsh on May 15.
• Geopolitical tensions remain high following US/Iran strikes, though a 3-day Russia-Ukraine ceasefire was announced.
• The US Dollar Index (DXY) is showing a bearish technical breakdown, with a cooler CPI likely to lead to a move toward the 96.901 support level.

Week in Review: Equities Defy Gravity as Oil and Rates Realign

The start of May has left market participants with more questions than answers. In a striking display of resilience or perhaps denial, US stock markets have surged to fresh highs, seemingly shrugging off the geopolitical tensions that briefly rattled indices mid-war.

However, this "risk-on" euphoria sits in uncomfortable contrast with the reality of the energy market. Oil prices have refused to retreat to pre-conflict levels, and interest rate expectations are being recalibrated higher across the board.

The disconnect is clear: can equities continue to climb while the cost of capital and energy remain elevated?

Geopolitical Developments

Markets continue to hang on every word of US President Donald Trump and the ongoing situation in the Middle East. Markets are rightly on edge heading into the weekend given the tit-for-tat strikes between Iran and the US on Thursday and Friday, May 7 and 8 respectively. Any significant developments over the weekend could drive early week volatility and price action.

Late on Friday, President Trump announced a 3 day ceasefire between Russia-Ukraine for the 9th, 10th and 11th of May.

Source: TruthSocial

Week Ahead: Central Bank Divergence and Inflation Storms Loom Large

As we look toward the week starting May 10, the focus remains on geopolitical nut markets, which are also debating whether central banks will follow the market’s hawkish lead or if a reality check is overdue.

This makes for interesting viewing and will likely lead to significant market movement.

US: The Fed’s Final Changing of the Guard

The coming week is a momentous one for the Federal Reserve. Not only do we face critical data points, but we also mark a transition in leadership. Jerome Powell is set to conclude his tenure as Fed Chair, with Kevin Warsh scheduled to take the reins on Friday, May 15.

On the data front, Tuesday’s Inflation report is the headliner. We are bracing for a second consecutive 0.9% MoM print at the headline level, largely fueled by the surge in gasoline and diesel prices. While the core reading is expected at a more modest 0.3%, the annual rate could push up to 2.7%. The Fed has recently made a concerted effort to talk up rate expectations, ditching their previous easing bias as the US economy continues to hold up better than its peers. However, with labor supply growth effectively stalled due to collapsing net migration (projected at near zero this year), the "hot" jobs numbers we’ve seen may be less a sign of strength and more a symptom of a tightening supply constraint.

UK & Europe: A Strange Case of Mispricing

Across the Atlantic, the Bank of England (BoE) and the European Central Bank (ECB) find themselves in different boats, though markets are currently pricing them as if they are in the same storm.

Markets are pricing in a significantly more hawkish path for the UK than the Eurozone—a move that looks overdone. While the UK is energy-dependent, this is not a repeat of the 2022 gas crisis; natural gas prices remain relatively contained compared to the spike in oil. We believe the ECB is actually more likely to deliver on its hawkish rhetoric in June, whereas the BoE may view "not cutting" as enough tightening for now. Watch the Euro and Sterling closely as this pricing discrepancy begins to unwind.

Asia: Inflation Fallout and Trade Tensions

In Asia, the focus is squarely on the fallout from the Middle East through the lens of inflation.

• China: We are looking for trade data on Saturday and inflation data on Monday. Exports are expected to grow by roughly 6.5%, but the real story lies in the PPI, which is accelerating. Markets will be hyper-sensitive to how China handles the impact of higher energy costs and the lingering effects of the "Liberation Day" tariffs.

India: Expect a modest rise in inflation. While gasoline prices remain capped by the government, the second-round effects of oil prices are starting to bleed into food costs, which could test the Reserve Bank of India’s patience.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Week - US Dollar Index (DXY)

The US Dollar Index (DXY) finds itself in a precarious position as we head into a pivotal week. Between the transition in Fed leadership and a looming inflation print, the technicals are flashing signs of exhaustion, suggesting the "Dollar King" crown might be slipping.

On the daily timeframe, the indexes break below its ascending channel, signaling a shift in momentum remains intact.

We are currently seeing the DXY trade below key Moving Averages:

The 50-day MA (Yellow) at 98.459 and the 200-day MA (Purple) at 98.538 have converged, effectively acting as a "ceiling" for recent price action.

The fact that price is struggling to reclaim these MAs suggests that the path of least resistance remains to the downside in the near term.

Support Watch: The immediate floor sits at 97.702. A daily close below this level would confirm the Double Top and likely open the trapdoor for a deeper correction toward the 96.901 handle.

Scenarios for the Week Ahead

Given the fundamental backdrop of the final Powell-led CPI print and the handover to Kevin Warsh, I see two primary technical paths:

Scenario 1: The Bearish Confirmation (High Probability)

If Tuesday’s US CPI data comes in cooler than expected—or even just meets estimates—the DXY is likely to break the 97.702 support. This would confirm the Daily Double Top and trigger a move toward 96.901. In this scenario, the convergence of the 50 and 200 SMAs on the daily will remain the ultimate barrier, cementing a medium-term bearish outlook.

Scenario 2: The "Sticky Inflation" Spike (Low Probability)

Should we get a significant beat in inflation (above the 0.9% MoM forecast), we could see a knee-jerk spike in the Dollar. The bulls would need to reclaim and hold above 98.729 on a daily closing basis to invalidate the bearish setup. However, even with a spike, the psychological resistance at 100.00 remains a massive hurdle that would likely attract heavy selling.

US Dollar Index (DXY) Daily Chart, May 8, 2026

Source:TradingView.Com (click to enlarge)

The market is currently betting on a "perfect landing" where growth stays firm despite rising rates. However, with the energy channel remaining hot and central banks diverging, the margin for error is becoming razor-thin. Stay disciplined and watch those support levels.

Canadian Highlights

• Canada’s labour market remained soft in April, with employment down and the unemployment rate rising to 6.9%.
• Canada’s trade balance returned to surplus in March on stronger commodity exports, though net trade is still likely to subtract from Q1 GDP growth.
• A soft labour market and weak ex-energy trade should keep the Bank of Canada in a wait-and-see mode despite energy prices.

U.S. Highlights

• U.S. payroll growth was solid in April, defying market expectations, while the unemployment rate held steady at 4.3%.
• Historically lean jobless claims reaffirmed a muted environment for layoffs, while the ISM Services Index signaled continued expansion in the services side of the economy.
• Volatility in oil prices continued this week as WTI crude oil retreated from $105 per barrel to the mid-$90s later in the week on hopes of a breakthrough in U.S.-Iran negotiations.

Canada – More Reason to Wait and See

The price of oil prices slid below $100 this week (WTI benchmark) on optimism surrounding a potential U.S.-Iran deal, helping both bond and equity markets regain their footing. Canada’s S&P/TSX Composite Index rose 0.6% on the week, though the gain was not enough to prevent it from surrendering its position as the world’s seventh-largest equity market to South Korea (the KOSPI). Bond markets also rallied, pushing 5- and 10-year Government of Canada benchmark yields down 9 basis points to 3.5% and 3.1%, respectively.

April’s jobs report provided a softer read on the economy. According to Statistics Canada, employment was little changed in April, declining by 18k versus expectations for a 10k gain, while the unemployment rate edged up to 6.9% (Chart 1). The labour force participation rate ticked up to 65.0%, contributing to the rise in unemployment. The increase in participation could be viewed as a modest positive, with workers being drawn into the labour market often a vote of confidence in job prospects. That said, there was little evidence of broader momentum beneath the surface. Meanwhile, wage growth decelerated in April, with constant-composition measures showing little improvement.

To some extent, this lack of labour market dynamism works in the Bank of Canada’s favour by helping contain broader price pressures from the energy price shock. The Bank has continued to characterize labour conditions as “soft”, reflecting subdued hiring and weaker demand for workers. As such, this report is unlikely to materially alter its current wait-and-see approach.

A similar message came from the trade report. Canada’s trade balance moved back into surplus in March after five consecutive monthly deficits (Chart 2). However, the improvement was largely driven by commodity prices and precious metals rather than broad-based external demand. Export values surged on higher crude oil prices and increased gold shipments, while imports pulled back following February’s outsized gain.

Excluding metal, mineral, and energy products, export growth was far more moderate. As a result, March’s trade report likely overstates the strength of the external sector. We continue to expect net trade to subtract from Q1 2026 real GDP growth, reflecting stronger imports over the quarter. If energy prices remain elevated, nominal exports and the trade balance should improve further in Q2 even if real export volumes remain subdued

Higher energy exports, however, offer little consolation to consumers. Our proprietary card-spending data show gas station spending rising 3.6% on the month and 16.7% on the year in April, before the gas tax holiday took effect, adding pressure to household budgets. The Bank of Canada has indicated it stands ready to respond should higher energy prices feed more broadly into inflation, but for now there is little reason for policymakers to move decisively in either direction.

U.S. – Labor Market Resilient Despite Energy Shock

U.S. financial markets remained firm this week. The S&P 500 advanced roughly 2% to new record highs, supported by a pullback in oil prices and a better-than-expected jobs report. Long-term Treasury yields eased later in the week, with the 10-year note hovering near 4.35% – a hair below last week’s close. Market pricing continues to reflect limited expectations for near-term rate cuts amid ongoing energy market uncertainty and a relatively resilient economy.

Resiliency was on display in the April jobs report, where nonfarm payrolls rose 115,000 – almost double the market consensus forecast. The unemployment rate held steady at 4.3% amid modest declines in both household employment and the labour force. Payrolls were volatile through the first quarter, due in part to factors like inclement weather and a healthcare strike in California. Looking through the volatility, it appears that job growth has picked up from its anemic trend at the end of last year and is now running at a decent pace that’s allowing it to hold the unemployment rate steady (Chart 1). High-frequency indicators reinforced this resilient labour market picture: initial jobless claims remained very low by historical standards, while continuing claims fell to 1.77 million – a new two-year low.

Other economic data lent further support to the resilience theme. The ISM Services Index eased modestly in April but remained comfortably above the 50-point expansion threshold. The details of the report, however, had a few blemishes. New orders recorded a notable pullback, while the prices-paid component remained elevated at 70.7 – the highest level since late 2022 and up notably from earlier this year – pointing to persistent cost pressures in the services sector.

With respect to prices, the good news is that the price of WTI crude oil, which had surged above $105/barrel late last week, fell back to the mid-$90s over the course of this week (Chart 2). This followed reports of U.S.–Iran negotiations and tentative de-escalation signals around the Strait of Hormuz. While constructive for inflation expectations, sustained disinflation will depend on a more durable resolution to the tensions.

These developments are likely front-of-mind for Fed Chair-nominee Kevin Warsh as he prepares to take the helm. Communication from the Fed this week maintained a cautious stance, with New York Fed President John Williams emphasizing that policy is “well positioned” to balance the risks to the dual mandate. Under the current backdrop, market odds remain strongly in favor of no Fed action over the near term, with the probability that rates are held steady this year still sitting at over 70%. Ultimately, this morning’s better-than-expected jobs report, alongside other high-frequency indicators, helps ease concerns that the U.S. labour market has continued to deteriorate. This should give policymakers more breathing room to assess the extent to which higher energy prices filter into core inflation over the coming months.